ADB's Work in Kiribati

Driven by construction associated with large, donor-financed investments and by strong revenues from fishing licenses, Kiribati has enjoyed sustained economic growth in recent years. The country’s economy is, however, highly vulnerable to external shocks and income volatility. It is highly exposed to extreme weather events and the impacts of climate change, and is dependent on imports and nontax revenues. Sources of external revenue include foreign aid and investment income from Kiribati’s sovereign wealth fund, the Revenue Equalization Reserve Fund. Private sector development is constrained by the size and scale of the economy, the high costs of doing business, and the country’s widely dispersed population.

Aerial view of Kiribati.

ADB has been working with Kiribati since 1974, having committed loans and grants totaling $96.97 million as well as technical assistance projects worth $20.02 million.

Cumulative loan and grant disbursements to Kiribati amount to $55.8 million. These were financed by concessional ordinary capital resources, and the Asian Development Fund.

The South Tarawa Sanitation Improvement Sector Project will improve sanitation infrastructure, sewerage and maintenance capacity, and public hygiene.

To improve sanitation services and hygiene practices in Kiribati’s capital, ADB has provided financing for the South Tarawa Sanitation Improvement Sector Project. The project’s goal is to increase access to sanitation in the city from 64% of the population in 2014 to 80% by 2019. To provide greater access to water, ADB committed $2 million as a project design advance to help prepare the South Tarawa Water Supply Project for 2019. The project, which will be cofinanced by the Green Climate Fund and the World Bank, aims to develop water supplies from ground resources and rainwater harvesting, and use solar-powered seawater desalination by reverse osmosis.

The Kiribati Road Rehabilitation Project reconstructed 32 kilometers of main roads and 8 kilometers of feeder roads across the country. Cofinanced by the World Bank and the governments of Australia and Kiribati, this vital transport project has improved access to social services and employment opportunities for Kiribati’s people. ADB has provided additional financing of $9 million to also reconstruct sections of the road from Betio to Bairiki, which were not part of the initial project.

Road construction site in Tarawa.

Many of the infrastructure services in Kiribati are provided by stateowned enterprises. ADB supports the improvement of these infrastructure enterprises through the Kiribati Economic Reform Plan. The bank provides assistance to improve policy, tighten legal and institutional settings, implement the government’s privatization pipeline, and sharpen the commercial focus of stateowned enterprises.

Nonsovereign Operations

As a catalyst for private investments, ADB provides financial assistance to nonsovereign projects and financial intermediaries. Total commitments from ADB’s own funds (in equity and direct loans) in 2018 amounted to $3.14 billion for 32 transactions in economic and social infrastructure, the finance sector, and agribusiness. ADB also actively mobilizes cofinancing from commercial and concessional sources. In 2018, ADB mobilized $3.17 billion of long-term cofinancing and $3.99 billion of cofinancing in trade finance, microfinance, and supply chain finance programs. Total outstanding balances and commitments of nonsovereign transactions funded by ADB’s own resources stood at $12.7 billion as of 31 December 2018.

Cofinancing

ADB began cofinancing operations in Kiribati in 1995. Since then, cumulative direct value-added official cofinancing commitments for Kiribati have amounted to $72.03 million for five investment projects, and $4.64 million for seven technical assistance projects.

In 2018, Kiribati received $7.36 million in grant cofinancing from the governments of Australia and New Zealand, as well as the World Bank, for the Strengthening Economic Management Reform Program—Subprogram 2.

Projects Cofinanced, 1 January 2014–31 December 2018

Operational Challenges

While ADB provides assistance for Kiribati to optimize its fiscal sustainability and stimulate private sector activity, the country faces intractable development constraints.

A shortage of natural resources— including critical ones such as land and fresh water—hampers development, and this is exacerbated by having a sparse population scattered across numerous islands. International markets are difficult for Kiribati to access, and there is little potential for economies of scale, with the outer islands functioning at only a subsistence level. The country’s small, open economy is also heavily reliant on imports, including basics such as food and fuel, leaving it vulnerable to international price hikes on commodities.

Kiribati also faces significant challenges in delivering education and health services for children, generating employment growth, and adapting to climate change.

Future Directions

In November 2018, the ADB Board of Directors voted to increase to $13 million the annual base allocation for its small developing member countries, and this has boosted the scope for the bank to invest in Kiribati. ADB, in partnership with the World Bank, will consider critical infrastructure investments for Kiribati’s remote islands.

Students of the USP ICT-based education in Kiribati.

The ADB country operations business plan, 2019–2021 for Kiribati focuses on generating economic growth for sustainable development, in line with the broad objectives of the Kiribati Development Plan 2016–2019, Kiribati’s Vision 2016–2036, and ADB’s Pacific Approach, 2016–2020, which serves as the bank’s country partnership strategy for Kiribati.