- Kiribati’s recent GDP growth has exceeded that of other Pacific Island countries and poverty has declined significantly. Growth is projected to moderate to about 3.1 percent in 2026 but the outlook remains highly uncertain amid external shocks and persistent structural challenges.
- Fiscal policy can help mitigate the impact of the energy price shock on vulnerable households with temporary, targeted transfers, while allowing domestic fuel prices to gradually adjust. A sustained growth-friendly fiscal consolidation over the medium term is needed for long-term debt sustainability.
- Strengthening institutional capacity, by establishing a debt management framework, improving public financial management, revenue administration, and the quality of national statistics, is essential for continued growth and private sector development.
Washington, DC:Â On May 8, 2025, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Kiribati.[1]
Kiribati has experienced strong GDP growth and significant poverty reduction in recent years. Real GDP growth in 2025 is estimated at 4.3 percent, supported by consumption and public investment. Average inflation rose to 6.5 percent in 2025 following a needed one‑off adjustment of domestic energy tariffs and, after beginning to recede, is under renewed pressure amid higher fuel and shipping costs triggered by the Middle East war. The authorities have pursued an ambitious development agenda despite external shocks and structural challenges and have substantially reduced poverty by increasing social benefits. Fiscal policy was broadly neutral in 2025 and external public debt declined to 8 percent of GDP. Nonetheless, despite the low public debt, Kiribati risk of debt distress is assessed to be high due to climate-related vulnerabilities and implicit contingent liabilities.
Real GDP growth is expected to moderate to around 3.1 percent in 2026 and to gradually decline to around 2 percent over the medium term. While the near‑term outlook remains favorable, uncertainty is high. Risks, primarily from a prolonged war in the Middle East and associated trade disruptions, as well as from a sharp tightening in financing conditions, are tilted to the downside. In the IMF’s April 2026 World Economic Outlook (WEO) reference scenario assuming a temporary energy shock, economic growth is expected to continue to be driven by ongoing infrastructure projects and consumption, with social benefits supporting the vulnerable population. Inflation is projected to remain elevated in 2026 due to the war in the Middle East but subside over the medium term as Kiribati shifts to using more solar power for electricity generation. The fiscal deficit is expected to widen in 2026 with increased subsidies to manage the impact of higher oil prices.
Executive Board Assessment[2]
Executive Directors welcomed Kiribati’s resilient economic growth, and the authorities’ continued focus on improving human development outcomes that has supported an impressive decline in poverty since 2019. Directors emphasized that Kiribati is highly vulnerable to external shocks and risks remain tilted to the downside, including from a protracted war in the Middle East with persistently high commodity prices, trade disruptions, potential financial market volatility, and climate shocks. They stressed the need for continued prudent policies and reforms to strengthen resilience and safeguard macroeconomic stability, supported by capacity development as needed from the Fund and other development partners.
Directors agreed that a growth‑friendly fiscal consolidation is essential over the medium term to rebuild buffers and safeguard debt sustainability while preserving priority spending. To achieve this, Directors concurred that Kiribati could gradually raise revenues and reduce tax expenditures in the fisheries sector and increase excise taxes. The fiscal response to the shock from the war should focus on protecting vulnerable households with targeted transfers while allowing domestic fuel prices to gradually adjust. Over the medium term, when cyclical conditions allow, the authorities could usefully focus on rationalizing recurrent spending on subsidies, improving efficiency and sustainability of social benefits and strengthening fiscal institutions. Directors agreed that adopting a balance‑based withdrawal rule from the sovereign wealth fund would help preserve its real value, facilitate countercyclical fiscal policy and support medium‑term climate adaptation investments.
Directors underscored the importance of continued institutional capacity building, including strengthening revenue administration, public financial management and debt management. They encouraged the authorities to monitor risks from contingent liabilities and ensure that borrowing by state‑owned enterprises and joint ventures is consistent with development objectives and long‑term debt sustainability.
Directors emphasized the importance of advancing structural reforms to support private sector development and diversification, strengthen human capital, and build climate‑resilient infrastructure. They called for strengthening regulatory and supervisory institutions to safeguard financial stability and also encouraged continued reforms to improve governance, transparency, and the quality of national statistics, including through continued capacity building from the Fund.
read more: https://www.imf.org/en/news/articles/2026/05/14/pr26153-kiribati-imf-executive-board-concludes-2026-article-iv-consultation
