The International Monetary Fund's Executive Board has concluded its Article IV consultation with Kiribati, assessing that the economy remains resilient in the near term but faces high downside risks from the war in the Middle East, trade disruptions, tighter financing conditions and climate shocks. Real GDP growth is estimated at 4.3 percent in 2025, supported by consumption and public investment, before moderating to around 3.1 percent in 2026 and easing toward 2 percent over the medium term. Inflation rose to 6.5 percent in 2025 after a one off domestic energy tariff adjustment and renewed pressure from higher fuel and shipping costs. Although external public debt fell to 8 percent of GDP, the IMF still assesses Kiribati as at high risk of debt distress because of climate related vulnerabilities and implicit contingent liabilities. Directors called for growth friendly fiscal consolidation over the medium term to rebuild buffers and protect debt sustainability while preserving priority spending. Recommended measures include gradually raising revenue, reducing tax expenditures in the fisheries sector, increasing excise taxes, and responding to the oil price shock through targeted transfers while allowing domestic fuel prices to adjust gradually. Over time, the authorities were encouraged to rationalize recurrent subsidy spending, improve the efficiency and sustainability of social benefits, strengthen revenue administration, public financial management and debt management, and adopt a balance based withdrawal rule for the Revenue Equalization Reserve Fund to preserve its real value and support countercyclical policy and climate adaptation investment. Directors also urged stronger oversight of contingent liabilities and borrowing by state owned enterprises and joint ventures, alongside reforms to support private sector development, financial supervision, governance and national statistics.

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