The International Monetary Fund (IMF) says Kiribati has recorded stronger economic growth than many Pacific Island countries and sharply reduced poverty, but warned that external shocks, rising fuel costs and climate vulnerabilities continue to threaten the country’s outlook.
In its latest Article IV consultation released Friday, the IMF said Kiribati’s real GDP growth is estimated at 4.3 percent in 2025, driven by consumption and public investment, before moderating to around 3.1 percent in 2026.
The IMF said average inflation climbed to 6.5 percent in 2025 following a one-off adjustment to domestic energy tariffs and renewed pressure from higher fuel and shipping costs linked to the war in the Middle East.
“Kiribati’s recent GDP growth has exceeded that of other Pacific Island countries and poverty has declined significantly,” the IMF said.
The report noted that fiscal policy in 2025 remained broadly neutral while external public debt declined to 8 percent of GDP.
However, the IMF warned that despite low public debt levels, Kiribati remains at “high” risk of debt distress because of climate-related vulnerabilities and contingent liabilities.
Executive Directors welcomed what they described as Kiribati’s “resilient economic growth” and the government’s focus on human development, which they said had contributed to “an impressive decline in poverty since 2019”.
At the same time, Directors warned that risks remain tilted to the downside due to “a protracted war in the Middle East with persistently high commodity prices, trade disruptions, potential financial market volatility, and climate shocks”.
The IMF said the government should use targeted transfers to protect vulnerable households from rising energy costs while allowing domestic fuel prices to gradually adjust.
“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,” the IMF said.
The Fund also called for “a sustained growth-friendly fiscal consolidation over the medium term” to maintain long-term debt sustainability.
The IMF urged Kiribati authorities to strengthen institutional capacity by improving public financial management, debt management, revenue administration and national statistics.
“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,” it said.
The IMF projects Kiribati’s economic growth to gradually slow to around 2 percent over the medium term, while inflation is expected to ease as the country increases its use of solar power for electricity generation.
