Kiribati: Selected Issues

KIRIBATI SELECTEDISSUES IMFCountryReportNo.23/226 June2023 ThispaperonKiribatiwaspreparedbyastaffteamoftheInternationalMonetaryFundasbackgrounddocumentationfortheperiodicconsultationwiththemembercountry.ItisbasedontheinformationavailableatthetimeitwascompletedonMarch31,2023. Copiesofthisreportareavailabletothepublicfrom InternationalMonetaryFundPublicationServicesPOBox92780Washington,D.C.20090Telephone:(202)623-7430Fax:(202)623-7201 E-mail:publications@imf.orgWeb:http://www.imf.org InternationalMonetaryFundWashington,D.C. ©2023InternationalMonetaryFund March31,2023 KIRIBATI SELECTEDISSUES PreparedByAnhThiNgocNguyen(APD),NicoValckx(AFR),CristianAlonso,andJoelKilpatrick(bothFAD),LisaKolovich(SPR),andMicheleFornino(STA) ApprovedBy AsiaandPacificDepartment CONTENTS CLIMATECHANGEINKIRIBATI:THEWAYFORWARD4 A.Introduction4 B.Adaptation6 C.Mitigation9 D.ClimateFinance12 E.Conclusion14References16 FIGURES 1.ConceptualDescriptionofClimateNoteandPolicyAdvice6 2.EstimatedAnnualClimateAdaptationCosts8 3.PriceIncreasesDuetoaCarbonTaxof$25perTon11 4.BurdenofHigherPricesbyQuintileforaCarbonTaxof$20perTon11 5.FundingApprovedandDisbursedbytheGCFasofMay202112 UNLOCKINGGROWTHPOTENTIALINKIRIBATI:TAKINGSTOCKOFSTRUCTURALREFORMS18 A.Introduction18 B.PotentialGrowthImpactofStructuralReforms19 C.TakingStockofRecentStructuralReformsinKiribati22 D.PolicyRecommendationsandConclusion25References27 KIRIBATI FIGURES 1.EconomicPerformanceofKiribatiandItsPeers19 2.GrowthandPovertyReductionUnderAlternativeDevelopmentScenarios21 3.TheNeedforReformsinLabor,CapitalandInfrastructureMarkets23 4.EconomicDiversification26 TABLE 1.DevelopmentPlan,2020-202322 APPENDICES I.ModelInputParametersforLong-TermGrowthCalculations,(2021-2050)29 II.MajorInfrastructureProjectsImplementedinKiribati30 GENDEREQUALITYINKIRIBATI:ACHIEVEMENTSANDPROSPECTS31 A.Context31 B.ImpactOfGenderEqualityonGrowth34 C.Policies:ProgressinThePastandOptionsfortheFuture37 D.Conclusion39References40 BOX 1.ConstructionofGenderInequalityIndex(GII)forKiribati35 FIGURES 1.GenderComparisoninLaborOutcomes33 2.ResultsofGrowthDecompositionModel36 3.ImprovementofLegalFrameworkonGender38 TABLE 1.SelectedIndicatoronGenderEquality32 FISHERIESDEVELOPMENTSINKIRIBATI:SUSTAINABILITYANDGROWTH42 A.Introduction42 B.DevelopmentsinCatchVolumesandSustainability43 C.MarineProtectedAreas(MPAs)andFisheryManagementRules48 D.ThePIPA–Kiribati’sMarineProtectedArea50 2INTERNATIONALMONETARYFUND KIRIBATI E.ConclusionsandPolicyRecommendations52References53 BOX 1.AssessingSustainabilityinFisheriesManagement46 FIGURES 1.TunaCatch45 2.SustainabilityofTunainWCPandKiribati47 3.CurrentMPACoverageinMajorFAOFishingAreas48 INTERNATIONALMONETARYFUND3 CLIMATECHANGEINKIRIBATI:THEWAYFORWARD1 ClimatechangerepresentsathreattomanysmallislanddevelopingstateslikeKiribati.ThisnotesummarizesthemainwaysinwhichclimatechangemaynegativelyaffecttheeconomyofKiribati.ItthenshowshowKiribatimaycopewiththesenegativeeffectsbyimplementingadaptationprojects,aswellasbycontributingtoglobalmitigationefforts.Finally,thenotedescribessomeissuesrelatedtoclimatefinanceandhowauthoritiesofKiribatimaydirecttheireffortsinthemostproductivewaytoensurethatclimate-relatedprojectsobtaintheproperfinancialbackingandarecarriedouttofruitioninatimelyfashion. A.Introduction 1.Thenegativeeffectsofclimatechangethreatenthefutureoftheworldeconomy.AccordingtothelatestIntergovernmentalPanelonClimateChangeAR-6Report(IPCC,2022),thenegativeeffectsofanthropogenicclimatechangehavealreadystartedtomaterializeacrosstheglobe.Theglobalaveragetemperaturewillalmostcertainlyriseto1.5degreeCelsiusabove pre-industriallevelsinthecomingdecades,eveniftheworldeconomyweretoimplementpoliciestoaggressivelyreducecarbonemissionsstartingfromtoday.Accordingly,theriskofrunawayclimatechange,whichmostscientistspredicttooccuriftheglobalaveragetemperatureweretoincreasetoandabove2degreesCelsiusabovepre-industriallevels,isdeemedveryhigh. 2.Againstthisbackdrop,smallislanddevelopingstates(SIDS)areinaprecariousposition.Thisisbecausetheirlocationandgeographicfeaturesmakethemvulnerabletoclimateinduceddisastersliketidalinundation,tropicalcyclones,droughts,andheatwaves.Inaddition,economiesofSIDSareoftenheavilydependentonnaturalresources,forinstancegroundwaterandfisheries,whichcouldbenegativelyaffectedbysomeofthesenovelnaturalprocessesassociatedtoclimatechangelikesealevelrise.Finally,thesizeandcurrentdevelopmentoftheireconomieshindereffortsbothtoadaptandtorecoverfromnaturaldisasters. 3.GlobalchangesinweatherpatternsmayleadtoahostofhazardsforKiribati,albeitagreatdealofuncertaintyremainsinmodel-basedprojectionsofrisk.Arisingglobalaveragetemperaturenaturallyleadstomorefrequentoccurrenceofdangerousheatwaves,includingmarineheatwaves—periodsofabnormallyhighseatemperature—whichintensifyandleadtoseverelynegativeeffectsonmarineecosystemswithinKiribati’sexclusiveeconomiczone.DroughtsontheatollsofKiribatiareprimarilymeteorological,meaningthattheyreflectaprolongedlackofrainfallandthusrequireprojectionsoffutureprecipitationpatte