Kiribati Fifth Economic Reform Development Policy Operation

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The development objective of the Fifth Economic Reform Development Policy Operation for Kiribati is to: (i) improve public financial management with respect to financial and physical assets; and (ii) support the prospects for inclusive growth by strengthening fisheries sector management and improving access to basic services. The first pillar, on public financial management, includes actions to strengthen the management of Kiribati’s sovereign wealth fund, improve cash management, and address weaknesses in the public investment cycle, including procurement and asset maintenance. This pillar consolidates and complements measures supported in previous series on the sovereign wealth fund, debt policy and management, and state-owned enterprise governance. Over time and in conjunction with other measures, these actions should contribute to improvements in the quality of public spending. The second pillar, on inclusive growth, includes actions to strengthen governance of fisheries, one of the few sectors with significant potential to drive growth and employment creation in Kiribati. This pillar also includes actions to expand access to safe drinking water and establish a legislative framework for early childhood care and education – basic services that are crucial building blocks for a healthy and educated workforce. This pillar complements measures supported in previous series on fisheries revenue, improving access to electricity for the poor, and telecom sector liberalization and service expansion in the outer islands. As part of the ongoing policy dialogue with the Bank and other budget support donors, the Government of Kiribati (GoK) has published its 2019 Fiscal Strategy (the first time a fiscal strategy has been made public), and the Strategy includes a commitment to no further step changes to salaries in the 2019 budget, and not until the impacts of the 2018 decision have been reviewed. The Kiribati Development Plan 2016–19 (KDP) identifies key priority areas for the medium term, with the overarching vision, Towards a better educated, healthier, more prosperous nation with a higher quality of life. The KDP focuses on six priority areas: (i) human resource development; (ii) economic growth and poverty reduction; (iii) health; (iv) environment; (v) governance; and (vi) infrastructure. The priorities in the KDP have been reinforced and set within a longer-term development strategy in the Kiribati 20-Year Vision 2016-2036 (“KV20”), finalized earlier this year following a series of community consultations. KV20 is structured around four pillars: (i) wealth – natural, human and cultural capital; (ii) peace and security; (iii) infrastructure for development; and (iv) governance. The first pillar of the proposed operation on strengthening public financial management (PFM) with respect to financial and physical assets is closely aligned with the economic growth and poverty reduction priority of the KDP, and with the wealth pillar of KV20. The second pillar of the proposed operation on supporting inclusive growth through fisheries reform and better basic services is closely aligned with the human resource development, economic growth and poverty reduction, health and infrastructure priorities of the KDP, as well as with the wealth and infrastructure for development pillars of KV20.