Second Economic Reform Development Policy Operation

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This second operation in a series of two development policy operations (DPOs) aims to support improved public services and fiscal sustainability. Fiscal sustainability has been undermined by weak growth, volatile fishing license receipts, and deteriorating revenue performance in the context of substantial investment needs to adapt to climate change impacts and improve the delivery of basic public services. The Kiribati Economic Reform Plan (ERP) outlines a strategy for restoring sustainability in government finances. Developed with World Bank technical assistance in 2011, significant progress has already been achieved against the plan, supported by the First Economic Reform Development Policy Operation, which disbursed in March, 2014. Major gains under the plan and supported by the first operation include: i) clearing of Government overdraft debt; ii) adoption and effective implementation of a debt policy to constrain uncoordinated non-concessional borrowing; iii) passage of a new SOE Act providing the legislative basis for improved SOE performance; iv) adoption of a new fisheries policy, to guide improved compliance with regional regulations and increased value of catch; and v) passage of a new telecommunications act providing a foundation for private participation in the telecommunications sector. This operation supports continued progress against the priority reform areas identified in the economic reform plan. Specifically, the operation will support: i) improvements in the management of fisheries revenues; ii) reforms to the management of RERF assets to achieve stronger alignment with long-term objectives and more appropriate balance between risk and return; iii) implementation of key provision of the SOE Act, including those relating to financial reporting, governance, transparency of subsidies, and continued restructuring of the SOE portfolio; and iv) further steps towards the introduction of private participation and competition into the telecommunications sector.