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- GDP (PPP):
- $0.2 billion
- 3.8% growth
- 1.7% 5-year compound annual growth
- $1,713 per capita
- Inflation (CPI):
- FDI Inflow:
Kiribati is one of the least developed Pacific Island nations. The public sector continues to dominate economic activity, accounting for two-thirds of employment and over 80 percent of GDP. Budgetary pressure has undermined economic growth, and the economy is heavily dependent on foreign assistance, remittances, and an increasingly important tourism sector.
Economic Freedom Snapshot
- 2016 Economic Freedom Score: 46.2 (down 0.2 point)
- Economic Freedom Status: Repressed
- Global Ranking: 165th
- Regional Ranking: 38th in the Asia–Pacific Region
- Notable Successes: Monetary Freedom
- Concerns: Rule of Law, Open Markets, and Regulatory Efficiency
- Overall Score Change Since 2012: –0.7
The Pacific archipelago of Kiribati gained its independence from Britain in 1979 and is a democracy. With presidential elections scheduled for early 2016, third-term President Anote Tong is barred from reelection. Economic activity in Kiribati once centered on the mining of phosphates, but deposits were exhausted in 1979. However, a $500 million Revenue Equalization Reserve Fund created with mining revenues continues to provide significant revenue. Reliance on foreign assistance, remittances from overseas, fishing licenses, exports of fish and coconuts, and tourism is also heavy. Crippling algae in the corals surrounding Kiribati seriously threaten the fishing industry, and preservation of the coral ecosystem, the South Pacific’s largest marine reserve, remains a priority.
Official corruption and abuse are serious problems, and international donors continue to push for improved governance and transparency. The judicial system is modeled on English common law and provides adequate due process rights, but the rule of law remains uneven across the country. Traditional customs permit corporal punishment. Contracts are weakly enforced, and courts are relatively inexperienced in commercial litigation.
The top individual income and corporate tax rates are 35 percent. Taxation remains erratic and poorly administered. The total tax burden is estimated to equal 14.9 percent of total domestic income. Government spending amounts to 96.6 percent of GDP. Large reserves held in a sovereign wealth fund have helped to cushion the effects of the global downturn. Public debt amounts to less than 10 percent of GDP.
The costs of launching a business and completing licensing requirements remain high, discouraging new investment. A small share of the labor force participates in the formal economy, and the public sector is the major source of employment. Monetary instability is mitigated by use of the Australian dollar as the official currency, but the government funds price-distorting subsidies for some agricultural products such as coconut oil.
Kiribati’s average tariff rate was 15.9 percent as of 2006. The government relies heavily on tariffs for revenue. New foreign investment may be screened, and foreign ownership of land is restricted. With a large part of the population remaining outside the formal banking system, constrained access to financing severely impedes entrepreneurial activity and development of the private sector.