2014 Index of Economic Freedom

Kiribati

overall score46.3
world rank164
Rule of Law

Property Rights30.0

Freedom From Corruption29.2

Limited Government

Government Spending0.0

Fiscal Freedom71.4

Regulatory Efficiency

Business Freedom57.0

Labor Freedom83.6

Monetary Freedom81.3

Open Markets

Trade Freedom55.4

Investment Freedom25.0

Financial Freedom30.0

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Quick Facts
  • Population:
    • 0.1 million
  • GDP (PPP):
    • $0.6 billion
    • 2.5% growth
    • 0.3% 5-year compound annual growth
    • $5,973 per capita
  • Unemployment:
    • 2.0%
  • Inflation (CPI):
    • 2.0%
  • FDI Inflow:
    • $-1.7 million
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Kiribati’s economic freedom score is 46.3, making its economy the 164th freest in the 2014 Index. Its score is 0.4 point higher than last year, reflecting modest improvements in monetary freedom, labor freedom, and fiscal freedom that outweigh declines in business freedom and freedom from corruption. Kiribati is ranked 38th out of 42 countries in the Asia–Pacific region, and its overall score is below the world and regional averages.

Kiribati was first graded in the 2009 Index, and its economic freedom has advanced since then by less than 1 point. Score increases have occurred in only two of the 10 economic freedoms, including a gain of nearly 30 points in fiscal freedom. Considered a “repressed” economy throughout its history in the Index, Kiribati recorded its highest economic freedom score in 2012.

Kiribati’s public sector accounts for two-thirds of formal employment and about half of GDP. Only a small proportion of the total labor force is employed on salaries; the rest work in subsistence farming or fishing. The economy relies heavily on foreign assistance and remittances. Progress in decentralizing economic activity away from the main islands has been very limited. The financial sector remains underdeveloped, and much of the population lacks formal access to banking services.

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Background

The Pacific archipelago of Kiribati gained its independence from Britain in 1979 and is a democracy. President Anote Tong was elected to a third and final term in January 2012. Kiribati was once rich in phosphates and highly dependent on mining, but deposits were exhausted in 1979. Today, it depends on a $500 million Revenue Equalization Reserve Fund created with the profits from phosphates earnings, as well as foreign assistance, remittances from overseas, sale of fishing licenses, exports of fish and coconuts, and tourism. 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, continues to be a priority.

Rule of LawView Methodology

Property Rights 30.0 Create a Graph using this measurement

Freedom From Corruption 29.2 Create a Graph using this measurement

Official corruption and abuse are serious problems, and international donors have demanded improved governance and transparency. The judicial system is modeled on English common law and provides adequate due process rights, although the rule of law remains uneven. Traditional custom permits corporal punishment. Contracts are weakly enforced, and courts are relatively inexperienced in commercial litigation.

Limited GovernmentView Methodology

The top individual income and corporate tax rates are 35 percent. Taxation remains erratic and poorly enforced among Kiribati’s 32 islands. The overall tax burden is 20.2 percent of gross domestic income. Government expenditures make up a sizable portion of the domestic economy at 92 percent of GDP. Public debt remained low at 10 percent of GDP in the most recent year.

Regulatory EfficiencyView Methodology

The costs of launching a business and completing licensing requirements remain high. A small share of the labor force participates in the formal economy, and the public sector is the major source of employment. Although monetary instability is mitigated by use of the Australian dollar as the official currency, the government funds price-distorting subsidies for some agricultural products.

Open MarketsView Methodology

The average tariff rate was 17.3 percent as of 2006. Tariffs have been a significant source of revenue. New foreign investment may be subject to government screening. The financial sector remains underdeveloped, leaving much of the population without formal access to banking services. Constrained access to financing severely impedes entrepreneurial activity and private-sector development.

Country's Score Over Time

Bar Graph of Kiribati Economic Freedom Scores Over a Time Period

Country Comparisons

Bar Graphs comparing Kiribati to other economic country groups

Regional Ranking

rank country overall change
1Hong Kong90.10.8
2Singapore89.41.4
3Australia82-0.6
4New Zealand81.2-0.2
5Taiwan73.91.2
6Japan72.40.6
7Macau71.3-0.4
8South Korea71.20.9
9Malaysia 69.63.5
10Kazakhstan63.70.7
11Thailand 63.3-0.8
12Azerbaijan61.31.6
13Samoa61.14.0
14Kyrgyz Republic 61.11.5
15The Philippines60.11.9
16Sri Lanka60-0.7
17Vanuatu59.52.9
18Mongolia58.9-2.8
19Fiji58.71.5
20Indonesia58.51.6
21Tonga58.22.2
22Cambodia57.4-1.1
23Bhutan56.71.7
24India55.70.5
25Pakistan 55.20.1
26Bangladesh 54.11.5
27Papua New Guinea53.90.3
28China52.50.6
29Tajikistan52-1.4
30Laos51.21.1
31Maldives512.0
32Vietnam50.8-0.2
33Nepal50.1-0.3
34Micronesia49.8-0.3
35Burma46.57.3
36Uzbekistan46.50.5
37Kiribati46.30.4
38Solomon Islands46.21.2
39Timor-Leste43.2-0.5
40Turkmenistan42.2-0.4
41North Korea1-0.5
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