2015 Index of Economic Freedom

Kiribati

overall score46.4
world rank164
Rule of Law

Property Rights30.0

Freedom From Corruption29.2

Limited Government

Government Spending0.0

Fiscal Freedom73.0

Regulatory Efficiency

Business Freedom56.8

Labor Freedom83.9

Monetary Freedom80.6

Open Markets

Trade Freedom55.4

Investment Freedom25.0

Financial Freedom30.0

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Quick Facts
  • Population:
    • 0.1 million
  • GDP (PPP):
    • $0.7 billion
    • 2.9% growth
    • 1.5% 5-year compound annual growth
    • $6,391 per capita
  • Unemployment:
  • Inflation (CPI):
    • 2.0%
  • FDI Inflow:
    • $9.0 million
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Kiribati’s economic freedom score is 46.4, making its economy the 164th freest in the 2015 Index. Its score is essentially the same as last year’s, with a change of 0.1 point reflecting improvements in fiscal freedom and labor freedom that are offset by declines in business freedom and monetary freedom. Kiribati is ranked 39th out of 42 countries in the Asia–Pacific region, and its overall score is below the world and regional averages.

Kiribati’s economy has institutionalized few of the basic principles of economic freedom. Over the past five years, the country’s low overall score, near the bottom ranks of the Index, has improved by 1.6 points. This modest advancement has occurred in just three of the 10 economic freedoms: fiscal freedom, monetary freedom, and freedom from corruption.

Kiribati is one of the countries least open to trade. Tariffs remain a significant source of revenue, removing the incentive to liberalize to a more open trading environment. Government spending supports over half of the domestic economy, and government payrolls make up a significant portion of employment. Much of the population is engaged in subsistence agriculture. The rule of law is weakly enforced, and respect for business contracts is uneven.

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Background

The Pacific archipelago of Kiribati gained its independence from Britain in 1979 and has a democratic form of government. Third-term President Anote Tong is barred from re-election. 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 using phosphates earnings, as well as foreign assistance, remittances from overseas, and revenue from 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 continue to demand 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.

Limited GovernmentView Methodology

The top individual and corporate income tax rates are 35 percent. Tax administration is erratic, and government expenditures have been more reliant on fishing license revenue. The total tax burden equals 15.7 percent of the domestic economy, but government expenditures, including transfer payments, exceed 109 percent of domestic production. Public debt is low.

Regulatory EfficiencyView Methodology

Commercial regulations are not enforced consistently and lack the capacity to spur dynamic entrepreneurial growth. Only a small share of the labor force participates in the formal economy. The government is the major source of employment. Although monetary instability is mitigated by use of the Australian dollar as the official currency, the state funds price-distorting subsidies for some agricultural products.

Open MarketsView Methodology

Kiribati’s average tariff rate was 17.3 percent as of 2006. Tariffs are an important source of revenue. The government may screen new foreign investment, and there are restrictions on foreign ownership of land. High credit costs and constrained access to financing severely impede private-sector development. A large proportion of the population remains outside the formal banking system.

Country's Score Over Time

Bar Graph of Kiribati Economic Freedom Scores Over a Time Period

Country Comparisons

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Regional Ranking

rank country overall change
1Hong Kong89.6-0.5
2Singapore89.40.0
3New Zealand82.10.9
4Australia81.4-0.6
5Taiwan75.11.2
6Japan73.30.9
7South Korea71.50.3
8Malaysia 70.81.2
9Macau70.3-1.0
10Brunei Darussalam68.9-0.1
11Kazakhstan63.3-0.4
12Thailand 62.4-0.9
13Philippines62.22.1
14Samoa61.90.8
15Kyrgyz Republic 61.30.2
16Vanuatu61.11.6
17Azerbaijan61-0.3
18Tonga59.31.1
19Mongolia59.20.3
20Fiji590.3
21Sri Lanka58.6-1.4
22Indonesia58.1-0.4
23Cambodia57.50.1
24Bhutan57.40.7
25Pakistan 55.60.4
26India54.6-1.1
27Bangladesh 53.9-0.2
28Maldives53.42.4
29Papua New Guinea53.1-0.8
30China52.70.2
31Tajikistan52.70.7
32Vietnam51.70.9
33Laos51.40.2
34Nepal51.31.2
35Micronesia49.6-0.2
36Solomon Islands470.8
37Uzbekistan470.5
38Burma46.90.4
39Kiribati46.40.1
40Timor-Leste45.52.3
41Turkmenistan41.4-0.8
42North Korea1.30.3
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