2020 Index of Economic Freedom

Kiribati

OVERALL SCORE45.2
WORLD RANK172
Rule of Law

Property Rights47.5

Judicial Effectiveness34.2

Government Integrity24.3

Government Size

Tax Burden72.4

Government Spending0.0

Fiscal Health99.0

Regulatory Efficiency

Business Freedom40.6

Labor Freedom62.9

Monetary Freedom82.2

Open Markets

Trade Freedom23.8

Investment Freedom25.0

Financial Freedom30.0

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Quick Facts
  • Population:
    • 0.1 million
  • GDP (PPP):
    • $0.2 billion
    • 2.3% growth
    • 3.5% 5-year compound annual growth
    • $2,086 per capita
  • Unemployment:
    • 30.6%
  • Inflation (CPI):
    • 1.9%
  • FDI Inflow:
    • $0.6 million

Kiribati’s economic freedom score is 45.2, making its economy the 172nd freest in the 2020 Index. Its overall score has decreased by 2.1 points due to a plunge in the trade freedom score. Kiribati is ranked 41st among 42 countries in the Asia–Pacific region, and its overall score is well below the regional and world averages.

The economy of Kiribati generally has been considered repressed since its Index grading began in 2009. GDP growth over the past five years has been healthy, however, driven in part by budget support from mining revenues and foreign aid.

A shortage of skilled workers, weak infrastructure, and remoteness from international markets constrain greater development and economic freedom in Kiribati. The public sector dominates economic activity through ongoing infrastructure projects and inefficient state-owned enterprises. Economic growth is further undermined by regulations that hinder private-sector development. The financial sector remains underdeveloped, leaving much of the population without formal access to banking services.

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Background

Comprised of 33 scattered coral atolls, Kiribati has few natural resources and is one of the least-developed Pacific Island countries. Kiribati gained independence from the United Kingdom in 1979, and its government functions democratically. Taneti Maamau of the Tobwaan Kiribati Party was elected president in 2016 after 12 years of rule by Anote Tong of the Boutokaan Te Koaua. Economic activity once centered on the mining of phosphates, but those deposits have been exhausted. A $500 million fund created with mining revenues continues to provide significant budget support. Kiribati relies on foreign assistance, emigrants’ remittances, fishing, coconut exports, and tourism. Crippling algae in the corals are a serious threat to the fishing industry.

Rule of LawView Methodology

Property Rights 47.5 Create a Graph using this measurement

Judicial Effectiveness 34.2 Create a Graph using this measurement

Government Integrity 24.3 Create a Graph using this measurement

Property rights are weak. The judicial system, modeled on English common law, provides adequate due process rights, but the rule of law remains uneven across the country. Contracts are weakly enforced, and courts are relatively inexperienced in commercial litigation. Official corruption, nepotism, and other abuses of privilege are serious problems. Government oversight institutions charged with implementing anticorruption measures are inadequately resourced and ineffective.

Government SizeView Methodology

The top individual income and corporate tax rates are 35 percent. Taxation remains erratic and poorly administered. The overall tax burden equals 17.5 percent of total domestic income. Government spending has amounted to 125.7 percent of the country’s output (GDP) over the past three years, and budget deficits have averaged 1.5 percent of GDP. Public debt is equivalent to 21.9 percent of GDP.

Regulatory EfficiencyView Methodology

Weaknesses in governance, regulations, and access to credit exacerbate the geographical hurdles that businesses face. Fishing earnings have recently been at record highs but are volatile. The labor market lacks dynamism. Although monetary instability is mitigated by Kiribati’s use of the Australian dollar, the government funds price-distorting subsidies for some agricultural products.

Open MarketsView Methodology

The total value of exports and imports of goods and services equals 105.2 percent of GDP. The average applied tariff rate is 28.1 percent, and import and export licensing add to the cost of trade. A modern investment framework is not in place. High credit costs and constrained access to financing severely impede entrepreneurial activity and development of the private sector.

Country's Score Over Time

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Regional Ranking

RANK COUNTRY OVERALL CHANGE
1Singapore89.40.0
2Hong Kong89.1-1.1
3New Zealand84.1-0.3
4Australia82.61.7
5Taiwan77.1-0.2
6Malaysia 74.70.7
7South Korea741.7
8Japan73.31.2
9Macau70.3-0.7
10Kazakhstan69.64.2
11Thailand 69.41.1
12Indonesia67.21.4
13Brunei Darussalam66.61.5
14Philippines64.50.7
15Fiji63.41.2
16Kyrgyz Republic 62.90.6
17Bhutan62.1-0.8
18Samoa62.1-0.1
19Vanuatu60.74.3
20China59.51.1
21Vietnam58.83.5
22Tonga58.81.1
23Papua New Guinea58.40.0
24Sri Lanka57.41.0
25Cambodia57.3-0.5
26Uzbekistan57.23.9
27Maldives56.53.3
28India56.51.3
29Bangladesh 56.40.8
30Mongolia55.90.5
31Laos55.5-1.9
32Pakistan 54.8-0.2
33Afghanistan54.73.2
34Nepal54.20.4
35Burma540.4
36Solomon Islands52.9-1.7
37Tajikistan52.2-3.4
38Micronesia520.1
39Turkmenistan46.5-1.9
40Timor-Leste45.91.7
41Kiribati45.2-2.1
42North Korea4.2-1.7
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