Kiribati - Joint World Bank-IMF Debt Sustainability Analysis

Overview & Synopsis

Kiribati debt remains sustainable but at high risk of debt distress, unchanged from the 2025 Article IV Debt Sustainability Analysis. While the mechanical signals indicate a moderate risk of debt distress, judgment was exercised to extend the projection horizon to 20 years to adequately capture climate-related vulnerabilities that can lead to large and persistent breaches of the indicative threshold/benchmark with high probability. Under the baseline scenario, the present value of public and publicly guaranteed (PPG) external debt-to-GDP and overall PPG debt-to-GDP ratios are expected to breach their respective indicative threshold/benchmark starting in 2038 and 2044. Stress tests confirm vulnerability to contingent liabilities and growth shocks. Despite the high risk of debt distress, Kiribati’s debt is assessed to be sustainable due to several mitigating factors: (1) grant-only status for financing from multilateral development banks; (2) availability of cash buffers and sovereign wealth fund withdrawals that can finance deficits; and (3) in the baseline, the breaches occur only in the long term. Continued access to highly concessional financing to support the country’s large development needs is needed to contain the risk of debt distress.