Climate Change Impact and Structural Reforms in Kiribati
KIRIBATI
23.
The main challenges in access to CFs are the procedures required to secure and
disburse climate funding. The process of obtaining Direct Access (DA) status, which helps directly
assessing climate fundings, requires fulfilling hundreds of criteria on Fiduciary Standards,
Transparency and Accountability, compliance with Anti-Money Laundering/Combating Financing of
Terrorism (AML/CFT) requirements, Environmental and Social Safeguards (ESS) and Gender Policy
issues. These stringent requirements on Public Financial Management (PFM) and Public Investment
Management (PIM), can make it overwhelmingly complicated and time-consuming for PICS,
including Kiribati, to obtain direct access status at any of the largest CFs (Dabla-Norris et al., 2021).
Moreover, the experience of peer nations in the PIC group shows that the effort may not be
reflected in expanded funding access. 10 In addition, even if the status was granted, each project
would need significant background work to ensure, among other things, that proper cost-benefit
analysis is undertaken, and progress measured using quantitative indicators. This may entail
significant ongoing expenses to ensure that projects are indeed brought to fruition. While helpful to
ensure the effective use of funds, the stringent criteria and requirements required by CFs might have
adverse effect due to high compliance cost, especially for countries with relatively severe institutional
and human resource capacity constraints like Kiribati, and should be streamlined (Dabla-Norris et al.,
2021).
24.
In the short-term, GoK should seek to obtain funding either through bilateral or AE
financing. Kiribati should take a strategic, comprehensive, and coordinated view of how best to
direct climate proposals to bilateral or multilateral sources. Specifically for multilateral sources, while
MDBs are under a lot of pressure to coordinate climate projects, they are better equipped to
navigate the complex requirements of CFs to ensure a higher likelihood that large climate projects
are approved for financing and successfully implemented. Experience of PICs suggests that regional
institutions are relatively more successful at obtaining funding for projects of smaller size and scope.
The experience garnered by working with bilateral donors and AEs could serve as the steppingstone
for future efforts to gain direct access status at CFs.
25. In fact, Kiribati has been following this strategy and effectively leveraging on bilateral
support and AEs for climate funding. Kiribati has been receiving external grants from bilateral
donors, especially from Australia, the EU, Japan, and New Zealand, for its infrastructure projects. It
also receives funding support from MDBs, with the ADB and the WB the two largest donors. The
South Tarawa Water Supply Project is the example of a multilateral-funded project approved in the
last few years with contributions from the GCF.11 This medium-scale project is based on a three-way
10 An example is the recent experience of the Fiji Development Bank, which obtained DA at the GCF in 2017 for
projects up to US$10 million, and of the Cook Islands Ministry of Finance and Economic Management, which
obtained DA at the GCF in 2018 for projects up to US$50 million. As of end-May 2021, only one project of the Fiji
Development Bank has been approved, but no disbursements have been made. For more details, see the discussion
in Dabla-Norris et al. (2021).
11 The focus of this project is both on adaptation and on mitigation, with a view to provide inhabitants of Tarawa with
safe and clean drinking water by means of desalination and by powering the plant with solar panels. This
infrastructure will not only enhance the resilience of Kiribati to climate-change induced depletion of its underground
water resources, but also lower carbon emissions because residents will no longer have to boil water to make it
potable.
INTERNATIONAL MONETARY FUND
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