Credit mtcurado/iStock
Credit mtcurado/iStock
Credit mtcurado/iStock
Credit mtcurado/iStock
A challenge faced by all countries, but particularly by small developing states (SDS), is to implement public expenditures that are climate smart. SDS, 80 percent of which are island economies, are disproportionately vulnerable to climate change and natural disasters, are heavily reliant on external assistance, and have extremely limited human resources and institutional capacity.
A starting point for SDS is to introduce a simple operational definition of what constitutes climate-related spending. This enables identification of the quantum of budgets and outturns allocated to climate-related projects and activities, can facilitate external financing, and enables tracking of trends over time (as called for in Dimension C.4.a in the IMF’s Climate Public Investment Management Assessment (C-PIMA), which asks whether planned climate-related public investment expenditures, sources of financing, outputs, and outcomes are identified in the budget and related documents, monitored, and reported).
Kiribati has been producing reports that link public expenditures to national climate change goals. These reports have been produced to meet occasional requests from the President for high level information on Kiribati’s climate change strategies and activities, but can be further integrated into annual planning, budgeting, and reporting. During a recent workshop on Climate PFM organized by the IMF’s Pacific Technical Assistance Center (PFTAC), representatives from the Ministry of Finance (MoF) in Kiribati explained how they developed the capacity to produce these reports.
Starting in 2017, the MoF has identified projects in the Development Budget that contribute to climate change adaptation, climate change mitigation, or disaster risk management (DRM). The information is contained in an EXCEL spreadsheet maintained by the Budget Department. Line ministries have been trained to input the data using a drop-down menu. The same template is applied to government funded projects and projects implemented by development partners. The MoF is readily able to extract consolidated reports.
As of January 2026, the spreadsheet contained details of around 90 projects and budget lines categorised as climate-related, of which 56 were defined as adaptation, 24 as mitigation, and 11 as DRM. The spreadsheet contained actual spending on each project in 2024, with 2025 full year expenditure data to be added as available.
The information is used for ad hoc reporting within the government and is not yet included in the Annual Budget Book or other budget documents. PFTAC technical assistance has encouraged Kiribati to further integrate climate considerations into the budget cycle by publishing a summary of climate-related investment spending with the annual budget and reporting outturn in the end-of-year budget implementation report.
Kiribati's experience demonstrates a simple but methodical strategy for integrating budgets with climate change goals and activities, beginning with an analysis of information available from the existing project classification of expenditures. Given that capital spending in the development and domestic budgets is where the bulk of climate-related spending takes place in small island economies, and the long life and exposure of the assets to climate change, it makes sense to focus initial efforts in this area.
This approach can be deepened by adding data on the proposed budget allocations for each project to integrate a climate focus in the budget planning and formulation stage, making it more likely that the information will influence decision making on project selection and allocations. The information could also be progressively developed by adding information on project outputs and outcomes (e.g. for a solar power project, the number of kilowatt hours to be produced and the anticipated reduction in emissions; for a new highway the number of kilometres to be constructed to flood resilient standard).ii Eventually, the information could be incorporated in a Climate Budget Statement with narrative on the country’s climate change strategies, commitments and targets and discussion of how fiscal policies and the initiatives in the next budget contribute to achieving government priorities. This would promote engagement and debate on climate policies, reduce the likelihood that new public investment projects are unduly exposed to natural hazards, and strengthen accountability for spending and results.
For small island economies, a more detailed and complex approach that involves climate tagging in the chart of accounts and the financial management information system at the budget execution stage, and covering the entire budget, recurrent and development, should carefully weigh additional benefits with the associated costs in terms of resources and demands on the MoF and line ministries. It would need to be justified by the value of the additional information generated for planning and decision making, compared to the information that can be compiled from a simple climate expenditure tracking system using existing budget classifications.
