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Kiribati

Political sketch

Formerly the Gilbert Islands. Independent from the United Kingdom on 12 July 1979.

Kiribati was first settled by early Austronesian-speaking peoples long before 100 A.D. Fijians and Tongans arrived about the 1300s and merged with the older groups. Spanish explorers may have sighted some of the islands in the 1500s. In 1765 John Byron, a British navigator, discovered the island of Nikunau. Europeans and Americans discovered the remaining islands by 1826. The main group was named the Gilbert Islands in the 1820s. The first permanent European settler arrived in 1837, and the first Christian mission was established on Abaiang island in 1857. The main trading commodity of the islands was coconut oil, until it was replaced by copra in the late 1800s. The waters around the Gilbert Islands were a whaling ground for U.S. and British ships from the early 1800s to the 1870s.

The British declared the Gilbert and the Ellice islands a protectorate in 1892 and annexed Ocean Island (Banaba) in 1900 after phosphate was discovered there. (Phosphates are used in fertilizers and some other chemical products.) On 12 January 1916 the islands became a crown colony. Kiritimati (Christmas) Atoll became a part of the colony in 1919. The Phoenix Islands, contested with the United States until 1979, became a part of the colony in 1937. During the Second World War, Japanese forces invaded in December 1941. U.S. forces conquered the islands in November 1943. In 1972 all the Line Islands except the three owned by the United States joined the colony, but on 1 October 1975 the Ellice Islands, whose inhabitants are Polynesians, were separated to form a distinct dependency. In 1977 the islands established internal self-government, and on 12 July 1979 they became independent as Kiribati (pronounced keer-ree-bahss).The government is democratic. Kiribati's economy is based mainly on subsistence farming and fishing; tourism is also important.

Wars since 1500

Second World War in the Pacific, 1942-1945 (Japan against United Kingdom, United States, China, Australia, New Zealand, Netherlands, and allies).

Convertibility

The sterling area:

On 2 August 1914, soon after the First World War began, the United Kingdom issued a proclamation imposing a one-month moratorium of payment for bills of exchange accepted before 4 August; an act of 3 August 1914 gave legislative sanction to the proclamation. The moratorium was subsequently extended for a month and ended on 4 November 1914. Legally the pound sterling remained convertible into gold and could be exported, but the risk to shipping from German submarines made the cost of shipment prohibitive, so the United Kingdom was in effect off the gold standard. The British government refused to include private shipments of gold in its war-risk insurance scheme. After the war, the export of gold was prohibited from 1 April 1919 under regulations that were given statutory form in 1920. On 28 April 1925 the government announced that the act would not be renewed when it expired on 31 December 1925. On 13 May 1925 the United Kingdom resumed the gold standard.

The United Kingdom abandoned the gold standard on 21 September 1931. The currencies of British colonies were almost all linked to the pound sterling through currency boards; being on a sterling-exchange standard rather than a gold-exchange standard, they followed the pound sterling off gold. Over the next few years, some former British colonies (Australia, New Zealand, South Africa) and other countries that had important trade links with the United Kingdom switched from gold to the pound sterling as their official or actual anchor. The result was termed the sterling area. The United Kingdom imposed exchange controls on 4 September 1939, the day after entering the Second World War. Most countries that were not current or former British colonies soon left the sterling area. Among the remaining countries, both current- and capital-account transactions were free of restrictions within the sterling area, but were restricted in dealings with outside countries. After the Second World War, the United Kingdom returned to the gold standard under the Bretton Woods system. It removed exchange controls on 15 August 1947, but reimposed them on 20 August 1947 after suffering a large loss of foreign reserves. Sterling had a dual exchange rate from 1961 until the United Kingdom abolished exchange controls. The sterling area remained in existence because sterling was not fully convertible. It began to crumble after the United Kingdom again abandoned the gold standard on 23 June 1972. By January 1973 the sterling area had shrunk to the British Isles and a few small British colonies; even Hong Kong had abandoned sterling as its anchor currency. The United Kingdom abolished exchange controls on 24 October 1979, ending the sterling area.

Territories occupied by Japan during the Second World War:

During the Second World War, French Indochina (Cambodia, Laos, and Vietnam) and Thailand, though occupied by Japanese troops, did not have Japanese occupation currency; rather, they paid a kind of ransom by creating domestic currency and giving it to Japan to pay for local expenses. In Burma, Hong Kong, western Indonesia (Sumatra and Java), and the Philippines, the Yokohama Specie Bank acted as the issuing agent of occupation currency and the de facto central bank. The Bank of Taiwan had the same capacity in Oceania and eastern Indonesia. The Bank of Japan was made the central bank for the Greater South East Asia Co-Prosperity Sphere by a Japanese law of July 1942, but Japanese occupation currencies were not officially all pegged to one another and to the yen until 1943, when the rate was established at 1 Japanese yen = 1 military yen (China) = 1 Burmese rupee = 1 Javanese gulden = Malayan $1 = 1 Philippine peso = 1 Thai baht = 2 Japanese Oceanic shillings, and 1 Indochinese piastre = 0.976 Japanese yen (Bányai 1974: 8). On 1 April 1942, Japan opened the Southern Development Bank (Nampo Kaihatsu Kinko), which had its headquarters in Tokyo and, from 1 July 1942, a primary regional office in Singapore (renamed Shonan by the Japanese). The Southern Development Bank became the official central bank of the Japanese occupation at various dates in 1943 and 1944 for Malaysia, Indonesia, the Philippines, and Singapore, but this was mainly an administrative change. Notes continued to be printed with the same appearance and the Yokohama Specie Bank and Bank of Taiwan continued as the agents for issuing occupation currency and regulating other banks. Although these currencies were part of a currency zone based on the Japanese yen, convertibility between any pair of currencies was restricted. Taiwan, Korea, and Manchuria were also parts of the Japanese yen currency zone through their older pegs to the yen.

Australia and territories using its currency:

Australia imposed exchange controls on 28 August 1939, shortly before the Second World War began. In January 1976 Australians became free to buy and sell gold in Australia; previously, they had been required to sell it to the central bank within one month. Australia removed most exchange controls on 12 December 1983, in conjunction with a managed float of the Australian dollar (Australia, Treasurer's announcement of 9 December 1983). On 1 July 1990 Australia abolished regulations pertaining to the export of Australian notes and coins.

Australia left the sterling area on 23 June 1972.

The monetary area of Australia included Papua and New Guinea from the First World War until Papua New Guinea left it on 1 January 1976.

Kiribati alone:

The exchange control regulations of the sterling area were later given a framework in local law through Gilbert and Ellice Islands, Exchange Control Ordinance, No. 7 of 1952. The Gilbert and Ellice Islands left the sterling area on 23 June 1972.

Other

Defaults on or restructurings of debt to the private sector (mainly from Purcell and Kaufman 1993 and Standard & Poor's 2004): None.

Banking crises (data since 1970s mainly from Caprio and Klingebiel 1999 and Frydl 1999): None.

Frankel and Rose (1996) list of currency crashes: Country not listed.

No exchange rate data in Reinhart and Rogoff (2003).

References

Primary sources:

--Laws and decrees:

Gilbert and Ellice Islands. Gazette. 1967-1979. Gilbert and Ellice Islands Colony Gazette (1967-1975); Gazette. Gilbert Islands (1975-1979). Suva, Fiji: T. Sanerive (1967-1975); Tarawa: Government Printer (1975-1979). (Successor to Great Britain, Western Pacific gazette; succeeded by Kiribati gazette.)

Great Britain (United Kingdom). Gazette. 1665-present. Oxford Gazette (1996-1666); London Gazette (1666-present). Oxford (1665-1666); London (1666-present): His/Her Majesty's Stationery Office from 1903. Online at <http://www.gazettes.online.co.uk>; as of September 2005, gazettes since 1900 are available.

Great Britain (United Kingdom). Western Pacific gazette. 1916-1967. High Commission for Western Pacific Islands. Western Pacific High Commission Gazette. Suva, Fiji: High Commission for the West Pacific. (Covers present-day Kiribati, Solomon Islands, and Tuvalu. Succeeded by Gilbert and Ellice Islands gazette.)

Kiribati. Gazette. 1979-present. Kiribati Gazette.Tarawa: Government Printer. (Successor to Gilbert and Ellice Islands gazette.)

--Publications of monetary authorities:

Commonwealth Bank of Australia. Annual report. 1912-1960. Aggregate Balance Sheet of the Commonwealth Bank of Australia (1912-1927); Balance Sheet of the Commonwealth Bank of Australia; and, Balance Sheet of the Commonwealth Savings Bank of Australia (1928-1941); Balance Sheet and Director's Report / Commonwealth Bank of Australia and Commonwealth Savings Bank of Australia (1942-1944); Report and Balance Sheets (1945-1959); Report and Financial Statements (1960). Sydney: Commonwealth Bank of Australia. (This report includes information about the Notes Issue Board during its existence from 1920-1924).

Commonwealth Bank of Australia. Bulletin. 1937-1959. Statistical Bulletin. Sydney: Commonwealth Bank of Australia.

Reserve Bank of Australia. Annual report. 1959/1960-present. Report and Financial Statements (1959/1960-1999); Annual Report (2000-present). Sydney: Reserve Bank of Australia.

Reserve Bank of Australia. Bulletin. 1960-present. Bulletin (1960-1981); Statistical Bulletin (1981-present). Sydney: Reserve Bank of Australia.

--Web site of the current monetary authority (viewed January 2005):

<http://www.rba.gov.au>

--Other publications or Web sites:

Gilbert and Ellice Islands Colony. ?-? Blue Book. Suva, Fiji.

Great Britain (United Kingdom). Report on the Gilbert and Ellice Islands. 1920-1939, 1947-1974? Colonial Office, Report for … (1919/1920-1929/1930); Colonial Office, Annual Report on the Social and Economic Progress of the People of the Gilbert and Ellice Islands Colony (1930/1931-1937); Colonial Office, Annual Report on the Gilbert and Ellice Islands Colony for the Year … (1947-1953); Colonial Office, Gilbert and Ellice Islands Colony and the Central and Southern Line Islands: Report for the Years … (1954 and 1955-1965); Commonwealth Office, Gilbert and Ellice Islands Colony and the Central and Southern Line Islands: Report for the Years … (1966/1967); Foreign and Commonwealth Office, Gilbert and Ellice Islands Colony and the Central and Southern Line Islands: Report for the Years … (1968-1974?). London: His / Her Majesty's Stationery Office. (This series was called Colonial Reports until the Second World War and Colonial Annual Reports afterwards; it was suspended during the war for most colonies.)

Main secondary sources:

Bányai, Richard A. 1974. Money and Banking in China and Southeast Asia During the Japanese Military Occupation 1937-1945. Taipei: Tai Wan Enterprises Company, Limited.

IMF ARER. 1950-present. International Monetary Fund. Annual Report on Exchange Restrictions (1950-1978), Annual Report on Exchange Arrangements and Exchange Restrictions (1979-1988), Exchange Arrangements and Exchange Restrictions: Annual Report (1989-present). Washington: International Monetary Fund. (Contains information on IMF member countries and some of their dependencies.)

Knapman, Bruce. 2001. Financial Sector Development in Pacific Island Economies, 2 v. Manila: Asian Development Bank.

Schwan, C. Frederick and Joseph E. Boling. 1995. World War II Remembered: History in Your Hands--A Numismatic Study. Port Clinton, Ohio: BNR Press.

Monetary authorities: Kiribati

Exchange rate arrangements: Kiribati