Phosphate mining on Banaba by the British Phosphate Commission accounted for 80 per cent of exports and 50 per cent of government revenue until the mines were exhausted in 1979, the year of independence. The loss of the phosphate industry caused a huge drop in GDP; no other product or sector has yet been able to make up the lost revenue. The best prospects for diversification of the economy lie in marine resources. The country’s exclusive economic zone of some 3.6 million sq km is among the largest in the world in relation to its land area. After fishing licences, the next largest source of income is remittances from seamen employed on foreign – mainly German – ships.
A vital source of revenue is the Revenue Equalisation Reserve Fund, built up from past phosphate taxation surpluses. It was worth about A$600 million in 2014.
There were some years when the economy was buoyant in the 1990s, growing five per cent in 1998 and 9.5 per cent in 1999, with modest levels of inflation, but in the 2000s growth was generally slower, when sustainable development became a key objective. This low-lying country faces numerous development challenges, not least that 32 of 33 islands rise no higher than two metres above sea level. The economy was in recession in 2009–10, when many countries were caught in the world economic downturn; but recovered in 2010 and showed steady growth of two to three per cent p.a. in 2011–15.