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Definition: Revenue Equalization Reserve Fund
The Revenue Equalization Reserve Fund (RERF) is a state owned fund that was established in 1956 to provide a sustained source of financing government expenditure. Phosphate mining accounted for about 50% of the revenues of the republic of Kiribati, a Pacific Island. In anticipation of depleting phosphate deposits, the British colonial administration set up the RERF to manage revenues from phosphate mining.
During its initial years, the fund was capitalized by tax revenues and royalties earned from phosphate mining. Post 1979, after the depletion of phosphate reserves, revenues from the fishing industry have been the major source for the fund. The geographical barriers to growth as well as the high exposure to external risks were the main considerations in setting up the fund to assist the government of Kiribati against revenue volatilities.
The RERF is controlled and managed by the government of Kiribati, which is the sole trustee as well as beneficiary of the fund. A committee of senior officials, including the Minister of Finance, administer the fund and are required to file reports on its operations on a quarterly and annual basis. The RERF is managed by two brokerage funds which are monitored by a custodian. The government budget as well as the RERF is integrated. As such any surplus during a fiscal year is deposited into the RERF. The government of Kiribati finances any fiscal deficits via the RERF.