The Kiribati government has been toppled after the opposition voted against a motion of confidence introduced by President Teburoro Tito.
Mr Tito's motion on the supplementary budget was defeated by 21 to 19 votes, forcing the dissolution of parliament.
A general election is to be held in 2 months.
The budget included a controversial lease payment to a French aircraft manufacturer of over 700-thousand US dollars for an ATR72 plane and compensation payments for hundreds of I-Kiribati people who went on strike more than 20 years ago.
The opposition leader, Taberannang Timeon, says President Tito's failed political gamble was a last ditched attempt to divide the opposition.
"They wanted to test our solidarity because if they succeeded in dividing the opposition they'd won the day. There was one seat still vacant.... the minister for labour. So if they managed to divide us then they would have managed to entice one of us to fill their seat. That means the numbers... they need one more and then we would be equal. The president miscalculated our solidarity."
Opposition leader Taberannang Timeon.
Kiribati is now under a caretaker administration comprising of the Speaker of Parliament , the Chief Justice and chairman of the Public Service Commission.