IMF Executive Board Completes First Review Under Standby Credit Facility Arrangement with Solomon Islands and Approves US$4.83 Million DisbursementPress Release No. 10/444
November 17, 2010
The Executive Board of the International Monetary Fund (IMF) today completed the first review of Solomon Islands' economic performance under a program supported by an 18-month Standby Credit Facility (SCF). The completion of the review enables the immediate disbursement of an amount equivalent to SDR 3.12 million (about US$4.83 million), bringing total disbursements under the arrangement to an amount equivalent to SDR 6.24 million (about US$9.66 million).
The SCF arrangement was approved on June 2, 2010 (see Press Release No. 10/223) for an amount equivalent to SDR 12.48 million (about US$19.3 million) or 120 percent of the Solomon Islands' quota.
Following the Executive Board's discussion on Solomon Islands, Mr. Naoyuki Shinohara, Deputy Managing Director and Acting Chair, stated:
“The Solomon Islands has benefitted from sound macroeconomic policies underpinning its economic reform program supported by a Standby Credit Facility arrangement. Program performance has been generally good, and economic prospects have improved with a pickup in exports and lower inflation. Strong adherence to the program and further progress in structural reforms would help anchor macroeconomic stability and lay the foundation for diversification of the economy.
“Fiscal performance has been broadly in line with the program, with strengthened cash and budget management facilitating smoother fiscal operations. Further steps are also being taken to settle external debt arrears under the Honiara Club Agreement. Ensuring that the 2011 budget is consistent with program commitments would help consolidate earlier gains. Longer-term fiscal sustainability will depend on further strengthening revenue administration, cash and debt management, budget processes, and expenditure prioritization. Developing a transparent and predictable tax regime for natural resources and adopting fiscal responsibility provisions, as committed under the program, would also bolster the fiscal framework.
“Large external inflows have contributed to a higher-than-anticipated buildup in international reserves and a rapid increase in domestic liquidity. Although inflation remains low, the central bank should remain vigilant and stand ready to exit its accommodative policy stance if inflationary pressures intensify.
“Financial sector health is improving but the authorities should continue to focus on enhancing the oversight and risk management of financial institutions. Reforming the National Provident Fund is also important for maintaining financial stability.”