Press Release: IMF Executive Board Completes Second Review Under Stand-By Arrangement with Solomon Islands, Approves US$4.98 Million Disbursement
June 30, 2011Press Release No. 11/267
June 30, 2011
The Executive Board of the International Monetary Fund (IMF) yesterday completed the second review of Solomon Islands' economic performance under a program supported by an 18-month arrangement under the Standby Credit Facility (SCF). The completion of the review enables the immediate disbursement of an amount equivalent to SDR 3.12 million (about US$4.98 million), bringing total disbursements under the arrangement to an amount equivalent to SDR 9.36 million (about US$14.95 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$19.93 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 authorities are to be commended for their strong program performance under the Standby Credit Facility arrangement. The macroeconomic outlook remains favorable, although inflation is rising due to global food and fuel prices. The authorities are committed to consolidating the improvements in the fiscal and external positions to enhance the resilience of the economy.
“The 2011 Budget reflects the authorities’ commitment to strengthen public finances while promoting infrastructure development. The authorities should remain steadfast in strengthening revenue administration, cash and debt management, budget processes, and expenditure prioritization. It will also be important to implement the new resource-based tax regime and adopt fiscal responsibility provisions. A transparent and predictable mining regime is critical to attracting foreign investment.
“In view of the high level of banks’ excess reserves, it would be prudent for the central bank to mop up liquidity and stand ready to tighten monetary conditions if banks begin to expand credit aggressively. Greater exchange rate flexibility can help mitigate the impact of fuel and food import prices on inflation, and the recent decision to let the currency appreciate modestly is in the right direction.
“The banking system remains well-capitalized and profitable, but the central bank should continue on-site examinations and enforce prudential regulations. Strengthening banking supervision and reforming the National Provident Fund are crucial to ensuring financial sector stability.”