Press Release: IMF Completes the Final Review Under the Standby Credit Facility Arrangement for Solomon Islands and Approves US$ 4.85 Million Disbursement
November 28, 2011Press Release No. 11/434
November 28, 2011
The Executive Board of the International Monetary Fund (IMF) has completed the third and final review of Solomon Islands’ economic performance under the Standby Credit Facility (SCF) arrangement.
The completion of the review has enabled the disbursement of an amount equivalent to SDR 3.12 million (about US$ 4.85 million), bringing total disbursements under the arrangement to an amount equivalent to SDR 12.48 million (about US$ 19.39 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$ 19.39 million), or 120 percent of the Solomon Islands' quota.
Following the Executive Board's discussion of the Solomon Islands on November 23, Mr. Naoyuki Shinohara, Deputy Managing Director and Acting Chair, stated:
“Solomon Islands’ economy has rebounded strongly from the 2008—09 global financial crisis and the outlook remains favorable. Strong program implementation under the Standby Credit Facility arrangement has succeeded in restoring macroeconomic and financial stability. However, downside risks have increased with the uncertainty in the global outlook. The economy is also vulnerable to commodity price and demand shocks while growth remains concentrated in the commodity sector. Therefore, bolstering resilience to shocks and adopting a more inclusive growth model remain top priorities.
“Preserving a strong fiscal position and strengthening the medium-term fiscal framework would ensure fiscal sustainability. The near-term priority is to strike a balance between maintaining strong fiscal buffers and increasing spending on critical infrastructure and social priorities. Looking ahead, a key challenge is to ensure that the forthcoming mineral wealth spills over to the rest of the economy. To this end, managing resource revenues, anchoring fiscal policy to the noncommodity balance, and resuming concessional borrowing to secure development financing would be critical.
“Monetary and exchange rate policies over the past few months have helped moderate and anchor inflation and are currently appropriate. Monetary tightening would be warranted if private sector credit were to increase rapidly.
“The banking system remains profitable and adequately capitalized. The central bank should continue to strengthen the supervisory and regulatory framework of the financial system. Reforming the National Provident Fund to improve its operation and financial performance will also help preserve financial sector stability.”