IMF Staff Completes a Visit to Solomon Islands
IMF News, March 6, 2018
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Bibliographic details
- Published: March 6, 2018
Mission overview and timing
- Press Release No. 18/74
- Visit led by Ms. Alison Stuart to Honiara February 27-March 2.
- End-of-Mission press release dated March 6, 2018.
- Statement: views are those of IMF staff and do not necessarily represent the views of the IMF’s Executive Board; this mission will not result in a Board discussion.
- Media contact: PRESS OFFICER: Raphael Anspach; Phone: +1 202 623-7100; Email: MEDIA@IMF.org
Key macroeconomic findings
- “Growth has been relatively buoyant, inflation is contained, and exchange rate and monetary policies are broadly appropriate.”
- Fiscal buffers have eroded since 2016 and domestic arrears have built up.
- The fiscal position is described as fragile, heightening the need for fiscal adjustment in 2018 and public financial management reforms.
Fiscal assessment and recommendations
- The authorities’ fiscal consolidation goal in the 2018 Budget is commended.
- Policy measures and recommendations:
- Anchor the budget on realistic revenue projections.
- Align spending with the available resource envelope.
- Take steps to eliminate arrears.
- Include a contingency reserve in the budget.
- Rebuilding a fiscal buffer in 2018 will require a temporary slowdown in government‑financed development spending to raise the cash balance to an adequate level and restore response capacity to shocks, including natural disasters.
- When pursuing expenditure restraint:
- Maintain expenditures in priority areas.
- Curb expenditures in areas which have expanded recently, for example: tertiary scholarships, constituency development funds and shipping grants.
- Encourage continued pursuit of concessional external financing for critical infrastructure consistent with debt sustainability and implementation capacity.
Revenue mobilization and tax policy
- Support for the ongoing tax review to improve revenue mobilization.
- Objectives for the tax review:
- Broaden the tax base.
- Reduce revenue volatility.
- Improve compliance.
- Eliminate ad hoc exemptions.
- Simplify the tax laws.
Public financial management and public investment
- Pressing ahead with public financial management reforms will improve spending efficiency.
- Combine public financial management reform with natural disaster mitigation measures to raise the benefits of public investment.
- Improve accountability and transparency of the constituency development funds.
Financial stability, contingency planning, and external engagement
- Authorities should closely monitor potential macroeconomic and financial stability risks from natural disasters, domestic and external shocks, including via correspondent banking relationships.
- Close regional engagement with development partners, banks, regulators, and supervisors is encouraged to assist with contingency planning.
IMF support and closing remarks
- “The IMF stands ready to support the government’s reform efforts through policy advice, technical assistance and capacity development.”
- The IMF team underscored the excellent, cooperative relationship between Solomon Islands and the IMF and thanked the authorities for their hospitality and productive discussions.
IMF Press Release No. 18/74, March 6, 2018.