IMF Executive Board Staff Concludes 2021 Article IV Consultation with Solomon Islands
IMF News, January 21, 2022
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- Published: January 21, 2022
Pandemic response and public health measures
- Authorities enacted strong and timely measures to contain COVID-19, including:
- temporary suspension of all commercial international flights;
- ban on entry of non-citizens;
- strict mandatory quarantine for all returning passengers.
- No record of local transmission thus far (as of the consultations).
- Progress in advancing vaccinations has been relatively slow and should be accelerated to meet the authorities target to allow timely and safe border reopening.
Economic impact and near-term outlook
- Real GDP performance:
- Real GDP contracted in 2020.
- Growth is estimated to have remained subdued at 0.4 percent in 2021.
- Economic activity is projected to recover gradually as containment measures are relaxed and borders re-opened.
- Labor market and social outcomes:
- Labor market conditions have deteriorated.
- The pandemic is likely to have disrupted progress in poverty reduction and human development.
- Recent events and risks to outlook:
- The unrest in late November 2021 increases downside risks.
- Inflation and reserves:
- Inflation remains low (at 2 percent in November 2021) but is expected to increase, reflecting, in part, the impact of higher commodity prices.
- Foreign reserves at end-December 2021 remained robust at about 11.1 months of prospective imports, reflecting inflows from development partners, subdued imports in 2020, and the new allocation of IMF Special Drawing Rights.
Fiscal position, debt, and public finances
- Fiscal balances and debt:
- The fiscal balance is estimated to have increased to 2.9 percent of GDP in 2021, reflecting revenue loss and additional spending in response to COVID-19.
- Central government debt remained low, but is estimated to have increased to 16.2 percent of GDP in 2021.
- Executive Directors’ fiscal guidance:
- Provide targeted and transparent support to vulnerable households and businesses in the near-term.
- Once the pandemic abates, rebuild fiscal buffers through gradual fiscal consolidation while retaining the debt-based fiscal anchor.
- Encourage comprehensive tax reform, spearheaded by modernizing tax administration and introducing a value added tax.
- Establish a medium-term revenue strategy and prioritize public financial management reforms to maintain fiscal sustainability and improve governance.
- Complete and publish the audit of pandemic-related expenditures.
- Identify additional sources of financing, including for achieving the Sustainable Development Goals and climate resilience.
Monetary, financial sector, and structural policy recommendations
- Monetary and exchange rate policy:
- Directors considered the accommodative monetary policy stance and the current exchange rate regime remain appropriate.
- Encouraged maintaining a strong reserves buffer to support macroeconomic stability.
- Financial sector resilience:
- Address potential financial sector vulnerabilities proactively and continue to closely monitor non-performing loans.
- Continue the financial sector reforms agenda to increase private sector credit growth and advance financial development and inclusion.
- Strengthen the AML/CFT framework to mitigate pressures on correspondent banking relationships.
- Structural reforms to support diversification and private sector development:
- Strengthen human capital.
- Develop quality infrastructure.
- Improve the business environment.
- Advance governance and anti-corruption agendas.
- Continue to benefit from capacity development by the Fund and development partners.
Executive Board assessment
- Directors commended the authorities for their strong and timely response that prevented a local outbreak, while noting containment measures weighed on economic activity and pre-existing socioeconomic tensions were aggravated during the pandemic.
- Emphasis on accelerating vaccination efforts, providing targeted near-term support, rebuilding fiscal buffers, and accelerating structural reforms to diversify the economy as the crisis dissipates.
Selected economic indicators and key statistics (2017–2026, as presented)
- Per capita GDP (2019): US$2,215 (p)
- Population (2019): 721,455 (p)
- Poverty rate (2006): 23 percent
- Quota: SDR 20.8 million
- Real GDP:
- 2017: 5.3
- 2018: 3.9
- 2019: 1.2
- 2020: -4.3
- 2021: 0.4
- 2022 (Proj.): 2.3
- 2023 (Proj.): 3.4
- 2024 (Proj.): 2.9
- 2025 (Proj.): 3.1
- CPI (period average) and CPI (end of period) (selected values):
- CPI (period average) 2017–2021: 0.5, 3.5, 1.6, 3.0, -0.2
- CPI (end of period) 2017–2020: 2.1, 2.7, -2.5, 3.2
- Nominal GDP (in SI$ millions):
- 2017: 11,703
- 2018: 12,522
- 2019: 12,833
- 2020: 12,697
- 2021: 13,290
- 2022 (Proj.): 14,211
- 2023 (Proj.): 15,299
- 2024 (Proj.): 16,442
- 2025 (Proj.): 17,657
- 2026 (Proj.): 18,950
- Central government operations (percent of GDP, selected series):
- Total revenue and grants:
- 2017: 39.2
- 2018: 40.4
- 2019: 32.8
- 2020: 33.2
- 2021: 30.9
- 2022 (Proj.): 29.7
- 2023 (Proj.): 30.1
- 2024 (Proj.): 30.7
- 2025 (Proj.): 30.4
- 2026 (Proj.): 30.2
- Revenue:
- 2017: 30.5
- 2018: 26.4
- 2019: 24.4
- 2020: 22.3
- 2021: 23.0
- 2022 (Proj.): 24.1
- 2023 (Proj.): 24.9
- 2024 (Proj.): 24.6
- 2025 (Proj.): 24.5
- Grants:
- 2017: 9.0
- 2018: 9.9
- 2019: 6.4
- 2020: 8.8
- 2021: 8.6
- 2022 (Proj.): 6.7
- 2023 (Proj.): 6.1
- 2024 (Proj.): 5.8
- 2025 (Proj.): 5.7
- Total expenditure:
- 2017: 42.1
- 2018: 39.5
- 2019: 33.7
- 2020: 35.6
- 2021: 33.8
- 2022 (Proj.): 32.9
- 2023 (Proj.): 33.9
- 2024 (Proj.): 34.4
- 2025 (Proj.): 34.5
- 2026 (Proj.): 34.6
- Overall balance:
- 2017: -2.9
- 2018: 0.9
- 2019: -0.9
- 2020: -2.4
- 2021: -3.1
- 2022 (Proj.): -3.8
- 2023 (Proj.): -3.7
- 2024 (Proj.): -4.2
- 2025 (Proj.): -4.4
- Central government debt 1/ (percent of GDP):
- 2017: 8.4
- 2018: 8.3
- 2019: 8.2
- 2020: 13.1
- 2021: 16.2
- 2022 (Proj.): 18.3
- 2023 (Proj.): 20.7
- 2024 (Proj.): 23.1
- 2025 (Proj.): 28.3
- Macrofinancial indicators (selected):
- Credit to private sector:
- 2017: 0.3
- 2018: 4.0
- 2019: 6.0
- 2020: 5.5
- 2021: 5.0
- Broad money:
- 2017: 6.8
- 2018: 6.6
- 2019: 4.3
- Reserve money (selected years):
- 2017: 7.5
- 2018: 10.6
- 2019: -7.1
- 2020: 2.0
- 2021: 1.8
- Balance of payments (selected, in percent of GDP and levels where shown):
- Trade balance (goods and services) (levels and percent of GDP where shown):
- Levels (2017–2026): -81.7, -67.6, -161.6, -127.4, -184.6, -308.7, -317.5, -291.3, -293.9, -322.9
- Percent of GDP (2017–2025): -5.5, -10.3, -8.2, -11.2, -17.5, -16.7, -14.3, -13.4, -13.7
- Current account balance (levels 2017–2026): -62.8, -47.8, -154.0, -25.1, -85.2, -219.3, -233.6, -202.1, -200.3, -225.6
- Foreign direct investment (+ = decrease): -35.9, -15.9, -28.7, -5.7, -24.1, -50.1, -58.2, -56.5, -57.3, -61.3
- Overall balance (+ = decrease) (2017–2024): -41.2, -57.4, -73.1, -39.6, 59.6, 57.1, 33.0, 35.5
- Gross official reserves (in US$ millions, end of period):
- 2017: 576.9
- 2018: 613.1
- 2019: 574.1
- 2020: 660.6
- 2021: 700.3
- 2022 (Proj.): 640.9
- 2023 (Proj.): 588.9
- 2024 (Proj.): 565.7
- 2025 (Proj.): 547.2
- 2026 (Proj.): 513.7
- In months of next year's imports of GNFS:
- 2017: 9.3
- 2018: 9.8
- 2019: 12.4
- 2020: 13.5
- 2021: 10.9
- 2022 (Proj.): 8.5
- 2023 (Proj.): 8.1
- Exchange rate:
- EXCHANGE RATE (SI$/US$, end of period): 7.9, 8.05, ...
- Memorandum items (selected):
- Cash balance (in SI$ millions) (selected years): 343, 311, 206, 104
- in months of recurrent spending: 0.8
- SIG Deposit Account (In addition to cash balance, in SI$ millions): 140, 120
- Broader cash balance (=Cash balance+ SIG Deposit Account; in SI$ millions): 483, 451, 346, 326, 224
- in months of total spending 3/: 0.6
- Public domestic debt, including arrears (in SI$ millions) (selected years): 193, 245, 273, 452, 747, 843, 1,010, 1,244, 1,620, 2,054
- Notes:
- Sources: Data provided by the authorities; and IMF staff estimates and projections.
- 1/ Includes disbursements under the IMF-supported programs.
- 2/ Includes SDR allocations made by the IMF to Solomon Islands in 2009 and in 2021, and actual and prospective disbursements under the IMF-supported programs.
- 3/ Total spending is defined as total expenditure, excluding grant-funded expenditure.
IMF Executive Board staff press release, January 21, 2022.
