Solomon Islands: Fourth Review Under the Extended Credit Facility Arrangement

IMF Staff Country Reports, April 15, 2015

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Parliamentary elections were held on November 19, 2014, electing a new government led by Prime Minister Manasseh Sogavare, representing the Democratic Coalition for Change.
The Gold Ridge mine, the country’s only gold mine, remains closed and the chances of it re-opening are limited given current gold prices.
The logging industry is being adversely affected by the depletion of forestry resources.
As a result of mining and forestry setbacks, the near-term outlook has worsened.
Lower oil prices are a windfall to consumers and producers.
Key medium-term priorities identified: diversifying sources of growth and boosting the competitiveness of the economy.
Risks to the outlook are to the downside.

Overall performance under the Extended Credit Facility (ECF) arrangement has been broadly satisfactory.
Performance criteria for end-June 2014 were met by large margins.
Indicative targets (ITs) for end September 2014 were met, except:
- Health spending ITs were narrowly missed in June and September 2014.
- Education spending ITs were narrowly missed in June and September 2014.
Despite delays, the authorities have made progress in implementing the structural reform agenda.

Medium-term fiscal stance:
- Recalibrate ambitious spending plans in line with implementation capacity, revenue envelope, financing availability, and the need to preserve fiscal buffers for resilience against shocks given the serious setback in mining prospects linked to the closure of the only gold mine.
Public financial management:
- Strengthen the quality of public spending and fiscal management by advancing Public Financial Management (PFM) reform, including improving the transparency and accountability in the use of constituency funds.
Monetary policy:
- Maintain the current monetary stance but stand ready to tighten policy if credit growth and inflationary pressures surge.
Financial sector and credit access:
- Strengthen financial regulation and supervision, including supervision of the National Provident Fund, and improve private sector access to credit.

Subjects: Banking, Credit, Expenditure, Imports, International trade, Money, Oil prices, Prices, Public financial management (PFM)
Keywords: Asia and Pacific, Australia and New Zealand, Caribbean, CR, Credit, ECF arrangement, Global, government, government value, Imports, ISCR, Oil prices, reform effort, SDR, Solomon Islands government, vulnerabilities to shock

Source: Solomon Islands: Fourth Review Under the Extended Credit Facility Arrangement (April 15, 2015).