Washington, DC: On June 29, the Executive Board of the International Monetary Fund (IMF) completed the Article IV Consultation for Solomon Islands.[1]
Economic activity in 2025 exceeded staff expectations. The economy is estimated to have grown by 3.5 percent, following 3.0 percent growth in 2024, supported by strong gold production, agricultural output, and progress in infrastructure projects. Inflation averaged 2.7 percent. Staff estimates that the current account balance surged to a surplus of 5.6 percent of GDP in 2025, driven by gold and agricultural exports, while the fiscal deficit is estimated to have widened to 3.9 percent of GDP, reflecting continued spending pressures and progress in externally financed infrastructure projects.
The Middle East war is expected to weigh on growth and heighten inflationary pressures in 2026. Growth is projected to slow to 2.6 percent, while inflation is expected to rise to an average of 5.4 percent, reflecting higher fuel prices. The current account is projected to return to a deficit of 3.4 percent of GDP, weighed by fuel and food import prices. Staff expects the fiscal deficit to widen to 4.1 percent of GDP, amid significant budget implementation risks arising from depleted cash reserves, revenue uncertainty, and limited investor capacity to absorb government bonds.
Risks to the outlook are firmly tilted to the downside, notably from prolonged geopolitical tensions, domestic political instability, and budget financing constraints. Upside risks include a further expansion of gold mining—if supported by robust resource management and limited fiscal incentives—and additional donor support.
Executive Board Assessment[2]
In concluding the 2026 Article IV consultation with Solomon Islands, Executive Directors endorsed staff’s appraisal, as follows:
Staff projects growth to soften and inflationary pressures to rise in 2026. Growth is expected to remain moderate over the medium term, supported by agriculture, mining, and infrastructure projects, but constrained by declining logging activity, limited diversification, and weak governance. Current account deficits are projected to persist, while strong gold exports and continued aid inflows are expected to support rising reserve coverage. Solomon Islands’ external position in 2025 was assessed as broadly in line with fundamentals. Staff expects continued fiscal deficits leading to higher public debt, while the risks of external debt distress and overall debt distress remain low and moderate, respectively. Risks to the outlook are firmly tilted to the downside, notably from prolonged geopolitical tensions, domestic political instability, and budget financing constraints.
Reducing fiscal deficits and rebuilding liquidity buffers is critical at this juncture. Depleted cash balances and rising debt underscore the need for realistic, fully financed budgets to avoid disruptive budget freezes. Staff’s advice—capping domestically financed deficits while steadily rebuilding cash balances—therefore remains appropriate. Reallocating resources away from the CDFs and strengthening coordination with donors would enhance spending efficiency. Further delays in introducing a VAT should be avoided, and efforts to strengthen tax enforcement and rationalize exemptions, particularly in extractive industries, should be accelerated. Measures to help mitigate the impact of the war should be strictly time‑bound, preserve price signals, be as targeted as possible, and be well coordinated with donors.
Long‑standing weaknesses in PFM continue to undermine fiscal transparency and credibility. Persistent delays in fiscal reporting, audits of government financial statements, and the completion of the Pacific Games audit weaken accountability. Immediate priorities include resuming regular inter-agency coordination meetings to facilitate fiscal reporting and completing the FMIS upgrade. Strengthening procurement, audit, and debt management capacity across government remains critical.
Solomon Islands should begin considering a medium-term fiscal framework to properly manage mineral resource revenues. Effective implementation of such a fiscal framework requires strengthening basic PFM functions, including realistic budgeting and timely, reliable fiscal reporting.
The CBSI should remain ready to tighten monetary policy in response to inflationary pressures stemming from the Middle East war, while avoiding ad‑hoc exchange rate adjustments. The primary response should be to allow the exchange rate to move in line with the currency basket, as it is calibrated to limit exchange rate volatility and support price stability. Adherence to the fixed exchange rate regime is essential to preserve policy credibility and transparency and to support market development. Adopting a coherent foreign exchange market policy would strengthen policy consistency and communication with market participants.
Staff welcomes the CBSI’s commitment to modernizing its monetary policy operations and encourages phased but steady implementation of the reform agenda. Near‑term priorities include gradually absorbing excess liquidity in the banking system and introducing standing facilities linked to the policy rate. Establishing effective monetary policy operations would help the CBSI better manage a potential surge in foreign exchange inflows associated with an expansion of mining activity.
While the financial sector remains broadly sound, addressing gaps in financial stability, inclusion, and integrity remains crucial. Priorities include upgrading legal and regulatory frameworks, strengthening risk-based supervision, and establishing a framework for crisis management. Completing the rollout of the outstanding National Payment System components would further support financial inclusion. The authorities should expedite legal reforms to establish a robust AML/CFT system.
Diversifying the economy and addressing governance weaknesses are key to achieving sustainable and inclusive growth. Staff welcomes the authorities’ focus on boosting productivity in agriculture, while improving the business environment and addressing infrastructure gaps remain priorities. Efforts to address governance weaknesses should be accelerated, including by advancing legislation in extractive sectors and resuming the implementation of the National Anti-Corruption Strategy.
Slow moving climate change is expected to have incremental but meaningful cumulative effects on the economy and debt trajectory over the long term. Staff’s assessment highlights the need for adaptation policies, particularly to mitigate impacts on populations vulnerable to sea‑level rise. A critical first step is to build basic PFM capacity to prioritize, execute, and monitor climate‑relevant projects.
Strengthening core capacity for sound macroeconomic management remains the near-term IMF CD priority. Data provided by the authorities continues to exhibit some shortcomings that somewhat hamper surveillance, particularly in national accounts and GFS. The IMF continues to support efforts to address these gaps. Other immediate priorities include strengthening PFM, establishing a medium-term fiscal framework for managing resource revenues, improving monetary policy and foreign exchange operations, and enhancing financial sector stability.
It is proposed that the next Article IV consultation takes place on the standard 12-month cycle.
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Table 1. Solomon Islands: Selected Economic Indicators, 2023–2031 |
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Per capita GDP (2025): US$2092 |
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Population (2025): 798,079 |
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Quota: SDR 20.8 million |
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2023 |
2024 |
2025 |
2026 |
2027 |
2028 |
2029 |
2030 |
2031 |
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Est. |
Est. |
Proj. |
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GROWTH AND PRICES |
(In percent change, unless otherwise indicated) |
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Real GDP |
2.8 |
3.0 |
3.5 |
2.6 |
2.8 |
2.8 |
2.8 |
2.9 |
2.9 |
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CPI (period average) |
5.1 |
4.2 |
2.7 |
5.4 |
4.8 |
4.1 |
3.9 |
3.4 |
3.0 |
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CPI (end of period) |
4.3 |
5.6 |
-1.4 |
5.4 |
4.3 |
4.0 |
3.8 |
3.0 |
3.0 |
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GDP deflator |
2.5 |
3.1 |
4.1 |
5.6 |
3.7 |
3.4 |
3.5 |
3.5 |
3.5 |
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Nominal GDP (in SI$ millions) |
12,615 |
13,392 |
14,431 |
15,625 |
16,657 |
17,707 |
18,832 |
20,052 |
21,344 |
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Nominal GDP (in US$ millions) |
1,506 |
1,584 |
1,733 |
1,876 |
2,000 |
2,126 |
2,262 |
2,408 |
2,563 |
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CENTRAL GOVERNMENT OPERATIONS |
(In percent of GDP) |
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Total revenue and grants |
40.1 |
37.2 |
39.0 |
37.8 |
37.7 |
37.3 |
37.4 |
37.2 |
36.6 |
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Revenue |
25.2 |
25.4 |
28.2 |
27.3 |
28.0 |
28.2 |
28.4 |
28.5 |
28.7 |
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Grants |
14.8 |
11.8 |
10.7 |
10.5 |
9.7 |
9.1 |
9.0 |
8.7 |
7.9 |
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Total expenditure |
44.2 |
39.6 |
42.8 |
41.9 |
40.9 |
40.3 |
40.1 |
39.9 |
39.1 |
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Expense |
32.2 |
31.9 |
32.0 |
31.8 |
31.1 |
30.7 |
30.6 |
30.6 |
30.3 |
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Net acquisition of nonfinancial assets |
12.0 |
7.7 |
10.9 |
10.1 |
9.8 |
9.6 |
9.5 |
9.3 |
8.8 |
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Net lending (+) / Net borrowing (-) |
-4.1 |
-2.4 |
-3.9 |
-4.1 |
-3.2 |
-3.0 |
-2.7 |
-2.6 |
-2.5 |
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External |
-2.9 |
-3.0 |
-2.7 |
-3.3 |
-2.4 |
-2.3 |
-2.0 |
-1.8 |
-1.8 |
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Domestic |
-1.2 |
0.6 |
-1.2 |
-0.8 |
-0.8 |
-0.7 |
-0.6 |
-0.8 |
-0.7 |
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Central government debt 1/ |
23.1 |
26.6 |
29.5 |
32.1 |
34.1 |
34.9 |
35.3 |
35.6 |
35.9 |
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Public domestic debt |
9.4 |
8.8 |
9.3 |
9.3 |
9.4 |
9.4 |
9.3 |
9.4 |
9.5 |
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Public external debt |
13.6 |
17.7 |
20.2 |
22.8 |
24.7 |
25.6 |
26.0 |
26.2 |
26.4 |
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MACROFINANCIAL |
(In percent change) |
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Credit to private sector |
4.7 |
5.2 |
2.5 |
2.9 |
3.5 |
4.5 |
5.0 |
5.5 |
5.7 |
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Broad money |
6.1 |
3.8 |
23.5 |
12.0 |
10.0 |
8.0 |
8.0 |
8.0 |
6.4 |
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Reserve money |
9.9 |
13.3 |
8.6 |
15.0 |
12.0 |
10.0 |
9.0 |
8.0 |
6.4 |
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BALANCE OF PAYMENTS |
(In percent of GDP, unless otherwise indicated) |
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Current account balance |
-11.4 |
-4.2 |
5.6 |
-3.4 |
-3.5 |
-3.1 |
-3.1 |
-3.1 |
-3.2 |
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Trade balance (goods and services) |
-21.8 |
-13.5 |
-3.1 |
-11.9 |
-11.9 |
-11.6 |
-12.0 |
-11.9 |
-11.8 |
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Exports |
35.9 |
40.4 |
52.4 |
50.0 |
47.4 |
45.7 |
44.2 |
43.4 |
42.9 |
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Imports |
57.7 |
53.8 |
55.5 |
61.9 |
59.3 |
57.3 |
56.3 |
55.4 |
54.7 |
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Gross Remittances |
4.1 |
4.9 |
4.5 |
4.6 |
4.7 |
4.9 |
5.1 |
5.1 |
5.1 |
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Capital and Financial Account |
15.0 |
3.4 |
4.6 |
9.6 |
8.4 |
7.1 |
6.7 |
6.5 |
6.4 |
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Foreign direct investment, net |
-4.8 |
1.2 |
-3.1 |
-1.8 |
-1.8 |
-1.7 |
-1.7 |
-1.7 |
-1.7 |
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Overall balance |
3.6 |
-0.7 |
7.8 |
6.2 |
4.9 |
4.0 |
3.6 |
3.4 |
3.2 |
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Gross official reserves (in US$ millions, end of period) 2/ |
678.8 |
683.3 |
814.9 |
931.6 |
1,029.3 |
1,114.0 |
1,194.6 |
1,276.8 |
1,359.5 |
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(in months of next year's imports of GNFS) |
9.6 |
8.5 |
8.4 |
9.4 |
10.1 |
10.5 |
10.8 |
10.9 |
11.0 |
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EXCHANGE RATE (SI$/US$, end of period) |
8.5 |
8.5 |
8.1 |
... |
... |
... |
... |
... |
... |
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Real effective exchange rate (end of period, 2010 = 100) |
135.8 |
139.5 |
142.8 |
… |
… |
… |
… |
… |
… |
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Sources: Data provided by the authorities; and IMF staff estimates and projections. |
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1/ Includes disbursements under the Rapid Credit Facility (RCF). |
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2/ Includes SDR allocations made by the IMF to Solomon Islands in 2009 and in 2021. |
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[1] Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.
[2] The Executive Board takes decisions under the lapse-of-time procedure when the Board agrees that a proposal can be considered without convening formal discussions.
