## Solomon Islands: Selected Issues

_IMF Staff Country Reports, March 8, 2018_

## Source details

**Canonical URL:** [Solomon Islands: Selected Issues](https://www.imf.org/en/publications/cr/issues/2018/03/08/solomon-islands-selected-issues-45710)

## Other formats

- [Markdown version](/en/publications/cr/issues/2018/03/08/solomon-islands-selected-issues-45710/index.md)
- [Structured JSON version](/en/publications/cr/issues/2018/03/08/solomon-islands-selected-issues-45710/index.json)
- [Bundle manifest](/en/publications/cr/issues/2018/03/08/solomon-islands-selected-issues-45710/bundle-manifest.json)

## Bibliographic details
- Published: March 8, 2018
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9781484346174.002

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### Summary
- This Selected Issues paper sets out options for how the authorities could supplement their cash balance target and public debt limit with an anchor to help discipline annual budget decisions.
- The paper introduces the current fiscal framework and effective fiscal rules based on international experiences, including the characteristics of each rule.
- It discusses the need for a new fiscal anchor given high revenue volatility, high infrastructure needs, and the country’s exposure and vulnerability to natural disasters.
- Contingency warrants for unforeseen expenditures, including from natural disasters, should be included in the budget in line with international best practices.
- If a disaster does not occur, the allocation could be saved in a contingency fund for natural disasters, enabling swift disbursement in the aftermath of a disaster.
- The fund would be set up once fiscal buffers have been rebuilt.
- IMF Staff suggests a target for the overall fiscal deficit of 1.5 percent of gross domestic product as a possible fiscal anchor, balancing debt sustainability and addressing the severe infrastructure gap.

### Fiscal framework, rules, and motivations for a new anchor
- Current policy tools described: cash balance target and public debt limit.
- Identified weaknesses motivating a new anchor:
  - High revenue volatility.
  - High infrastructure needs.
  - Exposure and vulnerability to natural disasters.
- Discussion includes international experiences with effective fiscal rules and the characteristics of each rule.

### Contingency warrants and natural disaster financing
- Recommendation: include contingency warrants for unforeseen expenditures (including natural disasters) in the budget in line with international best practices.
- If disasters do not occur, recommend saving the allocation in a contingency fund for natural disasters to allow swift post-disaster disbursement.
- Operational sequencing: the contingency fund would be established once fiscal buffers have been rebuilt.

### Suggested fiscal anchor and policy balance
- IMF Staff suggested target: overall fiscal deficit of 1.5 percent of gross domestic product.
- Policy rationale: strike a balance between safeguarding debt sustainability and addressing the severe infrastructure gap.

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## Content in this bundle

- **Country Report**
  - [Country Report (Markdown version)](/-/media/files/publications/cr/2018/cr1873.pdf.md){rel="alternate" type="text/markdown"}
  - [Country Report (PDF)](/-/media/files/publications/cr/2018/cr1873.pdf){rel="external" type="application/pdf"}

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_Source: https://www.imf.org/en/publications/cr/issues/2018/03/08/solomon-islands-selected-issues-45710_