Press Release No. 13/168

Press Release: IMF Executive Board Completes the Fourth Review Under the Extended Credit Facility Arrangement with Solomon Islands and Approves US$0.2 Million Disbursement

April 13, 2015

On April 10, 2015, the Executive Board of the International Monetary Fund (IMF) completed the fourth review of the Solomon Islands’ economic performance under the Extended Credit Facility (ECF) arrangement.

Completion of the fourth review enables the Solomon Islands to draw an amount equivalent to SDR 0.149 million (about US$0.2 million) immediately, bringing total disbursements under the arrangement to an amount equivalent to SDR 0.743 million (about US$1.02 million).

The three-year ECF arrangement was approved December 7, 2012, in an amount equivalent to SDR 1.04 million (about US$1.59 million), or 10 percent of the country’s quota (see Press Release No. 12/479).

Following the Executive Board’s discussion on the Solomon Islands, Mr. Min Zhu, Deputy Managing Director and Acting Chair, stated:

“Solomon Islands has made enormous strides in strengthening its macro-financial performance and its institutions over the last few years. Fiscal and reserve buffers have been rebuilt, and important reforms, notably public financial management (PFM) and financial sector reforms, are being implemented. However, sources of growth going forward are unclear as result of setback in mining prospects and the depletion of forest resources. While the country has large development needs, fiscal space should be used wisely in 2015, given Solomon Islands’ vulnerabilities to shocks and the uncertain growth outlook.

“The authorities should sustain efforts to advancing Public Financial Management (PFM) reforms, including by improving the transparency and accountability of scholarships and constituency funds and by continuing to strengthen the quality of public spending.

“The current monetary policy stance is appropriate especially as inflationary pressures have remained subdued. The central bank should, however, be ready to tighten if inflationary pressures emerge. The basket peg is an appropriate exchange rate regime for Solomon Islands and the recent removal of the band around the U.S. dollar should help deliver a more stable effective exchange rate and minimize any further erosion of competitiveness.

“Financial soundness indicators are adequate and the authorities’ efforts to further strengthen supervision and regulation should continue. The forthcoming, new National Provident Fund Act and Credit Union Act should help enhance financial sector stability. Ongoing initiatives to promote mobile banking while ensuring adequate supervision and consumer protection will go a long way toward promoting financial inclusion.”