Chapter

SOLOMON ISLANDS

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
September 2000
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Status Under IMF Articles of Agreement
Article VIIIDate of acceptance: July 24, 1979.
Exchange Arrangement
CurrencyThe currency of the Solomon Islands is the Solomon Islands dollar.
Exchange rate structureUnitary.
Classification
Conventional pegged arrangementThe exchange rate for the Solomon Islands dollar is pegged to a trade-weighted basket of the currencies of the Solomon Islands’ four major trading partners. The Central Bank of the Solomon Islands (CBSI) provides the commercial banks with daily limits on the buying and selling rates for the U.S. dollar in transactions with the CBSI and the public. The commercial banks in the Solomon Islands are free to determine their exchange rates for all other foreign currencies.
Exchange taxA tax of SI$3 is levied on sales of foreign exchange exceeding SI$3,000.
Exchange subsidyNo.
Forward exchange marketCommercial banks may enter into forward contracts with residents of the Solomon Islands in any currency.
Arrangements for Payments and Receipts
Prescription of currency requirementsContractual commitments in a foreign currency to nonresidents may be met only by payments in the currency specified in the contract. Export proceeds may be received in any foreign currency or in Solomon Islands dollars from an account of an overseas bank with a bank in the Solomon Islands.
Payment arrangementsNo.
Administration of controlExchange control is administered by the CBSI through the Foreign Exchange Control Regulations. The CBSI delegates extensive powers to commercial banks, which have been appointed authorized dealers in foreign exchange and may approve certain transactions up to the equivalent of SI$25,000.
International security restrictions
In accordance with Executive Board Decision No. 144-(52/51)Certain restrictions have been imposed on the making of payments and transfers for current international transactions in respect of the Federal Republic of Yugoslavia (Serbia/Montenegro).
Payment arrearsNo.
Controls on trade in gold (coins and/or bullion)
Controls on domestic ownership and/or tradeOnly Solomon Islands nationals may be granted a license to pan for alluvial gold. The CBSI is authorized to buy, sell, and hold gold but has not yet undertaken any such transactions. Commercial mining companies require a license from the Ministry of Natural Resources (MONR) to mine gold.
Controls on external tradeCommercial banks and all other residents are required to obtain a permit issued by the MONR to mine, buy, or export gold.
Controls on exports and imports of banknotes
On exports
Domestic currencyTravelers may not take out amounts in excess of SI$250 without the approval of the CBSI, which is not normally given.
On imports
Foreign currencyNonresidents visiting the Solomon Islands may bring in any amount of currency for travel expenditures.
Resident Accounts
Foreign exchange accounts permittedResident companies may obtain CBSI approval to hold these accounts in cases where there is a genuine need. As of March 1, 1999, exporters were allowed to hold 20% of their export proceeds in foreign currency accounts. The account may be opened only in one currency chosen by the exporter.
Held domesticallyThese accounts are permitted, but approval is required.
Held abroadThese accounts are permitted, but approval is required.
Accounts in domestic currency convertible into foreign currencyYes.
Nonresident Accounts
Foreign exchange accounts permittedForeign exchange accounts may be held, but proof of bona fide need is required.
Domestic currency accountsThese accounts may be held only at authorized foreign exchange dealers.
Convertible into foreign currencyBalances may be transferred abroad with the approval of the CBSI or authorized dealers. CBSI approval is required for these accounts to be credited from Solomon Islands sources.
Blocked accountsNo mechanism exists for these accounts.
Imports and Import Payments
Foreign exchange budgetNo.
Financing requirements for importsNo.
Documentation requirements for release of foreign exchange for importsAuthorized dealers are permitted to approve most transactions up to SI$25,000 without reference to the CBSI.
Import licenses and other nontariff measuresNo.
Import taxes and/or tariffsThe rate of import levy is 8%. There is no duty on imports from Melanesian countries.
Taxes collected through the exchange systemA tax of SI$3 is levied on sales of foreign exchange exceeding SI$3,000.
State import monopolyNo.
Exports and Export Proceeds
Repatriation requirementsProceeds must be received within three months of the date of exportation.
Surrender requirementsExport proceeds must be sold promptly to an authorized dealer, except that exporters are allowed to retain 20% of their export earnings as of March 1, 1999.
Financing requirementsNo.
Documentation requirements
Preshipment inspectionGoods exported are inspected by customs officers.
Export licensesResidents may export goods other than round logs without exchange control formalities, but they must comply with the terms of a general authorization issued by the CBSI. Exports of round logs require specific authority from the CBSI upon presentation of a market price certificate issued by the Ministry of Forestry, Conservation, and Environment.
Without quotasIf exporters cannot meet the conditions of a general authorization (repatriation, surrender, or market level price requirements), they must apply to the CBSI for a specific authorization. Authorization is not needed for goods valued under SI$250 in any one consignment or for certain exempt categories of goods, including most personal effects of passengers.
Export taxesExports of logs are subject to an export duty of 35% if valued up to SI$250 per cubic meter and 38% if of greater value.
Payments for Invisible Transactions and Current Transfers
Controls on these transfers
Investment-related payments
Prior approvalApproval is readily granted for the repayment of loans contracted overseas and for payments of services and remittances of dividends, profits, and other earnings accruing to nonresidents from companies in the Solomon Islands, provided it can be shown they are properly due.
Quantitative limitsLimits on the amortization of loans or depreciation of direct investments are based on a previously approved repayment schedule.
Indicative limits/bona fide testYes.
Payments for travel
Prior approvalApproval is normally given for the purchase of foreign currency for travel. Applications for travel funds must be submitted to an authorized dealer, and presentation of passports and airline tickets is required.
Personal payments
Prior approvalApproval is readily granted. In the case of medical costs, the application must be supported by an invoice from the medical practitioner, or from an educational institution for studies abroad.
Indicative limits/bona fide testYes.
Foreign workers’ wages
Prior approvalApproval is readily granted for the remittance of funds of temporary residents.
Indicative limits/bona fide testYes.
Credit card use abroad
Prior approvalYes.
Other payments
Prior approvalApproval is readily granted.
Indicative limits/bona fide testYes.
Proceeds from Invisible Transactions and Current Transfers
Repatriation requirementsYes.
Surrender requirementsApproval is required for the disposal of proceeds other than by sale to an authorized dealer.
Restrictions on use of fundsNo.
Capital Transactions
Controls on capital and money market instrumentsCBSI approval is required for all capital and money market transactions.
Controls on derivatives and other instrumentsThere are controls on all transactions in derivatives and other instruments.
Controls on credit operationsOnly the acceptance of guarantees, securities, and financial backup facilities from nonresidents is not controlled.
Controls on direct investment
Outward direct investmentInvestment by resident individuals or by companies and other organizations operating in the Solomon Islands is subject to certain limitations and when it is likely to be of benefit to the Solomon Islands.
Inward direct investmentApproval by the Foreign Investment Board (FIB) is required for initial or increased foreign investment.
Controls on liquidation of direct investmentApproval is readily given for the transfer of proceeds. Sales of investments by nonresidents to either a resident or a nonresident require FIB approval.
Controls on real estate transactions
Purchase abroad by residentsYes.
Controls on personal capital movementsOnly the transfer of assets into the country by immigrants is not controlled.
Provisions specific to commercial banks and other credit institutions
Borrowing abroadYes.
Lending to nonresidents (financial or commercial credits)Yes.
Lending locally in foreign exchangeYes.
Purchase of locally issued securities denominated in foreign exchangeYes.
Differential treatment of deposit accounts in foreign exchange
Liquid asset requirementsEffective April 15, 1999, the liquid asset requirement was lowered to 7.5% from 40%.
Differential treatment of deposit accounts held by nonresidents
Reserve requirementsYes.
Liquid asset requirementsYes.
Investment regulations
Abroad by banksYes.
Open foreign exchange position limitsLimits are set for each commercial bank at SI$2.5 million.
Provisions specific to institutional investorsInsurance companies must obtain permission from the Commissioner of Insurance to remit reinsurance premiums abroad.
Other controls imposed by securities lawsNo.
Changes During 1999
Exports and export proceedsMarch 1. Exporters were allowed to retain 20% of export proceeds in a foreign currency account at a domestic financial institution.
Capital transactions
Provisions specific to commercial banks and other credit institutionsApril 15. The liquid asset requirement was lowered to 7.5% from 40%.

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