Chapter

SOLOMON ISLANDS

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
September 2004
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(Position as of May 31, 2004)
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
Crawling pegThe exchange rate of the Solomon Islands dollar is determined on the basis of the value of a trade-weighted basket of the currencies of the Solomon Islands’ four major trading partners as a guide to daily variations of the parity. These variations, however, are programmed to yield modest weekly depreciations of the currency against the U.S. dollar, the intervention currency, with daily variations limited to an undisclosed narrow band. 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 by payments only 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 branch in the Solomon Islands.
Payments arrangements
Regional arrangementsSolomon Islands participates in the Melanesian Spearhead Group Trade Agreement, PACER, and PICTA.
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. The limit on payment applications that may be approved by commercial banks is SI$25,000 or the equivalent, with the CBSI approving all other bona fide requests for foreign exchange. Effective December 1, 2003, the CBSI lifted the delays in external payments that were introduced in June 2000. All other delays in internal payments were lifted on May 4, 2004.
International security restrictionsNo.
Payments 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 costs.
Resident Accounts
Foreign exchange accounts permittedResident companies may obtain CBSI approval to hold these accounts when there is a genuine need. Exporters are allowed to hold 20% of their export proceeds in foreign currency accounts. Accounts may be opened only in one currency, which is 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 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.
Approval requiredYes.
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.
Approval requiredCBSI 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 importsEffective May 4, 2004, authorized dealers are permitted to approve most transactions up to SI$25,000 (previously, SI$5,000) without reference to the CBSI.
Import licenses and other nontariff measuresNo.
Import taxes and/or tariffsThe maximum import duty is 20%. 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 export.
Surrender requirementsExport proceeds must be sold promptly to an authorized dealer; exporters are allowed to retain 20% of their export earnings.
Financing requirementsNo.
Documentation requirementsYes.
Preshipment inspectionGoods for export 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 and 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 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 individual travelers.
Export taxesExports of logs are subject to an export duty of 35%. If the value is greater than SI$250 a cubic meter, the tax is 38%.
Payments for Invisible Transactions and Current Transfers
Controls on these transfersYes.
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 on submission of proof that they are properly due.
Quantitative limitsLimits on the amortization of loans or depreciation of direct investments are based on the previously approved repayment schedule.
Indicative limits/bona fide testYes.
Payments for travel
Prior approvalApproval is normally granted 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 expenses, the application must be supported by an invoice from the provider of the medical services, 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 required, but it 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 through sales to an authorized dealer.
Restrictions on use of fundsNo.
Capital Transactions
Controls on capital transactionsYes.
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 free of controls.
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 conditions, including the likely 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 granted for the transfer of proceeds. Sales of investments by nonresidents to either residents or nonresidents require FIB approval.
Controls on real estate transactions
Purchase abroad by residentsYes.
Controls on personal capital transactionsOnly the transfer of assets into the country by immigrants is free of controls.
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 requirementsThe liquid asset requirement is 7.5%.
Differential treatment of deposit accounts held by nonresidents
Reserve requirementsYes.
Liquid asset requirementsYes.
Investment regulations
Abroad by banksYes.
Open foreign exchange position limitsEffective May 4, 2004, limits are set at SI$3 million (previously, SI$2.5 million) for each commercial bank.
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 2003
Arrangements for payments and receiptsDecember 1. The CBSI lifted the delays in external payments introduced in June 2000.
Changes During 2004
Arrangements for payments and receiptsMay 4. The CBSI lifted all remaining delays in external payments.
Imports and import paymentsMay 4. The limit on the amount that authorized dealers may approve for imports was increased to SI$25,000 from SI$5,000.
Capital transactions
Provisions specific to commercial banks and other credit institutionsMay 4. The limit on the open foreign exchange position for each commercial bank was increased to SI$3 million from SI$2.5 million.

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