Annual Report on Exchange Arrangements and Exchange Restrictions, 2007
Chapter

SOLOMON ISLANDS

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
October 2007
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(Position as of December 31, 2006)

Status under IMF Articles of Agreement
Article VIIIDate of acceptance: July 24, 1979.
Exchange Measures
Restrictions and/or multiple currency practicesNo restrictions as reported in the latest staff report as of December 31, 2006.
International security restrictionsNo.
References to legal instruments and hyperlinksn.a.
Exchange Arrangement
CurrencyThe currency of the Solomon Islands is the Solomon Islands dollar.
Exchange rate structureUnitary.
Classification
Conventional pegged arrangementThe Solomon Islands dollar has been broadly stable vis-à-vis the U.S. dollar. The Central Bank of the Solomon Islands (CBSI) determines the exchange rate of the Solomon Islands dollar on the basis of the value of a basket of foreign currencies, and 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. Commercial banks in the Solomon Islands are free to determine their exchange rates for all other foreign currencies, except for the Australian dollar and the U.S. dollar for which the CBSI sets limits.
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.
References to legal instruments and hyperlinksn.a.
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.
Controls on the use of domestic currency
For current transactions and paymentsYes.
For capital transactionsn.a.
Use of foreign exchange among residentsn.a.
Payments arrangements
Regional arrangementsThe Solomon 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 ADs in foreign exchange and may approve certain transactions. Effective May 23, 2006, commercial banks may approve applications for payments of up to SI$50,000 or the equivalent (previously, SI$25,000) for all trade-related payments and up to SI$30,000 (previously, SI$25,000) for all services and personal remittances. All other bona fide requests for foreign exchange require CBSI approval.
Payments arrearsNo.
Controls on trade in gold (coins and/or bullion)
On domestic ownership and/or tradeOnly nationals of the Solomon Islands 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.
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.
References to legal instruments and hyperlinksn.a.
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.
Approval requiredYes.
Held abroadThese accounts are permitted, but approval is required.
Approval requiredYes.
Accounts in domestic currency held abroadThese accounts are permitted, but approval is required.
Accounts in domestic currency convertible into foreign currencyYes.
References to legal instruments and hyperlinksn.a.
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 an AD.
Approval requiredCBSI approval is required for these accounts to be credited from Solomon Islands sources.
Blocked accountsNo mechanism exists for these accounts.
References to legal instruments and hyperlinksn.a.
Imports and Import Payments
Foreign exchange budgetNo.
Financing requirements for importsNo.
Documentation requirements for release of foreign exchange for imports
Letters of creditYes.
Import licenses used as exchange licensesn.a.
OtherYes.
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.
References to legal instruments and hyperlinksn.a.
Exports and Export Proceeds
Repatriation requirementsProceeds must be received within three months of the date of export.
Surrender requirements
Surrender to authorized dealersExport proceeds must be sold promptly to an AD; exporters are allowed to retain 20% of their export earnings.
Financing requirementsNo.
Documentation requirements
Letters of creditYes.
Preshipment inspectionGoods for export are inspected by customs officers.
Export licensesResidents may export goods, except for round logs, without exchange control formalities, but they must comply with the terms of a general authorization facilitated and issued by the Customs Division (CD), effective July 18, 2006 (previously, by the CBSI). Exports of round logs require specific authorization 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 25%. If the value is greater than SI$550 a cubic meter, the marginal tax rates range from 40% to 60%.
References to legal instruments and hyperlinksn.a.
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 on submission of proof of the transaction.
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 AD, and passports and airline tickets must be presented.
Personal payments
Prior approvalApproval is readily granted. For medical expenses, the application must be supported by an invoice or certification from the provider of the medical services; for studies abroad, from an educational institution.
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 on submission of supporting documents.
Indicative limits/bona fide testYes.
References to legal instruments and hyperlinksn.a.
Proceeds from Invisible Transactions and Current Transfers
Repatriation requirementsYes.
Surrender requirements
Surrender to authorized dealersApproval is required for the disposal of proceeds, other than through sale to an AD.
Restrictions on use of fundsNo.
References to legal instruments and hyperlinksn.a.
Capital Transactions
Controls on capital transactionsYes.
Repatriation requirementsn.a.
Surrender requirementsn.a.
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.
Commercial creditsControls apply to all these transactions.
Financial creditsControls apply to all these transactions.
Guarantees, sureties, and financial backup facilities
By residents to nonresidentsYes.
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 likelihood of benefit to the Solomon Islands.
Inward direct investmentApproval by the Investment Division of the Department of Commerce and Industry 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 transactionsControls apply to all personal and capital transactions except for the transfer of assets into the country by immigrants.
LoansControls apply to all these transactions.
Gifts, endowments, inheritances, and legaciesControls apply to all these transactions.
Settlements of debts abroad by immigrantsYes.
Transfer of assets
Transfer abroad by emigrantsYes.
Transfer of gambling and prize earningsYes.
References to legal instruments and hyperlinksn.a.
Provisions Specific to the Financial Sector
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 July 18, 2006, the limit on overnight positions of each commercial bank is SI$5 million (previously, SI$3 million).
Provisions specific to institutional investorsInsurance companies must obtain permission from the commissioner of insurance to remit reinsurance premiums abroad.
Pension fundsn.a.
Investment firms and collective investment fundsn.a.
References to legal instruments and hyperlinksn.a.
Changes during 2006
Arrangements for payments and receiptsMay 23. The limit on the amount of payments that commercial banks may approve was increased to SI$50,000 from SI$25,000 for all trade-related payments and to SI$30,000 from SI$25,000 for all services and personal remittances.
Exports and export proceedsJuly 18. All general authorization for exports is to be facilitated and issued by the CD and no longer requires CBSI approval.
Provisions specific to the financial sector
Provisions specific to commercial banks and other credit institutionsJuly 18. The limit on overnight foreign exchange positions of each commercial bank was increased to SI$5 million from SI$3 million.

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