Abstract
This paper is an account of the economic conditions of the Solomon Islands. The macroeconomic situation has shown a considerable expansion in recent years with the external buffers intact. Although the Islands have shown good growth, the IMF staff expects only a moderate performance in 2013 and 2014 owing to the euro area crisis. However, the state has prepared for any downside risks, and approaches the macroeconomic circumstances with a positive outlook. The Executive Board admires the efforts of the Islands.
The Executive Board of the International Monetary Fund (IMF) approved on December 7, 2012 a three-year arrangement under the Extended Credit Facility (ECF)1 for Solomon Islands, in an amount equivalent to SDR 1.04 million (about US$ 1.59 million), or 10 percent of the country’s quota.
The Board’s decision, which was taken on a lapse of time basis,2 enables the immediate disbursement of an amount equivalent to SDR 0.149 million (US$ 0.228 million).
Building on the success of the program supported by a Standby Credit Facility arrangement, which expired on December 5, 2012, the ECF-supported program will be instrumental in tackling deep institutional and structural issues and is seen by the authorities as critical for supporting Solomon Islands, which remains vulnerable to external shocks associated with its undiversified export base, strong dependence on aid, and frequent natural disasters.
The Extended Credit Facility (ECF) has replaced the Poverty Reduction and Growth Facility (PRGF) as the Fund’s main tool for medium-term financial support to low-income countries by providing a higher level of access to financing, concessional terms, enhanced flexibility in program design features, and more focused streamlined conditionality. Financing under the ECF carries a zero interest rate, with a grace period of 5½ years, and a final maturity of 10 years (http://www.imf.org/external/np/exr/facts/ecf.htm). The Fund reviews the level of interest rates for all concessional facilities every two years.
The Executive Board takes decisions under its lapse of time procedure when it is agreed by the Board that a proposal can be considered without convening formal discussions.