On February 16, 2018, the Executive Board of the International Monetary Fund (IMF) concluded the 2017 Article IV Consultation with Solomon Islands.1
The Solomon Islands economy grew by 3.5 percent in 2016 driven by a peak in the forestry sector. Growth remained solid in 2017 and is projected at 3.0 for 2018, buoyed by infrastructure spending, fisheries and agriculture, although logging production is slowing down. Inflation is contained at an annual rate of just 1.6 percent in October 2017. The current account deficit has widened a little but international reserves levels are comfortable.
Monetary conditions are accommodative with interest rates below their long-term average. The issuance of Bokolo bills to mop up excess liquidity remains high. Credit growth has moderated from an average of around 15 percent over 2013–2016 to around 10 percent in August 2017.
The fiscal deficit is expected to have reached 4.0 percent of GDP in 2017 and to widen further in 2018. Public debt is picking up from a low level. The risks to the economy are on the downside with the weakening fiscal position heightening vulnerability to shocks.
Solomon Islands faces large medium-term development challenges. Infrastructure needs are large, particularly with regard to energy supply, transportation, and telecommunications.
Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country’s economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.
At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country’s authorities. An explanation of any qualifiers used in summings up can be found here: http://www.imf.org/external/np/sec/misc/qualifiers.htm.