IMF executive board concludes reviews of Solomon’s ECF arrangement

March 28, 2016

SOLOMON Islands has made enormous strides in enhancing macroeconomic stability in recent years, with satisfactory implementation of the authorities’ economic program supported by the International Monetary Fund’s (IMFs) Extended Credit Facility (ECF) arrangement.

IMF says it is important that reforms have been implemented including in public financial management (PFM), tax administration, debt management, exchange rate regime, and the financial sector.

On March 21, 2016, the executive board of the IMF completed the fifth and sixth reviews of the Solomon Islands’ economic performance under the ECF arrangement.

Completion of the fifth and sixth reviews enables the Solomon Islands to draw an amount equivalent to SDR 0.297million (about $F0.078m) immediately, bringing total disbursements under the arrangement to an amount equivalent to SDR1.04m (about $F0.27m).

“Solomon Islands continues to face long-term development challenges and opportunities,” the fund said in a report.

“The Medium-Term Development Plan articulates a comprehensive growth and development strategy and implementation plan that is aligned with the Sustainable Development Goals.

“A multi-pillar strategy at the national, regional, and multilateral levels is crucial to enhance resilience to natural disasters.

“With uncertainty regarding future sources of growth and a challenging external outlook, fiscal space should be preserved.

“In implementing the 2016 budget and in formulating future budgets, the authorities should keep cash reserves at a minimum of two months of total spending.

“The authorities should sustain efforts to advancing PFM reforms, including by improving the transparency and accountability of scholarships and constituency funds and by continuing to strengthen the quality of public spending.”

It says monetary policy is appropriate however, given the high credit growth, the authorities should remain vigilant.

“The basket peg regime is working well and the level of the exchange rate should be assessed periodically to ensure that it remains supportive of competitiveness and growth.

“The financial system is sound and the authorities’ efforts to further strengthen supervision and regulation should continue.”

The fund adds the new National Provident Fund Act, a new Credit Unions Act and a new Financial Institutions Act should help enhance financial sector stability.

It says the recently adopted National Financial Inclusion Strategy for 2016-20 will help expand financial access, especially in rural areas.”

Source: Fiji Times