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Solomon Islands’ Economic Performance and Monetary Policy Review

The Central Bank of Solomon Islands (CBSI) recently released a report discussing the country’s economic performance, monetary policy, and fiscal developments. Here are some key points extracted from the report.

Monetary Policy

In 2022, the CBSI maintained an accommodative monetary policy to support the recovery from the COVID-19 pandemic. The key measures included:

Keeping the Cash Reserve Requirement for commercial banks at 5%
Maintaining a stock of central bank bills (Bokolo Bills) at SI$430 million

These measures helped to promote economic growth and stability in the country.

External Balance

The external balance is expected to have deteriorated significantly in 2022, with a current account deficit estimated at 13.3% of GDP. This was due to:

A decline in exports caused by border closures and weak demand from key export destinations, mainly China
However, remittance inflows underpinned by the labor mobility scheme under PACER Plus partially offset the worsening external balance

Gross Official Reserves

Gross official reserves are expected to have lowered to 9.5 months of prospective imports in 2022, staying well above the reserve adequacy range of four to seven months of imports.

Fiscal Developments

The regular 2022 budget prioritized expenditures on COVID-19 response and post-riot reconstruction. However, weak planning and delayed approval of the budget resulted in:

Budget underexecution
The fiscal deficit is estimated to have become smaller than expected at 4.1% of GDP in 2022

Revenue Shortfall

A significant revenue shortfall in early 2022 due to:

The riot and COVID-19
Donor support falling short of expectations
A shallow domestic bond market constraining domestic financing further restricted public expenditure

These are some of the key points extracted from the report. If you have any specific questions or would like me to clarify any of these points, please let me know!