The Governor of CBSI released a press statement sometimes ago that Solomon Islands will not be directly affected by the recent financial crisis because of two reasons. First, he explained that the three commercial banks are prudently managed and perhaps strictly supervised as well. Second, SI's small financial sector and businesses have very minimal exposure to global financial market. A direct impact is therefore quiet remote, except for NPF that has invested employees saving in a number of portfolios abroad. For this, NPF has publicly assured its members that all was well and safe. This was some two months ago. Things have changed lately with the financial crisis fueling a global recession across major economies. It would be good if NPF reassures us again. Had NPF had an official web site, updating announcements such as this would have been easier. Or have I missed their web page?
The indirect effect that has been felt now is the fall in the price of major commodities such as copra, cocoa and oil palm. Prices fall because of the recession in major developed economies that buy our commodities. The rural farmers have been the hardest hit, but thanks to the recent announcement of free education, their school fee commitments will be shouldered by the Government. However, when the price of log drops and it could well be, the Government will be devastated as it depends largely on revenue from log export. The global recession has also forced the CBSI/Government to revise down the projected GDP growth rate for 2009 from around 8% to around 4%, if my memory serves me well.
This puzzles me somewhat. On the one hand the Government recognizes that our export performance hinges on the weak global demand. As a result it projected a slow growth. On the other hand it has blown out its budget to $4 billion, and announced major initiatives such as free education. As I understand just over $1 billion of its budget will be financed by internal revenue. Where would this billion generated?
I only trust that our Government does not overly dependent on donors but has factored what is happening around us in its budgeting as well. Lets all hope that the CNURA is committed to the rural and the poor in this difficult times.
My Puzzel with Govt Budget.
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