Finance and Treasury Minister, Hon Gordon Darcy Lilo, has announced that the Solomon Islands Government has reached an agreement with the International Monetary Fund (IMF) on a reform program that can be supported by a precautionary Standby Credit Facility (SCF) once the current SCF arrangement expires this December.

Minister Lilo said, the agreement was reached during a recent IMF mission led by Mission Chief Patrizia Tumbarello between September 29 and October 12, 2011.

Minister Lilo also said that during the visit, the IMF also conducted an Article IV Consultation as well as the third and final review of the current SCF arrangement.

Minister Lilo explained that the Article IV Consultation focused on the policy mix that could help the Solomon Islands improve its resilience to external shocks and achieve sustainable and inclusive growth in the medium term.

Minister Lilo revealed that preliminary data obtained by the IMF indicate the Solomon Islands Government was able to meet the program targets with comfortable margins and continues to make progress in implementing the structural reform agenda. Minister Lilo explained that since the current SCF was first implemented in June 2010, macroeconomic conditions have improved substantially.

"The rate of economic growth is estimated at nearly 10% and inflation is estimated at 6.5% on average for 2011. Our balance of payments position has increased remarkably with gross international reserves reaching US$350 million, the equivalent of 6 months of imports of goods and services. Owing to strong political commitment to rebuilding fiscal and financial buffers, coupled with strong macroeconomic management, the Solomon Islands has greatly benefited from the Government's economic reform program," Minister Lilo said.

Minister Lilo further revealed that a further indicator of the Solomon Islands progress under the current IMF Program is our ascension in the World Bank's latest Ease of Doing Business global ranking from 106th in 2010 to 96th in 2011.

In the East Asia and Pacific region, Solomon Islands currently ranks 8th, behind Tonga (6th) and Samoa (7th) and in front of Vanuatu (9th) and Fiji (10th). "It is therefore crucial we build on this success and continue implementing growth-oriented structural reforms to further boost investor's confidence in the Solomon Islands and ensure broad-based growth", said Minister Lilo.

Minister Lilo also explained that the reforms proposed under the precautionary SCF arrangement for 2012 will continue to support Government in working to achieve its reform commitments in areas such as improving public financial management and commencing the taxation of natural resources.

"Given that only through ongoing budget discipline will we be able to hedge ourselves from commodity price volatility and external demand shocks, under the successor program we will continue to build on our fiscal buffers and maintain a strong cash balance, while ensuring government services continue to expand for the benefit of all citizens of the Solomon Islands", explained Minister Lilo.

Source: Press Release, Governmnet Communications Unit