Solomon Islanders are likely to face a much tighter fiscal policy regime from the new government, meaning a reduction in government spending and a possible increase in tax.

According to the new finance minister past governments have used expansionary fiscal policies, which basically encouraged more government spending but slightly less tax, because of the boom in the forestry sector in past decades.

He says that with the current situation which he describes as a "hand to mouth situation," Solomon Islands must now be very cautious in its spending and taxation.

Mr Lilo says he will ensure that government spending is only for activities that will generate more investment, employment and improve infrastructure, productivity and standard of living.

Meanwhile, Mr Lilo says if the ability of the country to raise tax is not there, other options must be consulted.

He says that whichever fiscal policy the government adopts the underlying fact is the country must spend within its limit.