OREANDA-NEWS. On March 21, 2016, the Executive Board of the International Monetary Fund (IMF) completed the fifth and sixth reviews of the Solomon Islands’ economic performance under the Extended Credit Facility (ECF) arrangement.

Completion of the fifth and sixth reviews enables the Solomon Islands to draw an amount equivalent to SDR 0.297 million (about US$ 0.42 million) immediately, bringing total disbursements under the arrangement to an amount equivalent to SDR 1.04 million (about US$ 1.46 million).

The three-year ECF arrangement was first approved December 7, 2012, in an amount equivalent to SDR 1.04 million (about US$ 1.46 million), or 10 percent of the country’s quota (see Press Release No. 12/479). In December 2015, the Executive Board extended the ECF to March 31, 2016 to allow the authorities enough flexibility to make further progress in implementing their structural reform agenda under the program (see Press Release No. 15/575).

During the same meeting, the Board also concluded the 2016 Article IV consultation. A separate press release will be issued shortly.

Following the Executive Board’s discussion, Mr. Mitsuhiro Furusawa, Deputy Managing Director and Acting Chair, stated:

“Solomon Islands has made enormous strides in enhancing macroeconomic stability in recent years, with satisfactory implementation of the authorities’ economic program supported by the IMF’s Extended Credit Facility (ECF) arrangement. Important reforms have been implemented including in public financial management (PFM), tax administration, debt management, exchange rate regime, and the financial sector.

“Solomon Islands continues to face long-term development challenges and opportunities. The Medium-Term Development Plan articulates a comprehensive growth and development strategy and implementation plan that are 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.

“Monetary policy is appropriate. But 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 new National Provident Fund Act, a new Credit Unions Act and a new Financial Institutions Act should help enhance financial sector stability. The recently adopted National Financial Inclusion Strategy for 2016–20 will help expand financial access, especially in rural areas.”