BY CAROL-ANNE SULEGA

SOLOMON Islands’ very small economy (nominal GDP of $1.1 billion in 2016) offers limited scope for diversification of economic activity and leaves the sovereign highly vulnerable to credit negative shocks.

This is according to Moody’s Investor Services.

Such potential shocks include Solomon Islands’ exposure to climate change, which poses significant economic and fiscal risks.

At the same time, resilience is low on account of the country’s low level of development, reflected in very low incomes, low quality of infrastructure and weak institutions.

These characteristics, Moody adds, are somewhat mitigated by low government debt levels that provide room for expansionary fiscal policy, if necessary, and the potential for physical assistance and financial support from international partners.

The economic base is narrow, reliant on agricultural and forestry production for around 30 percent of GDP.

The economy’s dependence on forestry resources — which are depleting at a sustained pace — and goods exports to China — which account for a sizeable 26 percent of GDP — raise the sovereign’s susceptibility to sector and market -specific shocks.

The Medium-Term Development Strategy 2016-2035 aims to bolster the economy’s resilience through new sources of growth and revenues, though the effectiveness of these measures has yet to be revealed.

Constraints on access to finance are a hurdle to strengthening economic output.

Moody adds that although banks are adequately capitalised, highly liquid and profitable, a potential further reduction in correspondent banking services could hinder the flow of credit to trade and investment sectors.

Incomes, with GDP per capita around $2,000 in 2016 at purchasing power parity, are very low relative to other B-rated sovereigns, despite more than doubling over the past decade.

“Furthermore, most economic and policy institutions are nascent.

“Solomon Islands’ rankings on Worldwide Governance Indicators, particularly government effectiveness and the rule of law, are low.

“Perceptions of corruption have the potential to hinder the implementation of key investment projects and stymie progress on economic development,” the released document states.

Lack of transparency, it adds, on parts of government funding and spending weighs on the operation of and reporting of the budget, particularly given the emphasis donors have placed on adherence to fiscal reforms.

Moody’s Investor Services then added that the country’s very small size constrains the effectiveness of institutions by subjecting Solomon Islands to factors beyond the control of domestic policymakers.

By Alfred Sasako

WEST Are Are community leader Charles Karaori has congratulated the Constituency MP, John Maneniaru, on his promotion to head the Ministry of Finance and Treasury.

Hon Maneniaru, formerly of the Ministry of Fisheries and Marine Resources, and Hon Snyder Rini swapped ministries in August this year. But the transition was delayed until last week as a result of intervention by the Party executives of the DCC Coalition.

In his congratulatory message, Mr Karaori warned that while the promotion was a gain for West Are Are, thousands of voters are demanding answers on a number of issues relating to the use of funding grants for the Constituency in the last three years.

“For example, the voters want the truth about the $4 million in shipping grants Hon Maneniaru received in 2016. They want to know what he spent the money on as to this day, West Are Are voters have not seen a constituency boat,” Mr Karaori said.

“All the people know through other sources is that their MP has requested an additional $5 million from the shipping grants this year, a request former minister for the Ministry of Infrastructure Development (MID) had turned down because the initial grant of $4 million was never retired,” Mr Karaori said.

He said shipping is not a priority in West Are Are because the Constituency is well served by existing shipping operators.

“What the voters are quite angry about is that their MP never told them he had received $4 million in shipping grants last year. Hon Maneniaru had an opportunity to inform his voters during his recent tour of the Constituency, but he never did,” Mr Karaori said.

“I think there are a lot of angry voters out there,” he said.

Mr Karaori said while Hon Maneniaru’s promotion to the Minister of Finance was a proud moment for the people of West Are Are, the ramifications could be dire for the DCC Government.

“I said this because of the fact that there absolutely is nothing to speak of in terms of tangible development in West Are Are. I guess the same is true of other provinces, despite tens of millions of dollars that Members of Parliament received on behalf of their constituencies,” he said.

“I guess one way of describing it is that while the move is a gain for West Are Are, it is suicidal for the government.”

Mr Karaori said a recent assessment of the MP’s performance in terms of project delivery showed only iron roofing was donated – all without nails and Louvre glasses.

“How do you expect a village man or woman to buy materials to complete their houses, when the bulk of the cost of completing their houses has been left to the poor people?”

“Members of Parliament, particularly those in government, are on the priority list of receiving annual grants of $7 million each in what is popularly known as the Constituency Development Fund (CDF).

“This means that each Constituency would have received $28 million in CDF grants by the end of their four-year term. But there is more that they get as extras that we all don’t know about,” Mr Karaori said.