Country’s debt is increasing but for a good reason

BY LORETTA B MANELE

The country’s debt is increasing but for a good reason.

This was voiced by World Bank’s Economist for Solomon Islands, Lodewijk Smets whilst speaking to the media earlier this week.

Speaking of public debt, he said public debt to GDP ratios has been low in the past years, less than 10 percent of GDP five years ago.

Smets mentioned that this is partly due to debt forgiveness after the Ramsey period and after the tensions and Solomon Islands is now about 20-22 percent of GDP.

He said debt is increasing but for a good reason because the development needs of the country are still large.

Smets pointed out that infrastructure needs are still large and it’s important to invest in the country so that the country can meet its national development goals.

“So that’s part of the reason why debt is increasing, to invest and to make productive investment”

Smets said what will be key is that these investments that we are currently making such as roads, airport infrastructure, investments in ports are sustainable.

He added that it’s important that these investments10 years from now are sustainable, are still functioning and maintained.

“So, while the increase in debt leads to investment, we need to ensure that the investments have good economic returns and are sustainable”

Smets said this also means complementary reforms as in ensuring that we can set some funds aside for the maintenance of all that infrastructure that we’re now investing in.

He noted that if you look at other Pacific countries like Fiji, the debt to GDP ratio in Fiji is a lot larger; it’s close to 80 percent of GDP, but it is on a declining trend.

Smets said it’s all about making sure that your debt is sustainable and currently that is still the case for Solomon Island which is sustainable.

However also stated is that the country must make sure that the investments made and the loans the government takes on are well invested.

“The investments they make must have good economic and social returns and benefit the people and the economy”

BY NED GAGAHE

Frank Wickham, Chairman of Solomon Airlines Limited (SAL), indicated that the company is possibly the lowest in terms of employee remuneration compared to other State-Owned Enterprises (SOEs).

Wickham made this revelation when he appeared before the Parliamentary Bills and Legislation Committee last week on the State-Owned Enterprise (Amendment) Bill 2024.

“We probably are the lowest remunerated of the SOEs, but if the standard is deemed to increase, we will be very happy,” the Chairman said.

SAL is one of the State-Owned Enterprises that presented its views on the proposed legislation before the Committee.

The State-Owned Enterprises (Amendment) Bill 2024 seeks to amend the State-Owned Enterprises Act 2007 in alignment with the Government’s SOE Ownership Policy 2018 and the National Gender Equality and Women’s Development Policy 2016-2020.

It aims to consolidate ownership monitoring under the Minister of Finance, clarify the process for SOEs to fulfill Community Service Obligations, strengthen publication requirements for documents tabled in Parliament, and introduce regulations for evaluating directors and electing board chairpersons and deputy chairpersons.

Commenting on the proposed amendment, Chairman Wickham noted that the change designates the Minister of Finance as the primary overseer of SOEs.

He suggested that previously, having two ministers involved allowed for shared responsibility—one focusing on the technical aspects and comparative strengths of the SOEs, while the other addressed broader ministry concerns.

“It’s important for the expertise related to the functions of the SOE to be considered in the process. However, we recognize that it now falls under the Ministry of Finance. Additionally, Chair, we acknowledge the new criteria for appointing directors, which include remuneration and performance evaluation—elements that were not part of the original Act. We have no objections to these changes.

“While we may be among the lowest in remuneration compared to other SOEs, we would welcome any increases to that standard. The decision is ultimately yours. We acknowledge the change, and we suggest that there could be a mechanism for involving the relevant ministry, which has the expertise related to the SOE’s mandate, in this process.” He said.

Wickham stated that he understands others may wish to discuss specific interventions, particularly regarding dividends.

He noted that the provision allowing the minister to call for dividends from SOEs aligns with the rights of the majority shareholder.

However, he suggested that SOEs should be encouraged to develop their own dividend policies, which could then be negotiated with the minister.

“Some SOEs may want to reserve a good proportion of their dividends for their capital budgets and other reasons, so perhaps there could be a rationale for negotiating the dividend payout by the SOE to the government,” Chairman Wickham said.

Solomon Airlines Limited (SAL) is a Solomon Islands company registered under the Companies Act 2009. One hundred percent of its shares are owned by the Government of Solomon Islands, through the Investment Corporation of the Solomon Islands (82.3%) and Solomon Island Holdings (17.7%).

This SOE is commercially focused on providing domestic and international air and ground handling services that fully maximize the benefits for its customers. The company is subject to the State-Owned Enterprises Act 2007 and State-Owned Enterprises Regulations 2010.

Solomon Airlines is governed by a board of directors that is responsible to the Minister of Finance and Treasury, who is the Accountable Minister for Solomon Airlines Limited.

According to reports, Solomon Airlines received SBD 9.9 million, SBD 3.039 million, SBD 2.766 million, SBD 3.8 million, and SBD 4.0 million in payments for the provision of community service obligations (CSOs) from the Government in 2016, 2017, 2018, 2019, and 2020, respectively.

These CSOs are air services to provincial airstrips where ticketing revenue is insufficient to cover the costs of service.

BY INDY MAEALASIA

PEOPLE With Disability Solomon Islands (PWDSI) has urged the Minister of Health and Medical Services (MHMS) and the Royal Solomon Islands Police Force (RSIPF) to launch an urgent campaign to eradicate marijuana in rural communities.

PWDSI’s Chief Executive Officer (CEO), Casper Fa’asala made this request during World Mental Day last week, alluding it to being a major cause to mental health conditions. 

“…we go to the gardens where marijuana is planted among the vegetables, that’s where the cause is,” he stated “You don’t need a survey, you don’t need data, it’s all evidence in the village.”

Fa’asala emphasized that addressing this issue could significantly reduce the prevalence of mental health conditions.

“Seriousness is what I am talking about, it’s not about a campaign of awareness. It’s about going to the villages, pulling every marijuana out, then we can realize the realities of bringing this country to some normalcy,” he said.

He warned that failing to take action could hinder the country’s progress for its youth and children.

“I just simply call on the government to commission the authorities to be more proactive, to carry those roles to reduce the effect of what we see today.” he added.