By Brian Lezutuni
THE dent to the economy brought about by the November 2021 riots and Covid-19 transmission has seen a refocus on the Government’s key policy commitments.
Minister of Finance and Treasury, Harry Kuma announced in his budget speech that key policy commitments would be focused on three key priority areas.
The key areas are COVID-19 transmission response in Honiara and the provinces, reconstruction and financial assistance to businesses affected by the riots and implementation of economic response measures to support economic recovery and growth in the country.
The areas of focus are important as the government predicts the local economy would further contract by 4.5 percent in 2022 after 2021 ended with a GDP contraction of 0.2% following the adverse effects of Covid-19 and the November 2021 riots and looting. These new figures revealed in the budget speech show Solomon Islands is now tracking well behind other Pacific nations in its economic recovery and are significantly worse than had been expected before the riot and the recent COVID outbreak.
Mr Kuma said a Ministry of Infrastructure Development report on the riots showed an estimated loss of SBD$811 million in 2021.
The report also showed that a total of 81 businesses and buildings were affected.
“The total loss was equivalent to 6.1 percent of the pre-unrest 2021 GDP value,” Mr Kuma remarked.
He said the civil unrest had also severely impacted Governments fiscal operations.
“Preliminary indicators have shown that Government has lost $120 million in total revenue in the last two months of 2021 alone.
Apart from that, ongoing revenue losses for 2022 are estimated at $200 million.
As compensation, the government is committing $125 million to support the reconstruction and rehabilitation of building and businesses destroyed during unrest.
In terms of the impacts of COVID-19, the Ministry of Finance and Treasury estimates that lockdowns associated with local transmission has costed the Government about $81 million in foregone revenue.
For the nation as a whole, it was estimated that the economy was losing $25 million worth of output per day, with Honiara alone accounting for $14 million per day.
Minister Kuma stressed that the most affected sectors were retail and wholesale, public administration, transport, manufacturing, and agriculture.
“The immediate knock-on loss in all other provinces were estimated at $10 million, as a result of supply chain disruptions.
He said the Community Transmission Plan estimates that around $400 million is needed for a period of six months to adequately respond to COVID-19 community transmission.
“The fight against the covid-19 pandemic is not yet over,” he said.
“Until COVID19 vaccination rates in the country increases dramatically, the pandemic will continue to be a handbrake on our economic growth prospects and a likely driver over a longer period.
The government will be committing $180.6 million under respective implementing ministries to support response to COVID-19 community transmission in Honiara and provinces.
Minister Kuma highlights that with these new developments, a review of the overall 2022 budget including revenue projections and policy priorities was made to cater for the changing economic environment faced.
Despite the setbacks, the Government said it is focused on ongoing commitments to its economic recovery strategy as demonstrated in the 2022 development budget.
The 2022 budget will see the Productive and Resources sectors again being key priority sectors. It views these two sectors as major drivers and enablers of economic growth.
The Minister said the productive sector is one of the pillars of the country’s recovery and growth process.
This explains why a total of $222.9 million is allocated to the productive sector.
The allocations are as follows.
(i) $25.0 million for Agriculture investments.
(ii) (ii) $33.7 million for Commerce and trade investments.
(iii) (iii) $109.2 million for Infrastructure developments.
(iv) (iv) $10.0 million for investment in lands issues.
(v) (v) $15.0 million for Fishery investments, and
(vi) (vi) $30.3 million for Communication and Aviation investments.
Allocation under the Resource Sector would aim to build a resilient environment to support socio-economic development, create innovative development models, review and strengthen development frameworks of the country’s extractive industries, support strategic development through Public Private Partnership (PPP), and maximize economic benefits from natural resources.
The following Budget allocations are made under the Resource Sector in the 2022 Budget.
(i) $10.6 million for Forestry related investments.
(ii) (ii) $7.5 million for Environment related investments.
(iii) (iii) $30.0 million for mining related investments.
In his closing remarks Mr Kuma told parliament Solomon Islands had suffered major challenges in 2021 and into 2022.
‘The task of rebuilding our nation and hopefully reversed the damages done by the COVID-19 and November 2021 riots is immense,’ he said.
‘For the sake of our nation’s future, I appeal to all citizens of our beloved country, Chiefs, Church and Community leaders, NGOs and Civil Society organizations, Premiers and Members of Provincial Assemblies, Public Servants and the general populace of Solomon Islands to support the government in this fight against our common enemy, the COVID-19 and work in partnership to lay the foundations for recovery, growth and prosperity in our country,’ he concluded.