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”
