Government restricted to enter into new borrowings

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BY GEORGINA KEKEA

IN its 2018 debt strategy and outlook, Government is committed to keeping the level of debt in Solomon Islands at a sustainable and affordable level.

Guided by the Debt Management Framework (DMF), the DMF provides guidelines for the Solomon Islands to enter into new borrowing.

Further to that, the Public Financial Management (PFM) Act restricted government to enter into any new borrowings.

Only the Minister for Finance has the sole authority to authorise any Government borrowing, which includes borrowing by the Central government, provincial government or a State Owned Enterprise (SOE).

In addition the provincial governments, SOEs and Honiara City Council shall require the consent of the Minister before undertaking Government borrowing.

To ensure that debt remains at a sustainable and affordable level, new debt should only be incurred incrementally, in a steady and predictable manner, the Budget outlook for 2018 says.

The Budget outlook says the Framework does not encourage large, one off borrowings, as they limit the Government’s ability to: a) adapt to economic shocks; and b) fund yet to be identified development initiatives that may exhibit high economic and social returns.

For 2018, Annual Borrowing Limit is $461.8 million a decrease from 2017. Last year the Annual Borrowing Limit was $900 million.

This comprises of $600 million for new Government borrowing related to the Tina River Hydropower Project and another $300 million for on-Tina River Hydropower Project Government borrowings.

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