New $15 million Operation to Build Sustainable Growth in Solomon Islands
The World Bank’s Board of Executive Directors has approved a US$15 million Development Policy Operation for Solomon Islands that will seek to strengthen public financial management while enabling the government to meet the costs of COVID-19 preparedness. The operation will also support Solomon Islands’ businesses through promoting the establishment of a national independent commission against corruption.
The First Solomon Islands Transition to Sustainable Growth Development Policy Operation, the first of two planned operations over the next 18 months, will promote debt sustainability, strengthen cash and budget management, and support Solomon Islands’ transition away from an economic dependence on logging to a more sustainable growth model. The development policy operation will support reform efforts through technical assistance while providing direct financing to the budget.
The operation will support the introduction of a fairer and more efficient tax framework for Solomon Islands’ taxpayers and promote greater transparency and accountability through the introduction of anti-corruption legislation, including support for the establishment of the Solomon Islands Independent Commission Against Corruption. Lastly, it will improve the efficiency of electronic payments through the adoption of a national payments system under the oversight of the Central Bank of Solomon Islands.
This assistance, which was first planned before the COVID-19 pandemic, has been increased after a request from the government (from US$9.9 million to US$15 million) to better enable the government to meet the challenges of COVID-19’s anticipated impact on economic growth and government revenue.
“This support will assist in laying the foundations for more sustainable growth into the future for Solomon Islands and the reforms align closely with the Government’s National Development Strategy,” said Hon. Harry Kuma, Minister for Finance and Treasury. “The assistance is also very timely, as it will enable Solomon Islands to meet the challenge of critical revenue shortfalls and the increased spending that will be required to deal with the economic impacts of the COVID-19 pandemic.”
Solomon Islands is expected to be one of the most effected Pacific economies from COVID-19. Travel restrictions, and demand shocks, particularly to logging, are predicted to lead to considerable reductions in GDP growth and tax revenue for the country.
This assistance is part of a wider budget support mechanism – the Core Economic Working Group – through which Australia, New Zealand, the Asian Development Bank, and the European Union all provide budget support.
“We are deeply committed to supporting Solomon Islands to build more inclusive and sustainable growth that ultimately benefits all Solomon Islanders. I’m proud that this assistance will support governance and institutions within the country while bringing well-coordinated budget assistance alongside our partners such as the Australian and New Zealand governments, the Asian Development Bank and the European Union. These efforts, over time and in conjunction with other reform measures underway, will build a foundation for longer term poverty reduction while fostering private sector growth and development.” said Michel Kerf, World Bank Country Director for Papua New Guinea and the Pacific Islands.
The majority of the assistance (US$11.84 million) is a direct grant for the country with the remainder of the operation financed through a credit from the International Development Association, the World Bank’s fund for the world’s poorest countries.
The World Bank works in partnership with 12 countries across the Pacific, supporting 84 projects totaling US$1.8 billion in commitments in sectors including agriculture, aviation and transport, climate resilience and adaptation, economic policy, education and employment, energy, fisheries, health, macroeconomic management, rural development, telecommunications and tourism. In Solomon Islands, this includes the landmark Tina River Hydropower Project, to which the World Bank is contributing $34 million, in addition to considerable technical guidance and support.
The World Bank Group, one of the largest sources of funding and knowledge for developing countries, is taking broad, fast action to help developing countries strengthen their pandemic response. We are increasing disease surveillance, improving public health interventions, and helping the private sector continue to operate and sustain jobs. Over the next 15 months, we will be deploying up to $160 billion in financial support to help countries protect the poor and vulnerable, support businesses, and bolster economic recovery, including $50 billion of new IDA resources in grants or on highly concessional terms.