Tuesday, November 16, 2010

IMF Advice to Solomon Islands on Growth

Still the standard advice is more structural reforms;

The authorities’ acknowledge that further progress on the agenda of structural reform is needed to strengthen medium-term growth prospects. They intend to build on the steps taken to commercialize operations in stateowned enterprises; improve competitiveness, including the deregulation of telecommunications; and reduce the cost of doing business through revision of the legal framework.

In view of the adverse impact of the global economic downturn, the key objective of the authorities’ economic reform program is to establish a basis for resuming solid growth and reducing external vulnerability in a low-inflation environment, while advancing poverty alleviation efforts. To this end, the program seeks to strengthen the fiscal position, enhance monetary policy operations, and safeguard the domestic financial sector. By laying a strong macroeconomic foundation, the program is also expected to help catalyze additional donor support for the country.

Fiscal discipline will continue to serve as the main anchor for macroeconomic stability. Efforts will focus on rebuilding cash reserves mainly by strengthening revenue collection and prioritizing expenditure. Adopting a fiscal responsibility law and devising a proper resource tax regime would help enhance budget discipline, improve revenue transparency, and ensure a sustainable fiscal path.

“The current monetary stance is broadly appropriate, and sufficiently accommodative to support economic recovery. The program seeks to strengthen the operational framework of monetary policy and introduce new policy instruments to help banks manage liquidity, ensuring long-term price stability.

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