THE recently released 2015 Annual Report from the Central Bank of Solomon Islands (CBSI) shows a record deficit of $172 million for the year on the fiscal front.
This was revealed by the Governor Denton Rarawa during the launch event yesterday.
He said the deficit resulted from an increase in government expenditure in the second half of the year as the Government spent its capital budget before year end.
“The fiscal deficit is equivalent to 2% of GDP, and while this is still manageable, the policy space for the Government to continuously run deficits in the medium term is limited,” he said.
Mr Rarawa added the country’s public debt stock now stands at $811 million, down from $1.0 billion at the end of 2014.
“As a result of prepayment of its domestic debt by the government, the country’s public debt is one of the lowest in the region.”
He further stated that, the Central Bank maintained the exchange rate policy of pegging the SBD against a basket of currencies. This ensured the stability of the SBD against the basket despite volatilities in the global exchange rate market.
“Global exchange rate developments in 2015 were such that commodity exporters gained from the weak SBD against the USD while importers trading in AUD and NZD benefited from the appreciation of the SBD against both currencies.
“In our effort to keep market participants informed, the Central Bank began publishing the exchange rate basket index on it’s website on a daily basis,” the Governor said.
The Governor said, while the country expects importers and exporters to behave rationally we also expect the benefits derived from favourable exchange rate movements to be passed on to consumers through affordable prices for consumables or to farmers through better copra and cocoa prices.
By RONALD TOITO’ONA