The Prevalence of Trade imbalance, budget deficit, weak infrastructure, less business initiatives and high rate of unemployment are reasons why, Solomon Islands remains under the least Developed Countries (LDC) category.
A management professional, who asked not to be identified, also said that trade imbalance is likely to be inherent in the island country.
He explained that if the issue is not addressed properly, economic growth will remain questionable.
“this country has been importing more foreign goods but has less export products which resulted in the trade imbalance,” he said.
“There’s lack of proper infrastructure to create links within the provinces.’’
The managerial chief also stated that formulation of budget is also a common issue, not only in Solomon Islands but in other Pacific countries as well.
“Every year the government formulate budget that is deficit, which is also common in the Pacific.
“The incurrence of high recurrent cost which means a lot of fund spent on operations for services within the Government ministries.
“Development budget remains low every year which resulted in the absence of growth of development.”
He also said that the government should consider reducing the incurrence of budget deficit.
“If more of the development budget are formulated it will enhance the economy.
“Another challenge is the high rate of unemployment in the country, which creates poverty and social problems which in turn posed negative impact on the law and order.”
He further stressed that Government should take the initiative to create more avenue such as the small medium enterprise (SME). Not only that but to act as catalyst to provide employment.
“Set up business incubators for small business holders to help them grow.
“Provide materials or facilities such as cheaper buildings, computers, and other administrative equipment.”
According to the economist, the concept of setting up business incubators for small holders (SME) is to assist them within a given period.
“The SMEs will run independently when they become mature, profitable and self-sustaining.
“The importance of formulating workable policies is that they will enhance the local economy.”
Meanwhile, local political scientist and current team leader for Honiara city’s constitutional reform group, Joseph Huta said trade imbalance is the result of uncontrolled trading.
He explained that the government has created several bilateral relations with other countries.
“Those relations only allow more space for the productive foreign partners, which also resulted in the accumulation of imported products in Solomon Islands,” Huta said.
He added the government had established bilateral relations with other trading partners but fall short ofo actually utilising them in order to boost the local economy.
He also explained that budget deficit is not purely degrading but can also allow more opportunities for foreign investors to invest in the country and thus enhance the economy.
However, Huta stressed that the government must be cautious when formulating and handling such budgets.
The political scientist also refered to renowned British economist John Maynard Keynes’ explanation of such deficit and its relevance.
Keynes stated that when a government’s spending goes beyond its income causing the deficit or shortfall, that government have to borrow funds from foreign governments or to be precise; it’s trading (bilateral) partners.
“The increased government spending can help stimulate the economy as more money flows in, (foreign exchange) but the jump in borrowing can have an adverse effect by raising interest rates,” according to Keynes.
Huta said high interest rates is one of the major challenges facing the country.
“This is one of the economic issues that needs to be negotiated with bilateral partners.
“Moderate interest rates will allow for the growth of the local economy, as it will be easier for local businesses to function.”
SINU journalism student