Posted by : Posted on : 28-Oct-2019

With a steady decline in logging revenue pressure is growing on the SIG government to maintain social services.

Writing in today’s Island Sun newspaper, Loretta Brigidia Manele predicted that the anticipated gradual decline in the local logging industry will see a fall in government revenue.

Loretta’s article read, quote:

“The Central Bank’s Monetary Policy Statement (MPS) for September 2019 expressed that there would have to be new revenue measures in place to fill in the gap logging will leave.

“New revenue measures such as a tax on rice and other expected tax reforms are envisaged to partially fill the gap from logging”, said CSBSI.

“Moreover, the MPS expressed that in terms of expenditure, there is pressure on the government to maintain social services given the country’s growing population and to construct large infrastructures as such, to accommodate the 2023 Pacific Games in Honiara.

“CBSI mentioned that while possible future deficits maybe financed through debt or donor support, government’s fiscal consolidation measures also ensure that the fiscal situation is contained and well managed.

“The Monetary Policy Statement (MPS) also noted that the government recorded a fiscal surplus of $129 million in the first half of 2019 against a deficit of $96 million in the second half of 2018.

“CBSI said this was somehow expected because government had been in caretaker-mode with no major capital expenditure before the April 2019 general elections.”

The alarm over declining revenue from logging was raised in 2008 when the then Sikua government launched a Medium Term Fiscal Strategy to ensure the impact of the revenue decline would be minimized.”

I don’t know whether the 2008 MTFS was based on advice received by the SIG from the World Bank but I do know in that year, the Solomon Islands Government asked the World Bank and IFC to assess the prospects for growth, exports and revenues in the Solomon Islands in the context of declining logging production.

The first step taken by the World Bank was to look at growth prospects in six key sectors – minerals, tuna fisheries, plantation forestry, tourism, plantation agriculture and palm oil – and estimate the extent to which growth in these sectors might fill the gaps created by the decline in native logging exports, and associated employment and government revenues over the next five years.

One must presume growth prospects in all six key sectors are still inadequate after 11 years since the MTFS to compensate for the decline in logging and the possibility of introducing new revenue measures, such as mentioned by the CBSI Policy Statement in September 2019 will hardly come as welcome news.

While possible future deficits maybe financed through debt or donor support, the government’s fiscal consolidation measures must ensure that the fiscal situation is contained and well managed.

Yours sincerely

Frank Short

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