BY ALEX DADAMU
THE current health of our economy is in a precarious situation, likened to a person walking one step forward and two steps backward.
This was according to Central Bank of Solomon Islands (CBSI) Governor, Dr. Luke Forau when delivering a statement at the launch of the 2021 CBSI Annual Report, on July 6, 2022.
Speaking on the theme “Navigating the way to recovery and strengthening resilience to mitigate future shocks”, Dr. Forau said, “The theme is relevant to such shock-prone environment we are currently in, which underscores the need to be even more vigilant and resilient now than ever to the rising challenges and risks posed by the COVID-19 pandemic, climate and natural disaster risks, and now the impact of the Russian-Ukraine war.”
Further to that, Dr. Forau pointed out that the Solomon Islands being a small open economy will continue to face risks of further macroeconomic slowdowns, coming from both the external and domestic fronts.
“Externally, the Russian-Ukraine war brings a new setback, on top of the pandemic, adding further threats to inflation and recovery for the country.
“Domestically, COVID-19 new variant, declining fiscal space amid elevated debt levels, and spillover effects from the war among other things are adding to headwinds for the economy’s recovery,” The CBSI Governor said.
Dr. Forau meanwhile reassured said that these challenges will nonetheless, bring opportunities for a relook at our macroeconomic policies, objectives, choices, technology, and doing things differently.
“We need to get the economic fundamentals right, with the right policy mix to move this country forward and improve our living standard.
“I would like to emphasize that these emerging challenges and opportunities will be the new normal that we will live with. Therefore, strengthening our capacities to navigate these uncertainties will be an important determinant for a resilient recovery from the pandemic.
“Three key actions we can Prioritize now to start economic recovery include:
1. Expedite and maintain support for the affected businesses till the recovery takes hold. The return to economic activity and growth hinges on their ability to weather the pandemic and return to work safely and revive from the aftermath of the riot. Business activities have been severely disrupted since the pandemic started, with added challenges now on the horizon, in particular, war outside and the second wave, the future is more uncertain now than ever. It is encouraging to note that businesses and employees remained resilient last year despite these challenges and have successfully adapted to the new normal and returned to work quickly during the year. This brings me to my second point;
2. In the short to medium term, strengthening resilience and capacity across all sectors of the economy, to sustain the country’s ability to absorb future shocks. Implement strategies that enhance revenue mobilization that will broaden the revenue base, build capital and macroeconomic buffers and expand and promote export diversification to foster a resilient economy. As an example, improving tax administrators’ capacity, reducing tax evasion, improving tax compliance and increasing efficient tax administration is a crucial objectives to prioritize and execute.
3. Finally, as I had highlighted in my recent statement during my appearance before the Public Accounts Committee in March this year, we should start working on a growth policy that will drive growth in the country. Prioritizing key commodities with export opportunities in non-logging sectors or new diversification opportunities, for instance, can facilitate growth transformations for a resilient recovery.
