Solomon Islands bumps up currency value

16/06/2011

The Solomons Islands government has appreciated its currency this week on the advice of its Central Bank. The Solomons Islands dollar value has been raised by 5 per cent.<!--more-->

The country’s economy has performed extremely well last year in comparison with other regional economies. GDP growth has been an impressive 7.1 per cent and has come from the agriculture, fisheries and forestry sectors.

Deft handling of economic policy has helped the government contain inflation at just 1 per cent, down from as much as 7.9 per cent in the previous year. Better tax compliance has also resulted in the government mopping up more revenue than ever before in its history.

In addition, ongoing economic reform contributed to better affordability of essential commodities. Moving away from monopolistic policies in food imports as exemplified by the opening up of the rice import market has driven down the price of staple food grain like rice. Previously, Solrice had a monopoly on all rice imports.

However, an appreciated currency will increase Solomon Islanders’ affordability only if importing businesses pass on the benefits of the higher dollar to the consumer. Sources from the country’s business circles told Pacific Periscope that they believed this would indeed be the case.

But the higher dollar is bound to bring some price pressure on the country’s core exports – logs and fisheries – making them more expensive in the international markets. Calvin Ziru of the Solomon Islands Chamber of Commerce, however, believes this impact will be marginal. Any increased yield on a dwindling resource is welcome, even if it marginally slows down the exports of the natural resource and helps conservation activity.

Meanwhile, Australia this week is sending medical supplies to the Solomon Islands aboard a vessel that will, upon arrival in Honiara, be pressed into service as an inter-island ferry, beginning with connections between the capital and destinations in Malaita province.