SOLOMON Islands Finance Minister, Gordon Darcy Lilo, says the country must break its long-standing cycle of earning wealth only to spend it.
Lilo warned that unless the country started to save and invest more wisely, future generations would have little to show for today’s natural resources.
A former prime minister, Lilo, outlined the government’s vision to transform the country’s economy by establishing a domestic capital market and a Sovereign Wealth Fund – two reforms he believes will help build lasting national prosperity.
“The Solomon Islands earns a lot of money, but we don’t keep enough of it,” Lilo said.
“Money comes in from logging, fishing licence fees and donor assistance, and then it goes straight back out again.
“It doesn’t stay here to grow into lasting wealth for our children and grandchildren.”
He described this pattern as “bad money” – income that is quickly spent rather than saved or invested for the future.
“We are going to change that,” he said.
Lilo holds the finance portfolio under Prime Minister Matthew Wale. He said one of the government’s priorities would be to develop a domestic capital market, allowing Solomon Islanders and local businesses to invest more of their money within the country instead of relying heavily on overseas financing.
A domestic capital market would give businesses greater access to long-term investment and financing beyond traditional bank loans, helping companies expand while reducing the country’s dependence on foreign borrowing.
Lilo said such a market would play an important role in creating jobs, encouraging local investment and strengthening economic growth.
The second pillar of the government’s strategy is the establishment of a Sovereign Wealth Fund.
Lilo described the fund as a national savings account that would invest part of the country’s revenue from industries such as logging, fisheries and other natural resources for the benefit of future generations.
“The idea is simple,” he said.
“We save some of what the country earns today so that it continues creating wealth tomorrow.”
He stressed that the fund must operate independently of the government’s annual budget and be managed by professional investment managers rather than politicians.
“It cannot become a source of quick cash whenever governments need money,” Lilo said.
He noted that many resource-rich countries had successfully established sovereign wealth funds, adding that what has held Solomon Islands back is not a lack of opportunity, but a lack of political will.
CBSI to play a central role
Lilo said the Central Bank was well placed to help implement both reforms because of its experience managing the country’s foreign exchange reserves and maintaining financial stability.
“This Government looks to CBSI as a partner in this work,” he said.
“We will introduce the legislation needed to make these reforms a reality.”
The country’s economy has traditionally relied on logging, fishing licence revenue, agriculture and donor funding to finance government spending.
For decades, logging has been the country’s largest export earner, but economists have repeatedly warned that the industry is operating at unsustainable levels and cannot continue to underpin economic growth indefinitely.
At the same time, the country has limited opportunities for domestic investment, with businesses relying largely on commercial bank lending and government spending to finance growth.
Economists have long argued that developing a domestic capital market and establishing a Sovereign Wealth Fund would help diversify the economy, encourage long-term investment and ensure that a greater share of the wealth generated from the country’s natural resources is preserved for future generations rather than consumed in the short term.
