Solomon Islands urged to control 2023 Pacific Games spending

Solomon Airlines is the latest Solomon Islands company to be an official sponsor of the Pacific Games.

The International Monetary Fund (IMF) has urged the Solomon Islands to ensure spending on this year’s Pacific Games and the delayed general election are “well controlled to minimise the crowding out of other essential spending”.

Staff from the IMF completed an Article IV mission to the Solomon Islands.

This is usually conducted every year, with staff holding discussions with members of the country, collecting economic and financial information and discussing policies.

Masafumi Yabara led the team that visited the Solomon Islands, and said that projects related to the Pacific Games had helped with an economic recovery, although challenges including the war in Ukraine and high inflation remained.

“The economy is recovering from a series of shocks, including civil unrest and a local outbreak of COVID-19,” Yabara said.

“The reopening of the border and infrastructure spending ahead of the 2023 Pacific Games have boosted growth but the recovery has been fragile, as Russia’s war in Ukraine has led to higher inflation and a worsening of the terms of trade.”

A growth rate of 2.5 per cent is estimated by Yabara for 2023, with inflation projected to be 4.7 per cent at the end of the current year, in comparison to 8.5 per cent at the end of 2022.

Yabara added that the Pacific Games is likely to contribute to an increased fiscal deficit for 2023, meaning that careful control of spending is required.

“The fiscal deficit is projected to widen to 6.3 per cent of GDP in 2023, mainly driven by exceptional expenditures for the hosting of the Pacific Games and preparation for the general elections (summing up to 5.3 percent of GDP),” he said.

“Expenditures related to these two events need to be well controlled to minimise the crowding out of other essential spending, including targeted support for the vulnerable and investment for future growth.

“Once the recovery is secured, rebuilding the government’s broad cash balance to at least two months of total spending should be prioritised.”

The IMF staff has recommended that an audit of expenditures related to the Pacific Games are published after it has concluded.

The Solomon Islands is due to stage this year’s Pacific Games between 19 November and 2 December, following a four-month delay blamed on COVID-19. Prime Minister Manasseh Sogavare says hosting the multi-sport event means the country cannot hold a general election in 2023 and has had his term extended beyond the constitutional limit of four years in a move critics say is a power grab and undemocratic.