Stocksak: World Bank warns Solomon Islands about unsustainable debt Without Reform

By Lucy Craymer

WELLINGTON (Stocksak), – The Solomon Islands must implement fiscal reforms, such as changes to its tax system and more efficient spending public funds. Otherwise, its debt levels could become unsustainable. This was stated by the World Bank in a Wednesday report.

The bank stated that the Solomon Islands are implementing a large-scale public investment programme and are facing declining logging revenues. Fiscal reform is essential for managing debt and securing hard-fought development benefits.

“Without reform, Solomon Islands’ debt may become unsustainable,” the bank said.

It said that public debt, if it is not changed, will reach the government threshold at 35% of gross domestic products (GDP) by 2026.

The government of the Pacific island country has undertaken many externally funded infrastructure projects, including transport and sporting facilities for 2023 Pacific Games, renewable energies, water, and healthcare.

These loans are used to address development and growth issues, but they are partially funded by concessionary loans that add to the country’s debt, the bank stated.

McKinnie dentana, permanent secretary to the Ministry of Finance, stated in a statement that the Solomon Islands had closely worked with the World Bank to prepare the report and that it provided useful guidance.

Dentana stated that “We know that we can expect a decrease in logging revenues” and that identifying ways to diversify the country’s income was a key focus for this government.

The bank also stated that the Solomon Islands should be aware of the costs of maintaining its infrastructure projects and should incorporate this into their spending plans.

The report comes amid concern among Western countries about China’s growing influence in the Solomon Islands after its government struck a security pact with China in April that allows Chinese police to restore order and protect Chinese infrastructure projects.

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