Volume 01 Issue No.

7 July 2009

Monthly Economic Bulletin

Content Page

Data published in this Bulletin are subject to revision 1.0 Monetary Development 1
and the Bank cannot guarantee the accuracy of 2.0 Balance of Payments
3.0 Government Finance 2
information obtained from outside sources.
4.0 Domestic Economy 4

I. MONEY AND BANKING Domestic Credit

Broad Money supply (M3) recorded an Total domestic credit declined by 6.9% to
increase of 1.6% to $1527.2 million as of last $1203.9 million, compared to an increase of
Wednesday of July 2009, following a 2.1% 2.4% in June. The fall was attributed to private
increase in the previous month. Net foreign sector credit which fell by 10.7% to $1159.9
assets fell by 3.2% to $959.6 million from the million, despite net credit to government
balance in June. This fall was due to a decrease improving from minus $19.0 million to $43.9
in net foreign assets held by the commercial million.
banks from $194.0 million in June to $115.5
million this month. Meanwhile, Central Bank’s II. BALANCE OF PAYMENTS
net foreign asset rose by 5.8% to $844.1 million,
an increase of $46 million from the preceding Solomon Islands’ Balance of Payment position
month. in July soared to a surplus of $72.6 million,
continuing on from the surplus of $37.7 million
in June. This outcome was attributed to a rise
in private sector loan inflows, increases in
Graph 1 exports and other receipts, and foreign
Monetary Survey exchange revaluation gains of $5.8 million.
1650
1500 Total exports in July increased by 11.6% to
1350
$115.1 million. The buoyant outcome was
1200
1050
attributed to increases in some major
900 commodities. Logs export, the country’s major
750 foreign exchange earner, was up by 2.3% to
600 $65.7 million, copra receipts jumped 34.5% to
450 $5.3 million, and cocoa exports rose 7.8% to
300
$8.1 million. Meanwhile, fish export receipts
150
0
also increased to $13.7 million from $5.8
-150 million and ‘other services’ receipts rose 34.6%
J FMAMJ J ASOND J FMAMJ J ASONDJ FMAMJ J to $8.7 million. On the other hand, alluvial gold
receipts declined by 11.6% to $1.2 million, and
2007 2008 2009 ‘other commodities’ dropped to $0.1 million
Net Foreign Assets Net credit to Government from $0.5 million during the month.
Credit to Private Sector Money supply

Total transfers rose by 33.9% to $73.6 million

during the month. This jump in receipts

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Volume 01 Issue No. 7 July 2009

represented increases in transfers to ‘private Exchange rates

enterprises and individuals ’, churches,
RAMSI, funding agencies, and NGOs. On the
other hand, transfers to foreign embassies and
the Solomon Islands government declined
during the month.
The Solomon Islands dollar (SBD) remained
stable against the US Dollar for the fourth
consecutive month in July, trading on average
at $8.06 per USD.

The SBD however, depreciated by 2.3% against

the Japanese Yen to $8.54 per 100 JPY, by 1.0%
Graph 2:
Gross International Reserve &
against the New Zealand dollar to $5.19 per
Import Cover NZD, by 0.4% against the Australian dollar to
1000 4.5
$6.48 per AUD and by 0.1% against the British
900
Pound to $13.20 per GBP. On the other hand,
4.0
800
the SBD slightly appreciated against the EURO
3.5
700 by 0.2% to $11.36.
3.0
600
2.5
500
2.0
400 Graph 3:
1.5 Exchange R ate
300
(SI$ P er F o reign C urrency)
200 1.0
16.0
100 0.5
0 0.0 14.0

J F M A M J J A S O N D J F MA M J J
12.0

08 09 10.0

Gross Reserves Import Cover 8.0

6.0

Meanwhile, investment and loan inflows rose 4.0

to $98.9 million in July, rising from $2.6 million 2.0

in the previous month. This significant
0.0
increase was primarily due to proceeds of an J F M A M J J A S O N D J F M A M J J
overseas borrowing to finance private sector 08 09
investment and capital projects.
USD AUD STG

The gross external reserves position of Solomon
Islands increased by 9.1% to $863.6 million at
end July. This positive outcome was attributed
to the continued positive export performance,
investment/loan inflows and foreign exchange
revaluation gains during the month.
Consequently the external reserves cover is
equivalent to approximately 4.3 months of
imports of goods and non-factor services. The
rise in import cover is attributed to slow
imports growth compared to levels in 2008.
YEN NZ EURO
III. GOVERNMENT FINANCE
Fiscal performance in July 2009 was
characterized by stronger expenditure over
revenue, resulting in a net overall deficit of
about $12.8 million. This was due mainly to
increased development spending and a drop
in revenues especially from company and
income taxes during the month.

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Volume 01
Total revenue collected for July slowed down
against budget by 19.7% to $111.0 million, in
contrast to the significant increase of 23.7% in
June. The total revenue collection was almost
the revenue collected in July 2008. By category,
local revenue accounted for $102.1 million,
while external sources contributed $8.9
million.
Graph 4
Revenue and Recurrent
Expenditure
(July 2009)
180
160
140
120
100
80
60
40
20
0
Revenue Recurrent Expenditure
Revenue collection from Inland Revenue
Division (IRD) totalled $64.2 million, 1.9%
above budget and 25.2% higher than July
2008. The outcome during the month reflected
improved compliance as more revenue
collecting categories under IRD registered
collections that exceeded expectation. These
were total withholding tax, up by 125.2%,
sales tax by 107.5% and licensing by 17.2%.
On the other hand, company tax collection fell
below budget by 22.7% while private PAYE
was lower by 12.3% and goods tax by 9.5%.
Revenue from Customs and Excise Division
(CED) in July was lower than budget by 4.2%
Issue No. 7 July 2009
to $33.1 million. On a monthly basis, July
revenue collection was lower than the previous
month by 10.0%. This resulted from weak
collections from log duties, excise duties and
‘Other’. Import and export duties surpassed
the previous month’s collections by 18.5% and
182.1% to $12.2 million and $0.4 million. The
below-the-budget collection reflected mixed
movements in the revenue collected against
budget. During the month, collection from
excise duty alone was above budget by 27.2%,
while collection from all other CED duties was
under budget. On a twelve month basis, total
collection was below budget by 10.9%.
Non-tax revenue for the period stood at $4.8
million, 70.5% below the previous month and
70.4% below budget. The drop in receipts from
the Ministry of Communication and Civil
Aviation by $6.3 million underpinned the weak
performance.
Grants received during the month totaled $8.9
million.
Expenditures
Total expenditure for July stood at $123.7
million. This was lower than budget by 24.2%,
even though it was above the previous month
by 20.6%. By months, the trend reflected
notable increase in all major expenditure
components.
“Other charges” recorded $48.0 million during
the month, 32.6% lower than budget but 25.8%
above the June spending. Against the
corresponding month a year ago, it expanded
by 26.7%. The increase was due mainly to a
payout of $8.6 million towards government’s
commitment to the University of the South
Pacific during the month. Most ministries are
anticipating lower expenditure outlays in the
coming months.
Development expenditure grew by 173.8% to
$32.1 million, compared to the previous month.
This was 5.4% higher than budget and 134.6%
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Volume 01 Issue No. 7
above July 2008. Of the total, SIG funding
accounted for $15.1 million, of which, 50% was
spent on Rural Livelihood Constituency Fund.
This was followed by spending on the Rural
rice Project with $1.6 million. The spending
from the donor’s consolidated funds accounted
for $17.5 million in July, of which, almost $10
million was for the ROC (Republic of China)
training award and the rest of the $7.6 million
was spent towards ROC Constituency Micro-
project Fund (RCMF).
SIG Debt Stock
Total debt stock at the end of July as depicted
in graph 4 was $1,433.1 million. This
comprised $1,069.1 million in external debts
and $364.0 million in domestic debts. On a
month-to-month basis, the overall debt position
edged up by 0.2% ($3.1 million), which
reflected the upward movement in the external
debts and more in particular, the domestic
debts. The external debt rose from $1,069.0
million to $1,069.1 million, due to the exchange
rate movements, whilst the domestic debt rose
from $361.1 million to $364.0 million due to
more investors participating in the Auction
Treasury Bills during the month.
Graph 5
SIG Debt Stock (CBSI)
(July 2009)
1600
1200
800
400
0 3% to 330 tons. This was reflective of a drop
Series1 Series2 Series3
4
July 2009
Debt servicing during July totaled $7.9 million.
This was 52.0% less than that of the previous
month. The external debt repayment was $5.3
million, $8.4 million lower than the previous
month, and 46.4% below budget. Repayment
during the period was mainly to the Asian
Development Bank and the World Bank.
Domestic debt repayment was $2.6 million,
where most of the payment was on
government securities, accounting for 71.0%
of the total domestic debts. Debt arrears
dropped during the month as opposed to June
from $25.9 million to $25.4 million.
IV. DOMESTIC ECONOMY
Logs
Log exports data, proxy for log production fell
38% to 77,164 cubic meters in July 2009 from
124,204 cubic metres in June. This drop was
attributed to relatively higher export shipments
in June combined with lower volumes during
the month. Year to date production volume
reached 618,635 cubic meters compared with
908,587 cubic meters in the first seven months
of 2008. The underlying concern for this export
commodity is that at the current rate of
extraction it is estimated that non-plantation
logging could be fully exhausted by 2014. The
average international log price rose slightly
from US$279 per cubic meter to US$281 per
cubic meter at the end of July.
Palm oil & kernels
Palm oil production declined 1.5% to 2,161 tons
in July following a 4.2% drop in the previous
month. The drop in production this month was
due to the seasonal cycle when palm trees
reach their low cropping period.
Consequently, palm kernel output fell by 2%
to 631 tons whilst palm kernel meal dropped
in the international price for palm oil from
US$726 per metric ton to US$639 per metric
ton. The drop in the price was mainly due to
Volume 01 Issue No. 7
high stock levels as Malaysia and Indonesia
(larger producing countries) enter into their
peak cropping months.
Fish
Fish catch in July dropped 22% to 1,486 tons,
reversing the rise seen in the previous month.
The drop is mainly associated with unfavorable
fishing conditions during the month. Year to
date catch volume fell by 17% to 9,504 tons
compared to 11,389 tons in the same period in
2008. Fish catch, however, is expected to pick
up towards the end of the third and fourth
quarters of the year. The drop in the catch was
a missed opportunity since the average
international price of fish increased by 29.2%
to US$1,550 per metric ton at the end of the
month.
Copra
Copra exports used as proxy for copra
production fell sharply by 58% to 686 tons in
July, following a 21% fall in the previous
month. The fall mainly reflected depressed
world market prices since July 2008.
July 2009
Consequently domestic copra prices fell from
$2.15 per kilo to $2.00 per kilo at the end of
July. Contracted export prices on the other
hand rose from US$318 per metric ton in June
to US$365 per metric ton this month.
Meanwhile, international prices for copra
sourced from the World Bank also fell 7% to
US$448 per metric ton from US$480 per metric
ton a month ago.
Cocoa
Cocoa exports used as proxy for cocoa
production dropped markedly by 31% to 493
tons in July despite a seasonal peak cropping
period. The drop was mainly attributed to a
delay in cocoa export shipments during the
month. Export is expected to see a rise in the
coming months as exporters stockpile the
product for shipment. Contracted export
prices for cocoa fell 3% to £1,328 per ton from
£1,363 per ton last month. Domestic prices on
the other hand improved from $13.50 per kilo
to $13.75 per kilo at the end of July.
International price for cocoa sourced from the
World Bank rose by 3% to US$2,775 per metric
ton from US$2,704 per metric ton last month.