Speech by the Minister for
Finance and Treasury Hon. Gordon Darcy Lilo on the 2007 Appropriation Bill 2007
(Budget Speech),
Hon DARCY: Mr Speaker, I rise
to beg that the 2007 Appropriation Bill 2007 be now put to the second reading.
Mr Speaker, I am honored and
privileged to present this House with the 2007 Appropriation Bill 2007 on
behalf of the Grand Coalition for Change Government in accordance with Section
102 of the National Constitution of Solomon Islands.
Sir, this is the first full year Budget presented by this
Government and the first I have presented.
It represents our first step towards implementing our policies and
mandate on behalf of the people of
Mr Speaker, this Government is
aiming to create a society that is equitable, trustworthy and
forward-looking. We are committed to
strengthening the country’s democratic, constitutional, and community
institutions and structures as well as its economy.
The Budget is a fundamental instrument of Government
policy in action and its development is a task this Government has taken very
seriously.
Sir, this House will recall that this Government
requested additional time in 2006 to develop a budget which provides effective
approaches to the nation’s challenges. I
am pleased to report that the extra breathing space granted has been put to
good use. After extensive consultation
and deliberation we have identified several fundamental targets and principles
to guide our decision-making.
Mr Speaker, our primary
objective is to achieve development through a bottom-up, regionally-focused
approach. The focus is on the provinces
and on rural development. This Budget is
an important first step in this direction, both in the way it is presented and
in the decisions and priorities it reflects.
The Government has identified three components to its rural development
strategy.
The first component, sir, is community consultation and
grass root policy development. The main
responsibility for this lies foremost with us as Members of this House and with
Members of the Provincial Assemblies.
Specifically in this Budget we have made provision for Constituency
Community Development Officers in each constituency as well as provision for $1
million in rural development funding for each electorate. Furthermore, we have made provisions to
clearly identify provinces that will benefit from projects in the Development
Budget.
The second component, sir, is effective sectoral strategies to improve access to economic
opportunities for rural people. Notable
development programs and activities in this Budget include:
·
Expanding
infrastructure in the provinces such as land registration, court
infrastructure, water supplies, housing, micro-projects and community
facilities;
·
Restructuring
road and wharf maintenance expenditure to expedite rebuilding and improving
maintenance, including for two provincial airstrips, namely Temotu
and
·
Fostering private
sector development in the provinces through training, a credit guarantee
scheme, and support to rural banking;
·
Resourcing and promoting employment generating projects in the
strategic areas of agriculture, forestry, fisheries and tourism; and
·
Increasing
funding to education so as to enable a better skilled workforce throughout the
country in the immediate future.
The
third component, sir, is building the capacity of the provincial governments to
deliver services to rural communities and promote business development. For this Budget we have made provisions for:
·
$3 million for
provincial governments’ debt;
·
Beefing up
Ministries with sectoral responsibilities to
undertake a wide range of capacity building tasks across the country, including
visits, research and training; and
·
Commencing
negotiations with provincial governments on measures to enhance their private
sector, including reducing business licence fees.
Related
to this issue, Mr Speaker,
is the constitutional reform, particularly the federal constitution. The Government is committed to progressing the federal constitution that has begun by the
successive governments. We acknowledge
and are full supportive of initiatives by some provinces to advance the federal
constitution in their respective provinces.
This is reflective of their utmost desire and aspiration to move governance
and decision making closer to the people.
The Government’s commitment to the federal constitution has been
demonstrated by the transfer of this particular task to the Prime Minister’s
Office.
Mr
Speaker, we have not neglected national priorities. We are also very much determined to
strengthen
·
We have
established a separate head for the National Judiciary in recognition of its
independence;
·
We have
established a National Truth and Reconciliation Commission;
·
There is
additional funding support for the Parliament; and
·
We have expanded
the role of the Auditor-General.
Mr
Speaker, strengthening institutions is, however, as much a matter of process as
of money. An example of our serious
commitment to proper process is that, for the very first time in many years, I
am pleased that the Public Accounts Committee has been able to review and
scrutinize the Budget before the commencement of the Parliament sitting.
Mr Speaker, we are
also most determined to place
Mr Speaker, we have toiled and grown
the revenue base. This has allowed the Budget to produce a
small surplus and has avoided the need for further borrowing. Revenue collection has been helped by better
tax administration to ensure compliance and fairer management of tax exemptions
by the application of tax exemption guidelines.
Compilation of better statistical information will also help guide
economic decision-making into the future.
However,
sir, the improved budget position has not been at the expense of business. Action is being taken to create new
opportunities for business, particularly business in the provinces. The establishment of an effectively
autonomous Transport Fund will help to manage and develop our nation’s
transport infrastructure in a way that will attract further contributions from
development partners.
Mr
Speaker, let me now outline the fundamentals of the Recurrent and Development
budgets. Before taking into account new
revenue initiatives, government domestic revenue in 2007 is forecast to
increase by 13.5 per cent from that achieved in 2006. This is 18 percent above that originally
budgeted for 2006. After new revenue
measures we have implemented are taken into account, revenue will increase to
$887 million. This is an overall
increase of 28.8 percent.
Total
recurrent expenditure in 2007 is expected to rise by 12.7 percent. Recurrent expenditure to be appropriated in
the 2007 Appropriation Act (excluding Statutory Expenditure and Budget support
from donors) has increased by 18.3 percent to $ 792 million.
Mr
Speaker, the Government’s preliminary estimate for the national economy in 2007
is for real economic growth of almost 5 percent. Furthermore, we expect inflation to be
contained at around 8 percent. This
positive economic outlook stands us in good stead to implement the reforms
necessary to ensure the prosperity of
Mr Speaker, I would now like to
give an overview of the 2007 Budget.
Mr Speaker, this Government’s
long term vision for the
·
Provincial and
rural development;
·
Access for all
Solomon Islanders to essential services including schools, health care and
transport;
·
Stabilising law and order and enhancing national institutions and
services; and
·
Encouraging a
vibrant private sector economy.
Sir,
the Government’s activities are carefully directed to progress this
vision. These focus on taking leadership
in respect to governance, security and the legal system, supporting (not
stifling) private enterprise in the productive sectors, ensuring equitable
services and overcoming entrenched obstacles to development - obstacles such as inadequate capacity in
the provinces, limited lending facilities and difficulties in obtaining access
to land for major projects.
Sir,
in August 2006, we launched our Policy Translation and Implementation Document. This has guided ministries in developing new
policies for the Government. This is the
basic framework by which our work and efforts should be assessed.
Budget Speech
Mr
Speaker, the Government hopes that this policy framework will lead to vibrant
private sector throughout this nation, where new economic developments are
encouraged for the benefit of all Solomon Islanders. This can be achieved by a responsible
government creating a regulatory environment that supports the development of
new opportunities.
Of
course, Mr Speaker, these objectives are best
achieved in a stable economic and political environment, with a healthy
democratic process and respect for the rule of law. A combination of all these factors is
necessary if we are to overcome the significant challenges that still face the
national economy.
Challenges facing the national economy
Mr
Speaker, while the outlook for the national economy in 2007 is broadly
positive, there are a number of risks and potential shocks to our economy that
threatens to impact on economic growth.
Mr
Speaker, although the global oil price has fallen slightly in recent times, it
is expected to remain high by historical standards over the course of 2007, and
could potentially rise further. Higher
oil prices throughout 2006 have contributed to upward price pressures in the
national economy both for our domestically produced goods and for our imports.
Sir,
annual inflation continued to increase throughout 2006, rising to almost 10 per
cent before being contained later in the year.
This is largely due to the flow-on effect of fluctuating global oil
prices feeding into costs of transport and utilities. The strong economic growth of the national
economy, together with capacity constraints, has also contributed to price
pressures in the economy. Neither the
domestic nor the international pressures are expected to diminish in the near
future. Accordingly, inflation is
expected to remain steady at around 8 per cent through 2007, although increases
in global oil prices pose a real risk to this outlook.
Mr
Speaker, although inflation and high oil prices represent real risks to
economic growth in
For
many years, a big contributor to our economy has been the forestry sector. This sector currently provides around two
thirds of our export income and accounts for around 15 per cent of our market
economy.
However,
the un-logged forestry resource is limited, and there will be a significant
delay until replanted areas are ready for harvesting. Mr Speaker, we
cannot afford to be too heavily dependent on this one commodity for growth of
our economy. Without strengthening other
sectors and industries, the expected medium term decline in incomes from forest
industries will adversely affect the economy and weaken government
finances. This situation, Sir, could
occur within the life of the current Parliament. This Government realizes the adverse impacts
of this possibility and is committed to take the necessary actions to avert
this.
Mr
Speaker, the alternative path this Government is taking is to pursue vigorous
economic reforms. When combined with
prudent fiscal and monetary management, this can potentially sustain real
economic growth in the medium term – giving hope of rising living standards of
all Solomon Islanders, particularly those in rural areas.
3. Driving
Economic Growth
The barriers to growth
Mr
Speaker, although the outlook for the national economy is generally positive in
the short term, in the medium to long term there are a number of barriers to
economic growth. Continuing economic
reform to address these barriers is needed to ensure the current recovery
process continues and economic growth is shared by all Solomon Islanders.
Sir,
the first major barrier to broad based economic growth is that of distance. Our rural areas are situated some distance
away from markets, and often lack access to essential infrastructure such as
telecommunications services, safe and reliable transport, electricity and clean
water.
The
second barrier to broad based economic growth, Sir, is the inefficient
regulatory and tax environment. High tax
rates and an overly burdensome regulatory framework mean that businesses are
unable to develop to their full potential.
The
third major barrier, Sir, is inadequate capacity for Solomon Islanders to start
up a business. This includes inadequate
business skills and entrepreneurship as well as limited access to capital.
Government Reform Agenda
Mr
Speaker, this Government plans to combat these barriers to economic growth by
continuing with its ambitious economic reform agenda. We will build on the advances we made in
2006. At the heart of the Government’s
reform agenda is the Strategic Framework for Rural Development and the
Bottom-up Approach. This can be seen in
the types of reforms the Government is implementing.
Transport and communications
Mr
Speaker, this Government has at the centre of its development strategy
initiatives to ease the critical impact of distance on the rural
economies. To this end, the National
Transport Plan aims to provide effective transport infrastructure to support
sustained economic growth and social development. This will include regular, reliable and
privately operated shipping services to all areas, as well as enhanced road and
air services. Furthermore, the
Government is working to improve affordable access to telecommunications
services by introducing competition.
Financial services
Mr
Speaker, improving access to secure and well-managed financial services for
rural people, particularly savings and micro-credit services, is a key
objective of this Government. This Budget includes two new initiatives that
will help to ensure this objective is achieved in the life time of this
Government.
First,
the Government will launch a Credit Guarantee Scheme. Mr Speaker, this
scheme will help entrepreneurs to secure loans with commercial banks to start
their own business. Such loan proposals
are often turned down by the commercial banks because they lack adequate
security.
A
similar scheme was successfully operated by the Central Bank of
Mr
Speaker, the Government intends to encourage the expansion of high quality
financial services into rural areas, particularly savings and micro-credit
facilities. We are already seeing an
expansion of financial services across the country. Most notably, the value of loans has tripled
since 2003, more people hold bank accounts, some Post
Offices are offering banking services and other agencies will soon open up
around the country in partnership with the commercial banks.
As a
second initiative, Sir, we will further encourage this expansion by inviting
registered financial institutions in
State Owned Enterprises
Mr
Speaker, many of our State Owned Enterprises (SOEs)
continue to under-perform because of inadequate proper governance. We have seen poor and unreliable services,
and a lack of current audited financial statements by SOEs.
To
address this, Mr Speaker, the Government is
introducing a new
In
addition, Sir, the Government is updating all
Needless
to say, the Government may consider providing subventions to SOEs that adopt good governance and prudential principles
and have established and justified that such assistance is absolutely required
for their sustenance to deliver on their mandated responsibilities. Related also to this matter, Mr Speaker was the statement on the Development Bank of the
Business taxation and regulation
Mr
Speaker, the Government is implementing a number of reforms aimed at reducing
the heavy regulatory and taxation burden faced by all Solomon Islanders and
ensuring a level playing field for all businesses – large and small. These reforms include import duty reform, tax
exemption guidelines and the cessation of round log export duty exemptions.
These
reforms complement changes such as the new Foreign Investment Act, improved
statistical collections, streamlined work permits and a planned comprehensive
modernization of our business laws that will make it easier for businesses to
commence and operate.
Mr
Speaker, the Government is particularly keen to support Solomon Islanders
establishing and running their own businesses.
Hence, I am pleased to announce to this House today the allocation of
$3million for business skills training.
This training will help ordinary Solomon Islanders to start and operate
their own business so they can support themselves, their families and their
communities.
Further,
Mr Speaker, the Government is prepared to provide
financial incentives to Provincial Governments that abolish business license
fees. We will soon be commencing
discussions with all Provincial Governments including the Honiara City Council
with the view to implement this initiative as soon as possible. These fees are a major hurdle to those people
wishing to start their own business and should, therefore, be removed.
Mr
Speaker, I have recently announced reforms to import duties being designed to
benefit local businesses and communities.
Many small, local businesses have, in the past, struggled under the
burden of high import duties whilst other businesses obtain an unfair advantage
by gaining duty exemptions. The reforms
that I announced reduced by half, the top rate of import duty from 20 percent
to 10 percent. Many unnecessary and
costly exemptions have also been removed.
Sir,
under this reform, lower duty rates will also benefit rural communities by
reducing the pressure on the price of many basic goods. Before these reforms, the top import duty
rate of 20 per cent applied to most goods, including many basic items such as
soap, noodles, clothes, boots, exercise books, water tanks and mattresses. This has been reduced to a maximum of 10 per
cent. This is a significant reduction
that will benefit all Solomon Islanders.
4. The 2007
Budget
Budget framework
A
particular innovation in the 2007 Budget, Mr Speaker,
is reporting of expenditures from a provincially focused perspective. This allows Solomon Islanders to see the
extent to which this Government is delivering on its bottom-up policy and
providing direct regional benefits.
In
relation to the Development Budget, Mr Speaker, I am
pleased to be able to report to the House that for the first time projects are
categorized on a provincial basis as well as by sector. This confirms that, in line with this
Government’s commitment to fairness and equity, it is the most populous provinces
– Malaita, Western and Guadalcanal, that secure the major share of funds while
the most remote and least populous – Renbell, Temotu, Isabel, Choiseul and Makira
attract the most support per head of population.
Mr
Speaker, permit me now to outline the broad Recurrent Budget framework – the
‘big picture’. Revenue will rise from
$688million budgeted in 2006 to $887million in 2007, an increase of 29 per
cent. Total income, including
development partners’ Budget support, will rise to $949million, an increase of
26 per cent. Total Recurrent Budget
expenditure, including statutory expenditure and donor contributions, will rise
to $944million, an increase of $106million o4 12.7 percent.
The
Recurrent Budget is only part of the picture.
Nevertheless, particular focus is on this area because it is funded
almost entirely from government domestic revenue and is directly appropriated
by this House.
Indeed,
Sir, we also rely on our development partners for substantial assistance with
projects jointly agreed between the Government and the donors. Donor support in the development estimates is
$2,020million, an increase of 22 percent over last year. Most notably, we have doubled the Solomon
Islands Government contribution to the Development Budget to $88million. Details of these jointly agreed projects are
sent out in the 2007 Development Estimates.
In
terms of the Recurrent budget initiatives or new
spending, Mr Speaker, I am pleased to be able to
report that $17million extra will be of direct regional benefit. In subsequently years I hope to be able to
also provide provincial breakdowns of the full Recurrent Budget.
Mr
Speaker, I would like to highlight and stress that this is a fully funded
Recurrent Budget which will provide both a small surplus of about $5million and
a reduction in debt. While the
Government’s total level of debt at the end of 2006 was still in the order of
$2billion, it is now largely regularized and the focus is on debt reduction,
going forward. No new debt or government
guarantees were issued in 2006 or are proposed for 2007.
Main Priorities for 2007 Budget
Mr
Speaker, the priorities for the 2007 Budget are to encourage rural development,
to enhance the productive sector, especially in the provinces, and to maintain
and stabilize the national economy.
Mr
Speaker, the provinces and rural areas, where 85 per cent of the country’s
population reside, is paramount and close to the heart of the Government. In this vein, our prime focus will be to
allocate adequate resources to the provincial governments and to build t heir
capacity. Provincial governments,
therefore, can now expect additional visits and training across the range of
government functions. This will be
complemented by additional staff recruitment by provincial governments and
national government support of the Constituency Community Developments Officers
for each constituency.
Mr
Speaker, this Government recognizes the resources endowments and potentials of
the different provinces and regions. On
this basis the Government would strive to assist the provinces to develop these
resources and realize their full potential.
In the tourism sector, focus will be on Temotu
and
Mr
Speaker, I indicated earlier that forestry, for many years, has been a big
contributor to our economy which currently provides around two thirds of our
export income and accounts for around 15 per cent of our market economy. This Government fully acknowledges the
contribution of the forest resources owners to our economy. To this end, the Government is determined to
devise and implement programs that would assist forest resource owners to
reinvest in the forestry sector, better manage the utilization of forest
resources and engage in alternate sustainable rural economic development
activities.
Sir,
this Government also recognizes the major contribution of fishers to our
economy and the huge potential of the industry to drive the economy. Our local fishermen in the rural areas,
however, need to participate and integrate more fully with foreign investors in
the harvesting and processing of the fish resources in our waters. The Government, in this respect, will seek to
undertake feasibility studies into the construction of small and medium pole
and line fishing vessels for local fishermen, establishment of tuna canneries
and fish processing facilities for smoked fish in the provinces.
The
Government, Sir, will be making active efforts to support these productive
sectors in the provinces. The
centerpiece of this will be credit guarantee scheme to encourage the major
commercial lenders to take on more provincial commercial debt. Private enterprise is the engine of growth
throughout the world. However, without
access to capital even the best of plans will fail. We will also be increasing support for
various palm oil projects, injecting funds into cattle, livestock and exotic
and indigenous crop production (nor neglecting farming and the essential
slaughter house facilities).
Mr
Speaker, the House needs no reminding that the land tenure system has been as
one of the main barriers of economic development and economic growth of our
economy. The complexity of the land
tenure systems in the country does not lend itself readily for land owners and
land owning groups to access credit from financial institutions.
The
Government is committed to pursuing a land reform process that provides due
recognition to customary lands being tribally owned – not individually owned or
held in trust by a group of trustees.
This process will entail the registration of tribally owned customary
lands and entrusting groups the right to deliberate on the optimal use of the
lands, including the utilization of t he lands for economic development.
To
this effect, a Tribal Customary Land Recognition Bill will be introduced to
this House at its next sitting in July this year. Related also to this initiative is the
Secured Transaction Reform Project being pursued by the Government. The objective of this project is to expand
access to credit through legal reform and mechanism that will promote the
effective use collateral such as land as security for loans.
These
initiatives, Sir, demonstrate this Government’s serious commitment and support
for sustainable rural development aimed at improving the livelihoods and the
daily lives of rural people. These are
in line with the Government’s economic development strategy which include
providing an enabling environment that our economy can grow and thrive upon and
ensuring diversified growth across the economy through the bottom-up approach.
Mr
Speaker, we will be working to ensure that transport links in the provinces are
improved through a new National Transport Special Fund. The Fund is expected to attract at least
$12million in Government funds – including $4.8million in additional funds in
this Budget – and substantial donor support.
Fundamentally, however, it will provide a more efficient and effective
means of providing transport infrastructure, roads, bridges and jetties, than
the current fragmented approach. The
Aviation Special Fund will also provide for the upgrading of two provincial
airstrips.
Sir,
provincial courts will also be upgrade and the backlog of cases reduced by a
new program of sittings and increased assistance to local courts and chiefs
courts.
Mr
Speaker, the role of our development partners in assisting
Sir,
my colleague, the Minister for National Planning and Aid Coordination will be
making further statements on these developments.
Sir, in 2006 the government rectified long term wage
imbalances with salary and allowance increases for constitutional office
holders, public servants, teachers and police.
In 2007 we will provide for the legitimate claims for back-pay for law
enforcement personnel during the tension period. We are also currently addressing, in a
consultative way, the national minimum wage policy – for the first time in 10
years.
Mr Speaker, this Government
also seeks to strengthen our overall economic position with a responsible
approach to taxation and investment returns.
Revenue is expected to rice by 13.5 per cent as a result of improved
collections, reduced exemptions and stronger enforcement. Increases in determined round log prices last
December and adjustments to excise will net a further estimated $45 million per
annum.
Dept repayments have been increased significantly in line
with the growth in revenue to $135.7 million, including $3 million to address
the provincial government debt that hampers the provinces’ capacity to
develop. This is an overall increase of
over 38 per cent in debt repayments.
Mr Speaker, the government has
continue to make progress in regularising its debts
and has restructured and repaid a number of its debts. The 2007 budget increases its allocation to
debt servicing by approximately $34 million, an increase of one-third on 2006
levels. In 2006 the government gave
priority to domestic creditors and cleared the majority of its trade creditor
arrears. The government will continue
this focus in 2007 and assist Provincial Governments in clearing their
arrears. On this note I am proud to
announce that, compared to 2002 when all of the government loans were in default, presently 75 per cent of all government official
debts have been regularized and are fully serviced.
Sir, in addition to the payments made to trade creditor
arrears holders, the government is honouring
guarantees it proved to other entities for loans in default. Guarantees for the defaulted loans of Soltai and Western and
Budget Process Reform
Mr
Speaker, this government’s appetite for reform and for the most efficient and
effective use of scarce government funds has not been satisfied.
In 2006, expenditure performance by many ministries was
still disappointing, with too many projects which had been funded by the
government and development partners failing to make adequate progress. Steps are being taken to ensure an improved
outcome in 2007. We will be developing
structural changes to the budget that will give Permanent Secretaries more
flexibility in the use of funds. These
include less complex administrative procedures to move funds to where they are
needed, longer-term time horizons and, most importantly, greater accountability
for bringing projects to completion.
Mr Speaker, the usual excuse
that budget procedures are too complex as an explanation for inadequate project
progress can no longer be tolerated. In
this vein, the government will establish a Development Planning and Monitoring
Committee to be chaired by the Hon Prime Minister to oversee and ensure a
rigorous implementation and progression of the budget. Moreover, I propose to integrate the
Development and Recurrent Estimates and to introduce longer horizons for
estimates.
I
will also reduce the number of individual appropriations that slow effective
spending and provide no additional accountability. As an example, I do not believe it improves
accountability to know that a Ministry spent nothing on IT cables, nothing on
IT Software purchase, nothing on IT Software Development and nothing on IT
Software licenses and yet all these are reported in the current 514 page
document.
Sir, I shall also be pressing for an extension of the
innovation in the 2007 budget to show expenditure by project and sector in
numerical and graphical format.
Provinces and individual citizens deserve to be informed where their
money has been spent.
Mr Speaker,
this government firmly believes in joint and combined partnership to progress
our nation to prosperity and to succeed in our plans and programs. Hence, we need to enlist the assistance and
support of all stakeholders throughout the country including the private
sector, SOEs, NGOs and churches in the implementation
of our policies and programs and in service delivery. Most importantly, our efforts and endeavours must be blessed and in unison with the will of
God – our Creator. Almost all in this
House are Christians and we all love to profess that
Sir, the Holy Bible teaches about tithing. Deuteronomy
Indeed, Mr Speaker, this
government is committed to follow the path of the Holy Scriptures. As a matter of fact, the government and the
churches in
As a
start, in 2007, the government pledges to assist churches in every way possible
with the various programs that they conduct and promote for good causes
including education, health, peace building, national unity and youth
development.
Mr Speaker, while the
government is committed to make greater use of the NGOs and churches we will
need to review budget records to see if they can be modified to allow recording
of expenditure in these entities for reporting in future years. Initial estimates suggest that between $140
million and $160 million of government revenue is currently channeled through
NGOs and private agencies.
Sir, of course, increased use of NGOs to deliver services
on behalf of government should not reduce overall government accountability for
ensuring provision of essential services to the community and the spending of
public funds. The community expects a
high level of service performance and full transparency in the use of public
funds.
5. Economic
Outlook
Overview
Mr Speaker, the prospects for
the economy in 2007 are positive.
Economic activity has been resilient and foreign aid flows are
robust. Lending from commercial banks
and the Credit Corporation has been rising, indicating that there has been an
increase in business activities. The
maintenance of law and order has further strengthened business activity through
greater investor confidence. As a
result, we have experience growth in employment.
Mr Speaker, these positive
trends are broadly expected to continue in 2007, with recent achievements
creating a base for a stronger economy.
The government’s preliminary estimate is that real
However, there remain a number of risks to the national
economy, especially those relating to the price of oil. Oil price volatility over the course of 2007
could significantly disrupt the national economy, fuelling higher inflation and
limiting economic growth prospects. In
addition, despite recent improvements, business confidence remains somewhat fragile. Any deterioration in the rule of law may
substantially damage the economic outlook.
Inflation
Mr Speaker, inflation has been
held to under 10 per cent in 2006, and he government estimates that will remain
under control at around 8 per cent in 2007.
However, as I have indicated, risks remain around oil prices in the
international market. Any significant
increase would affect a lot of domestic goods and service, especially in the
transport, construction and services sector.
As I have already stated, Mr
Speaker, investor confidence has grown in recent months. Investment confidence has soared amongst the
local business community and potential investors both from abroad and
locally. Whilst there may have been some
political disagreements between
Balance of Payments
Mr Speaker, while exports have risen over the last year this has been often outweighed by
greater rice in imports. This has led to
continued trade deficits.
However, strong foreign exchange inflows have outweighed
the trade deficits, leading to rising external reserves levels. Accordingly, net foreign assets rose from
$711 million at the end of 2005 to $783 million n December 2006.
Mr Speaker, the government
expects a similar trend in the balance of payments in 2007. Although there are some risks surrounding
rising imports and fluctuations in the oil price, the continuing inflow of
foreign aid should impact positively on our balance of payments.
5.
Conclusions
Mr Speaker, I have presented to day a budget that lays a
firm foundation for our nation and its economy after a difficult year for us
all. This is a financially responsible
budget that aims to build our nation’s prosperity from the bottom up. It is one of the first steps in implementing
this government’s vision of a vibrant, prosperous economy with better living
standards for all
Mr Speaker, the budget outlines
measures that are important to the future of our beloved nation. These and associated further economic reform
build will the foundation for our future prosperity. With the significant challenges still to be
faced we must not rest and be complacent with our recent achievements. We must look forward and work towards
developing economic opportunities for all, especially for the 85 per cent of
Solomon Islanders who live in rural areas.
This budget takes us one step I believe a long step, closer to this
goal.
Mr Speaker, this
government has faith and places trust in the people of
Mr Speaker, our
nation has abundant resource and great potential. It is for all of us who hold
Mr Speaker, I
commend this Bill to the House and beg to move.