Good afternoon ladies and gentlemen of the media. It’s good to have the opportunity to once again address you in our press conference today.

Today I want to talk to you about the current state of Solomon Islands economy and what measures the Government must take to ensure it continues to deliver services to the people.

I believe it is a good idea to inform people about the difficulties and challenges the Government faces in the efforts to maintain its financial commitments such as ensuring hospitals and health clinics are supplied with necessary drugs and medicines, schools continue to run classes, repay debts, pay the salaries and wages of state workers, ensure  the rule of law and secure the security and safety of the people as well as their properties, facilitate the development of national development projects and for Parliament to continue implement regulations and laws.

Presently, the Government is facing two fiscal concerns namely, the cash situation is extremely challenging and current forecasts would indicate that the Government will shortly run out of resources to meet the existing commitments and according to the International Monetary Fund advice, revenue estimates are around $100 million too high for this year. They do not include any additional expenditure above the 2010 Budget.

As you all know, the European Union has allocated $179m in budget support for 2010, but the money will only be disbursed if an IMF program is in place. The Asian Development Bank has also announced a $75m budget support to ease the cash flow problem and other fiscal challenges. The EU budget support will be disbursed in the latter part of the year.

But the IMF program is not a budget support rather it is an 18-month Stand-By Arrangement which will allow the Central Bank to hold reserves that could be used if things turn out for the worst. The Government hopes to sign the IMF program with the IMF Board in the middle of April.

The IMF has asked the Government to take a number of significant actions to resolve the fiscal concerns and put the economy onto a more sustainable path. I must say it is important we accept the IMF demands because we don’t want the reputation of the CNURA Government to be tarnished by leaving our finances in a poor state.

The IMF required actions include withdrawing warrants to the equivalent of $157m to improve the cash situation and realigning the budget to updated revenue estimates, ensure the Determined Price of Logs automatically adjusts quarterly based on current Ministry of Finance and Treasury formula to increase revenue throughout the year and the ministry to issue a circular that all Contingency Warrants for 2010 need to be fully funded within the existing envelope.

It is also required that saving from within the existing budget would need to be found before any new expenditure is agreed, the Government to start putting together a Customs Valuation Bill and to develop a three-month rolling cash forecast.

I must say that in order to meet the targets of the IMF program, the Government could use a proportion of the EU Budget Support to build up cash reserves to ensure sufficient reserves in 2010 and to fully implement the 2011 budget and to give a signal to the wide community that the Solomon Islands Government is able to pay all its accounts in a timely manner.

I understand these are difficult actions to take especially in an election year. But it is likely they will be forced upon us with or without an IMF program given the fiscal situation. The IMF has put it in clear terms to us that without a program the Solomon Islands Government will not receive the EU Budget Support and the opportunity it brings to put the country on a more sustainable path.

I must say signing up to the program is the clearest signal the CNURA Government can give to maintain its reputation as a reformist Government and will put the country in a better shape that it was when we came to office towards the end of 2007. And the decision will ensure a better future for our children.

My Cabinet notes that the Government is facing a potential 2010 Budget shortfall and a more immediate cash shortfall as well as the potential options for reducing expenditure in 2010.

Finally, the Cabinet has subsequently approved the measures and requirements.

Thank you.