CBSI lowers headline inflation to 3.5 percent, Governor Dr Forau attributes this achievement to prudent management of monetary and exchange rate policy and ease in global oil prices
THE Central Bank of Solomon Islands (CBSI) managed to bring down headline inflation to 3.5 percent in December 2023.
Headline inflation is the total inflation in an economy. The headline inflation figure includes inflation in a basket of goods which is inclusive of commodities like food and energy.
It is different from core inflation, which excludes food and energy prices while calculating inflation.
CBSI Governor, Dr Luke Forau announced this during the launch of the 2023 CBSI Annual Report at the Heritage Park Hotel on Monday.
The theme of the launch was “The Time is Now: Taking Bold Action to Level Up Growth in Solomon Islands”.
Dr Forau said this reflected CBSI’s prudent management of the monetary and exchange rate policy and also ease in global oil prices.
Furthermore, Dr Forau said the external conditions improved as well during the year as both the trade balance and current account deficits narrowed due to a rise in exports, inward remittances and donor in-flaws.
He said this combined with a buoyant capital and financial account and led to a surplus in the overall balance of payments position of $218 million.
“As a result, gross foreign reserves rose by 6 percent to $5.8 billion, sufficient to cover 11.8 months of imports.
“This is well above our minimum threshold of 6 months of import cover,” he said.
However, Dr Forau said on the fiscal front, the Government’s financial conditions deteriorated markedly last year.
He said the deficit more than doubled to 7 percent of Gross Domestic Product or $950 million from the 3 percent of GDP registered in 2022.
“Some financing of the deficit came largely from borrowing.
“As a result, the Central Government’s debt stock – domestic and external reached 21 percent of GDP at the end of the year, compared to 16 percent of GDP one year prior,” he added.
Dr Forau said the worsening fiscal balance is attributable to a noticeable rise in spending geared towards the hosting of the Pacific Games and the preparation for the recent synchronized elections at the same time and this resulted in the declination of revenue collection during the year.
By EDDIE OSIFELO Solomon Star, Honiara