Government finances remain stable regardless of pressures triggered by covid-19 and the November 2021 Honiara riots on revenue collection as opposed to claims in the media suggesting the Government is facing financial distress earlier this year.
The Permanent Secretary (PS) of Ministry of Finance and Treasury (MOFT) Mckinnie Dentana made the assurance yesterday to clarify unsubstantiated claims by the Solomon Star on Tuesday 29 March implying the Government is in Financial Distress and with funds hitting rock bottom.
PS Dentana reassures the public and government stakeholders, that although Solomon Islands is facing a challenging time, like all other countries throughout the region due to the current pandemic, the Ministry of Finance is managing government finances prudently and responsibly according to law, to ensure resources are available to meet the financial obligations of the Government during this challenging time.
Dentana also confirm that Solomon Islands had faced a significant challenge since 2020, which was further exacerbated by the burning and looting of private and public infrastructures in Honiara in late 2021 and the covid-19 community transmission since January this year.
“These unfortunate events had put a lot of pressures on government finances. However, despite the significant pressures, the government has taken control of the situation and put in place appropriate fiscal measures to manage and mitigate the financial situation pragmatically,” Dentana stated.
The Permanent Secretary further revealed that the Government’s current financial position is robust and well above the IMF Benchmark of 3 months of expenditure cover.
This means that the Government can still meets its financial obligations for the next three months even if limited or no domestic revenue is collected from the major Government’s revenue agencies.
Regardless of the pandemic since 2020 and its impact on Government finances, the Ministry ensures that fiscal management is a priority and maintained under this benchmark due to uncertainties of this pandemic and to ensure that Government have resources to meet its obligation when domestic economic activity shuts down. This is exactly what the country experienced during recent lockdowns.
“I am comfortable and not too worry because Government have some resources to meet it obligation despite the recent lock down or slow down in economic activities especially here in Honiara early this year. Our cash position today is even 22 per cent stronger than on 31st December 2021”, Dentana pointed out.
However, this year will be a challenging year given the forecasted negative growth of the local economy due to last year’s unrest, the COVID-19 community transmission and the potential fallout of Ukraine/Russia conflict that will transmit into the commodity prices that reaches our shores, while at the same time delivers the Government’s commitments in the 2022 budget.
The Ministry of Finance and Treasury will continue to ensure the Government’s financial position remains strong throughout the year to enable the Government continues to deliver its commitments.
Regarding delays in making payments to clients, Mr Dentana clarified that the limited budget within Government Ministries during the current interim period is a contributing factor. There are some arrears that are outstanding since last year and because of limited budgets, Ministries cannot process payments.
The government is yet to pass the 2022 national budget, and thus, the government is operating under an interim budget. As a result, expenditures are being prioritized to essential services, utilities, payroll, rental and arrears are being managed and slowly being settled.
During the interim budget period, not all financial commitments are being catered for. However, when the 2022 budget proper is passed in Parliament, government will ensure all financial commitments are catered for in a timely and efficient manner as required.
The other possible reason could relate to processing issues. This could involve compliance requirement that are not quickly addressed or payments are not quickly transmitted to Treasury in time for payment.
Mr Dentana assures the public that its officers will continue to reach out to all Government Ministries to identify options to manage their commitments, especially arrears and other commitment to ensure that payments are made on time during the current interim period.