ADB is helping the Government of Solomon Islands weather the global economic crisis by providing budgetary support. The project will support improved fiscal management and structural measures that will aid economic recovery and enhance productivity. It will help ensure the delivery of basic services to the vulnerable, and be complemented by actions to engage with key stakeholders.
|Project Name||Economic Recovery Support Program (subprogram 1)|
|Project Type / Modality of Assistance||Grant
|Source of Funding / Amount||
|Strategic Agendas||Inclusive economic growth
|Drivers of Change||Gender Equity and Mainstreaming
Governance and capacity development
Private sector development
|Sector / Subsector||
Education / Education sector development
Health / Health system development
Public sector management / Public expenditure and fiscal management - Reforms of state owned enterprises
Transport / Transport policies and institutional development - Water transport (non-urban)
|Gender Equity and Mainstreaming||Some gender elements|
The program will help realize the private sector's potential, and specifically the growth potential of the mining, agriculture, fishing, and tourism industries. Progress is being made toward reopening a large gold mine closed during past civil unrest, and there is a potential to develop large nickel deposits. The best prospects for creating jobs and generating
government revenue lie in large-scale palm oil developments, in fishing (there is already one large fish cannery), and in the smallholder tree crops of cocoa and copra. The supply of fruit and vegetables to the urban centers also offers good prospects, as does the fledgling tourism industry.
The ERSP is anchored in the Solomon Islands Medium Term Development Strategy 2008-2010, supporting sector plans, and the 2009 and 2010 budgets. The program design is aligned with a policy matrix prepared by the government to identify key fiscal measures and structural policy actions. A core economic working group was established by the
government, the Regional Assistance Mission to Solomon Islands and key development partners in March 2009. The group was central to the preparation of the government's policy matrix. Through the core economic working group, key development partners have committed to support implementation of the government's policy matrix.
The ESRP builds on the macroeconomic assessment prepared by the International Monetary Fund through its 2009 Article IV Consultation. The consultation concluded that new external assistance in the form of budget support can provide a cushion for undertaking more lasting fiscal adjustment and improving budget execution. The International
Monetary Fund estimated a budget financing gap for the medium term of $25 million per year (around 4% of gross domestic product).
The ERSP has four output areas: (i) improved fiscal management, (ii) productivity enhancing structural initiatives, (iii) support for the vulnerable, and (iv) communication and ownership of policy actions. Subprograms 1 and 2 support the same four output areas, and these will be progressed concurrently under each subprogram.
|Project Rationale and Linkage to Country/Regional Strategy||
The Solomon Islands economy has been among the most affected in the Pacific by the global economic crisis. Global events have brought forward a sharp economic slowdown that had been expected between 2009 and 2015 as natural forest resources approached exhaustion. Gross domestic product growth averaged 7.3% per annum in the 5 years to 2008.
Preliminary estimates are of little or no economic growth in 2009. Economic stagnation is looming in the absence of a concerted government response to the economic deterioration.
Without policy action and additional external financial assistance, the government faces the prospect of exhausting its cash reserves and accumulating large expenditure arrears. No fiscal space would be left for additional government-funded development spending and much needed improvements in public service delivery. Such developments would undermine prospects for diversifying away from dependence on logging and foreign aid and achieving higher, socially inclusive economic growth.
The government has requested support from development partners to achieve economic adjustment. Early, prudent action can help reduce the economic and fiscal imbalances aggravated by the global economic crisis. This can in turn help avoid the re-emergence of potentially destabilizing social tensions. The ERSP provides the contribution of the
Asian Development Bank (ADB) to a collaborative response by key development partners to the government's request.
|Impact||Achievement of a higher and more inclusive path of economic growth|
|Description of Outcome||
Initiation of economic recovery combined with protection of the vulnerable members of the community
and the fiscal position.
|Progress Toward Outcome||Following a contraction of 1% in 2009 due to the global financial crisis, the economy returned to positive growth of about 4% in 2010.|
|Description of Project Outputs||
Productivity enhancing structural initiatives
Improved fiscal management
Support for the vulnerable
Communication and ownership of policy actions
|Status of Implementation Progress (Outputs, Activities, and Issues)||
The progress toward reform in 2010 has been good, particularly in the area of public finnancial management. A few reform measures where progress has been slower than anticipated could be addressed by the end of the year pending actions by the new Government.
The compliance status of the 24 triggers for the second phase of the program have been nearly all met. A mission to be fielded in March 2011 will further assess the progress.
|Summary of Environmental and Social Aspects|
|Environmental Aspects||The program grant will be released to the national budget. The project team believes that the grant will not have any significant direct or indirect environmental impacts.|
|Involuntary Resettlement||The program grant will be released to the national budget. The project team believes that the grant will not have any significant direct or indirect impacts on involuntary resettlement.|
|Indigenous Peoples||The program grant will be released to the national budget. The project team believes that the grant will not have any significant direct or indirect impacts on indigenous people.|
|Stakeholder Communication, Participation, and Consultation|
|During Project Design||Ministry of Finance and Treasury (MOFT) and members of the Core Economic Working Group (CEWG), established in March 2009, which is the government -led working group who coordinate and implement economic and financial reforms in Solomon Islands. CEWG comprises central government agencies, including MOFT, Central Bank of Solomon Islands, Office of Prime Minister, Ministry of Planning Devevelopment and Aid Coordination, and key development partners.|
|During Project Implementation||Continue to consult the stakeholders consulted during the project design stage, but also expand the consultation to a wider stakeholders including the private sector and civil society organizations such as Solomon Islands Chamber of Commerce and Industry and Transparency Solomon Islands.|
|Responsible ADB Officer||Lao-Araya, Kanokpan|
|Responsible ADB Department||Pacific Department|
|Responsible ADB Division||Pacific Liaison and Coordination Office in Sydney, Australia|
Ministry of Finance
G.P.O. Box 26
|Concept Clearance||20 Feb 2009|
|Fact Finding||17 Aug 2009 to 25 Aug 2009|
|MRM||22 Sep 2009|
|Approval||16 Mar 2010|
|Last Review Mission||-|
|Last PDS Update||09 Mar 2011|
|Approval||Signing Date||Effectivity Date||Closing|
|16 Mar 2010||18 Mar 2010||31 Mar 2010||31 Aug 2010||-||11 Feb 2011|
|Financing Plan||Grant Utilization|
|Total (Amount in US$ million)||Date||ADB||Others||Net Percentage|
|Project Cost||5.00||Cumulative Contract Awards|
|ADB||5.00||16 Mar 2010||5.00||0.00||100%|
|Cofinancing||0.00||16 Mar 2010||5.00||0.00||100%|
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|Title||Document Type||Document Date|
|Economic Recovery Support Program – Subprograms 1 and 2||Project/Program Completion Reports||Sep 2012|
|Grant Agreement for Economic Recovery Support Program - Subprogram 1 between Solomon Islands and Asian Development Bank dated 18 March 2010||Grant Agreement||Mar 2010|
|Economic Recovery Support Program||Reports and Recommendations of the President||Feb 2010|
Safeguard Documents See also: Safeguards
Safeguard documents provided at the time of project/facility approval may also be found in the list of linked documents provided with the Report and Recommendation of the President.
None currently available.
Evaluation Documents See also: Independent Evaluation
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