POLICY AND STRUCTURAL REFORM PROGRAMME OF THE SOLOMON ISLANDS ALLIANCE FOR CHANGE (SIAC) FORMER GOVERNMENT 1997-2000BARTHOLOMEW ULUFA'ALU FORMER PRIME MINISTER OF THE SOLOMON ISLANDS, 1997-2000 |
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Beneath Guadalcanal: Serialised Public Statements from the Former Prime Minister
When the Solomon Islands Alliance for Change (SIAC) Government took office in September 1997 it was faced with a major financial crisis in the public sector. The domestic financial system was overburdened with public debt, which the Government was unable to service. Moreover, external economic events, which occurred in late 1997, threatened to further deepen the crisis in the domestic economy. The Government made a series of policy statements committing itself to a broad-based program of policy and structural reform. Subsequently the Government has taken some important steps in formulating and implementing the reforms necessary to restore macroeconomics stability for sustainable economic and social development.
The over objectives of the Policy and Structural Reform Programme are to bring about financial and economic stability, establish a more efficient and effective public sector and create a more enabling environment for the private sector so as to generate sustainable economic growth and human development.
The Government has adopted a three-part approach to policy and structural reform. This addresses issues in public finance, the public service and the wider public sector, in each case aiming to reform and strengthen government operations, so as to enable faster and more durable expansion of the private sector. Given the immediate need to stabilise government finances, the immediate priority is to rehabilitate public finances and the public service. This would be followed by policy and structural changes in key economic and social sectors. The Government also decided that the formulation of the PSRP would be carried out by the Government itself, utilising assistance from donors as required for specific tasks. The PSRP is therefore a "home-grown" product. The process of its formulation and implementation is internally driven. To oversee the formulation and implementation of the PSRP the Government established at the policy level the Policy and Structural Reform Committee (PSRC). The PSRC is chaired by the Prime Minister. It consists of the Minister of Finance (Deputy Chairman), Minister of National Planning and Development, Minister of Commerce, Employment and Tourism, Governor of the Central Bank of Solomon Islands, the Chairperson of Solomon Islands Chamber of Commerce and Employers and the President of the Public Employees Union. The PSRC established two Task Forces, Task Force I (Public Finance and Economic Reform), which works out of the Ministry of Finance, Ministry of National Planning and Development and the Central Bank of Solomon Islands. Task Force I has established two working groups, Expenditure Control Group and Revenue Enhancement Group, to identify immediate measures to control public expenditures and increase government revenues. Task Force II (Public Service Reform), which works out of the Office of the Prime Minister, includes representatives of the Public Service Division, the Ministry of Finance, the Ministry of National Planning and Development and the Public Employees Union. It has formed a number of Task Teams to carry out detailed work on the different aspects involved in the reform of the Public Service. All Permanent Secretaries are substantially involved in the important task of reducing the size of their individual ministries and the Public Services.
The objectives of the public finance and budget reform are to stabilise public finances in the short term and to ensure its long-term structural stability. This requires reducing and controlling public expenditure, increasing and broadening the domestic revenue base and collection, rearranging and managing public debt, and improving the management of government finances and the budget system.
The reducing the size of the public service and the public enterprises sector will reduce involvement of Government in the economy. Policy actions:
Apart from the policy and structural reforms in government finance, public service, public enterprise and the financial sector, policy and structure changes are also needed in a number of key economic and social sectors. The sector the immediate required policy actions are to reduce log extraction to sustainable levels and to capture resource rents arising of the harvesting of natural forests for the benefit of the resources owners, the government and the country at large. In the health sector the key issue is to re-focus resources on primary health care and rural health services from the present bias towards policy actions are needed to address the issues of access, quality and equity in the education system and to allocate resources more cost-effectively. The key issues concerning forestry, health and education as well as other sectors are discussed further below.
The Government will prepare a Medium Term Development Strategy, which will set out the overall aims, strategies and policies for the national government and the public sector, with a 3-5 year time frame. The plan will address the need for further changes to the scope, and improvements in the performance, of the public sector; the requirements for sustained growth of private investment and business activity; and the need for fair distribution of the cost and benefits of growth among the Solomon Islands Community and over time.
The implementation of the PSRP will be subject to continuous monitoring and regular review. The monitoring of the PSRP on a continuous basis is necessary particularly with regard to the policy actions required to stabilise government finances and the reduction in size of the Public Service. Given the tight budgetary situating, actions to reduce and control public expenditure and to increase revenues have to be well managed to ensure that fiscal targets are met. Periodic reviews will be carried out to assess the progress of the PSRP and futures directions. The reviews will include the assessing the overall economic and social impacts of the reforms. The first review of the progress of the PSRP will be carried out after the first six months of implementation. The second and a more substantial review will be carried out at the end of the 1998. Subsequently, substantial review of progress of the PSRP will be carried out annually, with six-monthly progress reports prepared as necessary. The participants in the PSRP will need to consult annually on progress of the PSRP and on further actions that may be needed.
The Government has made a number of policy decisions and taken steps in implementing the PSRP, particularly to stabilise government finances. Amongst these, the Government has imposed a 15 percent reduction in monthly payments on 1997 Estimates and continue it for the first for months of 1998 whilst the 1998 Budget is prepared. it has formulated the 1998 budget framework putting a ceiling on recurrent expenditures below the 1997 actual levels in line with anticipated revenues. The expenditure ceiling on the payroll will lead to the reduction in the staff levels in the Public Service. The Government has reviewed and cancelled exemptions and remissions and also placed a moratorium on new logging licenses. Annex 1. provides further details on the status of the PSRP implementation and the future actions to be taken.
The key results expected during the first 6 months of 1998 are:
Some progress has been made in the elaboration of the various aspects of the PSRP. This has been made possible with the technical assistance from our development partners. Much more progress would have been made if development partners were forthcoming with technical assistance. This year should see headway made with implementation of the PSRP. This would depend to a large extend on assistance from development partners. Also, it depends on the will of Government to carry out the reforms though they may be painful. The Government is determined to carry through implementation of PSRP. Continuous review and consultation with stakeholders are an important part of PSRP. Whilst focus has been on immediate requirements, of particular importance should development of a coherent strategy to address the structural weaknesses of the economy - this would now be possible with technical assistance provided to Ministry of National Planning and Development.
