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Asia and Pacific > Solomon Islands

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Cover IMF Working Papers
Climate Finance and Adaptation Needs In Pacific Island Countries
Fabien Gonguet
,
Xuehui Han
,
Choonsung Lim
,
To-Nhu Dao
, and
Saraf Nawar
Pacific Island Countries (PICs) face acute and rising climate adaptation needs due to high exposure to sea‑level rise, natural disasters, and structural vulnerabilities associated with small size and geographic remoteness. This paper develops a unified framework to produce the first region‑wide, internally consistent estimates of climate adaptation financing needs for PICs. A metadata analysis harmonizes country‑level assessments into comparable annual measures, while a complementary machine‑learning approach generates synthetic estimates for data‑deficient countries using economic, geographic, and climate‑vulnerability indicators, subject to differences in sectoral definitions and coverage embedded in the underlying source studies. The results show that adaptation needs are large, highly uneven across countries, and exceptionally high relative to GDP, particularly for atoll nations where physical risks dominate. The paper also examines climate adaptation finance flows to PICs over the past decade, distinguishing between commitments and estimated disbursements, and finds that current financing levels fall well short of projected needs. Disbursement ratios vary substantially across financing channels, reflecting differences in institutional capacity and project implementation. Taken together, the findings highlight substantial adaptation financing gaps in PICs and underscore the importance of strengthening institutional capacity and improving the effectiveness and accessibility of climate finance mechanisms.
Keywords:
Climate Adaptation; Pacific Island Countries; Financing Needs; Climate Finance Flows; Meta-data Analysis; Machine Learning; face acute; disbursement ratio; metadata analysis; finance flow; IMF working papers; Climate finance; Climate change; Climate policy; Natural disasters; Pacific Islands; Global; Asia and Pacific; Sub-Saharan Africa
Cover Technical Assistance Reports
Solomon Islands: Technical Assistance Report-Central Bank Risk Management
International Monetary Fund. Monetary and Capital Markets Department
The Central Bank of Solomon Islands (CBSI) has received sustained IMF technical assistance since 2021 to strengthen its enterprise-wide risk management framework. The objective of the 2025 onsite mission was to conduct an independent assessment of CBSI’s progress in implementing recommendations from the previous reports. In addition, the mission team provided technical guidance on selected areas, including implementation of the Three Lines Model, business continuity management, and good practices for interaction with internal audit. These activities were intended to support CBSI maturing its enterprise risk management to better safeguard the organization and to contribute to strategic decision-making. While CBSI has made modest but meaningful advances—such as establishing the Risk Management Committee, approving and launching the Enterprise Risk Management Policy, and developing a draft Business Continuity Management Plan—gaps remain. A follow-up technical assistance mission, including an Executive and Board workshop, is recommended within 18–24 months.
Keywords:
Central Bank Risk Management; Enterprise Risk Management; IMF Technical Assistance; Risk Appetite Statement; Three Lines Model; Integrated Risk Reporting; Risk Management Committee.; IMF publication; technical assistance provider; IMF's Monetary and Capital Markets Department; staff of the Central Bank of Solomon Islands; Cbsi officer; Operational risk; Crisis prevention; Auditing; Internal audit
Cover Departmental Papers
Macroeconomic Challenges of Fragility and Policies for Stability and Growth
Alexei Miksjuk
,
Paul M Bisca
,
Jocelyn Boussard
,
John-Paul Fanning
,
Romina Kazandjian
,
Yipei Zhang
,
Lavinia Zhao
,
Thomas Augsten
,
Gaëlle Pierre
,
Björn Rother
, and
Guillaume Chabert
In 2025, fragile and conflict-affected (FCS) included 38 economies that are home to 1 billion people. The recent shocks have intensified fragility-related pressures even in more stable economies. This paper provides a comprehensive discussion of macroeconomic challenges and policies under fragility, expanding on the existing literature and drawing on the implementation of the IMF’s 2022 FCS Strategy. It finds that fragility is associated with slower long-term economic growth amid impaired government functions, including weak public service provision, low tax revenues, and underdeveloped financial sector. In the short term, fragility heightens economies’ vulnerability, with external shocks (such as terms of trade changes) having a stronger and longer-lasting impact. These effects are particularly pronounced in cases when institutional fragility is compounded by conflict or structural characteristics such as fuel export dependence or small country size. The paper argues that strengthening core government functions—macroeconomic stabilization, public service delivery, and market-based resource allocation—is essential to improving macroeconomic performance and addressing fragility, provided institutional and socio-political constraints are accounted for. International financial institutions can support countries’ efforts to mitigate and overcome fragility through tailored policy advice, capacity development, financing, and stronger partnerships with humanitarian, development, and peace organizations.
Keywords:
Fragility; conflict; fragile and conflict-affected states (FCS); macroeconomic shocks; macroeconomic policy; external financing; international support; Fcs warrant; country policy; economic policy; Policy agenda; countercyclical policy response; Fcs economy; Public employment; Global; Sub-Saharan Africa; Caribbean; South America; Central America
Cover Selected Issues Papers
Modernizing Palau's Financial System: Opportunities and Risks
Ricardo Davico
and
Yuanyan S Zhang
Palau’s financial system faces structural challenges that inhibit effective financial intermediation, mobilization of domestic savings, and payment system efficiency. The authorities have been striving to address these challenges through digital initiatives. While these initiatives are intended to modernize the payment system and retain domestic savings, they also entail significant risks that need to be carefully managed with enhanced supervision and regulations. Policy options need to be well tailored to suit the specific financial sector challenges, economic scale, and resource considerations in Palau, starting with a comprehensive financial sector modernization and domestic payment strategy.
Keywords:
Palau; Financial Intermediation; Fintech; Payment System; Palau's financial system; IMF country; IMF staff; payment system efficiency; issues paper; Payment systems; Commercial banks; Credit; Loans; Anti-money laundering and combating the financing of terrorism (AML/CFT); Pacific Islands; Asia and Pacific
Cover IMF Staff Country Reports
Republic of Palau: Selected Issues
International Monetary Fund. Asia and Pacific Dept
This Special Issues paper examines the modernization of Palau’s financial system amid persistent structural challenges that limit effective financial intermediation, domestic savings mobilization, and payment system efficiency. The authorities are pursuing fintech and digital initiatives to support economic diversification and improve the financial landscape; however, these innovations also introduce important risks that require strengthened regulation and supervision. The paper underscores the need for policy responses tailored to Palau’s small economic scale, unique financial system structure, and limited institutional capacity. Key priorities include addressing structural impediments in the banking sector and enhancing supervisory frameworks to ensure financial stability. The planned implementation of the blockchain‑based Palau Savings Bond will require robust institutional arrangements and a comprehensive legal and regulatory foundation to mitigate associated risks. Significant infrastructure, legal, and regulatory gaps remain, and closing these gaps is essential to avoid premature issuance of a tokenized dollar and ensure safe, sustainable financial system modernization.
Keywords:
Palau's financial system; staff team; Palau's banking system; copyright page; IMF country; Commercial banks; Payment systems; Credit; Loans; Anti-money laundering and combating the financing of terrorism (AML/CFT); Pacific Islands; Asia and Pacific
Cover Technical Assistance Reports
Tonga: Technical Assistance Report-Modernizing the Monetary Policy Framework and Operations of the NRBT
International Monetary Fund. Monetary and Capital Markets Department
The IMF conducted a Technical Assistance mission to assist the National Reserve Bank of Tonga (NRBT) in modernizing its monetary policy framework. The mission aimed to address persistent challenges such as excess liquidity and an inactive interbank market, which have impeded effective monetary policy transmission. The mission is significant as it builds on previous IMF assistance and addresses key vulnerabilities in Tonga's monetary policy framework. The mission also aligns with ongoing Fund surveillance and program priorities. The mission found that the effectiveness of Tonga's monetary policy framework is constrained by gaps in both the institutional arrangements and the calibration of NRBT’s monetary policy actions. In this context, the mission focused on developing a modernized market-based monetary operational framework that enables active liquidity management and the alignment of short-term money market rates with the NRBT policy rate. The mission also focused on improving collateral policies (for liquidity providing monetary policy operations) and strengthening NRBT communications as key complementary tools. To this end, innovative tools were applied, such as Large Language models to assess NRBT communications, and the provision of collateral haircut methodologies to improve risk management. The mission recommended a gradual modernization process focusing on two main workstreams: developing the NRBT’s analytical capacity to assess the monetary policy stance and enhancing its operational capacity to align money market rates with the desired policy stance. This involves transitioning to a mid-rate interest rate corridor with regular open market operations supported by adequate standing facilities, and a robust liquidity monitoring and forecasting framework.
Keywords:
Monetary Policy; Central Banks and Their Policies; Tonga.; NRBT communications; NRBT balance sheet evolution; NRBT communication instrument; A. foreign exchange regime; market condition; currency basket exchange rates; Central bank policy rate; Financial sector stability; Interest rate corridor; Liquidity; Collateral; Global
Cover Selected Issues Papers
Enhancing Effectiveness of Solomon Islands' Fiscal Framework
Masafumi Yabara
Solomon Islands faces the immediate fiscal challenges of rebuilding cash reserves, improving the quality of public spending, and imposing fiscal discipline on domestic borrowing. To address these challenges while financing necessary investments, it is an urgent priority to improve the effectiveness of the fiscal framework, in parallel with the efforts to strengthen basic public financial management (PFM) functions. Staff analysis indicates that the current debt ceiling of 35 percent of GDP remains broadly appropriate as a medium-term debt anchor. Given the weak PFM foundation and the absence of effective operational fiscal rules, staff proposes the introduction of a simple ex-ante guideline for annual budget formulation, as an interim measure. The proposed guideline sets a ceiling on the domestically financed primary budget deficit, to be consistent with a potential fiscal rule covering both domestic and external sources. The government should assess ex post whether the budget was implemented in line with the guideline and whether the fiscal outlook is consistent with the medium-term anchor.
Keywords:
Fiscal framework; fiscal rule; debt sustainability; public financial management; Asia Pacific department; staff analysis; PFM foundation; enhancing effectiveness of Solomon Islands; debt anchor; Budget planning and preparation; Fiscal governance
Cover Selected Issues Papers
Strengthening Fiscal Data Governance in Solomon Islands
Yuwawan Rattakul
Solomon Islands faces challenges in fiscal data governance despite reforms. While the Public Financial Management Act (PFMA) of 2013 aimed to enhance transparency, inconsistent implementation and resource constraints persist. This paper highlights key issues and recommendations, including adherence to public finance management good practices, enhanced and regularly disseminated financial reporting, and better utilization of the current Financial Management Information System. Strengthening coordination and capacity building is crucial for robust fiscal governance, fostering transparency and investor confidence. Addressing these challenges can enhance public finance management and long-term economic stability.
Keywords:
Fiscal data governance; Public financial management; Financial Management Information System; Fiscal transparency; Fiscal reporting; Data Dissemination; Budget execution; Cash management; Government finance statistics; International Public Sector Accounting Standards; Public expenditure; Policy coordination; Debt sustainability; Investor confidence; Accountability and compliance; government debt data; public finance management; resource constraint; faces challenge; Budget planning and preparation; Financial statements; Global
Cover IMF Working Papers
Impact Dynamics of Natural Disasters and the Case of Pacific Island Countries
Choonsung Lim
and
Yue Zhou
This paper investigates the short- and medium-term economic impacts of natural disasters, focusing on Pacific Island Countries (PICs) and using global high-frequency nightlight data in addition to macroeconomic data. In this paper, we identify significant short-term effects on growth following natural disasters, which are exacerbated by high public debt and heightened climate vulnerability. Although the negative impacts generally diminish within a year for most countries, PICs face disproportionately larger and rising short-term disruptions (-1.4 percent of annual potential growth) and persistent medium-term consequences. Further analysis of PICs' fiscal, external, and real sectors following severe disasters using annual economic data reveals that weaker fiscal positions, partly driven by reduced output, may lead to an upward trend in public debt, and increased imports may deteriorate current account balances over the medium term. These findings underscore the need for robust counter-cyclical policies and proactive investments in climate resilience to mitigate the adverse effects of climate shocks and promote long-term economic stability
Keywords:
Climate change; natural disasters; growth; development; nightlight; IMF staff calculation; Choonsung lim; impact dynamics; nightlight data; IMF working paper 25/84; Fiscal stance; Pacific Islands; Global
Cover IMF Working Papers
“Checking the Receipts” Audits of Emergency Finance: A preliminary analysis of the implementation of the Letter of Intent commitment on audits in 50 countries
Sebastiaan Pompe
,
Alice F French
,
Martin Aldcroft
, and
Camilla Fredriksen
This paper explores one dimension of the IMF’s COVID response – support for conducting and publishing independent audits of COVID-related spending. The economic impact of COVID was felt across the globe and created stresses on the balance of payments of member countries. Many members turned to the IMF for emergency financing . The IMF Managing Director urged member countries to “do what it takes but keep the receipts.” In line with this guidance, the majority of IMF emergency financing included commitments by members to put in place transparency and accountability measures. In 56 member countries, Fund financing included commitments for SAIs to audit spending related to the response to COVID. SAI audit reports were ultimately published in 50 member countries. This paper examines how these commitments were implemented, and the broader lessons which can be derived.
Keywords:
Supreme Audit Institutions; Accountability; Covid-19; pandemic; governance; emergency financing; audit report; IMF emergency finance; IMF emergency financing; IMF COVID-19 emergency; COVID response; Auditing; Emergency assistance; Corruption; Budget planning and preparation; Middle East; North Africa; East Africa; Global; Middle East and Central Asia; Europe