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By Donaldson Rusa

HONIARA, Solomon Islands (Solomon Star, May 31) – Despite an improved economy in the Solomon Islands, the underlying situation remains fragile, the Central Bank of Solomon Islands reveals.

"Any positive developments achieved so far could easily be reversed if the security situation were to deteriorate and the implementation of government reforms are prolonged," the Bank said in its Monetary Policy Stance 2005, released last week.

However, the Bank said it would maintain its current monetary stance and continue to foster conditions conducive to the orderly and balanced economic development of Solomon Islands.

This requires close monitoring of all indicators such as changes in the exchange rates, external reserves, money and credit aggregates, prudent implementation of governments 2005 budget, level of donor assistance inflows, and developments in the global economy to help determined any change in policy direction it might want to take.

"The economy has emerged from significant contraction since 2000, and it is important that the recovery process is supported with appropriate policies," the central bank said.

The Bank’s monetary policy objectives for 2005 are to continue to foster conditions conducive for economic growth by capping inflationary pressures, and to continue to maintain appropriate level of reserves whilst encouraging private sector led growth.

This Monetary Policy Statement is the third to be issued by the CBSI to the public.

It is aimed at informing the general public of the outlook for monetary developments in 2005, and to ensure the Bank is accountable and transparent in the discharge of its mandate and responsibilities.

In deciding the stance of monetary policy for 2005, the Central Bank has considered developments and projections in the global economy, domestic economic conditions, the balance of payments outlook, and fiscal operations of the government with particular attention to their possible impacts on monetary aggregates and prices.

June 1, 2005

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