2 Jun 2009

ADB advises Pacific states to rethink budgets

1:22 pm on 2 June 2009

The Asian Development Bank says Pacific island governments must trim low-priority spending to minimise the negative effects of the global economic downturn.

The ADB's new quarterly economic monitoring report says Fiji and Solomon Islands remain the economies most at risk.

It says in these countries the official foreign reserves are below the comfort level, and their balance of payments and budgets are under pressure.

The Bank has made 10 recommendations for the Pacific, including cutting low priority government expenditure, setting a competitive exchange rate and protecting expenditure on services for the vulnerable.

It says as countries such as Australia, New Zealand and the US face economic hardships, tourism-reliant Pacific economies are experiencing reduced numbers of holiday makers.

Solomon Islands faces dramatic revenue losses from reduced logging as the financial crisis takes its toll on industry in Asia, in particular China.

But it says for PNG a prolonged and well-managed mineral resource boom will see the nation through tough times, though the economy has been weakened by the fall in commodity prices.