[stop-imf] Solomon Islands: IMF demands implemented by foreign Finance Minister]

[rob@essential.org]

Solomon Islands begins implementing IMF demand for severe job cuts World
Socialist
By Peter Byrne
21 November 2002
At the insistence of the International Monetary Fund (IMF), the Solomon
Islands government is pressing ahead with plans to retrench 1,300
employees or about 30 percent of the public sector workforce. The first
group of sackings was due to take place last week.

The retrenchments, along with other IMF austerity measures, will
compound the country's already severe economic and social crisis.
Fighting between competing militia groups in 1999 and 2000 led to the
closure of the Gold Ridge gold mine, the Solomon Taiyo tuna cannery and
palm oil plantations, leaving the public sector as the only major
employer.

The number of government employees had already been halved from 8,473 to
4,337 between 1993 and 1999. Another 800 were stood down in October 2000
in the midst of militia fighting but were later reinstated. Now with the
economy and public finances in a state of collapse, the government has
been forced to further slash the number of employees.

Such is its financial position that the government is completely reliant
on foreign assistance to fund the retrenchment packages to sack its
workers. The New Zealand government provided $US900,000 as the first
installment of the $7 million retrenchment payout.

Prime Minister Allen Kemakeza was backed into a corner at a key meeting
of representatives of the IMF, World Bank, Asian Development Bank and
major donor countries in the capital Honiara on June 19. At the
gathering, the first of its kind since early 2001, the government
presented its National Economic Recovery Plan and called for a large
injection of funds to resolve the deepening financial crisis. The
donors, however, led by Canberra, refused to provide any funds unless
Kemakeza moved to reduce government spending and jobs.

The government effectively ceded control of its finances with the
appointment the same month of an Australian, Lloyd Powell, to the post
of Permanent Secretary of Finance. Powell is the executive director of
the New Zealand-based company Solomon Leonard, which has a proven track
record in overseeing austerity programs in the South Pacific. The
company has worked in the Cook Islands, Vanuatu and Tonga, as well as
Jamaica.

The IMF agenda has provoked sharp opposition. In early August, Kemakeza
faced a revolt in his shaky administration and was forced to reshuffle
his ministry in a bid to regain control over keyb portfolios. He
threatened to dump his major coalition partner-an association of
independent MPs. The prime minister faced a similar rebellion in March
when he attempted to introduce a budget that included a 25 percent
devaluation of the currency. At that point he was compelled to sack the
finance minister and reverse the devaluation.

Effectively acting on behalf of the IMF, Powell has intervened to insist
that the cutbacks proceed. Addressing a meeting of business groups in
Honiara in early September, he revealed that the government had
overspent its payroll budget by 40 percent, or $US4.1 million, for the
year up to July. According to Powell, "the only answer to this is for
the government to reduce its payroll and stop compensation payments".

The compensation payments, made to people affected by the past four
years of civil unrest, were part of the Australian-sponsored Townsville
Peace Agreement, signed in 2000 as a means of ending the island-based
militias and disarming the combatants. While Australia and New Zealand
pushed for the deal, neither country provided the finance necessary to
fund the ambitious redevelopment plans that were aimed at overcoming the
deepening social crisis at the root of the fighting. The agreement
expired in mid-October.

Kemakeza responded to Powell's pressure by announcing a radical
restructure of his administration on October 3, cutting the number of
ministries from 20 to 10. The following week, National Unity,
Reconciliation and Peace Minister Nathaniel Waena officially halted all
compensation payouts.

The impact of the IMF's austerity measures will be severe. Basic
services are already in a state of disarray. Schools and hospitals are
either closed or providing only minimal services. There are frequent
power blackouts in Honiara because the government cannot afford to pay
the fuel bill to run the electricity generators. Even those government
employees who still have a job, experience lengthy delays in the payment
of wages.

At Honiara's main teaching hospital, the National Referral Hospital,
only 11 of the 40 medical positions are filled. While 35 percent of the
admissions are children, the only qualified paediatrician left the
country at the end of September. A number of children have reportedly
died due to a lack of appropriate drugs and treatment. Outside the
capital, medical services are either non-existent or extremely
rudimentary.

Unemployment, especially among young people, is rampant. The only major
remaining export industry is logging, which accounts for 85 percent of
foreign earnings. The logging operations are devastating large areas of
forest and are simply unsustainable. Around 80 percent of the population
of 450,000 lives on subsistence agriculture with no regular wage
earners.

The appalling social conditions have exacerbated the tensions that led
to the fighting in 1999 and 2000, when militia groups based on the main
island of Guadalcanal drove out thousands of residents who had come from
the neighbouring island of Malaita to work in Honiara. While the rival
militias were meant to disarm under the terms of the Townsville
agreement, Australian High Commissioner Robert Davis noted last month:
"There are in fact now more weapons in the community than there were at
the beginning of the period."

Lacking education and without employment prospects, a number of young
people have drifted towards the militia groups. A UN report in May noted
that members of one militia, the Malaitan Eagle Force, were typically
aged between 14 and 25, had a low level of formal education, were
unemployed and relied on their families to support them.

The impotence of the police force, which has close ties to Malaitan
Eagle Force, was highlighted in August when Youth, Sport and Women's
Affairs Minister Augustine Geve was brutally murdered by a
Guadalcanal-based militia headed by Harold Keke. Keke, who demands that
all Malaitan settlers leave Guadalcanal, refused to be a party to the
Townsville agreement and has, to date, resisted all police attempts to
flush out his group.

As unemployment and poverty continue to rise as a result of the IMF
measures, the already tense situation is likely to erupt in further
social unrest.