International aid flows are equivalentto almost half of Solomon Islands' economy, making itone of the most aid-dependent countries in the world. AroundUS$250 million of non-military aid enters the country, butonly 15-20 percent of this amount is spent locally throughlocal procurement or staff expenditure. Solomon Islands arecurrently highly reliant on logging for export receipts,Government revenues, and employment. But existing stocks ofnatural forest logs are expected to be entirely exhausted by2014. The Solomon Islands Government approached the WorldBank Group to identify alternative sources of revenue,foreign exchange receipts, and employment in the absence oflogging. In responding to this request, the World Bank Grouphas undertaken extensive analytical work examining short andmedium-term prospects for economic growth in SolomonIslands, under the sources of growth project. This reportcontributes to the sources of growth work, and is informedby its findings. A key conclusion arising from sources ofgrowth analysis is that aid is likely to remain a key partof the Solomon Islands economy for the near future. Theexistence of an international security guarantee, backed bythe presence of an international peacekeeping force, isparamount for security, and investment certainty. In theabsence of clear or certain alternatives to logging, and inthe context of rapid population growth, current levels ofservice delivery will continue to depend on high levels ofaid expenditure.
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