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Solomon Islands

Political sketch

Also formerly known as the British Solomon Islands. Independent from the United Kingdom on 7 July 1978.

The Solomon Islands have been settled since at least 2000 B.C. In 1568, the Spanish explorer Alvaro de Mendaña de Neira became the first European to land on the islands; he named them for the ancient Hebrew king Solomon. German claims to the Northern Solomons were transferred in 1898 and 1899 to the United Kingdom in return for the recognition of German claims in Western Samoa. The United Kingdom had already declared a protectorate over the southern islands in 1893. In 1942, during the Second World War, British forces evacuated the islands shortly before the Japanese invaded them; the Japanese landing on Guadalcanal, the most important island, occurred on 6 July 1942. Over the next few years, the islands were the scene of bloody battles between Japanese and Allied forces. The Japanese evacuated Guadalcanal on 1 February 1943. British rule of the islands was restored at the end of the war. The islands became independent form the United Kingdom on 7 July 1978. The government is democratic. In June 2000, a rebellion in the capital by armed groups from the island of Malaita resulted in the brief detention of the prime minister and his subsequent resignation. Groups from the island of Guadalcanal retaliated and sought to drive Malaitan settlers from Guadalcanal. Ethnic tensions continued, and in July 2003, at the request of the government of the Solomon Islands and with unanimous support from the parliament, troops from Australia and other Pacific Ocean nations arrived to restore order. The economy is based mainly on agriculture, fishing, and logging.

Wars since 1500

Second World War in the Pacific, 1942-1945 (Japan against United Kingdom, United States, China, Australia, New Zealand, Netherlands, and allies); Malawian Rebellion of 2000.

Convertibility

The sterling area:

German colonies in the Pacific:

The First World War began in Europe on 1 August 1914. By November 1914, all German colonies in the Pacific had been captured by opposing forces. In the meantime, communications with Germany, including financial transactions, were blocked.

On 2 August 1914, soon after the First World War began, the United Kingdom issued a proclamation imposing a one-month moratorium of payment for bills of exchange accepted before 4 August; an act of 3 August 1914 gave legislative sanction to the proclamation. The moratorium was subsequently extended for a month and ended on 4 November 1914. Legally the pound sterling remained convertible into gold and could be exported, but the risk to shipping from German submarines made the cost of shipment prohibitive, so the United Kingdom was in effect off the gold standard. The British government refused to include private shipments of gold in its war-risk insurance scheme. After the war, the export of gold was prohibited from 1 April 1919 under regulations that were given statutory form in 1920. On 28 April 1925 the government announced that the act would not be renewed when it expired on 31 December 1925. On 13 May 1925 the United Kingdom resumed the gold standard.

The United Kingdom abandoned the gold standard on 21 September 1931. The currencies of British colonies were almost all linked to the pound sterling through currency boards; being on a sterling-exchange standard rather than a gold-exchange standard, they followed the pound sterling off gold. Over the next few years, some former British colonies (Australia, New Zealand, South Africa) and other countries that had important trade links with the United Kingdom switched from gold to the pound sterling as their official or actual anchor. The result was termed the sterling area. The United Kingdom imposed exchange controls on 4 September 1939, the day after entering the Second World War. Most countries that were not current or former British colonies soon left the sterling area. Among the remaining countries, both current- and capital-account transactions were free of restrictions within the sterling area, but were restricted in dealings with outside countries. After the Second World War, the United Kingdom returned to the gold standard under the Bretton Woods system. It removed exchange controls on 15 August 1947, but reimposed them on 20 August 1947 after suffering a large loss of foreign reserves. Sterling had a dual exchange rate from 1961 until the United Kingdom abolished exchange controls. The sterling area remained in existence because sterling was not fully convertible. It began to crumble after the United Kingdom again abandoned the gold standard on 23 June 1972. By January 1973 the sterling area had shrunk to the British Isles and a few small British colonies; even Hong Kong had abandoned sterling as its anchor currency. The United Kingdom abolished exchange controls on 24 October 1979, ending the sterling area.

Territories occupied by Japan during the Second World War:

During the Second World War, French Indochina (Cambodia, Laos, and Vietnam) and Thailand, though occupied by Japanese troops, did not have Japanese occupation currency; rather, they paid a kind of ransom by creating domestic currency and giving it to Japan to pay for local expenses. In Burma, Hong Kong, western Indonesia (Sumatra and Java), and the Philippines, the Yokohama Specie Bank acted as the issuing agent of occupation currency and the de facto central bank. The Bank of Taiwan had the same capacity in Oceania and eastern Indonesia. The Bank of Japan was made the central bank for the Greater South East Asia Co-Prosperity Sphere by a Japanese law of July 1942, but Japanese occupation currencies were not officially all pegged to one another and to the yen until 1943, when the rate was established at 1 Japanese yen = 1 military yen (China) = 1 Burmese rupee = 1 Javanese gulden = Malayan $1 = 1 Philippine peso = 1 Thai baht = 2 Japanese Oceanic shillings, and 1 Indochinese piastre = 0.976 Japanese yen (Bányai 1974: 8). On 1 April 1942, Japan opened the Southern Development Bank (Nampo Kaihatsu Kinko), which had its headquarters in Tokyo and, from 1 July 1942, a primary regional office in Singapore (renamed Shonan by the Japanese). The Southern Development Bank became the official central bank of the Japanese occupation at various dates in 1943 and 1944 for Malaysia, Indonesia, the Philippines, and Singapore, but this was mainly an administrative change. Notes continued to be printed with the same appearance and the Yokohama Specie Bank and Bank of Taiwan continued as the agents for issuing occupation currency and regulating other banks. Although these currencies were part of a currency zone based on the Japanese yen, convertibility between any pair of currencies was restricted. Taiwan, Korea, and Manchuria were also parts of the Japanese yen currency zone through their older pegs to the yen.

Australia:

Australia imposed an embargo on shipments of gold from 14 July 1915, after the First World War had begun, through 24 April 1925 (Australia, proclamation of 14 July 1915). Australia imposed exchange controls on 28 August 1939, shortly before as the Second World War began. In January 1976 Australians became free to buy and sell gold in Australia; previously, they had been required to sell it to the central bank within one month. Australia removed most exchange controls on 12 December 1983, in conjunction with a managed float of the Australian dollar (Australia, Treasurer's announcement of 9 December 1983). On 1 July 1990 Australia abolished regulations pertaining to the export of Australian notes and coins.

Australia left the sterling area on 23 June 1972.

The monetary area of Australia included Papua and New Guinea from the First World War from 1914 until Papua New Guinea left it on 1 January 1976.

Solomon Islands:

The Solomon Islands left the sterling area along with Australia, whose currency it was using at the time, on 23 June 1972.

On 5 June 2000, during a period of civil unrest, the central bank imposed delays on external payments exceeding US$25,000. On 1 July 2002 the central bank provided foreign exchange only for items on a list of critical goods. On 1 December 2003 it lifted delays on external payments that it had imposed in June 2000, and on 4 May 2004 it removed all remaining delays in external payments (IMF ARER 2001: [page to come-see also central bank annual reports for these years on central bank Web site or at IMF]; 2003: [page to come]; 2004: 867).

Other

Defaults on or restructurings of debt to the private sector (mainly from Purcell and Kaufman 1993 and Standard & Poor's 2004): 1996-2004 (local currency debt).

Banking crises (data since 1970s mainly from Caprio and Klingebiel 1999 and Frydl 1999): None.

Frankel and Rose (1996) list of currency crashes: None.

No exchange rate data in Reinhart and Rogoff (2003).

References

Primary sources:

--Laws and decrees:

Germany. Overseas gazette. 1890-1921. Deutsches Kolonialblatt. Issued by Kolonial-Abtheilung des Auswärtigen Amts (1890-1907); Reichs-Kolonialamt (1907-1919); Reichskolonialministerium (1919-1920); Kolonialzentralverwaltung, Reichsministerium für Wiederaufbau (1920-1921). Berlin: Ernst Siegfried Mittler und Sohn.

Germany. 1892-1910. Die deutsche Kolonialgesetzgebung. Sammlung der auf die deutschen Schutzgebiete bezüüglichen Gesetze, Verordnungen, Erlasse, und internationale Vereinbarungen mit Anmerkungen und Sachregister. Edited by various persons. Berlin: D. Reimer, later Ernst Siegfried Mittler und Sohn, later Alfred Zimmermann. (The first volume was published in 1898 but covers the period starting in 1892.)

Great Britain (United Kingdom). Gazette. 1665-present. Oxford Gazette (1996-1666); London Gazette (1666-present). Oxford (1665-1666); London (1666-present): His/Her Majesty's Stationery Office from 1903. Online at <http://www.gazettes.online.co.uk>; as of September 2005, gazettes since 1900 are available.

Great Britain (United Kingdom). Western Pacific gazette. 1916-1967. High Commission for Western Pacific Islands. Western Pacific High Commission Gazette. Suva, Fiji: High Commission for the West Pacific. (Covers present-day Kiribati, Solomon Islands, and Tuvalu; succeded by Solomon Islands gazette.)

Solomon Islands. Gazette. 1955-present. British Solomon Islands Protectorate News Sheet (1955-1965); BSIP News Sheet (1965-1968); British Solomon Islands Protectorate Gazette (1968-1975); Solomon Islands Gazette (1975-present). Honiara: Government Printing Works. (Successor to Great Britain, Western Pacific gazette.)

--Publications of monetary authorities:

Central Bank of Solomon Islands. Annual report. 1982-present. Annual Report. Honiara: Central Bank of Solomon Islands.

Central Bank of Solomon Islands. Bulletin. 1990-present. Quarterly Review. Honiara: Central Bank of Solomon Islands.

Commonwealth Bank of Australia. Annual report. 1912-1960. Aggregate Balance Sheet of the Commonwealth Bank of Australia (1912-1927); Balance Sheet of the Commonwealth Bank of Australia; and, Balance Sheet of the Commonwealth Savings Bank of Australia (1928-1941); Balance Sheet and Director's Report / Commonwealth Bank of Australia and Commonwealth Savings Bank of Australia (1942-1944); Report and Balance Sheets (1945-1959); Report and Financial Statements (1960). Sydney: Commonwealth Bank of Australia. (This report includes information about the Notes Issue Board during its existence from 1920-1924).

Commonwealth Bank of Australia. Bulletin. 1937-1959. Statistical Bulletin. Sydney: Commonwealth Bank of Australia.

Neu Guinea Compagnie. 1979. German New Guinea: The Annual Reports. Edited and translated by Peter Sack and Dymphna Clark. Canberra: Australian National University Press. (The name of this company was sometimes spelled with hyphens between the first two words or between all three words, and the last word was sometimes spelled as beginning with a K.)

Reserve Bank of Australia. Annual report. 1959/1960-present. Report and Financial Statements (1959/1960-1999); Annual Report (2000-present). Sydney: Reserve Bank of Australia.

Reserve Bank of Australia. Bulletin. 1960-present. Bulletin (1960-1981); Statistical Bulletin (1981-present). Sydney: Reserve Bank of Australia.

Solomon Islands Monetary Authority. Annual report. 1976-1981. Annual Report. Honiara: Solomon Islands Monetary Authority.

--Web site of the current monetary authority (viewed January 2005):

<http://www.cbsi.com.sb>

--Other publications or Web sites:

Great Britain (United Kingdom). Report on the Solomon Islands. 1921/1922-1938, 1948-1974. Colonial Office, British Solomon Islands Protectorate, Report for … (1921/1922-1930); Annual Report on the Social and Economic Progress of the People of the British Solomon Islands (1931-1938); Annual Report on the British Solomon Islands for the Year … (1948-1964/1965) Commonwealth Office, Annual Report on the British Solomon Islands for the Year … (1965/1966); Foreign and Commonwealth Office, Annual Report on the British Solomon Islands for the Year … (1967-1974). London: His / Her Majesty's Stationery Office. (This series was called Colonial Reports until the Second World War and Colonial Annual Reports afterwards; it was suspended during the war for most colonies.)

Great Britain (United Kingdom). Colonial Office. 1923/1924-1941/1942 Blue Book for the Year from 1st April, … to 31st March, …. Suva, Fiji.

Main secondary sources:

Bányai, Richard A. 1974. Money and Banking in China and Southeast Asia During the Japanese Military Occupation 1937-1945. Taipei: Tai Wan Enterprises Company, Limited.

Deeken, Matthias. 1913. Das Geldwesen der deutschen Kolonien. Münster in Westfalen, Germany: Druck der Westfälischen Vereinsdruckerei.

IMF ARER. 1950-present. International Monetary Fund. Annual Report on Exchange Restrictions (1950-1978), Annual Report on Exchange Arrangements and Exchange Restrictions (1979-1988), Exchange Arrangements and Exchange Restrictions: Annual Report (1989-present). Washington: International Monetary Fund. (Contains information on IMF member countries and some of their dependencies.)

Shafer, Neil, and Colin R. Bruce II. 2000. Standard Catalog of World Paper Money, Volume 2: General Issues. Iola, Wisconsin: Krause Publications.

Monetary authorities: Solomon Islands

Exchange rate arrangements: Solomon Islands