What Is the Solomon Islands Currency and How Does It Work?

The Solomon Islands relies on its national currency for trade, savings, and daily transactions. As a small island economy, its monetary system is central to commerce and financial stability. Understanding its currency provides insight into the broader economic landscape.

Name and Currency Code

The official currency of the Solomon Islands is the Solomon Islands dollar, represented by the symbol “$” and the ISO 4217 code “SBD.” This designation standardizes its use in global financial transactions. The Central Bank of Solomon Islands (CBSI) issues and regulates the currency, managing monetary policy to maintain stability.

The SBD is a free-floating currency, meaning its value is determined by market conditions rather than being pegged to another currency. This allows the CBSI to adjust interest rates, manage foreign exchange reserves, and intervene in currency markets when necessary.

Businesses in the Solomon Islands must use the SBD for tax filings, financial statements, and regulatory compliance. The Solomon Islands Financial Reporting Act 2010 mandates that corporate financial records be maintained in the local currency unless exemptions apply. This aligns financial disclosures with International Financial Reporting Standards (IFRS).

Circulating Denominations

The Solomon Islands dollar is issued in both banknotes and coins. Coins are used for smaller purchases, while banknotes facilitate higher-value transactions. The CBSI ensures an adequate supply of both to support economic activity.

Coins are available in denominations of 10, 20, and 50 cents, as well as $1 and $2. Lower-value coins are used for small transactions, such as buying goods at markets or paying for transportation. The $1 and $2 coins, made from durable metals, circulate alongside smaller banknotes. Their designs feature national symbols and cultural motifs.

Banknotes come in denominations of $5, $10, $20, $50, and $100. The $5 and $10 notes are frequently used for everyday expenses, while higher denominations are more common in business transactions and savings. Each note includes security features such as watermarks, security threads, and color-shifting ink to prevent counterfeiting. Designs highlight aspects of Solomon Islands heritage, including traditional canoe building, marine biodiversity, and historical leaders.

Factors Affecting Value

The value of the Solomon Islands dollar is influenced by economic conditions, fiscal policies, and trade dynamics. The country relies heavily on exports such as timber, fish, and palm oil. A trade surplus strengthens the currency by increasing foreign exchange reserves, while a trade deficit can lead to depreciation if demand for foreign currencies outpaces supply.

Government fiscal policy also affects currency stability. Public debt levels, budget deficits, and government spending influence investor confidence and inflation. Heavy reliance on external borrowing can put downward pressure on the SBD. The Solomon Islands Ministry of Finance and Treasury manages fiscal policy under the Public Financial Management Act 2013, which sets guidelines for responsible borrowing and expenditure.

Foreign direct investment (FDI) also impacts the currency. Sectors like mining, tourism, and infrastructure attract foreign capital, increasing demand for the SBD. Policies encouraging investment, such as tax incentives under the Foreign Investment Act 2005, can boost capital inflows and support exchange rate stability. However, reliance on volatile commodity markets introduces risks, as fluctuations in global prices for key exports can deter investors and weaken the currency.

Exchange Procedures

Converting Solomon Islands dollars into foreign currencies and vice versa occurs through commercial banks, foreign exchange bureaus, and authorized money transfer services. Exchange rates fluctuate based on market conditions, and the CBSI oversees foreign exchange regulations under the Exchange Control Act.

Businesses engaged in international trade must follow CBSI’s foreign exchange approval process when remitting funds abroad. Importers require foreign currency to settle invoices, often needing prior authorization for large transactions. Exporters convert foreign earnings into SBD, with regulations requiring a portion of revenues to be repatriated into the domestic banking system. Noncompliance can result in penalties, including fines or restrictions on future transactions.

Tourists and expatriates rely on exchange services at banks and licensed money changers, though availability is limited in remote areas. Credit and debit card transactions offer an alternative, but their use is concentrated in urban centers due to limited electronic payment infrastructure in rural regions. Exchange rate margins and transaction fees vary by provider, making it important to compare options when converting currencies.