Gold Rush or Growth Trap? Solomon Islands Bets on Mining to Build a Stronger Economy

Solomon Islands’ mining boom is replacing logging and strengthening growth and exports, but rising debt, limited job creation, poverty and dependence on gold leave the recovery vulnerable. The World Bank urges government and development partners to turn mineral revenues into lasting gains through fiscal reform, stronger governance, renewable energy, infrastructure, productive finance and investment in agriculture, fisheries, tourism and SMEs.

Solomon Islands is entering a crucial economic transition as mining, particularly gold, replaces the logging industry that supported exports and government revenues for decades. The World Bank's research, drawing on information from the World Bank, the Central Bank of Solomon Islands, the Ministry of Finance and Treasury, the Solomon Islands National Statistics Office, the International Monetary Fund, OECD and World Resources Institute, finds that mining could provide a major new source of growth. But the report warns that mineral wealth will deliver lasting development only if the government converts it into jobs, infrastructure, stronger public finances and opportunities for businesses beyond the extractive sector.

The economy grew by an estimated 3.6 percent in 2025, supported by gold production and household consumption. Growth, however, is expected to slow to 2.8 percent in 2026 because of higher fuel prices, Cyclone Maila, weak private investment and declining logging. It is forecast to recover to around 3.1 percent in 2027 and 2028, a pace that would support recovery but is unlikely to transform living standards quickly.

Gold Reshapes the Economy, but Dependence Brings New Risks

The biggest change is visible in exports. Minerals accounted for 53 percent of goods exports in 2025, compared with just 4 percent in 2019. Logs moved in the opposite direction, falling from 70 percent of exports in 2019 to 16 percent in 2025.

Strong gold exports helped Solomon Islands record a current-account surplus equivalent to 5.6 percent of GDP in 2025, the first surplus since 2012. Mining could deliver much larger gains in the future. World Bank modelling suggests that, compared with a scenario without mining development, real GDP could average about 70.7 percent higher during 2026–2040. At full production, the mining pipeline could generate around SBD3.6 billion in gross fiscal revenues.

For policymakers, however, the lesson from logging is important. Depending heavily on gold would expose exports and public finances to global commodity prices. The government therefore needs transparent mining licences, effective production monitoring, stronger tax administration and clear benefit-sharing arrangements with customary landowners and communities.

Rising Debt Puts Fiscal Reform at the Centre

Public finances are already under pressure. The fiscal deficit reached 3.8 percent of GDP in 2025 and is projected at around 4 percent in 2026. Public debt increased to 29.5 percent of GDP in 2025 and is forecast to rise to 32.1 percent in 2026, 34.1 percent in 2027 and 34.9 percent in 2028.

Government spending is also becoming harder to manage. The public wage bill has reached around 16 percent of GDP, compared with a medium-term target of 10 percent, while tax exemptions cost an estimated 5 percent of GDP.

The report recommends implementing the proposed 15 percent VAT, passing the Mineral Resources Bill, reducing poorly targeted tax exemptions and controlling wage spending. Part of unexpected mining and tax revenues should be saved instead of immediately spent, creating financial reserves that can be used when cyclones, fuel-price shocks or other emergencies strike.

For development partners, this means support should increasingly strengthen tax administration, public financial management, mining governance, disaster financing and climate-resilient infrastructure. Grants and concessional finance will remain important, particularly as Solomon Islands tries to avoid expensive borrowing while financing major infrastructure needs.

Jobs and Finance Remain the Missing Links in Growth

Mining may raise GDP rapidly, but it cannot solve the employment challenge alone. Around 9,000 young people enter the labour market each year, while only about 2,100 formal jobs are created. This makes employment-intensive sectors such as agriculture, fisheries, tourism, agro-processing, infrastructure maintenance and small businesses critical to future development.

Businesses, however, continue to face serious constraints. More than 60 percent of formal firms were operating below 60 percent capacity in 2025, compared with about 35 percent in 2015.

Finance is another obstacle. Around 40 percent of bank credit goes to personal consumption, while agriculture, fisheries and forestry together receive only 5 percent. Only 31 percent of smaller firms have a bank loan or credit line, compared with 63 percent of large firms.

For banks, investors and development-finance institutions, this gap represents an opportunity. Better credit guarantees, digital payments, movable-collateral systems and financial products for SMEs could channel more investment into productive sectors and create jobs.

Energy and Diversification Could Turn Mining Wealth into Lasting Growth

Energy dependence remains another major vulnerability. Imported diesel supplies about 98 percent of electricity generation, exposing households and businesses to global fuel-price shocks. During the 2026 energy crisis, domestic fuel prices increased by roughly 35–40 percent within weeks.

Projects such as the Tina River Hydropower Project, together with solar power, improved electricity infrastructure and additional fuel-storage capacity, could lower energy costs and create opportunities for private investment.

The development challenge remains substantial. Around 63 percent of the population is estimated to live below the lower-middle-income poverty threshold, while one in three children under five is reported as stunted. Remittances, now equivalent to around 5 percent of GDP, support household consumption but cannot replace productive employment at home.

The report's message to government, development partners and investors is therefore straightforward: mining should finance diversification rather than become the economy's next dependency. Investing mineral revenues in infrastructure, renewable energy, agriculture, fisheries, tourism, skills and SMEs could create a broader economic base. Poor management, by contrast, risks replacing dependence on timber with dependence on gold while debt rises and job creation remains weak.