Press Release:IMF Executive Board Approves US$9.3 Million Disbursement for Samoa Under the Exogenous Shocks Facility
December 7, 2009Press Release No. 09/446
December 7, 2009
The Executive Board of the International Monetary Fund today approved a disbursement of SDR 5.8 million (about US$9.3 million) to Samoa under the rapid-access component of the Exogenous Shocks Facility (ESF) to help the country recover from the damage caused by a devastating earthquake and tsunami on September 29, 2009.
Samoa has suffered its worst human losses and physical damage from a natural disaster since its independence in 1962. The disaster also severely damaged the country’s economic resilience and prospects for a quick recovery from the global economic slowdown. In particular, the impact on Samoa’s tourism sector, which is its main commercial source of foreign exchange, was significant.
The ESF disbursement will provide the authorities with financial assistance to support the country’s external reserves amid shortfalls in export earnings and increased import costs related to the disaster response. It will also help catalyze significant donor support by signaling the authorities’ commitment to maintain sound macroeconomic policies.
Following the Executive Board discussion, Mr. Takatoshi Kato, Deputy Managing Director and Acting Chair, issued the following statement:
“The IMF extends sympathy to the people of Samoa for the losses caused by the September 2009 tsunami. Owing to its scale, the disaster has severely undercut Samoa’s prospects for a quick recovery from the global recession. Its adverse impact on the tourism sector and sizable reconstruction needs will result in a sharp widening of the fiscal and current account deficits. The government responded swiftly in addressing immediate humanitarian needs and in developing a recovery plan consistent with securing Samoa’s social and economic progress.
“The fiscal cost of emergency relief and rehabilitation is significant and will result in sharply higher fiscal deficits over the coming two to three years. Against this background it will be important to prioritize spending on areas that are key to revive the economy, as well as on basic social services. The authorities’ commitment to minimize the overall fiscal burden by re-directing some development spending under existing plans to tsunami-related infrastructure rehabilitation is encouraging.
“Reflecting prudent fiscal policies, the authorities achieved a low level of public debt in recent years. It will be important that public debt be stabilized at comfortable levels once tsunami-related reconstruction is completed as Samoa remains susceptible to severe external shocks. Any remaining tsunami-related financing needs should be met primarily through grants and concessional borrowing.
“The authorities’ commitment to the exchange-rate basket peg has proved an effective anchor of sound macroeconomic policies. Further structural reform is key to enhancing prospects for private-sector led growth, including by building on recent progress in state-owned enterprise reform, and financial sector development,” Mr. Kato stated.