## Implementing the Enhanced General Data Dissemination System (eGDDS) ## Source details **Canonical URL:** [Implementing the Enhanced General Data Dissemination System (eGDDS)](https://www.imf.org/-/media/files/publications/cr/2017/cr17112.pdf) ## Other formats - [Markdown version](/-/media/files/publications/cr/2017/cr17112.pdf.md) - [Structured JSON version](/-/media/files/publications/cr/2017/cr17112.pdf.json) --- ### Rationale and commitments - e-GDDS established: May 2015. - Purpose: refocuses on data dissemination to support transparency, encourage statistical development, and strengthen synergies between data dissemination and surveillance. - Samoa committed to be the first country in the Asia and Pacific region to implement the e-GDDS. - Samoa committed to publish in April 2017 key macroeconomic data in a new National Summary Data Page (NSDP) under e-GDDS. - Samoa committed to publish 13 of the 15 core e-GDDS data categories in April 2017; the remaining two core categories (external debt and international investment position) to be published later in 2017. - Authorities opted to disseminate supplementary datasets, including direction of trade, labor market, population, financial soundness indicators (FSIs), sectoral financial statements for FSIs, and financial access survey. ### NSDP features and benefits - NSDP functions: - Assembles links for e-GDDS recommended data categories and supplementary datasets. - Provides access to time series in formats readable by humans and computers, including SDMX machine-readable formats. - Coordinates dissemination and regular updating through one designated agency while data are compiled by multiple agencies. - Benefits for users and agencies: - Browse time series and graphics; download data in SDMX. - Access metadata describing compilation and dissemination practices. - Reduce reporting burden by centralizing data in one portal in standardized formats. - Make processing easier for international/regional organizations and other institutional users. ### Staff findings and surveillance-relevant indicators - e-GDDS recommends dissemination of 15 data categories; Samoa to publish 13 of the 15 core categories in April 2017. - Remittances: 18 percent of GDP (figure caption). - Average remittance cost: described as high, well above the G20 objective of 5 percent (figure caption). ### Data gaps, technical assistance needs, and implementation priorities - Data adequacy: - Core macroeconomic data are regularly reported to IMF and published, but some shortcomings exist (potential bias in national accounts). - One third of GDP is “non-monetary” and difficult to measure precisely. - IIP not yet disseminated; SBS expected to provide IIP data to the Fund during 2017. - Key statistical improvements urged by staff (from PFTAC mission recommendations): - Ensure appropriate transformation of VAGST data. - Further analysis of the household expenditure survey to estimate the informal sector. - Upgrade deflation methodology. - Develop a revisions policy for SBS. - Additional technical assistance needed with Government Finance Statistics (GFS). - NSDP and e-GDDS implementation assistance: - Authorities welcomed IMF technical assistance to implement the eGDDS and requested further technical assistance and training for national accounts and GFS improvements. ### Linkages to macroeconomic analysis and policy - Data dissemination and transparency: - Staff analysis indicates data transparency reforms reduce borrowing costs and enhance resilience (Choi and Hashimoto, 2017 cited in source). - NSDP dissemination in human- and machine-readable formats supports surveillance and policy analysis. - Broader policy context (selected, as connected to data needs): - Reserve coverage: reserves were 3.2 months of prospective GNFS imports in January 2017; ARA metric suggests optimal reserves between 2.7 to 4 months. - Public debt objectives: reduce public sector debt to 50 percent of GDP by 2020/21 (authorities’ target); staff recommends earlier achievement and a longer-term target of 40 percent of GDP. - Remittances and AML/CFT: remittances account for 18 percent of GDP; staff recommends AML/CFT upgrades and consideration of a KYC utility—data improvements and NSDP can support monitoring and policy responses. ### Implementation timeline and deliverables (as committed) - April 2017: publish 13 of 15 core e-GDDS data categories on NSDP. - Later in 2017: publish remaining two core categories—external debt and international investment position. - Ongoing: build out supplementary datasets and continue technical assistance for national accounts and GFS improvements. *Source: Box 1. Implementing the Enhanced General Data Dissemination System (eGDDS), cr17112.* ### 1. Implementing the Enhanced General Data Dissemination System (eGDDS) __________________ 17 ### 1. Implementing the Enhanced General Data Dissemination System (eGDDS) ### Context - Samoa is ranked most vulnerable to natural disasters among small states. - Legacy of the 2009 and 2012 natural disasters includes elevated public sector debt and financial sector vulnerabilities. - Samoa is reliant on workers’ remittances and vulnerable to withdrawal of correspondent banking relationships by global banks. - Reconstruction from natural disasters is largely complete and healthy economic growth is contributing to renewed focus on structural reforms and greater private sector confidence. - Policy stance: - Fiscal policy consolidation anchored by expenditure restraint and increased revenue collection efforts. - Exchange rate remained stable. - Accommodative monetary policy stance supported private sector activity. - Central Bank of Samoa (CBS) has made significant efforts to implement key FSAP recommendations; ongoing technical assistance remains critical. - Authorities are implementing Fund advice to mitigate spillovers from withdrawal of correspondent banking relationships, including upgrades to the AML/CFT framework and enforcement efforts. - Continued progress needed on structural reforms, including privatizing state-owned enterprises (SOE), and improving access to credit. ### Recent developments, outlook, and risks - 2015/16 developments: - Economic activity pickup driven by tourism arrivals, lower fuel prices, new fish processing facilities, two major sporting events, and infrastructure projects. - Measured growth rate of 6.6 percent could partially reflect improved value-added tax (VAGST) compliance and could be potentially overstated by between 1 to 2 percentage points. - Inflation at 1.1 percent remains subdued. - Current account deficit widened to 6.1 percent of GDP in 2015/2016 (from 3.0 percent) due to deterioration of the services balance and lower remittances related to charities, which more than offset an improvement in tourism earnings. - The Tala was little changed in nominal and real effective terms during 2015/16. - Reserves recovered in December and January reversing a gradual decline; reserves were 3.2 in months of prospective GNFS imports in January 2017. - Financial sector and credit: - Credit growth accelerated, led by commercial banks. - PFIs account for about one-third of total credit to the economy; PFIs’ asset quality is weaker than commercial banks. - Non-performing loan ratios in commercial banks declined to 5.2 percent in June 2016 from 8.3 percent in June 2014. - Deposit and lending rates declined slightly in FY2016 but remain high relative to the policy rate setting. - Liquidity conditions tightened; aggregate liquidity remains high but excess liquidity is concentrated in one bank and associated with a large depositor. - Outlook: - Near-term growth outlook is moderately positive; barring any natural disasters, GDP is expected to grow at around 2 percent per year. - Growth drivers: improvements in the business climate, tourism, and construction including infrastructure projects. - Tourism sector current constraint: mismatch between excess hotel capacity and limited flight arrivals, putting downward pressure on pricing and contributing to financial sector vulnerabilities. - Closure of the Yazaki Corporation automobile harness assembly plant is estimated to reduce growth by about 0.9 percentage points for 2017/18 with a further reduction of about 0.1 percentage points in 2018/19. - Average inflation expected to pick up with increasing commodity prices but remain around 3.0 percent over the medium term. - Current account deficit expected to gradually narrow to about 4½ percent of GDP over the medium term. - Major risks (Annex I): - Natural disasters: - Samoa faces elevated risk; annual average damage and losses estimated at over 12 percent of GDP, compared to an average of 2.3 percent for Pacific island countries. - Natural disasters have been associated with increases in public debt and drive assessment of high risk of debt distress in the debt sustainability analysis. - High levels of debt and financial sector vulnerabilities limit policy space for future recovery. - Spillovers from loss of correspondent banking relationships: - Over 80 percent of Samoa’s remittances are channeled through MTOs; MTOs face closure of bank accounts and increased difficulty accessing financial services in Australia and New Zealand. - Remittance sector risks: fragility of MTOs, potential increase in remittance costs, and undermined financial access in remote areas. - Contingent liabilities associated with PFIs and SOEs: - Explicit guarantees along with on-lending arrangements to SOEs amount to 18.8 percent of GDP; additional implicit guarantees associated with the PFIs. - Downside risks to growth: - Uncertainty on macroeconomic spillovers from Yazaki closure despite transitional support packages. - Potential closure of the tuna cannery in American Samoa could affect remittances given Samoan citizen workforce share. ### Authorities’ views - Authorities broadly agreed with staff’s outlook and risk assessment and highlighted continued vulnerability to natural disasters. - They acknowledged strong growth in 2015/16 but noted outer years will be challenging. - Authorities expected the Yazaki closure to be partially offset by shifts to other business activities but expressed concern over negative spillovers from the potential closure of Samoa’s tuna cannery in American Samoa. - On the upside, increased airline connectivity could support tourism. ### Policy issues and recommendations - Overall policy stance: - Fiscal restraint combined with accommodative monetary policy is appropriate to support activity while rebuilding fiscal buffers. - Samoa assessed to be at high risk of debt distress due to extremely high vulnerability to natural disasters. - High levels of external debt limit scope for the exchange rate to smooth external shocks; fiscal policy is the main lever to respond to shocks given weak monetary transmission. - Emphasis on tighter fiscal policy during non-disaster periods, reducing vulnerabilities, rebuilding buffers, and implementing reforms to improve growth prospects. A. Policies to address spillovers from loss of correspondent banking relationships - Problem: strains in correspondent banking have increased fragility of Samoa’s remittance sector; about 80 percent of remittances are channeled through MTOs. - Staff-proposed pilot project for Samoa: - Anchored on authorities’ commitment to a comprehensive set of measures to serve as catalyst for donor support. - Measures to be implemented as soon as possible to alleviate correspondent banks’ near-term concerns while laying foundations for a fully AML/CFT compliant and efficient remittance system. - AML/CFT upgrades and progress (including APG Mutual Evaluation Report recommendations, Annex III): - National strategy for AML/CFT published in February 2017; next step is a more detailed work plan with quantifiable implementation targets. - APG recommended considerable increase in number of AML/CFT specialists throughout the financial and legal system; recent efforts to enhance FIU and law enforcement capacity should continue. - Ensure compliance by MTOs with AML/CFT requirements; on-site inspections of MTOs are important and should continue. - Address risks from the offshore sector by aligning laws governing the offshore sector with international AML/CFT standards and enhancing AML/CFT supervision, especially over international banks, insurance companies, trust companies and service providers. - Work with domestic banks to ensure FATCA compliance has helped lower risk of correspondent banking relationship withdrawal. - Dissemination of a sanctions list by the central bank to all local financial institutions is welcomed and outreach should continue to ensure full compliance. - KYC utility and other measures: - Authorities should explore establishment of a national database—a Know Your Customer (KYC) utility—hosted by the FIU to include KYC data on remittance senders and receivers to improve compliance screening, facilitate information sharing, enhance compliance, and reduce costs. - Compliance with customer due diligence should remain with financial institutions and be risk-based in line with international standards. - IMF technical assistance could support AML/CFT compliance improvements. - Developing a KYC utility in tandem with a credit bureau could provide synergies. - Authorities’ perspective on these measures: - Concerned about financial stability risks from correspondent banking relationship withdrawals. - Have increased FIU capacity, AML/CFT awareness, disseminated a sanctions list, enhanced FATCA compliance, and conducted on-site MTO inspections, but full implementation will take time and resources. - Authorities welcome further IMF and donor support for AML/CFT upgrades, training, development and implementation of a KYC utility, and outreach to reassure overseas banks. B. Macro-financial policies - Financial stability overview: - Commercial banks remain profitable and report high capitalization while non-performing loan ratios have declined. - System-wide liquidity remains high but concentrated in one bank; some banks face tighter liquidity conditions. - Main risk is potential sharp deterioration in asset quality following natural disasters; the financial cycle is driven largely by natural disasters with recovery periods associated with weak credit growth and increases in non-performing loan ratios. - Further risks from high loan concentration and number of borrowers with high loan-to-capital ratios. - FSAP implementation progress (Annex III): - Supervision and regulation strengthened; staff capacity enhanced; on-site inspections increased; prudential standards strengthened. - Continued FSAP implementation recommended, including: - Amendments to the Financial Institutions Act. - Upgrades to guidance on prudential statements for banks. - Increasing financial supervision staffing and additional training. - Updating the framework for single borrowing limits. - Progress on establishing a national payments system; capacity constraints limit financial stability analysis improvements. - Institutional arrangements could be strengthened by establishing terms of reference and holding regular meetings of the Financial Stability Committee. - Improve financial stability analysis by increasing data quality and coverage, developing stress testing analysis, and preparing and publishing short notes on financial stability. - Reform of PFIs (Annex IV) as high priority: - Restore PFIs’ activities to original mandates to reduce contingent liability risks and prevent crowding-out of private financial institutions. - Development Bank of Samoa (DBS) is re-orienting focus to agriculture, but poorly performing tourism-related loans remain a long-standing risk. - Costs associated with policy lending decisions should be clearly articulated. - Samoa National Provident Fund (SNPF) should gradually reduce its personal lending, including lending against members’ contributions. - Unit Trust of Samoa (UTOS) subsidized lending to underperforming SOEs increases contingent liability risks and crowds out private institutions; UTOS could be transformed into an unleveraged mutual fund or a policy-lending bank. _1. Implementing the Enhanced General Data Dissemination System (eGDDS)_ ### 18. The authorities appreciate IMF technical assistance and are committed to implement ### cr17112 - 18. The authorities appreciate IMF technical assistance and are committed to implement ### Financial sector: PFIs and supervision - Authorities appreciate IMF technical assistance and are committed to implement FSAP recommendations. - The CBS has stepped up supervision of the PFIs and is ensuring that PFIs adhere to reporting guidelines. - Authorities emphasized that UTOS has played an important role in facilitating access to financing for SOEs and do not share staff’s concerns with its operations as UTOS fully meets the supervisory requirements of the CBS. - Samoa: Public Financial Institutions, FY 2016 (figures as reported) - Institutions: DBSS H C S N P F U T O S (column headings as in source) - Total assets (% of GDP): 14.2 3.8 31.4 7.5 - Share in financial system (%): 9.0 2.1 24.0 4.8 - Gross loans&investments (% of GDP): 7.8 2.1 17.3 4.2 - Borrowing (% of GDP) 1/: 6.3 0.6 - - - Net profit 2/: -0.6 2.2 32.3 1.0 - ROA (%) 3/: -0.2 2.9 5.0 0.6 - Return of capital (%) 1/ 4/: -1.2 7.6 - - - NPLs (% of total loans) 5/: 4.6 2.1 5.8 - - Sources/notes: - 1/ FY 2015 for DBS - 2/ For Samoa National Provident Fund (SNPF) the net surplus from investment income is shown. - 3/ Ratio of net profits to total assets. - 4/ Ratio of net profits to capital and reserves. - 5/ Latest data FY 2014 ### Fiscal sustainability and consolidation - FY2014/15 overall deficit: -3.9 percent of GDP. - FY2015/16 overall deficit: -0.4 percent of GDP. - Expenditure rationalization and revenue collection reduced the deficit to 0.4 percent of GDP during FY2015/16 from 3.9 percent in 2014/15 (text preserves original sign conventions). - Operating expenditure reductions contributed about 2.5 percentage points to the improved fiscal position. - Targeted 10 percent expenditure reductions for most ministries, apart from health and education. - Additional revenues (including from improved compliance and increased collection efforts) were saved, amounting to about 1.5 percent of GDP. - For 2016/17, the deficit is expected to widen to 1.9 percent of GDP largely reflecting higher expenditure (partly associated with new ministries) and less buoyant revenue projections. - Public debt to GDP ratio: 52.5 percent of GDP (reported as high). - Debt service requirements will increase in 2017/18 to 2.7 percent of GDP. - Fiscal strategy objectives and measures: - Reduce public sector debt to 50 percent of GDP by 2020/21 through sustained increase in revenues by 0.4 percentage points relative to 2016/17 along with expenditure restraint (text table scenario). - Main elements: - Broadening the tax base by removing exemptions, including VAGST exemptions, and continuing efforts to enhance compliance. Concessions and tax credits should be reviewed and streamlined. - Consider increasing excise taxes and user fee charges. - Continue SOE reforms, including completion of audits of annual reports to facilitate collection of dividends. - Save any windfall revenues such as upside surprises to revenue collection or from privatization. - Solidify recent improvements in expenditure control and maintain expenditure restraint; prioritize health, education and climate-resilient infrastructure. - Consider rolling expenditure reviews to identify scope for efficiency improvements and further cuts if revenue measures are insufficient. - Adhere to the medium-term debt strategy: ensure a minimum 35 percent grant element for new borrowing; implement procedures/guidelines for contracting new loans and issuance of guarantees approved by Cabinet in 2014; annual reporting on medium-term debt strategy; implement debt management operations; set strategic indicators and targets to monitor costs and risk exposure, including reducing currency risk by diversifying currencies where possible. - Fiscal projections (In percent of GDP) - Baseline scenario (Est./Proj. columns in source): - Tax Revenue: 22.7 24.2 23.3 23.2 23.1 22.9 22.8 22.6 - Corresponding years: 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 - Overall Balance: -3.9 -0.4 -1.9 -1.7 -1.9 -2.0 -2.1 -2.3 - Public Debt: 57.8 52.6 52.3 52.2 52.4 52.4 52.6 52.8 - Fiscal scenario with revenue measures 1/: - Tax Revenue: 22.7 24.2 23.3 23.4 23.7 23.7 23.7 23.7 - Overall Balance: -3.9 -0.4 -1.9 -1.5 -1.3 -1.2 -1.2 -1.1 - Public Debt: 57.8 52.6 52.3 52.0 51.6 50.8 50.2 49.4 - 1/ Measures include broadening the tax base by reducing GST exemptions and streamlining tax credits and concessions. ### Debt sustainability, risks, and contingent liabilities - Debt sustainability analysis (DSA) indicates a high risk of debt distress, taking into account vulnerability to natural disasters. - Methodological change compared with the 2015 Staff Report adjusts for the average impact of natural disasters on growth, the current account and fiscal balance over the medium term. - Recommendation: aim to meet the 50 percent debt target earlier than 2020/21 and target a public debt to GDP ratio of 40 percent over the longer term to reduce risk of debt distress and increase fiscal space. - Suggested actions: - Sustain tight fiscal policy stance during periods when not recovering from natural disasters. - Contingency planning via pre-negotiated borrowing from multilateral lenders as a buffer to natural disasters, evaluated within the overall debt management strategy. - Samoa faces sizeable fiscal risks from natural disasters: - Historical impacts: 2009 Tsunami added 10 percent of GDP to public sector debt; 2012 Cyclone Evan added a further 5 percent. - Public debt is denominated in foreign currency, limiting exchange rate adjustment as a shock absorber. - Contingent liabilities related to SOEs and PFIs present significant fiscal risk: government guarantees to SOEs and several on-lending arrangements with PFIs. - Costs of policy-related lending initiatives or forbearance should be clearly articulated; continued PFI reforms should help limit contingent liability risk. - Authorities’ stance on debt and fiscal policy: - Authorities recognize risks posed by high debt levels and are committed to fiscal consolidation to achieve medium-term fiscal deficit targets. - They agreed with DSA findings, noted the risk to debt sustainability from natural disasters, and emphasized ensuring any newly contracted debt has a minimum 35 percent concessional component. - Intend to broaden the tax base and continue vigorous compliance measures; emphasize expenditure restraint and are conducting expenditure reviews in health and education to improve efficiency. ### Monetary and exchange rate policy, reserves - External position: broadly in line with fundamentals; current level of the exchange rate assessed to be appropriate. - International reserves (in U.S. dollar terms): declined towards the end of 2016 but improved in December and January to 3.2 months of prospective GNFS imports. - IMF reserve adequacy metric for credit constrained economies suggests an optimal level of reserves for Samoa between 2.7 to 4 months of imports of goods and non-factor services, depending on assumed long-run opportunity cost of holding reserves. - Monetary policy stance: appropriate given low inflation and moderate growth prospects; monetary policy can remain accommodative to support private sector activity while fiscal buffers are built. - If reserve position deteriorates, macroeconomic policies will need adjustment; a tighter monetary policy stance would be appropriate but monetary transmission mechanism is weak, so fiscal policy would bear most adjustment burden. - Authorities’ views on monetary policy: - Consider current stance broadly appropriate. - Recent decline in reserves attributed to one-off factors and the ending of a period of substantial grant inflows. - Anticipate reserves to continue to recover but would tighten monetary policy if reserves continue to decline. - Due to weak transmission, in addition to raising interest rate of CBS securities, CBS would rely on moral suasion; authorities could consider recalling overseas investments for some institutions if needed. ### Structural policies for sustained and inclusive growth - Priority: improve resilience to natural disasters by focusing development expenditure on climate-resilient infrastructure (construction to climate resilient standards and adequate maintenance). - Example: Green Climate funded project announced in December 2016 to upgrade key infrastructure in Apia to prevent flooding. - Greater economic diversification would improve resilience. - SOE performance and reforms: - SOEs control a large share of physical assets; contribution to GDP estimated at 3 percent (Annex IV). - 2010-2014: returns on equity and assets were negative; average government transfers to SOEs (excluding subsidized loans by UTOS) amounted to 0.9 percent of GDP. - Recent steps: establishment of new Ministry of Public Enterprises, implementation of SOE Act provisions, appointment of independent directors. - Authorities should proceed with privatization of selected SOEs over the medium-term and continue improvements to SOE governance. - Private sector and labor market: - Impediments to SME funding constrain private sector activity. - Implementation of the Personal Properties Securities Act (amended January 2015) in February 2017 expected to improve access to finance; eventual implementation of the credit bureau will also help. - Proposed reforms to legal framework for land leases would facilitate access to credit. - Skills shortages are significant; targeted vocational skills and accreditation efforts recommended. - Scope for tourism development exists through improved flight availability and enhanced tourist experience. - Completion of a submarine cable in 2017 is expected to improve quality and reduce costs of information technology services. - Agriculture: - Absorbs as much as two-thirds of the potential labor force but productivity is low and output projected to continue to decline. - Constraints: access to land and inability to use land for collateral. - Recommendation: reform and upgrade the agricultural sector to deliver sustainable growth and help meet SDGs. - Poverty and inequality (2013/14 indicators from Samoa Hardship and Poverty Report 2016): - Food Poverty (Share of Population): 10.6 4.9 4.3 (2002 2008 2013/14 as presented) - Basic Needs Poverty (Share of Population): 22.9 26.9 18.8 - Poverty Gap Index: 6.6 6.6 4.9 - Gini Coefficient (Households): 0.430 0.470 0.56 - Notes: Extreme poverty rare; incidence of food and basic needs poverty declined since 2002; modest decrease in share poor or vulnerable; income inequality increased. - Strategy for Development of Samoa 2016/17-2019/20 (SDS): - SDS highlights government priorities and aims to ensure increased opportunities and improved access to services and infrastructure. - Government committed to link annual and multiyear budgets to SDS strategic outcomes. - Authorities’ views on structural policies: - Committed to achieving SDGs. - Acknowledge importance of improving infrastructure resilience but note additional upfront costs and trade-offs. - Committed to SOE reform and privatization, with progress dependent on investor availability. - Recognize potential benefits of greater access to land but are committed to protecting rights of landowners. ### Statistics, data dissemination, and technical assistance - Samoa’s economic statistics are broadly adequate for surveillance; core macroeconomic data regularly reported to IMF and published on official websites. - Issues raised: potential bias in recent national accounts data. - Staff urges timely implementation of recommendations from the PFTAC national accounts mission in December 2016: - Ensure appropriate transformation of VAGST data. - Further analysis of the household expenditure survey to estimate the informal sector. - Upgrade deflation methodology. - Samoa Bureau of Statistics (SBS) encouraged to develop a revisions policy. - Additional technical assistance needed with Government Finance Statistics (GFS). - SBS has recently increased statistical capacity and expected to provide IIP data to the Fund during 2017. - Data dissemination improvements: - Implementation of the enhanced General Data Dissemination System (e-GDDS) and development of a national “data hub” — the National Summary Data Page (NSDP) featuring data dissemination in human readable and machine readable SDMX formats. - Authorities welcomed technical assistance to implement the eGDDS and requested further technical assistance and training for national accounts and GFS improvements. ### Staff appraisal and other macro outcomes - Staff appraisal highlights: - Samoan economy performed well in recent years; growth was strong in 2015/16 and expected to remain buoyant in the near term. - Closure of the largest manufacturing plant will drag on growth in 2017/18 and in 2018/19. - Growth expected to average close to 2 percent in the absence of natural disasters. - Inflation subdued and expected to be close to 3 percent over the medium term. - Current account widened in 2015/16 despite an improved trade balance due to lower charitable remittances and deterioration in the services account. - Medium-term current account expected to remain in deficit of about 4.5 percent of GDP. - Remittances and AML/CFT: - Loss of correspondent relationships has increased fragility of the remittance sector; some MTOs operate without bank accounts, increasing risk of disruption. - An IMF pilot project supports coordinated measures to address these risks. - Ongoing improvements to AML/CFT framework but additional technical assistance needed to strengthen legislation and effectiveness. - Authorities encouraged to consider developing a KYC utility to reduce costs and improve AML/CFT compliance in the remittance sector. _International Monetary Fund staff report (cr17112) — content as provided in the source._ ### 39. Financial stability indicators point to a generally sound banking system, although ### 39. Financial stability indicators point to a generally sound banking system, although vulnerabilities persist in the PFIs ### Financial stability and supervisory progress - Financial stability indicators point to a generally sound banking system, although vulnerabilities persist in the PFIs. - Good progress has been made in implementing FSAP recommendations. - Continued efforts will support financial sector stability, including: - amendments to the Financial Institutions Act, - upgrades to prudential statements, - increased capacity, - updating the framework for single borrower limits. - Enhanced data quality and coverage along with: - development of stress testing analysis, and - preparation of notes on financial stability will sharpen financial stability analysis and help build capacity to address risks. ### Fiscal policy, public debt, and contingent liabilities - Continued efforts are needed to reduce the public sector debt to mitigate the vulnerabilities from natural disasters. - Recent improvement in expenditure control should be sustained. - Expenditure reviews in health and education can support improved efficiency. - Revenue mobilization efforts are needed to address a projected downward trend in revenues as a percent of GDP and should focus on: - broadening the tax base, - improving compliance, and - streamlining tax concessions and credits. - Adherence to the medium-term debt strategy, including a minimum 35 percent concessional component for new borrowing, will support fiscal sustainability. - Ongoing efforts to manage contingent liabilities, including reform of SOEs and PFIs, will reduce Samoa’s fiscal risks. ### Monetary policy, exchange rate, and reserves - The monetary policy stance is appropriate and the exchange rate is broadly in line with fundamentals. - International reserves trended downwards during 2016 and although this trend reversed in recent months, reserve developments merits close monitoring. - Macroeconomic policies should be adjusted if the reserve position deteriorates; however, the weak monetary transmission mechanism implies that fiscal policy would bear most of the burden of adjustment. ### Structural reforms and growth - Accelerated structural reforms will help Samoa meet its development goals, as outlined in the SDS. - Continued efforts to enhance the resilience of public infrastructure to natural disasters will support sustainable growth by: - reducing the costs of natural disasters, and - encouraging private sector activity. - Private sector activity can be further boosted by: - sustained efforts to improve the business climate, - increasing access to credit, and - addressing skill mismatches and shortages. - Reform of SOEs would: - raise growth prospects, - reduce drain on the budget, and - alleviate financial sector vulnerabilities. ### Staff recommendation - The staff recommends that the Article IV consultation with Samoa be held on the standard 12-month cycle. *SAMOA — INTERNATIONAL MONETARY FUND* ### Box 1. Implementing the Enhanced General Data Dissemination System (eGDDS) ### Box 1. Implementing the Enhanced General Data Dissemination System (eGDDS) ### Rationale and context - The e-GDDS was established in May 2015 as an enhancement of the General Data Dissemination System. - The e-GDDS refocuses on data dissemination to support transparency, encourage statistical development, and strengthen synergies between data dissemination and surveillance. - Staff analysis has shown that data transparency reforms reduce borrowing costs and enhance resilience of the economy (Choi and Hashimoto, 2017). ### Samoa’s commitment and timeline - Samoa is to be the first country in the Asia and Pacific region to implement the e-GDDS. - The Samoan authorities committed to publish in April 2017 key macroeconomic data in a new national summary data page (NSDP) under e-GDDS to support surveillance and improve data transparency. - The Samoan authorities committed to publish 13 of the 15 core e-GDDS data categories in April 2017. - The remaining two core data categories (external debt and international investment position) will be published later in 2017. - Authorities have opted to disseminate supplementary datasets, including direction of trade, labor market, population, financial soundness indicators (FSIs), sectoral financial statements for FSIs, and financial access survey. ### Core content emphasis for surveillance - The e-GDDS recommends dissemination of 15 data categories considered essential for analysis and monitoring of macroeconomic and financial conditions. - These data categories are aligned with the Table of Common Indicators Required for Surveillance (TCIRS) to integrate and leverage e-GDDS and TCIRS data provision. ### National Summary Data Page (NSDP): features - The NSDP is a national “data portal” that assembles links for e-GDDS recommended data categories and supplementary datasets for a country. - The links provide access to time series in formats readable by humans and computers. - Data are usually compiled by multiple agencies, but dissemination and regular updating are coordinated by one designated agency. ### NSDP: benefits for users and agencies - The NSDP enables data users to: - browse data via link to online datasets in time series format or as graphics; - download data in SDMX, a format used for machine-to-machine data sharing; - access metadata describing a country’s practice for data compilation and dissemination. - The NSDP: - reduces reporting burden for data reporters to multiple agencies via posting data in one data portal in a standardized format; - allows data managers to control data updating processes; - makes processing easier for international/regional organizations and other institutional data users due to dissemination in machine readable format; - provides links to data in a format that the general public can easily browse as time series, view as graphs, or download. ### Relevant numeric and comparative indicators (selected from figures) - e-GDDS: 15 data categories recommended; Samoa to publish 13 of the 15 core categories in April 2017. - e-GDDS established: May 2015. - Remittances stand at 18 percent of GDP (figure caption). - Average remittance cost is high, well above the G20 objective of 5 percent (figure caption). *Source: Box 1. Implementing the Enhanced General Data Dissemination System (eGDDS), cr17112.* ### 1. No Poverty ### 1. No Poverty ### Priority areas, key outcomes, and SDG mapping - Priority Areas (four pillars): - 1. Economic - 2. Social - 3. Infrastructure - 4. Environment - Key outcomes with corresponding SDGs: - Agriculture and fisheries productivity increased — 2. Zero Hunger - Exports products increased — 9. Industry, Innovation, and Infrastructure - Tourism development and performance improved — 8. Decent Work & Economic Growth - Participation of private sector in development enhanced — 12. Responsible Consumption and Production - A healthy Samoa and well-being promoted — 3. Good Health and Well-being - Quality education and training improved — 4. Quality Education - Gender equality — 5. Gender Equality; 10. Reduced Inequalities; 16. Peace, Justice, and Strong Institutions - Access to clean water and sanitation sustained — 6. Clean Water and Sanitation - Transport systems and networks improved — 9. Industry, Innovation, and Infrastructure; 11. Sustainable Cities and Communities - Improved and affordable country wide ICT connectivity — 9. Industry, Innovation, and Infrastructure - Quality energy supply — 7. Affordable and clean energy - Environmental resilience improved — 14. Life Below Water; 15. Life on Land - Climate and disaster resilience — 13. Climate Action - Social institutions strengthened — 8. Social institutions strengthened (listed under Priority Areas) ### Risk Assessment Matrix — key risks, likelihood, impact, and policy recommendations - Natural disasters - Likelihood: High - Findings: - The probability of Samoa being struck by a natural disaster is about 25 percent each year. - The annual average damage and losses are estimated at over 12 percent of GDP. - The 2009 tsunami is estimated to have added 10 percent of GDP to debt and the 2012 cyclone added an additional 5 percent of GDP. - Limited fiscal space and financial sector vulnerabilities could limit policy space to support recovery. - Expected impact: High (widespread damage; historically increased public debt) - Policy recommendations: - A growth friendly fiscal consolidation will help replenish buffers. - Address financial sector vulnerabilities through enhanced supervision and regulation. - Reform of the PFIs and SOEs will reduce risks from contingent liabilities. - Reduced financial services by correspondent banks - Likelihood: High - Findings: - Spillovers from withdrawal of correspondent banking services could have a sizeable impact. - Continued withdrawal of services to MTOs would increase remittance sector fragility and could disrupt remittances. - Expected impact: High (lower remittances → lower consumption; could widen current account deficit; higher remittance costs hurt vulnerable populations; closure of MTO bank accounts could increase hand-carry of cash undermining AML/CFT compliance) - Policy recommendations: - Upgrade effectiveness of the AML/CFT regime, including implementing and strengthening the national strategy for AML/CFT. - Increase AML/CFT capacity through additional training and technical assistance. - Increase on-site inspections of MTOs. - Consider establishment of a KYC utility. - Address risks from the offshore financial sector. - Weaker-than-expected global growth - Likelihood: High/Medium - Findings: - Low productivity growth in advanced economies, particularly Japan and the U.S., and key emerging markets would reduce export tourism receipts and negatively impact GDP growth. - Expected impact: Medium/High (decline in exports, tourism earnings, and remittances would worsen current account balance; reduce fiscal revenue; weaken reserves buffer) - Policy recommendations: - Implement a growth friendly fiscal consolidation to replenish buffers. - Accelerate structural reforms to support private sector development and diversify economic activity. - Financial stress in public financial institutions (PFIs) - Likelihood: Medium - Findings: - PFIs play an important role but asset quality is poor; natural disasters increase probability of financial stress in PFIs. - Expected impact: High (limited spillovers to banks expected; public finances would deteriorate; credit to the economy impeded) - Policy recommendations: - Strengthen financial operations of PFIs. - Enhance transparency and governance of PFIs. - Fully cost any policy lending by PFIs. Notes on risk assessment methodology: - “Low” indicates probability below 10 percent, “medium” probability between 10 and 30 percent, and “high” a probability of 30 percent or more. The RAM reflects staff views as of discussions with the authorities; risks may interact and materialize jointly. ### Anti-Money Laundering and Counter-Terrorist Financing (AML/CFT) — findings and recommended high-priority actions - Overview and assessment: - Samoa improved its AML/CFT framework since 2006 through the Money Laundering Prevent Act 2007 and subsequent regulations in 2009. - In 2015, the Asia Pacific Group on Money Laundering (APG) assessed Samoa under the revised 2012 FATF standard and found significant shortcomings: - Rated low or moderately effective in 10 out of 11 immediate outcomes assessing effectiveness. - Non-compliant or partially compliant with more than half of the 40 FATF Recommendations. - Authorities were encouraged to pursue substantial strategic and operational improvements. - Money laundering risks (key findings) - International (offshore) sector: - Presents main money laundering risk due to relative anonymity, concerns about transparency of ownership and control information, complexity, and tax-exempt status. - At the end of 2014, there were 34,000 international business companies (IBCs), 155 international trusts, and 7 international banks. - Samoan IBCs are created only through Samoan trust and company service providers (TCSPs) which capture beneficial ownership information when the IBC is created. - International trusts are domiciled in Asia, including Hong Kong SAR, China, and Singapore. - TCSPs have limited ability to detect and report suspicious transactions; supervision of TCSPs is limited in depth and scope. - Beneficial ownership information is not publicly available, except with permission of the client. - Strengthened provisions implemented at the end of 2015 should significantly increase TCSPs’ capacity for ongoing due diligence. - Money Transfer Operator (MTO) sector: - Largely responsible for channeling remittances; globally considered high-risk for ML/TF. - Large MTOs have implemented reasonably robust customer identification and verification; level of suspicious-transaction-reporting is lower than expected given sector size. - Government does not require financial institutions to include full beneficiary information with cross-border wire transfer messages; ordering institutions must obtain and retain originator information. - Cross-border movement of cash: - Border declaration regime is broadly sound technically; Customs, FIU, and Immigration coordinate on border currency reports (BCRs) but further coordination (including police) would improve monitoring/investigation. - Domestic banking system: - ML risks arise mainly because of its materiality; domestic proceeds-generating crimes appear to be low. - High-priority recommended actions (numbered as in source) 1. Offshore Sector: - Amend International Companies Act, Trust Act, Companies Act, Money Laundering Prevention Act and regulations to address technical deficiencies and issue updated guidance. - Increase scope and intensity of AML/CFT supervision of the offshore sector, including international banks and insurance companies and TCSPs. - Enhance accuracy and timeliness of beneficial ownership information held by TCSPs for IBCs. 2. AML/CFT Supervision: - Ensure AML/CFT supervision of financial institutions (banks and MTOs) and DNFBPs is risk-based. - Strengthen frequency and intensity of on-site inspections of key financial sectors. - Increase engagement by supervisors with financial institutions and Designated Non-Financial Business Professions (DNFBPs). 3. Enhanced Implementation: - Strengthen resources of the CBS and FIU to undertake AML/CFT supervision. - Pursue ML investigations as a matter of policy and pursue confiscation action in more serious/complex cases. - Improve effectiveness of the cross-border declaration system. ### Implementation of Key FSAP Recommendations — status and actions - Cross-cutting priorities - Improve quality and coverage of data: CBS to collect granular data on banks, PFIs, insurers, and other intermediaries for prudential and financial stability analysis. - Ongoing: CBS compiles Financial Soundness Indicators for commercial banks and since 2016 Q1 has submitted to IMF’s IFS database. CBS is compiling FSIs for PFIs and other financial institutions. - Upgrade regulatory and supervisory frameworks to modern standards, including amending Financial Institutions Act and Central Bank Act to support corrective actions and resolution. - Ongoing: CBS has received TA; draft legislation expected to be finalized by end-2017. - CBS capacity building and staffing for financial oversight remains constrained by budgetary limits. - Banking supervision and regulation - Conduct regular on-site inspections and in-depth assessments (including asset quality reviews). - Ongoing: In-depth assessments and on-site inspections prioritized since 2015; another round scheduled to start March 2017. - Upgrade supervisory guidance to banks on risk management and NPL write-offs. - Ongoing: PFTAC TA mission scheduled for April 2017 to assist with upgrading supervisory guidance. - PFIs — supervision and regulation - CBS to produce periodic FSIs for PFIs and ensure proper IFRS accounting for loan classification, NPLs, and provisioning. - Ongoing: CBS produces FSIs for PFIs; dialogue ongoing regarding IFRS harmonization versus supervisory requirements. - CBS to issue and upgrade prudential regulations for PFIs. - Ongoing: PFTAC TA mission scheduled for April 2017; Prudential guidelines regarding UTOS were issued January 2015. - CBS to start on-site inspections of PFIs. - Status: On-site inspections completed for Development Bank of Samoa (2015), UTOS and SNPF during 2016; another round scheduled to start in second half of 2018. - Offshore bank regulation and supervision - Enhance operational independence of Samoa International Finance Authority (SIFA) to supervise international banks and remove conflict between promotional and supervisory roles. - Ongoing: Internal restructuring planned to isolate marketing from compliance/registration; SIFA has begun using a new brand for promotion. - PFIs — governance - Government to reform mandates and governance of PFIs for defined policy objectives based on cost-benefit assessments, ensuring efficient operations. - Ongoing: CBS encourages DBS and other PFIs to clearly calculate and articulate costs associated with government-sponsored policy changes. - Crisis preparedness and systemic stability - Adopt full set of enforcement and resolution instruments; review of Financial Institutions Act (FIA) 1996 is underway with resolution provisions drafted. - Create Emergency Liquidity Assistance scheme and operational framework. - Status: No substantial changes to CBS facilities since FSAP; review pending. - CBS and Ministry of Finance to create financial stability and contingency planning committees. - Ongoing: IMF TA has supported CBS to outline a financial stability report structure; once operational, CBS will liaise with MOF on committee recalibration. - CBS to analyze systemic risks, including stress testing and macro-financial mapping. - Ongoing: CBS seeking TA from IMF/PFTAC to establish a stress testing framework appropriate for Samoa. - Central bank policies and operations - CBS to unwind lending to DBS and SHC. - Status: Last CBS credit line facility lending approved November 2015; current policy is not to approve further credit lines. - Access to finance - Focus on indirect measures: credit bureau, economic use of customary land, complete setting up of personal property registry (PPR). - Status: CBS intends to combine credit bureau with KYC utility operated by CBS. PPR implemented; registry administered by Ministry of Commerce, Industry and Labour became operational in March 2017. - Work ongoing with ADB project on economic use of customary land. - Insurance, payment systems, and infrastructure - CBS to develop insurance supervisory strategy and capacity building plans; additional technical assistance requested. - CBS to implement the new National Payment Systems (NPS). - Status: NPS Act approved in 2015; two of four corresponding regulations drafted and submitted to Attorney General’s office. Automated Transfer System procured and should be installed with commercial banks within first half of 2017. ### Public Financial Institutions (PFIs) — structure, risks, and policy directions - Structure and recent developments - PFIs expanded rapidly after the 2009 and 2012 natural disasters, moving into areas competing with commercial banks; asset quality deteriorated. - PFIs make up a substantial part of the financial sector. Largest PFIs by assets: Samoa National Provident Fund (SNPF) and Development Bank of Samoa (DBS); UTOS and Samoa Housing Corporation (SHC) have been expanding rapidly. - Key characteristics and vulnerabilities - Asset quality deterioration followed 2009 and 2012 disasters; lending concentrated in tourism which was hard hit; policy directed lending likely contributed to deterioration. - Direct linkages between commercial banks and PFIs are relatively low, limiting systemic risk via banks; commercial banks receive sizeable deposits from PFIs but lend little to PFIs. - Fiscal and macroeconomic linkages are significant: - Explicit government guarantees along with on-lending arrangements amount to 18.8 percent of GDP, implying large fiscal risks associated with PFIs. - Any disruption in PFIs could reduce credit availability to households and SOEs. - Individual PFIs — profiles and issues - Samoa National Provident Fund (SNPF) - Established 1972 as compulsory retirement savings scheme with a minimum 5 percent contribution paid both by employees and employers. - Covers 78 percent of the formally employed population; most Samoans do not contribute. - SNPF concentrates on loans to members (natural collateral in contributions) and offers other commercial and community loans, including to other PFIs. - Less than five percent of investments are overseas. - About 60 percent of assets comprise loans to members. - Loans to members provided for up to 50 percent of contributions with most members borrowing their full entitlement. - Development Bank of Samoa (DBS) - Established 1974 to provide development assistance to agriculture and SMEs. - On-lends funds from international institutions and availed credit lines from the central bank as part of policy response to natural disasters. - On-lending of concessional loans is a significant portion of its portfolio; portfolio heavily concentrated in tourism; portfolio quality seems substantially impaired. - Unit Trust of Samoa (UTOS) - Open-ended private unit trust established in 2010 to provide opportunities for small investors to participate in privatized SOEs. - In absence of further privatizations, UTOS diversified into financing vehicle for SOEs: issues capital notes to SOEs that borrow from the Trust, backed by a limited general government guarantee. - By intermediating funds among SOEs and maintaining leveraged position, Trust has generated high returns to unit holders. - FSAP recommended UTOS could be transformed into an unleveraged mutual fund or a policy-lending bank. - Samoa Housing Corporation (SHC) - Established 1989 to facilitate access to housing for modest incomes; funded by the central bank and guaranteed by the government. - Policy directions for PFIs (from source) - Focus on reducing contingent liability risks associated with PFIs and redesign their role to support private financial markets. - Specific recommendations: - DBS should continue efforts to re-orient focus to agriculture sector and development objectives; costs associated with policy lending decisions should be clearly articulated. - SNPF should gradually reduce its personal lending, including lending against members’ contributions. - UTOS could be transformed into an unleveraged mutual fund or a policy-lending bank (in line with FSAP recommendations). *Source: Strategy for the Sustainable Development of Samoa.* ### Annex V. External Sector Assessment ### Annex V. External Sector Assessment ### Current account developments - The external position is assessed to be broadly in line with fundamentals and desirable policy settings. - Baseline projection (no natural disasters): the current account deficit is expected to gradually narrow to about 4.5 percent over the medium term. - Natural disasters: - Can be expected to widen the current account deficit. - Would also increase aid and capital transfers, implying a larger current account deficit norm during disaster recovery periods. - EBA-lite results: - The norm for Samoa is estimated to be -7.4 percent. - Projected current account deficit for 2016/17 is -6.1 percent. - Much of the misalignment in the EBA-lite current account equation reflects the unexplained residual; overall this equation does not fit Samoa very well. - External sustainability and debt considerations: - The external sustainability approach, based on maintaining net foreign assets at the 2015 level, does not suggest a current account gap. - The DSA indicates that Samoa is at high risk of debt distress, implying the current account deficit will need to narrow further to help ensure debt sustainability. - Based on a targeted reduction in the debt-to-GDP ratio to 40 percent, the external sustainability approach yields: - a current account norm of -3.9 percent, and - a current account gap of -0.6 percent. ### Exchange rate assessment - The EBA-lite REER equation suggests the REER is broadly in line with fundamentals. - Nominal and real effective exchange rates: - The Tala appreciated against the U.S. dollar during 2016, reversing the depreciation in the previous year. - The nominal and real effective exchange rates depreciated slightly during 2016. - Terms of trade and tourism: - A tourism-based index suggests the terms of trade improved gradually since 2012 (including when adjusting for changes in the price of imported fuels); this trend reversed during 2016. - EBA-lite REER misalignment: - Misalignment based on October 2016 EBA-lite indicates a REER misalignment of 1.2 (as reported in the EBA-lite Real exchange rate equation). ### Reserve adequacy - Reserve levels and recent trend: - Since mid-2015 reserves have been declining; reserves increased in December 2016 and in January. - At end-January 2017, reserves were US$108million or about 3.2 in months of prospective imports. - ARA metric and optimal range: - The ARA metric for credit constrained economies suggests an optimal level of reserves between 2.7 to 4 months of imports, depending on the assumed long-run opportunity cost of holding reserves. - Policy/contingency recommendations: - Given the high risk of natural disasters, additional reserves could help increase resilience. - Contingency planning in the form of pre-negotiated borrowing from multilateral donors can also serve as a buffer to natural disasters but should be evaluated in the context of an overall debt management strategy. *Annex V. External Sector Assessment* ### 2012. The Public Trust Office and the Samoan Shipping Services are either technically insolvent or have negative ### cr17112 - 2012. The Public Trust Office and the Samoan Shipping Services are either technically insolvent or have negative ### SOE financial position and risks - The Public Trust Office and the Samoan Shipping Services are either technically insolvent or have negative shareholders’ equity. - UTOS was formed in 2010 by the government and is managed by UTOS (Management) Limited, a SOE. - Total loans to SOEs and government-controlled entities were ST76.5 million in 2016, representing 84 percent of total liquid financial assets. - Loans to SOEs are guaranteed by the government. - Examples of SOEs mentioned: Samoa Housing Corporation, Public Trust Office, and Samoa Post Limited. - Contingent liabilities from government guarantees and on-lending to public enterprises from public financial institutions (PFIs) contribute to a heightened overall risk of public debt distress. ### SOE performance metrics (FY2010–FY2014) - Average Return on Equity of all SOEs: charted across countries including Singapore, Solomon Islands, Mauritius, Tonga, Kiribati, Vanuatu, Fiji, PNG, Samoa, New Zealand, Marshall Islands, Jamaica (values shown in the source figures; negative and positive percent ranges depicted). - Average Return on Assets of all SOEs: presented alongside Return on Equity in the source figure. - Average Government Transfers to SOEs, FY2010 - FY2014: charted in percent of GDP across countries including Marshall Islands, Jamaica, Samoa, Vanuatu, Mauritius, PNG, New Zealand, Fiji, Solomons, Singapore, Tonga, Kiribati (values are shown in the source figures). ### SOE governance and monitoring - The SOE Monitoring Division within the Ministry of Finance previously performed the SOE ownership-monitoring role. - Responsibilities (as described) include: - managing the recruitment and selection process of Board Directors and evaluating their performance; - monitoring performance and adherence to corporate plans; - ensuring regular financial reporting; - reviewing government grants. - The enactment of the Competition and Consumer Act in 2016: - requires ministers to consider the competitive impact of their decisions on the provision of goods and services by SOEs; - will encourage competitive tendering of government contracts for CSOs; - will restrict subsidies to SOEs; - will deter anticompetitive collusion and abuse of market power. - The framework, building on earlier reforms, is expected to have a strong positive impact on SOE performance. ### Fund relations and financial position (As of March 31, 2017) - Membership Status: Joined: December 28, 1971; Article VIII. - Quota and holdings (General Resources Account): - Quota: 16.20 SDR Million 100.00 percent quota. - Fund holdings of currency: 14.37 SDR Million 88.69 percent quota. - Reserve position in Fund: 1.84 SDR Million 11.38 percent quota. - SDR Department: - Net cumulative allocation: 11.09 SDR Million 100.00 percent allocation. - Holdings: 9.18 SDR Million 82.75 percent allocation. - Outstanding Purchases and Loans (SDR Million; Percent Quota): - RFC Loans: 5.80 SDR Million 35.80 percent quota. - ESF RAC loan: 3.48 SDR Million 21.48 percent quota. - Latest Financial Arrangements (Stand-by): - Stand-by approved 7/9/1984 to 7/8/85: Amount Approved (SDR million) 3.38; Amount Drawn (SDR million) 3.38. - Stand-by approved 6/27/1983 to 6/26/1984: Amount Approved (SDR million) 3.38; Amount Drawn (SDR million) 3.38. - Overdue Obligations and Projected Payments to Fund (SDR million; forthcoming by year): - 2017 Principal: 1.16; Charges/interest: 0.00; Total: 1.16. - 2018 Principal: 1.74; Charges/interest: 0.01; Total: 1.75. - 2019 Principal: 2.32; Charges/interest: 0.01; Total: 2.33. - 2020 Principal: 1.16; Charges/interest: 0.01; Total: 1.17. - 2021 Principal: 1.16; Charges/interest: 0.01; Total: 1.17. ### Exchange rate and monetary framework - The exchange rate of the tala is pegged to a trade and payments weighted basket of currencies, adjustable within a ±2 percent band. - The basket comprises currencies of New Zealand, Australia, the United States, and Euro countries. - The exchange rate regime is free of restrictions and multiple currency practices. - Safeguards assessment (June 2014) found concerns over CBS autonomy and governance, audit quality, and staff capacity; steps taken include a new central bank law in 2015 and calls to strengthen external audit quality and oversight of audit functions. ### Technical assistance and external partnerships - PFTAC assistance (recent years and FY2018 plans): - Volume of TA planned for Samoa in FY2018 will nearly triple from FY2017 (up from 77 to 245 field days), constituting 9.5 percent of PFTAC resources. - PFTAC support areas: macro-fiscal planning and analysis, revenue administration, statistics, PFM reforms, cash management, accounting and reporting, fiscal oversight of SOEs, medium-term budgeting, revenue forecasting, SERF model improvements, GDP rebasing and new GDP by expenditure measure, BoP and GFS improvements, on-site bank examination program, prudential standards review. - Specific PFTAC outputs: assistance with rebasing GDP by production in 2016; development of GDP by expenditure (expected completed in 2017); resident GFS advisor appointment in March 2017; on-site bank examinations undertaken August 2015, November 2015, and May 2016; mission planned April 2017 for prudential standards guidance. - World Bank engagement (as of March 21, 2017): - RPF focuses on agriculture and tourism, employment and education outcomes, disaster/climate resilience, and macroeconomic management and infrastructure. - Active portfolio: 9 projects with total commitment of US$139 million. - IDA Lending Operations table (Current projects total): Original Amount Total US$138.8 million; Undisbursed Balance US$102.6 million (project-level details provided in the source). - Areas: post-disaster recovery, budget support (Second Fiscal & Economic Reform Operation 2017), climate resilience, ICT (Pacific Regional Connectivity Program: Phase 3), agriculture, aviation. - IFC investment examples: Digicel (market liberalization and increased competition), tourism sector support, expansion of banking services for SMEs. - Asian Development Bank (As of March 15, 2017): - Since 1966: $186.19 million in loans, $127.97 million in grants, and $32.16 million in TA provided to Samoa. - One loan, 6 grants, and 1 TA project active at year-end 2016. - COBP 2017-2019 aligned with Samoa’s Strategy for the Development of Samoa (SDS). - Notable projects: Samoa Submarine Cable Project ($25 million grant approved November 2015 with co-financing), ports master plan completed 2016, Fiscal Resilience Improvement Program (Subprogram 1) $5 million grant approved December 2016. - ADB loans and disbursements 2011–16: Loan Approvals (2011) 10.82; Loan Disbursements by year: 2011 9.8, 2012 17.9, 2013 4.3, 2014 2.03, 2015 1.1, 2016 0.0; Cumulative loan amount available shown for 2011–2016; Net loan amount undisbursed by year: 17.1, 9.7, 5.3, 3.1, 2.0, 2.0. ### Statistical issues and data adequacy (As of March 2017) - General: Data provision has some shortcomings but is broadly adequate for surveillance. Core macroeconomic and monetary data are regularly reported to the IMF and published on official websites. - National Accounts: - GDP compiled quarterly, predominantly using the VAGST data. - GDP recently rebased from 2002 to 2009 constant prices. - One third of GDP is “non-monetary” and difficult to measure precisely. - Experimental estimate of GDP by expenditure is being refined and hasn’t been released yet. - Price statistics: CPI compiled monthly (February 2016=100). A quarterly import price index published with limited coverage (chapters 01-27 HS). - Government Finance Statistics: - Samoa migrated GFS data from GFS 86 to GFSM 2001 format. - Authorities began publishing improved data in 2013 and submitting data for IMF publications for the first time. - Gaps remain: general government not yet compiled or published; instrument detail and consistency issues persist. - Monetary and Financial Statistics: - Samoa reports monetary data regularly; Central Bank and other depository corporations submitted in SRF format. - Samoa does not report data on other financial corporations (OFCs); in November 2014 authorities requested STA assistance to compile SRFs for OFCs. - Financial Sector Surveillance: Samoa began reporting Financial Soundness Indicators to the IMF in March 2016. - External sector statistics: - Quality overall poor due to frail data collection framework and limited access to source data. - Omission of cross-border transactions and positions of offshore enterprises limits coverage. - Samoan non-bank enterprises hold at least US$ 4.6 billion according to the BIS (Locational Banking Statistics database). - CBS produces and disseminates quarterly balance of payments following BPM6 but restricted to main aggregates and with poor coverage. - The IIP is not currently disseminated but SBS is expected to provide IIP data to the Fund during 2017. - Participation in data standards: - Samoa is a participant in the GDDS since September 2012 and eGDDS will launch in April 2017. - No data module ROSC has been conducted in Samoa. ### Debt sustainability and natural disaster risk - The DSA update shows that under current policies Samoa faces a high risk of debt distress, based on an assessment of public external debt. - In the 2015 Article IV report Samoa was assessed as moderate risk of debt distress; the change to high risk is driven by a methodology change to account for the impact of natural disasters in the near term and medium-to-long term. - Methodological change: incorporate the average annual impacts of natural disasters on growth and on fiscal and external debt, and assess near-term natural disaster shock impacts. - The DSA uses a 5 percent discount rate. - Samoa is rated as a strong performer for its policies and institutions for the purposes of the IMF-World Bank low-income country DSA framework. - Fiscal targets emphasized to keep debt manageable: - Medium-term fiscal debt target: 50 percent of GDP. - Long-term fiscal debt target: 40 percent of GDP. - Structural reforms to reduce the impact of natural disasters on average growth rates can contribute to debt sustainability. *Prepared by the Asia and Pacific Department (In Consultation with Other Departments); April 13, 2017.* ### 1. Rapid fiscal expansion and borrowing following the global financial crisis and natural ### 1. Rapid fiscal expansion and borrowing following the global financial crisis and natural ### Debt stock and recent fiscal outturn - Rapid fiscal expansion and borrowing following the global financial crisis and natural disasters in 2009 and 2012 have left Samoa with a large stock of debt. - The 2015/16 fiscal deficit outturn of 0.4 percent of GDP has helped alleviate risks from elevated debt. - Recovery and reconstruction after the 2009 tsunami and 2012 cyclone were largely financed by borrowing. - Total public debt increased to 57.8 percent of GDP at end-2015, which was well above the government’s threshold of 50 percent. ### Risk rating and methodology - The risk rating is increased to high, reflecting the potential impact of natural disasters on Samoa’s fiscal position over the medium term. - The methodology follows the 2016 IMF Board Paper on “Small States’ Resilience to Natural Disasters and Climate Change”: medium-term projections are adjusted to account for the average impact of natural disasters on growth and the fiscal and current account deficits, with significant impact on debt-dynamics. - The 2015 DSA lowered the risk rating for debt distress for Samoa from high to moderate, reflecting an increase in the discount rate and rebasing of GDP. The assessment of moderate debt distress was based on the external debt assessment, but the overall risk of public debt distress was found to be higher due to contingent liabilities. - Emphasis on the importance for the authorities to adhere to consolidation plans to reach their debt target. ### Structure of debt and debt-service outlook - Much of Samoa’s debt is long-term and concessional. - Approximately 60 percent of debt is owed to multilateral agencies and 40 percent to bilateral partners. - Total debt service requirements are projected to increase over the next few years to about 2.7 percent of GDP, due largely to increasing principal repayments. - Although debt service is low relative to projected foreign reserves and government revenue, debt service requirements have increased significantly in recent years. ### Contingent liabilities and SOE exposure - The central government’s net domestic debt is small, but domestic liabilities in SOEs pose a potential risk. - The government issues guarantees to its SOEs, and has five on-lending arrangements active with the Electric Power Corporation (EPC), Development Bank of Samoa (DBS) and Unit Trust of Samoa (UTOS) as of end-2015. - Contingent liabilities related to SOEs and PFIs are estimated at 18.8 percent of GDP (government guarantees of 8.8 percent and on-lending to SOEs of 10 percent). ### Macroeconomic assumptions (baseline and disaster adjustments) - Real GDP growth is projected at 2.1 percent on average over 2017-2022 in the baseline scenario, which assumes no natural disasters. - To account for the average impact of natural disasters, the growth rate is lowered by 1.3 percentage points after 2022. - Inflation is expected to stabilize at around 3 percent over the medium term. - The current account widened to -6.1 percent in FY2015/2016 due to a deterioration of the income account and lower charitable remittances; the deficit is projected to remain below 5 percent of GDP between 2017-2022 in the baseline scenario. - To account for the average annual impact of natural disasters, the current account deficit is widened by 1.5 percentage points after 2022. - The primary fiscal balance is estimated to be in balance between 2017-2022 but widens by 1.5 percentage points after 2022 to account for the average annual impact of natural disasters. - New external borrowing will be required to finance the fiscal deficit. Continued eligibility for concessional borrowing from multilateral development partners is assumed for the forecast period. - The grant element of new loans is 40 percent on average. - Alternative assumption: if borrowing from the World Bank is at full credit terms, then the breach in the threshold occurs about 5 years earlier in 2028. - The 5 percent discount rate is used to calculate the net present value (NPV) of external debt. ### Natural disasters: exposure, historical impacts, and modeling approach - Samoa is ranked as the most vulnerable to natural disasters among small states in the 2016 IMF Board Paper. - The probability of Samoa being struck by a natural disaster is about average for Pacific island countries with a probability of about 25 percent each year. - Annual average damage and losses are over 12 percent of GDP—the highest in the region. - Cyclone Evan caused total damage and losses of approximately US$210 million (about 30 percent of annual GDP). - Literature findings on the macroeconomic impact of natural disasters are mixed: - Laframboise and Boileau (2012) estimate growth drops by an average 0.7 percent in the first year after a disaster, with a cumulative output loss three years after of about 1.5 percent, and a drop in per capita real GDP of 1 percent on average in low-income countries. - Lee et al (2017) estimate that for the Pacific islands, the growth rate declines by 4 percent in the disaster year, with a further decline of 0.5 percent in the following year. - Cabezon et al found that for the Pacific islands, trend growth over 1980-2014 was 0.7 percentage point lower than it would have been in the absence of natural disasters. - Lee et al estimate natural disasters increase public debt by 14.4 percent on average in the disaster year. - Synthetic control analysis suggests the 2009 tsunami increased Samoa’s public debt by 10 percent of GDP and the 2012 cyclone increased debt by a further 5 percent. - DSA treatment: - From 2016-2022 staff’s projections assume no natural disasters to avoid complicating near-term policy discussions. - Baseline projections after 2022 take into account the average annual impact of natural disasters by adjusting downwards the average growth rate and increasing the current account and fiscal deficits. - Given high frequency and severity in Samoa, the average growth rate was adjusted down by 1.3 percent (to 0.8 percent compared with a non-disaster potential growth rate of 2.1 percent and the historical average of 0.9 percent) and the current account and fiscal deficits are estimated to widen by 1.5 percentage points. ### External debt sustainability findings - In the baseline scenario the external debt-to-GDP+remittances ratio increases to over 46 percent by 2034, breaching the indicative threshold. - By the end of the sample the ratio is 11.1 percentage points above the threshold by 2037. - In the baseline scenario the average growth rate is 0.8 percent after 2022, compared with a historical average of 0.9 percent. - The deviation from the historical scenario primarily reflects a lower projected change in the GDP deflator in U.S. dollar terms. - Stress tests indicate vulnerability: - The PV of debt-to-GDP and debt service-to-revenue ratios are vulnerable to exogenous shocks. - A one-time depreciation shock (the most extreme shock scenario) leads to a protracted and significant breach of the PV of debt-to-GDP ratio. - A severe natural disaster shock in 2018 leads to a breach of the PV of debt-to-GDP ratio after 2024. - Measured by debt service to revenue and debt service to exports ratios, Samoa’s debt service burden increases significantly when the average impact of natural disasters is incorporated into the baseline. - Under the most extreme shock scenario, the threshold for debt service to exports is breached starting in 2027. - The debt service to revenue ratio is breached towards the end of the projection period under the most extreme shock. - The debt service to revenue ratio also breaches the threshold following a one-time depreciation shock at the end of the projection horizon. ### Public debt sustainability findings - Public sector debt rises in the baseline scenario but is stable in the historical scenario. - The baseline includes government guarantees and on-lending to SOEs of about 8.8 percent and 10 percent as a share of GDP respectively; these are added to the debt-to-GDP ratio in 2016. - An extreme shock drives up the PV of debt-to-GDP and debt service-to-revenue ratios, leading to a sustained breach of the PV of debt-to-GDP ratio and a protracted elevation of the debt service to revenue ratio. ### Policy recommendations and conclusions - The DSA highlights the central role of fiscal policy in ensuring debt sustainability. - With the public debt portfolio dominated by external loans, exposure to foreign currency risk remains high. - Key policy recommendations: - Should Samoa fail to consolidate its fiscal position and experience natural disasters, public debt would increase rapidly and become unsustainable, leading to a breach in the PV of debt-to-GDP ratio. - Future external borrowing should be limited to loans with at least a 35 percent grant element, and that support projects with a return sufficient to cover the interest and repayment costs. - Improving resilience to natural disasters and reform of SOEs can help reduce Samoa’s debt burden and should be part of the overall debt management strategy. *International Monetary Fund. CR17112 section on Samoa DSA.* ### 16. The authorities recognize the risks posed by high debt levels and are committed to ### 16. The authorities recognize the risks posed by high debt levels and are committed to ### Authorities' fiscal and debt-management commitments - The government has put in place a credible fiscal consolidation plan to keep Samoa’s debt burden manageable. - Commitments under the medium-term debt management strategy: - Restrict the level of public debt to less than 50 percent of GDP. - Ensure that loans contracted are highly concessional, with a grant element of at least 35 percent. - Effectively manage SOEs guarantees. ### Debt dynamics and stress-test framework (high-level) - Debt projections and stress tests cover 2017-2037 and include a set of alternative scenarios and bound tests. - The most extreme stress tests referenced correspond to: - One-time depreciation shock (figures a, d, f in the report). - Terms shock (figures c and e in the report). - Severe Natural Disaster 2018 is included as a scenario/threshold in several charts. ### Key baseline indicators and projections (selected figures from tables and charts) - External debt (nominal), percent of GDP: - 2014: 51.8 - 2015: 55.3 - 2016: 50.7 - 2017: 50.8 - 2022 average (2017-2022): 64.8 - 2027: 86.8 - Change in external debt (percent of GDP): - 2017: 0.0 - 2018: 0.3 - 2019: 0.6 - 2022 average (2017-2022): 2.4 - 2027: 2.1 - Identified net debt-creating flows (percent of GDP), 2017-2022 average: 4.5; 2027: 4.4 - Non-interest current account deficit (percent of GDP): - 2017: 5.5 - 2018: 2.6 - 2019: 5.2 - 2022 average (2017-2022): 3.8 - 2027: 3.6 - PV of external debt (percent of GDP): - 2017: 36.7 - 2022 average (2017-2022): 35.6 - 2027: 43.0 - 2037: 58.2 - PV of PPG external debt (in percent of exports): - 2017: 125.0 - 2022 average (2017-2022): 124.0 - 2027: 149.5 - 2037: 202.4 - PPG debt service-to-revenue ratio (percent): - 2017: 9.6 - 2018: 12.2 - 2019: 12.8 - 2022 average (2017-2022): 11.8 - 2027: 12.2 - 2037: 17.2 - Total gross financing need (Millions of U.S. dollars): - 2017: 49.1 - 2018: -2.9 - 2019: 41.6 - 2022 average (2017-2022): 58.2 - 2027: 83.5 - 2037: 122.7 - Grant element of new public sector borrowing (in percent), selected projections: - 2022: 39.6 - 2023: 45.9 - 2024: 46.3 - 2025: 42.8 - 2027: 43.8 - 2037: 41.5 - Grant-equivalent financing (in percent of GDP), selected projections: - 2019: 9.3 - 2020: 11.9 - 2021: 8.6 - 2022: 8.4 - 2027: 9.6 - 2037: 9.3 - Gross workers' remittances (Millions of U.S. dollars): - 2014: 160.0 - 2017: 138.1 - 2022 average (2017-2022): 164.6 - 2027: 186.8 - 2037: 240.3 ### Public sector debt indicators (selected) - Public sector debt (percent of GDP): - 2014: 74.0 - 2015: 76.6 - 2016: 71.4 - 2017: 71.1 - 2018: 71.0 - 2022 average (2017-2022): 71.7 - 2027: 83.7 - 2037: 105.7 - Foreign-currency denominated public sector debt (percent of GDP): - 2014: 51.8 - 2017: 50.7 - 2022 average (2017-2022): 52.3 - 2027: 64.8 - 2037: 86.8 - PV of public sector debt (selected projection): 2027: 77.4; 2037: 87.0 - Gross financing need (percent of GDP), projections: - 2017: 5.3 - 2018: 3.9 - 2022 average (2017-2022): 4.6 - 2027: 6.2 - 2037: 7.5 - PV of public sector debt-to-revenue and grants ratio (percent): - 2022 average (2017-2022): 171.8 - 2027: 194.8 - 2037: 242.6 - Debt service-to-revenue ratio (percent): - 2017: 9.3 - 2018: 10.8 - 2019: 12.1 - 2022 average (2017-2022): 10.9 - 2027: 9.7 - 2037: 13.7 ### Sensitivity and scenario outcomes (selected highlights) - Table 1b and associated charts present sensitivity analysis for PV of debt-to-GDP+remittances, PV of debt-to-exports+remittances, and PV of debt-to-revenue ratios under alternative scenarios and bound tests for 2017-2037. - Examples of scenario outcomes for PV of debt-to-GDP+remittances ratio (percent): - Baseline (2017): 32 - Severe Natural Disaster in 2018 (A3, 2027): 40 - One-time 30 percent nominal depreciation in 2018 (B6, 2027): 41 - 2037 baseline: 50 - Examples of scenario outcomes for PV of debt-to-exports+remittances ratio (percent): - Baseline (2017): 83 - A2 (less favorable terms) 2037: 199 - A3 (Severe Natural Disaster) 2037: 138 - B6 (one-time 30 percent nominal depreciation) 2037: 129 - Examples of PV of debt-to-revenue ratio (percent): - Baseline (2017): 142 - A2 (less favorable terms) 2037: 3355 (table formatting indicates very large values under that scenario) - A3 (Severe Natural Disaster) 2037: 2251 - B6 (one-time 30 percent nominal depreciation) 2037: 326 ### Policy implications and priorities implied by the analysis - Maintain fiscal consolidation to meet medium-term fiscal deficit targets and keep public debt below the stated threshold of less than 50 percent of GDP. - Continue to secure highly concessional financing (grant element at least 35 percent) and maintain high grant-equivalent financing shares as projected. - Strengthen management of SOE guarantees and contingent liabilities to limit off-balance-sheet risks. - Monitor vulnerabilities revealed by stress tests, in particular: - Large impacts from one-time nominal depreciation shocks and severe natural disasters. - Sensitivity to less favorable borrowing terms, which can substantially raise debt ratios and debt-service metrics. *Sources: Country authorities; and staff estimates and projections.* ### 1. Real GDP growth and primary balance are at historical averages169161181186190194213246 ### 1. Real GDP growth and primary balance are at historical averages ### Recent economic developments and outlook - Economic growth: "In 2016/17, economic growth will moderate to 2.1 percent." - Short-term drags on growth: "Spillovers from the closure of a fish cannery in American Samoa and the closure of the largest manufacturing plant in Samoa will both be drags on growth in 2017/18 and 2018/19." - Medium-term growth: "returning to the potential growth level of around 2 percent in the medium term, and in the absence of natural disasters." - Inflation: - "Average inflation, on the other hand, is subdued at 1.8 percent" - "and is expected to climb close to 3 percent over the medium term." - Monetary policy projection: "Inflation (year average) is expected at 1.8 percent in 2016/17 and is projected to remain no more than 3.0 percent over the medium term." - External position and reserves: - "Samoa’s current account is expected to remain steady in 2016/17, before narrowing over the medium term." - International reserves: "3.0 months of import of goods and non-factor services cover;" - Optimal reserves range: "between 2.7 to 4.0 months of import of goods and non-factor services cover" - Currency assessment: "Samoa’s local currency (Tala) is also assessed to reflect economic fundamentals." ### Fiscal policy: stance, performance, and targets - Fiscal stance: "to tighten general spending and impose quality spending in priority areas whilst maintaining budget deficits not more than 2.0 percent of GDP over the medium term." - Recent fiscal outcomes: - "the fiscal deficit dropping to 0.4 percent of GDP from 3.9 percent in 2014/15." - Medium-term debt objective: "Reducing public debt to 50 percent of GDP over the medium term remains a priority." - Debt strategy aim: "ensure that the debt to GDP ratio will decline in the medium term to 50 percent of GDP while its growth priorities are adequately met." - Revenue and tax reforms: - "promoting a fair and efficient Samoan tax system to enhance revenue collections." - Reviews underway: "reviewing the tax exemptions and concessions"; "vigorously pursuing payment of back taxes"; "reviewing the current tax credit arrangement allowed to larger companies" - SOE dividend policy: "State Owned Enterprises which generate revenue and earn profits pay dividend to the consolidated revenue." - 2015/16 tax measures: "increased the excise duty on tobacco and alcohol products and introduced excise on sugar items and some salt products." - Public financial institutions and SOE reforms: - "All public financial institutions are now under a new Ministry of Public Enterprises" - Plans: "implement the State-Owned Enterprise (SOE) Act, appoint independent directors, as well as, privatize selected SOEs over the medium term." - Development Bank of Samoa (DBS): "re-oriented its focus to providing credit to the agriculture sector" - Samoa National Provident Fund (SNPF): "operates as usual without any threat of bankruptcy." - Unit Trust of Samoa (UTOS): "complies with all the requirements of the Central Bank of Samoa and its operations are transparent." ### Monetary policy and financial sector resilience - Monetary policy stance: "to support economic growth given the low inflation environment and moderate growth prospects." - Policy design notes: - "accommodative monetary policy stance balances the authorities’ desire to support economic activity whilst rebuilding fiscal buffers" - Consideration of framework changes: "intend to review its monetary policy framework with consideration towards the setting of an official policy rate by the Central Bank of Samoa like the Reserve Bank of New Zealand’s overnight Cash Rate." - Other instruments: "reserve requirements, repurchase and rediscount facilities and moral suasion through quarterly meetings with the commercial banks" - Financial sector soundness: - Capital adequacy ratio: "24.0 percent" - Non-performing loans: "non-performing loans (NPL) ratio has declined over the past year." - Supervisory actions: "increased on-site inspections of commercial banks"; "amendments to the Financial Institutions Act"; "upgrading the guidelines on prudential statements for commercial banks"; "increasing financial supervision staff numbers"; "increasing training for supervisory staff"; "updating the framework for single borrowing limits." - Financial Stability Analysis mission: expected to "help enhance further financial stability analysis of Samoa, including development of a framework for analysis of risks." ### Correspondent banking, remittances, and AML/CFT - Remittances importance: "Remittances account for 18 percent of GDP in Samoa, of which about 80 percent is channeled through small Money Transfer Operators (MTOs)." - De-risking concerns: - "MTOs continue to face closure of their bank accounts without explanation from correspondent banks and are also prevented from reopening business accounts in other correspondent banks." - Risks: "potential that ongoing correspondent banking relationship withdrawal could create financial stability risks, undermine financial inclusion and rocket the cost of remittances. Other consequences include increasing movement of cash-handling across borders." - AML/CFT reform actions: - "published Samoa’s AML/CFT national strategy" - Capacity building: "two financial intelligence unit (FIU) staff attaining certification from the Association of Certified Anti-Money Laundering Specialist (ACAMS) and training for police recruits as well as the judiciary." - On-site inspections: "continued with on-site inspections of MTOs to improve AML/CFT compliance." - Know Your Customer database: - Commitment: "Samoa is committed to establishing a national “Know Your Customer” database, as recommended by the Fund." - Scope and governance: "The database will contain information on senders and receivers of remittances and provide readily available information to verify the senders and receivers of remittances. The database will be housed in Samoa at the Central Bank, which will have the necessary legal authority to collect data." - International cooperation: "Participation of the Australian and New Zealand regulators remain critical to ensuring standards of these countries are met in the database to prevent further correspondent banking relationships withdrawal and create confidence in Samoa’s financial system." ### Structural reforms and long-term resilience - Private sector and business environment: - Legal land leases framework: "continuing with reforms to the legal land leases framework" - Personal Properties Securities Act: "implementing the Personal Properties Securities Act (amended January 2015) which is expected to improve access to finances by small to medium enterprises." - Vocational skills and education accreditation: "improve vocational skills and education accreditation to ease shortage of skilled workers or to take advantage of overseas opportunities" - Infrastructure and technology: - Submarine cable: "Upon the completion of the submarine cable, quality and cost opportunities of information technical services should improve." - Data and transparency: - "enhancing data dissemination through the implementation of the enhanced General Data Dissemination System (e-GDDS) with the technical assistance from the Fund." ### Key policy commitments and targets - Maintain budget deficits "not more than 2.0 percent of GDP over the medium term." - Reduce public debt "to 50 percent of GDP over the medium term." - Continue SOE reform: implement SOE Act, appoint independent directors, privatize selected SOEs. - Strengthen AML/CFT compliance and establish national "Know Your Customer" database. - Review monetary framework to consider setting an official policy rate and other instruments to improve transmission. *Sources: Country authorities; and staff estimates and projections.* --- _Source: https://www.imf.org/-/media/files/publications/cr/2017/cr17112.pdf_