## 1wsmea2022001 ## Source details **Canonical URL:** [1wsmea2022001](https://www.imf.org/-/media/files/publications/cr/2022/english/1wsmea2022001.pdf) ## Other formats - [Markdown version](/-/media/files/publications/cr/2022/english/1wsmea2022001.pdf.md) - [Structured JSON version](/-/media/files/publications/cr/2022/english/1wsmea2022001.pdf.json) --- ### Preface and mission - The Climate Macroeconomic Assessment Program (CMAP) assists countries, especially small and low-income countries, to build resilience and develop policy responses to cope with the economic impact of climate change. Samoa is the first pilot country where a CMAP has been conducted. - IMF team composition and support: - Team led by Y. Kinoshita; team members: C. Alonso, C. Chen, K. Funke, A. Hosny, K. Kirabaeva, D. Prihardini, S. Suphachalasai, E. Tandberg, G. Zinabou (all FAD), Z. Aligishiev (RES), and A. Swiston (APD). - V. Allena and Y. Kim (all FAD) provided editorial and research assistance. - Local and regional contributors include Mr. Lae Tui Siliva, Mr. Lulai Lavea, and Mr. Neves. - Stakeholder engagement included multiple Samoan government ministries and agencies, the Central Bank of Samoa, SOEs (Electric Power Corporation, Samoa Ports Authority, Samoa Water Authority, National Bank of Samoa, National Pacific Insurance), and donors/partners (World Bank, ADB, WRI). The Samoan Bureau of Statistics provided the 2018 Household Income and Expenditure Survey dataset for mitigation impact analysis. ### Executive summary — key findings - Exposure and climate trends: - Samoa is highly exposed to tropical cyclones, earthquakes, tsunamis, droughts, and floods. - Approximately 70 percent of Samoa’s population and infrastructure is located in low-lying coastal areas. - In the past 40 years, Samoa had 13 major disaster events, ranking 6th among the 20 Pacific Island States on the frequency of disasters. - Between 1991-2016 the average temperature increased by 0.81°C compared to the 30-year average (1960-1990). - By mid-century, mean annual temperature rise likely between 0.89°C and 1.89°C in a more severe scenario. - By mid-century, increase of extreme warm days (Heat Index >35°C) rises by more than 135 days in a severe scenario. - Samoan meteorological data over 101 years indicate a decreasing trend in precipitation by 49 mm a year; by mid-century annual precipitation expected to further decrease by more than 50mm on average. - By mid-century, magnitude of a 25-year extreme rainfall event will increase by 51 mm on average. - Four coastal storms in the past two decades had wind speeds between 190-310 km/hour; mid-century cyclone average maximum wind speed likely to increase by between 2% and 11% and rainfall intensity near cyclone center by approximately 20%. - Historical economic damages and macro impacts: - Samoa’s economic damage per disaster averaged about 30 percent of GDP over the past four decades. - 2009 earthquake caused loss and damage equivalent to about 35 percent of GDP. - 2021 Article IV projects GDP growth lower by 1.3 percentage points in the long run and fiscal and current account deficits widened by 3.5 percent of GDP compared to a counterfactual without natural disasters. - Samoa’s debt-to-GDP ratio was 49 percent of GDP in FY2020/21; projected to cross the DSA threshold of 70 percent of GDP by 2034 under stated assumptions. - A near-term disaster comparable to historical magnitudes could permanently increase debt-to-GDP by up to 20-25 percentage points absent grant financing. - Sectoral vulnerabilities: - Tourism: accounts for 20 percent of GDP; vulnerable via coral reefs, fish stocks, and critical infrastructure. - Agriculture: output <10 percent of GDP; employment share 20 percent; source of income for over 70 percent of population. - Fisheries: about 3.4 percent of GDP in 2014; marine heat stress could reduce potential fish catch in the Northeast Pacific by about 20 percent; declining production since 2007. ### Priority policy recommendations (Box 1 summary) - National Climate Strategy: - Include adaptation plans with costs in the PSIP or other suitable document — Short term. - Formalize a disaster risk financing strategy consistent with NDMP — Short term. - Keep national and sectoral plans updated — Short to Medium term. - Mitigation: - Increase excise taxes on kerosene and LPG and index them to inflation — Short term. - Tax electricity at the standard VAT rate of 15% and ensure tariffs cover cost of provision — Short term. - Consider recycling tax revenue to strengthen social safety nets — Short term. - Use feebates to encourage uptake of fuel-efficient vehicles and energy-efficient appliances — Medium term. - Disaster Risk Management: - Develop and maintain a centralized registry of public fixed assets — Short term. - Include disaster and climate risks in budget documents for a comprehensive contingent liability framework — Short to Medium term. - Strengthen social protection for vulnerable households and introduce digital ID — Short to Medium term. - Adaptation: - Strengthen planning through risk zoning, resource mapping, and risk monitoring — Short term. - Conduct climate risk assessments consistently at the sector level — Short to Medium term. - Use a common methodology for cost-benefit analysis of adaptation projects — Short to Medium term. - Incentivize private sector adaptation via regulation enforcement and improved financial inclusion — Short to Medium term. - Financing Climate Policies: - Scale up ex-ante adaptation investments by pursuing additional grant financing — Short to Medium term. - Strategically match climate project proposals to accessible financing sources with acceptable cost — Short to Medium term. ### Macro-fiscal implications, costs, and financing gaps - Total estimated costs over 2022-2026: Total 657 (millions of USD); Annualized 17.0 (percent of GDP). - Identified adaptation projects: Total 426 (millions of USD); Annualized 11.0 (percent of 2021 GDP). - Transportation: Total 23 (millions of USD); Annualized 1.6 (percent of GDP). - Flood mitigation: Total 79 (millions of USD); Annualized 2.0 (percent of GDP). - Water and Sanitation: Total 61 (millions of USD); Annualized 1.6 (percent of GDP). - Environment: Total 24 (millions of USD); Annualized 0.6 (percent of GDP). - Agriculture and Fisheries: Total 22 (millions of USD); Annualized 0.6 (percent of GDP). - Early Warning Systems: Total 10 (millions of USD); Annualized 0.3 (percent of GDP). - Social spending needs: Total 122 (millions of USD); Annualized 3.2 (percent of GDP). - Health: Total 41 (millions of USD); Annualized 1.1 (percent of GDP). - Education: Total 81 (millions of USD); Annualized 2.1 (percent of GDP). - Mitigation goals (NDC): Total 107 (millions of USD); Annualized 2.8 (percent of GDP). - Land transport: Total 62 (millions of USD); Annualized 1.6 (percent of GDP). - Maritime transport: Total 31 (millions of USD); Annualized 0.8 (percent of GDP). - Electricity: Total 8 (millions of USD); Annualized 0.2 (percent of GDP). - AFOLU: Total 4 (millions of USD); Annualized 0.1 (percent of GDP). - Waste, Tourism and Marine: Total 3 (millions of USD); Annualized 0.1 (percent of GDP). - Financing status and gap: - Of the US$657 million identified spending needs, US$306 million have committed funding from multilateral donors. - Another US$100 million could be expected from bilateral donors based on recent trends. - Remaining funding gap: US$250 million, roughly 6 percent of GDP per year if spread over the next five years. - Committed or likely donor funding elsewhere noted as roughly $400 million; funding gap around US$250 million or 6 percent of GDP per year. - Public investment implications: - Scaling up to implement all projects in five years may be overly ambitious given capacity constraints. - If projects with identified donor financing are fully factored and roughly half of outstanding needs are capital investment, Samoa would need to increase annual public investment spending by 3 percent of GDP. - Public investment for 2022-26 projected at about 7-8 percent of GDP annually (historical average ~6 percent since 2010). - Debt and growth implications: - DSA baseline projects PV public debt-to-GDP ratio to breach 70 percent threshold by 2034. - Investing an additional 2 percent of GDP in adaptation capital for five years would: - Save Samoa about 4.5 percent of 2021 GDP in output losses if a typical natural disaster occurs in 2027. - If adaptation investment is financed entirely through concessional borrowing, the overall increase in debt-to-GDP is contained to about 20 percent versus about 23 percent in a disaster scenario with no additional adaptation. - Financing mix of 80 percent grants and 20 percent concessional loans for adaptation and reconstruction would contain projected increase in public debt-to-GDP to 3.5 percent in the long run following a natural disaster. - Donor discounted net savings (percent of reconstruction costs): Average historical (AH) impact — 9.3%; AH+10% — 14.1%; AH+20% — 18.1%; AH+30% — 21.6%. ### Electricity-sector decarbonization and mitigation policies - Electricity-sector targets and progress: - NDCs target 100% RE generation by 2025; the 2017 target under the first NDC was not achieved and is reset to 2025. - EPC planning could reach 90 percent RE by 2025 under current strategy; two diesel generators commissioned in 2013 imply diesel will remain part of the mix for some time. - RE share rose from 24 to 43 percent between FY2013/14 and FY2018/19. - A RE share of 93 percent can reduce the cost of electricity to 31 sene/kWh (around half the cost of diesel generation). - Demand and generation: - Electricity demand expected to increase by 25 percent over the next ten years. - Transport electrification: - Grid factor 0.4 kg CO2e/kWh; EVs would reduce emissions even without 100 percent RE. - Lifetime cost gap: NDC roadmap found lifetime costs of an EV are around US$11,000 higher than an ICE vehicle. - Feebates and shared EV models are being analyzed. - Mitigation profile and NDC: - Samoa’s total GHG emissions in 2007: 352 Gg CO2e (0.001 percent of global GHG emissions) or 1.6 metric tons per capita. - Emissions dominated by agriculture (livestock), followed by road transport and electricity generation. - 2nd NDC broadened mitigation to transport, waste, and AFOLU beyond electricity. - Selected mitigation cost example: - Energy mitigation target: Reduce GHG emissions in 2030 by 30% versus 2007 levels. - Proposed actions include 100% RE by 2025, grid stabilization, electrification of vehicles, low carbon marine transport options. - Estimated Cost: US$126 million. - Recommended tax-system changes and fiscal effects: - Proposed changes: - Increase kerosene excise by 20 sene/liter. - Change LPG excise from ad-valorem 8 percent to specific rate of 43 sene/liter. - Apply the standard VAT rate on electricity (remove zero-rating) — VAT standard electricity rate recommendation: 15%. - These changes would raise around 0.3 percent of GDP in revenue and would help meet 4 percent of Samoa’s NDC target. - Distributional impacts and compensation: - Price increases under mitigation package: kerosene 7 percent, LPG 9 percent, electricity 15 percent. - Average household welfare reduction: around 0.5 percent of initial consumption. - Poorest quintile average loss: 0.51 percent of initial consumption; Richest quintile average loss: 0.59 percent. - Compensation options: - Revenue recycling to top up the Senior Citizen Benefits Fund or introducing a cash grant per child reduces inequality. - Proxy-means targeted cash grant to poorest 40 percent: under-coverage rate 31 percent; leakage rate 29 percent. - Cash transfer targeted by proxy-means testing: 81 percent of households in poorest quintile better off; average welfare increase for poorest quintile 2.7 percent; average welfare loss for richest quintile 0.6 percent. - Sensitivity: If informal firms pass on higher electricity costs, additional negative impact could be up to 0.4 percent of initial consumption. ### Disaster risk management, insurance, and fiscal buffers - Disaster-related fiscal risks: - PCRAFI estimates average annual fiscal cost about 1.5 percent of GDP or around US$10mn. - PCRAFI model probabilities: 50 percent chance of losses exceeding $130mn in next 50 years; 10 percent chance of losses exceeding $350mn in next 50 years. - Contingency measures and buffers: - “Unforeseen expense” line set at 3 percent of current government expenditures (or less than 1 percent of GDP). - FX reserves end-2020: US$277mn or about 8 months of imports. IMF AIV recommends around 3-5 months coverage, or 4-6 months adjusted for natural disasters, implying Samoa currently has 2-3 months of FX buffers (or around 8-12 percent of GDP) relative to adjusted recommendation. - Samoa has no dedicated disaster emergency fund; decision consistent with best PFM practices to avoid fragmented extra-budgetary funds. - Risk transfer and contingency instruments accessed: - PCRIC membership since 2015; annual premia through 2023 around US$0.5mn/year; coverage up to US$10.7mn (2020) for insured hazards. - Total contingencies beyond PCRIC amount to about US$40mn or 5 percent of GDP. - WB Cat-DDO country limit up to US$20mn for IDA clients; Samoa’s 2018 DPO Cat-DDO component US$8.7mn (disbursed); 2020 DPO Cat-DDO US$10mn (not activated). - WB CERCs undisbursed amounts ~US$9.3mn; ADB CDF commitments and ADB APDRF grants cited. - IMF rapid facilities and WB CRW have been used historically (e.g., IMF Rapid Access Component US$9.3mn after 2009 tsunami; IMF RCF US$8.6mn after 2012 TC Evan and US$22mn under 2020 RCF). - Public asset insurance and registry: - Government insures major public buildings but excludes roads and bridges; PFM Act 2001 establishes an insurance fund with balance estimated at SAT 11mn (0.5 percent of GDP). - Recommendation to develop a comprehensive centralized registry of public fixed assets to map resilience, estimate maintenance/repair costs, facilitate post-disaster assessments, and consolidate insurance coverage. - Financial sector and private insurance: - Banking system resilient per stress tests but local banks relatively more vulnerable; large disasters could create financial instability due to loan concentration in construction and tourism. - Deposit insurance scheme recommended to protect small depositors. - CBS on-lent after disasters via Credit Line Facility; historical totals cited with outstanding balance declining to SAT 87mn in FY2020. - Private insurance is limited: six insurance companies; cyclone insurance optional and based on engineer certification; about 10 percent of residential premises have cyclone insurance. - Disaster risk insurance not available for farmers. ### Adaptation planning, data gaps, and private sector role - Adaptation planning and implementation: - Adaptation plans exist at community and sector levels; Community Integrated Management (CIM) plans feed into sector plans. - Sectoral adaptation planning is fragmented and often donor-driven; lack of consolidated, costed national summary of adaptation plans. - Recommendation to adopt a common methodology for cost-benefit analysis and consistent climate risk assessments across projects and sectors. - Data gaps hindering adaptation: - Three main data gaps: (i) systemic climate risks assessment; (ii) consistent cost and benefit analysis; (iii) slow-moving climate stresses in baseline projections. - Collection of observational and projected data is crucial; external technical assistance exists but not scaled across sectors. - Private sector constraints and recommendations: - Private sector participation is extensive but guidance and operational standards do not always incorporate adaptation. - Financial constraints limit private-sector adaptation; smallholders and micro businesses lack access. - Recommended actions: remove financial constraints, improve financial inclusion, and provide cross-sector adaptation guidance. ### Public financial management, public investment management, and transparency - Climate PIMA assessment highlights: - Some PIM aspects in place (coordination and risk management), but project appraisal, selection, and review lack climate-specific elements. Budget does not identify climate-relevant spending. - C1 Climate-aware planning: SDS and sector plans integrate climate objectives; adaptation and mitigation targets in 2nd NDC conditional on external finance; recommendation to expand central technical guidance. - C2 Coordination: Decision making well coordinated; CDC approval required for budget-funded projects; PCs follow controls for investments above SAT 1 million. - PCs financial data (million SAT): Electric Power Corporation — Assets 516; Liabilities 231; Equity 285. (See full list in source.) - Note: LTA accounts do not show value of road assets; a valuation study indicated those assets could be 1.5 billion SAT. - C3 Project appraisal and selection: No standard methodology for climate analysis; Project Preparation Guidelines (MOF, 2009) lack required climate-specific analysis; recommendation to update project preparation and EIA guidelines and formalize selection criteria with weights. - C4 Budgeting and portfolio management: Budget does not identify climate-relevant spending; monitoring, ex-post review, and reporting tied to climate outcomes can be strengthened. - Information and transparency gaps: - No consolidated overview of climate-relevant public investment projects in budget documents; last comprehensive PSIP was 2015/16–2017/18. - No budget tagging mechanism for climate-related expenditures; recommendation to provide comprehensive project overview in budget documents and consider budget tagging. - Major climate-related public investment projects (2021/22) listed with total costs in thousand WST (examples include Samoa Climate Resilient Transport Project — 33,256; Pacific Resilience Program (PREP Samoa) — 8,161). - Monitoring, audit, and asset management: - No ex-post review/audit of projects specifically for climate outcomes; SAO conducting financial audits of three World Bank-funded climate projects. - Asset registers exist but do not include climate damage or vulnerability information; Asset Management Framework being updated to include risk assessment. ### DIGNAD model calibration and scenario findings - Model description: - DIGNAD is a dynamic two-sector small open economy model distinguishing standard physical capital and adaptation capital; disasters affect public/private capital, productivity, investment efficiency, and creditworthiness. - Samoa calibration (selected parameters and steady-state values in percent): - Initial return on standard infrastructure investment — 25.0 - Initial return on adaptation infrastructure investment — 30.0 - Public investment to GDP ratio — 10.1 - Grants to GDP ratio — 8.8 - Consumption tax (VAT) rate — 15 - Public debt to GDP ratio — 45.3 - Remittances to GDP ratio — 27.1 - Imports to GDP ratio — 37.6 - Real interest rate on domestic debt — 11.4 - Real interest rate on concessional debt — 0 - Depreciation rate of public infrastructure — 3 - Calibrated synthetic disaster: - Calibrated to average impact of tropical cyclone Evan and 2009 earthquake/tsunami: results in 16.5 percent of GDP in losses and 13.6 percent of GDP in damages. - Reconstruction of public infrastructure assumed to take four years. - Scenario outcomes: - Additional adaptation investment assumed to mitigate 40 percent of negative effects of recurrent disasters and climate change on growth and fiscal balance, with maintenance cost equal to depreciation rate of 3 percent times adaptation capital stock, financed by borrowing. - Financing mix with 80 percent grants and 20 percent concessional loans: PV public debt breaches threshold only in 2038 versus 2034 under baseline and stays substantially below baseline thereafter. - Financing with concessional loans (no grants): improves long-term debt dynamics but raises debt-to-GDP significantly during first eight years. - In both scenarios public debt-to-GDP does not fully stabilize due to residual climate-related effects. ### Key statistics and numeric figures preserved from the source - Total estimated costs over 2022-2026: Total 657 (millions of USD); Annualized 17.0 (percent of GDP). - Total climate spending needs for 2022-2026: about US$650 million (noting Table 8 total 657 million USD). - Equivalent to about 17 percent of GDP per year. - Committed/likely donor funding: roughly $400 million; of US$657 million identified needs, US$306 million committed from multilateral donors and another US$100 million could be expected from bilaterals. - Remaining funding gap: around US$250 million, or 6 percent of GDP per year. - VAT standard electricity rate recommendation: 15%. - Samoa’s total GHG emissions in 2007: 352 Gg CO2e; per capita 1.6 metric tons. - Tourism share: 20 percent of GDP. - Agriculture: less than 10 percent of GDP; employment share 20 percent; source of income for over 70 percent of the population. - Fisheries: about 3.4 percent of GDP in 2014. - Fuel excises and levies: - Petroleum excise: 55 sene/litre. - Diesel excise: 54 sene/litre. - ACC levy: 5 sene/litre. - Combined excise and levy taxation on fuels: around US 23 cents per liter (of which US 15 cents/liter reflects GHG cost at USD 62/tCO2e). - LPG excise ad-valorem: 8 percent (proposed change to specific 43 sene/liter). - Proposed kerosene excise increase: 20 sene/liter. - Electricity tariff examples: - Energy component fell from 72 to 56 sene/kWh as RE share rose; 93 percent RE yields 31 sene/kWh. - FX reserves end-2020: US$277mn or about 8 months of imports. - PCRAFI average annual fiscal cost estimate: about 1.5 percent of GDP or around US$10mn. - Simulated disaster losses (calibrated): 16.5 percent of GDP in losses; 13.6 percent of GDP in damages. - DIGNAD parameter: public debt to GDP ratio initial — 45.3; remittances to GDP ratio — 27.1; imports to GDP ratio — 37.6. *Source: 1wsmea2022001 - PREFACE and Samoa chapter (IMF staff report excerpts).* ### PREFACE __________________________________________________________________________________________ 7 ### 1wsmea2022001 - PREFACE __________________________________________________________________________________________ 7 ### Preface and Mission - The Climate Macroeconomic Assessment Program (CMAP) assists countries, especially small and low-income countries, to build resilience and develop policy responses to cope with the economic impact of climate change. CMAP is a successor to the Climate Change Policy Assessment (CCPA) with more focus on macroeconomic implications of climate change policies. Samoa is the first pilot country where a CMAP has been conducted. - IMF team composition and support: - Team led by Y. Kinoshita; team members: C. Alonso, C. Chen, K. Funke, A. Hosny, K. Kirabaeva, D. Prihardini, S. Suphachalasai, E. Tandberg, G. Zinabou (all FAD), Z. Aligishiev (RES), and A. Swiston (APD). - V. Allena and Y. Kim (all FAD) provided editorial and research assistance. - Local and regional contributions: Mr. Lae Tui Siliva (Advisor to the Executive Director), Mr. Lulai Lavea (PFTAC PFM advisor), Mr. Neves (mission chief for Samoa PEFA). - Stakeholder engagement: - Meetings with multiple Samoan government ministries and agencies, the Central Bank of Samoa, SOEs including Electric Power Corporation, Samoa Ports Authority, Samoa Water Authority, National Bank of Samoa, and National Pacific Insurance. - Acknowledgement of data support: Samoan Bureau of Statistics provided the 2018 Household Income and Expenditure Survey dataset for mitigation impact analysis. - Consultations with donors and international partners: World Bank, ADB, WRI, and others. ### Executive summary — Key findings - Samoa is highly exposed to natural hazards: tropical cyclones, earthquakes, tsunamis, droughts, and floods — all of which damage economic growth and worsen debt sustainability. - Climate trends and sectoral impact: - Increasing frequency and intensity of coastal storms likely to amplify damage to infrastructure and livelihoods. - Slow-moving stresses (sea level rise, increasing heat hazard) likely to impact potential growth in agriculture, fisheries, and tourism. - National strategy and planning: - Samoa prioritizes climate resilience and disaster management in national development strategies. - The Nationally Determined Contribution (NDC) contains a clear mitigation strategy; disaster management planning is well-developed. - A consolidated, costed national summary of adaptation plans is lacking and would be useful. - Mitigation and tax measures: - 2nd NDC expands mitigation coverage to transport, waste, and AFOLU, beyond electricity. - Policy levers to support mitigation include feebates for fuel-efficient cars and energy-efficient appliances; tax reforms such as increasing excise taxes on kerosene and LPG, and applying VAT to electricity. - Revenue from such tax measures could be recycled to strengthen social safety nets for low-income households. - Disaster risk management (DRM): - Samoa’s DRM framework includes elements of risk-layering but gaps remain. - Recommendation to integrate disaster risk assessments into the budget process and to strengthen social protection via a digital ID system. - Samoa has access to global and regional risk transfer instruments; public asset insurance should be extended and domestic private insurance further developed. - Adaptation planning and implementation: - Community-based adaptation is inclusive, but sectoral adaptation planning is fragmented and often donor-driven. - Need for consistent climate risk assessments and a common methodology for cost-benefit analysis of adaptation projects. - Private sector adaptation should be incentivized via enforcement of regulations and improved financial inclusion. - Financing needs and fiscal implications: - Estimated total climate spending needs for 2022-2026: about US$650 million, equivalent to about 17 percent of GDP per year. - Committed or likely donor funding: roughly $400 million. - Remaining funding gap: around US$250 million, or 6 percent of GDP per year. - Scaling up public investment to meet all projects in five years may be overly ambitious given capacity constraints. - Benefits of ex-ante adaptation investment: - Investing in adaptation ex-ante mitigates disaster impacts, supports higher long-term growth, and reduces overall financing needs. - Additional ex-ante adaptation investment financed by grants improves the long-term economic outlook and reduces debt vulnerabilities. - Financing adaptation ex-ante also yields net savings for international donors by lowering post-disaster reconstruction needs. - Financing strategy and debt sustainability: - Given limited fiscal space, grants and/or concessional loans are needed to support additional ex-ante investment. - Without grants, Samoa’s debt would likely become unsustainable over the medium-term. - Samoa should strategically match its climate project pipeline to financing sources that are accessible with reasonable effort and acceptable cost. - Public financial management (PFM) and public investment management (PIM): - Institutional planning processes are comprehensive but have limited climate focus. - Project appraisal, selection, and review need to consistently integrate climate-specific elements and follow standard methodologies. - Climate-related project information is fragmented; transparency can be improved through ex-post reviews or audits to ensure projects meet climate objectives. ### Priority policy recommendations (Box 1 summary) - National Climate Strategy (time frame as indicated; Bold indicates highest priority in original) - Adaptation plans that include costs of adaptation investment should be included in the PSIP or other suitable document — Short term - Formalize a disaster risk financing strategy consistent with NDMP, improving availability of information on damages and losses — Short term - Keep national and sectoral plans updated — Short to Medium term - Mitigation - Increase excise taxes on kerosene and LPG and adjust these excise taxes in line with annual inflation — Short term - Tax electricity at the standard VAT rate of 15% and ensure the electricity tariff covers cost of provision — Short term - Consider recycling tax revenue from mitigation measures to strengthen the social safety net — Short term - Use feebates to encourage the uptake of fuel-efficient vehicles and energy efficient appliances — Medium term - Disaster Risk Management - Develop and maintain a centralized registry of public fixed assets — Short term - Disaster and climate risks should be included in budget documents for a comprehensive contingent liability framework — Short to Medium term - Strengthen social protection for vulnerable households in disaster response and by introducing digital ID — Short to Medium term - Adaptation - Strengthen planning through risk zoning, resource mapping, and risk monitoring — Short term - Conduct climate risk assessment consistently as part of adaptation planning, particularly at the sector level — Short to medium term - Use a common methodology for the cost-benefit analysis of adaptation projects, obtaining information from consistent project monitoring & evaluation — Short to medium term - Incentivize adaptation in the private sector by enforcing regulations and improving financial inclusion for farmers and small businesses — Short to medium term - Financing Climate Policies - Scale up ex-ante investments in climate adaptation by pursuing additional grant financing — Short to Medium term - Take a strategic view in matching climate project proposals to those financing sources that can be accessed with reasonable effort and at acceptable cost — Short to Medium term ### Key statistics and numeric figures preserved from the source - Total climate spending needs for 2022-2026: about US$650 million. - Equivalent to about 17 percent of GDP per year. - Committed/likely donor funding: roughly $400 million. - Funding gap: around US$250 million or 6 percent of GDP per year. - VAT standard electricity rate recommendation: 15%. *Source: 1wsmea2022001 - PREFACE (IMF).* ### Box 1. Summary of Key Recommendations (concluded) ### Box 1. Summary of Key Recommendations (concluded) ### Key policy recommendations (completion of list) - Complete costing of adaptation and mitigation policies to enable accurate estimation and communication of financing gaps — Medium term. - Public Investment and Financial Management: - Update project preparation and Environmental Impact Assessments (EIA) guidelines to include explicit requirements for climate impact analysis and define standard methodologies for this analysis — Short term. - Improve transparency of climate-related spending by including PSIP in budget documents, defining climate-related selection criteria in prioritizing projects. Develop climate tagging over time — Short to medium term. - Strengthen climate-sensitive budgeting, through an updated budget circular, appropriate maintenance allocations, rigorous project monitoring, climate spending reviews and systematic ex-post audit and review of climate investment — Medium term. ### Table 1 — Strategic questions for assessing gaps in NDC and other climate plans - Mitigation - Does the NDC have well-specified mitigation targets? - Are current policies consistent with NDC? - Are current policies and financing consistent with moving towards net-zero emission by mid-century? (for a small developing economy) - Adaptation - Do adaptation plans in NDC and other climate plans adequately reflect climate shocks? - Are current policies consistent with NDC and other climate plans? - Disaster Risk Management - Are risk management policies adequately reflected in NDC and other climate plans? - Are current risk management policies adequate? - Macro-fiscal Implication - To what extent were macroeconomic vulnerabilities eased by existing climate policies? - To what extent are climate projects in NDCs and other climate plans costed? - Are the financing plans adequate? - Are polices in the NDC and other climate plans consistent with debt sustainability? - National Process - Are planning processes adequate to support NDC and other climate plans? - Is PIM adequate to support NDC and other climate plans? - Is Public Financial Management (PFM) adequate to support NDC and other climate plans? Note: Green indicates little or no gaps; yellow indicates some gaps; red indicates significant gaps. ### A. Impact of Climate Change Risks on the Macro Framework and Long-Term Outlook — Main findings - Exposure to hazards and observed changes - Samoa is highly exposed to multiple natural hazards, including tropical cyclones, flooding, droughts, and earthquakes. - Approximately 70 percent of Samoa’s population and infrastructure is located in low-lying coastal areas. - In the past 40 years, Samoa had 13 major disaster events, ranking 6th among the 20 Pacific Island States on the frequency of disasters. - Between 1991-2016 the average temperature increased by 0.81°C compared to the 30-year average (1960-1990). - By mid-century, mean annual temperature rise is likely to be between 0.89°C and 1.89°C in a more severe climate change scenario. - By mid-century, increase of extreme warm days (with the Heat Index >35°C) rises by more than 135 days in a severe climate change scenario. - Samoan meteorological data over 101 years indicate a decreasing trend in precipitation by 49 mm a year. - By mid-century, annual precipitation is expected to further decrease by more than 50mm on average. - By mid-century, the magnitude of a 25-year extreme rainfall event will increase by 51 mm on average. - Four coastal storms caused by cyclones were documented in the past two decades, with wind speed ranging between 190-310 km/hour. - By mid-century, there is likely to be an increase in the average maximum wind speed of cyclones by between 2% and 11% and an approximate 20% increase in rainfall intensity within 100 km of the cyclone center. - Historical economic damages and projected macro impacts - Samoa’s economic damage, including property, crops, and livestock, are estimated to be about 30 percent of GDP per disaster on average over the past four decades. - The earthquake in 2009 caused loss and damage equivalent to about 35 percent of GDP. - Due to repeated natural disasters, the 2021 Article IV for Samoa projects GDP growth to be lower by 1.3 percentage points in the long run and fiscal and current account deficits to widen by 3.5 percent of GDP compared to a counterfactual without natural disasters. - Samoa’s debt-to-GDP ratio was 49 percent of GDP in FY2020/21. - Under assumptions described, debt-to-GDP is expected to trend upwards and cross the applicable DSA threshold of 70 percent of GDP by 2034. - An additional near-term natural disaster comparable to historical magnitudes could permanently increase the debt-to-GDP ratio by up to 20-25 percentage points in the absence of grant financing for reconstruction. - Sectoral long-term vulnerability - Tourism - Tourism accounts for 20 percent of GDP. - Sector depends on marine and terrestrial resources (coral reefs, tropical fish stocks) vulnerable to climate risks; critical infrastructure (hotels, roads, airports, ports) vulnerable to more frequent flooding from cyclones. - Agriculture - Agricultural output accounts for less than 10 percent of GDP; employment share is 20 percent; it is a source of income for over 70 percent of the population. - Long-term temperature rise and precipitation volatility can lead to water resource scarcity, soil erosion, and changes in pest and disease profiles. - Fisheries - Fisheries accounted for about 3.4 percent of GDP in 2014. - Marine heat stress could reduce the potential fish catch in the Northeast Pacific by about 20 percent. - Samoa has experienced declining production of fish since 2007. ### B. The NDC and Other Climate Resilience Building Strategies — Findings on strategy and planning - Coverage and costing - The 2nd NDC includes a broadened sectoral coverage in mitigation compared to the 1st NDC and presents a costing of mitigation needs by sector. - The scope of adaptation plans in the NDC remains limited; adaptation strategies are reflected in other national strategic documents and mainstreamed in sectoral plans. - An estimate for aggregate adaptation cost is not available; adaptation financing is done on a sector-by-sector basis often aligned with donor interests. - An updated PSIP could consolidate costing and funding gap information and summarize main projects and activities in resilience building and disaster management. - Institutional arrangements and coordination - High-level strategic documents include Samoa 2040, Strategy for Development of Samoa (SDS), and Samoa’s Climate Change Policy (NCCP). - National Disaster Management Plan (NDMP) and the National Action Plan for Disaster Risk Management (NAP) define the disaster risk management framework and implementation. - A Climate Resilience Steering Committee (CRSC) with CEOs of 14 sectors was established in 2014; Climate Resilience Investment Coordination Division (CRICD) of the MOF acts as Secretariat. - MNRE is the lead technical agency for mainstreaming climate change and disaster management policies and for cross-agency coordination, including for the development of Community Integrated Management (CIM) plans. - Cross-sectoral coordination could be enhanced to address trade-offs at the operational level; some sectoral plans (transport, agriculture, tourism) need to be kept up to date. - Alignment with development goals - Climate-related national strategy is broadly consistent with Samoa’s development goals (SDGs); climate resilience and disaster risk objectives are reflected in sectoral plans. - The SDS links outcomes to individual SDGs; the NDC is consistent with SDS, and electricity and transport sector plans are aligned with mitigation objectives of the NCCP 2020. - The SDS is being updated under the new government to be published by end-2021. ### C. Meeting Emission Reduction Targets — Mitigation commitments and costs - Emissions profile and NDC scope - Samoa’s total GHG emissions in 2007 reached 352 Gg CO2e (0.001 percent of global GHG emissions) or 1.6 metric tons per capita. - Emissions per capita are comparable to other Pacific island small states and well below other small states at 5.9 metric tons per capita. - Emissions are dominated by the agriculture (livestock) sector, followed by road transport, and electricity generation. - The 2nd NDC broadened mitigation commitments to cover transport, waste, and Agriculture, Forestry and Land Use (AFOLU) sectors, in addition to electricity. - Mitigation objectives, actions, and estimated cost (selected) - Energy: Reduce GHG emissions in 2030 by 30% compared to 2007 levels. - Proposed actions include: 100% RE generation by 2025; Improve grid stabilization and network efficiency; Electrification of vehicles; Various low carbon options for marine transport. - Estimated Cost: US$126 million. - Policy instruments and fiscal considerations - Suggested support measures include feebates to encourage uptake of fuel-efficient cars and energy-efficient appliances. - Selected tax reforms in kerosene, LPG, and electricity can help meet mitigation objectives. - Revenue raised from these tax measures can be used to strengthen the social safety net to mitigate adverse impacts of higher energy prices on vulnerable households. *Source: 1wsmea2022001 - Box 1. Summary of Key Recommendations (concluded).* ### 15. Samoa has taken significant steps to decarbonize the electricity sector towards ### 15. Samoa has taken significant steps to decarbonize the electricity sector towards ‘net-zero’ but more can be done in other sectors. ### Electricity-sector decarbonization: plans and progress - Under the first and second NDCs, Samoa aims to generate 100% of electricity from renewable energy by 2025; the first NDC target for 2017 was not achieved and is reset to 2025. - The Electric Power Corporation (EPC) is actively planning investments to meet the renewable target. - Current plans (sectoral decarbonization by 2030 in the second NDC) are conditional on external financing and: - Would allow Samoa to reduce GHG emissions by almost 50 percent relative to 2007 levels by 2030. - Do not suffice to reach net-zero; decarbonization plans to support net zero by mid-century have not been developed. - Comparative context: a number of small island countries have net-zero targets (e.g., Fiji, Marshall Islands, Solomon Islands). ### Energy mix and impacts of higher renewable electricity (RE) penetration - Samoa energy dependence and use (2016): - Petroleum products met 69 percent of energy needs. - Road transport used 51 percent of petroleum products. - Biomass remains main household energy source, though its importance has declined with uptake of LPG, kerosene, and electricity. - Historical RE penetration and tariff effects: - RE share rose from 24 to 43 percent between FY2013/14 and FY2018/19. - As RE increased, the energy component of the tariff fell from 72 to 56 sene/kWh. - A RE share of 93 percent can reduce the cost of electricity to 31 sene/kWh. - 31 sene/kWh is around half the cost of diesel generation (Vaiaso and Jack, 2021). - Demand and generation considerations: - Electricity demand expected to increase by 25 percent over the next ten years. - Historically, demand growth was met by diesel rather than renewables; investment in RE must keep pace with demand. ### EPC strategy and likely power mix - EPC is working with a private company (Gridmarket) to design and procure solar and other RE investments. - Under EPC strategy, Samoa could reach 90 percent RE in the electricity sector by 2025, slightly short of the 100 percent target. - Diesel generation likely to remain part of the power mix for some time because two diesel generators (life span 20–30 years) were commissioned in 2013. ### Transport electrification potential and barriers - Samoa’s grid factor is 0.4 kg CO2e/kWh; this is low enough that introducing electric vehicles (EVs), even without 100 percent RE, would reduce emissions. - Small island states are particularly suitable for EV deployment because of short driving distances and low driving speeds. - Long-term potential: EVs could act as distributed energy storage, feeding power into the grid during peak times. - Barriers: - Cost of EVs is prohibitively high for most Samoan households; NDC roadmap found lifetime costs of an EV are around US$11,000 higher than that of an ICE vehicle. - Technical and financial challenges remain for widespread EV adoption. - Samoa is analyzing scenarios for EV potential in the NDC roadmap, including shared EV models that can be more affordable than private ICE ownership. ### Mitigation policies in land-use and agriculture (NDC roadmap) - Prioritized projects in agriculture, forestry, and livestock include: - Agroforestry support program (supplying farmers with coconut seedlings and awareness-raising). - National forestry plan (building on campaign to plant a further two million trees by 2027). - Manure management project (to be expanded to cover 10 percent of the pig herd) commissioned under the Improving the Performance and Reliability of RE Power Systems in Samoa project. - Authorities plan to explore accessing REDD+ to incentivize forest cover expansion. ### Carbon taxation, fuel pricing, and current tax treatment - Fuel pricing and taxation: - Petroleum, diesel, and kerosene prices are regulated and reviewed monthly; international price fluctuations are passed on to consumers with a 1–2-month lag. - Petroleum and diesel excise: 55 and 54 sene/litre, respectively. - Accident Compensation Corporation (ACC) levy: 5 sene/litre. - VAT rate: 15 percent. - The combined level of excise and levy taxation on fuels is around US 23 cents per liter; this is at an efficient level, of which US 15 cents/liter is to reflect the cost of GHG emissions priced at USD 62/tCO2e. - Diesel used for power generation is subject to the excise tax but receives a refund for the levy. - Taxation of kerosene and LPG is below the efficient level. - Vehicle taxation: - Passenger motor vehicle excise taxes range between 10 – 50 percent and increase with engine size. - Buses: excise rate 8 percent. - Hybrid vehicles: excise rate 5 percent. - Electric vehicles: no excise applied. - Annual registration fee increases with engine size but does not distinguish EVs from ICE vehicles. - Electricity taxation: - Electricity is zero-rated under VAT (no tax on sales of electricity); EPC receives tax credit for VAT paid on inputs. - Energy component of tariff is reviewed monthly by the Office of the Regulator to reflect fuel and IPP feed-in costs. - Government has intervened in price setting in certain circumstances (e.g., pandemic); recently introduced a 20 percent tariff reduction for domestic customers. - Tariff reduction should be reviewed to ensure tariffs remain sufficient for EPC to recover costs; if reduced tariff does not cover EPC production cost, government should cover losses and report them as a transfer to EPC. ### Feebates, efficiency standards, and other regulatory options - Revenue-neutral feebates could encourage uptake of fuel-efficient cars: - Feebate mechanism: tax less fuel-efficient vehicles and subsidize more fuel-efficient vehicles based on difference from historical average fuel consumption (or CO2/km). - Example with carbon price of US$300/tCO2e: - Subsidy around US$1,140 for a vehicle that meets Europe’s efficiency standards (95g-CO2e/km). - Tax around US$1,160 for a vehicle emitting 200g-CO2e/km. - Administrative costs expected to be modest using existing excise framework; data on fuel economy is available. - Feebates for appliances: - Samoa implemented minimum energy performance standards for refrigerators, freezers, air conditioners, and lighting between 2018 and 2019 (based on Australia and New Zealand standards). - Energy efficiency labelling is mandatory for refrigerators, freezers, and air conditioners. - Standards and labelling do not cover large commercial refrigeration equipment or cool rooms. - Feebates would lower costs of efficient appliances and penalize inefficient ones. ### Recommended tax-system changes and expected fiscal impact - Proposed changes: - Increase kerosene excise by 20 sene/liter. - Change LPG excise from ad-valorem 8 percent to specific rate of 43 sene/liter. - Apply the standard VAT rate on electricity (remove zero-rating). - Fiscal and mitigation effects: - These changes would raise around 0.3 percent of GDP in revenue. - Revenue could be redistributed to support vulnerable households. - Would help meet 4 percent of Samoa’s NDC target. ### Distributional impact of recommended mitigation package and compensation options - Direct price and welfare impacts (mitigation package = increase excises on kerosene and LPG + introduce VAT on electricity): - Price increases: kerosene 7 percent, LPG 9 percent, electricity 15 percent. - Average household welfare reduction: around 0.5 percent of initial consumption. - Burden distribution: - Poorest quintile: average loss 0.51 percent of initial consumption. - Richest quintile: average loss 0.59 percent of initial consumption (slightly higher electricity bills for richer households). - Compensation and inequality effects: - Using revenue to top up the Senior Citizen Benefits Fund or introducing a cash grant per child would reduce inequality. - Cash grant targeted to poorest 40 percent via proxy-means testing would reduce inequality further. - Proxy-means targeting characteristics and model performance: - Under-coverage rate: 31 percent. - Leakage rate: 29 percent. - Targeted lower electricity tariff for households with monthly consumption below 50 kWh (introduced November 2021) reduces inequality more than the universal lower-tariff prior measure for prepaid consumers. - Household-level outcomes under compensation: - Cash transfer targeted by proxy-means testing: - 81 percent of households in the poorest quintile would be better off. - Average welfare increase for poorest quintile: 2.7 percent. - Average welfare loss for richest quintile: 0.6 percent. - Alternative compensation schemes can make the vast majority of poorest households better off at a small cost to the richest households. - Sensitivity and indirect effects: - Introduction of VAT on electricity is assumed to have no indirect impact on other goods because firms can claim VAT credits; if informal firms or exempt firms pass on higher electricity costs, the additional negative impact could be up to 0.4 percent of initial consumption in the most conservative scenario. ### Disaster risk management, fiscal risks, and buffers - Disaster-related fiscal risks: - PCRAFI estimates average annual fiscal cost of natural disasters in Samoa is about 1.5 percent of GDP or around US$10mn. - PCRAFI model suggests: - 50 percent chance of experiencing losses exceeding $130mn in the next 50 years. - 10 percent chance of losses exceeding $350mn in the next 50 years. - National Action Plan (NAP) and National Disaster Management Plan (NDMP) analyze hazards qualitatively; budget documents do not systematically quantify disaster fiscal costs. - Risk-retention instruments and buffers: - Budgetary contingency: - “Unforeseen expense” line set at 3 percent of current government expenditures (or less than 1 percent of GDP). - Budget re-allocations: - Intradepartmental transfers permitted if the transfer does not increase a line item by 20 percent or more; supplementary budgets can be approved if a state of emergency is declared. - FX reserves: - As of end-2020, FX reserves reached US$277mn or about 8 months of imports. - IMF AIV recommends around 3-5 months of imports coverage per the Assessing Reserve Adequacy metric, and 4-6 months adjusted for natural disasters. - This suggests Samoa currently has 2-3 months of FX buffers (or around 8-12 percent of GDP) relative to the adjusted recommendation. *Source: IMF staff report text (content unit 1wsmea2022001).* ### 33. Samoa has, appropriately, no ### 1wsmea2022001 - 33. Samoa has, appropriately, no ### Disaster financing and contingency arrangements - Samoa has no dedicated disaster emergency fund; this is consistent with best PFM practices to avoid fragmented extra-budgetary funds. - Samoa’s resilience for short-term disaster relief has improved through build-up of reserves and ex-ante contingent financing instruments, which can be supplemented by donor financing for reconstruction. - Given limited fiscal space, elevated debt level, and capacity constraints, the opportunity cost of establishing a dedicated fund is likely to outweigh its benefit. - Current contingency and buffer indicators (selected Pacific Island countries, various measures shown in source table): - Samoa: Budget contingency lines = 3% (as % of total appropriations); Budget re-allocations = Discretionary (% of total budget allowed: n.a.); Emergency reserve funds established = 2009, 2012; FX reserves end-2020 = $277 (8 months). ### Digital IDs and social protection for post-disaster relief - Introduction of digital IDs can improve the efficiency of post-disaster social protection for vulnerable households. - In Samoa, post-disaster assistance has historically included in-kind assistance; establishing the envisaged digital national ID system would make relief distribution faster and more effective and inclusive (Figure 8 referenced). - Current formal social protection in Samoa: - One formal program: the National Provident Fund (NPF). - No unemployment or health insurance. - Participation is mandatory in NPF, but pension coverage of workers is only 20 percent and pension adequacy as a share of minimum wage is 40 percent. - Post-disaster use of traditional social protection programs can involve: - Vertical expansions (e.g., increased benefits to existing beneficiaries after disasters, example: Fiji’s Poverty Benefit Scheme). - Horizontal expansions (e.g., adding beneficiaries, example: Ethiopia’s Productive Safety Net Program). - Both vertical and horizontal (example: Kenya’s Hunger Safety Net Program). ### Risk transfer instruments accessed by Samoa - Samoa has accessed global and regional instruments to strengthen financial resilience: - Member of PCRIC since 2015; PCRIC offers parameter-based insurance with annual premia through 2023 of around US$0.5mn/year, mostly financed through the WB-funded Pacific Resilience Program (PREP) with a small but increasing Samoan contribution. In 2020, insured hazards were earthquakes and tropical cyclones, with coverage up to US$ 10.7mn (Table 5). - Total contingencies (in addition to PCRIC insurance) amount to about US$40mn or 5 percent of GDP. - WB Cat-DDO: per country limit for IDA clients up to US$20mn. Samoa’s 2018 DPO had a Cat-DDO component of US$8.7mn (fully disbursed). The 2020 DPO has a Cat-DDO component of US$10mn (not yet activated). - WB CERCs: Undisbursed amounts under Samoa 2015 and 2018 PREPs amount to around US$9.3mn to date; CERC not activated so far. - ADB CDF: 2017 commitment US$6mn under phase 1; Samoa drew down $2.9mn from Phase 1 when expanded; replenished in 2020 for Phase 3 with a $10mn grant. - ADB APDRF: quick-grant up to US$3mn/event; Samoa received US$1mn after 2009 tsunami. - Ex-post recovery and reconstruction financing examples: - IMF Rapid Access Component of Exogenous Shocks Facility: Samoa accessed US$9.3mn after 2009 tsunami. - IMF Rapid Credit Facility (RCF): US$8.6mn after 2012 TC Evan (equivalent to 50 percent of quota); US$22mn under the 2020 RCF in response to COVID-19. - WB CRW: Samoa accessed US$20mn after 2009 tsunami; US$20mn after 2012 TC Evan; US$1.4mn (out of a committed US$2.9mn) in 2020 under Samoa Covid Response Project. Disbursements can occur a year or more after events and often require Post-Disaster Needs Assessment. - ADB concessional loans and grants post-disaster: total US$25.8mn in concessional loans in two phases from ADB ERSP after 2009 tsunami; US$19.2mn in grants under Renewable Energy Development and Power Sector Rehabilitation Project after 2012 TC Evan. ### Public asset insurance and asset registry - The government insures major public buildings but excludes key public infrastructure assets such as roads and bridges. - The PFM Act 2001 establishes an insurance fund to finance premiums to insure government buildings against fire, earthquake, or other catastrophe hazards on an indemnity value basis, but excludes coverage for other public infrastructure assets (PCRAFI 2015). - Underinsurance of key public assets could pose potentially significant contingent liabilities in case of large disasters. - Ongoing discussions with WB to allow further use of the insurance fund balance, currently estimated at SAT 11mn (or 0.5 percent of GDP), including potential expansion of its mandate to insure key public infrastructure and use available funds for immediate relief/rescue work. - Recommendation: develop a comprehensive centralized registry of public fixed assets to: - Map which assets are climate-resilient and which need retrofitting. - Estimate maintenance and repair costs. - Facilitate post-disaster damage assessments. - Allow consolidation of insurance coverage into larger policies with potentially reduced premiums from international insurers. ### Risk layering and strategy - Assessment (staff/WB risk-layering framework): Samoa applies a mix of instruments across layers; weaknesses are identified (Figure 11 referenced). Red areas in figure assessed as relatively ‘weak’, yellow as ‘partially available/utilized’, green as ‘well utilized’. - Samoa would benefit from a National Disaster Risk Financing and Insurance (DRFI) Strategy to coordinate existing instruments, provide centralized guidance on disaster risk assessments, outline financing instruments, and specify disaster response processes and agency responsibilities. The strategy is expected to be approved by the Cabinet. - Current approach: proactive but instruments mostly developed in isolation (PCRAFI 2015). ### Financial sector preparedness and response - Banking system resilience: - Stress tests suggest banks are resilient to natural disaster shocks, although local banks are relatively more vulnerable (FSAP 2015). - Large disaster shocks could lead to financial instability given high loan concentration in disaster-sensitive sectors such as construction and tourism (CBS Annual Report 2019-20). - A deposit insurance scheme would help protect small depositors and strengthen the CBS financial safety net. - Central Bank of Samoa (CBS) support role: - CBS has on-lent after disasters via its Credit Line Facility: 2009 (SAT 5mn), 2012 (SAT 44mn), 2018 (SAT 10mn). These were backed by government guarantees and on-lent by PFIs at concessional terms. - Previous IMF analysis recommended unwinding this scheme to avoid conflict between CBS supervisory capacity and its creditor position, and to better channel such support through the normal budget process (FSAP 2015; IMF CR 21/56). - Historical totals: CBS extended five separate Credit Lending Facilities since 200? for a total of SAT 135mn, with outstanding balance declining to SAT 87mn in FY2020 (CBS Annual Report 2019-20). [Note: text contains an apparent typographical gap for the start year in source.] - Digital financial services: - Digital/mobile payments could expedite short-term relief distribution; mobile payments often lower cost and wider rural reach. - Samoa’s internet and mobile penetration are relatively lower than peers (Figure 12 referenced), but mobile money outlets are becoming more available compared to traditional outlets (Figure 13 referenced). - Remittances represent, on average, 20 percent of GDP in Samoa; about 60-70 percent of remittances to Samoa originate from New Zealand and Australia (PFIP 2016; WB database). ### Private sector insurance coverage and vulnerability - Samoa’s insurance sector is small: six insurance companies, one an SOE. - Cyclone, earthquake, and tsunami insurances are limited and optional: - Cyclone insurance as optional extension of property policies requires valid engineer’s certification of compliance with the 2017 National Building Code. - Based on prior major cyclone events, about 10 percent of residential premises have cyclone insurance—reflecting high premiums and lack of awareness. - Disaster risk insurance is not available for farmers due to high inherent risk and inability to use community-owned land as collateral. - Insufficient private insurance can create fiscal risks as contingent liabilities to the government (IMF CR 21/56). ### Adaptation policies, planning, and implementation - Adaptation planning landscape: - Adaptation plans developed at sector and community levels; community-based approach ensures inclusive decision-making. - Sectoral CIM plans feed into relevant ministry sector plans; sector-led planning often fragmented and driven by external financing and donor timelines. - Decentralized approach makes it difficult to prioritize adaptation at the national level; donors and investors may drive projects aligned with their strategies rather than national priorities. - MOF coordination role: - MOF’s CRICD oversees alignment among adaptation objectives across government levels, facilitates development of sector plans integrating climate risk management and sectoral development, and develops financing strategies to fund adaptation projects and incorporate them into budget plans. - National Disaster Management Unit provides technical and coordinating support for short-term disaster response. - Community inclusion: - CIM plans are inclusive and address concerns of the most vulnerable; village inputs feed into sectoral plans. - Some sectors (e.g., Ministry of Commerce, Industry, and Labor) have mature social dialogue systems to ensure adaptation measures address vulnerable groups and micro and small entrepreneurs. - Project appraisal and prioritization challenges: - Preparation of project appraisals is hampered by lack of capacity and comparable data on climate impacts, socioeconomic conditions, and impacts of previous projects (Table 6 referenced). - No consistent methodology for cost-benefit analysis of adaptation projects (exception: road transport sector which develops climate scenarios and risk assessments). - Recommendation: adopt a common approach to project assessment (including consistent cost-benefit analysis and climate risk assessment) to support efficient allocation of public resources in line with government priorities. - Additional measures suggested: - Incentivize private sector adaptation through better enforcement of regulations and financial inclusion. - Conduct climate risk assessments more consistently in adaptation planning and use a common methodology for cost-benefit analysis for project planning. _Italic: Source — IMF chapter content (1wsmea2022001 - excerpt)._ ### 50. Efficient adaptation decision-making is hampered by a paucity of data availability. ### 1wsmea2022001 - 50. Efficient adaptation decision-making is hampered by a paucity of data availability. ### Data availability and adaptation decision-making - Efficient adaptation decision-making is hampered by a paucity of data availability. - Data constraint is a common issue in small developing countries. - Adaptation is a learning process supported by data at all stages: assessing climate risks, planning adaptation, implementing adaptation measures, and monitoring and reviewing measures. - Samoa has data gaps in three areas: - (i) systemic climate risks assessment - (ii) consistent cost and benefit analysis - (iii) slow-moving climate stresses in the baseline projections - Collection of observational data and projected data is crucial for effective adaptation planning. - Samoa receives technical assistance from external development partners to collect climate data (example: World Bank technical support for vulnerability assessment in the road transport sector), but such support has not scaled up across sectors. ### Private sector role and constraints - The private sector could play an important role in climate adaptation, especially in agriculture and fisheries, tourism, and the power sectors. - Sector participation by private entities has been extensive, but challenges remain: - General guidelines and operational standards provided to the private sector do not always incorporate adaptation strategies. - Financial constraints limit private-sector adaptation: Samoa’s financial market is not well developed and smallholders or micro-scale businesses have limited access to finance. - Recommended supportive actions: - Remove financial constraints to enable adaptation activities by smallholders and micro businesses. - Provide adaptation guidance across all sectors to facilitate private-sector adaptation. ### Adaptation policy gaps (high-level findings from Table 6) - Climate risks and exposure: - Slow-moving climate stresses: heat, rainfall variability, and sea level rise relevant to agriculture, fisheries, health, power, and water. - Disaster hazards: increased intensity of tropical cyclones, extreme rainfall and flooding, landslides, droughts, and heatwaves. - Physical exposure: 70% of infrastructure and population are in the coastal area. - Sector vulnerabilities: agriculture susceptible to extreme events, drought, pests and disease due to minimally modernized farming; tourism accounts for a quarter of Samoa GDP and relies on climate-vulnerable marine and terrestrial resources. - Service access: Samoa has less than 50% of population with access to basic drinking water and managed sanitation. - Power sector: hydropower accounts for over 50% in Samoa’s renewable power supply; goal of reaching 100% renewable by 2025; sensitive to dry spells. - Adaptation goals and actions: - Sector plans target climate disaster risks: more intense tropical cyclones, more frequent flooding, more frequent drought. - Actions include establishing governance frameworks and support systems, enhancing sustainable climate finance, mainstreaming adaptation into national planning, implementation and monitoring, improving data and information management, strengthening coordination, and promoting awareness, education and advocacy. - Policy and implementation gaps: - Long-term climate risk assessment is lacking to project impacts of slow-moving stresses on macroeconomic baseline, especially for agriculture, fisheries, and tourism. - Adaptation planning is largely backward-looking, risking neglect of hazards not historically critical (example: heatwave hazard not taken into account). - Decision-making lacks systematic climate risk assessment due to technical constraints. - Adaptation decision-making is not guided by systematic cost-benefit analysis. - Disaster resilience building and post-disaster rehabilitation face budget constraints. - Most small-holder farmers and micro businesses lack access to financial markets to implement adaptation actions. - Lack of incentives or guidance to facilitate adaptation by private sectors and individuals. ### Non-fiscal public programs and recommendations (from Table 7 and text) - Many line ministries and implementing agencies (MAF, MNRE, SAT, EPC, MWTI) have adopted non-fiscal adaptation measures addressing storm/flooding and drought risks, risk and resource mapping, building codes and standards, and education/outreach. - Key recommendations and gaps: - Apply new regulations rigorously: MWTI finalized building codes incorporating climate and disaster risk considerations for new construction; risk zoning work is progressing but needs congruent implementation. - For droughts: current approach is reactive. Two suggested improvements: - (1) Prepare for future droughts using risk mapping and hydrological monitoring (examples: EPC optimal water allocation tools). - (2) Prepare operational guidelines for smallholder farmers for longer dry spells (examples: community small-scale water reservation, soil management to reduce evaporation, crop alternation). - Specific non-fiscal gaps noted: - Risk zoning is underway (MWTI) but not finalized, limiting PUMA’s ability to restrict development in flood zones. - Operational standards have not yet fully incorporated climate risk-proofing (EPC, SAT, MAF). - For droughts, MAF should liaise with MNRE’s MET Division to map water resources and monitor risks. - Extreme heat planning measures are largely not adopted: terrestrial and marine “hot spots” mapping, identifying cooling centers and vulnerable populations, operation guidelines in fisheries and tourism, and community-based early warning protocols are not adopted. ### Macro-fiscal implications: costs, financing, and debt sustainability - Aggregate costs and annualized shares (Table 8): - Total estimated costs over 2022-2026: Total 657 (millions of USD); Annualized 17.0 (percent of GDP) - Identified Adaptation Projects: Total 426 (millions of USD); Annualized 11.0 (percent of 2021 GDP) - Transportation: Total 23 (millions of USD); Annualized 1.6 (percent of GDP) - Flood mitigation: Total 79 (millions of USD); Annualized 2.0 (percent of GDP) - Water and Sanitation: Total 61 (millions of USD); Annualized 1.6 (percent of GDP) - Environment: Total 24 (millions of USD); Annualized 0.6 (percent of GDP) - Agriculture and Fisheries: Total 22 (millions of USD); Annualized 0.6 (percent of GDP) - Early Warning Systems: Total 10 (millions of USD); Annualized 0.3 (percent of GDP) - Social spending needs: Total 122 (millions of USD); Annualized 3.2 (percent of GDP) - Health: Total 41 (millions of USD); Annualized 1.1 (percent of GDP) - Education: Total 81 (millions of USD); Annualized 2.1 (percent of GDP) - Mitigation goals (NDC): Total 107 (millions of USD); Annualized 2.8 (percent of GDP) - Land transport: Total 62 (millions of USD); Annualized 1.6 (percent of GDP) - Maritime transport: Total 31 (millions of USD); Annualized 0.8 (percent of GDP) - Electricity: Total 8 (millions of USD); Annualized 0.2 (percent of GDP) - AFOLU: Total 4 (millions of USD); Annualized 0.1 (percent of GDP) - Waste, Tourism and Marine: Total 3 (millions of USD); Annualized 0.1 (percent of GDP) - Financing status and gap: - Of the US$657 million identified spending needs, US$306 million have committed funding from multilateral donors. - Another US$100 million could be expected from bilateral donors based on recent trends. - Remaining funding gap: US$250 million, roughly 6 percent of GDP per year if spread over the next five years. - Samoa’s fiscal space is constrained; additional grant financing will be necessary. - Public investment implications: - Fully carrying out identified climate-related projects over five years would significantly increase government spending. - If projects with identified donor financing are fully factored into medium-term plans and roughly half of outstanding spending needs are capital investment, Samoa would need to increase annual public investment spending by 3 percent of GDP. - Public investment for 2022-26 is projected at about 7-8 percent of GDP annually, compared to a historical average of around 6 percent of GDP since 2010. - Debt and growth implications: - Samoa is rated as being at a high risk of overall and external debt distress due to expected negative impacts of climate change and natural disasters. - The present value (PV) of Samoa’s public debt-to-GDP ratio is projected to breach the 70 percent threshold from 2034 onward under the DSA baseline. - Simulations using the IMF DIGNAD model indicate that investing an additional 2 percent of GDP in adaptation capital for the next five years would: - Save Samoa about 4.5 percent of 2021 GDP in output losses if a typical natural disaster occurs in 2027. - Reduce the negative fiscal impact: if adaptation investment is financed entirely through concessional borrowing, the overall increase in the debt-to-GDP ratio is contained to about 20 percent relative to about 23 percent in a disaster scenario with no additional adaptation investments. - Grant financing is necessary to avoid further debt build-up: - A financing mix of 80 percent grants versus 20 percent concessional loans for investments in adaptation capital and post-disaster reconstruction would contain the projected increase in the public debt-to-GDP ratio to 3.5 percent in the long run following the natural disaster. - Donor perspective: - Financing additional ex-ante adaptation investment is likely to result in net savings for international donors. - In the simulated scenario, if donors financed the additional adaptation investments, expected discounted net savings would amount to about 9 percent relative to the cost of financing post-disaster reconstruction under no policy change; savings would increase with more intense natural disasters. *Italic: Source — IMF staff report excerpt (1wsmea2022001).* ### 62. Long-term debt sustainability is estimated to improve with additional ex-ante ### 1wsmea2022001 - 62. Long-term debt sustainability is estimated to improve with additional ex-ante ### Long-term debt sustainability and ex-ante adaptation investment - Additional adaptation investment was assumed to mitigate 40 percent of the negative effects of recurrent natural disasters and climate change on growth and the fiscal balance, subject to some additional spending on maintenance of the adaptation capital stock. - Additional maintenance costs were assumed to equal the depreciation rate of 3 percent times the adaptation capital stock, financed by borrowing. - Scenario—financing mix with 80 percent grants and 20 percent concessional loans: - The present value of public debt breaches the debt sustainability threshold only in 2038 as opposed to 2034 under the baseline, and stays substantially below the baseline thereafter. - Scenario—financing with concessional loans (no grants): - Improves debt dynamics over the long term but leads to a significantly higher debt-to-GDP ratio during the first eight years of the projection period. - In both financing scenarios, the public debt-to-GDP ratio does not stabilize because residual climate-related effects continue to lower economic growth and raise financing needs. ### Donor discounted net savings (illustrative DSA / reconstruction context) - Table 9 (Samoa: Discounted Net Savings of International Donors*; percent of reconstruction costs): - Hazard Magnitude — Net Savings - Average historical (AH) impact — 9.3% - AH+10% — 14.1% - AH+20% — 18.1% - AH+30% — 21.6% - Note: Net savings are calculated as the difference between fiscal savings in the reconstruction phase and cost of extra investment spending. Both are discounted at 5 percent rate and measured in percent of reconstruction costs under no policy change. ### Sources of financing and access to climate finance - Samoa relies on international donor support, with the majority provided in the form of grants. - Between 2014 and 2018, Samoa received on average around 16 percent of GDP in development finance each year. - Of this, about 8 percent of GDP went to sectors broadly related to climate resilience and just under 1 percent of GDP went to activities expressly tagged as having either climate change mitigation or adaptation as their goals. - Samoa has accessed several global and regional concessional climate financing sources (GEF, GCF, World Bank, Asian Development Bank, Climate Investment Funds, Adaptation Funds, other multilateral climate funds) and ranks roughly in the middle of the PICs in recently committed climate finance. - Samoa does not have direct access accreditation for climate funds and relies on internationally accredited entities (in particular UNDP) for execution of GCF- and GEF-financed projects. - Samoa is seeking direct accreditation with the GCF for the Development Bank of Samoa; this process is likely to take time. - Bilateral donors (notably Australia, Japan, and New Zealand) have been important climate project funders. - Barriers and recommendations: - Access is hindered by complex and demanding requirements of climate funds and domestic capacity constraints common to small states. - Slow disbursement rates can undermine realization of secured climate finance. - The government should strategically match its climate project pipeline to financing sources that provide a positive balance of administrative costs and total funding access. - Combining smaller projects into one larger project with sub-components can reduce per-dollar administrative cost; when smaller projects cannot be combined or needs are urgent, prioritize bilateral donor financing for faster access and disbursement. - Private capital considerations: - Private capital can be mobilized to finance mitigation investments within limits. - Expanding renewable energy generation capacity could result in significantly lower tariffs, making the electricity sector a good fit for private sector funding. - Some mitigation investments in transport could be recouped through user fees. - Government guarantees may be required for large projects, creating potential contingent liabilities and necessitating careful risk exposure assessments. ### Public investment and financial management: Climate PIMA assessment - Overall finding: Some key aspects of public investment management are in place (coordination across the public sector and risk management), but project appraisal, selection, and review lack climate-specific elements. Public financial management has limited focus on climate issues and the budget does not identify climate-relevant spending. - Assessment framework: IMF Climate PIMA conceptual framework (assessment summarized in Table 10). - C1. Climate-aware planning: - National and sectoral public investment plans are consistent with the country’s climate objectives. - The SDS provides a five-year national plan; the new SDS was being finalized and expected to be published in end-2021. Sector plans are being updated in the context of the new SDS. - Climate adaptation and mitigation are integrated into the SDS and climate-relevant sector plans (e.g., agriculture, energy, transport) and are consistent with the SCCP and the NDC. - Samoa 2040 prioritizes climate-resilient infrastructure investment in climate-relevant sectors. - The adaptation and mitigation targets set in the 2nd NDC are conditional on external financial support. - The National Building Code and Urban Development Policy contain comprehensive coverage of climate and disaster risks; building codes and land-use regulations are well-developed and support climate-aware public investment planning. - Recommendation: Main stakeholders (line ministries and state-owned enterprises) would benefit from technical guidance and support to integrate climate change into public investment planning. Responsibilities of central teams (MOF’s CRICD and/or MNRE’s sectoral divisions) could be expanded to provide this guidance. - C2. Coordination across the public sector: - Decision making on climate-related public investment is well coordinated across the central government; all budget-funded projects go through CDC approval and are guided by the SDS, sector plans, and corporate plans. - The Project Planning and Programming Manual ensures a common approach and specifies roles/responsibilities and integration of project planning into the budget cycle. - Externally financed projects are approved by the CDC and discussed at the Aid Coordination Committee. - Community-level projects involve consultation and participation through the CIM planning process. - The regulatory and oversight framework for Public Corporations (PCs) ensures climate-related investments are consistent with national climate policies and guidelines. - PCs: EPC and LTA manage about two-thirds of infrastructure assets. PC investments above SAT 1 million go through government appraisal and CDC approval; smaller investments decided by PC boards. - Table 11 (key financial data for PCs involved in climate-relevant infrastructure; million SAT): - Electric Power Corporation — Assets 516; Liabilities 231; Equity 285 - Land Transport Authority — Assets 22; Liabilities 14; Equity 8 - Samoa Airport Authority — Assets 184; Liabilities 128; Equity 56 - Samoa Housing Corporation — Assets 54; Liabilities 20; Equity 34 - Samoa Land Corporation — Assets 113; Liabilities 71; Equity 42 - Samoa Ports Authority — Assets 278; Liabilities 135; Equity 143 - Samoa Water Authority — Assets 192; Liabilities 126; Equity 66 - Samoa Sports Facilities Authority — Assets 75; Liabilities 49; Equity 26 - Total — Assets 1434; Liabilities 774; Equity 660 - Note: LTA accounts do not show the value of road assets; a recent valuation study indicated those assets could be 1.5 billion SAT. - C3. Project appraisal and selection: - There is no standard methodology for climate analysis in project appraisal. - The Project Preparation Guidelines (MOF, 2009) provide a comprehensive appraisal process but do not require climate-specific analysis according to a standard methodology; they include general EIA requirements to assess and quantify environmental impacts and identify mitigating measures. - Many projects supported by development partners undergo climate-related risk assessment according to partner guidelines and methodologies. - Recommendation: Update project preparation and EIA guidelines by incorporating a unified approach to climate impact assessment, including cost/benefit analysis of climate adaptation projects; MNRE could develop specific methodological guidance. - The PPP framework does not include specific climate-related elements but includes guidance on risk sharing in events of natural disasters; no explicit climate references in the PPP Handbook. More specific guidance is needed to allocate climate risks and define climate-related performance criteria in PPP contracts. - Project selection: Climate-related factors are considered but there is no formalized project selection mechanism, reducing transparency. - Current process: MOF verifies proposals contribute to achieving SDS objectives prior to CDC consideration; SDS includes climate adaptation and mitigation objectives but lacks formal structured selection criteria and weights. - Recommendation: Formulate and structure SDS objectives (including climate) as explicit selection criteria with relative weights and establish a formal, published project selection mechanism. - C4. Budgeting and portfolio management: - Public financial management has limited focus on climate issues and the budget does not identify climate-relevant spending; ex post review, monitoring, and reporting mechanisms tied to climate outcomes could be strengthened. *Source: IMF staff estimates and IMF mission assessment.* ### 77. Information on climate-related public investment projects is fragmented and it is ### 1wsmea2022001 - 77. Information on climate-related public investment projects is fragmented and it is ### Information gaps and transparency on climate-related public investment - Information on climate-related public investment projects is fragmented and it is hard to see if projects meet climate objectives. - There is no consolidated overview of climate-relevant public investment projects in budget documents nor systematic reporting on the implementation of these projects. - The 2015 Public Sector Investment Program (PSIP) covered 2015/16 – 2017/18 and provided detailed information on ongoing and planned public investment, but there has been no comprehensive update of the PSIP. - Fiscal Strategy documents for 2020/21 and 2021/22 provided summary overviews of public investment, but a consolidated mechanism is absent. - There is no mechanism for budget coding (or “tagging”) climate-related budget expenditures; some major climate-related investment projects can be identified by project names in budget documents or separate SOE corporate plans. - Table 12 provides an overview of major public investment projects in the 2021/22 budget period; most of the major projects have an explicit climate angle. ### Major climate-related public investment projects (2021/22) - Note: TOTAL COST (thousand WST) - Enhanced Road Access Project — Transport — 6,395 - Samoa Climate Resilient Transport Project — Transport — 33,256 - Central Cross Island Road Project — Transport — 11,512 - Central Cross Island Road Upgrading Project — Transport — 2,865 - Enhancing Safety, Security, and Sustainability of Apia Port Project — Transport — 10,233 - Enhancing Safety Security and Sustainability of Apia Ports (ESSSAP) project — Transport — 12,791 - Samoa Port Development Project (ADB) — Transport — 3,837 - Samoa Connectivity Project — Telecom — 9,439 - Samoa Connectivity Project — Telecom — 1,617 - Improving the Performance and Reliability of RE Power System in Samoa — Energy — 1,341 - Enhancing Climate Resilience of Coastal Resources & Communities (PPCR) — Environment — 2,067 - Economy wide integration of CC Adaptation & Disaster Risk Mgmt. — Environment — 7,000 - Pacific Resilience Program (PREP Samoa) — Environment — 8,161 - The Project for Provision of Emergency Rescue Equipment to SFESA — Environment — 354 ### Recommendations to improve transparency and tracking - Provide a comprehensive overview of all major projects in budget documents, similar to the 2015/16 PSIP. - Consider establishing a budget tagging mechanism for all climate-related spending (see Box 2 example of Nepal’s Climate Tagging System). ### Example: Nepal Climate Tagging System (summary of Box 2) - Uses a climate budget coding system to track climate-relevant budgets and expenditures and to support prioritization of climate-relevant public investment programs and projects in the budget formulation and the Medium-Term Expenditure Framework. - Sector ministries tag proposed budgets through the Line Ministry Budget Information System; tagging is reviewed and validated by the National Planning Committee. - Tagged expenditures are presented as an annex to the budget document (Redbook) and in an annual citizens’ climate budget. - Climate change budget code has been implemented in the national budget since the fiscal year 2012/13. - Nepal’s climate coding identified eleven categories of climate-related programs (listed verbatim categories 1–11 in source). - Climate Change Budget Code assesses each activity’s climate relevance: - Highly relevant — Expected expenditure is more than 60% of the total budget - Relevant — Expected expenditure is 20% to 60% of the total budget - Neutral — Expected expenditure is less than 20% of the total budget ### Monitoring, audit, and asset management findings - There is no ex-post review or audit of projects specifically for their climate adaptation and/or mitigation outcomes. - Samoa Audit Office (SAO) is mandated for public sector audit services and promotes improvement in public sector administration; SAO focuses on financial performance but recognizes climate change, environment, and disaster risks as important emerging areas. - SAO is conducting financial audits of three climate-related projects funded by the World Bank. - SAO has undertaken environmental audits (e.g., solid waste and rubbish collection) in the past; audit reports were published as part of Reports to Parliament. - The existing Environmental Audit Manual is being updated to international Supreme Audit Institution standards. - Samoa Monitoring Evaluation Reporting Framework can be applied at the project level to map project outcomes to sector plan outcomes; the Framework and SAO provide good entry points for ex-post review and monitoring of climate outcomes. - Asset Management Framework and maintenance practices do not explicitly address climate-related risks. - Asset registers exist at line ministries and SOEs; some are linked to a MOF-managed database. - MOF has a register of minor assets (below SAT100,000); other assets captured in line ministries’ and PCs’ registers. - Asset registers do not include information related to climate damages or vulnerability. - Some PC asset registers have GIS features that can map risks and vulnerability of assets. - The Asset Management Framework is being updated and will include risk assessment (not specifically climate-related). - Maintenance funding is through the regular budget process; improving the asset register could ensure maintenance of existing assets is more systematic. ### Risk management and fiscal risk analysis - Samoa has a disaster risk management strategy and has mainstreamed disaster risk management since the Disaster and Emergency Management Act in 2007. - National Emergency Operation Center established and staffed with the DMO team and secondees from technical agencies and sector ministries. - MOF’s Disaster Finance team collaborates with DMO through the National Emergency Operation Center. - Multi-hazard Early Warning System is in place and operating. - Government has put in place several ex-ante financing mechanisms to manage exposure of public infrastructure to climate-related risks. - Samoa does not conduct a fiscal risk analysis related to climate change and natural disasters. - To manage negative shocks from climate-related hazard events, Samoa needs to: - Quantify contingent liabilities related to those events, - Plan mitigation measures, - Develop a governance framework. - Government is considering external technical support to develop climate-related fiscal risk analysis. - International examples cited include the UK Fiscal Risk Report 2021 and fiscal risk analyses/statements from the Philippines and the United States. ### DIGNAD model: role and calibration for Samoa - DIGNAD (Debt, Investment, Growth, and Natural Disasters) is a dynamic two-sector small open economy model that simulates impacts of natural disasters and policy trade-offs; it distinguishes standard physical capital and adaptation capital. - Natural disasters in the model affect the economy via five channels: (i) damages to public capital; (ii) damages to private capital; (iii) temporary productivity loss; (iv) decline in public investment efficiency during reconstruction; (v) loss in credit worthiness. - For Samoa, a synthetic natural disaster shock calibrated to an average impact of tropical cyclone Evan and 2009 earthquake/tsunami results in 16.5 percent of GDP in losses and 13.6 percent of GDP in damages. - Reconstruction of public infrastructure is assumed to take four years, after which the stock of standard capital returns to the pre-disaster level. - Adaptation capital is more resilient and suffers smaller damages; adaptation capital carries a marginally larger rate of return due to climate-proofing. - Financing options in the model include grants and concessional loans from international donors; the government budget constraint incorporates external concessional debt, public adaptation and standard investment expenditures, public transfers, donor grants, and taxes. The parameter ν governs the relative cost premium of adaptation infrastructure. ### Calibrated parameters and initial steady-state values (in percent) - Initial return on standard infrastructure investment — 25.0 - Initial return on adaptation infrastructure investment — 30.0 - Public investment to GDP ratio — 10.1 - Grants to GDP ratio — 8.8 - Consumption tax (VAT) rate — 15 - Public debt to GDP ratio — 45.3 - Remittances to GDP ratio — 27.1 - Imports to GDP ratio — 37.6 - Real interest rate on domestic debt — 11.4 - Real interest rate on concessional debt — 0 - Depreciation rate of public infrastructure — 3 *Source: Excerpt from 1wsmea2022001 (Samoa chapter) as provided.* ### References ### References ### Asian Development Bank and regional reports - Asian Development Bank (2009) “Establishment of the Asia Pacific Disaster Response Fund”, Asian Development Bank. - Asian Development Bank (2014) “Samoa: Economic Recovery Support Program—Subprograms 1 and 2”, ADB Completion Report, Asian Development Bank. - Asian Development Bank (2021) “Asian Development Bank and Samoa: Fact Sheet”, Asian Development Bank. - Grütter, J. M., & Kim, K. J. (2019) “E-mobility options for ADB developing member countries”. ADB Sustainable Development Working Paper No. 60. ### International Monetary Fund (IMF) publications - Buffie, E., A. Berg, R. Portillo, C. Pattillo, and L.F. Zanna (2012) “Public Investment, Growth, and Debt Sustainability: Putting together the Pieces,” IMF Working Paper No. 12/144, Washington, DC: International Monetary Fund. - Cantelmo, A., L. Bonato, G. Melina, and G. Salinas (2019) “Policy Trade-Offs in Building Resilience to Natural Disasters: The Case of St. Lucia.” IMF Working Paper No. 19/54, Washington, DC: International Monetary Fund. - Cantelmo, A., G. Melina, and C. Papageorgiou (2019) “Macroeconomic Outcomes in Disaster-Prone Countries,” IMF Working Paper No. 19/217, Washington, DC: International Monetary Fund. - International Monetary Fund (2010) “Samoa: Request for Disbursement Under the Rapid-Access Component of the Exogenous Shocks Facility: Staff Report; Press Release on the Executive Board Discussion; and Statement by the Executive Director for Samoa”, IMF Country Report No. 10/46, Washington, DC: International Monetary Fund. - International Monetary Fund (2013) “Samoa: Request for Disbursement Under the Rapid Credit Facility-Staff Report; Staff Supplement; Press Release on the Executive Board Discussion; and Statement by the Executive Director for Samoa”, IMF Country Report No. 13/162, Washington, DC: International Monetary Fund. - International Monetary Fund (2015) “Samoa: Financial Sector Assessment Program”, IMF Country Report No. 15/192, Washington, DC: International Monetary Fund. - International Monetary Fund (2017a) “Large Natural Disasters-Enhancing the Financial Safety Net for Developing Countries”, IMF Policy Paper, Washington, DC: International Monetary Fund. - International Monetary Fund (2017b) “The Effects of Weather Shocks on Economic Activity: How Can Low-Income Countries Cope?” in World Economic Outlook: Seeking Sustainable Growth—Short-Term Recovery, Long-Term Challenges. - International Monetary Fund (2019) “How to Mitigate Climate Change?” Fiscal Monitor. Washington, DC, October. - International Monetary Fund (2020) “Samoa: Request for Disbursement Under the Rapid Credit Facility-Press Release; Staff Report; and Statement by the Executive Director for Samoa”, IMF Country Report No. 20/138, Washington, DC: International Monetary Fund. - International Monetary Fund (2021a) “Samoa: 2021 Article IV Consultation-Press Release; and Staff Report”, IMF Country Report No. 21/56, Washington, DC: International Monetary Fund. - International Monetary Fund (2021b) “Unlocking Access to Climate Finance for Pacific Island Countries,” Departmental Paper No. 21/20, Washington, DC: International Monetary Fund. - International Monetary Fund (2021c) “Fiscal Policies to Address Climate Change in Asia and the Pacific,” IMF Departmental Paper No. 21/07, Washington, DC: International Monetary Fund. - International Monetary Fund (2021d) “Climate-Sensitive Management of Public Finances—Green PFM”, Washington, DC: International Monetary Fund. - International Monetary Fund (2021e) “SAMOA - PEFA Assessment of Climate Responsive Public Financial Management”, Washington, DC: International Monetary Fund. - Melina, G. and M. Santoro (2021) “Enhancing Resilience to Climate Change in the Maldives.” IMF Working Paper No. 21/96, Washington, DC: International Monetary Fund. - Nishizawa, H., S. Roger and H . Zhang (2019) “Fiscal Buffers for Natural Disasters in Pacific Island Countries”, IMF Working Paper No. 19/152, Washington, DC: International Monetary Fund. - Tiedemann J., V. Piatkov, D. Prihardini, J.C. Benitez, and A. Zdzienicka (2021) “Meeting the Sustainable Development Goals in Small Developing States with Climate Vulnerabilities: Cost and Financing”, IMF Working Paper Volume 2021: Issue 062. ### World Bank, PCRAFI, GFDRR and related World Bank outputs - World Bank (2010a) “Program Document for a Proposed Credit from the IDA Crisis Response Window Pilot Program to the Independent State of Samoa”, Washington, DC: World Bank. - World Bank (2010b) “Cost-Benefit Analysis in World Bank Projects,” Washington, DC: Independent Evaluation Group, World Bank. - World Bank (2011) “Samoa – country risk profile: Pacific catastrophe risk assessment and financing initiative”, Washington, DC: World Bank. - World Bank (2014) “Financial Protection Against Natural Disasters: An Operational Framework for Disaster Risk Financing and Insurance”, Washington, DC: World Bank. - World Bank (2015a) “Advancing Disaster Risk Financing and Insurance in the Pacific”, PCRAFI, Washington, DC. - World Bank (2015b) “Samoa: Disaster Risk Financing and Insurance”, PCRAFI, Washington, DC. - World Bank (2017) “PCRAFI Program Phase II: Furthering Disaster Risk Finance in the Pacific”, PCRAFI, Washington, DC. - World Bank (2018) “Furthering Disaster Risk Finance in The Pacific: Increasing Financial Protection for Fourteen Pacific Island Countries”, Results in Resilience Series, GFDRR, PCRAFI, Washington, DC. - World Bank (2020a) “PCRIC 2020 Final Financial Statements and Audit Opinion”, PCRAFI, Washington, DC. - World Bank (2020b) “Adaptation Principles: A Guide for Designing Strategies for Climate Change Adaptation and Resilience”, Washington, DC.: World Bank. - World Bank (2020c) “Adaptive Social Protection: Building Resilience to Shocks”, Washington, D.C.: World Bank. - Spearing, M. (2019) “IDA’s Crisis Response Window: Learning Lessons to Drive Change”, Discussion Paper, London: Centre for Disease Protection. ### United Nations and UN agencies - United Nations (2019) “25 Years of Adaptation under the UNFCCC – Report by the Adaptation Committee”, United Nations Climate Change Secretariat, Bonn, Germany. - United Nations (2015) “Global Assessment Report on Disaster Risk Reduction”, United Nations Office for Disaster Risk Reduction. - United Nations (2017) “EPA’s Smart Growth Fixes for Climate Adaptation and Resilience”, EPA 231-R-17-001, United Nations US EPA. - UN Office for the Coordination of Humanitarian Affairs (2001) “Samoa - Floods OCHA Situation Report No. 1” available at: https://reliefweb.int/report/samoa/samoa-floods-ocha-situation-report-no-1 - UNICEF and World Health Organization (2019) “Progress on household drinking water, sanitation and hygiene 2000- 2017. Special focus on inequalities,” New York, NY. ### Food and agricultural, energy, and sector studies - Food and Agriculture Organization (2018) “Impacts of Climate Change on Fisheries and Aquaculture”, Fisheries and Aquaculture Technical Paper 627, Rome: FAO. - Fuganti, G., Minelli, M. and Rojas, O. (2020) “Practical guidelines for Early Warning Early Action plans on agricultural drought”, Panama City. FAO. https://doi.org/10.4060/cb0624en - Hutton, G. and M. Varughese (2016).“The Cost of Meeting the 2030 Sustainable Development Goal Targets on Drinking Water, Sanitation, and Hygiene,” World Bank, Washington, DC. - Gay, D., Rogers, T., & Shirley, R. (2018) “Small island developing states and their suitability for electric vehicles and vehicle-t o-grid services”. Utilities Policy, 55, 69-78. - Vaiaso, T. J., and M.W. Jack (2021) Quantifying the trade-off between percentage of renewable supply and affordability in Pacific island countries: Case study of Samoa. 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Bangalore and J. Rozenberg (2017) “Unbreakable: Building the Resilience of the Poor in the Face of Natural Disasters”, Climate Change and Development, Washington, DC: World Bank. - Hallegatte, S., A. Vogt-Schilb, J . Rozenberg, M. Bangalore & C. Beaudet (2020) “From Poverty to Disaster and Back: a Review of the Literature”, Economics of Disasters and Climate Change 4: pp. 223–247. - Cantelmo, A., G. Melina, and C. Papageorgiou (2019) “Macroeconomic Outcomes in Disaster-Prone Countries,” IMF Working Paper No. 19/217, Washington, DC: International Monetary Fund. - Gay, D., Rogers, T., & Shirley, R. (2018) “Small island developing states and their suitability for electric vehicles and vehicle-t o-grid services”. Utilities Policy, 55, 69-78. - Gaspar V., D. Amaglobeli, M. Garcia-Escribano, D. Prady, M. Soto. (2019) “Fiscal Policy and Development: Human, Social, and Physical Investments for the SDGs”, SDN No. 19/03. *Source: 1wsmea2022001 - References* --- _Source: https://www.imf.org/-/media/files/publications/cr/2022/english/1wsmea2022001.pdf_