An International Monetary Fund (IMF) team led by Niamh Sheridan visited
Samoa from February 8-17 to hold discussions with authorities on the 2017
Article IV Consultation.
[1]
The team met with the Minister of Finance Sili Epa Tuioti, Chief Executive
Officer of Ministry of Finance Lavea Tupa'imatuna Iulai Lavea, the Governor
of the Central Bank of Samoa (CBS) Atalina Ainuu-Enari, senior government
officials, as well as development partners and representatives from the
private sector. An Advisor from the Asia and the Pacific Executive Director’s office also joined the mission. Staff from the Asian Development Bank (ADB) and the World
Bank joined the mission. The team expresses its appreciation to the
authorities and relevant stakeholders for the open and constructive
discussions.
At the conclusion of the meetings, Ms. Sheridan issued the following
statement:
“The Samoan economy continues to perform well and activity picked up in FY
2015/16 (ending June 30). Tourism arrivals increased; a new processing
plant helped boost fishing revenues; and agriculture benefitted from
government initiatives and new export markets. Looking ahead, GDP is
expected to grow at around 2 percent annually, driven by construction
activity, infrastructure development and improvements in the business
environment. However, this outlook is subject to downside risks related to
natural disasters, strains in correspondent banking relationships and
elevated contingent liabilities from public financial institutions (PFIs)
and state owned enterprises (SOEs). The closure of the largest
manufacturing employer is also likely to adversely affect growth.
“Current policy settings of fiscal consolidation combined with
accommodative monetary policy are appropriate. This policy mix helps
support economic activity while rebuilding fiscal buffers to handle
external shocks and natural disasters. The 2015/16 Budget outcome reflected
concerted efforts to rationalize expenditure and improve revenue collection
and the
deficit declined to 0.4 percent from 3.9 percent of GDP. Efforts to
consolidate the fiscal position were appropriate, given strong growth and
the need to rebuild buffers. To achieve the government’s target of reducing
public sector debt to 50 percent of GDP by 2020, continued expenditure
restraint is needed but health, education and climate resilient
infrastructure expenditure should be prioritized. Additional measures are
needed to shore-up revenues including through improved compliance and by
broadening the tax base.
“Samoa’s remittance sector is facing increasing challenges and many money
transfer operators (MTOs) are experiencing difficulties in accessing
financial services – referred to as derisking. Remittances are
approximately 18 percent of GDP and about 80 percent are channeled through
MTOs. Derisking is increasing the fragility of the remittances sector and
is likely to further increase the cost of remittances. The Samoan
authorities have taken important steps to address derisking, including
active engagement with global stakeholders. Recent publication of the
national strategy for Anti-Money Laundering and Combating the Financing of
Terrorism (AML/CFT) was an important step and the mission encourages
continued efforts to enhance compliance with global AML/CFT standards. The
mission welcomes the authorities’ commitment to establish a database,
referred to as Know-your-Customer utility, which can help facilitate
remittances by enhancing compliance. The IMF is supporting the government’s
efforts through a proposed pilot project and an IMF technical assistance
mission is planned for June 2017.
“Financial stability indicators suggest a generally sound banking system,
though there are risks stemming from high loan concentration, the number of
borrowers with a high loan-to-capital ratio, and the potential for a sharp
deterioration in asset quality in the event of a natural disaster.
“Continued structural reforms are needed to improve Samoa’s growth
prospects. The mission welcomes the government’s continued efforts to
increase the accountability and efficiency of public enterprises, which
will also help alleviate financial sector vulnerabilities. The introduction
of the personal property register will improve access to finance and will
support private sector growth. Skills shortages remain a significant
impediment for businesses and targeted efforts to improve vocational skills
and accreditation could help ease these shortages.
“The IMF continues to support Samoa’s reform efforts by providing technical
assistance and training in government finance statistics, through the
implementation of the enhanced General Data Dissemination System (e-GDDS).
A IMF Statistics Department e-GDDS mission overlapped with the Article IV
mission to assist authorities in rolling out the system, making Samoa the
first country in the Asia and Pacific region to develop a national data
hub.”
[1]
Under Article IV of the IMF's Articles of Agreement, the IMF holds
bilateral discussions with members. A staff team visits the country
(typically on an annual basis) to collect economic and financial
information and hold discussions with officials on the country's
economic developments and policies. On return to headquarters, the
staff prepares a report, which forms the basis for discussion by
the Executive Board. At the conclusion of the discussion, the
Managing Director, as Chairman of the Board, summarizes the views
of Executive Directors, and this summary is transmitted to the
country's authorities.
