An International Monetary Fund (IMF) team led by Giovanni Ganelli visited
Samoa from February 21-March 5 to hold discussions with authorities on the
2018 Article IV Consultation.
[1]
The team met with 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 Atalina Ainuu-Enari, senior government
officials, and representatives of the private sector. A Senior Advisor to
the Executive Director for the Asia and Pacific Constituency also joined
the meetings. At the conclusion of the meetings, Mr. Ganelli issued the
following statement:
“The Samoan economy continues to perform well and has shown resilience.
Growth was robust at 2.5 percent in the 2016/17 fiscal year (ending June
30), but is expected to temporarily moderate to 1.8 percent in 2017/18,
mostly reflecting the closure of the Yazaki manufacturing plant. In the
medium term, growth is projected to rebound—averaging around 3 percent in
the next five years—supported by infrastructure spending, preparation for
the Pacific Games (PG) that Samoa will host in 2019, and new business
operations at the former Yazaki plant. Inflation is expected to remain
within the Central Bank of Samoa (CBS) 3 percent target. This outlook is
subject to downside risks related to natural disasters, and spillovers from
the partial withdrawal of correspondent banking relationships.
“In recent years, the authorities have made progress toward fiscal
consolidation, but, while the fiscal deficit remains well below the
authorities’ 2 percent target, it widened to 1.1 percent of GDP in 2016/17,
up from 0.4 percent of GDP in the previous year The fiscal position is
projected to loosen further in the medium term, given limited scope for
reductions in current spending, a projected increase in development
expenditure, and uncertainties on the revenue impact of planned tax
reforms. Strengthening the fiscal framework would solidify the gains from
previous consolidation efforts. Specific measures in this regard should
include targeting a debt-to-GDP ratio of 40 percent in the long term, and
keeping the overall fiscal deficit under 2 percent of GDP. The level of
international reserves is adequate according to the Fund’s metric for
Assessing Reserves Adequacy for credit constrained economies. Monetary
policy remains appropriately accommodative.
“The Samoan authorities have taken welcome steps to mitigate Samoa’s
vulnerability to the partial withdrawal of correspondent banking
relationships, including progress with the implementation of the national
strategy for Anti-Money Laundering and Combating the Financing of Terrorism
(AML/CFT), which should continue. Further progress in this area should also
include establishing a database for customer identification and monitoring,
and addressing risks from the offshore sector by aligning the laws
governing it with international AML/CFT standards. The IMF is supporting
the authorities’ efforts through technical assistance and by promoting
dialogue between banks, Money Transfer Operators and regulators in the
region.
“Financial stability indicators suggest that the banking system remains
sound. Commercial banks are well capitalized and earnings, profitability
and liquidity indicators are within historical norms.
“Structural reforms should focus on boosting growth prospects by increasing
resilience to natural disasters, improving the business environment, and
fostering financial inclusion. In this regard, the mission encouraged the
authorities to speedily implement measures aimed at strengthening
resilience and improve financial inclusion, including those laid out in the
Strategy for the Development of Samoa 2016/17-2019/20 and in the National
Financial Inclusion Strategy for Samoa 2017-2020.
“The IMF team would like to thank the Ministry of Finance, the Central Bank
of Samoa, other ministries and government agencies, and private sector
interlocutors for their open and constructive discussions and for their
generous hospitality.”
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.
