2026 Article IV Consultation for Samoa: IMF Staff Concluding Statement

Mission Concluding Statement

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2026 Article IV Consultation for Samoa: IMF Staff Concluding Statement

July 29, 2026

Apia, Samoa: Samoa's strong post-pandemic recovery is giving way to subdued growth as weaker domestic demand is compounded by adverse external shocks. Higher global energy prices, elevated external risks, and persistent structural challenges are expected to continue weighing on the economy. Policy priorities should therefore focus on preserving macroeconomic stability through a prudent but supportive fiscal stance, remaining vigilant against inflationary pressures, safeguarding financial sector resilience, and advancing structural reforms to strengthen medium-term growth.

Recent Development, Outlook, and Risks

Samoa has continued to demonstrate resilience despite a challenging external environment. Low public debt, ample international reserves, and prudent macroeconomic management have helped preserve stability. However, higher global energy prices, climate-related risks, infrastructure gaps, a narrow production base, and outward migration continue to weigh on medium-term growth and complicate policy trade-offs. Against this backdrop, economic activity has slowed markedly over the past year, reflecting both cyclical headwinds and structural constraints.
Following a strong post-Pandemic recovery, growth has slowed sharply. Real GDP is estimated to have grown by just 0.4 percent in FY2025/26, down from 4.2 percent in FY2024/25. The slowdown reflects both domestic and external factors. Domestically, weak household consumption and subdued private investment have weighed on demand. The unwinding of the one-off boost from the 2024 Commonwealth Heads of Government Meeting (CHOGM), together with weak agricultural production and commerce sector activity, has further dampened growth. More recently, rising global fuel prices and shipping costs, amid heightened global uncertainty, have increased import and operating costs, further weighing on economic activity. Inflation remained subdued through much of FY2025/26, with average headline inflation at 1.4 percent. However, sharp increases in fuel prices during May–June 2026 pushed end-period inflation to 5.8 percent in June 2026. The current account surplus is estimated at around 4 percent of GDP in FY2025/26, supported by strong tourism and remittance inflows. Higher fuel import costs raised imports, although weak household consumption and business activity partly offset this effect. Despite estimated overall and primary fiscal surpluses of 0.7 percent and 1.1 percent of GDP, respectively, the fiscal impulse—measured by the primary balance excluding grants—suggests that fiscal policy remained expansionary in FY2025/26.
The economy is expected to recover gradually, although the near-term outlook remains challenging. Growth is projected to rebound to 2 percent in FY2026/27, supported by an expansionary fiscal stance. However, the recovery is expected to remain modest, as elevated oil prices continue to weigh on real incomes, private consumption, tourism demand, and project implementation. Inflation is projected to rise to 4½ percent in FY2026/27, reflecting the pass-through of higher fuel and food prices, with most of the increase occurring in the first half of the fiscal year. The current account is projected to shift to a deficit of around 3 percent of GDP, primarily reflecting higher energy import costs, while international reserves are expected to remain ample. Over the medium term, growth is projected to stabilize at around 2½ percent, constrained by persistent structural impediments, including weak productivity growth, infrastructure gaps, a narrow production base, and labor shortages.
Risks are tilted to the downside. Escalating geopolitical tensions, commodity price volatility, rising trade protectionism, weaker growth in tourism source markets, and more frequent climate-related shocks could weigh on growth and external balances. Domestically, inflation could prove more persistent if demand strengthens or credit growth remains rapid amid abundant liquidity, while continued outward migration could further constrain productive capacity.

Policy Discussions

Policies should focus on mitigating the near-term impact of the global energy price shock while preserving Samoa's hard-won macroeconomic stability and strengthening resilience. Given the adverse supply-side shock, weak domestic demand, and available fiscal space, a temporary fiscal expansion is appropriate to support vulnerable households and productive investment. Monetary policy should remain vigilant against inflationary pressures and second-round effects, while strengthening financial sector oversight. Structural reforms should boost productivity, foster private sector development, and raise medium-term growth.

A. Fiscal Policy

Near-term fiscal policy should provide targeted support to cushion the impact of the global energy price shock while preserving fiscal sustainability. The FY2026/27 budget envisages a continued expansionary fiscal stance. In staff's view, a temporary expansionary stance is appropriate given the adverse impact of higher energy prices on households and businesses, available fiscal space, and Samoa’s strong external position. At the same time, support measures should remain consistent with medium-term fiscal sustainability. Staff welcome the authorities’ efforts to strengthen social assistance and better target support toward the most vulnerable households.
Support measures should continue to rely on targeted assistance rather than broad-based price controls or subsidies. Staff welcome the authorities' commitment to maintaining a high degree of fuel price pass-through while strengthening social assistance. Any additional support should be well targeted, transparent, and temporary. Generalized fuel subsidies should be avoided except as a last resort, as they are costly, regressive, and difficult to unwind. Staff note the authorities' one-off financial support for the Electricity Power Corporation to mitigate the impact of the global energy price shock. Over time, however, electricity tariffs should be gradually restored to cost-recovery levels through a transparent pricing mechanism.
Fiscal policy should also support productive capacity while remaining aligned with implementation capacity. Public investment can strengthen growth and resilience, but persistent under-execution of capital spending, notably under the District Development Program (DDP), underscores the need to improve project appraisal, procurement, implementation, and monitoring. Further expansion of the DDP should be contingent on demonstrable improvements in execution, transparency, and accountability. Initiatives with potential fiscal risks, including public enterprise-related projects, should proceed only after robust credit risk assessments, transparent financing arrangements, and clear safeguards to contain contingent liabilities.
Strengthening the fiscal framework remains critical to safeguarding fiscal sustainability and resilience. Near-term reforms should focus on improving budget realism, macro-fiscal forecasting, revenue projections, fiscal reporting, and public investment management. Over time, the authorities should strengthen the medium-term fiscal framework by publishing the calibration of fiscal anchors, providing clearer ex ante guidance for budget preparation and execution, and specifying well-defined escape clauses and credible paths for returning to the fiscal anchors following shocks.
Samoa's debt dynamics remain broadly unchanged since the 2024 Article IV consultation, although climate vulnerabilities continue to pose long-term fiscal risks. The updated debt sustainability analysis assesses Samoa at a moderate risk of external and overall debt distress. Most debt sustainability indicators remain below their thresholds under stress tests but are sensitive to adverse shocks, particularly more frequent and severe climate-related events. Preserving fiscal buffers, strengthening public investment and debt management, and reinforcing the medium-term fiscal framework remain critical to safeguarding debt sustainability.

B. Monetary and Exchange Rate Policies

Monetary policy should remain vigilant against inflationary pressures. The Central Bank of Samoa (CBS) should maintain its current monetary policy stance, with the policy rate remaining around the estimated neutral range of 2–3 percent. The CBS should remain vigilant to second-round effects from higher fuel prices and stand ready to tighten policy if inflation expectations show signs of becoming de-anchored, particularly under a more adverse commodity price scenario.
Further strengthening liquidity management is essential to enhance the effectiveness of monetary policy. The CBS should continue improving its liquidity forecasting framework, expand open market operations, and consider reforming the statutory reserve deposit requirement to absorb excess liquidity. Over time, a gradual transition to an interest-rate-based operational target, supported by a well-defined policy corridor and standing facilities, would strengthen policy communication and improve monetary transmission.
The exchange rate basket peg continues to serve Samoa well as the appropriate nominal anchor. Supported by ample international reserves and a strong external position, the peg remains a key pillar of macroeconomic stability by anchoring inflation expectations and reinforcing policy credibility. The current exchange rate arrangement remains appropriate. Continued prudent macroeconomic policies will be essential to preserve external stability and maintain confidence in the peg.

C. Financial Sector Policies

Financial sector risks remain contained, but emerging vulnerabilities warrant close monitoring. Lending by public financial institutions (PFIs), particularly to households, has expanded rapidly, while nonperforming loans (NPLs) have risen in some segments, largely reflecting the CBS's alignment of PFI loan classification standards with those of commercial banks. The CBS should continue to closely monitor PFI lending and bank asset quality, ensure adequate provisioning, strengthen credit risk management, and further enhance the supervisory framework. Priorities include developing macroprudential tools, consistently enforcing prudential standards across banks and PFIs, strengthening PFI governance and oversight, and ensuring that PFI lending remains aligned with their policy mandates.
Expanding access to finance is key to private sector development. Despite ample system liquidity, many businesses—particularly small and medium-sized enterprises—continue to face financing constraints due to limited collateral, incomplete financial records, and inadequate capacity to prepare project feasibility studies. Reforms should focus on addressing these bottlenecks. The planned credit information register would further improve credit allocation, support financial inclusion, and strengthen financial sector resilience.
Amendments to the CBS Act should strengthen governance, transparency, and accountability while safeguarding the CBS’s institutional and financial autonomy. A strong and independent central bank is essential for effective monetary and financial policymaking, preserving policy credibility, and maintaining macroeconomic and financial stability.
Safeguarding correspondent banking relationships (CBRs) remains essential given Samoa's reliance on remittances and external payments. While CBRs remain broadly stable, they are concentrated, and smaller money transfer operators continue to face pressures. Staff welcome the authorities' progress in strengthening financial integrity and mitigating reputational risks, including Samoa's removal from the EU list of non-cooperative tax jurisdictions, and ongoing efforts to strengthen the AML/CFT framework ahead of the 2027 Mutual Evaluation, including through planned amendments to the Money Laundering Prevention Act. Building on this progress, the authorities should continue strengthening the AML/CFT framework, beneficial ownership transparency, risk-based supervision, e-KYC, and the national digital ID system to support secure remittance channels, preserve external financial links, and safeguard financial stability.
Any move toward digital asset initiatives should proceed with extreme caution. Given Samoa's limited financial sector depth and supervisory capacity, progress should be gradual and contingent on further strengthening AML/CFT frameworks, supervisory capacity, and risk management to safeguard financial stability and CBRs. The CBS should first undertake a national digital asset risk assessment to identify vulnerabilities and determine the regulatory, supervisory, enforcement, crisis management, and resolution measures needed before any rollout.

D. Structural Reforms

Accelerating structural reforms is essential to raise potential growth and strengthen resilience. Samoa's remoteness, small size, reliance on tourism, vulnerability to natural disasters, weak FDI inflows, and outward migration constrain productivity and economic diversification. Improving the business environment and promoting diversification should therefore remain central policy priorities.
A stronger enabling environment is needed to unlock private sector development. Reforms should focus on reducing barriers to investment and trade by improving land tenure, access to finance, trade facilitation, business regulations, and judicial and insolvency frameworks. These measures would promote diversification, boost productivity, and strengthen medium-term growth.
Human capital reforms are needed to address labor shortages and support more inclusive growth. Expanding technical and vocational education, upskilling and reskilling, job matching services, childcare support, and measures to raise labor force participation would help reduce skills mismatches and informality.

An IMF staff team visited Apia during July 15–28, 2026, to conduct the 2026 Article IV consultation discussions with the Samoan authorities. The staff team would like to thank the Samoan authorities for their candid and constructive discussions and for their warm hospitality.

Table 1. Samoa: Selected Economic and Financial Indicators, FY2023/24–FY2030/31 ^1/

	2023/24	2024/25	2025/26	2026/27	2027/28	2028/29	2029/30	2030/31
			Est.	Proj.

Output and Inflation
Real GDP	4.8	4.2	0.4	2.0	2.5	2.5	2.5	2.5
Nominal GDP	13.6	10.6	3.5	7.0	5.6	5.5	5.5	5.5
Consumer price index (end of period)	0.8	1.5	5.8	3.5	3.0	3.0	3.0	3.0
Consumer price index (period average)	3.6	1.8	1.4	4.5	3.1	3.0	3.0	3.0
Central Government Finances
Revenue and grants	35.6	31.1	27.0	31.2	30.7	29.6	29.6	29.6
Of which: Tax revenue	24.2	23.8	21.8	21.5	22.9	22.9	22.9	22.9
Of which: Grants	8.3	5.2	2.5	6.9	5.0	4.0	4.0	4.0
Expenditure	26.3	26.4	26.3	32.3	32.1	31.6	31.0	30.5
Of which: Expense	24.6	23.2	22.8	27.8	27.6	27.1	26.5	26.0
Of which: Net acquisition of non-financial assets	1.7	3.2	3.5	4.5	4.5	4.5	4.5	4.5
Overall balance	9.3	4.7	0.7	-1.1	-1.4	-1.9	-1.4	-0.9
Primary balance	9.7	5.0	1.1	-0.8	-1.1	-1.6	-1.1	-0.6
Primary balance excluding grants	1.4	-0.2	-1.4	-7.8	-6.1	-5.6	-5.1	-4.6
Public debt	25.3	21.2	18.1	18.2	18.8	19.7	20.2	20.2
Money and Credit Aggregates
Broad money (M2)	7.7	5.4	6.2	6.5	6.5	6.5	6.5	6.5
Private sector credit, financial sector	5.2	5.5	5.5	5.5	5.5	5.5	5.5	5.5
Share of commercial banks in private sector credit (in percent)	55.4	54.5	54.1	53.8	53.4	53.1	52.7	52.4
Balance of Payments
Current account balance	4.4	5.7	4.0	-2.9	-2.2	-2.4	-2.4	-2.3
Merchandise exports, f.o.b.	3.2	2.9	2.0	3.2	3.3	3.3	3.4	3.4
Merchandise imports, f.o.b.	37.5	34.4	34.0	37.5	37.5	37.6	37.7	37.8
Services (net)	16.1	16.1	15.8	14.1	14.9	15.0	15.1	15.4
Of which: Tourism receipts	19.1	18.0	17.7	18.2	18.5	18.9	19.3	19.7
Income (net)	-1.3	0.0	0.0	-3.0	-3.1	-3.3	-3.3	-3.3
Current transfers (net)	23.9	21.1	20.2	20.3	20.2	20.1	20.1	20.0
External Reserves and Debt
Gross official reserves (million U.S. dollars)	494.3	565.2	653.2	647.4	654.3	657.4	661.9	666.3
(in months of next year's imports)	10.7	11.6	11.3	10.8	10.2	9.7	9.3	8.8
External debt (in percent of GDP)	23.5	19.8	16.7	17.0	17.7	18.7	19.3	19.4

Exchange Rates
Market rate (tala/U.S. dollar, period average)	2.76	2.78	2.75	…	…	…	…	…
Real effective exchange rate	-1.7	-1.4	…	…	…	…	…	…
(12-month percent change) 2/

Memorandum items:
Nominal GDP (million tala)	3,240	3,585	3,711	3,970	4,194	4,426	4,670	4,929
GDP per capita (U.S. dollars)	5,581	6,075	6,330	6,614	6,892	7,236	7,545	7,866

Sources: Data provided by the Samoan authorities; and IMF staff estimates and projections.
1/ Fiscal year begins in July and ends in June.
2/ Increase indicates appreciation.

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Mission Concluding Statement

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2026 Article IV Consultation for Samoa: IMF Staff Concluding Statement

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