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© 2005 International Monetary Fund

June 2005

IMF Country Report No. 05/220

Samoa: 2005 Article IV Consultation—Staff Report; Staff Statement; Public Information Notice on the Executive Board Discussion; and Statement by the Executive Director for Samoa

Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. In the context of the 2005 Article IV consultation with Samoa, the following documents have been released and are included in this package:

  • the staff report for the 2005 Article IV consultation, prepared by a staff team of the IMF, following discussions that ended on March 22, 2005, with the officials of Samoa on economic developments and policies. Based on information available at the time of these discussions, the staff report was completed on May 13, 2005. The views expressed in the staff report are those of the staff team and do not necessarily reflect the views of the Executive Board of the IMF.

  • a staff statement of June 17, 2005 updating information on recent developments.

  • a Public Information Notice (PIN) summarizing the views of the Executive Board as expressed during its June 17, 2005 discussion of the staff report that concluded the Article IV consultation.

  • a statement by the Executive Director for Samoa.

The document listed below has been or will be separately released.

Selected Issues Paper and Statistical Appendix

The policy of publication of staff reports and other documents allows for the deletion of market-sensitive information.

To assist the IMF in evaluating the publication policy, reader comments are invited and may be sent by e-mail to publicationpolicy@imf.org.

Copies of this report are available to the public from

International Monetary Fund • Publication Services

700 19th Street, N.W. • Washington, D.C. 20431

Telephone: (202) 623-7430 • Telefax: (202) 623-7201

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Price: $15.00 a copy

International Monetary Fund

Washington, D.C.

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INTERNATIONAL MONETARY FUND

SAMOA

Staff Report for the 2005 Article IV Consultation

Prepared by the Staff Representatives for the 2005 Consultation with Samoa

Approved by Masahiko Takeda and Michael Hadjimichael

May 13, 2005

  • The consultation discussions were held in Apia during March 9–22, 2005. The staff team comprised Mr. Leigh (Head), Messrs. Chamon and Semblat (all APD) and was assisted by Mr. Craig and Ms. Morant (Pacific Financial Technical Assistance Centre-PFTAC in Fiji). Ms. Adolph (OED) attended the policy discussions.

  • The mission met Prime Minister Tuilaepa Malielegaoi, Minister of Revenue Anasii Leota, Financial Secretary Petana, the Governor of the Central Bank of Samoa (CBS) Scanlan, representatives of financial institutions, public enterprises, tourism and other private sector enterprises and major donors.

  • In concluding the last Article IV consultation on June 2, 2003, Directors noted that Samoa’s combination of sound economic management and structural reform had led to robust growth, low inflation, sound public finances, and a comfortable external position. Directors urged the authorities to maintain prudent macroeconomic policies and move ahead with structural reforms to improve public sector efficiency and reduce barriers to investment.

  • Samoa accepted the obligations of Article VIII, Sections 2, 3, and 4 in 1994 and maintains an exchange system free from restrictions on payments and transfers for current international transactions.

  • The authorities have indicated their intention, as in the past, to publish the staff report and the background documents.

Contents

  • Executive Summary

  • I A Decade of Economic Transformation

  • II. Recent Economic Developments

  • III. Report on the Discussions

    • A. Overview

    • B. Outlook and Vulnerabilities

    • C. Fiscal Policy

    • D. Monetary and Exchange Rate Management

    • E. Financial Sector Issues

    • F. Structural Reform Policies

    • G. Other Issues

  • IV. Staff Appraisal

  • Boxes

  • 1. Recent Structural Reforms and Unfinished Agenda

  • 2. Importance of Workers Remittances

  • 3. Polynesian Airlines

  • Tables

  • 1. Selected Economic and Financial Indicators, 2000/01–2005/06

  • 2. Balance of Payments, 2000/01-2005/06

  • 3. Financial Operations of the Central Government, 2000/01–2005/06

  • 4. Monetary Survey, 2000/01-2004/05

  • 5. Medium-term Outlook, 2000/01–2009/10

  • 6. Vulnerability Indicators, 2000/01–2003/04

  • Figures

  • 1. Regional Comparators (Averages 2000-2004)

  • 2. Selected Economic Indicators, 1999/00–2004/05

  • 3. External Sector Developments, 1999/00-2004/05

  • 4. Monetary and Financial Indicators, 1999/00–2004/05

  • 5. Regional Competitiveness Indicators, 1999–2005

  • 6. Medium-Term Outlook, 2001/02–2009/10

  • Annexes

  • I. Fund Relations

  • II. Support from the Pacific Financial Technical Assistance Centre

  • III. Relations with the World Bank Group

  • IV. Relations with the Asian Development Bank

  • V. Statistical Issues

  • VI. Social and Demographic Indicators

  • VII. Progress on Millennium Development Goals

Executive Summary

Economic Setting

  • Samoa’s decade of economic reforms has yielded several years of strong performance, but the record in more recent years has been uneven.

    • article image
      Real GDP growth has picked up (3½ percent in 2003/04 and 3 percent projected for 2004/05) driven largely by the boom in the construction sector, but remains below levels attained through 2000/01. Inflation rose significantly in 2004 but has slowed down in recent months. The trade deficit widened in 2003/04.

    • article image
      The government has made further progress on structural reforms. However, there are still substantial reforms which need to be tackled.

  • The near term outlook on growth is moderately favorable. Overall growth is projected at 3 percent in 2005/06 underpinned by robust growth in the services and construction sectors. Agriculture is expected to slowly recover, while improvements in the fishing sector remain uncertain.

  • The authorities remain committed to macroeconomic stability and reform, but face a number of immediate domestic challenges to sustaining that positive record.

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      There are strong calls for a large public sector wage increase ahead of the elections scheduled for early 2006. The costs of restructuring the loss-making Polynesian Airlines are also likely to impose a significant burden on the 2005/06 budget (to be presented to Parliament at end-May 2005).

Key Policy Issues

  • This year’s consultation discussions focused on how to contain the immediate risks to macroeconomic stability and deepen structural reforms to rekindle growth.

    • article image
      On fiscal policy, to limit the impact of any wage increase on the budget, wage policy should be developed in line with the ongoing civil service reform and the upward adjustment be phased in such that after the initial moderate increase subsequent wage increases be linked to performance. The government should also find ways to limit the burden of the restructuring costs of Polynesian airlines on the forthcoming 2005/06 budget.

    • article image
      With regards to financial sector issues, strengthening the National Provident Fund’s (NPF’s) investment guidelines and supervisory framework is recommended.

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      On structural reform policies, it is essential that Samoa continue to deepen its implementation of the state-owned enterprises (SOE) reform and tackle the other impediments to private sector development (including the functioning of the land market). The recent initiative taken by the government on land market reform (a politically sensitive issue) to facilitate the leasing of unused communal land represents a significant step on their reform agenda.

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June 17, 2005

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Public Information Notice (PIN) No. 05/80

FOR IMMEDIATE RELEASE

June 27, 2005

International Monetary Fund

700 19th Street, NW

Washington, D. C. 20431 USA

On June 17, 2005, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Samoa.1

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June 17, 2005