Front Matter

Front Matter Page

© 2007 International Monetary Fund

June 2007

IMF Country Report No. 07/185

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 2007 Article IV consultation with Samoa, the following documents have been released and are included in this package:

  • the staff report for the 2007 Article IV consultation, prepared by a staff team of the IMF, following discussions that ended on May 18, 2007, 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, 4, 2007. 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; and

  • a Public Information Notice (PIN) summarizing the views of the Executive Board as expressed during its May 18, 2007 discussion of the staff report that concluded the Article IV consultation.

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

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Price: $18.00 a copy

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INTERNATIONAL MONETARY FUND

SAMOA

Staff Report for the 2007 Article IV Consultation

Prepared by the Staff Representatives for the 2007 Consultation with Samoa

Approved by Masahiko Takeda and Michael Hadjimichael

May 4, 2007

Discussions: Apia, March 8–20, 2007. The team met with Prime Minister Tuilaepa Malielegaoi, Minister of Finance Niko Lee Hang, Central Bank of Samoa Governor Papali’i Tommy Scanlan, and other senior government officials.

Team: Messrs. Semblat (head) and Porter, and Mses. Mineshima and Zhou (all APD). Mr. Momo (OED) joined the discussions.

Economic Setting: Despite a recent slowing, the current economic situation is sanguine. The slowdown almost entirely reflected the restructuring of an auto parts manufacturer, with other sectors remaining robust. Looking ahead, growth will rebound thanks to tourism and construction related to the South Pacific Games in September 2007.

Exchange rate: Samoa maintains an exchange rate arrangement pegged to a basket of currencies with undisclosed weights. Samoa has accepted the obligations of Article VIII, Sections 2, 3, and 4, and maintains an exchange system that is free of restrictions on payments and transfers for current international transactions.

Outreach: Staff met with business leaders, donors, and representatives of the diplomatic corps. As in the past, the authorities intend to authorize the publication of the report.

Previous Fund Advice: Samoa has had a very good track record in implementing Fund advice: in line with previous Fund recommendations, the authorities have maintained fiscal prudence and deepened their agenda of structural reforms.

Statistical issues: Core economic data are updated regularly in a timely manner, which enhances surveillance. National accounts data have improved but are not on prepared on an expenditure bases. Balance of payments data are limited.

Contents

  • Executive Summary

  • I. Success Story of the Pacific

  • II. Recent Economic Performance and Outlook

    • A. Recent Developments

    • B. Outlook and Risks

  • III. Policy Discussions: Sustaining the Strong Performance

    • A. Maintaining Fiscal Prudence

    • B. Improving the Effectiveness of Monetary Policy

    • C. Promoting the Economic Use of Land and Fostering Private Sector Development

    • D. Developing and Strengthening the Financial Sector

    • E. Further Integrating Samoa into the Global Economy

  • IV. Staff Appraisal

  • Box

  • 1. Private Sector Development

  • Tables

  • 1. Selected Economic and Financial Indicators

  • 2. Financial Operations of the Central Government

  • 3. Balance of Payments

  • 4. Medium-Term Baseline Scenario

  • 5. Vulnerability Indicators

Executive Summary

Background

  • Samoa has achieved a major economic transformation over the last decade and a half. Real per capita GDP has increased by over 3 percent per year on average, and external public debt has fallen below 40 percent of GDP. These achievements have entitled Samoa to graduate from LDC status.

  • Macroeconomic conditions remain good. Despite a recent slowing in growth, real GDP growth is rebounding to its 3-3½ percent historical pace, boosted by the continued dynamism of the service sector and the rapid development of tourism. Inflation remains low and the external position, after some weakening in 2006, has recovered thanks to a tightening of fiscal and monetary policies.

  • Over the medium-term, steady real per capita growth is expected to continue. Growth is expected to remain at around 3½ percent until 2010/11. The current account should improve gradually as net exports of services and remittances continue to grow and the reserve position is also expected to improve further. As growth remains strong and fiscal prudence continues, external debt is expected to decline to around 34 percent of GDP.

Key Policy Issues

  • Sustaining the strong performance requires the continuation of prudent fiscal policies. The authorities could face a series of fiscal pressures over the medium-term. To deal with these pressures, the authorities should restrain overall expenditure in conjunction with a higher prioritization of current spending toward health and education expenditures.

  • Improving the effectiveness of monetary policy would help better deal with possible shocks. This could be done notably by developing money markets and enhancing the communication strategy of the Central Bank of Samoa (CBS).

  • Accelerating the program of structural reforms would boost growth further. Removing impediments to the economic use of customary land would unlock an untapped potential, especially for tourism and intensive agricultural development. Promoting private sector development would require further privatization of SOEs, as well as improving the business climate and developing the financial sector. The successful restructuring of Polynesian Airlines and the recent fall in telecom tariffs following the introduction of competition in the sector have clearly demonstrated the benefits of the reforms.

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INTERNATIONAL MONETARY FUND

Samoa

Annexes to the 2007 Article IV Consultation—Informational Annex

Prepared by Asian and Pacific Department

May 4, 2007

Contents

  • I. Medium-Term Debt Sustainability Analysis

  • II. Fund Relations

  • III. Support from the Pacific Financial Technical Assistance Centre

  • IV. Relations with the World Bank Group

  • V. Relations with the Asian Development Bank

  • VI. Statistical Issues

  • VII. Social and Demographic Indicators

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Public Information Notice (PIN) No. 07/62

FOR IMMEDIATE RELEASE

June 1, 2007

International Monetary Fund

700 19th Street, NW

Washington, D. C. 20431 USA

On May 18, 2007, the Executive Board of the International Monetary Fund (IMF) concluded the 2007 Article IV consultation with Samoa.1

Samoa: 2007 Article IV Consultation: Staff Report; and Public Information Notice on the Executive Board Discussion for Samoa
Author: International Monetary Fund