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© 2010 International Monetary Fund

February 2010

IMF Country Report No. 10/46

Samoa: Request for Disbursement Under the Rapid-Access Component of the Exogenous Shocks Facility—Staff Report; Press Release on the Executive Board Discussion; and Statement by the Executive Director for Samoa.

In the context of the request for disbursement under the rapid-access component of the exogenous shocks facility, the following documents have been released and are included in this package:

  • The staff report for the Request for Disbursement Under the Rapid-Access Component of the Exogenous Shocks Facility, prepared by a staff team of the IMF, following discussions that ended on November 9, 2009, 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 November 23, 2009. 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 Press Release summarizing the views of the Executive Board as expressed during its December 7, 2009 discussion of the staff report that completed the request and/or review.

  • A statement by the Executive Director for Samoa.

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

  • Letter of Intent sent to the IMF by the authorities of Samoa*

  • *Also included in Staff Report

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

Copies of this report are available to the public from

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International Monetary Fund

Washington, D.C.

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INTERNATIONAL MONETARY FUND

SAMOA

Request for Disbursement Under the Rapid-Access Component of the Exogenous Shocks Facility

Prepared by the Asia and Pacific Department (In consultation with other departments)

Approved by Ray Brooks and Aasim Husain

November 23, 2009

Context: On September 29, Samoa was hit by a tsunami with the worst human losses and physical damage from any natural disaster since independence in 1962. The disaster severely undercut the economy’s resilience and prospects for a quick recovery from the global recession, in particular through its impact on Samoa’s fledgling tourism sector. The fiscal cost of infrastructure rehabilitation could well exceed 15 percent of GDP.

Discussions: Apia, November 4–9, 2009. The staff team comprised Mr. Unteroberdoerster (Head), Ms. Tumbarello (working from HQ), and Ms. Pongsaparn (all APD), and was joined by Mr. Chetwin (OED). The team met with Minister of Finance, Nickel Lee Hang; Governor of the Central Bank of Samoa, Papali’I Tommy Scanlan; and other senior government officials. The mission overlapped with AsDB, World Bank, and EU missions.

Focus: The tsunami’s economic impact, the government’s recovery framework, and fiscal sustainability.

Fund relations: Samoa has not had financial assistance from the Fund since 1985. The last Article IV consultation was concluded on May 18, 2007. The 2009 Article IV consultation has been postponed to early 2010 to afford the authorities more time in managing disaster relief and implementing a recovery framework.

Fund support: The authorities have requested disbursement under the Rapid-Access Component of the Fund’s Exogenous Shocks Facility (RAC-ESF) in the amount of SDR 5.8 million (50 percent of quota) to mitigate pressures on official reserves and the impact of the tsunami on the economy. Staff supports the request on the basis of the authorities’ low public debt and credible commitment to sound macroeconomic policies.

Transition to New LIC Facilities: If the new architecture of the Fund’s concessional lending facilities becomes effective prior to the Board discussion of this request for disbursement under the rapid-access component of the Exogenous Shocks Facility (ESF-RAC), and given that the Rapid Credit Facility (RCF) supersedes the ESF-RAC, the authorities have indicated that they would amend their request to a request under the RCF. The authorities’ request is in line with the qualification and policy requirements for a disbursement under the RCF, based on an exogenous shock. If this happens, a supplement containing a revised proposed decision and additional information for Board consideration would accordingly be issued to amend the request prior to the Board meeting.

Contents

  • Executive Summary

  • I. Background

  • II. Economic Performance Prior to the Tsunami

  • III. Economic Outlook and Policy Framework

    • A. Impact of the Tsunami

    • B. Fiscal Management: From Rebuilding to Maintaining Sustainability

    • C. Monetary and Exchange Rate Policy: Maintaining a Sound Framework

    • D. Structural Reform: Enabling the Private Sector

  • IV. Access and Risks

  • V. Staff Appraisal

  • Box

  • I. The Impact of the 2009 Tsunami on Tourism and the Economy

  • Figures

  • 1. Samoa and its Peers During the Global Recession

  • 2. Selected Monetary and Financial Indicators

  • Tables

  • 1. Selected Economic and Financial Indicators, 2004/05–2009/10

  • 2. Illustrative Medium-Term Baseline Scenario, 2005/06–2013/14

  • 3. Balance of Payments, 2004/05–2010/11

  • 4. Financial Operations of the Central Government, 2005/06–2010/11

  • 5. Indicators of Capacity to Repay the Fund, 2008–19

  • Attachments

  • I. Letter of Intent

  • II. Debt Sustainability Analysis

Executive Summary

  • The tsunami that hit Samoa on September 29, 2009, has been the worst natural disaster since independence in 1962. The death toll has risen to 143, while almost 5,300 people—some 2½ percent of Samoa’s population—have lost their homes, many of them in poor rural areas. Beyond the human suffering, the fiscal cost of infrastructure rehabilitation, resettlement, and maintaining access to social services could well exceed 15 percent of GDP.

  • The disaster has undercut Samoa’s economic resilience and prospects for a quick recovery from the global recession. In particular the impact on Samoa’s tourism sector, the main commercial foreign exchange earner, could be severe. As a result, real GDP is likely to contract in 2010 and the current account deficit is set to widen, with reconstruction-related imports rising sharply. The outlook is subject to considerable uncertainty, given the unprecedented scale of the damage.

  • The authorities’ immediate disaster response has been swift and measures are now shifting toward economic recovery and social protection while ensuring fiscal sustainability. A supplementary budget for FY 2009/10, which could bring the overall fiscal deficit to nearly 12 percent of GDP, will be fully funded by grants and concessional loans. It will focus on the most urgent task of humanitarian relief and repairs to infrastructure that are key to resuscitating growth. The authorities are also reviewing existing development spending for synergies with infrastructure rehabilitation, and are committed to finance any remaining financing gap through external grants and concessional borrowing. Furthermore, they intend to reduce the fiscal deficit to less than 3 percent over the medium term to stabilize public debt at prudent levels.

  • The authorities have requested a disbursement equivalent to 50 percent of quota (SDR 5.8 million) under the Rapid-Access Component of the Fund’s Exogenous Shocks Facility (ESF-RAC). The staff supports the request on Samoa’s low public debt and credible commitment to sound macroeconomic policies.

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INTERNATIONAL MONETARY FUND

SAMOA

Request for Disbursement Under the Rapid-Access Component of the Exogenous Shocks Facility—Informational Annex

Prepared by the Asia and Pacific Department

November 23, 2009

Contents

  • I. Fund Relations

  • II. Relations with the World Bank Group

  • III. Relations with the Asian Development Bank

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Press Release No. 09/446

FOR IMMEDIATE RELEASE

December 7, 2009

International Monetary Fund

Washington, D. C. 20431 USA

Samoa: Request for Disbursement Under the Rapid-Access Component of the Exogenous Shocks Facility: Staff Report; Press Release on the Executive Board Discussion; and Statement by the Executive Director for Samoa
Author: International Monetary Fund