Exchange Rate Arrangement

The exchange rate of the tala is pegged to a trade and payments weighted basket of currencies. The pegged rate can be adjusted within a ±2 percent band. The basket is a composite of the currencies of Samoa’s most important trading partners and countries that are major sources of tourism revenue from abroad—New Zealand, Australia, the United States, and Euro countries. The exchange rate regime is free of restrictions and multiple currency practices.

Article IV Consultations

The 2015 Article IV consultation discussions were held during February 23-March 6, 2015. It was concluded by the Executive Board on June 1, 2015 (IMF Country Report No. 15/191). Samoa has been on the 24–month cycle and it is proposed that the next consultation take place on a 12–month cycle.

Technical Assistance from Headquarters

The Pacific Financial Technical Assistance Centre (PFTAC) has provided assistance on budgetary management, tax administration, and financial sector supervision. MCM has provided assistance on monetary policy operations, banking, and insurance supervision and other central banking issues. STA has provided help with government finance statistics and balance of payments statistics, and FAD with tax administration and LEG with central bank law. Following FSAP recommendations, MCM and PFTAC plan to provide assistance on bank supervision and regulations, and STA will provide assistance on monetary and financial statistics.

Safeguards Assessments

An update safeguards assessment of the CBS was completed in June 2014. The assessment found some safeguards elements in place, but concerns over CBS autonomy and governance, audit quality, and staff capacity need to be addressed. The CBS has taken steps to address these, including improving its governance and autonomy through enactment of a new central bank law in 2015. In line with the safeguards policy, the CBS should accelerate efforts to strengthen the quality of the external audit. The CBS should also take further steps to enhance oversight of audit functions.

AML/CFT

Samoa has improved its AML/CFT framework since the 2006 assessment, including through the Money Laundering Prevent Act 2007 and subsequent regulations in 2009. These better align Samoa’s framework with the FATF’s recommendations under the third round of mutual evaluations. The FATF recommendations were revised for the fourth round in 2012 and, in 2015, Samoa’s AML/CFT regime was assessed by the Asia Pacific Group on Money Laundering (APG) under the revised 2012 FATF standard. APG assessors found significant shortcomings in Samoa’s AML/CFT regime, rating it low or moderately effective in 10 out of 11 immediate outcomes assessing effectiveness, and non-compliant or partially compliant with more than half of the 40 FATF recommendations. Hence, the authorities were encouraged to work toward substantial improvements of the AML/CFT framework, both on strategic and operational levels.

Resident Representative

The Regional Resident Representative Office for Pacific Island Countries based in Suva, Fiji was opened on September 13, 2010 and the office covers Fiji, Kiribati, Marshall Islands, Micronesia, Palau, Papua New Guinea, Samoa, Solomon Islands, Tonga, Tuvalu, and Vanuatu. Mr. Tubagus Feridhanusetyawan is the current resident representative.

Background

PFTAC has provided moderate technical assistance (TA) to Samoa in recent years mainly on macro-fiscal planning and analysis, revenue administration, and statistics. In FY2018, the volume of TA planned for Samoa will nearly triple from FY2017 (up from 77 to 245 field days), constituting 9.5 percent of PFTAC resources. In recent years, PFM support by PFTAC was focused on facilitating PEFA assessments and implementation of Samoa’s PFM Roadmap. PFTAC TA was instrumental in the development of quarterly national accounts in Samoa, with recent TA on statistics focused on increasing the range, frequency, and accuracy of GDP estimates. Recent TA in the macroeconomic area has focused on revenue forecasting and enhancing the Samoa Economic and Forecasting (SERF) model; a macroeconomic programming framework to assist in budget development and undertake debt sustainability and external vulnerability assessments. Support has also been provided in the modernization of Samoa’s income tax legislation.

Strategy 2015–2018

PFTAC’s TA strategy is guided by the APD regional strategy note and is planned within the results framework for PFTAC’s funding cycle.¹

PFTAC TA aims to support the authorities to sustain progress on fiscal consolidation and to improve the macroeconomic environment. PFTAC will continue to focus on building macroeconomic analysis capacity and delivering specific technical inputs in the context of larger ISPs.

In the Public Financial Management area, PFTAC will continue to support the Ministry of Finance’s PFM reform plan (1.2). Since 2015, PFTAC has been providing TA to Samoa on improving cash management (1.7), accounting, and reporting (1.8), and fiscal oversight of state-owned enterprises (1.8). PFTAC is available in the coming years to provide follow-up support to strengthen the medium-term budgeting system (1.5).

Assistance in the macroeconomic area will continue to be instrumental to the success of budget reforms. PFTAC will continue working with Ministry for Revenue staff to enhance tax revenue forecasting. The focus is on complementing the Ministry of Finance’s top-down revenue forecasts based on economic projections with bottom-up forecasts that make use of the internal knowledge on tax trends, including on compliance improvement and risk management activities, by the tax administration and greater use of individual taxpayer data. PFTAC will also continue assisting staff at the Ministry of Finance to improve GDP forecasting methodology (5.1) and to build capacity to produce their own debt sustainability analyses and external vulnerability assessments (5.2). This work continues to support building stronger links among all relevant macro fiscal entities to analyze the country’s economic and fiscal outlook (5.3)

In the revenue area, Samoa’s Ministry for Revenue continues to make good progress as evidenced by a strong legal framework and development of improved functions and processes. A Compliance Improvement Plan (1.5) introduced in 2016 to target the most significant tax risks has been strengthened through the introduction of a Compliance Risk Management Committee and the creation of a data analytics team. The design of an Industry Partnership initiative, facilitated by PFTAC, to target high risk cash economy sectors will be rolled out in FY2018. In a significant scaling-up in FY2018, other TA planned and agreed with the authorities is geared to further improve performance across core tax functions.

In statistics, Samoa continues to be one of the most advanced nations in the Pacific region. Based on earlier PFTAC advice, for several years Samoa has produced quarterly National Accounts (12.1) alongside several income indicators. In 2016, PFTAC assisted with a rebase of GDP by production (4.1), which will bring methods closer into line with the 2008 SNA; and also in developing a new measure of GDP by expenditure (5.2). Both projects are expected to be completed in 2017. Balance of payments (BoP) and government finance statistics (GFS) standards were improved (4.1) via missions funded by the JSA project that concluded in September 2015. The appointment of a resident GFS advisor at PFTAC in March 2017 will see GFS TA resume in FY18, while annual BP TA missions are also expected to recommence, subject to PFTAC and/or alternate regional funding.

In financial sector supervision, PFTAC commenced an on-site examination program (3.3) for the Central Bank of Samoa in August 2015. A Short-Term Expert was engaged to assist the Central Bank in performing three on-site examinations of local banks. Three mission were undertaken – August 2015; November 2015; and May 2016. The missions included the delivery of workshops prior to each examination on a topic relevant to the examination process, and the provision of technical assistance and guidance in all aspects of the on-site examination process.

In April 2017, PFTAC will undertake a mission to the Central Bank of Samoa to provide guidance and assistance in reviewing and updating their suite of prudential standards for banks (3.3).

1) Post-disaster recovery projects

Enhanced Road Access Project: Aims to restore key road sector assets damaged by Cyclone Evan and enhance the climate resilience of critical roads and bridges in Samoa.

Agriculture and Fisheries Cyclone Response Project: Provides recovery assistance to cyclone-affected farmers and fishers through vouchers and grants, with the aim of restoring their lost production capacity, while improving the ability of the agricultural sector to respond to future disasters.

2) Budget support

Second Fiscal & Economic Reform Operation: Supports the Government of Samoa’s efforts to improve fiscal management, establish the conditions for more robust private sector growth over the medium term, and strengthen the monitoring, reporting and coordination of climate resilience activities in Samoa, including through reforms in the areas of debt management, procurement, revenue, payments systems and remittances, tourism sector policy, and PPPs policy.

3) Climate Resilience

Enhancing the Climate Resilience of West Coast Road: Focuses on ‘climate-proofing’ the West Coast Road from the airport to Apia.

Enhancing the Climate Resilience of Coastal Resources & Communities: Provides training and support in targeted communities to update and implement local Coastal Infrastructure Plans, and supports activities that increase the resilience of coastlines, near-shore areas, and coral reefs. The project will also help improve national climate information services and hazard mapping.

Pacific Resilience Program: Aims to strengthen early warning systems, promote resilient investments, and strengthen the financial resilience of Samoa by facilitating access to immediate liquidity after a natural disaster.

4) ICT Sector

Pacific Regional Connectivity Program – Phase 3: Aims to reduce the cost and increase the availability of internet services in Samoa. The project encompasses construction of a submarine cable connecting Samoa to Fiji; the establishment of the Samoa Submarine Cable Company (SSCC), a public-private partnership; and the provision of technical assistance to review, development and implement ICT regulation in Samoa.

5) Agriculture Sector

Agriculture Competitiveness Enhancement Project: Aims to support fruit and vegetable growers and livestock producers to improve their productivity and take greater advantage of market opportunities. The project covers three components – (i) livestock production and marketing, (ii) fruit and vegetable production and marketing, and (iii) institutional strengthening.

6) Aviation sector

Samoa Aviation Investment Project: Aims to improve operational safety and oversight of international air transport and associated infrastructure, including through improvements to runways, facilities, and navigation aids at the main international airport.

The IFC has also been active in Samoa, particularly in the telecoms sector. The IFC has invested substantially in Digicel, with market liberalization and increased competition helping to increase mobile access in Samoa to over 80 per cent of the population. The IFC has also provided assistance to the tourism sector, and has helped with the expansion of banking services to allow small and medium entrepreneurs find capital to start and run their businesses.