The update of the DSA shows that under current policies Samoa faces a high risk of debt distress, based on an assessment of public external debt. In the 2015 Article IV report, Samoa was assessed as moderate risk of debt distress. The change in the assessment is driven by a change in methodology to take into account the impact of natural disasters both in the near term and over the medium-to-long term. In the near term, the impact of a natural disaster shock is assessed. The change in methodology is to incorporate the average annual impacts of natural disasters on growth and on fiscal and external debt. The impact of natural disasters has a significant impact of debt dynamics, emphasizing that the government will need to maintain its medium-term and long-term fiscal debt targets (of 50 percent of GDP and 40 percent of GDP respectively) to keep its debt burden manageable. Samoa faces a heightened overall risk of public debt distress, reflecting contingent liabilities from government guarantees and on-lending to public enterprises from public financial institutions (PFIs). Structural reforms to reduce the impact of natural disasters on average growth rates can also contribute to debt sustainability.
This DSA was prepared jointly with the World Bank, in accordance with the Debt Sustainability Framework for low-income countries approved by the Executive Boards of the IMF and the IDA. Samoa is rated as a strong performer for its policies and institutions for the purposes of the IMF-World Bank low-income country DSA framework. The DSA uses a 5 percent discount rate.
GDP data were revised to 2009 prices (previously 2002) and the coverage widened through new censuses and surveys, increasing nominal GDP from SAT1.6billion to SAT1.8billion in 2012/13.
Samoa’s CPIA rating for 2015 is 4.0.
The 5 percent discount rate used to calculate the net present value (NPV) of external debt.
The probability of a natural disaster averages around 24 percent for Pacific island countries. For details, refer to Cabezon et al, 2015, “Enhancing Macroeconomic Resilience to Natural Disasters and Climate Change in the Small States of the Pacific” WP/15/125.
See 2016 Board paper for further discussion.
Laframboise and Boileau, 2012, “Natural Disasters: Mitigating Impact, Managing Risks,” WP 12/245.
Lee, Dongyeol, Patrizia Tumbarello, Kazuaki Washimi and Tlek Zeinullayev, 2017, “Mind the Gap: Public Investment, Growth and Natural Disaster Risk in the Small States of the Pacific”, IMF Working Paper, forthcoming.
IMF Samoa 2015 Article IV Staff Report.
The historical scenario generates a new path of debt by freezing key macroeconomic variables at their 10-year historical average.