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IMF Country Report No. 18/145
SAMOA
2018 ARTICLE IV CONSULTATION—PRESS RELEASE; STAFF REPORT; STAFF STATEMENT; AND STATEMENT BY THE EXECUTIVE DIRECTOR FOR SAMOA
June 2018
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 2018 Article IV consultation with Samoa, the following documents have been released and are included in this package:
A Press Release summarizing the views of the Executive Board as expressed during its May 7, 2018, consideration of the staff report that concluded the Article IV consultation with Samoa.
The Staff Report prepared by a staff team of the IMF for the Executive Board’s consideration on May 7, 2018, following discussions that ended on March 5, 2018, 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 April 20, 2018.
An Informational Annex prepared by the IMF staff.
A Debt Sustainability Analysis prepared by the staffs of the IMF and the International Development Association.
A Staff Statement updating information on recent developments.
A Statement by the Executive Director for Samoa.
The IMF’s transparency policy allows for the deletion of market-sensitive information and premature disclosure of the authorities’ policy intentions in published staff reports and other documents.
Copies of this report are available to the public from
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© 2018 International Monetary Fund
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SAMOA
STAFF REPORT FOR THE 2018 ARTICLE IV CONSULTATION
April 16, 2018
Key Issues
Outlook and Risks. Samoa has demonstrated resilience in the face of multiple external shocks. Growth remains robust, but is expected to temporarily moderate before rebounding. Inflation has picked up but remains below the authorities’ target of 3 percent. The authorities have made efforts towards fiscal consolidation in recent years, but the fiscal position loosened in 2016/17 and Samoa remains at high risk of debt distress. Samoa remains vulnerable to natural disasters and to the partial withdrawal of correspondent banking relationships (CBRs). The authorities are implementing mitigation measures to address these risks.
Main Policy Recommendations
Policies should focus on strengthening the fiscal framework to ensure debt sustainability; mitigating risks from the loss of CBRs; and implementing structural reforms to improve financial inclusion, resilience to natural disasters, and the business environment. Priority actions are:
Introduce a lower public debt target (45 percent of GDP in the medium term and 40 percent of GDP in the longer term), and a fiscal balance anchor consistent with the debt target. Further reduce fiscal risks by strengthening public financial management (PFM).
Maintain an accommodative monetary policy stance while implementing policies to reduce banks’ reluctance to lend and strengthen the transmission mechanism.
Continue efforts to mitigate spillovers from the loss of CBRs by bringing the AML/CFT framework in line with international standards, and establishing a database for customer identification and monitoring.
Enhance financial stability by continuing to implement the recommendations of the Financial Sector Assessment Program (FSAP), including reform of the governance and mandates of public financial institutions (PFIs).
Focus structural reform efforts on improving financial inclusion, resilience to natural disasters, and the business environment.
Approved By
Paul Cashin (APD) and Yan Sun (SPR)
Discussions were held in Apia during February 21-March 5, 2018. The staff team comprised Giovanni Ganelli (head-APD), Reshika Singh (RR-PIC), Analisa Ribeiro Bala (SEC), and Chau Ngoc Bao Nguyen (APD). Gemma Preston (OED) joined the discussions. The mission met with Minister of Finance Sili Epa Tuioti, Chief Executive Officer of Ministry of Finance Lavea Tupa’imatuna Iulai Lavea, the Governor of the Central Bank of Samoa Maiava Atalina Ainuu-Enari, senior government officials, and representatives of the private sector. Nadine Dubost assisted in preparing this report.
Contents
CONTEXT
RECENT ECONOMIC DEVELOPMENTS
OUTLOOK AND RISKS
MACROECONOMIC AND FINANCIAL POLICIES
A. Strengthening the Fiscal Framework to Ensure Fiscal Sustainability
B. Monetary and Exchange Rate Policies
C. Policies to Address Spillovers from the Withdrawal of Correspondent Banking Relationships
D. Financial Sector
MEDIUM-TERM CHALLENGES
OTHER ISSUES
STAFF APPRAISAL
BOXES
1. Summary of Revenue Review Recommendations
2. Impact of the Withdrawal of CBRs on MTOs
FIGURES
1. Real Sector Developments
2. External Sector Developments
3. Fiscal Sector Developments
4. Monetary and Financial Sector Developments
5. The Role of Remittances
TABLES
1. Selected Economic and Financial Indicators, 2014/15 – 2022/23
2. Balance of Payments, 2014/15 – 2022/23
3. Financial Operations of the Central Government, 2014/15 – 2022/23
4. Monetary Developments, 2011/12 – December 2017
5. Financial Soundness Indicators, 2013/14 – December 2017
6. Status of Millennium Development Goals
7. Strategy for the Development of Samoa and Sustainable Development Goals
8. Post-Disaster Finance Sources
ANNEXES
I. Risk Assessment Matrix
II. External Sector Assessment
III. Key 2015 FSAP Recommendations
IV. List of Public Enterprises
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SAMOA
STAFF REPORT FOR THE 2018 ARTICLE IV CONSULTATION—INFORMATIONAL ANNEX
April 16, 2018
Prepared By
The Asia and Pacific Department
(In Consultation with Other Departments)
Contents
FUND RELATIONS
RELATIONS WITH THE PACIFIC FINANCIAL TECHNICAL ASSISTANCE CENTRE
RELATIONS WITH THE WORLD BANK
RELATIONS WITH THE ASIAN DEVELOPMENT BANK
STATISTICAL ISSUES
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SAMOA
STAFF REPORT FOR THE 2018 ARTICLE IV CONSULTATION— DEBT SUSTAINABILITY ANALYSIS
April 16, 2018
Approved By
Paul Cashin (IMF) and John Panzer (IDA)
Prepared by the staffs of the International Monetary Fund (IMF) and the International Development Association (IDA)1
The results of this update of the debt sustainability analysis (DSA) show that Samoa remains at high risk of external debt distress. Consistent with the methodology introduced in the previous DSA, the average long-term costs of natural disasters are incorporated into the DSA to assess the impact on Samoa’s economic growth, fiscal position and external debt sustainability. The result is a breach of the threshold under the baseline scenario for the present value of the public-and publicly guaranteed (PPG) external debt-to-GDP ratio. Given Samoa’s vulnerability to natural disasters, strategies to strengthen Samoa’s resilience to economic shocks should continue to be implemented.
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Press Release No. 18/217
FOR IMMEDIATE RELEASE
June 4, 2018
International Monetary Fund
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Washington, D. C. 20431 USA
