Samoa’s “fiscal buffers” growing, but could be better

By Sapeer Mayron ,

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The Asian Development Bank headquarters in Philippines.

The Asian Development Bank headquarters in Philippines. (Photo: Supplied)

The Asia Development Bank’s latest Pacific Economic Report says Samoa’s first marginal fiscal surplus since 2009 shows it’s on its way to achieving higher development outcomes.

While debts rose this year due to the tala depreciating against the loan currencies, removing some tax concessions and raising other taxes has contributed to the result.

The report states the more internal revenue gathering there is the fewer loans there need to be for development purposes.

“These efforts have resulted in improvements in operating balances for the past 3 years and allowed the government to use domestic resources for development expenditures.”

Overall the report appears positive on Samoa’s financial situation.

It said the current debt stock reflects the impacts of  the global economic crisis of 2008 and two natural disasters in the years following.

Consolidating loans in the last three years have begun reversing the high debt levels those issues caused.

“This reflects that strong government commitment, combined with ongoing development partner support, can rebuild fiscal buffers while, at the same time, the country’s development objectives are met.”

But it can’t end here. The report emphasises the debt consolidation needs to continue to “recreate fiscal buffers.”

It also reiterated the points made by the International Monetary Fund and World Bank debt sustainability analysis, which urged Samoa to reduce the debt-to-G.D.P ratio by 10 per cent over the long term.

“Introducing a lower public debt-to-G.D.P target of 45 percent in the medium term and 40 percent over the longer term would increase fiscal space available to respond to a natural disaster.”

Public debts are currently 50.3 per cent of G.D.P, which breaches the sustainability threshold after including the cost of natural disasters.

Alongside Tonga and Tuvalu, Samoa has a high risk debt distress assessment, with debts to seven external agencies.

This month’s Pacific Economic Report focused on debt sustainability across the region. 

“Although debt financing can play an important role in responding to substantial infrastructure needs in the Pacific, strong project due diligence and debt monitoring frameworks are needed to safeguard against future repayment concerns,” the report states.

The chapter on Samoa was written by lead researcher Shiu Raj Singh.

© Samoa Observer 2016

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