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IMF Staff Completes 2017 Article IV Mission to Samoa

February 22, 2017

End-of-Mission press releases include statements of IMF staff teams that convey preliminary findings after a visit to a country. The views expressed in this statement are those of the IMF staff and do not necessarily represent the views of the IMF’s Executive Board. Based on the preliminary findings of this mission, staff will prepare a report that, subject to management approval, will be presented to the IMF's Executive Board for discussion and decision.

  • Samoa’s GDP is expected to grow at around 2 percent annually, driven by construction, infrastructure development and improved business environment.
  • The outlook is subject to downside risks including natural disasters and strains in correspondent banking relationships.
  • The policy mix of fiscal consolidation and accommodative monetary policy will help support growth while rebuilding fiscal buffers.

An International Monetary Fund (IMF) team led by Niamh Sheridan visited Samoa from February 8-17 to hold discussions with authorities on the 2017 Article IV Consultation. [1] The team met with the 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 (CBS) Atalina Ainuu-Enari, senior government officials, as well as development partners and representatives from the private sector. Staff from the Asian Development Bank (ADB) and the World Bank joined the mission. The team expresses its appreciation to the authorities and relevant stakeholders for the open and constructive discussions.

At the conclusion of the meetings, Ms. Sheridan issued the following statement:

“The Samoan economy continues to perform well and activity picked up in FY 2015/16 (ending June 30). Tourism arrivals increased; a new processing plant helped boost fishing revenues; and agriculture benefitted from government initiatives and new export markets. Looking ahead, GDP is expected to grow at around 2 percent annually, driven by construction activity, infrastructure development and improvements in the business environment. However, this outlook is subject to downside risks related to natural disasters, strains in correspondent banking relationships and elevated contingent liabilities from public financial institutions (PFIs) and state owned enterprises (SOEs). The closure of the largest manufacturing employer is also likely to adversely affect growth.

“Current policy settings of fiscal consolidation combined with accommodative monetary policy are appropriate. This policy mix helps support economic activity while rebuilding fiscal buffers to handle external shocks and natural disasters. The 2015/16 Budget outcome reflected concerted efforts to rationalize expenditure and improve revenue collection and the

deficit declined to 0.4 percent from 3.9 percent of GDP. Efforts to consolidate the fiscal position were appropriate, given strong growth and the need to rebuild buffers. To achieve the government’s target of reducing public sector debt to 50 percent of GDP by 2020, continued expenditure restraint is needed but health, education and climate resilient infrastructure expenditure should be prioritized. Additional measures are needed to shore-up revenues including through improved compliance and by broadening the tax base.

“Samoa’s remittance sector is facing increasing challenges and many money transfer operators (MTOs) are experiencing difficulties in accessing financial services – referred to as derisking. Remittances are approximately 18 percent of GDP and about 80 percent are channeled through MTOs. Derisking is increasing the fragility of the remittances sector and is likely to further increase the cost of remittances. The Samoan authorities have taken important steps to address derisking, including active engagement with global stakeholders. Recent publication of the national strategy for Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) was an important step and the mission encourages continued efforts to enhance compliance with global AML/CFT standards. The mission welcomes the authorities’ commitment to establish a database, referred to as Know-your-Customer utility, which can help facilitate remittances by enhancing compliance. The IMF is supporting the government’s efforts through a proposed pilot project and an IMF technical assistance mission is planned for June 2017.

“Financial stability indicators suggest a generally sound banking system, though there are risks stemming from high loan concentration, the number of borrowers with a high loan-to-capital ratio, and the potential for a sharp deterioration in asset quality in the event of a natural disaster.

“Continued structural reforms are needed to improve Samoa’s growth prospects. The mission welcomes the government’s continued efforts to increase the accountability and efficiency of public enterprises, which will also help alleviate financial sector vulnerabilities. The introduction of the personal property register will improve access to finance and will support private sector growth. Skills shortages remain a significant impediment for businesses and targeted efforts to improve vocational skills and accreditation could help ease these shortages.

“The IMF continues to support Samoa’s reform efforts by providing technical assistance and training in government finance statistics, through the implementation of the enhanced General Data Dissemination System (e-GDDS). A IMF Statistics Department e-GDDS mission overlapped with the Article IV mission to assist authorities in rolling out the system, making Samoa the first country in the Asia and Pacific region to develop a national data hub.”

[1] Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members. A staff team visits the country (typically on an annual basis) to collect economic and financial information and hold discussions with officials on the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board. At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities.

IMF Communications Department

PRESS OFFICER: Keiko Utsunomiya

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