Economy alarm bells

By Samantha Goerling ,

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The government has been warned that the economy could be heading towards a disaster.

The warning comes from a businessman and an investor, who spoke to the Sunday Samoan, on the condition of anonymity, fearing repercussions for his business. For this story, he will be referred to as Sione*. Sione had contacted the Sunday Samoan to make his concerns known. He said he considers the constant budget deficits as a warning. This and the debt level, which has reached $1.4billion, he said, are also keeping potential investors away from Samoa.

 “I’m concerned that if certain things continue, then it will have an impact on the economy,” he said. “They will not be by choice; they will be enforced upon us, without a doubt.”

Sione is primarily concerned about Samoa’s debt level. He is also worried about reports that Samoa is within the top ten countries for “illicit financial flows”. 

He believes that an International Monetary Fund (I.M.F) intervention is not an unrealistic prospect for Samoa.

“My concern is that if this money laundering is going to continue to happen, very soon I.M.F. and other international organisations including most of the people we get aid from, will slam the door shut and we will go back to the 1960s,” he said. 

“That is what will happen to our economy until we are forced by I.M.F. to comply with those transnational transactions and anti-money laundering activities. 

“We don’t have an anti-money laundering organisation here; we don’t have any such watchdog. Why?” Sione’s concerns were reflected in an article titled “Samoa named in corrupted trade routes” by Island Business Magazine. 

Published on the 8 January 2016, the article cited the G.F.I Illicit Financial Flows and Development In-dices: 2008-2012 in estimating that “3044% time the amount of corrupt dollars flowing out of the country for every dollar of foreign direct investment”.

Although only covering up to 2012, the potential investor emphasised the lack of dialogue from the government in regards to the issue. 

“The government have been totally silent. In fact the silence is deafening over those statistics,” he said. “The Governor of the Central Bank should be ringing alarm bells if those statistics are correct.”

Fuelled by the budget deficit that has continued to rise since the March Quarter 2014 and illicit financial flows, Sione is scared to invest in Samoa because of his fear that if the economic situation takes a turn for the worse, his money will be trapped within Samoa. 

“I don’t want to bring our funds here to Samoa and then have the money stuck here because we can’t get it out,” he said. 

“If this country goes back to the dark ages, the 60’s. If the doors slam on us there will be no more foreign funds. If I want to take my money out, the government will say ‘no, we need that money here’. I want to make sure it’s safe to come home economically and financially.”

According to the last Quarterly Government Finance Statistics published in September “total Government Debt remained at $1.14 billion as of the end of September 2015. 

“The biggest proportion of outstanding debts were mainly from external borrowings totalled at $1.1 billion with the rest of domestic borrowings.” 

Internal debt fell 6.5 million in from September 2014 while external debt continued to rise. From $984.8 million to $1,099.7 million, external debt was raised a total of $114.9 million.

Just over half, 54.1% of external loans were from Multilateral Institutions, primarily the Asian Development Bank and the World Bank. 

The other 45.9% of external loans came from bilateral loaners; The People’s Republic of China and Japan.  Of all external loaners, the largest debt is with The People’s Republic of China which measured in at $420.6 million. This was far greater than the second biggest lender to Samoa, the Asian Development Bank which had loaned $286.6 million in September. 

It was not possible to get a comment from the Ministry of Finance.

*Sione is not his real name 

© Samoa Observer 2016

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