A.D.B. president weighs in on debt distress debate

During the visit of the Asian Development Bank’s president and regional leaders to Samoa, President Takehiko was asked if he is confident the country can pay off its loans. 

Since its establishment in 1966, A.D.B has committed US$385 million, over half of which comes from the Asian Development Fund. In recent times, the bank has stopped giving loans to Samoa, choosing to give grants instead.

Speaking with media, President Nakao said supporting countries vulnerable to climate change is important.

“We have been careful to manage the debt issues of the countries and this year because of the debt to GDP ratio is increasing, and because of vulnerability to climate change, we will continue to give a grant 100 per cent to countries again,” he said.

Funding towards building resilience and adapting to the effects of climate change is a priority for the bank, said the president, including developing the renewable energy sector.

“The roads should be elevated and made stronger against flooding; we need stronger communities and a good power system with the resilience to climate change,” he said.

“We are supporting renewable energies."

“This country has the objective of making renewable energy 100 per cent of the power supply and we continue to support that, we need a lot of effort to make it workable.”

Part of President Nakao’s visit included an in-depth look into Samoa’s renewable energy developments. Their first day saw a trip to the Sun Pacific Energy Solar Farm near Faleolo International Airport, and yesterday they toured the Fiaga Power Station and battery storage centre.

However, President Nakao added that despite the banks best efforts to support Samoa, being smart about spending was always important.

“At the same time, countries should continue to pursue prudent policies regarding fiscal expenditure and debt management,” he said.

The Asian Development Bank’s Regional Director in the Pacific Sub-regional Office in Suva, said the choice to make Samoa’s assistance grant based was to do with how vulnerable the economy is to shocks.

Masayuki Tachiiri said more so than before, the bank is considering vulnerability of economies, with new classification measures - especially when it comes to climate change.

“With the new factors we agreed to incorporate the vulnerability of the economy,” Mr Tachiiri explained.

“So smaller countries subject to natural disasters, typically Pacific countries, they are now eligible for grant funding.”

The debt sustainability analysis, conducted by the A.D.B, the International Monetary Fund and the World Bank also measures debt size and repayment terms but Mr Tachiiri said Samoa’s vulnerability was the main consideration for the grant.

“Small economies have a difficult to manage their economies because one cyclone has a lot of impact. It’s very different from a large economy,” he said.

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