Samoa's finance sector gets help on debt management

Samoa’s finance sector has been getting expert help on debt management from the Commonwealth debt management unit this week, as well as the upgraded management system.

Briar Ferguson is the debt management adviser for the unit and has been in Samoa working with the Ministry of Finance, Central Bank of Samoa and development partners on implementing an improved debt management system and also capacity building.

She said she is seeing strong initiatives and political will to improve and develop in this area, and will be reporting back to Samoa with recommendations for any improvements that could be made.

“There needs to be the capacity and resources there and that is the key thing for Samoa is building up those resources to manage what they’ve got and make those decisions but I think there is the political will definitely,” Ms Ferguson said.

The new Commonwealth system, called Meridian includes both debt management reporting and analysis, which should help governments not only know what their debt portfolios look like but also what they can do with them. When it comes to financial resilience to the effects of climate change, this is especially important.

“On the conceptual side it’s about trying to understand where your money is coming from, when you have to pay it back spread over time, the cost of that debt,” Ms Ferguson explained.

“On the financial resilience for disaster side of things it’s about making sure they have a plan in case there is a disaster to continue those debt service payments.”

Samoa and the Cook Islands are two Pacific states receiving this technical assistance. Ms Ferguson said not only is there a lack of technical assistance from the Commonwealth to the region, the nations’ high debt to GDP ratios are high and unsustainable.

“Those are the countries we really want to help understand what is going on, and it’s not a case of external companies coming in and telling Samoa what to do,” said Ms Ferguson.

“They have to understand exactly what is going on for themselves.”

But the process of reducing those unsustainable high ratios is slow, and needs committed politicians and public sector. New Zealand’s experience shows that any country can get there.

“From my experience in the New Zealand side, we had very high debt to GDP, our whole public sector had to be reformed, we went through the hard yards to get to where we are right now and it’s a continuous battle of making those decisions for the long term,” Ms Ferguson said.

“You’ve got to sometimes go through the hard and painful times to get to the good side”

She has been conducting e-learning on debt management concepts, and on policies which can help governments manage their portfolios. A positive outcome has been learning Samoa is eager to eventually develop a domestic debt market.

New Zealand’s case of the Earthquake Commission paying out insurance for natural disasters has taken the load off Government, in a way Samoa could look at doing too. While getting to that place might be slow going, the right conversations can get Samoa there, Ms Ferguson said.

“It’s about thinking about things before they hit, to have those systems in place, and I understand with those developing markets those instruments aren’t there at the moment.

“If there is enough of a push, drive and conversation around it those things will come to market. I think there needs to be those conversations to try and shift the mind set of grants, development partners and debt, and more into other instruments and innovative ways that governments can decrease the burdens on government finances.”

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