Central Bank makes $3 million profit

The Central Bank of Samoa made a profit of $3 million at the end of the 2018 financial year, which is a decrease of $3 million compared to the previous year. 

This was highlighted in the Central Bank's 73-page report, which outlined the bank's audited accounts for the financial year ending 30 June, 2018. 

At year end June 2018, the Central Bank had total assets of $630.3 million, which comprised $451.4 million in foreign assets, and $178.9 million in local assets.

“On the other hand, the Central Bank recorded total liabilities of $610.9 million comprising foreign liabilities totaling at $199.0 million and $411.8 million in local currency.

“The Central Bank’s net assets amounted to $19.5 million, a marked increase from $16.3 million recorded a year earlier. Total reserves increased mainly due to unrealised gains from the revaluation of foreign currency assets during the year.” 

The Board of the Central Bank decided to convert its $3 million profit into reserves. 

According to the audit report, the Central Bank’s budget position continues to be influenced by global developments, particularly the volatile exchange rate movements and that of the ongoing low interest rate environment world wide, which subsequently impacts on the Bank’s primary source of revenue, its interest income on foreign reserves holdings. 

“As such, the Bank recorded a total net profit of $3 million tala in 2017/2018 compared to $6 million tala in the previous year,” says the annual report.

The C.B.S. Governor, Maiava Atalina Auelua noted in her report that the world economy’s growth momentum, while continuing gradually, has come up against risks that are more on the downside. 

“Ten years on since the start of the global financial crisis, global economic growth has steadily recovered with a 3.7 per cent growth estimated for 2017/2018 by the International Monetary Fund (I.M.F.). 

“While this was slightly higher than the 3.5 per cent growth in 2016/2017, it was nonetheless lower than earlier expectations following a string of mounting headwinds which has weighed heavily on the global economy since the start of 2018. 

“These included the rise of US trade protectionist measures flaring up tensions with some of the top global economic powers, increasing oil prices and political uncertainties in the advanced economies among other factors.” 

Maiava stated the major challenges to the Samoan economy in 2017/2018 included the complete closure in Au­gust 2017 of the largest private sec­tor manufacturing company in the country, Yazaki EDS (Samoa) Limited. 

“This was due to the closure of the car (Ford) manufacturing industry in Australia, which was the main market for Yazaki’s wire-harnessing products. Furthermore, with the current fre­quency of natural calamities around the globe, Samoa also endured its share of these adverse climatic con­ditions, with Tropical Cyclone Gita hit­ting the country in February 2018.” She said the rising oil prices, global infla­tion trended higher to an estimated 3.3 per cent in 2017/2018, from 2.7 per cent in the previous year. 

“Samoa was not immune to this develop­ment, which together with the weight of increased local food prices after TC Gita exerted greater inflationary pres­sure in the economy.” 

Maiava noted that against this backdrop, the Central Bank continued its easing monetary policy stance to assist fiscal policy efforts to stimulate further activities in the Samoan econ­omy. 

Overall, the larger than expected reduction in overall manufacturing activities in the economy, following the closure of the Yazaki manufac­turing plant, as well as the drop in output from the agricultural, fishing and transportation sectors contribut­ed to the slowdown in real econom­ic growth.

“Nevertheless, Samoa’s exter­nal sector remained positive with an overall balance of payment surplus of $109.8 million tala, reflecting amongst others, the strong improvements in visitors’ earnings, private remittances and large inflow of grant budgets sup­port funds received during the year. As a result, Samoa’s official gross foreign reserve levels remained comfortably high at an equivalent of 6.1 months of imports in 2017/2018, compared to 4.8 months in 2016/2017. 

“Outside its traditional monetary poli­cy channels, the Bank also approved a new credit line facility (C.L.F.) valued at SAT$10 million that was made avail­able through the Development Bank of Samoa (D.B.S.) to support and pro­vide economic stimulus following the impact of TC Gita earlier in the year.” 

Maiava stated that with their prudential responsibility “I am pleased to report that Samoa’s financial system remained stable and sound in 2017/2018. 

“The bank­ing system achieved a comprehen­sive profitability performance and a steady capital adequacy ratio of 27.3 per cent, comfortably ahead of the Central Bank’s minimum capital re­quirement of 15.0 percent. Similar­ly, the insurance industry performed well, sustaining steady growth in prof­itability of $6.5 million tala, despite a strong increase on claims paid by gen­eral insurance to claimants as a result of TC Gita.” 

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