Ministry to pay close attention to S.O.E. liabilities, partnerships
The Ministry of Finance will pay closer attention to and monitor the liabilities of state-owned enterprises (S.O.E.) as well as public private partnership arrangements.
This undertaking was made in the Ministry’s annual report for the 2017-2018 financial years, with the annual report further revealing that the Ministry will also review and update approved procedures and guidelines for both contracting new loans and issuance of Government guarantees, in view of the Ministry of Public Enterprises’ role in the process.
The Ministry’s Chief Executive Officer, Leasiosiofaasisina Oscar Malielegaoi, noted the role of the Ministry in Samoa’s governance process over the last 57 years.
He said the Ministry of Finance plays a critical role in advancing the Government’s development agenda, “through sound and prudent management of public resources within the framework of sustainable policies”, as the custodian of the nation's finances.
“The Ministry of Finance plays a crucial role in providing strategic policy advice to Cabinet; preparing and overseeing the implementation of plans for the economic development of Samoa; managing Government financial assets through its annual budget process; providing the analytical basis, as well as sound and thorough analysis to support the implementation of major government priorities, through the Cabinet Development Committee and the ongoing Public Financial Management Reforms to support macroeconomic stability on the economic front, Samoa registered a positive growth of 0.9 per cent as at year end, 30th June 2018."
However, Leasiosio noted the decline in economic growth compared to last year's rate of 2.7 per cent that was driven in part by the closure of Yazaki, and the sluggish performance of industries namely manufacturing, fishing and agriculture due to the economic impact of Cyclone Gita.
“On a positive note, other sectors of the economy including accommodation and restaurants, commerce, communication and construction recorded positive annual growth rates throughout the four quarters of the financial year.
"The fiscal out turn for the reviewing period resulted in an overall budget surplus of 0.1 percent to G.D.P (gross domestic product). With government's medium term deficit goal set at 3.5 percent of G.D.P., the surplus itself is an indication of government's commitment to strong fiscal discipline.
"Overall, the 2017/2018 financial year was very challenging, yet very productive year for the Ministry of Finance,” he said.
The report also pointed to the challenges and issues within the Ministry and the adverse movement of the exchange rate tops the list of challenges.
“The foreign currency risk remains the key risk in the portfolio, with 98.2 per cent of the total Government debt ($1.08 billion) is denominated in foreign currencies. The tala depreciated against all loan currencies.”
Other challenges are the limited sources of concessional finance and high risk of external debt rating.
“Samoa is at high risk of debt distress, and need to build fiscal space for future unexpected events, and any borrowing needs from highly concessional sources.
“The Medium Term Debt and borrowing strategy also recognised the constraints in highly concessional financing from the multilateral banks, therefore the FY19 and FY20 planned to meet any financing gap after concessional financing through Government bonds issuance.
“The bonds instruments are expensive and non-concessional. Capacity constraints, with evolving debt management functions and responsibilities, the Ministry continued to face with technical capacity constraints to sustain and increased monitoring and management of Government debt.
“The structure of the debt management unit is lean and operational risk needs to be addressed.”
In terms of the Ministry’s recommendations moving forward, it assured that Samoa’s Medium Term Debt Strategy (M.T.D.S.) indicators and annual targets set, remain relevant to monitor the progress and implementation of the debt strategy.
“With two years of the current M.T.D.S. remaining, the focus should be on initiatives to explore other potential financing sources including Government T-bills and T-bonds program. (Treasury bills or “T-bills” are short-term bonds that mature within one year or less from their time of issuance).
"Also there is a need to review debt management functions and structure to address increase in debt management responsibilities and capacity constraints.
“In addition, debt management operational manuals and continuity plan should be in place,” stated the Ministry of Finance annual report.