Central Bank looks to absorb coronavirus shock

The Central Bank of Samoa (C.B.S.) says it is already preparing to contain fallout from the coronavirus-led downturn buffeting economies worldover and moving central bankers to stabilise the economy.

Responding to questions from the Samoa Observer, Central Bank of Samoa Governor, Maiava Atalina Ainuu-Enari, said Samoa’s national foreign reserves by the end of January stood at SAT$511.4 million.

This was more than enough to cover more than six months of imports and goods, she said.

And for further support, financial assistance through a rapid credit facility from the International Monetary Fund (I.M.F.) has been obtained to cushion the nation's balance of payment position from potential losses in foreign receipts from exports, tourism and remittances.

The financial assistance sought from the I.M.F. may also stimulate international financial assistance from Samoa’s development partners, Maiava said. 

The Governor said during their quarterly meeting with commercial banks held on Wednesday, the banks level of preparedness was discussed to ensure they are able to survive in spite of the risks posed by the global economy. 

“C.B.S. has encouraged the commercial banks to engage with their affected clients where relevant, for any [possible] arrangement [for their] consideration, on a case by case basis,” she said.

“C.B.S. has also been reassured by the commercial banks that they are considering emergency response plans for business continuity in preparation of the adverse impacts of C.O.V.I.D.-19 on their respective staff and management teams.”

Countries around the world have been undergoing efforts to cushion the blow of the coronavirus on economies with monetary policy maneuvering and cutting interest rates drastically.

The Bank of England had cut their interest rates twice in one week, from 0.75 per cent to 0.25 per cent, and then again to 0.1 per cent: the lowest ever in the Bank’s history.

Asked if the Central Bank of Samoa is expecting cuts to its cash rates, Maiava said keeping interest rates low has been C.B.S.’s principal goal for more than ten years.

“This stance dating back to pre-Global Financial Crisis 2007-2008 times has been continuously supported by the Article IV consultations which are currently annual assessments by the International Monetary Fund (IMF).”

There is very limited room for lowering CBS interest rates further, Maiava stated.

The current interest rates in the Samoa banking system on average include: a 0.15 per cent rate of C.B.S. securities; a deposit rate for cash at bank of 2.46 per cent and a commercial lending rate of 8.88 per cent. 

Two days after the Central Bank’s quarterly meeting with the commercial banks that was held on Wednesday, A.N.Z. Pacific announced a number of support measures for their customers.

In a statement, the A.N.Z. revealed that support measures include a reduction in repayment amounts for commercial customers in line with reduced interest rates.

They have cut their rates per annum by 0.50 per cent for all local currency overdrafts for commercial customers (effective 6 April) and all local currency variable term loans for commercial customers (effective 1 May).

All local currency variable home loans and personal loans (effective 1 May) have also received a reduction of 0.50 per cent per annum.

There has also been a removal of monthly loan administration charges for term loans for both retail and commercial customers (effective 1 May),” it reads.

The bank is also promising a waiver on loan restructuring fees for commercial customers on a case-by-case basis.

Correction: This story misstated the nature of the support measures the A.N.Z.Pacific is offering for: commercial customers for local currency overdrafts; local currency variable term loans; and all local currency variable home and personal loans. All stated reductions will by 0.50 per cent, not 50 per cent as the story originally stated.


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