Stimulus, $66 million budget passes Parliament
A $66 million supplementary budget, composed mostly of economic relief measures for consumers and businesses, will expand the budget deficit to 1.7 per cent of Gross Domestic Product (G.D.P.).
In measures passed unanimously by Parliament on Tuesday, the Government passed stimulus measures targeted at consumers to the value of $27.5 million, including a one-off pension of $300 and waivers on utility bills.
About $12.5 million or 20 per cent of the budget was dedicated to the private sector which included waivers on Samoa National Provident Fund (S.N.P.F.) contributions for tourism businesses for up to six months and local production subsidies that free local enterprises from loan repayment obligations for three months.
In total, the Government says that the new measures will only expand the projected budget deficit for this quarter by $8 million.
“This means that the second supplementary budget estimates have expanded the deficit by 0.5% compared to the 1.2% estimated at the beginning of the current fiscal year,” said Finance Minister Sili Epa Tuioti who gave an optimistic speech when introducing the budget to Parliament on Tuesday morning.
“[The budget] has expanded the deficit by 0.5% compared to the 1.2% estimated at the beginning of the current fiscal year."
Sili said the measures, which include a six-month waiver on principal repayments for loans from the Development Bank of Samoa, rent waivers for businesses headquartered in a range of buildings owned by Government agencies, would help counter downward economic trends.
The assistance laid before Parliament on Tuesday was characterised as an initial policy response. In addition to the stimulus measures it included additional spending on medical equipment and consumables, food security and multi-sectoral responses which included funding for emergency services and education.
Food security measures included a grant of more than $3 million to the Scientific Research Organisation of Samoa for research into adding value to agricultural production and initiatives to support the development of import substitution.
“Despite the detrimental effects anticipated for the economy, I would like to emphasise the significant role that the Government’s assistance will play not only in the protection of our nation from the coronavirus but it will also act as a trigger to help stimulate economic growth through reprioritisation of Government spending as well as extending the assistance to the citizens and the private sector through these times of uncertainty.
"This is only the early response of the Government and there will be a longer term plan to be publicised in the near future.”
Sili foreshadowed further measures to increase spending to help the growth of the economy over the next six months.
Among the private sector relief initiatives unveiled on Tuesday was a $1 million measure dedicated to Samoa Airways.
S.N.P.F. members who have lost employment in the hospitality sector will be eligible for early withdrawal of their net contributions up to the value of $4000.
The expenditure measures were complemented by reductions and postponements to a variety of Government agencies.
These included a reduction of $320,000 for the Ministry of Agriculture’s budget; $500,000 from the Ministry of Education relating to the cancellation of the Pacific Festival of Arts; a $2 million reduction from the Electoral Commissioner’s office because of an anticipated delay in the construction of a new Electoral building and $100,000 from the Ministry of Foreign Affairs and Trade because of the cancellation of an international conference on oceans later this year.
Also listed in the Government's package but not highlighted was an anticipated $12.5 million reduction in border taxes collected by the Ministry of Customs and Revenue.
This reduction in revenue was projected to be composed of a five per cent in import duty worth $3.2 million; a five per cent reduction in import excises worth $3.6 million; a $2.4 million reduction in domestic excises; and a two per cent reduction in imported Value Added Goods and Service Tax.
No supplementary information was provided by the Government about what sectors to which these reduction in import levies would apply to.
But the Samoa Observer understands the reductions will not apply across the board but rather be highly targeted reductions aimed at basic consumer necessities including goods such as chicken and rice, not the consumer economy as a whole. Attempts to seek clarification on what goods and services would be subject to the reduction in duties and tax were unsuccessful before deadline.
The Minister said that the economic terrain had changed significantly since the Government had presented his first supplementary budget estimate before the Parliament late last year.
That budget was engineered in the shadow of the measles epidemic. Sili said the Government was seeking to return the state of the national economy to its place before the epidemic struck in late September last year.
Since the epidemic there has been a complete collapse in the tourism export sector. The nation recently announced the further complete closure of national borders for another four weeks.
Recent analysis by the A.N.Z. bank found that combined with declines in money sent to Samoa from overseas, construction and forgone fees from visiting cruise ships could result in the loss of nearly 20 per cent of all jobs in the country.
“These are unprecedented times that we live in as we bear witness to a global devastation never seen before since World War II,” the Minister said.
“Not only has the coronavirus affected the lives and livelihoods of people across the globe but it will undoubtedly also have a detrimental effect on the world’s economy.
“It was in January of this year, when the world was made aware of the Coronavirus epidemic that was affecting the Wuhan Province of China.
"Whilst the Chinese Government were working at containing the spread of the virus and trying to find a cure, no other country in the world – not even those with the expertise to create a vaccine, could have imagined that this virus would have such devastating effects on the rest of the world.”
He said this pandemic has completely changed the global environment, particularly for countries - like Samoa - which had declared states of emergency in a bid to try and control the spread of the virus.
He said the international organisations tasked with overseeing the compilation of economic statistics had been forced to revise their economic projections across the world.
“Earlier this year, projections were still optimistic anticipating a 3.3% growth for the global economy for 2020. However, this has now been revised down to 2.4% or less depending on how long the spread of the virus continues,” Sili said.
“The revising down of the global G.D.P. is due primarily to the closing of many industrial companies which has affected international trade; global unemployment has increased; large enterprises have been forced to close particularly large airlines upon which much of the world’s development rely on and money markets have been affected thus affecting foreign reserves for many countries.”
The aggregated value of the supplementary measures is $66.3million tala forecast to be implemented over the next three to six months.
The time frame allows for the possibility of another round of Governmental assistance to be announced during the main budget estimates for the Financial Year 2020/21.
The budget listed a total of $40.8million in additional grants received from a variety of national development partners including:$14.4 million from the World Bank (the amount includes an earlier disbursal of funds relating to the measles epidemic during last year’s first supplementary budget). The Investment Project Financing organisation, an arm of the Bank’s, made contributions equivalent to $7 million specifically for poverty reduction measures and initiatives to combat the spread of COVID-19.
The Asian Development Bank’s Contingency Disaster Facility added more than $8 million to the budget.
New Zealand injected $9 million directly into the budget for coronavirus assistance and Japan made contributions valued at $1.8 million specifically designed for the procurement of medical equipment.
The Government also said it had collected $8 million in additional revenues for its supplementary budget from its own agencies, from the Ministry of Finance and the Accident Compensation Corporation.