I.M.F. approves Samoa's $60.9 million loan
The International Monetary Fund (I.M.F.) has approved a US$22.03 million loan (T$60.9 million) for Samoa’s COVID-19 response, in particular to go towards boosting the private sector decimated by the pandemic.
On Friday, the I.M.F. Executive Board revealed it would release the funds under the Rapid Credit Facility to cover payments urgently needing to be paid but unable to be because of the COVID-19 pandemic.
With Samoa’s economy taking its second major hit in six months following the 2019 measles epidemic, the international body is looking to help the country maintain “macroeconomic stability” by supporting the private sector and facilitating international payments in the import sector.
“The border closure, combined with a sudden stop of tourist arrivals and decline in remittances, has led to a precipitous fall in two vital sources of foreign earnings and resulted in an urgent balance of payments need,” Deputy Managing Director and Acting Chair of the I.M.F. Mr. Tao Zhang said in a statement.
“I.M.F. emergency support under the Rapid Credit Facility will help meet this balance of payments need, maintain macroeconomic stability, and catalyse additional donor support which is needed to fill the remaining balance of payments gap and ease the potentially sizable adjustment burden on the fiscal sector.”
Mr. Zhang applauded Samoa’s supplementary budget stimulus package released earlier this month, commending its measures strengthening the healthcare system, vulnerable businesses and households and “accommodative monetary policy to ensure liquidity in the financial sector.”
The supplementary budget includes discounts on power and water, free rent to businesses leasing certain Government owned offices and fee reductions on services at the airport and ports, among other measures.
It was not welcomed across the board by Samoa’s private sector, including the Samoa Association of Manufactures and Exporters (S.A.M.E.) which said it barely supports their industry at all.
“I am not being cynical, but perhaps the budget was put together in a hurry and there was no consultation with the private sector,” S.A.M.E. President Tagaloa Eddie Wilson said.
“We all know there is limited funding but it could have been a lot more innovative if there were other more important things looked at.
The R.C.F. disbursement is a loan with zero interest rate, has a grace period of five and half years, and a final maturity of 10 years.
I.M.F. Acting Chair Mr. Zhang said as well as responding to the country’s urgent needs, Samoa needs to continue working on debt sustainability and economic growth in balance with each other.
“[The authorities] also need to continue their efforts to enhance spending efficiency, strengthen social protection programs and safety nets, further improve tax administration, strengthen public financial management, and safeguard financial stability.
“Addressing vulnerability to climate change remains a key medium-term challenge to create a fiscal buffer.”
The I.M.F., like the Central Bank of Samoa, predicts gross domestic product (G.D.P.) to contract to -5.0 per cent this year, and to eventually return to near pre-pandemic levels by 2025.
Last year G.D.P. rose 3.5 per cent from -2.2 per cent in 2017/2018. But the growth will be short-lived: the I.M.F. predicts G.D.P. to recover by just -1.5 per cent in 2020/2021.
It also predicts Government expenditure to rise to account for nearly 40 per cent of G.D.P. in the coming years (to 37.5 per cent), from previous levels of closer to 30 per cent between 2016 and 2019.
The Chamber of Commerce and Industry, which represents the interests of its private sector members to Government, has been approached for comment, as has the Ministry of Finance.