Economists say budget falls short

By Soli Wilson 30 May 2020, 6:00AM

Economists have declared that the $965 million budget proposed for the new Financial Year in Parliament on Tuesday as "not enough" for the period of extreme economic downturn facing Samoa. 

The Government’s total budget for the new Financial Year of 2020-2021 was composed of $838 million in revenue and $965 million in expenditure, widening the national deficit of $116 million after “soft term borrowing” is accounted for. 

An economic researcher, Alexandre Dayant of Australia’s Lowry Institute said the Government’s priorities are evident in the tabled budget: Economy and Health first.

These two account for more than 45 per cent of the budget appropriations for Ministries alone, he noted. 

Although, while the priorities are "understandable",he said that more funds may be needed to sustain Samoa's economy.

The Ministry of Finance holds the largest portion of the budget allocation, $133.6 million.

Some of the larger initiatives led by the M.O.F. include $32 million for the Phase II of the Government’s COVID19 Response Plan or stimulus package, $27.1 million for the usual annual Senior Citizens’ Pension, $13.5 million allocated to cover V.A.G.S.T. and duties for development project-related expenditures including imports. Some $5 million to be paid to the Samoa Airways as compensation for Government’s takeover of the Fagalii Airport properties.

“The focus on the Ministry of Finance is understandable,” Mr. Dayant said in an email response.

“According to the [International Monetary Fund's (I.M.F.)] April’s report, Samoa’s [Gross Domestic Product] is going to decrease by 3.7 per cent in 2020. 

"In reaction, the current Government had to apply extraordinary measures to keep the economy of the country afloat.

“The Government, through the Ministry of Finance, had to put together the first phase of the fiscal and economic response package, accounting for almost 3% of gross domestic product.

“For the package to reach its target – support the private sector so they can feed the region – it needs supervision for a correct implementation. Hence those allocations.”

Mr. Dayant said it is comforting to see the Government focusing on Health given the pandemic exposing alarming weaknesses in the region’s health systems.

“To me, the Ministry appropriations seems adapted to the crisis. It is important to get both the economy on track on the health system working properly.

“While the amounts put on the table by the Samoan government are impressive, I don’t think it will be enough to address the dire financing needs of the country. Samoa will require additional support from development partners."

Samoa was the first Pacific islands country to benefit from the I.M.F. Rapid Credit Facility, a boost of US$22.03 million (2.4% of GDP) in emergency financing.

“While those are welcomed, more might be needed in the long run,” added Mr. Dayant.

National University of Samoa Economics lecturer, Savai’inaea Tamaleta Taimang, shared similar views saying while he supports the budget, the Phase II stimulus package announced on Tuesday of $80 million is “not enough.”

“If the Government is vote-buying through the freebies targeted for the citizens then they should double or triple this amount. Part of this spending is coming back to the economy through the V.A.G.S.T,” he wrote in an email response.

“The money to the pensioners should be diverted to the assistance to the households; the pensioners will get their increase from assistance to the household.  All citizens should be treated equal under this stimulus package,” said Savaiinaea.

Economist and Political Party leader, Afualo Luagalau Dr. Salele Afualo said the budget for financial year 2020-2021 does not reflect an effort from Government to diversify the economy.

In an interview with the Samoa Observer, Afualo highlighted that apart from normal priorities of health and education, the proposed budget is an "election budget".

Afualo pointed out the increased provision for the Ie Samoa Show (Faalelegapepe) of $1 million and $50 per citizen during the 2020 Census and National ID Registration Roll Out.

"Although that it falls directly along the line of COVID-19 and measles, whereby it needs a really good stimulus package, but so far it does not go far enough to ensure a real commitment," he said.

"I would say the budget is insufficient to warrant for all demands of the economy, different sectors. A lot of other incentives that have been put into the budget, we know for sure that this is an election budget."

Afualo also noted that the stimulus package includes too many measures that will have little effect on the national economy.

He then urged Government to seize the next financial year budget to reprioritise and diversify the economy.

"This is a great opportunity for the Government to reprioritise other development goals. The Government needs to be serious with diversifying the economy to ensure it responds," he said.

"Especially during such challenging times, when they come, [Samoa] is safe. Rather than putting all your eggs in one basket, you need to spread it around.”

By Soli Wilson 30 May 2020, 6:00AM

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