Debt repayments to jump 50 per cent: forecast
Samoa is predicted to increase spending on servicing its debt this year and next to the extant that it will soak up nearly 17 per cent of the country's total economic output, according to new analysis from a charity based in the United Kingdom.
The Jubilee Debt Campaign says developing countries’ debt has doubled in less than a decade, and left 52 countries, including Samoa, at risk of a debt crisis.
In the wake of the COVID-19 crisis which has sent the world into the worst economic situation since the Global Financial Crisis of 2008, countries have been ramping up borrowing and spending to recover.
For its part, Samoa has so far avoided borrowing more money, and has received grants from multilateral organisations to help finance its budgets instead.
In April, Ministry of Finance Chief Executive Officer Leasiosofaasisina Oscar Malielegaoi said Samoa “has no appetite to borrow” and intends to maintain its current spending on debt: 11 per cent of gross domestic product.
But the Jubilee Debt Campaign’s (J.D.C.) new analysis predicts it will increase its spending on debt alone will increase to 14.5 per cent this year and to 16.9 per cent next year. If that forecast materialises spending next year will represent a more than 53 per cent growth in the proportion of the country's G.D.P. spent on debt compared to current levels.
But the analysis found that the repayments would reduce back down to just below current levels by 2024 and account for only 10.8 per cent of G.D.P..
It believes Samoa is at “high” risk of a public and private debt crisis, based on figures from the International Monetary Fund and the World Bank, some of which have not yet factored in the impacts of the pandemic.
It also predicts Samoa will increase its government spend per person by nearly 5 per cent by 2023.
Leasiosio has been approached for comment about Samoa’s predicted growing debt distress.
The J.D.C. campaigns for debt relief for the global south based on a biblical concept of forgiving debt every seven years.
In the wake of the pandemic, the group believes the COVID-19 crisis could be disastrous for indebted, developing nations.
“Debt burdens were already taking much-needed money away from healthcare and social protection before the Covid-19 crisis hit, and the situation is rapidly deteriorating,” said Sarah-Jayne Clifton, the director of the Jubilee Debt Campaign.
“Debt payments for poor countries are at the highest level in 20 years. We need urgent action to cancel payments, to reduce debt to a sustainable level, and to rein in irresponsible lending to stop debt crises coming back to haunt us every decade.”
According to JDC analysis, there are 52 countries in debt distress today, up from 30 just two years ago.
A further 24 countries are at risk of both a public and private debt crisis, 32 re at risk of solely a private sector debt crisis, and seven were at risk of a public sector debt crisis.
In April, the I.M.F. also predicted Samoa’s debt would increase, saying the debt to GDP ratio would reach 71.3 per cent by 2023 and stay there until 2025.
At the time, Leasiosio said he could not speak for the full five years but for at least two years there are no plans to make new loans.
So he is confident debt levels will remain closer to 50 per cent of G.D.P., its target threshold.
In June, China announced it would suspend debt repayments from 77 developing nations, including Samoa.
Minister of Finance Sili Epa Tuioti said he had yet to receive official communications on the debt relief programme (Debt Service Suspension Initiative for Poorest Countries by the G20) and could not comment on whether it has taken China up on the offer.