Samoa "on track" to achieving debt threshold
Samoa is "on track" to achieving its 40 per cent debt to G.D.P. threshold, despite the challenges brought on by the global pandemic, says the Ministry of Finance Chief Executive Officer, Leasiosiofa'asisina Oscar Malielegaoi.
He said the Government is a "responsible borrower” and keeping in mind that the COVID-19 pandemic is not the only crisis that Samoa will face.
"The principle of the loan is that the smaller your loan the bigger the space there is for you to manoeuvre in the case of a crisis," he told the Samoa Observer in an interview. "The target is 40 per cent to G.D.P. and right now we are about 47 per cent, so we are on track to meeting that goal of 40 per cent to G.D.P."
Leasiosio added that it is a medium-term goal, meaning that it is expected to be reached in about three years.
"Then we will try to maintain it below that because the lower the loans the more the money we can spend elsewhere," he said. "Not necessarily to massively decrease it but ensuring there is balance and with 47 per cent (to G.D.P.), in our view, it is still very high."
In the most recent quarterly report released by the Ministry of Finance, the official Government debt for June quarter 2019/20 stood at $786.22 million, which is a $257.41 million decrease when compared to the corresponding quarter of the previous financial year.
An analysis by Dr. Robert Kirkby, a macroeconomist from Victoria University of Wellington, says that while that places Samoa well in terms of the future government finances, conventional wisdom is that the recession is not the best time to be improving finances, which he argued could be better done during periods of economic growth.
But the Ministry of Finance Chief thinks otherwise, saying Samoa is taking action based on experience.
"Like I said before, after the disasters in the past including the Global Financial Crisis which hit its peak in 2007, not long after it was the 2009 tsunami, 2012 was Cyclone Evan, and through all of this, we did not rest," Leasiosio said.
"After the global crisis we did so many projects including our large buildings and road works with the hope to inject our economy. After the tsunami, we injected more and after Cyclone Evan, we injected again.
"But what is happening? All we hear is complaints that our loan has hit a billion, without knowing and understanding that all that money was to assist the economy at the time."
Though the C.E.O. could not say for sure if the Government will not increase its debt this year, Leasiosio says the Government is standing by the principle of loaning, only when needed and “not if we want.”
"And now that we have completed most of our major projects, including our hospital, the airport, the courthouse [...] because we cannot just sing that these have improved when the environment where the service is provided has not.
"We aim to improve the public services because once they have improved the rest of the country improves and grows along with it."