Govt. must own up to hard economic truths
It’s a truism of politics in democracies large and small across the world that the political success of a nation’s Government is tied to the performance of its economy.
It was American President Ronald Reagan who made one of the most famous political statements of all time when he stared into a camera to ask voters: “Are you better off today than you were four years ago?”
Development has similarly been the yardstick by which Samoan voters judge their Government’s performance.
And the current Government’s success in raising living standards in Samoa, exemplified by our elevation from the United Nations “Least Developed Country” status in 2014, goes some way to explaining their enduring political success.
Now with the 9 April election around the corner, many Samoans will be asking themselves the exact same question: are we better off than we were five years ago?
But the question is whether voters have the information they need to make such decisions, or whether bad news has been sugar-coated.
It’s not an easy question to answer objectively; economics is not for nothing known as “the dismal science”.
But the Government has been dancing around inconvenient truths about the state of our economy in an election year to nobody’s benefit.
On the front page of Saturday’s edition made by the Tautua Samoa party President that the Government is being downright misleading about national finances. (“Govt. "lying" about nation's finances: Afualo”).
Afualo Luagalau Dr. Salele, an economist and election candidate, claims the Government is, to use accounting slang, cooking the books to present a misleadingly rosy picture of the nation’s economy.
Crudely put, Afualo’s point is essentially that the national debt is larger than the Government claims.
Those claims are based on a highly technical analysis of the national Gross Domestic Product, which we will not rake over here.
But he speaks a broader truth about the current Government’s approach to economic transparency that we believe needs to be highlighted.
In response to Afualo’s claims, the head of the Ministry of Finance, Leasiosiofaasisina Oscar Malielegaoi, said that while he agreed that Samoa’s G.D.P. was dropping Afualo’s conclusions that Samoa’s ability to repay its debt was not supported by the figures.
Leasiosio said that those observing from outside of the nation’s economic control room did not have the necessary data to draw economic conclusions.
"Of our earnings only 11 per cent is taken off to pay our debt while 89 per cent of our earnings are for the development and normal operations of our country,” he said.
"So it's a very healthy position if you consider international standards, so these are the true figures and numbers we are talking about and the I.M.F. has given their backing."
It’s unlikely that without access to recent jealously guarded economic data that this is an argument that will be able to be settled definitively. Indeed, few competing interpretations of economics ever are.
Afualo’s criticism, as thorough as it is, lacks the potential to incite popular appeal in an election campaign.
Claims about Government revenue sources and Ministries’ budget allocations are unlikely to engage the average Samoan voter. Those who can interpret these issues are more than likely to have decided for whom they will be casting their ballots.
But he makes a point about the Government obfuscating the reality of Samoa’s economy that must be acknowledged.
The Central Bank of Samoa only last month publicly announced that the country had entered into recession. This is something that had been apparent by any definition for several months.
But in private correspondence obtained by the Samoa Observer, the bank had been much freer in its assessment of the health of the nation’s economy.
In a letter signed by the bank’s Governor, Maiava Ainuu-Enari, sent to the nation’s commercial banks on 28 September last year she was exceptionally candid about the state of Samoa’s economy.
Not only did she acknowledge that Samoa had entered into a recession some four months before the bank did so publicly, but she was also honest in her disclosure of the bleak outlook that lay ahead for the nation.
"The economy is moving into a depression (at least 8 consecutive quarters of negative [growth]) or at least a 10 per cent decline [in] real Gross Domestic Product,” she wrote.
"We therefore need to do more to minimize these impacts on our people and their livelihoods.”
That was a very different picture to that presented by Leasiosio in an interview with this newspaper in January about an astonishing 16 per cent drop in the nation’s G.D.P.
The decline was the largest on record since quarterly economic figures started being recorded some two decades ago.
He brushed off the figures and said he believed that the worst effects of the pandemic-led downturn are over.
"If you look at things per quarter, that is not right, because there is a quarter that goes up and another that goes down; what's important is the 12 months review," he said.
(In December the Asian Development Bank predicted a 10.7 per cent decline in Samoa’s economy in the following year, making it among the worst of the Pacific economies surveyed.)
In a similar instance of putting the best possible public spin on economic data, the Ministry of Customs and Revenue released a report through Government-owned media noting that it had broken an all-time record for Government revenue collection.
The statement said that over $2.5 billion had been collected during the five-year term from 2015-2016 to June 31st 2020.
This was factual but not accurate in the way it portrayed our economic situation.
The choice of dates used was highly selective and designed to choose the time when the Government’s coffers would look their most impressive, before the impact of the current economic recession.
Let’s compare that with Finance Minister Sili Epa Tuioti’s May budget speech in which he said:
“Total Ordinary [revenue] Receipts are expected to decline 10 per cent [which is] attributed to the aforementioned decline in Taxation Revenues which will fall by 12 per cent while Non-Tax Revenues will increase by 12 per cent.”
The Government can gloss over gloomy economic data precisely because it is so complicated that ordinary voters will not engage with it.
But as the entire world is in a recession there is no better time than now for an honest reckoning with our economic circumstances; after all they have been caused by factors beyond our control.
Presenting our voters with the shabby truths the Government has been acknowledging freely in private is the first step toward a productive debate on how to overcome them.