GOVT. DEBTS NOT AN ISSUE, ATTEST MOF CHIEF EXECUTIVE
By: Nanai Taofiga Laveitiga Tuiletufuga
Resorting to external loans to bail out the country should the COVID 19 continues to prolong posing drastic effects on the local economy and residents livelihoods, will be the Government’s “last resort.”
The latest Economy Report compiled by the Central Bank of Samoa, showed that as of December 2019, Samoa’s outstanding external debt stands at $1,028.5 million (around 45.6 percent of nominal GDP), 3.3 percent lower compared to $1,063.9 million at end December 2018 (49.3 percent of nominal GDP).
The annual Debt Servicing Repayment as at the end of December 2019 totalled $71.43 million, which was 0.4 percent lower than $71.70 million in the year up to December 2018.
“This was equivalent to
• 10.63 percent of recurrent revenue;
• 14.70 percent of foreign reserves; or
• 8.54 percent of total exports of goods and services,”
Clarified the Economy Report.
“What this means is that for every tala that is earned by Government (Recurrent) Revenue, approximately 11 sene is used to pay off Samoa’s foreign debt,” clarified the CBS document.
“For every tala that is saved as the country’s foreign reserves, 15 sene is used to pay for our external debt,” the report continued.
“For every tala that we earn from the export of our goods (export earnings from fish, taro, nonu juice etc…) and services (mainly tourism earnings), we use around 9 sene of those earnings to repay our foreign loans.
And the report, says Chief Executive Officer of the Ministry of Finance, Leasiosiofaasisina Oscar Malielegaoi reflects that 11% of Government’s Revenues are dedicated to External Debt Service while the remaining 89% is utilized by Government to meet its financial obligations ranging from funding major infrastructural projects and maintaining public services such as health and other essential services. Overall he reiterates that the External Debt is manageable and speaks volumes for Government’s financial stability.
“A total of $89million is included under the total Statutory Payments of $137million allocated specifically for the Government’s debt servicing taken from total Government Revenues of $838.2million.
“This means that after paying our debt servicing, a total of $749.2million is left to be appropriated towards remunerations for public servants, payment of operations as well as other development programmes of the Government.”
“In terms of percentage, only 11% of Government revenues go towards our debt servicing while 89% remains for other operations of Government and its key developments,” Minister of Finance Sili Epa Tuioti told Parliament during the FY 2020-2021 budget debate. “Despite current circumstances the Government remains confident that we can work together to ensure strong economic growth for a better future for all.”
Added the Finance Minister;
“There are also wild claims by some false prophets that if they come into office, they will do away with any future loans or borrowing money to meet Government’s obligations.
“I find those claims horrendous and are totally untrue.
“The sound planning reflected in our Budget Estimates reaffirm the wisdom of a responsible government which is fully aware of its obligations to the people and in control of its financial fate. “Furthermore, the governments audited revenue and expenditures report are public records and that should be more than enough evidence to vindicate government from the ridiculous sinister or conspiracy rhetoric.”
On that note, the MOF Chief Leasiosiofaasisina reaffirmed that at this point in time, considering additional new external loans as a result of COVID 19 is not on the table and will be a “last resort.”
Some of the measures that have been in place prior to pandemic and continue to implement;
The PFM Act requires Government to set aside an annual allocation for a sinking fund to be invested and that may be utilised if needed should the Government ever has difficulties in settling it debt repayment obligations. The Government has been investing and building up this fund over the years and it provides a buffer during these times.
Every year, the IMF and WB in consultation with the Ministry of Finance conducts debt sustainability analysis. Though Samoa remains at high risk of debt distress, the assumptions made and incorporated in the analysis include the vulnerability and exposure to natural disasters as well as adverse movement of exchange rates that impact on debt portfolio.
The Ministry of Finance continues to provide regular quarterly reporting on the Government debt portfolio, as well as dissemination of the same information to the Government Statisticians and CBS to also allow timely reporting and forward looking projections to assist Government in decision making.
Responsible fiscal management has been in the forefront of key decisions made and implemented to respond to the impact of the pandemic including the stimulus package that is currently implemented. A whole of Government and society approach as well as global solidarity is very essential in responding to the impact of COVID19 and during these extraordinary times.
Leasiosiofaasisina adds that 11% of Government’s Revenues are dedicated to External Debt Service which means 89% is utilised by Government to meet its financial obligations such as funding major infrastructural projects and maintaining public services in health and other necessary services.
In view of those figures, the Chief Executive Officer for the Ministry of Finance concludes that the External Debt is manageable and speaks volumes to Government’s financial stability.
