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International Monetary Fund

. The authorities responded early in the global recession with monetary and fiscal stimulus. The Central Bank of Samoa (CBS) has lowered policy rates (CBS securities overall rate) by nearly 500bps since mid 2008 to ¼ percent. The government also started to increase development spending in 2008 and the pre-tsunami fiscal deficit was budgeted to double to over 10 percent of GDP in FY 2009/10, largely financed by grants and concessional loans. A massive humanitarian relief effort was mounted within days after the September 2009 tsunami and attention is now shifting

International Monetary Fund

profit transfer from the central bank and would help build up the central bank’s foreign assets by committing to meet all of its debt service obligations from the Treasury’s own foreign currency deposits until 2007, at which time it would transfer its remaining foreign currency deposits, with the exception of some sinking funds, to the central bank. 3 9. Auctions of CBS securities have become the principal instrument for influencing monetary conditions . The auctions take place on a fortnightly basis and are open to all Samoan resident over the age of 18. The CBS

International Monetary Fund
This Selected Issues paper and Statistical Appendix reviews Samoa’s record of economic reform, its economic performance to date, and future areas of reform focus. The paper highlights that reform of the taxation system has reduced Samoa’s dependence on international trade taxes and enhanced the efficiency of the tax system. Tax reform was initiated in January 1994 with the introduction of a 10 percent value-added tax on goods and services. The paper also assesses the Samoan experience of reform implementation and remaining issues and challenges.
International Monetary Fund. Monetary and Capital Markets Department
EXECUTIVE SUMMARY AND KEY RECOMMENDATIONS The Samoan financial sector is dominated by commercial banks and Public Financial Institutions (PFIs). The four commercial banks provide almost 60 percent of credit to the economy, and the most important PFIs, the Samoa National Provident Fund, and the Development Bank of Samoa, account for around 30 percent. There is also a small and shrinking offshore banking sector without linkages to the domestic financial sector. Banks are liquid and report high capitalization, but close supervisory attention is required in light of high and rising non-performing loans (NPLs) and the results of the FSAP stress tests.1 Banks are still dealing with the effects from past natural disasters, and assessments of their health are impeded by the significant uncertainty surrounding the quality of balance sheet data, in particular on asset quality and provisioning. High loan concentration and exposure to natural disasters represent significant risks to the financial system. The stress tests illustrate that the local banks are relatively less resilient and could not withstand a severely adverse scenario. Thus, close monitoring, through on-site supervision and asset quality reviews, paired with prompt corrective action and a plan to address NPLs (including in PFIs) as needed, are top priorities. PFIs are particularly vulnerable to shocks due to low asset quality and strong linkages with state owned enterprises. This is largely the result of increased policy lending in response to the extraordinary economic stress from recent natural disasters. Significant stress in PFIs could have significant impact on other financial institutions (FIs) through the effect on the economy, and explicit and implicit government guarantees raise potential fiscal risks. The authorities, therefore, are encouraged to step up oversight of the PFIs, including through enhanced data collection and on-site reviews. Where substantial adjustments are needed, new lending should be restricted. The Central Bank of Samoa (CBS), as the main supervisor and regulator of domestic financial institutions, has made important efforts to strengthen its oversight in recent years. These efforts include conducting on-site inspections, introducing elements of risk-based supervision, expanding staff resources, initiating PFI supervision, submission of a new CBS Act (CBA) to reform governance and safeguards, promoting financial inclusion, and progress on Anti-Money Laundering and Combating Financing of Terrorism (AML/CFT). Still, much remains to be done, including improving the quality and coverage of the financial sector data, upgrading legal, regulatory and supervisory frameworks, and building capacity and staff.
International Monetary Fund
This Selected Issues paper on Samoa reviews limitations to the existing framework of monetary policy, and suggests ways to improve its effectiveness. It examines current instruments at the disposal of the central bank to conduct monetary policy, before showing why monetary policy execution can be sometimes difficult. It also shows that such problems are not uncommon in economies with shallow financial markets. The paper also takes stock of developments since the early 1990s, and asks what major impediments to sustained private development remain.
International Monetary Fund
International Monetary Fund

This Selected Issues paper and Statistical Appendix reviews Samoa’s record of economic reform, its economic performance to date, and future areas of reform focus. The paper highlights that reform of the taxation system has reduced Samoa’s dependence on international trade taxes and enhanced the efficiency of the tax system. Tax reform was initiated in January 1994 with the introduction of a 10 percent value-added tax on goods and services. The paper also assesses the Samoan experience of reform implementation and remaining issues and challenges.

International Monetary Fund

This Selected Issues paper and Statistical Appendix reviews Samoa’s record of economic reform, its economic performance to date, and future areas of reform focus. The paper highlights that reform of the taxation system has reduced Samoa’s dependence on international trade taxes and enhanced the efficiency of the tax system. Tax reform was initiated in January 1994 with the introduction of a 10 percent value-added tax on goods and services. The paper also assesses the Samoan experience of reform implementation and remaining issues and challenges.

International Monetary Fund

References Boxes 1. CBS Securities II. Sustaining Private Sector Development and Growth A. 1993–2005: Reform, Transformation, and Growth B. What Are the Further Impediments to Private Development? C. What Should Be Done? D. Conclusion References Boxes 2. Samoan Customary Land Tables 1. Gross Domestic Product by Sector at Constant 2002 Prices, 2000–05 2. Gross Domestic Product by Sector at Current Prices, 2000–05 3. Indices of Industrial Production, 2001–06 4. Energy Statistics, 2001–06 5. Building Permits Issued, 1999–2004 6

International Monetary Fund

regular issuance of CBS securities. Both repo operations and the discount window of the CBS securities are considered to be a standing facility whereby banks can voluntarily have assess to liquidity. CBS Securities (Stock, millions of tala) Source: IMF, International Financial Statistics . 4. However, credit growth can not always be controlled through interest rate-based instruments. Given its small size and the importance of government operations in the economy, major projects are often initiated by the government, and may therefore not be sensitive