Samoan PM says debt levels manageable

Samoa’s Prime Minister says his country will make its own decisions about its debt level, in the wake of an IMF warning it is getting too high.

The World Bank has also raised concerns about Samoa’s debt-to-GDP ratio.

Samoan Prime Minister Tuilaepa Sa’ilele Malielegaoi said his country will make its own assessment about its debt levels.

“The policies of these two bodies are standard policies – but the members have the inherent knowledge to also do what they consider appropriate,” he said. “In their own circumstances, they know better.”

A visit to Apia last week by a senior IMF economist Geoffrey Bannister raised concerns over debts.

The IMF statement says Samoa has taken appropriate steps to cope with disasters, but now needs to prepare its economy for future challenges.

“The Samoan government has reacted appropriately to increase expenditure for recovery and reconstruction in the face of recent external shocks, including the global financial crisis, the tsunami and cyclone,” Bannister said.

“However, public debt has risen rapidly in recent years, raising risks to sustainability and leaving little fiscal space to address future disasters.

“It is thus necessary to begin a process of gradual fiscal consolidation, once the recovery has taken hold.”

The IMF warning follows World Bank figures showing Samoa’s public debt-GDP radio had increased to 62 per cent for the 2012-13 financial year.

Tuilaepa says he’s confident Samoa can continue to service its debts, and won’t require a bailout.

“When a country considers its debts, it’s not the totality of the debts, but the debt service capacity,” he said.

“In both debt-service-ratio in terms of our GDP, and also our foreign reserve ratio, we are quite strong.

“These are very difficult issues that people like you in the media find it very difficult to understand, and I do not blame you because these are very high technical matters of financial terms.”

He says it’s not the first time the IMF has warned Samoa about its debt, and a decade ago, they were warned to stop four major projects.

“We considered very carefully the recommendation, and based on our own experiences of our circumstances decided to proceed with the projects regardless,” he said. “On the completion of the four projects, the figures for our foreign exchange reserve went up considerably instead.”