There is no restriction on the quotation or reproduction of any part of this publication, provided that the source is acknowledged Ministry of Finance Finance Sector Division Private Mail Bag Apia SAMOA Tel: 34-333 FAX: 21-312 E-Mail: [email protected] Website: www.mof.gov.ws TABLE OF CONTENTS 1. REVIEW OF FINANCE SECTOR PERFORMANCE ............................................................................... 6 1.1. Overview ........................................................................................................................................ 6 1.2. Fiscal Developments....................................................................................................................... 6 1.3. Monetary and Financial Developments ....................................................................................... 13 1.4. Sound External Position ............................................................................................................... 23 2. KEY FINDINGS FROM DOCUMENT REVIEW AND CONSULTATIONS ............................................. 28 2.1. Overview ...................................................................................................................................... 28 2.2. Fiscal ............................................................................................................................................. 28 2.3. Monetary and Financial ................................................................................................................ 32 2.4. External Position .......................................................................................................................... 35 Annex 1: List of Key Documents Reviewed ........................................................................................... 39 Annex 2 : List of Key Stakeholders Consulted ....................................................................................... 42 Annex 3: Summary of Issues: Stakeholder Consultations ..................................................................... 44 Annex 4 Key Fiscal Policy Developments .............................................................................................. 52 Annex 5: PFM Reform Areas ................................................................................................................. 55 Annex 6. Key Monetary/Financial and External Position Developments ............................................. 62 Annex 7: Financing Facilities ................................................................................................................. 65 LIST OF FIGURES AND TABLES Figure 1: Government Expenditure as a % of GDP ................................................................................. 9 Figure 2: Personnel Costs to GDP 2007/08 – 2011/12 ........................................................................... 9 Figure 3: External resourcing of development expenditures 2007/08 to 2011/12 .............................. 10 Figure 4: Money Supply to GDP, 2000 to 2010 ..................................................................................... 15 Figure 5: Broad Money to GDP 2000, 2005 and 2010 .......................................................................... 16 Figure 6: Comparative Pacific Islands: Private Sector Credit to GDP .................................................... 16 Figure 7: Causes of Changes in Money Supply ...................................................................................... 16 Figure 8: Percentage Share of Total Loans to Private Sector 2005/06 to 2011/12 .............................. 18 Figure 9: Underlying Inflation and Interest Rates ................................................................................. 18 Figure 10: Weighted Average Interest Rates 2005/06 to 2010/11 ....................................................... 20 Figure 11: Share of Interest-Bearing Deposits and Savings 2006/07 to 2011/12 ................................. 20 Figure 12: Commercial Banks' Liquidity 2006/07 to 2011/12............................................................... 21 Figure 13: Total Savings and Time Deposits 2006/07 to 2011/12 ........................................................ 22 Figure 14: Gross Official Reserves and Import Cover 2005/06 to 2010/11 .......................................... 25 Table 1: Financial Operations of Central Government 2007/08 to 2012/13 (SAT$ m) .......................... 7 Table 2: Personnel Expenditure to Budget ........................................................................................... 10 Table 3: External Public Debt Outstanding 2007/08 to 2010/11 .......................................................... 11 Table 4: External Public Debt to GDP Levels 2011/12 - 2015/16 .......................................................... 12 Table 5: PEFA Summary Results ............................................................................................................ 12 Table 6: Selected Domestic Indicators 2005/06 to 2010/11 ................................................................ 14 Table 7: Structure of the Financial System Assets 2006/07 to 2011/12 ............................................... 17 Table 8: Inflation Indicators 2002 to 2011 ............................................................................................ 22 Table 9: Balance of Payments 2006/07 to 2011/12 .............................................................................. 23 Table 10: Remittance 2002-2011 .......................................................................................................... 26 2 LIST OF ACRONYMS ACC Accident Compensation Corporation ACEO Assistant Chief Executive Officer ADB Asian Development Bank AG Office of the Attorney General AML/CFT Anti Money Laundering/Combating the Financing of Terrorism ANZ Australia New Zealand AO Audit Office ASYCUDA Automated System for Customs Data AusAID Australian Agency for International Development BOP Balance of Payments CBS Central Bank of Samoa CCA Controller and Chief Auditor CEO Chief Executive Officer CPI Consumer Price Index DBS Development Bank of Samoa DCEO Deputy Chief Executive Officer ECF Extended Credit Facility EFF Extended Financing Facility EIB European Investment Bank EPC Electric Power Corporation EPPD Economic Policy and Planning Division of the Ministry of Finance ESA Exchange Settlement Accounts EU European Union FCD Foreign Currency Deposit FCL Flexible Credit Line FDI Foreign Direct Investment FEDs Foreign Exchange Dealers FEMM Forum Economic Ministers Meeting FFE Furniture, Fittings and Equipment FSAC Finance Sector Advisory Committee FSP Finance Sector Plan FSPCC Finance Sector Plan Coordinating Committee FY Fiscal/ Financial Year GDP Gross Domestic Product GFC Global Financial Crisis GFS Government Finance Statistics GoS Government of Samoa HIES Household Income Expenditure Survey IMF International Monetary Fund ISP Institutional Strengthening Project IT Information Technology LDC Least Developed Country LICs Low Income Countries LRC Samoa Law Reform Commission LTA Land Transport Authority MCIL Ministry of Commerce, Industry and Labour MCIT Ministry of Communications, Information and Technology MDG Millennium Development Goals MFAT Ministry of Foreign Affairs and Trade 3 MfR Ministry for Revenue MoF Ministry of Finance MoU Memorandum of Understanding MPMC Ministry of the Prime Minister and Cabinet MTDMS Medium Term Debt Management Strategy MTEF Medium Term Expenditure Framework MTOs Money Transfer Operators MWCSD Ministry of Women, Community and Social Development NEER Nominal effective exchange rate NHS National Health Services NPSO National Private Sector Organisation NUS National University of Samoa OECD/DAC Organisation for Economic Cooperation and Development/Development Assistance Committee PACER Pacific Agreement on Closer Economic Relations PEFA Public Expenditure Financial Assessment PFM Public Finance Management PFMRP Public Finance Management Reform Plan PFTAC Pacific Financial Technical Assistance Centre PIFS Pacific Island Forum Secretariat PIN Public Information Notice PLL Precautionary and Liquidity Line PRGT Poverty Reduction and Growth Trust PSC Public Service Commission PSC Private Sector Credit PSIF Public Sector Improvement Facility RCF Rapid Credit Facility REER Real Effective Exchange Rate RFF Rapid Financing Facility ROSC Report on the Observance of Standards and Codes SAME Samoa Association for Manufacturers and Exporters SAT$ Samoan Tala SBA Standby Agreements SBEC Small Business Enterprise Centre SBS Samoa Bureau of Statistics SCF Standby Credit Facility SDR Special Drawing Rights SDS Strategy for the Development of Samoa SES Statement of Economic Strategy SHC Samoa Housing Corporation SIFA Samoa International Finance Authority SLAC Samoa Life Assurance Corporation SNPF Samoa National Provident Fund SOEs State Owned Enterprises SOEMD State Owned Enterprises Monitoring Division SPBD South Pacific Business Development SSC Samoa Shipping Corporation SUNGO Samoa Umbrella for Non-Governmental Organisations TA Technical Assistance TIEA Tax Information Exchange Agreements 4 TIMF Trade Integration Mechanism Facility USD$ United States Dollar UTOS Unit Trust of Samoa WIBDI Women in Business Development Incorporated WTO World Trade Organisation 5 1. REVIEW OF FINANCE SECTOR PERFORMANCE 1.1. Overview a. Samoa has successfully maintained macroeconomic and financial stability during the last two decades despite major economic setbacks resulting