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Samoa’s debt tops a billion dollars

Monday 16 November 2015 | Published in Regional

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APIA – Samoa’s foreign debt has reached $1.1 billion – leaving prominent politicians scared for the nation’s development and the country’s ability to pay back the debt.

A report from the Samoa Bureau of Statistics, on government finance statistics for June 2015, stated the government debt “maintained at $1.1 billion in June”.

During the opposition Tautua Samoa’s last week, shadow minister of finance Afualo Dr Wood Salele said the alarming debt would only continue to rise.

Afualo said the way the government handled the money showed the ruling party did not care about the public. He criticised the prime minister’s constant disapproval of those who cautioned against seeking loans to pay for developments in the country.

“He keeps saying we are afraid but in honest truth taking out loans is not love,” Afualo said.

“True love is advising the government to slow down on foreign debt and loan accordingly. If only the HRPP (the governing party) was paying for the debt, but it’s the people that will suffer from it.”

The last time Afualo cautioned the government over debt was in September, when the debt was understood to be at $987.84 million.

Two months later, the economist is maintaining his ground in warning the government.

He believed the situation could even lead to a tax hike from the government.

Afualo said the Tautua Party was prepared to take appropriate measures to pay back the debt if they took power in next March’s general election.

“We cannot reveal those plans that we have in our manifesto on paying back the debt but we reassure that we will not increase the tax.”

Afualo said that if Samoa did not slow down in terms of taking on debt, it would end up like Argentina and its recent financial problems.

Tautua Leader, Palusalue Fa’apo II said with the current debt, “even the newborn babies that have just fallen out of their mothers already have a debt to pay”.

Palusalue added it may sound like a joke to others, but the reality was far from funny.

He believed the only way the government can make the repayments is by increasing the tax, using foreign aid and using remittances.

“A sign of us reaching a situation where we can no longer pay the debt is as you see, our citizenships being sold, customary lands being leased and sold as well. Our advice has always been to loan accordingly.”

Veteran MP for Falealupo, Aeau Peniamina Leavaise’eta shared his concerns.

Aeau said the government had negligently handled the financial state of the country by increasing its debt over the past five years.

“This is their accomplishment for this parliament term –putting the country into more debt by increasing it.”

MP Toesulusulu Cedric Schuster compared the current foreign debt situation to what it was in 2011. According to Toesulusulu, in 2011 the country was making repayments of $37 million per year.

He explained seven sene (cents) of every talat (dollar) taken in by the government went towards paying the debt.

The remaining 93 sene was allocated for developments. Four years later, he said the repayments have doubled.

“We now make payments of $71 million. The government keeps hammering on about the ability to pay the debt but our concern is the majority of the loans are for building big buildings and less is going towards investment to lift the economy.

“There should be more loaned money for investment so that it can also lift the returns.”

Toesulusulu said there is so much debt that most of the money goes towards paying it, with very little put aside for development work and increasing pensioners’ benefits.

He agreed with suggestions made by Palusalue on each Samoan having to pay for the debt. Toesulusulu used an example of each Samoan having to pay a debt of equivalent to more than $6000 in order for the country to meet the repayments.

“Whether you did it or not and whether you have access roads or have no electricity, it doesn’t matter. Each person will pay more than $6000 of debt.”

Furthermore, the MP said while the government was yet to pay back the loan from building the first airport it has already made plans to take out an additional loan on top of it.

The recent warnings on Samoa’s rising debt have been downplayed by Prime Minister Tuilaepa Sailele Malielegaoi.

Last year, the International Monetary Fund warned Samoa over the country’s financial situation.

In response, Tuilaepa said it was not unusual for major financial institutions to issue such warnings.

Tuilaepa recalled that, between 2003 and 2004, the IMF issued a similar warning. It called on the government to stop four major projects at the time.

Those projects included the construction of the SamoaTel headquarters at Maluafou, the Virgin Samoa joint venture, the construction of Aggie Grey’s Resort at Mulifanua as well as the construction of the Development Bank Building.

“I looked at it – the warning – and I said to cabinet to go ahead with the projects,” he said. “We have brains too.”

The prime minister said it is not the amount of a country’s debt that its leaders should be worried about. Rather, it is a country’s ability to service the debt.

In Samoa’s case, he said the country’s debt service capacity was stable, with more than enough revenue generated to sustain the debt.

- Samoa Observer