Samoa: Economic Recovery Support Program - Subprogram 2

Sovereign Project | 43191-023

Summary

The Samoa ERSP is a program cluster of two subprogram loans totaling $26.82 million. The ERSP program cluster aims to assist Samoa's economic recovery and movement to a higher medium-term growth rate, following the double impact of the global economic crisis and the September 2009 tsunami. Subprogram 2 of the program cluster will support improved fiscal management and structural measures that will place the economy on a sustainable medium-term growth path. Budget support will help create the fiscal space to enable raised levels of capital spending over the medium term. This will be complemented by measures that enable targeting of services to protect the vulnerable and by engagement with key stakeholders.

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Project Name Economic Recovery Support Program - Subprogram 2
Project Number 43191-023
Country Samoa
Project Status Closed
Project Type / Modality of Assistance Loan
Source of Funding / Amount
Loan 2801-SAM: Economic Recovery Support Program (Subprogram 2)
Asian Development Fund US$ 10.82 million
Strategic Agendas Inclusive economic growth
Drivers of Change
Sector / Subsector Public sector management - Economic affairs management - Public administration - Reforms of state owned enterprises - Social protection initiatives
Gender Equity and Mainstreaming
Description

The Samoa ERSP is a program cluster of two subprogram loans totaling $26.82 million. The ERSP program cluster aims to assist Samoa's economic recovery and movement to a higher medium-term growth rate, following the double impact of the global economic crisis and the September 2009 tsunami. Subprogram 2 of the program cluster will support improved fiscal management and structural measures that will place the economy on a sustainable medium-term growth path. Budget support will help create the fiscal space to enable raised levels of capital spending over the medium term. This will be complemented by measures that enable targeting of services to protect the vulnerable and by engagement with key stakeholders.

Subprogram 2 completes the program reform agenda under the ERSP program cluster. Subprogram 2 is consistent with the strategic focus of the country partnership strategy for Samoa (2008-2012) to address binding constraints to growth, including deficiencies in access to public services and in the quality of public service delivery, and weaknesses in the private sector-enabling environment. Subprogram 2 of the ERSP program cluster supports the government's economic and financial reform program in coordination with key development partners including Australia, the European Union and the World Bank. The national elections, in March 2011, slowed the formulation and implementation of policy and as such proved a challenge to the program cluster. Subsequent to this, the government remains strongly committed to continuing dialogue with development partners.

Subprogram 2 loan financing will help meet the Government's overall budget financing needs, particularly given the adjustment costs arising from implementing an economic reform program to place the economy on a sustainable growth path. Structural and governance measures will strengthen prospects for sustaining economic growth over the medium term. Infrastructure will be upgraded and rebuilt amid constant efforts to reinforce fiscal safeguards to preserve fiscal sustainability and sustain the expansion in capital expenditure, while paying special attention to the needs of the vulnerable members of the community and ensuring widespread engagement in the program.

Project Rationale and Linkage to Country/Regional Strategy

The weakening economic performance: Samoa's real per-capita income growth since the mid-1990s has been significantly higher than for most other countries in the region underpinned by prudent fiscal and monetary policies, and structural reforms. Its reforms, particularly in the early 1990s, resulted in a steady strengthening of the economy's resilience to external shocks. There is clear potential for sustained, and even stronger, economic performance. The economy is led by the tourism, agriculture, and fisheries sectors, which can continue to be vibrant sources of employment and economic growth given Samoa's natural beauty, well-educated labor force, and ample land and marine resources.

Despite this the Samoan economy was severely affected by the global recession commencing 2008. In particular the Yazaki automotive plant was downsized in FY2009 (ends 30 June) and offshore jobs were lost in the tuna processing industry. In addition, construction also recorded a significant decline, in part reflecting the unwinding of activity related to the South Pacific Games, while agriculture and fishing suffered from poor harvests. As a result, real GDP fell by 5.1% in FY2009, recording the worst slump in two decades; Government revenue was 4.7% below budget estimates; and a deficit of 4.3% of GDP was sustained. Adding to this, the physical cost of the late 2009 tsunami, estimated at $60 million (over 10% of GDP), weakened the economic outlook.

Government responded to the external shocks with expansionary budgets in FY2010 and FY2011. The aim was to stimulate economic activity and support the private sector. Activity generated by post-tsunami reconstruction work was largely responsible for holding the contraction to 0.2% in FY2010. Despite substantial grant funding for initial rehabilitation the budget deficit reached 11% in FY2010 and grew to 8.1% of GDP in FY2011. Growth is estimated to have been 3.0% of GDP in FY2011, due to reconstruction work and the rebound in transport, communications, tourism, remittances and manufacturing activities.

The external debt level has become a matter of concern. While the government has set a target of official external debt being not more than 40% of GDP equivalent, this ceiling was breached in FY2010, debt levels subsequently increased to 47% of GDP in FY2011, and the macroeconomic framework projects a level of 55% by FY2014. Over this same period government intends to run annual fiscal deficits of over 6% of GDP. Sustaining such a stance holds risks the government would find it hard to adjust to any external shocks, for example. Structural reforms to improve the commercial focus of state-owned enterprises and to increase access to, and economic use of, customary land are needed for the potential benefits of public investment to be realized.

Impact Achievement of a higher and more inclusive economic growth path.
Project Outcome
Description of Outcome Economic recovery combined with protection of the most vulnerable and the fiscal position
Progress Toward Outcome
Implementation Progress
Description of Project Outputs

1. Post-tsunami reconstruction needs addressed by Government

2. Fiscal responsibility maintained

3. Productivity enhanced through structural and governance improvements

4. Targeted support to the most vulnerable members of the community

5. Improved consultation and engagement of stakeholders

Status of Implementation Progress (Outputs, Activities, and Issues)
Geographical Location
Summary of Environmental and Social Aspects
Environmental Aspects
Involuntary Resettlement
Indigenous Peoples
Stakeholder Communication, Participation, and Consultation
During Project Design
During Project Implementation
Responsible ADB Officer Caroline G. Currie
Responsible ADB Department Pacific Department
Responsible ADB Division Pacific Subregional Office in Suva, Fiji
Executing Agencies
Ministry of FinanceV-TAGILIMA@TREASURY.GOV.WSMinistry of Finance
Government of Samoa
Private Bag, Apia, Samoa
Timetable
Concept Clearance 03 Jun 2011
Fact Finding 17 May 2011 to 24 May 2011
MRM 19 Aug 2011
Approval 07 Nov 2011
Last Review Mission -
Last PDS Update 25 Jul 2011

Loan 2801-SAM

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
07 Nov 2011 20 Mar 2012 10 May 2012 30 Jun 2012 - 02 Jul 2012
Financing Plan Loan Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 10.82 Cumulative Contract Awards
ADB 10.82 07 Nov 2011 10.42 0.00 100%
Counterpart 0.00 Cumulative Disbursements
Cofinancing 0.00 07 Nov 2011 10.42 0.00 100%

Safeguard Documents

See also: Safeguards

No documents found.

Evaluation Documents

See also: Independent Evaluation
Title Document Type Document Date
Samoa: Economic Recovery Support Program— Subprograms 1 and 2 Validations of Project Completion Reports Jan 2015

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