International Finance
Hassssan
Samoa.docxOver the past few days, Samoa has done some tremendous work to impact their economy throughout this pandemic. Although we are not focusing on the medical side of COVID-19, I wanted to express Samoa’s process with testing for the virus. Samoa is a small country and has limited resources. Just in December of 2019, Samoa had ended a measles health crisis making it difficult to afford much. Samoans must send any testing samples to New Zealand to get a positive or negative confirmation of COVID-19. Fortunately, as of April 11, there are still no confirmed cases in Samoa. I find this extremely important because, although they have not had any cases, their financial structure is still struggling. They still shut the whole country down similar to what the U.S. has been doing.
To assist Samoa’s attempts to prepare for the effects of COVID-19, the World Bank delivered 5.1 million U.S. dollars (1.4 million Samoan tala) on March 26. “The US$5.1 million in funding has been made available through a Development Policy Operation with a Catastrophe-Deferred Drawdown Option [Cat DDO], approved in 2018, that ensures emergency funding from the World Bank can be mobilized in the event of a major national emergency” (The World Bank, March 2020). Cat DDO was created to give developing countries liquidity for when a natural disaster may occur, or a health emergency is present.
According to the IMF, there are no current new measures of the exchange rate for the Samoan tala. However, the Samoan government has started a response package amounting to 66.3 million Samoan talas. This will be used to help stimulate their economy in several ways. One way is to help cover medical expenses and assist individual households throughout this virus. Their main goal is to prepare and prevent. Temporarily, the government is stopping imports of food items. Also, Samoa has created an Emergency Price Control Board. This board will be used to control retail and wholesale prices preventing businesspeople from raising them due to panic buying and increased need for certain supplies.
Another interesting form of assistance through all of this comes from Samoan electric and water companies. For the next six months, the households and businesses of Samoa are given a reduction on their utility bills. EPC (Electric Power Corporation) created their own version of a stimulus package. As of April 1st, the EPC created discounts totaling in 8.6 million talas.
The Central Bank of Samoa (CBS) has been working to help control their economy as well. They are working to lower interest rates. Also, to assist with loan payments, a three-month grace period has been imposed. The government will be assisting banks to make up for these changes. The CBS has gone through extra steps for this and mentions that they expect COVID-19’s consequences may turn out worse than the measles outbreak they have previously conquered. CBS states that Samoa will be financial stable for the next few months in terms of imports. As of January 2020, Samoa had on hand 511.4 million talas in imports which the CBS compares to as “6.6 months of imports of goods” (CBS, March 2020). The CBS also explains that the money used from the IMF is meant to keep their balance of payments under control for the lack of exporting goods for the time being.
From the CBS page, I found their current rates;
Official Interest Rate: 0.20%
Commercial Banks Lending rates: 8.91%
Commercial Banks Deposit rates: 2.42%
Headline Inflation Rate: 1.9%
April 17th currency rate: 1 tala = 0.35877 USD compared to April 10th: 1 tala = 0.3586 USD
http://www.samoagovt.ws/2020/04/ministry-of-health-coronavirus-covid-19-update-11-04-2020/
https://www.imf.org/en/Topics/imf-and-covid19/Policy-Responses-to-COVID-19#S
http://pubdocs.worldbank.org/en/563361507314948638/product-note-cat-ddo-ida-english-2018.pdf
