When paying external debts, there are two important indicators you have to look at. According to Prime Minister, Tuilaepa Sa’ilele Malielegaoi, they are Foreign Reserve and Government Revenue.
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“Tourism contributes enormously to our foreign exchange earnings,” he said.
“And the foreign currency reserve it creates is used by Government to pay for its external loans. Because these loans are not paid with Samoan currency.
“Our foreign reserve balance which gravitates up to six months is very strong.”
Though Samoa has debts of around $960 million, said the Prime Minister, it only pays a small fraction annually because the country has been borrowing on soft terms.
“Our debt service ratio is therefore quite manageable. So there is nothing to be worried about.”
In 1980, the Prime Minister said, Samoa only had $15 million tala in external debts and “we had huge problems in paying because we ran out of reserves.”
“Everybody closed their doors to Samoa and we could not acquire any loans.”
“So that is what I have been trying to explain to the Opposition, time and again. It is not the total sum of the debts that is important, it is what you are required to pay each year. And your ability to pay them."
“Nearly all our external loans are at soft terms. Not only are we given very low interest rates – between one and two percent – but the duration of payment is over 20 years. Some other loans only require us to pay the interest for the first 5 to 10 years.”
GROSS DOMESTIC PRODUCT
Another important economic measure, says the Prime Minister, is the debt-to-GDP ratio, or percentage.
“GDP relates to the total income earned in the country,” said PM Tuilaepa.
“Our GDP at the moment is approximately $1.6 billion. So if you calculate the debt-to-GDP percentage, you have the total debt as the numerator and the GDP as the denominator, multiplied by 100.
“If you want to improve that percentage, then you build up your denominator, the GDP. Or in simple words, you grow the economy.
“How do you do that? By fiercely engaging in all forms of national development. Establishing and pursuing international development partnerships, attracting foreign investment, building hotels, building IT and communications capabilities, building roads, investing in energy delivery and generation, building airports, building wharves, stimulating business, promoting tourism, developing education so that we have smart, educated and employable young people and improving health service so that we have a strong and healthy population.
“At the same time, we have to safeguard the environment, particularly the soils and water supply as well as promoting our customs, values, traditions and material culture because that is our identity."
The Prime Minister says that many times Government’s vision and pursuit is misconstrued by the Opposition and the media. And in turn, the public and overseas observers tend to be misled.
“I really don’t blame them,” he said.
“Because these are complicated issues that only those with a background in finance and development understand.”
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