Samoa - Joint World Bank-IMF Debt Sustainability Analysis

Overview & Synopsis

Samoa is assessed at moderate risk of external and overall debt distress, unchanged from the moderate risk rating in the December 2024 DSA. This continued moderate risk assessment reflects Samoa’s strong debt-carrying capacity and significantly improved debt dynamics, underpinned by large fiscal surpluses and a further buildup of government deposits in recent years. Consistent with earlier DSAs, the projection horizon has been extended to 20 years to incorporate the average long-term effects of climate change and natural disasters on the economy, given Samoa’s high climate vulnerability. Under the baseline scenario, all external and public debt indicators remain below their respective thresholds throughout the projection period, even with an anticipated normalization of the fiscal position as grants decline and capital spending recovers, which will generate renewed financing needs financed first by drawing down part of the accumulated deposits and then through future highly concessional external borrowing. However, the gap between the PV of external PPG debt and its threshold narrows toward the end of the horizon, implying limited space to absorb adverse shocks. Moreover, standard stress tests show vulnerabilities with the PV of external PPG debt to exports, and external PPG debt service to exports breaching their respective benchmarks. In addition, a severe growth shock, reflecting Samoa’s historical growth vulnerability, results in a breach of the PV of public debt threshold. However, the tailored natural disaster shock—calibrated to Samoa’s historical median—does not result in breaches of either the PV of external PPG debt-to-GDP threshold or the PV of public debt benchmark. The results highlight the importance of ongoing reforms to prioritize high-quality climate-resilient public investment, enhance public financial management, raise domestic revenues, and support sustainable, inclusive growth. Such measures will be vital to rebuild and preserve fiscal and external buffers over time, further reduce risks to debt sustainability, and potentially create the conditions for Samoa to eventually reach a low risk of debt distress.