INTERNATIONAL DEVELOPMENT ASSOCIATION INTERNATIONAL MONETARY FUND SAMOA JOINT BANK-FUND DEBT SUSTAINABILITY ANALYSIS – 2018 UPDATE1 Prepared jointly by the staff of the International Development Association (IDA) and the International Monetary Fund (IMF) Approved by Lalita Moorty (IDA) and Paul Cashin (IMF) Samoa remains at high-risk of external debt distress under the revised Debt Sustainability Framework (DSF) introduced in July 2018. Consistent with previous analyses, the average long-term costs of natural disasters and climate change are incorporated into the baseline scenario to consider their impact on economic growth, the fiscal position and current account balance. The result is a breach of the threshold under the baseline scenario for the present value of the external public-and publicly guaranteed (PPG) debt-to-GDP ratio from 2036. Stress tests confirm the vulnerability of the debt position to plausible shocks. A tailored natural disaster shock, similar in scale to the median impact of natural disasters in Samoa’s history, causes a large and significant deterioration in debt sustainability in the aftermath of the event. A contingent liability shock would also worsen debt sustainability. Given Samoa’s vulnerability to natural disasters, strategies to strengthen Samoa’s resilience to economic shocks should continue to be implemented. A ‘mechanical’ application of the new DSF would imply that the risk of debt distress in Samoa is moderate. 2 However, staff judgement has been applied to arrive at a high-risk assessment as there is a high probability the threshold will be largely and persistently breached in the long-run due to Samoa’s exposure to climate change despite government efforts to mitigate its impacts. While domestic debt remains small, domestic guaranteed debt accounts for 7 percent of GDP in 2017/18. 1 This DSA has been prepared jointly by the IMF and World Bank, following the revised LIC-DSF Framework and Guidance Note (2017) in effect as of July 1, 2018. Samoa’s debt carrying capacity is classified as strong, based on its Composite Indicator (CI) value of 3.31, based on the October 2018 WEO and updates to the CPIA index through 2017.Thresholds for debt burden indicators are those established in the revised framework. 2 This is due to a shortening of the period for analysis to a 10-year forecast horizon (from 20 years) under the revised LIC- DSF (Staff Guidance Note). PUBLIC DEBT COVERAGE 1. Central government and central government-guaranteed debts are covered in this report. Public and Publicly Guaranteed debt accounted for 57.2 percent of GDP in FY2017/18, allocated between central government debt (50.3 percent of GDP) and central government-guaranteed debt (6.9 percent of GDP). The government-guaranteed debt includes SOE debt, which is explicitly guaranteed by the central government. The Samoa National Provident Fund, a social security fund, does not owe debt. There is no sub-national government structure in Samoa, nor extra budgetary funds. The Central Bank of Samoa is not allowed to contract debt on behalf of the government. Non-guaranteed SOE debt estimates are not available and cannot be included in PPG debt. The definition of external and domestic debt is based on residency3. The authorities are currently working towards strengthening the monitoring and disclosing of fiscal risks from the SOEs with the assistance of PFTAC. The creation of a debt management unit would also improve debt data coverage. Subsectors of the public sector Sub-sectors covered 1 Central government X 2 State and local government 3 Other elements in the general government 4 o/w: Social security fund X 5 o/w: Extra budgetary funds (EBFs) 6 Guarantees (to other entities in the public and private sector, including to SOEs) X 7 Central bank (borrowed on behalf of the government) 8 Non-guaranteed SOE debt 1 The country's coverage of public debt The general government, central bank, government-guaranteed debt Used for the Default analysis Reasons for deviations from the default settings 2 Other elements of the general government not captured in 1. 0 percent of GDP 0.0 3 SoE's debt (guaranteed and not guaranteed by the government) 1/ 2 percent of GDP 2.0 4 PPP 35 percent of PPP stock 0.0 5 Financial market (the default value of 5 percent of GDP is the minimum value) 5 percent of GDP 5.0 Total (2+3+4+5) (in percent of GDP) 7.0 1/ The default shock of 2% of GDP will be triggered for countries whose government-guaranteed debt is not fully captured under the country's public debt definition (1.). If it is already included in the government debt (1.) and risks associated with SoE's debt not guaranteed by the government is assessed to be negligible, a country team may reduce this to 0%. BACKGROUND ON DEBT 2. Public debt increased to 50.3 percent of GDP in 2017/18, from 49.1 percent in FY2016/17. The depreciation of the Tala against the main loan currencies, the continuous disbursements of external loans and limited increase in GDP contributed to the increase of the debt-to-GDP ratio. 3. Public external debt was US$421 million at the end of FY2017/18, increasing by 3.6 percent with respect to FY2016/17. The outstanding public external debt at the end of FY2017/18 was SAT1.09 billion, 51 percent from multilateral creditors – including IDA and ADB – and 49 percent from bilateral creditors – including China and Japan. The increase in public external debt and in debt service was driven by the loss of access to exclusive grant funding from IDA and ADB in 2015 and 3 Since all the domestic debt is in tala and all the external debt is in foreign currency or SDRs, the residency-based classification is equivalent to the currency-based classification in the case of Samoa. 2 2016, and on further disbursements of previously contracted loans from bilateral creditors for large infrastructure projects. Samoa: Evolution of Public Debt, FY 2015/16 – FY 2017/18 FY2015/16 FY2016/17 FY2017/18 FY2015/16 FY2016/17 FY2017/18 In millions of In millions of In millions of In percent of In percent of In percent of SAT SAT SAT external debt external debt external debt Total public debt 1080.8 1047.3 1113.8 -- -- -- External 1041.8 1018.0 1094.3 100.0% 100.0% 100.0% Multilateral 546.9 534.5 563.0 52.5% 52.5% 51.5% IDA 247.3 247.2 280.8 23.7% 24.3% 25.7% ADB 270.2 256.1 250.6 25.9% 25.2% 22.9% OPEC 20.7 23.2 24.0 2.0% 2.3% 2.2% Other 8.7 8.0 7.6 0.8% 0.8% 0.7% Bilateral 495.0 483.5 531.3 47.5% 47.5% 48.5% EXIM Bank (China) 413.7 410.0 440.1 39.7% 40.3% 40.2% Japan 81.3 73.5 91.2 7.8% 7.2% 8.3% Domestic 38.9 29.4 19.5 -- -- -- Memorandum items: Nominal GDP 2055.3 2133.2 2213.5 Market rate (tala/U.S. dollar, end period) 2.6 2.5 2.6 Sources: Samoan authorities; and IMF staff estimates. 4. Domestic debt remains below 1 percent of GDP. All domestic public debt is held by domestic creditors and issued in local currency. It is mainly composed by government loans provided by the central government to public entities. Samoa: Stock of Public Debt at the End of FY 2017/18 In millions of In millions of As a share of In percent of SAT US dollars total debt GDP Total public debt 1113.8 433.6 100.0% 50.3% External 1094.3 426.0 98.2% 49.4% Multilateral 563.0 219.2 50.5% 25.4% IDA 280.8 109.3 25.2% 12.7% ADB 250.6 97.5 22.5% 11.3% OPEC 24.0 9.4 2.2% 1.1% Other 7.6 3.0 0.7% 0.3% Bilateral 531.3 206.8 47.7% 24.0% EXIM Bank (China) 440.1 171.3 39.5% 19.9% Japan 91.2 35.5 8.2% 4.1% Domestic 19.5 7.6 1.8% 0.9% Memorandum items: Nominal GDP 2213.5 Market rate (tala/U.S. dollar, end period) 2.6 Sources: Samoan authorities; and IMF staff estimates. 3 5. Guarantees accounted for 6.9 percent of GDP in FY2017/18, with public and publicly guaranteed (PPG) debt totaling 57.2 percent of GDP. Government-guaranteed debt is held by domestic creditors and accounted for 6.9 percent of GDP in 2017/18, from 7.9 percent in 2016/17. METHODOLOGY AND ASSUMPTIONS 6. The underlying assumptions are consistent with the macroeconomic framework, based on updated data provided by the authorities and estimates by staff. The baseline scenario incorporates the effects of natural disasters and climate change over the longer term. The years 2019–24 are assumed to be disaster free to simplify the policy discussion of the near-term outlook. From 2025 onwards, the baseline incorporates the average long-term effects of natural disasters and climate change by lowering GDP growth by 1.3 percentage points (pp) annually, raising the current account deficit by 1.5 pp and increasing the fiscal deficit by 1.5 pp vis-à-vis disaster-free projections to reflect the country’s historical experience. These are consistent with the findings of staff’s analysis on the impact of natural disasters.4 The discount rate used to calculate the net present value of external debt is 5 percent. The main assumptions are: Samoa: Baseline Macroeconomic Assumptions (In percent of GDP, unless otherwise noted) 2018 DSA 2017 DSA 2019-2024 2025-2039 2018-2023 2024-2038 Real GDP growth (in percent change) 2.8 0.9 2.8 0.9 Inflation (change in percent) 2.8 2.8 2.5 3.0 Current account deficit 0.8 5.1 3.7 6.3 Overall fiscal balance deficit 2.2 5.1 2.3 5.0 • Real GDP growth is projected to rebound to 3.4 percent in FY2018/19 driven by commerce, infrastructure spending, and the development of the transport and communication sector. Growth in FY2019/20 is expected to spike to 4.4 percent driven by tourism related to Samoa hosting the Pacific Games (PG) in July 2019, before normalizing at about and 2.2 percent in the medium-term. To account for the average impact of natural disasters, the growth rate is lowered by 1.3 percentage points after 2024. • After a temporary increase driven by the impact of cyclone Gita on local food prices, a one-time increase in education fees, and higher price on imported fuel, inflation is expected to stabilize at around 2.8 percent over the medium term. • The current account deficit is projected to remain below 1 percent of GDP between 2019-2024. The current account recorded a temporary surplus of 2.3 percent of GDP in 2017/18 driven by higher than average remittances, on the aftermath of Cyclone Gita, and tourism receipts. Remittances are expected to normalize from 2018/19, but tourism receipts are projected to remain strong in anticipation 4 See Samoa Article IV consultation, 2017. 4 of the PG. To account for the average impact of natural disasters, the deficit is widened by 1.5 percentage points after 2024. • The overall fiscal balance is projected to return to deficit from FY2017/18. Given recently- legislated increases in public servant wages for cost of living adjustment, the projected reduction in budget support grants and the need to scale up infrastructure projects, staff projects a 1.2 percent of GDP deficit in 2018/19, which will widen to 2.7 percent in 2023/24. To account for the average impact of natural disasters, the deficit is widened by 1.5 percentage points after 2024. • Continued eligibility for concessional borrowing from MDBs is assumed for the forecast period to finance the fiscal deficit. The grant element of new loans is 40 percent on average. It is assumed that borrowing from the IDA and the Asian Development Bank is on full credit terms5. 7. The new realism tools suggest that the projections are reasonable. Both external and public PPG debt projections are in line with last year DSA (Figure 3). At the same time factors contributing to debt dynamics remain broadly in line with historical contribution, with the exception of the impact of current account balance and price that is due to temporary factors. The primary balance is expected to be -2.4 percent of GDP in 2020/2021. This belongs to the middle of the distribution of other countries experience. Forecasted real growth in 2019 and 2020 is higher than paths obtained based on plausible fiscal multiplier effects. This is due to the exceptionally low GDP growth in 2017/18, the basis year to calculate the growth path, and to the projection of additional and temporary expected growth in FY2018/19 and FY2019/20 due to the Pacific Games. Public investment has declined in FY2017/18 due to the completion of large infrastructure projects in the previous fiscal year but is expected to rebound in FY2019/20. Public capital stock is expected to contribute to about one third of the GDP growth, in line with historical data and previous DSA (Figure 4). COUNTRY CLASSIFICATION 8. The country’s debt-carrying capacity remains strong, though the indicator has declined. Samoa’s Composite Indicator (CI) index, which has been calculated based on the October 2018 WEO and 2017 CPIA, is 3.31, indicating that the country’s debt-carrying capacity is high in the revised LIC- Debt Sustainability Framework. The CI is lower than during the previous version of the DSA but remains associated with a strong rating. The rating is the highest among the Pacific island countries (PICs), and debt is therefore assessed against a higher threshold compared to other PICs. 9. The relevant indicative thresholds for the countries with a strong CI rating are 55 percent for the PV of debt-to-GDP ratio, 240 percent for the PV of debt-to-exports ratio, 21 percent for the debt service-to-exports ratio, and 23 percent for the debt service-to-revenue ratio. These thresholds are 5 With respect to projected new borrowing from IDA and ADB, DSAs always assume terms that would prevail if the country was at low risk of debt distress, independent of current actual terms (which can change on a year to year basis). This is done to avoid a circular situation where the assumption that future commitments will be on grant terms would yield actual commitments on credit terms. 5 applicable to public and publicly guaranteed (PPG) external debt. The benchmark for the PV of total public debt under strong capacity is 70 percent. Components Coefficients (A) 10-year average CI Score components Contribution of values (B) (A*B) = (C) components CPIA 0.385 3.995 1.54 46% Real growth rate (in percent) 2.719 2.566 0.07 2% Import coverage of reserves (in percent) 4.052 32.791 1.33 40% Import coverage of reserves^2 (in percent) -3.990 10.753 -0.43 -13% Remittances (in percent of GDP) 2.022 15.494 0.31 9% World economic growth (in percent) 13.520 3.660 0.49 15% CI Score 3.31 100% CI rating Strong DETERMINATION OF SCENARIO STRESS TESTS 10. Given the severity and frequency of natural disasters in Samoa, a tailored stress test for a natural disaster shock was conducted. Parameters for this test were based on staff research 6 and assume a one-off shock of 21 percent to the debt-GDP ratio in 2019, corresponding to the impact of the median natural disaster shock in the country history, and a reduction of real GDP growth and exports by 3 percent and 6 percent respectively. 11. The stress test for the combined contingent liabilities accounts for implicit liabilities and a potential financial market shock. Default settings of the contingent liability test were used to reflect the likely consequences of a contingent liability shock on the debt path in Samoa. The stress test for contingent liabilities amounts 7 percent of GDP, comprising 2 percent of GDP of non-guaranteed SOE debt and 5 percent of GDP of financial market shock. 6 Detail in the IMF Working Paper 18/108, “The Economic Impact of Natural Disaster in Pacific Island Countries” (https://www.imf.org/en/Publications/WP/Issues/2018/05/10/The-Economic-Impact-of-Natural-Disasters-in-Pacific-Island- Countries-Adaptation-and-45826 ). 6 DEBT SUSTAINABILITY A. External Debt Sustainability Analysis 12. Under the baseline scenario, Samoa’s external debt path is projected to breach the indicative benchmark from 2036 and onward (Figure 1). The PV of debt-to-GDP ratio is expected to increase gradually from 33.4 in 2019 to 39.1 in 2029 and to reach 60.3 in 2039, on the increase of external borrowing to finance construction of infrastructure. The PV of external debt-to-GDP ratio breaches the indicative threshold of 55 percent in 2036. The ratio of the PV of external-debt-to-exports ratio also breaches the threshold of 240 percent in 2036. As a large share of the external debt remains on concessional terms, debt service remains limited and does not breach the indicative threshold. 13. Stress tests confirm the vulnerability of debt dynamics to natural disasters and contingent liabilities. A natural disaster shock has the largest negative impact on the debt trajectory, causing a breach of the threshold for the PV of debt-to-GDP ratio from 2030 (Figure 3). There is a protracted and significant breach of the PV of debt-to-GDP and PV of debt-to-exports after a severe natural disaster shock but also after the contingent liability shock (from 2035 and onward, Table 3). B. Public Sector Debt Sustainability Analysis 14. Total public debt follows a similar dynamic as the external debt. Under the baseline scenario, the PV of public debt-to-GDP ratio breach the benchmark in 2034 (Table 2). The natural disaster and contingent liability shocks result in a sharper deterioration in debt sustainability. The threshold is breached from 2027 and 2032, respectively (Figure 2). RISK RATING AND VULNERABILITIES 15. The debt outlook for Samoa is subject to several risks. PPG debt is expected to grow in the medium-term. The external debt-to-GDP ratio is expected to decrease in the short-term on the positive overall fiscal balance registered in FY2017/18 and the expected higher growth in FY2018/19 and FY19/20 due to the Pacific Games. After FY2020/21, the debt ratio is expected to increase again, driven by the negative primary balance. Samoa’s external debt breaches the high-risk threshold when the average annual impact of natural disasters and climate change on the medium-term growth, current account, and fiscal balance projections is included in the DSA baseline. 16. Samoa remains at high-risk of debt distress. Another major natural disaster or a materialization of implicit guarantees shock could substantially worsen the debt dynamics. While a mechanical assessment based on the output of the new DSF template would have resulted in a moderate risk assessment, staff’s judgement has been applied to conclude on a high-risk assessment as there is a high probability the threshold will be substantially and persistently breached in the long-run due to Samoa’s exposure to climate change despite government efforts to mitigate its impacts. The government should continue with recent efforts to consolidate and boost revenue collection and build fiscal buffers to be prepared to respond to a future economic shock or natural disaster. Introducing a lower public debt- to-GDP target of 40 percent over the long term, associated with operational guidance on the overall 7 deficit, would allow to reduce the level of risk in Samoa. The authorities should also make efforts to widen the coverage of debt data by producing and disseminating aggregate data on general government and public-sector debt (including non-guaranteed SOE debt) AUTHORITIES’ VIEWS 17. The authorities broadly agreed with the DSA assessment and expressed their commitment to reduce the long-term debt target to 40 percent of GDP. The authorities agreed that a lower long- term debt target of 40 percent of GDP (compared to the current target of 50 percent of GDP) is desirable and would allow them to build fiscal buffers to respond to a large natural disaster, while ensuring adequate funding of development priorities. Consistent with the Medium-Term Debt Strategy, the authorities aim to fund development needs with grants and concessional loans to the extent possible. The authorities are currently working towards strengthening the monitoring and disclosing of fiscal risks from the SOEs with the assistance of PFTAC. 8 Table 1. Samoa: External Debt Sustainability Framework, Baseline Scenario, 2016-39 (In percent of GDP, unless otherwise indicated) Actual Projections Average 8/ Historical Projections 2016 2017 2018 2019 2020 2021 2022 2023 2024 2029 2039 External debt (nominal) 1/ 50.7 47.7 49.4 48.7 48.6 49.6 50.5 51.4 53.5 59.7 87.9 46.9 53.1 Definition of external/domestic debt Residency-based of which: public and publicly guaranteed (PPG) 50.7 47.7 49.4 48.7 48.6 49.6 50.5 51.4 53.5 59.7 87.9 46.9 53.1 Is there a material difference between the No two criteria? Change in external debt -4.6 -3.0 1.7 -0.7 -0.2 1.0 1.0 0.9 2.1 2.1 1.1 Identified net debt-creating flows 5.2 -0.5 -5.2 0.4 -2.5 -1.1 -0.2 -0.6 -0.1 4.2 4.1 1.5 1.5 Non-interest current account deficit 4.7 1.8 -4.0 -0.6 -0.1 -0.3 0.2 0.2 0.5 4.2 4.1 4.3 1.9 Deficit in balance of goods and services 19.2 15.3 14.5 16.8 17.2 17.3 17.5 17.5 17.8 22.0 23.4 21.4 19.4 Exports 30.7 31.2 32.9 31.3 31.4 31.2 30.9 30.8 30.7 24.3 23.0 Imports 49.8 46.4 47.4 48.1 48.7 48.5 48.4 48.3 48.5 46.3 46.4 Debt Accumulation 10.0 50 Net current transfers (negative = inflow) -16.8 -16.7 -20.2 -20.2 -19.4 -19.7 -19.6 -19.5 -19.4 -20.1 -21.4 -20.3 -19.7 of which: official 0.0 -0.6 -1.0 -0.4 -0.4 -0.4 -0.4 -0.4 -0.4 -0.4 -0.4 9.0 48 Other current account flows (negative = net inflow) 2.4 3.2 1.7 2.8 2.1 2.1 2.3 2.2 2.1 2.3 2.0 3.2 2.2 8.0 46 Net FDI (negative = inflow) -0.8 1.0 -1.7 1.5 -1.4 -0.7 0.0 -0.3 -0.1 -0.1 -0.1 -1.9 -0.1 Endogenous debt dynamics 2/ 1.2 -3.3 0.6 -0.5 -1.1 0.0 -0.4 -0.5 -0.5 0.1 0.1 7.0 44 Contribution from nominal interest rate 0.0 0.0 1.7 1.1 0.9 1.0 0.6 0.6 0.6 0.6 0.9 6.0 42 Contribution from real GDP growth -4.1 -1.3 -0.4 -1.6 -2.0 -1.0 -1.1 -1.1 -1.1 -0.5 -0.8 5.0 40 Contribution from price and exchange rate changes 5.3 -2.0 -0.7 … … … … … … … … Residual 3/ -9.8 -2.4 6.9 -1.1 2.4 2.1 1.2 1.4 2.2 -2.1 -3.0 0.6 -0.6 4.0 38 of which: exceptional financing 2.1 -1.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 3.0 36 2.0 34 Sustainability indicators PV of PPG external debt-to-GDP ratio ... ... 34.4 33.4 32.9 33.0 33.5 34.0 35.3 39.1 60.3 1.0 32 PV of PPG external debt-to-exports ratio ... ... 104.4 106.8 104.7 105.7 108.5 110.3 114.9 160.6 261.7 0.0 30 PPG debt service-to-exports ratio ... 15.2 22.3 10.6 10.1 10.5 9.7 9.4 9.2 13.3 19.1 2019 2021 2023 2025 2027 2029 PPG debt service-to-revenue ratio ... 17.5 27.7 12.3 11.6 11.9 10.9 10.6 10.3 11.7 15.9 Gross external financing need (Million of U.S. dollars) 31.1 63.2 13.7 38.2 16.4 22.0 33.6 30.4 35.7 95.4 145.2 Rate of Debt Accumulation Grant-equivalent financing (% of GDP) Key macroeconomic assumptions Grant element of new borrowing (% right scale) Real GDP growth (in percent) 7.2 2.7 0.9 3.4 4.4 2.2 2.2 2.2 2.2 0.9 0.9 1.0 2.1 GDP deflator in US dollar terms (change in percent) -8.7 4.2 1.5 1.6 1.7 1.6 1.8 1.9 1.8 1.8 2.8 1.9 1.7 Effective interest rate (percent) 4/ 0.0 0.0 3.6 2.3 2.1 2.2 1.3 1.3 1.3 1.1 1.0 0.4 1.5 External debt (nominal) 1/ Growth of exports of G&S (US dollar terms, in percent) 9.5 8.7 8.2 -0.1 6.6 3.3 2.9 3.8 3.8 2.7 3.8 4.5 1.2 of which: Private Growth of imports of G&S (US dollar terms, in percent) 0.1 -0.3 4.5 6.6 7.3 3.6 3.7 3.9 4.5 2.8 3.8 3.3 3.6 70 Grant element of new public sector borrowing (in percent) ... ... ... 39.0 38.7 39.5 39.3 40.2 39.4 41.8 35.4 ... 40.6 Government revenues (excluding grants, in percent of GDP) 26.8 27.0 26.4 27.0 27.2 27.4 27.3 27.3 27.3 27.6 27.6 24.8 27.4 60 Aid flows (in Million of US dollars) 5/ 73.1 60.7 67.7 68.8 70.2 70.8 73.8 78.6 79.8 86.7 64.3 Grant-equivalent financing (in percent of GDP) 6/ ... ... ... 8.5 8.5 8.2 8.3 8.3 8.5 7.5 6.4 ... 8.0 50 Grant-equivalent financing (in percent of external financing) 6/ ... ... ... 78.2 73.9 72.9 72.1 72.8 68.9 67.4 56.3 ... 72.4 Nominal GDP (Million of US dollars) 786 841 862 905 960 997 1,038 1,080 1,125 1,302 1,738 40 Nominal dollar GDP growth -2.2 7.0 2.4 5.0 6.1 3.8 4.0 4.1 4.1 2.7 3.8 2.9 3.8 30 Memorandum items: 20 PV of external debt 7/ ... ... 34.4 33.4 32.9 33.0 33.5 34.0 35.3 39.1 60.3 In percent of exports ... ... 104.4 106.8 104.7 105.7 108.5 110.3 114.9 160.6 261.7 10 Total external debt service-to-exports ratio 0.0 15.2 22.3 10.6 10.1 10.5 9.7 9.4 9.2 13.3 19.1 PV of PPG external debt (in Million of US dollars) 296.0 302.3 315.7 329.3 348.0 367.4 397.2 508.6 1047.2 0 (PVt-PVt-1)/GDPt-1 (in percent) 0.7 1.5 1.4 1.9 1.9 2.8 2.3 3.6 2019 2021 2023 2025 2027 2029 Non-interest current account deficit that stabilizes debt ratio 9.4 4.7 -5.7 0.1 0.1 -1.3 -0.8 -0.6 -1.7 2.1 3.0 Sources: Country authorities; and staff estimates and projections. 0 1/ Includes both public and private sector external debt. 2/ Derived as [r - g - ρ(1+g) + Ɛα (1+r)]/(1+g+ρ+gρ) times previous period debt ratio, with r = nominal interest rate; g = real GDP growth rate, ρ = growth rate of GDP deflator in U.S. dollar terms, Ɛ=nominal appreciation of the local currency, and α= share of local currency-denominated external debt in total external debt. 3/ Includes exceptional financing (i.e., changes in arrears and debt relief); changes in gross foreign assets; and valuation adjustments. For projections also includes contribution from price and exchange rate changes. 4/ Current-year interest payments divided by previous period debt stock. 5/ Defined as grants, concessional loans, and debt relief. 6/ Grant-equivalent financing includes grants provided directly to the government and through new borrowing (difference between the face value and the PV of new debt). 7/ Assumes that PV of private sector debt is equivalent to its face value. 8/ Historical averages are generally derived over the past 10 years, subject to data availability, whereas projections averages are over the first year of projection and the next 10 years. 9 SAMOA Table 2. Samoa: Public Sector Debt Sustainability Framework, Baseline Scenario, 2016-39 (In percent of GDP, unless otherwise indicated) Actual Projections Average 6/ 2016 2017 2018 2019 2020 2021 2022 2023 2024 2029 2039 Historical Projections Public sector debt 1/ 61.3 57.0 57.2 57.5 57.6 59.2 60.3 61.4 62.5 78.2 115.9 54.1 65.0 Definition of external/domestic Residency- of which: external debt 50.7 47.7 49.4 48.7 48.6 49.6 50.5 51.4 53.5 59.7 87.9 46.9 53.1 debt based of which: local-currency denominated Change in public sector debt -5.2 -4.4 0.3 0.2 0.1 1.6 1.1 1.1 1.1 3.4 2.9 Is there a material difference Identified debt-creating flows -1.5 -0.3 1.5 0.2 0.1 1.6 1.1 1.1 1.1 3.4 2.9 3.1 1.9 No between the two criteria? Primary deficit 0.4 1.1 -0.1 1.2 1.8 2.3 2.5 2.7 2.7 4.5 5.5 3.6 3.2 Revenue and grants 36.1 34.2 34.3 34.0 33.8 33.6 33.5 33.5 33.3 32.5 31.3 33.6 33.3 of which: grants 9.3 7.2 7.9 7.0 6.6 6.2 6.2 6.2 6.0 4.9 3.7 Public sector debt 1/ Primary (noninterest) expenditure 36.5 35.3 34.2 35.2 35.7 36.0 36.1 36.3 36.1 37.1 36.9 37.2 36.5 Automatic debt dynamics -1.9 -1.4 1.6 -0.9 -1.8 -0.7 -1.4 -1.6 -1.6 -1.1 -2.6 of which: local-currency denominated Contribution from interest rate/growth differential -3.0 -1.0 0.7 -1.3 -1.9 -0.9 -1.5 -1.7 -1.7 -1.2 -0.3 of which: foreign-currency denominated of which: contribution from average real interest rate 1.5 0.6 1.2 0.6 0.5 0.3 -0.2 -0.3 -0.4 -0.5 0.8 of which: contribution from real GDP growth -4.5 -1.6 -0.5 -1.9 -2.4 -1.2 -1.3 -1.3 -1.3 -0.7 -1.0 90 Contribution from real exchange rate depreciation 1.0 -0.4 0.9 ... ... ... ... ... ... ... ... 80 Other identified debt-creating flows 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 70 Privatization receipts (negative) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 60 Recognition of contingent liabilities (e.g., bank recapitalization) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 50 Debt relief (HIPC and other) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 40 Other debt creating or reducing flow (please specify) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 30 Residual -3.7 -4.0 -1.3 0.3 0.1 0.1 0.0 0.0 0.1 0.1 -2.4 -0.3 0.1 20 10 Sustainability indicators 0 PV of public debt-to-GDP ratio 2/ ... ... 42.2 42.2 41.9 42.6 43.3 44.0 44.3 57.5 88.2 2019 2021 2023 2025 2027 2029 PV of public debt-to-revenue and grants ratio ... ... 123.2 124.0 123.9 126.8 129.1 131.2 132.9 176.8 281.7 Debt service-to-revenue and grants ratio 3/ ... 18.8 28.3 17.0 17.6 15.9 13.4 11.9 11.1 13.0 16.5 Gross financing need 4/ 0.4 6.6 9.6 7.0 7.8 7.7 7.0 6.7 6.4 8.8 10.7 of which: held by residents of which: held by non-residents Key macroeconomic and fiscal assumptions 90 Real GDP growth (in percent) 7.2 2.7 0.9 3.4 4.4 2.2 2.2 2.2 2.2 0.9 0.9 1.0 2.1 80 Average nominal interest rate on external debt (in percent) 0.0 0.0 3.6 2.3 2.1 2.2 1.3 1.3 1.3 1.1 1.0 0.4 1.5 70 Average real interest rate on domestic debt (in percent) 11.3 7.5 6.5 7.7 5.7 2.5 0.8 -0.3 -0.3 -0.4 -0.5 1.7 1.3 60 Real exchange rate depreciation (in percent, + indicates depreciation) 2.0 -0.7 1.9 … ... ... ... ... ... ... ... 0.2 ... 50 Inflation rate (GDP deflator, in percent) -1.6 1.1 2.9 2.9 2.7 2.6 2.8 2.9 2.8 2.8 2.8 1.8 2.8 40 Growth of real primary spending (deflated by GDP deflator, in percent) 0.4 -0.6 -2.3 6.4 5.7 3.0 2.5 2.8 1.7 0.9 0.9 3.1 2.8 30 Primary deficit that stabilizes the debt-to-GDP ratio 5/ 5.6 5.4 -0.3 0.9 1.8 0.7 1.4 1.6 1.6 1.1 2.6 3.6 1.3 20 PV of contingent liabilities (not included in public sector debt) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 10 0 2019 2021 2023 2025 2027 2029 Sources: Country authorities; and staff estimates and projections. 1/ Coverage of debt: The general government, central bank, government-guaranteed debt. Definition of external debt is Residency-based. 2/ The underlying PV of external debt-to-GDP ratio under the public DSA differs from the external DSA with the size of differences depending on exchange rates projections. 3/ Debt service is defined as the sum of interest and amortization of medium and long-term, and short-term debt. 4/ Gross financing need is defined as the primary deficit plus debt service plus the stock of short-term debt at the end of the last period and other debt creating/reducing flows. 5/ Defined as a primary deficit minus a change in the public debt-to-GDP ratio ((-): a primary surplus), which would stabilizes the debt ratio only in the year in question. 6/ Historical averages are generally derived over the past 10 years, subject to data availability, whereas projections averages are over the first year of projection and the next 10 years. 10 Figure 1. Samoa: Indicators of Public and Publicly Guaranteed External Debt under Alternative Scenarios, 2019-39 1/ PV of debt-to GDP ratio PV of debt-to-exports ratio 90 400 80 350 70 300 60 250 50 200 40 150 30 20 100 10 50 Most extreme shock is Natural disaster Most extreme shock is Natural disaster 0 0 2019 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039 2019 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039 Debt service-to-exports ratio Debt service-to-revenue ratio 25 25 20 20 15 15 10 10 5 5 Most extreme shock is Exports Most extreme shock is One-time depreciation 0 0 2019 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039 2019 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039 Baseline Historical scenario Most extreme shock 1/ Threshold Customization of Default Settings Borrowing Assumptions for Stress Tests* Size Interactions Default User defined Shares of marginal debt Standardized Tests Yes No External PPG MLT debt 100% Tailored Tests Terms of marginal debt Combined CLs Yes Avg. nominal interest rate on new borrowing in USD 1.1% 1.1% Natural Disasters Yes Yes USD Discount rate 5.0% 5.0% Commodity Prices 2/ n.a. n.a. Avg. maturity (incl. grace period) 24 24 Market Financing n.a. n.a. Avg. grace period 6 6 Note: "Yes" indicates any change to the size or * Note: All the additional financing needs generated by the shocks under the stress tests are interactions of the default settings for the stress tests. assumed to be covered by PPG external MLT debt in the external DSA. Default terms of marginal "n.a." indicates that the stress test does not apply. debt are based on baseline 10-year projections. Sources: Country authorities; and staff estimates and projections. 1/ The most extreme stress test is the test that yields the highest ratio in or before 2029. Stress tests with one-off breaches are also presented (if any), while these one- off breaches are deemed away for mechanical signals. When a stress test with a one-off breach happens to be the most exterme shock even after disregarding the one- off breach, only that stress test (with a one-off breach) would be presented. 2/ The magnitude of shocks used for the commodity price shock stress test are based on the commodity prices outlook prepared by the IMF research department. 11 Figure 2. Samoa: Indicators of Public Debt under Alternative Scenarios, 2019-39 1/ PV of Debt-to-GDP Ratio 200 180 160 140 120 100 80 60 40 20 Most extreme shock is Growth 0 2019 2022 2025 2028 2031 2034 2037 PV of Debt-to-Revenue Ratio Debt Service-to-Revenue Ratio 700 35 600 30 500 25 400 20 300 15 200 10 100 5 Most extreme shock is Growth Most extreme shock is Growth 0 0 2019 2022 2025 2028 2031 2034 2037 2019 2022 2025 2028 2031 2034 2037 Baseline Most extreme shock 1/ Public debt benchmark Historical scenario Borrowing Assumptions for Stress Tests* Default User defined Shares of marginal debt External PPG medium and long-term 71% 71% Domestic medium and long-term 29% 29% Domestic short-term 4% 0% Terms of marginal debt External MLT debt Avg. nominal interest rate on new borrowing in USD 1.1% 1.1% Avg. maturity (incl. grace period) 24 24 Avg. grace period 6 6 Domestic MLT debt Avg. real interest rate on new borrowing -0.7% -0.7% Avg. maturity (incl. grace period) 40 40 Avg. grace period 30 30 Domestic short-term debt Avg. real interest rate -2% -2% * Note: The public DSA allows for domestic financing to cover the additional financing needs generated by the shocks under the stress tests in the public DSA. Default terms of marginal debt are based on baseline 10-year projections. Sources: Country authorities; and staff estimates and projections. 1/ The most extreme stress test is the test that yields the highest ratio in or before 2029. The stress test with a one-off breach is also presented (if any), while the one-off breach is deemed away for mechanical signals. When a stress test with a one-off breach happens to be the most exterme shock even after disregarding the one-off breach, only that stress test (with a one-off breach) would be presented. 12 Table 3. Samoa: Sensitivity Analysis for Key Indicators of Public and Publicly Guaranteed External Debt, 2019-39 Projections 1/ 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 PV of debt-to GDP ratio Baseline 33.4 32.9 33.0 33.5 34.0 35.3 35.4 36.0 36.9 37.8 39.1 40.8 42.8 45.2 47.7 50.4 53.1 55.4 57.6 58.9 60.3 A. Alternative Scenarios A1. Key variables at their historical averages in 2019-2039 2/ 33.4 36.2 38.7 40.9 43.3 46.3 46.1 45.4 44.9 44.3 44.1 43.5 43.4 43.7 44.2 45.1 46.3 47.2 48.3 49.2 50.1 0 #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A B. Bound Tests B1. Real GDP growth 33.4 36.9 40.2 40.8 41.4 43.0 43.1 43.8 44.9 46.0 47.5 49.6 52.1 55.0 58.0 61.3 64.6 67.4 70.1 71.7 73.3 B2. Primary balance 33.4 34.7 36.4 36.9 37.4 38.8 38.9 39.5 40.4 41.3 42.5 44.1 46.1 48.4 50.9 53.5 56.2 58.4 60.5 61.7 62.9 B3. Exports 33.4 34.6 37.5 38.0 38.5 39.8 39.9 40.6 41.4 42.2 43.2 44.7 46.5 48.7 51.0 53.5 56.1 58.1 60.1 61.3 62.4 B4. Other flows 3/ 33.4 35.6 38.4 38.9 39.4 40.7 40.8 41.5 42.3 42.9 43.9 45.3 47.0 49.1 51.3 53.7 56.2 58.2 60.1 61.1 62.1 B5. Depreciation 33.4 41.4 37.2 37.9 38.4 40.1 40.2 40.9 41.9 43.4 45.1 47.5 50.3 53.6 57.0 60.6 64.3 67.4 70.4 72.4 74.3 B6. Combination of B1-B5 33.4 37.8 39.9 40.5 41.0 42.5 42.7 43.4 44.3 45.2 46.5 48.3 50.5 53.1 55.9 58.8 61.8 64.3 66.6 68.1 69.4 C. Tailored Tests C1. Combined contingent liabilities 33.4 35.9 36.0 36.6 37.0 38.4 38.5 39.1 40.1 41.1 42.3 44.1 46.2 48.6 51.2 54.0 56.8 59.2 61.4 62.8 64.1 C2. Natural disaster 33.4 43.1 43.7 44.6 45.5 47.2 47.7 48.9 50.4 51.9 53.7 56.1 58.8 61.9 65.1 68.5 72.0 75.0 77.9 79.8 81.7 C3. Commodity price n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Threshold 55 55 55 55 55 55 55 55 55 55 55 55 55 55 55 55 55 55 55 55 55 PV of debt-to-exports ratio Baseline 106.8 104.7 105.7 108.5 110.3 114.9 145.6 148.0 151.7 155.5 160.6 174.8 183.5 196.2 207.2 218.8 230.8 240.7 250.2 256.0 261.7 A. Alternative Scenarios A1. Key variables at their historical averages in 2019-2039 2/ 106.8 115.2 123.9 132.4 140.6 150.7 189.5 186.5 184.5 182.2 181.1 186.6 186.2 189.6 192.1 195.9 201.3 205.1 209.8 213.7 217.8 0 106.8 100.4 96.1 93.9 91.3 91.6 113.6 111.3 110.2 109.4 110.2 117.8 122.1 128.7 134.6 141.3 148.5 153.9 159.2 163.6 168.2 B. Bound Tests B1. Real GDP growth 106.8 104.7 105.7 108.5 110.3 114.9 145.6 148.0 151.7 155.5 160.6 174.8 183.5 196.2 207.2 218.8 230.8 240.7 250.2 256.0 261.7 B2. Primary balance 106.8 110.4 116.5 119.5 121.4 126.1 159.9 162.6 166.3 169.8 174.6 189.2 197.6 210.2 220.9 232.3 243.9 253.5 262.6 268.0 273.2 B3. Exports 106.8 119.5 136.7 140.1 142.3 147.7 187.1 190.2 194.3 197.6 202.4 218.4 227.3 241.1 252.7 264.9 277.6 288.0 297.8 303.3 308.8 B4. Other flows 3/ 106.8 113.2 122.9 125.9 127.8 132.5 167.9 170.7 173.9 176.5 180.4 194.2 201.6 213.3 223.0 233.4 244.1 252.8 261.0 265.5 269.9 B5. Depreciation 106.8 104.7 94.5 97.2 99.0 103.5 131.1 133.3 136.8 141.4 147.3 161.8 171.3 184.7 196.5 208.9 221.7 232.4 242.7 249.4 256.0 B6. Combination of B1-B5 106.8 116.8 112.0 123.7 125.7 130.6 165.5 168.3 171.8 175.4 180.4 195.5 204.4 217.7 229.0 241.0 253.4 263.6 273.3 279.0 284.7 C. Tailored Tests C1. Combined contingent liabilities 106.8 114.2 115.3 118.2 120.1 124.8 158.2 160.8 164.7 168.8 174.1 189.2 198.1 211.3 222.6 234.5 246.7 256.9 266.7 272.7 278.6 C2. Natural disaster 106.8 142.8 145.4 150.0 153.4 159.7 204.0 208.9 215.3 221.9 229.7 250.1 262.1 279.4 294.0 309.3 325.1 338.7 351.9 360.5 368.9 C3. Commodity price n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Threshold 240 240 240 240 240 240 240 240 240 240 240 240 240 240 240 240 240 240 240 240 240 Debt service-to-exports ratio Baseline 10.6 10.1 10.5 9.7 9.4 9.2 11.3 11.6 12.3 12.7 13.3 13.5 14.1 14.5 14.7 15.0 15.8 15.9 17.2 18.1 19.1 A. Alternative Scenarios A1. Key variables at their historical averages in 2019-2039 2/ 10.6 10.4 11.0 10.4 10.4 10.3 12.9 13.1 14.5 15.4 16.3 16.8 17.7 17.6 17.1 16.8 17.1 16.7 17.3 17.8 18.4 0 10.6 9.8 9.9 8.8 8.3 7.9 9.5 9.6 9.4 8.8 8.1 6.8 6.1 5.0 4.0 3.2 2.8 2.0 2.0 1.9 1.9 B. Bound Tests B1. Real GDP growth 10.6 10.1 10.5 9.7 9.4 9.2 11.3 11.6 12.3 12.7 13.3 13.5 14.1 14.5 14.7 15.0 15.8 15.9 17.2 18.1 19.1 B2. Primary balance 10.6 10.1 10.6 9.9 9.6 9.4 11.5 11.8 13.0 14.0 14.5 14.7 15.4 15.8 15.9 16.2 17.1 17.1 18.4 19.3 20.3 B3. Exports 10.6 11.0 12.2 11.4 11.1 10.8 13.3 13.7 15.0 16.4 17.0 17.2 17.9 18.3 18.5 18.8 19.7 19.8 21.2 22.2 23.3 B4. Other flows 3/ 10.6 10.1 10.6 10.0 9.7 9.5 11.6 11.9 13.4 14.7 15.2 15.4 16.0 16.4 16.5 16.7 17.5 17.6 18.8 19.6 20.5 B5. Depreciation 10.6 10.1 10.5 9.5 9.2 9.0 11.0 11.4 12.1 11.5 12.1 12.2 12.9 13.3 13.5 13.8 14.7 14.8 16.1 17.1 18.1 B6. Combination of B1-B5 10.6 10.6 11.4 10.5 10.2 10.0 12.3 12.6 14.0 14.5 15.0 15.3 15.9 16.4 16.5 16.8 17.7 17.8 19.1 20.1 21.1 C. Tailored Tests C1. Combined contingent liabilities 10.6 10.1 10.6 9.8 9.6 9.3 11.5 11.8 12.5 12.9 13.5 13.7 14.3 14.7 14.9 15.2 16.0 16.1 17.3 18.3 19.2 C2. Natural disaster 10.6 10.8 11.8 10.9 10.7 10.4 12.8 13.2 13.9 14.4 15.1 15.3 16.0 16.5 16.7 17.0 17.9 18.0 19.4 20.4 21.4 C3. Commodity price n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Threshold 21 21 21 21 21 21 21 21 21 21 21 21 21 21 21 21 21 21 21 21 21 Debt service-to-revenue ratio Baseline 12.3 11.6 11.9 10.9 10.6 10.3 9.9 10.2 10.8 11.2 11.7 11.4 11.9 12.1 12.2 12.5 13.2 13.3 14.3 15.1 15.9 A. Alternative Scenarios A1. Key variables at their historical averages in 2019-2039 2/ 12.3 12.0 12.6 11.8 11.7 11.6 11.3 11.6 12.7 13.6 14.3 14.2 14.9 14.7 14.3 14.0 14.3 13.9 14.4 14.9 15.4 0 12.3 11.4 11.2 10.0 9.4 8.8 8.4 8.4 8.3 7.8 7.1 5.7 5.1 4.2 3.3 2.6 2.3 1.6 1.6 1.6 1.6 B. Bound Tests B1. Real GDP growth 12.3 13.0 14.5 13.3 12.9 12.6 12.1 12.4 13.2 13.7 14.3 13.9 14.5 14.7 14.9 15.2 16.1 16.1 17.4 18.3 19.3 B2. Primary balance 12.3 11.6 12.0 11.2 10.8 10.5 10.1 10.4 11.5 12.3 12.8 12.4 13.0 13.1 13.2 13.5 14.2 14.3 15.3 16.1 16.9 B3. Exports 12.3 11.7 12.2 11.3 11.0 10.7 10.3 10.6 11.6 12.6 13.1 12.7 13.3 13.4 13.5 13.7 14.4 14.5 15.5 16.2 17.0 B4. Other flows 3/ 12.3 11.6 12.1 11.3 11.0 10.7 10.2 10.5 11.8 12.9 13.4 13.0 13.5 13.6 13.7 13.9 14.6 14.6 15.6 16.4 17.1 B5. Depreciation 12.3 14.6 15.0 13.5 13.1 12.7 12.2 12.6 13.4 12.7 13.4 13.0 13.7 14.0 14.2 14.5 15.4 15.6 16.9 17.9 19.0 B6. Combination of B1-B5 12.3 12.6 13.7 12.6 12.3 11.9 11.4 11.8 13.0 13.5 14.0 13.6 14.3 14.4 14.6 14.8 15.6 15.7 16.9 17.7 18.6 C. Tailored Tests C1. Combined contingent liabilities 12.3 11.6 12.1 11.1 10.8 10.5 10.1 10.4 11.0 11.4 11.9 11.6 12.1 12.3 12.4 12.6 13.4 13.4 14.4 15.2 16.0 C2. Natural disaster 12.3 11.6 12.5 11.6 11.2 10.9 10.5 10.8 11.5 11.9 12.4 12.1 12.6 12.8 13.0 13.2 14.0 14.0 15.1 15.9 16.7 C3. Commodity price n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Threshold 23 23 23 23 23 23 23 23 23 23 23 23 23 23 23 23 23 23 23 23 23 Sources: Country authorities; and staff estimates and projections. 1/ A bold value indicates a breach of the threshold. 2/ Variables include real GDP growth, GDP deflator (in U.S. dollar terms), non-interest current account in percent of GDP, and non-debt creating flows. 3/ Includes official and private transfers and FDI. 13 Table 4. Samoa: Sensitivity Analysis for Key Indicators of Public Debt, 2019-39 Projections 1/ 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 PV of Debt-to-GDP Ratio Baseline 42.2 41.9 42.6 43.3 44.0 44.3 46.5 49.2 52.2 54.9 57.5 60.4 63.5 66.5 69.3 72.1 74.8 78.3 81.8 85.1 88.2 A. Alternative Scenarios A1. Key variables at their historical averages in 2019-2039 2/ 42 45 47 49 52 53 56 59 62 65 67 69 72 73 75 77 79 81 85 88 91 0 #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A B. Bound Tests B1. Real GDP growth 42 49 59 64 68 73 80 87 95 103 110 118 126 134 141 149 156 164 172 180 187 B2. Primary balance 42 45 48 49 50 50 52 55 58 60 63 66 69 72 75 77 80 83 87 90 93 B3. Exports 42 43 47 47 48 48 51 53 56 59 61 64 67 69 72 75 77 80 84 87 90 B4. Other flows 3/ 42 45 48 49 49 50 52 55 58 60 62 65 68 70 73 75 78 81 84 87 90 B5. Depreciation 42 49 48 46 45 43 43 44 44 45 45 46 47 48 49 49 50 52 54 55 57 B6. Combination of B1-B5 42 47 49 50 51 52 55 59 63 66 70 74 77 81 85 88 92 96 100 104 108 C. Tailored Tests C1. Combined contingent liabilities 42 47 48 48 49 49 51 54 57 60 62 65 68 71 74 77 80 83 87 90 93 C2. Natural disaster 42 59 60 61 62 63 66 69 73 76 80 83 87 91 95 98 102 106 110 114 118 C3. Commodity price n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Public debt benchmark 70 70 70 70 70 70 70 70 70 70 70 70 70 70 70 70 70 70 70 70 70 PV of Debt-to-Revenue Ratio Baseline 124.0 123.9 126.8 129.1 131.2 132.9 138.4 146.4 160.4 169.0 176.8 190.5 202.9 212.3 221.4 230.3 238.8 250.1 261.4 271.7 281.7 A. Alternative Scenarios A1. Key variables at their historical averages in 2019-2039 2/ 124 131 138 145 151 156 163 171 186 194 200 213 222 228 233 238 243 251 261 270 279 0 16.9826 26.8284 22.7207 18.2 15.6902 14.0726 13.0005 12.7916 12.3388 12.4514 12.5406 11.25808 11.32621 10.60589 9.97923 9.551031 9.509066 9.295738 9.310504 9.236293 9.320629 B. Bound Tests B1. Real GDP growth 124 143 168 182 197 211 228 250 284 306 328 362 392 416 440 463 485 511 537 559 582 B2. Primary balance 124 133 144 146 148 149 155 163 177 186 193 207 220 229 238 247 255 266 278 288 297 B3. Exports 124 128 139 141 143 145 151 159 173 181 188 201 213 222 230 238 246 257 267 277 286 B4. Other flows 3/ 124 132 143 145 147 149 155 163 177 185 192 205 216 225 233 241 249 259 269 279 288 B5. Depreciation 124 148 144 139 135 130 130 132 138 140 142 147 152 154 157 159 161 167 173 179 184 B6. Combination of B1-B5 124 138 142 147 151 155 163 173 191 202 212 229 245 256 268 279 290 303 317 329 341 C. Tailored Tests C1. Combined contingent liabilities 124 139 142 144 146 147 153 161 175 184 192 206 219 228 237 246 255 266 278 288 298 C2. Natural disaster 124 173 177 181 184 188 194 204 223 233 244 261 277 289 301 312 323 337 351 364 376 C3. Commodity price n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Debt Service-to-Revenue Ratio Baseline 17.0 17.6 15.9 13.4 11.9 11.1 10.3 11.4 12.1 12.5 13.0 12.7 13.7 13.3 13.0 13.0 13.6 13.9 14.7 15.4 16.5 A. Alternative Scenarios A1. Key variables at their historical averages in 2019-2039 2/ 17 18 17 14 13 12 12 13 14 15 16 16 17 16 16 16 16 16 17 18 19 0 16.9826 26.8284 22.7207 18.2 15.6902 14.0726 13.0005 12.7916 12.3388 12.4514 12.5406 11.25808 11.32621 10.60589 9.97923 9.551031 9.509066 9.295738 9.310504 9.236293 9.320629 B. Bound Tests B1. Real GDP growth 17 19 19 16 15 14 13 15 16 17 19 19 21 22 22 23 24 25 27 29 31 B2. Primary balance 17 18 16 14 12 11 11 12 13 14 14 14 15 14 14 14 15 15 16 17 18 B3. Exports 17 18 16 14 12 11 11 12 13 14 14 14 15 14 14 14 15 15 16 16 17 B4. Other flows 3/ 17 18 16 14 12 11 11 12 13 14 14 14 15 15 14 14 15 15 16 17 18 B5. Depreciation 17 18 18 16 14 13 12 14 14 14 15 14 15 14 14 14 14 14 15 16 17 B6. Combination of B1-B5 17 18 17 14 13 12 11 12 13 14 14 14 15 15 14 15 15 16 16 17 18 C. Tailored Tests C1. Combined contingent liabilities 17 18 16 14 12 11 11 12 12 13 13 13 14 14 13 13 14 14 15 16 17 C2. Natural disaster 17 18 17 15 13 12 11 13 13 14 14 14 15 15 14 14 15 15 16 17 18 C3. Commodity price n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Sources: Country authorities; and staff estimates and projections. 1/ A bold value indicates a breach of the benchmark. 2/ Variables include real GDP growth, GDP deflator and primary deficit in percent of GDP. 3/ Includes official and private transfers and FDI. 14 Figure 3. Samoa: Drivers of Debt Dynamics – Baseline Scenario External Debt Gross Nominal PPG External Debt Debt-creating flows Unexpected Changes in Debt 1/ (in percent of GDP; DSA vintages) (percent of GDP) (past 5 years, percent of GDP) Current DSA 20 80 Residual 50 Previous DSA proj. 40 70 DSA-2013 Interquartile 10 range (25-75) Price and 30 60 exchange rate 20 50 Real GDP 10 growth 0 Change in PPG 40 debt 3/ 0 30 Nominal interest rate -10 -10 20 Median -20 Current 10 account + FDI -30 0 -20 -40 Contri bution of Change in 5-year 5-year Di s tribution across LICs 2/ 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 unexpected PPG debt 3/ historical projected -50 cha nges change change Public debt Gross Nominal Public Debt Debt-creating flows Unexpected Changes in Debt 1/ (in percent of GDP; DSA vintages) (percent of GDP) (past 5 years, percent of GDP) Residual 40 Current DSA Previous DSA proj. 20 DSA-2013 Interquartile 90 Other debt 15 range (25-75) creating flows 20 80 10 70 Real Exchange rate depreciation 5 60 0 Real GDP 50 growth 0 Change in debt 40 -5 Real interest 30 rate -20 -10 20 Primary deficit 10 -15 -40 Median 0 Change in debt 5-year 5-year -20 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 Distribution across LICs 2/ historical projected Contribution of -25 unexpected change change 1/ Difference between anticipated and actual contributions on debt ratios. 2/ Distribution across LICs for which LIC DSAs were produced. 3/ Given the relatively low private external debt for average low-income countries, a ppt change in PPG external debt should be largely explained by the drivers of the external debt dynamics equation. 15 Figure 4. Samoa: Realism Tools 3-Year Adjustment in Primary Balance Fiscal Adjustment and Possible Growth Paths 1/ (Percentage points of GDP) Distribution 1/ 8 8 14 7 Projected 3-yr 6 6 12 adjustment 3-year PB adjustment greater than 5 In percentage points of GDP 2.5 percentage points of GDP in 10 approx. top quartile 4 4 3 In percent 8 2 2 6 1 0 0 4 -1 2 -2 -2 -3 0 -4 -4 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5 6.0 6.5 7.0 7.5 8.0 -4.5 -4.0 -3.5 -3.0 -2.5 -2.0 -1.5 -1.0 -0.5 More 2013 2014 2015 2016 2017 2018 2019 2020 Baseline Multiplier = 0.2 Multiplier = 0.4 Multiplier = 0.6 Multiplier = 0.8 1/ Bars refer to annual projected fiscal adjustment (right-hand side scale) and lines show 1/ Data cover Fund-supported programs for LICs (excluding emergency financing) approved since possible real GDP growth paths under different fiscal multipliers (left-hand side scale). 1990. The size of 3-year adjustment from program inception is found on the horizontal axis; the percent of sample is found on the vertical axis. Public and Private Investment Rates Contribution to Real GDP growth (% of GDP) (percent, 5-year average) 10 4.0 8 3.0 6 2.0 1.0 4 0.0 Historical Projected (Prev. DSA) Projected (Curr. DSA) 2 -1.0 0 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 -2.0 Gov. Invest. - Prev. DSA Gov. Invest. - Current DSA Contribution of other factors Priv. Invest. - Prev. DSA Priv. Invest. - Current DSA Contribution of government capital1/ 1/ Capital stock in 2010 corresponds to PFTAC estimates. Later data are obtained by using the net acquisition of non-financial asset growth. 16