SAMOA: Risk Assessment Frameworks Crucial for Financial Institutions’ Resilience Amid Economic Shocks
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A comprehensive risk assessment framework is essential for financial institutions in Samoa to navigate the country’s economic landscape and mitigate potential risks, according to a report by the Asian Development Bank (ADB).
Key Risks to Samoa’s Economic Recovery
The report highlights several key risks that could derail Samoa’s economic recovery, including:
- External shocks from natural disasters or health crises
- COVID-19 risks
- Government capacity constraints
- Turnover of key staff
- Social discontent
- Debt sustainability concerns
- Weak public financial management systems
- Anticorruption efforts
Mitigating Risks
To mitigate these risks, the government is engaging in continuous dialogue with development partners to:
- Mobilize immediate relief and strengthen policy, governance, and institutional arrangements for disaster risk management
- Renew contingent financing arrangements by early 2023
- Strengthen public financial management systems
Disaster Risk Management and COVID-19 Preparedness
Samoa has access to funds from the Pacific Catastrophe Risk Insurance Company in the event of a major disaster, and its COVID-19 vaccination rate is high at 94% for those aged 12 years and above. The government is building health system capacity to respond to potential outbreaks and deliver essential medicines and supplies.
Strengthening Public Financial Management Systems
The report emphasizes the importance of strengthening public financial management systems, which are currently weak and limited in their capacity to support strong fiscal planning, budgeting, and monitoring. Development partners are working closely with the Ministry of Finance to strengthen regulatory frameworks, systems, and capacities in PFM.
Debt Sustainability and Management
The government is committed to maintaining debt below 50% of gross domestic product in the medium term and has drawn on grants from external partners rather than taking new loans. The loan portion of ADB’s contingent disaster financing facility has not been drawn down, indicating the government’s keenness to maintain debt levels.
Conclusion
A risk assessment framework is essential for financial institutions to identify, assess, and mitigate potential risks in Samoa’s economic landscape. With ongoing support from development partners, including the ADB, the government can strengthen its resilience and navigate the challenges ahead.