Samoan tala “overvalued,” IMF tells Govt
“Directors called for continued efforts to strengthen financial sector supervision, in particular by bringing the Unit Trust of Samoa under the oversight of the Central Bank” – International Monetary Fund
The Samoan tala is “overvalued.” That’s the verdict of the International Monetary Fund (IMF) following consultations with the Government about the state of the economy.
“Directors noted that the tala has appreciated substantially in real effective terms over the past decade and is assessed to be overvalued,” the IMF reported. “Most Directors considered that a gradual realignment of the exchange rate could help prevent further reserve losses and strengthen export competitiveness.
“Directors cautioned that the pace and timing of a realignment would need to be carefully managed, with due consideration to the potential impact on external debt and inflation.”
The IMF Directors report is posted under the Public Information Notice (PIN) No. 12/66 on its website, dated 29 June 2012. It follows the end of meetings with the Government on 15 June 2012 where “surveillance of developments at the regional level” was among the issues discussed. In its assessment, the IMF called on the Government to strengthen the “supervision” of the financial sector. “Directors agreed that monetary policy could remain accommodative at the current juncture given weak economic activity,” the IMF noted.
“The authorities should nevertheless be ready to tighten monetary policy in the event of an exchange rate adjustment. Directors called for continued efforts to strengthen financial sector supervision, in particular by bringing the Unit Trust of Samoa under the oversight of the Central Bank.” And finally, the Directors of IMF “agreed that continued structural reforms would be vital to restoring Samoa’s strong growth record.
“They encouraged the authorities to undertake bold reforms, focusing on increasing the efficiency of public enterprises, further improving public financial management, making customary land more accessible for productive use, and deepening financial intermediation.”