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‘Austerity budget’ announced in Parliament

By Marieta Heidi Ilalio

APIA, Samoa (Samoa Observer, March 31, 2009) — Health and education take the biggest hits in the Government’s austerity budget announced in Parliament yesterday.

For although government spending is expected to increase by 8 per cent, the allocation to education is slashed by 11 per cent while health takes a 14.9 per cent cut.

The education budget is down from $72.32 million to $65.35 million while health is reduced from $70.07 million to $59.6 million.

However, the government has decided not to raise taxes to increase its revenue because of the difficult times the population already faces.

The $741 million budget for Fiscal Year 2009-2010 was tabled by Minister of Finance, Niko Lee Hang.

Lee Hang in his budget statement said this is a very critical year for Samoa because of the economic crisis. He said the 2009/10 budget is framed against a background of great economic uncertainty.

"The global financial crisis has reached unprecedented levels and has now transmitted to the real economy across the US, Europe, Japan, Asia and neighbouring markets," he said. Mr Lee Hang pointed out the crisis is a real threat to the achievement of the Millennium Development Goals for many low income countries. "For small Pacific states like Samoa, we cannot avoid being affected given our highly open economy and weak fiscal resilience which combined leave us with little protection to cushion the impact of an economic downturn." Lee Hang said these are difficult times, where responsible governments need to make bold decisions to navigate their way out of an economic downturn of devastating proportions as we are now experiencing. "There is no doubt the global financial crisis has now impacted on the Samoan economy," he said. The government intends to spend $741.1 million in the coming fiscal year against projected revenue of $551.7 million.

The $189.9 million deficit will be funded mostly by concessionary loans.

Mr Lee Hang said the reduction in education spending would not mean a reduction in services.

"The Government will commit $65.35 million excluding sporting events provisions as part of its investment in the sector," he said.

"The reduction of 11 per cent compared to the FY2008/2009 allocation of $72.32 million is a reflection of the winding down of several major one-off initiatives. This reduction in the total allocation has not in any way hindered the provision of core initiatives as follows:

$5.0m tala provided as grants to non-government schools, an additional $1.0m compared to the FY2008/2009;

$2.6m tala provided for the supply of village school stationery;

$3.0m tala is to support the Government Scholarship Scheme, whilst $0.80m is provided for sponsoring new and continuing students to attend NUS’s School of Education.

$9.88m to be granted to the National University of Samoa

$1.39m is provided to support the Samoa Qualifications Authority

$0.28m is set aside to assist in the provision of resources for schools in the areas of Agriculture Science, Food & Textiles and Design technology.

"In essence," said the finance minister, "the 2009/10 budget is expected to realise a deficit that is equivalent to 11 per cent of GDP, gradually declining to 9 per cent in 2010/11 and to 8 per cent in 2011/12. This exceeds the SDS target range of +3.5 to -3.5 per cent and presents a challenging situation where both current expenditures and development expenditures are expected to peak in 2009/10 and then reduce thereafter."

Financing the deficit is sourced largely from a highly concessional loan from the Asian Development Bank and grant funding from our traditional development partners.

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