The International Monetary Fund (IMF) has raised concerns that proposed changes to Samoa’s central banking law could weaken safeguards and open the door to political influence over the country’s financial system.
In a letter to Finance Minister Mulipola Anarosa Molioo, IMF Asia-Pacific Director Krishna Srinivasan warned the reforms risk undermining the independence of the Central Bank of Samoa.
“I am writing to express concern about the planned reforms to the Central Bank of Samoa (CBS) Act.”
“In our assessment, the proposed amendments could weaken the independence of the CBS, including its institutional and financial autonomy.”
Srinivasan stressed that central bank independence is critical to maintaining effective economic management.
“Such independence is critical to ensuring sound and independent policy decision-making, thereby safeguarding the credibility and effectiveness of the CBS’s monetary and financial policies.”
The IMF outlined several areas of concern in the proposed changes, including governance structures and decision-making powers.
“Our specific concerns include the proposed mechanism for assigning additional CBS functions through secondary legislation; governance concerns arising from the proposed Board structure and overlapping decision-making responsibilities.”
The letter also warned about provisions affecting the central bank governor.
“Provisions that could weaken the autonomy of the Governor, including a shortened term and broad grounds for dismissal.”
It further raised concerns about expanding government influence over central bank decisions.
“Other amendments that could expand the Ministry of Finance’s influence over CBS policy formulation and budgetary matters.”
Despite the concerns, the IMF said the reforms present an opportunity to address existing weaknesses.
“The planned reform would also be an opportunity to address existing legal shortcomings that were identified in the 2021 IMF Safeguards Assessment.”
Srinivasan urged the government to reconsider the draft amendments and focus on strengthening, not weakening, the institution.
“Against this background, I respectfully encourage you to reconsider the draft amendments.”
“I strongly recommend that any reform of the CBS Act seek to strengthen, rather than weaken, the legal foundations for central bank independence, accountability, and sound governance.”
The IMF also signalled its willingness to continue supporting Samoa.
“We stand ready to engage further with you and other relevant authorities in support of efforts to ensure that the legal framework for the CBS remains aligned with international good practice and conducive to supporting lasting macroeconomic and financial stability.”
The warning comes as Samoa reviews key financial legislation, with the IMF cautioning that maintaining a strong and independent central bank will be critical for economic stability and investor confidence.
