Re: The real issue with foreign debt
I would like to say thank you to Vai Autu.
You raised an important issue about foreign debt.
What will happen if Samoa cannot repay the foreign debt?
There is also a typical and long-standing rumor that foreign countries will possess Samoa if we can’t repay the debt.
The reason I say it is a rumor is simple. It is 21th century, not 19th century now.
Samoa’s foreign debt comes from many countries and international organizations, including China, Japan, World bank and Asian Development Bank. But all these foreign debt is concessional loans in the name of foreign aid.
They are not the commercial loans, which is under the strict conditions, especially default clause.
From 2008, many countries are plunged into debt crisis. These countries, including some European countries can’t repay the commercial loans, but no countries are possessed by other countries. It is 21th century.
So the most important thing is that Samoa’s debt is concessional loans in the name of foreign aid or development cooperation partnership.
If Samoa cannot repay the loan, no countries will force Samoa to repay, not to speak of possessing Samoa. They are not so stupid.
If these countries do so, they will hurt themselves first. They will lose their credit and reputation, as well as losing their friends in international society. The amount of loan may be big for Samoa, but very, very, very small for these countries.
At last, what will happen if Samoa can not repay the foreign debt?
Their usual practice is to extend the period of repayment or reduce interest rates, even debt relief.
I read an old news from ABC Radio Australia recently. Several years ago, China wrote off Samoa’s all earlier loans to the tune of $80 million. Ironically, the rumor said the foreign countries would possess Samoa, but they cancelled Samoa’s debt. Unfortunately, all of us do not know this.