Journal Issue
Share
Democratic Republic of São Tomé and Príncipe - 2016 Article IV Consultation, First Review under the Extended Credit Facility, and Request for Waiver for Nonobservance of Performance Criterion and Modification of Performance Criteria-Press Release; Staff Report; and Statement by the Exective Director for the Democratic Republic of São Tomé and Príncipe
Article

IMF Executive Board Completes the First Review under the ECF Arrangement for São Tomé and Príncipe and Approves US$0.9 Million Disbursement

Author(s):
International Monetary Fund. African Dept.
Published Date:
June 2016
Share
  • ShareShare
Show Summary Details

The Executive Board of the International Monetary Fund (IMF) today completed the first review of São Tomé and Príncipe’s performance under the economic program supported by an Extended Credit Facility (ECF) arrangement.1 Completion of the review enables the disbursement of SDR 634,285 (about US$ 0.9 million), bringing total disbursements under the arrangement to SDR 1.27 million (about US$ 1.8 million).

In completing the review, the Executive Board also approved a waiver for the nonobservance of the end-December 2015 performance criterion on the domestic primary deficit, based on the corrective measures introduced by the authorities. The Executive Board also approved new program targets for 2016.

São Tomé and Príncipe’s three-year ECF arrangement for SDR 4.44 million (about US$ 6.3 million or 60 percent of quota) was approved by the Executive Board on July 13, 2015 (see Press Release No. 15/336). It supports the government’s economic reform program for stronger and more inclusive growth, and it also plays a catalytic role for bilateral and multilateral assistance.

Following the Executive Board’s discussion on São Tomé and Príncipe, Mr. Min Zhu, Deputy Managing Director and Acting Chair, made the following statement:

“São Tomé and Príncipe’s economy has been resilient even after prospects for commercial oil production became uncertain with the withdrawal of a large oil company from exploration. In addition, performance under the program supported by the Extended Credit Facility has been satisfactory. International reserves have increased, and inflation has continued to decline, reaching its lowest level in the past two decades. Fiscal performance was, however, impacted by tax revenue underperformance.

“GDP growth is projected to pick up to 5 percent in 2016—albeit below the authorities’ medium-term target of 6 percent needed to significantly impact poverty—aided by higher public investments, a recovery in cocoa production, and increased foreign direct investment in the tourism sector. Inflation is expected to remain around 4 percent in 2016 and stabilize around 3 percent over the medium term, while the current account deficit is set to contract further.

“The authorities’ 2016 economic program focuses appropriately on sustaining the fiscal consolidation to help bring debt toward a moderate risk of debt distress. This will require sustained efforts to boost tax revenue collection, clear arrears, strengthen expenditure monitoring and control, and gradually scale up the infrastructure program, which will be backed by enhanced investment management capacity in project selection, implementation, and evaluation. Strengthening debt management capacity and continued reliance on grants and concessional financing will help mitigate the high risk of debt distress.

“The outlook is facing macro-financial challenges. Elevated bank lending risks and potential contingent claims on the budget, in an environment marked by rising nonperforming loans and highly indebted households and businesses, will continue to hold back private sector credit expansion and the prospects for higher growth. Against this backdrop, the authorities are working to increase the banking system’s efficiency, profitability, and resilience.

“Looking ahead, it is important that the authorities maintain the policy resolve and commitment demonstrated so far, especially in an election year, to mitigate these risks and bring the benefits of reforms to a broader segment of the population.”

São Tomé and Príncipe: Selected Economic Indicators, 2014–19(Annual change in percent, unless otherwise indicated)
201420152016201720182019
EBS/15/71EBS/15/71EBS/15/71EBS/15/71
ActualProgramEst.ProgramProj.ProgramProj.ProgramProj.Proj.
National income and prices
GDP at constant prices4.55.04.05.25.05.55.55.55.55.5
Consumer prices
End of period6.45.24.04.04.03.03.03.03.03.0
Period average7.05.85.34.63.93.53.53.03.03.0
External trade
Exports of goods and nonfactor services64.35.8−9.28.59.26.97.26.96.58.2
Imports of goods and nonfactor services28.6−8.3−17.415.511.89.17.08.55.82.9
Exchange rate (dobras per US$; end of period) 120,14822,424
Real effective exchange rate (depreciation = -)7.00.8
Money and credit
Base money23.214.637.511.110.47.16.38.07.29.7
Broad money (M3)16.815.113.111.411.66.66.37.57.27.9
Credit to the economy−1.0−0.73.81.67.03.44.85.35.27.5
Velocity (GDP to broad money; end of period)2.62.62.62.42.52.42.52.42.52.5
Central bank reference interest rate (percent)12.010.0
Average bank lending rate (percent)23.223.3
Average bank deposit rate (percent)8.96.9
Government finance (figures in percent of GDP)
Total revenue, grants, and oil signature bonuses25.931.828.033.935.134.933.435.633.733.5
Of which: tax revenue14.115.014.315.514.916.015.416.515.916.5
Nontax revenue1.51.71.51.72.21.71.31.71.31.3
Grants10.315.111.416.617.317.116.617.316.415.6
Oil signature bonuses0.00.00.80.00.70.00.00.00.00.0
Total expenditure and net lending31.440.634.236.244.136.937.335.936.233.9
Personnel costs9.18.88.98.78.68.68.58.58.48.4
Interest due0.70.40.80.40.70.70.70.70.70.7
Nonwage noninterest current
expenditure8.78.78.58.78.18.47.98.27.67.6
Treasury funded capital expenditures0.90.90.71.00.71.91.62.52.22.5
Donor funded capital expenditures11.820.814.716.620.216.617.915.516.714.0
HIPC Initiative-related social expenditure0.21.00.60.90.90.60.60.60.50.7
Domestic primary balance 2−3.3−2.7−3.0−2.0−2.0−1.8−1.8−1.5−1.5−1.4
Overall balance (commitment basis)−5.5−8.8−6.3−2.3−9.0−2.0−3.8−0.4−2.5−0.4
External sector
Current account balance (percent of GDP)
Including official transfers−21.9−12.4−16.7−15.2−12.2−16.4−12.7−17.0−12.6−10.5
Excluding official transfers−32.6−28.5−28.2−32.7−29.5−34.3−29.7−35.1−29.3−26.4
PV of external debt (percent of GDP)30.132.539.732.536.232.038.331.739.437.9
External debt service (percent of exports) 33.74.84.34.24.83.94.33.74.03.8
Export of goods and non-factor services
(US$ millions)88.593.580.4101.587.7108.494.1115.9100.2108.5
Gross international reserves 4
Millions of U.S. dollars56.566.961.080.572.897.775.9102.782.487.6
Months of imports of goods and
nonfactor services 54.24.04.44.55.05.15.05.15.15.0
National Oil Account (US$ millions)9.98.010.36.511.55.39.34.37.66.2
Memorandum Item
GDP
Billions of dobras6,2427,1717,0287,7907,8478,2518,2878,8208,8399,533
Millions of U.S. dollars338.0325.6318.2356.3349.2381.8371.2412.9396.0428.8
Sources: São Tomé and Príncipe authorities’ data and IMF staff estimates and projections.

Central Bank (BCSTP) mid-point rate.

Excludes oil related revenues, grants, interest earned, scheduled interest payments, and foreign-financed capital outlay.

Percent of exports of goods and nonfactor services.

Gross international reserves exclude the National Oil Account and commercial banks’ foreign currency deposits at the BCSTP in order to meet reserve requirements and foreign currency deposits of commercial banks used application deposits for new licensing or for meeting capital requirements.

Imports of goods and nonfactor services excluding imports of investment goods and technical assistance.

Sources: São Tomé and Príncipe authorities’ data and IMF staff estimates and projections.

Central Bank (BCSTP) mid-point rate.

Excludes oil related revenues, grants, interest earned, scheduled interest payments, and foreign-financed capital outlay.

Percent of exports of goods and nonfactor services.

Gross international reserves exclude the National Oil Account and commercial banks’ foreign currency deposits at the BCSTP in order to meet reserve requirements and foreign currency deposits of commercial banks used application deposits for new licensing or for meeting capital requirements.

Imports of goods and nonfactor services excluding imports of investment goods and technical assistance.

The ECF is a lending arrangement that provides sustained program engagement over the medium to long term in case of protracted balance of payments problems.

Other Resources Citing This Publication