Gabon: Staff Report for Article IV Consultation and Staff-Monitored Program Supplementary Information
Author: International Monetary Fund
Publication Date:
05 Feb 2004
eISBN:
9781451813890
ISBN:
9781451813890
Language:
English
Keywords:
ISCR; CR; wage bill; government; bill; authority; oil revenue; order basis; customs revenue; non-reschedulable arrears; Oil; gas and mining taxes; Arrears; Debt service; Fiscal stance
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The continued decline in oil production and the absence of sustained adjustment policies have contributed to Gabon's uneven economic performance over the past three years. To strengthen further the track record before discussing a possible IMF-supported program, a staff-monitored program has been established for the period September–December 2003. The authorities emphasized their determination to confront the challenges facing the country by pursuing policies aimed at diversifying the economy, sustaining growth, and reducing poverty while containing financial imbalances.

Abstract

The continued decline in oil production and the absence of sustained adjustment policies have contributed to Gabon's uneven economic performance over the past three years. To strengthen further the track record before discussing a possible IMF-supported program, a staff-monitored program has been established for the period September–December 2003. The authorities emphasized their determination to confront the challenges facing the country by pursuing policies aimed at diversifying the economy, sustaining growth, and reducing poverty while containing financial imbalances.

1. This supplement reports on budgetary data through end-September 2003 received since the issuance of the staff report. End-September represents the first test date under the staff-monitored program (SMP).

2. Preliminary data on budgetary execution through September indicate that performance with respect to the overall balance was satisfactory. Oil revenues exceeded program projections by 1.6 percent of GDP because of higher-than-expected production and oil prices. As specified under the program these revenues were not used for higher spending, and the benchmark on the primary fiscal balance (adjusted for oil revenues) was met (Table 1 and 2).

Table 1.

Gabon: Quantitative Benchmarks and Indicative Targets Under the Staff-Monitored Program, 2002–03

(In billions of CFA francs; cumulative flows from January 1) 1/

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Sources: Gabonese authorities; and staff estimates and projections.

Targets for March and June 2003 are prior actions. Targets for September and December 2003 are benchmarks under the SMP.

The benchmarks will be adjusted upward/downward for any lower/higher oil revenues, lower/larger nonproject external financing disbursement net of external debt service paid, larger/smaller net reductions in domestic arrears, and smaller/larger privatization proceeds, as defined in paragraphs 17 and 18 of the TMU, relative to program targets.

This benchmark applies not only to debt as defined in point No. 9 of the Guidelines an Performance Criteria with Respect to Foreign Debt, adopted by the IMF Executive Board on August 24, 2000, but also to commitments contracted or guaranteed for which value has not been received. Excluded from this benchmark are rescheduling arrangements and purchases from the Fund. For purposes of this benchmark, the term “nonconcessional” means that the debt has a grant element of less than 35 percent calculated on the basis of currency-specific discount rates that are based on the OECD commercial interest reference rates (CIRRs).

Excluded from this benchmark are rescheduling arrangements, purchases from the Fund, and normal import-related credits.

The nonaccumulation of new external payments arrears will constitute a continuous benchmark.

The benchmark on the primary fiscal balance will be adjusted upward/downward for any higher/lower-than-programmed oil revenue (see paragraph 17 of the TMU).

These amounts represent the estimate of obligations falling due in 2003 that are reschedulable.

Table 2.

Gabon: Fiscal Operations of the Central Government, 2001–04

(In billions of CFA francs, unless otherwise indicated)

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Sources: Gabonese authorities; and staff estimates and projections

During 2003, the government pays end-2002 non-reschedulable arrears (CFAF 82 billion) and accumulates arrears on reschedulable current maturities (CFAF 156 billion). The stock of reschcdulable arrears at end-20O3 is projected at CFAF 340 billion. This stock, together with the reschedule current maturities in 2004 (CFAF 158 billion), is projected to be rescheduled in 2004.

The 2002 budget column includes CFAF 16.5 billion for telephone bills relating to 2001, which the authorities had classified under domestic debt repayment in the draft budget.

For 2001: equity participation in Compagnie Mintere de I’Oguoué (COMTLOG) (CFAF 4.1 billion), advance to OPT (CFAF 6.6 billion), the payment of Air Gallon’s debt (CFAF 14.2 billion), and down payments for the purchase of airplanes for Air Gabon (CFAF 13 billion). For 2002: assistance to Air Gabon; and repayment of the CFAP 6.6 billion advance to Gabon Telecom (for die acquisition of a marine cable).

“Other float at the treasury” includes mainly variations in consignments and operations with autonomous bodies.

Including old debt repayments to Sociéte d’Eau et d’Encrgie de Gabon (SEEG), National Social Security Fund (CNSS), and Office des Postes et Telecommunication (OPT), as well as debt service on new debt agreements with Gabon Telecom, Gahon Poste, Air Gallon’s suppliers, and CNSS.

Restructuring costs refer to social casts of privatization and voluntary departures. During 2002, the government also took over suppliers’ credit to Air Gabon and debt owed by public enterprises to CNSS, for CFAF 31 billion and CFAF 36 billion, respectively.

Local authorities consist of variations in local entities’ account balances with the Treasury.

3. However, the composition of expenditures and revenues was not in line with the program. The indicative benchmarks on non-oil revenue and the wage bill were both missed, and the fiscal balance was only preserved because of much lower than projected capital expenditure. At a more detailed level, customs revenue picked up significantly in the third quarter, but still remained below original projections. Indirect tax collections continued to be slightly above target, but company profit tax collections was somewhat weak, partly due to large provisioning by the biggest commercial bank. Overall, non-oil revenue fell short of program projections by CFAF 18 billion (0.5 percent of GDP). On the expenditure side, the wage bill continued to run somewhat above target, as in the first half of the year, reflecting the regularization of advancements following the 2001 civil service census; the measures to curtail the number of senior advisors taken in August have not yet had a financial impact. With other current expenditures on target, total current primary expenditures exceeded the target by CFAF 8 billion (0.3 percent of GDP). Capital expenditures continued to remain well below target (by CFAF 28 billion, or 0.8 percent of GDP), with very low execution of foreign-financed projects. Debt service on non-reschedulable arrears was serviced on a timely manner, but some small payments were not made, pending clarifications of certain obligations with bilateral creditors.

4. The adjusted end-September target on bank financing to the government was missed by a substantial margin (1.9 percent of GDP). The failure to meet this benchmark mainly reflected the above mentioned overrun on the wage bill and lower than projected non-oil revenue.1 In addition, various quasi-government agencies drew down their accounts at the Treasury, forcing the government to rely more on domestic bank financing than projected. While part of this slippage could be reversed by end-year, a deterioration of the government position toward the banking system runs counter to the authorities’ medium-term objective of sharply reducing its indebtedness toward the central bank.

5. While the end-September data do not alter the thrust of the staff appraisal, they underscore the risks and concerns previously expressed, and the need to further strengthen the program before requesting Fund resources. In particular, the authorities will need to redouble their effort to keep the wage bill under control, and boost non-oil revenue to ensure that the planned fiscal adjustment is achieved in a manner compatible with ensuring growth and poverty reduction. Actions to address the slippages observed under the SMP, as well as measures to strengthen structural reform, will be necessary for staff to support any future request for Fund resources.

1

In contrast the benchmark on the fiscal balance, this was not offset by the lower than projected investment expenditure as the latter was associated with lower foreign financing.

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Cover IMF Staff Country Reports
Gabon: Staff Report for the 2003 Article IV Consultation and Staff-Monitored Program—Staff Report
Author: International Monetary Fund
Volume/Issue:
Volume 2004: Issue 028
Publisher:
International Monetary Fund
ISBN:
9781451813890
ISSN:
1934-7685
Pages:
111
DOI:
https://doi.org/10.5089/9781451813890.002