The Executive Board of the International Monetary Fund (IMF) today completed the second review of Gabon’s economic performance under a 14-month Stand-By Arrangement to support the country’s economic program. The completion of the review enables the release of a further SDR 13.9 million (about US$21.4 million), which will bring the total amount drawn under the arrangement to SDR 41.7 million (about US$64.1 million).
In completing the review, the Executive Board also waived the non-observance of the performance criterion on reforming the role of the timber marketing board.
Following the Executive Board’s discussion on Gabon’s economic performance, Ms. Anne Krueger, First Deputy Managing Director and Acting Chair, stated:
“Gabon’s implementation of the program supported by the Stand-By Arrangement continues to be satisfactory, reflecting increased program ownership and the authorities’ commitment to reform. The pick-up in non-oil activity in the second half of 2004 is expected to continue in 2005. However, real GDP growth over the medium term is expected to stay below the population growth rate, and social indicators remain weak. This underscores the need to pursue vigorously reforms to raise economic growth and achieve the Millennium Development Goals.
“Gabon’s external current account surplus and international reserve position have strengthened, and the debt-to-GDP ratio has declined. However, this performance is highly dependent on favorable but volatile oil prices. It is therefore reassuring that the government is committed to pursuing fiscal consolidation and deepening structural reforms. These policies are essential to place the public debt on a sustainable path, free resources for the development of the non-oil sector, and tackle Gabon’s poverty problems.
“The success of the authorities’ ambitious fiscal program for 2005 will depend to a large extent on efforts to restrain current spending and improve tax administration. In particular, it is important to continue to moderate the wage bill through the introduction of a merit-based promotion system and the rationalization of the statute of contractual workers, and to strengthen the finances of local authorities and the social security system.
“The authorities have decided to use the oil revenue windfall during 2004 and 2005 to repay domestic and external debt and to accumulate deposits in the Fund for Future Generations. They have indicated that part of this windfall could in due course be used to finance higher priority outlays in key social sectors. It is essential that this be done in the context of a well-focused medium-term expenditure framework and in line with the priorities of the Poverty Reduction Strategy Paper, which is expected to be completed in mid-2005.
“Efforts are underway to improve the transparency and efficiency of budget management. These include stricter monitoring of the execution of priority investment projects, the conduct of public expenditure reviews, the audit of payments arrears of the Road Maintenance Fund and of regional investments, and the preparation of the information required under the Extractive Industry Transparency Initiative (EITI).
“It is also crucial that the authorities carry out in a timely manner their structural reform agenda, designed to stimulate non-oil economic growth, promote the diversification of the economy, and reduce poverty. The key reforms underway include privatizing Gabon Télécom, restructuring and privatizing Air Gabon, improving the investment climate and governance, and revamping the management of the forestry sector,” Ms. Krueger said.
A Stand-By Arrangement is a decision of the IMF by which a member is assured that it will be able to make purchases (drawings) from the General Resources Account up to a specified amount and during a specified period of time, normally between 12 and 18 months, provided that the member observes the terms of the arrangement.