Democratic Republic of São Tomé and Príncipe
Poverty Reduction Strategy Paper

This paper focuses on the Poverty Reduction Strategy Paper (PRSP) for the Democratic Republic of São Tomé and Príncipe. The National Poverty Reduction Strategy Paper represents the result of analyses of the country’s current situation as well as a set of proposals designed to rout the causes of poverty in São Tomé and Príncipe in the medium to long term, based on creating the conditions that make development viable and promote the welfare of the population. This paper is prepared in response to a perception of the problems facing the country in different areas.


This paper focuses on the Poverty Reduction Strategy Paper (PRSP) for the Democratic Republic of São Tomé and Príncipe. The National Poverty Reduction Strategy Paper represents the result of analyses of the country’s current situation as well as a set of proposals designed to rout the causes of poverty in São Tomé and Príncipe in the medium to long term, based on creating the conditions that make development viable and promote the welfare of the population. This paper is prepared in response to a perception of the problems facing the country in different areas.


1.1. Centralized economy period

11. After winning national independence on July 12, 1975, São Tomé and Príncipe kept the colonial productive structure inherited from the Portuguese with almost no alterations until 1987. The economy was based on a cocoa monoculture, which came to be run by state farms after the Roças nationalizations of September 30, 1975. The state became the principal producer, with a concentration of over 90 percent of the country’s agricultural land. Similarly, health and all other sectors, both social and economic, were centralized under the government of São Tomé.

12. From the early 1908s, the decapitalization of state farms and the extremely low living standards of agricultural workers in all social spheres (housing with no decent amenities for cohabitation, hence overcrowding, no basic sanitation, no sanitation services to state farm outbuildings), combined with low wages, led to an irreversible rural exodus.

13. Wage earners (whole families in some cases) abandoned the state farms in numbers that would accelerate the process of disorganized urbanization of the second half of the 1980s and the beginning of the 1990s. The result was a compounding of rural poverty with urban and suburban poverty.

1.2. Economic liberalization

14. The liberalization of the economy started in 1985. In 1987, the first structural adjustment program was officially launched with financing from the World Bank in the amount of US$17 million. A similar agreement was reached with the IMF (June 1989) for a loan of SDR 2.8 million.

15. Agriculture was one of the first sectors of the economy to benefit from WB credit. All in all, the results fell far short of the objectives targeted. An ambitious program to privatize agricultural and non-agricultural public enterprises was introduced, leading to the partial or total liquidation or privatization of the vast majority of public enterprises. Between 1988 and 1997, real GDP growth was positive but remained below population growth, thus the process of real impoverishment continued, though the GDP growth rate finally caught up with population growth in 1998.

16. Despite positive trends in some macroeconomic indicators, the country’s external debt situation more or less deprived it of any external negotiating capacity. In 1992–1999, the debt increased at a fast rate, moving from US$172 to US$294 million, of which US$168.1 million was multilateral debt and US$125.9 million was bilateral debt, as shown in the table below:

Table 1.

Development of São Tomé

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Source: First National Seminar on External Debt Analysis and Strategy (October 19–31, 2000)

17. In 2000, the economic situation of São Tomé and Príncipe continued to be very difficult. There was a huge fiscal deficit, the burden of the external debt and its service became increasingly heavy, export revenue declined owing to a fall in prices on the international market. The primary balance ratios of the state budget shrank progressively from 1996 to 2000 and continue to be negative, making it difficult for the government to take any meaningful action in the social area and on behalf of the poor using its own resources. Interest on the debt also trended upward, thereby aggravating the government’s financial situation.

18. However, the government’s efforts produced encouraging results in some important indicators: i) the inflation rate dropped sharply to 9.6 percent (from 80.5 percent in 1997); ii) the exchange rate to the dollar (US$) stabilized (with a parallel market differential of less than 5 percent). Based on the results obtained in terms of economic and financial rehabilitation, the country was able to secure the conditions for negotiating the issue of the external debt and debt sustainability with its bilateral and multilateral partners and reached the decision point of the HIPC Initiative in December 2000.

19. Thus, from 2001, the country has been benefiting from the financial resources released from payment of the debt, which have been used to finance projects and actions in the social sector (health and education) and in infrastructure. It should be noted that, besides the rural sector, these are the sectors hardest hit by poverty in São Tomé and Príncipe.

1.3. General characteristics of poverty

20. The first attempts to measure poverty in the country date back to the late 1980s and the first half of the 1990s. Indeed, the “Report on the Poverty Line” (1987–1990) funded by UNDP and published in January 1991 and the “Poverty Line in São Tomé and Príncipe” (1991–1994) published in March 1995 provided the first elements of poverty analysis. Both studies used the cost of basic needs (CBN) method. A number of estimates were made in the absence of more reliable data, which compromised the reliability and compatibility of the statistics with later studies. Nevertheless, the worsening of the situation is noticeable in the external manifestations of poverty (“street children” phenomenon, abandonment of minors, decline in the gross enrolment rate at the basic education level, etc.).

21. The survey of household living conditions, which was the basis for defining the “Profile of Poverty in São Tomé and Príncipe” (November 2000 to February 2001) used the average returns (AR) method, and determined that the poverty line in São Tomé and Príncipe was Dbs. 2,.638,618 per year (around US$294/year). This amount covers the barest minimum—daily meals and some nonfood expenses (clothing, housing, fuel for preparing meals).

22. Thus, the income available for other basic expenditure, especially education and health of the household, are practically nonexistent.

23. In the case of housing, three important factors must be stressed (a): -i) the fact that the share of the poor’s resources allocated to this basic need diminished during the period 1991–1994 from 6.3 percent to 2.7 percent; -ii) property ownership arrangements-the poor are merely tenants, with very tenuous property relationships, as the parties normally have an honor commitment with nothing in writing, much less a contract, making it possible for landlords to demand that tenants vacate the property within three weeks; and, -iii) there are no recent comparison factors, as a result of which developments in the situation of the poor with regard to housing over the last seven years are unknown.

1.3.1. Developments in monetary poverty and living conditions

24. The “Report on the Poverty Line” (1987–1990), funded by UNDP and published in January 1991, reported that the situation in the health services had worsened considerably due to the lack of resources needed to import medicine and materials, and to improve the existing infrastructure. Diseases such as malaria and cholera, which had practically disappeared, re-emerged with a vengeance and became endemic, culminating in the cholera epidemic of 1989. Infant mortality had risen. Poverty began to be visible, affecting 41 percent of the total population in 1990, up from 36 percent in 1987.

25. A second study financed by the same institution (UNDP) “The Poverty Line in São Tomé and Príncipe” (1991–1994), published in March 1995, confirmed the trend. In fact, the index rose to 48 percent in 1992.

26. This report identified the socioeconomic groups most vulnerable to poverty, namely:

  1. agricultural workers;

  2. low-level civil servants;

  3. fishermen and vendors;

  4. female heads of household; and

  5. senior citizens living alone (over 60 years old).

27. More recently, the study on the “Profile of Poverty in São Tomé and Príncipe” (November 2000-February 2001), conducted with the technical support of the ILO and funding from UNDP and AfDB, published in May 2001, confirmed the rural exodus and the resulting accelerated urbanization. Thus, the urban population, estimated at 44 percent of the total population in 1992, rose to 54.5 percent in 2001, according to the third RGPH. Close to 1/3 of Sãotomean families are headed by women. Families with 4–7 members make up 57 percent of the total population while bigger families (with 8 or more members) total 26.7 percent.

28. According to the same study, 53.8 percent of the total population in the country lives in poverty, more so households headed by women (55.7 percent) than those headed by men (53 percent). 15.1 percent of São Tomé’s population lives in extreme poverty. The average size of a household is inversely proportional to its income; thus the average household with 6.43 persons is extremely poor, while families with 3.78 members are considered not poor.

29. Regarding the poverty of basic living conditions (access to education, health, drinking water, environmental sanitation, and housing), the study concluded that 11.8 percent of the population had never been to school. It was also found that illiteracy increases with the degree of poverty; 9.6 percent of the nonpoor population is illiterate in comparison with 12.9 percent of poor people and 15.9 percent of the extremely poor. In the area of health, the study observed that health care increases with income levels. Thus, 23.2 percent of nonpoor sick people visited a doctor in a private clinic, as opposed to just 8.7 percent of poor sick people, and only 2 percent of the extremely poor. There situation of pipe-borne water nationwide is disastrous; only 19.6 percent of the total population has access to pipe-borne water. 9.2 percent of extremely poor households have pipe-borne water in comparison with 13 percent of poor households, and 25.5 percent of nonpoor households. Environmental sanitation is also in a lamentable state. A mere 16 percent of households in São Tomé have septic tanks connected to a public sewer system. 69 percent of the people relieve themselves in the open air.

30. Combining the results of the last two surveys of household living conditions yields the following results:

Table 2.

Structure of Poverty Line Expenditure in São Tomé and Príncipe

(in percent)

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Sources: Data for 1991–1994 taken from “The Poverty Line in São Tomé and Principe (1991–1994)” data for 2000/2001 taken from “Profile of Poverty in São Tomé and Principe” (November 2000 to February 2001) AfDB, May 2001.

1.3.2. Geographic inequalities

31. The study “Profile of Poverty in São Tomé and Príncipe” (November 2000-February 2001) found that almost 2/3 of the total population (more precisely, 64 percent) live in the central region (Água Grande and Mé Zochi districts) of the country. Similarly, it found great disparities in the distribution of average per capita consumption expenditure with 1/3 (precisely 32 percent) less in rural areas than in urban areas.

32. The focal points of poverty are primarily the northern region (Lemba and Lobata districts)-70.6 percent of the population in the region, followed by the southern region (Cantagalo and Caué districts)—65.1 percent of the population of the region, then the autonomous region of Príncipe—(60 percent of the regional population), and next the central region, with 46.4 percent of the population.

1.3.3. Social and gender inequality

33. The unequal distribution of average per capita consumption between town and country is also observed in relation to gender. This consumption is 11 percent lower for households headed by women.

34. Average per capita consumption is 42 percent higher for the self-employed socio-professional category (craftspeople, businesspeople, proprietors of small non-farming businesses, etc.) than for the poorest people (farmers—crops and livestock—and fishermen). Consumption declines increasingly as one moves further away from the capital.

35. Similarly, average per capita consumption is inversely proportional to household size; it is 2.3 times higher for single-person households than for households of 10 or more.

1.4. Determinants of poverty

1.4.1. Economic determinants

36. Internally, the economy is facing the following problems: low production and productivity; persistently high inflation; inability to generate employment; persistently unstable value of the domestic currency; inability to systematically guarantee the mechanisms for financial stability; inadequate socioeconomic infrastructure; rural exodus; unequal access to national resources.

37. Externally, the regional integration policy has been unsuccessful, there is a great dependence on external aid, and the burden of previously contracted debt is heavy.

38. The macroeconomic indicators(*) reveal how fragile the São Tomé economy has been during the last decade. In the 1996–1999 period, per capita GDP declined sharply and an unfortunate trend in inflation rates was observed as they rose to 80.5 percent in 1997. From this date, as a consequence of the austerity measures to stabilize the economy, inflation dropped to 9.6 percent in 2000. Previously, governments had already implemented austerity measures to ensure financial stability, thereby initiating some improvement in the situation. Subsequently, as these measures were abandoned, the situation began to deteriorate.

39. In the rural areas, the poverty situation is conditional upon two key sets of factors: structural factors and cyclical factors.

40. The structural factors are:

  • - relief of the majority of workable agricultural land, which limits the crops that can be grown as well as the possibilities of mechanization;

  • - increasing difficulty and cost of retaining farm hands;

  • - poor infrastructure;

  • - small size of the domestic market, combined with the obvious scarcity of financial resources and skilled human resources;

  • - high costs resulting from the isolation of a small insular country;

  • - inapt legal framework for the sector (inappropriate forestry and land laws).

41. The cyclical factors are:

  • - an economic policy that discourages agricultural production and facilitates competition with local output;

  • - no specific policies that offer protection or incentives;

  • - inefficient management and use of financial resources;

  • - no coherent policy on credit and incentives to the sector;

  • - skewed productive structure, with foreign exchange earnings coming from a single export product—cocoa;

42. Nowadays, there is heavy population pressure on the land and, as a result, a large number of households received less than 1.5 hectares, with some beneficiaries being assigned no more than 0.5 hectares, when the average lot size stipulated for each farmer is 2.1 hectares. This practice has become widespread, in contradiction with the criteria originally established in the PPADPP and laid down in the law stipulating the share of land to be allocated to small farms and medium-sized enterprises.

43. Initially, in 1993–1995, there was a moderate increase in cocoa production with the distribution of farmland, owing to more efficient harvesting. Subsequently however, as a result of the combined effect of the failure to use phytopharmaceuticals to combat mildew (phytophotora palmivora) and other pests and diseases (only 22 percent of farmers use pesticides) and the forceful resurgence of cocoa thrips (rubrocinctus) starting in 1998, caused by the indiscriminate felling of trees, there was a marked decline in cocoa production.

44. Cocoa, which used to be the main income earner for households (73 percent in 1999 as opposed to 66 percent in 2000) and which was selling on the international market at prices higher than US$2000/ton c.i.f., experienced a 50-percent price cut in a declining trend that started in 1998. Thus, the cocoa paste produced by farmers plunged to Dbs. 1000.00/kg from the Dbs. 2,300.00 price at which it had been sold, causing a drastic income losses.

45. In respect of food crops, despite efforts made by farmers to diversify their production to obtain new and additional income (banana, taro, millet, cassava, fresh horticultural products), they did not receive proper compensation given the distribution and marketing constraints.

46. In the area of environmental protection, the fact that certain legislative (regulatory) measures were not taken in a timely manner resulted in critical problems for the sector, namely:

  • a. In the use of forestry resources:

    • - i) over-exploitation of shade forest species with high commercial value; ii) encroachment on forested areas to produce coal; iii) degradation of the system of shading cocoa crops, causing a violent attack of cocoa thrips in 1998; iv) escalation in the number of loggers using chain saws and causing massive waste in processing the wood (65–70 percent);

  • b. In the environment:

    • - i) deforestation of mountain slopes to plant food crops, thereby increasing the incidence of erosion; ii) improper land use without taking into account the land’s production potential; iii) loss of biodiversity.

47. The rich and varied biodiversity of flora and fauna is under threat. The wildlife is becoming less diverse and the dense forest is thinning out because its use has not been properly thought out or controlled, and this has led to its impoverishment.

48. As regards livestock rearing, despite major efforts targeting the sector—the significant local genetic potential, good natural pastureland, and the introduction of better grasses and animal feed for the different species—, the sector has not significantly improved, not only in terms of farmers’ yields, but also in terms of daily diet. The vast majority of households in farming communities (86 percent) eat meat less than once a week.

49. In fishing, fishermen did not fare well. The coordination and organization of interventions in the field under the various infrastructure programs and projects did not work out as was expected.

50. The emergence of an agricultural class with little or no capital raised doubts about how these new agrarian structures could be financed to enhance the value of the land distributed and intensify the process.

51. From 1997 onward, access to credit through decentralized rural funds was limited to short-term financing, without taking into account the objective needs of the farms and the respective recipients.

52. The difficult living conditions in rural areas had a negative impact on women, particularly those receiving plots of land.

1.4.2. Socially

53. In recent years, education and training have received considerable amounts of funding from both international cooperation partners and from domestic sources. During the period 1990–1995, external assistance represented 12.5 percent of the resources for education and 14.5 percent for training.

54. In the 2000–2001 school year, 22,270 students were enrolled in primary school—11,577 boys and 10,689 girls.

55. The percentages reflecting the distribution of the school population by district in the country are high for the districts of Água Grande and Mé Zóchi (39 percent and 40 percent in 2000–2001), but are still at the 7- and 4-percent levels for Lembá and the autonomous region of Príncipe, respectively.

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Source: Preliminary Study of the School Map, 2000

56. The existence of secondary schools in all the districts of the country does not mean that they are easily accessible to the entire school-age population at that level of education. Geographic dispersal, poor accessibility, the scarcity and high cost of transportation, are factors that determine access to education.

57. All school facilities are overcrowded, and the state has been unable to ensure that buildings are repaired and that more are constructed to meet the growing demand.

58. Teachers at almost all levels of education have a relatively low level of academic qualifications overall, and have practically no teacher training.

59. Virtually nonexistent public transportation and the sometimes considerable distances that children have to travel are conditions that affect their attendance at classes and are at the root of the high proportion of school dropouts.

60. In the area of health, the main problems arise in prevention of such diseases as malaria, acute respiratory ailments, and dysentery, which are the main causes of mortality and morbidity in the population.

61. Malnutrition is also one of the primary causes of death among children under 5 years old, estimated at around 15 percent.

62. Nutritional anemias—iron deficiency—resulting in low hemoglobin levels have been detected in more than 60 percent of the population surveyed. The index of premature births (low birth weight) stands at 15.2 (MICS/2000).

63. Furthermore, the supply of drugs in São Tomé and Príncipe is flawed and unstable. The drug supply system is affected by a number of deficiencies within the health system.

64. Up until 1960, 60.9 percent of the population of São Tomé was in the 15–59 age group. This trend was reversed in 1970, with the result that 46.9 percent of the population was in the 0–14 age group in 1991 and 42.1 percent in 2001.

65. This proportion of youth in the population added to the over-65 population (4.4 percent in 1991 and 4.3 percent in 2001) led to a high dependency rate (51.3 percent in 1991). A young population also implies greater demand for infrastructure and social services and heavy pressure on the labor market.

66. The urbanization process is observable mostly in the Água Grande district, followed by Mé-Zóchi. The Água Grande population grew from 15 percent of the total population in 1960 to 36.5 percent in 1991 and 37.7 percent in 2001. According to the last census, the populations of Água Grande and Mé-Zóchi combined represent 63.2 percent of the total population.

1.4.3. Politically and Institutionally

67. Throughout the last 12 years, there have been repeated institutional conflicts and long periods of political instability. The country had been through nine different governments by October 2002.

68. As a consequence of successive crises and the inability to make decisions, the state has lost its authority and public order is not well maintained.

Ill-adapted democratic institutions and weak decision-making power

69. The current number of deputies in the National Assembly is not consistent with the need for a more efficient state apparatus, based on a realistic view of the country, the size of the territory, its population, and current economic and financial capacity.

70. The changing governments, all with different compositions, are followed by appointments, dismissals, and reassignments of technical staff in the ministries. Partisan political motives, cronyism, nepotism, favoritism, and family ties take precedence over criteria of competency and seniority.

71. The courts face a lack of qualified professionals, reduced budgetary resources, insufficient or inappropriate physical resources and equipment to perform their functions. Although the law on the creation of the Audit Court has been passed, the court is still not functional.

Poor management of public assets

72. In the General State Budget, expenditure is not always programmed based on specific objectives defined in accordance with priorities. There is no rigor in the commitment of current expenditure. There is no guarantee of transparency in the procurement of goods and services and the award of contracts for public sector agency or institution projects. Local government institutions receive aid from their counterparts under partnership or twinning arrangements, over which there is no control.

Inadequate decentralization system

73. Now, a decade after the start of the decentralization process, local political and administrative structures have not been able to provide effective support to the population in solving its problems of law and order, housing, and employment.

74. By law, local and regional elections take place every three years. However, after the local elections of 1992 and the regional elections of 1995, no other local government elections were held.

75. It has been realized that the way the country was divided is not realistic for an area 1001 km2, with less than 140,000 inhabitants and limited available resources.

Limited public administration capacity

76. Public administration is characterized by inefficient service, weak decision-making capacity on the part of managers, no criteria on relationships and on accountability in the organizational structure of the units, insufficient skilled professionals, low wages, nonobservance of working hours, frequent absenteeism, lack of ethics in service to the public.

77. Since 1997 a new civil service statute was adopted (Law 5/97). However, there are still periodic changes in the structure of units as their managers are transferred, and the criteria for personnel training are unclear. The statute itself is considered to be poorly thought out and needs to be reviewed.

Little participation by civil society

78. Economic initiative groups and associations to lobby for or manage infrastructure and public services have been created. Although some participatory efforts in cultural, social, political and economic life are remarkably dynamic, civil society continues to be poorly organized and not very active.

79. A telephone network covers virtually all inhabited areas but poor people still have limited access to it. The use of Internet services is restricted mostly to senior public administration officials, the private sector, and a very small percentage of the urban population mostly resident in the capital, though the number of users increases annually.

80. Radio continues to be the best means of communication. About half of all households have radios. The reviews are more mixed for the written press. As a significant portion of the population is illiterate, one media challenge in the poverty reduction strategy is to tailor information and radio and television programs to the specific target groups.


2.1. Strategic vision in the short, medium, and long terms

81. Taking into account the main determinants of poverty and based on an optimistic scenario derived from national long-term perspective studies, the strategy seeks to significantly reduce poverty by the horizon of 2015, through optimal use of the country’s human, natural, and physical resource potential, as well as bilateral and multilateral cooperation.

2.2. Overall medium-and long-term objectives

82. By implementing the actions established in each of its pillars, the strategy should achieve the following overall medium- and long-term objectives:

  • - Reduce the percentage of the São Tomé population (53.8 percent) living in poverty to half by 2010 and to less than 1/3 by 2015;

  • - Provide access to basic social services for the entire population by 2015 and promote improvement in the quality of life;

  • - Considerably reduce the social and gender gaps between the districts in São Tomé and between these and the autonomous region of Príncipe.

5. The actions under the different pillars of the strategy are responsive to the targets set in pursuit of the Millennium Development Goals (MDGs), provided that the government is committed to the process of reaching these targets.

2.3. Basic pillars of the strategy

83. Besides recognizing that economic growth is key to poverty reduction, given the effect it has of creating employment and income that can be invested in sectors which directly or indirectly help improve the living conditions of the poor, the promotion of a policy of good governance was selected as an absolute priority.

84. This strategic option seeks to respond to the need to consolidate the democratic rule of law and defend human rights, customize and build the capacity of institutions and public administration agencies, strengthen mechanisms for accountability and reporting, and promote a culture of participation by citizens in making decisions to solve their problems.

85. This choice of priorities seeks to ensure that the conditions are present for a viable commitment to the poverty reduction strategy and to making any adjustments required as the socioeconomic situation and levels of poverty in the country change.

6. Thus, a poverty reduction strategy in São Tomé and Príncipe revolves around the following five basic pillars:

  • - Reforming public institutions, capacity building and promotion of a policy of good governance

  • - Accelerated and redistributive growth

  • - Creating opportunities to increase and diversify income

  • - Developing human resources and access to basic social services

  • - Mechanisms for monitoring, assessing, and updating the strategy

2.3.1. Public institution reform, capacity building, and promotion of a policy of good governance

86. In light of the current situation, the pillar of the strategy that refers to promoting good governance to reduce poverty over the medium and long terms (by 2015), revolves around the need to:

  • - maintain political stability;

  • - consolidate democratic institutions;

  • - strengthen transparency and accountability in the management of public assets;

  • - amend policies on decentralization and reorganization of regional and local governments;

  • - promote active involvement of the private sector and civil society in the design and execution of measures that benefit poor populations;

  • - highlight the role of communications and information in the process of poverty reduction.

2.3.2. Accelerated and redistributive growth

87. Agricultural development is and should continue to be an essential component of growth, diversifying production, marketing, employment, and stemming the tide of rural exodus.

88. The recovery of the productive sectors is based on the following three poles: development of the primary sector as a factor in increasing national production, creating employment, and diversifying the secondary sector; enhancing the development of tourism and fishing in the archipelago; promoting new sectors of export-oriented growth.

2.3.3. Creating opportunities for increasing and diversifying income

89. In the next 15–20 years, the fundamental objective of all government action in this regard should be, first of all, to establish a stable economic and institutional environment by defining policies that are properly framed and designed to build and develop rural and urban areas, and which revolve around:

  • - production growth and diversification;

  • - guaranteed food security;

  • - improved socioeconomic conditions for people in rural, urban, and peripheral areas (small villages and localities);

  • - natural resource conservation;

  • - promotion of women and youth;

  • - development of export capacity.

2.3.4. Developing human resources and improving access to basic social services

Education, Literacy, Training

90. The strategy targets the following overall objectives for education, literacy, and training:

  • - eradicate illiteracy;

  • - make school enrolment mandatory for 6 years;

  • - provide equal opportunity for entering and completing secondary school;

  • - train human resources to meet the country’s development needs.

91. Some guiding principles for implementation of the reforms to achieve these objectives, taking into account the need to reduce poverty:

  • address the problems in order of priority;

  • base decision-making on reliable data and information;

  • view capacity building as one of the stakes (training, modernizing services, improving management);

  • promote the principle of responsible solidarity.


92. The strategic vision of the health situation involves a qualitative improvement in the state of health of populations and their well-being. To that end, it is based on the National Health Policy (PNS), which recognizes that health care is a social good and therefore a factor of development, social justice, and poverty reduction.

93. The national health system will have to guarantee the health of the population of São Tomé by formulating and implementing policies that seek to reduce the risk of disease and other ailments, establishing the conditions for universal and equal access to interventions and services that promote, protect, restore, and maintain health, mindful of the determinants and prerequisites for such well-being.

2.3.5. Creation of mechanisms for monitoring, assessing, and updating the strategy

94. Based on past experience with laudable but costly initiatives which fell by the wayside, namely the National Long-Term Perspective Study, there is a risk that ad hoc initiatives will take precedence over requirements for consistency in monitoring, assessing, and constant updating, which the national poverty reduction strategy requires. This legitimate concern justifies the inclusion of mechanisms for monitoring, evaluation, and updating of the strategy as another strategic option.

2.4. Risks of the strategy

95. First, it requires political stability and the normal functioning of institutions, which are also intrinsic components of the strategy itself. It is important that, in the short term, the causes of the institutional conflicts that occurred in the past be removed.

96. Secondly, to attain the objectives of this strategy, there must be involvement and commitment on the part of all the organs of sovereignty, as well as the principal agents of development, both public and private, to creating the momentum for implementation of the various stages of the strategy, in a participatory, coherent, and organized framework, without losing sight of the need for systematic control, which is difficult to achieve in situations where confidence in and among members of the executive branch has been eroded.

97. The participation/commitment of bilateral and multilateral partners is also of paramount importance, as they must make available the necessary resources and other support for funding and implementation at each stage.

98. And, finally, in view of the fact that initiatives in the area of oil are ongoing, there is the risk of conflict with certain actions taken under the new guidelines for governance, which are incompatible with the strategic vision advocated for poverty reduction within the established time frame.

99. These risks may still be overcome, as long as the political will for implementation remains firm, and provided that efforts at consensus building among various social agents are revived in order to reach a consensus on priority actions in each successive stage.


3.1. Consolidation of the democratic rule of law

100. Prerequisites of consolidation of the democratic rule of law are:

  • - Broad consensus on constitutional review, in order to clarify ambiguous provisions, namely those concerning the separation of powers and functions of each organ of sovereignty, and to remove potential sources of conflict among institutions;

  • - Restoration of the authority of the government by building capacity for law enforcement and maintenance of public order in a democratic society, and through initiatives to inform the public and raise awareness about standards of civic and moral conduct;

  • - Reorganization of the National Assembly based on acceptance by consensus of the need for it to be commensurate with the size of the country and to guarantee effective representation in accordance with the most realistic political/administrative divisions. In that connection, serious thought needs to be given to defining the job profile of a deputy, in order to guarantee more balanced representation of the various constituencies or electoral districts.

  • - A respectable and proportionally representative number of women should be encouraged and become the norm. Furthermore, this position should be strengthened with training initiatives to ensure that parliamentarians are qualified in the different areas that require their intervention within the framework of the National Assembly’s specific missions, including those of its various commissions.

  • - Design and establishment by law of the composition of government, basing the demands of central government on economic, social, and cultural realities and on the human and financial resources available for its effective operation. With this in mind, the key ministries that must be part of the composition of any government should be determined.

  • - Strengthening of the judicial system and structures, with a view to promoting their effectiveness, closer contact with vulnerable and unprotected citizens, and public confidence in the independence of the judiciary. For this purpose, it is imperative that the justice system be treated with the dignity it deserves, as well as its magistrates, administrative, or technical personnel. Administration of justice in the context of strategic poverty reduction should not only give precedence to the protection of basic human rights and guarantee safety, but it should also help promote the equality of citizens before the law, combat gender discrimination, violence against women, and corruption.

101. This brings to mind the military and paramilitary forces in particular. The problems they pose in the context of a small, insular country should be given special attention and should be the subject of an exchange of views among the diverse actors in the country’s political, social, and economic life.

102. This exercise in reflection should lead to the adoption of a country-specific strategy of national defense, which is compatible with poverty reduction efforts and facilitates the offering by consensus of a package of services that would effectively guarantee the sovereign rights of the nation of São Tomé.

3.2. Promotion of responsible, effective, and transparent management of public assets

103. Public asset management is one of the areas where results could determine whether intervention is targeted to the poorer or more vulnerable social groups.

104. But inefficient management of public assets and deficiencies in the functioning of the courts are usually cited among the problems facing the country.

105. Thus, for good economic governance consistent with the goals of poverty reduction, a national poverty reduction strategy must include the following measures:

– “Broadcast” through the media and other means of communication, the importance and need for responsibility, transparency, and accountability in the management of public assets;

– Strengthen the mechanisms for preparation, drafting, approval, and execution of the General State Budget, taking into consideration that budgetary choices must have an impact on strategic poverty reduction actions;

– Promote accountability and periodic reporting by government revenue collection departments;

– Accelerate the establishment and operation of the Court of Audit and provide it with the human and physical resources that would enable it to function independently, particularly in the areas of combating fraud and corruption;

– Proceed to inventory all public assets and allocate them to revenue collectors, who are responsible for regular accounting.

3.3. Adjust the decentralization process and reorganize local government

106. With a view to long-term decentralization, one must not lose sight of the size of the country, the number of inhabitants, or its economic potential, which should form the basis for mapping out the new political and administrative divisions, to avoid unnecessary costs associated with the proliferation of representation structures at the local level.

107. In this area as well, problem solving seems to be more affected by political will than the obstacles encountered in the laws regulating the existing local government structures and operations. Taking the current situation into account, the strategy considers the following actions pertinent:

  • - Review and/or update legal instruments, the Constitution, and the law on political and administrative divisions, which govern the organization, structure, and functioning of the local government authorities;

  • - Urgent need to create a local government inspection unit, which is essential for the government to exercise supervision under the law. This unit would have specific functions not covered by the existing Financial Inspectorate;

  • - Create mechanisms for internal coordination within government in response to the need to work together in land and environmental development;

  • - Study and establish procedures to execute the proposed deconcentration of basic social services for constituents in the districts, and make these services more accessible to the public;

  • - Define support mechanisms at the Chambers’ request when they do not have their own resources to implement projects;

  • - Plan, prepare, and organize elections at the regional and local government levels, with a view to reinstating regular democratic processes, respecting the will of the electorate;

  • - Support the local governments so that, in conjunction with the private sector and organized civil society, they can play a fundamental role in the socioeconomic, cultural, and environmental development of the localities, taking into account the aspirations of the respective populations.

3.4. Resize and modernize public administration

108. Successive diagnostic studies of public administration in the country pointed to a number of institutional constraints, including ineffective human resource management, unsuitable or unapplied administrative processes, poor statistical information systems, and weak coordination of aid.

109. An effort to reorganize and modernize public administration should review in the short and medium terms:

  • - Adjustment to the government’s new missions as it withdraws from the productive sphere;

  • - Effective decentralization of services, to bring them closer to the public, taking into account capacity building to meet the needs of the population in reorganizing regional and local government services;

  • - Precise guidelines on the mission and functioning of each institution to avoid overlapping;

  • - Adequate staff development and training as needed for proper administration;

  • - Acquisition of adequate physical resources and capital goods;

  • - Institutionalization of mechanisms for regular reporting at every possible level;

  • - Wage levels that are more compatible with the qualifications demanded, as a means of instilling discipline and efficiency and overcoming vulnerability to corruption, and to restore the dignity of the civil service;

  • - Mandatory organization and periodic updating of statistical data on developments in the different sectors, with technical assistance and supervision from the National Statistics Institute.

3.5. Promotion of civil society and its active involvement

110. With a view to revitalizing organized civil society and fostering its involvement in promoting good governance, in partnership with the government and the private sector, the following must be taken into account:

  • - Build the technical and organizational capacity of the representatives of civil society by providing concrete support, namely in the areas of social and cultural infrastructure (cultural and recreational centers, meeting halls, libraries, etc.), credit and professional training policies;

  • - Development of a strategy for NGO intervention in response to poverty reduction strategy priorities;

  • - Promote dialogue on questions requiring consensus;

  • - Promote a public awareness and mobilization campaign that would have the advantage of enabling active involvement in all the issues concerning initiatives to improve the living conditions of the poor.

3.6. Development of mechanisms for access to information and communication and promotion of a culture of participation

111. The strategy of participation and communication regarding poverty reduction in São Tomé and Príncipe will require close coordination with information, education, and communication (IEC) campaigns. In that regard, the strategy must envisage:

  • - Promoting an interactive campaign of advocacy and IEC that is broad in scope;

  • - Increasing the access of poor communities to information so that they can participate in monitoring local activities;

  • - Improving the quantity and quality of information that reaches the public;

  • - Diversifying the media through the responsible contributions of private agencies;

  • - Improving the operation of government agencies;

  • - Normalizing the operation of the Superior Press Council;

  • - Incentives to promote a love of reading in schools and communities;

  • - Promoting the use of new information and communication technologies (NICT) in the localities (mobile telephones, Internet, etc.).

112. More so than for rest of the national anti-poverty strategy, the success of this pillar in particular is predicated on the promotion of a far-reaching and intensive literacy campaign, including education on health and cultural, moral, and ethical values throughout the country (civic education). This action, combined with an extensive information process, involving the media, will help improve the capacity for intervention by citizens and will enhance overall participation.


113. Divestment by the state, its liberalization of the productive sectors, as well as its intervention as an implementer in the infrastructure sector, creates considerable opportunities for the private sector, to the extent that the government fosters a favorable environment for private enterprise.

4.1. Stimulate private sector development

114. The main sections of the action plan that intersect with promoting the private sector are:

  1. Deepening the reform of the legal and judicial framework for business, namely by revising labor law to adapt it to the new economy, revising the investment code, and implementing a set of measures to improve the environment for the private sector, such as improving domestic transportation infrastructure; diversification and safety of the means of communication with the outside world; finding ways to reduce factor costs; consolidating the banking and insurance sector; simplifying administrative procedures; or improving investment incentives;

  2. Developing trade relations, leading to a policy of more open economic and financial cooperation, in particular with the countries of the subregion;

  3. Continued tax reform to make taxation simpler and more flexible for enterprises;

  4. Enhancing the jurisdiction of the regulatory authorities and its applicability to telecommunications; passing acts implementing the law on competition; and establishing market regulation mechanisms;

  5. The government’s commitment to a firm policy in the main priority sectors, in particular agriculture, livestock, and tourism, with a view to augmenting growth, diversifying production, diversifying and increasing job opportunities and income by means of suitable labor-intensive policies.

4.2. Savings and investment

115. All aspects of the economic and financial context, such as market size, limited infrastructure, low levels of saving, and an ill-adapted credit system have discouraged economic operators from investment projects.

116. Thus the government, in conjunction with civil society, will take action to create an environment conducive to private investment and domestic saving.

4.3. Sectoral strategies of the key traditional economic sectors and subsectors(I)

4.3.1. Agriculture

117. Given the magnitude of the problems in rural areas, the strategy seeks to increase productivity to meet the challenge of substantially reducing the underdevelopment and poverty of rural areas, based on the following:

  1. Diversify agricultural production and exports;

  2. Ensure rapid development of agricultural production on family farms;

  3. Develop sectors related to agriculture (processing, transport, canning, marketing, services, and techniques, etc.);

  4. Support agricultural extension, acquisition of inputs and farm work animals, and their use in the productive process;

  5. Establish and apply standards for the protection of natural resources;

  6. Provide basic infrastructure;

  7. Implement agricultural training.

4.3.2. Livestock

118. Development of the sector will be based on small family farms and medium-sized agricultural plants. Government intervention will have the following priorities: dissemination of techniques as a priority for farmers rearing small ruminants, poultry, and pigs; strengthening health protection; organizing the supply of drugs; reinforcing local and general authority to take action against robbery and destruction of productive areas by loose animals; adoption of an integrated position on agricultural promotion; improvement of the conditions for preserving, marketing, and processing livestock products.

4.3.3. Forests and forestry

119. The objectives in this area are to lay the institutional and technical foundations for overall effective forestry management; combat excessive and uncontrolled logging; and ensure the timely renewal of forestry resources. To achieve these objectives, the following strategic guidelines will have to be followed: review the legal framework for forestry management and strengthen the institutional capacity of the sector; promote operations involving community management of forested areas; adopt technical measures to replenish and conserve forestry resources.

4.3.4. Tourism

120. The government already has a Strategic Tourism Development Plan (PEDT), which envisages a market study with one of its guiding principles being to make the sector one of the key motors of increasing and diversifying the national income by 2005.

121. The objectives/strategies aim to significantly increase the sector’s contribution to GDP, from 5 to 7 percent starting in 2003, promoting tourism as one of the sectors driving growth in the medium term; develop employment directly in the sector and maximize its spin-off effects; recognize the value of natural, architectural, and sociocultural resources; develop ecotourism and seaside tourism; create the conditions necessary for the involvement of private initiative in the sector.

4.3.5. Industry and the production line

122. In light of the situation in the industrial sector, the primary sector—agriculture, livestock, forestry, and fishing—must remain one of the key components of growth, employment creation, and supply of raw materials for agroindustry. This would make it possible to boost government revenue and the opportunity for private enterprise, which would result in increased value added and reduced unemployment and poverty.

123. The objectives/strategies are as follows: to contribute to the acceleration of growth by diversifying production; to reduce the country’s dependency on export revenue from cocoa in order to develop export flows of nonagricultural goods and services; to reduce unemployment in urban areas by promoting activities centered on agriculture; to encourage foreign trade and investments; to provide support for income-generating sectors; to take action to incorporate STP in the regional and subregional economic zones.

4.3.6. Fishing and fisheries resources

124. Given its potential, it is necessary to establish a policy for the sector that seeks to increase its share of GDP as well as create employment, self-employment, and household income. As such, the objectives and strategies are the following: contribute to the animal protein supply for the population; improve the living and working conditions of fishing communities; create organizational and institutional structures adapted to the needs and realities of the sector, with a view to implementing the master plan for fisheries and to coordinating activities; create a strategic framework of reference and build the sector’s institutional capacity; develop the conditions for production and marketing of artisanal fishing; promote the balanced management of fisheries resources.

4.3.7. Infrastructure

125. The quantity and quality of infrastructure for the various stages of the development process in RDSTP are key to the strategy of economic and social recovery. The guideline here is enhancement of the capacity to manage, maintain, and preserve infrastructure, proposing for the purpose a public investment policy that is fully consistent with production development priorities.


126. The Telecommunications Master Plan was prepared in 1989 and is being revised, taking into account the numerous changes in technology and international regulations, as well as internal institutional developments. Following the creation of the São Tomé Telecommunications Company (CST) in 1990, development of the sector has been closely linked to the concession contract signed with the Ministry of Social Infrastructure and Environment (MESA), which grants a monopoly of new services to this operator for 20 years.

127. The objectives/strategies for development of the sector are: to enable the public and private parties involved in the sector to deal with the technological and economic risks of the telecommunications market; to improve the reliability of the network and the level of national and international telecommunications infrastructure; to reduce the cost of market prospecting and rates as a means of helping businesses grow; to develop basic telephone services in rural areas; to provide incentives to the private sector to invest in the telecommunications sector; to improve the quality of service of local operators; to reduce the cost of international communications; to diversify the existing products on the market; to expand rural telephony and develop the regulatory capacity of the government in this sector.


128. This is one of the major problems to be solved in order to guarantee a sequential productive process and provide energy to the population at an affordable cost.

129. In recent years, the government of RDSTP made a great effort to increase potential thermal energy sources, having acquired generators that substantially improve the energy supply for public lighting and household and industrial use.

130. The objectives and strategies are: to meet the population’s basic energy needs; to help develop the productive sectors by introducing measures to guarantee supply and reduce the cost of the energy supplied; to produce energy with minimal foreign exchange expenditure; to strengthen the management capacity of the water and power distribution company (EMAE), giving priority to technical maintenance services and enhancing the independence of the company’s management; to restore and establish the security of the network; to optimize the economic advantages of energy production and distribution technologies; to review and progressively expand installed capacity.


131. One of São Tomé and Príncipe’s greatest natural resources is the abundance of water. There are probably some 12 mineral water springs at various points in the country, according to a survey conducted in 1990/91.

132. The objectives/strategies are: to increase access by the population to the public water supply system (AAP) by connecting households and installing standpipes; to improve the quality of the water, particularly in the EMAE network; to develop infrastructure and determine environmental sanitation measures, in particular as regards stillwater management, given the negative impact of diseases such as malaria; to develop the existing urban drinking water supply system; to strengthen the capacity to protect water sources and control quality; to define a maintenance policy for AAP systems (EMAE, municipalities, settlements); to develop infrastructure for disposing of solid waste and polluted water in the major towns; to promote the construction of stand-alone sanitary facilities (latrines) and hygiene measures in rural areas.

Transportation and communications

133. The transportation and communications infrastructure was built in colonial times to support the productive structure of the old plantations. With the disappearance of coastal shipping and railroads on the plantations and in the coastal areas of the country, the roads became the almost exclusive mode of domestic transportation.

134. The objectives/strategies are: to repair and maintain roads to meet the demands of production (distribution of goods, especially) and society (access to remote areas); to strengthen the marine network of São Tomé and Príncipe with a view to the integrated development of both islands; to develop international sea and air transportation in response to the need to diversify the economy and end the archipelago’s isolation; to define and implement a policy of conservation of the primary road network (SENAE) and rural roads; to improve the operating capacity of the São Tomé port; to promote projects by private operators for the development of sea transportation between each of the islands of the archipelago and between the archipelago and the outside world; to liberalize air traffic; to enhance air safety; to develop planning capacity in the sector.

4.3.8. Nontraditional sectors: free zones and oil

135. The studies and arrangements made in the last 10 years have shown that STP has two potential resources as yet unknown and unexplored: a prime location in the Gulf of Guinea and hydrocarbons.

136. Tapping these two potential resources, on the one hand, could provide the government with the revenue to establish a modern and efficient public administration and infrastructure and, on the other hand, could create job and income-earning opportunities conducive to reducing poverty.

Free zones

137. Since the early 1990s, when successive governments started promoting activities related to free zones and recognizing their importance for the development of the country, laws on free zones were passed.

138. However, the government needs to adopt effective policies to revive the process of activating the free zones and, as part of its functions, the Free Zone Authority must proceed to gradually develop activities and services that would take advantage of the archipelago’s geographic location.

Hydrocarbons (oil, natural gas, etc.)

139. The existing hydrocarbon potential and its commercial viability are not yet known for sure. In May 1997, an agreement was reached between the government and the U.S. firm ERHC, resulting in the establishment of a mixed capital company (49 percent ERHC; 51 percent STEPETRO, representing the state). Within the framework of that agreement, ERHC gave the government US$5 million, which was budgeted in 1998 and 1999. Next, a contract was signed with Mobil New Exploration Ventures Group, which conducted seismic prospecting in January 1999. A technical commission on oil was also established with a view to studying the case and drawing up a management strategy for the São Tomé economy in the oil age.

140. To date, negotiations have already been conducted culminating in the demarcation of maritime borders with neighboring countries, namely Gabon and Equatorial Guinea. In addition, the STP government has already had negotiations with Nigeria concerning the problems related to oil exploration in areas considered to be common, and joint exploration is under way.

141. This leads us to conclude that, for the future, the economic growth of STP will depend not only on traditional resources, external aid, and foreign investment, but also on resources from the exploration of hydrocarbons.

4.3.9. Trade, international, regional, and subregional integration

142. The importance of trade in the São Tomé economy is all the more significant because the primary and secondary sectors of the economy are not in a position to produce enough to satisfy all the population’s needs for primary commodities and other goods.

143. In this context, the country’s economic openness is a key to its development. For this reason, along with sectoral policy action, there must be an overall strategy to enhance RDSTP’s integration in the regional and world economy.

4.3.10. Environment

144. RDSTP has very little land space, only 1001 km2. Its territorial sea is not extensive and the exclusive economic zone is vast. In each of these zones, there are inert substances and marine life that the country requires to meet its many needs: trade, food, housing construction, medicine, etc. Some of these natural resources are renewable and others not, hence the need to conserve the nonrenewable resources because their total disappearance would be very damaging for the future of the country.

145. The objectives/strategies are: to preserve the forests, which have considerably deteriorated as a result of tree felling without replanting new species; to protect the coast, where the problem is the removal of sand for construction; to preserve the countryside, fauna, and architectural assets, which are essential to the quality of life of the population and to a policy of tourism development.

4.4. Macroeconomic framework

146. The recent economic history of São Tomé e Príncipe reflects the importance the authorities have placed on a stable macroeconomic framework for economic growth. In early 1998, a series of macroeconomic policy and adjustment measures were implemented, which contributed to fiscal consolidation, reduced inflation, advanced the process of liberalization of the economy, and lowered the differential between the exchange rates on the official and parallel markets.

147. Despite the progress made, the external vulnerability of the economy continues to be a concern. The burden of the public external debt is high and per capita income is very low, in addition to which, structural problems continue to pose problems for economic growth and private investment.

148. Under the strategy, poverty reduction will only be possible through real GDP growth, for which the participation of all sectors of the society, particularly those that can generate income and employment opportunities for the poor is vital. Access to credit and productive assets is also extremely important.

149. The economic growth strategy is based on expansion of the private sector and diversification of production. The public sector is still dominant and accounts for almost 70 percent of national production. The challenge is to create conditions that would enable the private sector to be the engine of growth and employment creation. For that purpose, a broad-based privatization program has already been put in place, a new investment code has been prepared, and more extensive and business-friendly fiscal reform is about to be concluded.

150. With a view to increasing export revenue and creating new employment opportunities for the poor in the rural areas, the government prepared sectoral strategies for the agriculture, infrastructure, and tourism sectors.

151. To facilitate accelerated economic growth, the government will make its policies within a macroeconomic equilibrium framework derived from structural reforms that target private sector development and economic diversification. The medium-term macroeconomic framework (2003–2005) sets the GDP growth rate at 5 percent for the period and projects a reduction in inflation from 9.2 percent in 2002 to 8 percent in 2003 and 4 percent in 2005. The nominal exchange rate will continue to be market-determined. By adopting these objectives, the government will create a favorable environment for the NPRS and will reach decision point under the HIPC Initiative more easily.

152. The government will give the highest priority to ensuring that the primary deficit is in line with the macroeconomic framework. This objective, which guarantees fiscal discipline, diminishes the threat of inflation resulting from the scarcity of financial resources in the country and the limited capacity to absorb expenditure, and also creates an environment conducive to the development of private sector activity.

153. For the period 2003-05, fiscal policy will be conducted with a view to maintaining the primary deficit, including the HIPC Initiative, at 7 percent of GDP. To attain this goal, the government will continue its efforts to raise revenue from oil-related activities and will adequately control primary expenditure. As regards revenue, the tax system is to be simplified and tax and customs exemptions will be limited. Financial and customs inspection and audit units will be strengthened to better combat fraud and corruption. On the expenditure side, the government will prioritize programs related to poverty while current expenditure, exclusive of interest, shall be set at 10 percent of GDP for the period 2003-05. Wage bill expenditure will be set at 9 percent of GDP.

154. The reduction in inflation, which most heavily penalizes the poor, will be backed by the central bank, which will control the growth of domestic assets by sterilizing a large proportion of the resources coming from the oil sector. Credit to the private sector is expected to increase in line with the economic growth estimated in the Poverty Reduction Strategy and also by means of open market operations to be started in 2003. In this way, broad money would increase at a rate consistent with the maintenance of gross international reserves equivalent to four months of imports. To that end, banking supervision will be enhanced.

155. The structural reforms prepared with the assistance of the IMF and WB, include a wide range of measures to make public policy more efficient and transparent. These include, notably: privatization of public enterprises; continuous adjustment of the prices of oil derivatives, as well as water and energy, to reflect production costs while protecting the most vulnerable groups; and various reforms to strengthen the education and health services.

156. The São Tomé and Príncipe economy could be dominated by oil-related investments. The government estimates that the licensing round for oil exploration in the joint exploration zone with Nigeria could take place in 2003; investments in oil exploration will be stepped up in 2003-06 and exploration will begin in 2006. During that period, the current account deficit (excluding official transfers) may be four times greater than GDP with massive flows of foreign direct investment. As offshore oil exploration and funds go into a special account, the inflationary pressure will be minimized and the dobra, in real effective terms, might even appreciate slightly.

157. The government is determined to distribute the wealth derived from oil exploration equitably between this generation and future ones. Considering that oil reserves are limited, the government has firmly decided to conserve this wealth for future generations as well. To that end, there will be transparent management of the fund in which all income from oil exploration will be deposited and the results of the periodic audits will be published. Basically, the government intends to ensure the efficient, transparent, and effective management of these resources, which contribute to reducing poverty, improving living conditions for citizens, and guaranteeing saving, within the framework of action envisaged for sustainable and lasting human development.

158. In the short and medium terms, São Tomé and Príncipe will continue to depend on external assistance and concessional credit to finance its external account deficits, which are clearly manifested in the wide gap between imports and exports. Overall, the export diversification strategy could improve the trade balance. There are already some promising results, for example, in the production of beer, palm oil, flowers, fish, taro, coconuts, and tropical fruit, in addition to small ruminants. As long as the situation continues to be delicate, São Tomé and Príncipe will need the support of the international community to finance the balance of payments deficit. The required flows of assistance are estimated at US$5.1 million for 2003, US$4.8 million in 2004 and US$4 million in 2005. These inflows of capital will be supplemented by direct foreign investment.


159. The strategy to achieve progressive development of the poor population will have to be implemented by the sectors and subsectors of agriculture, livestock, fishing, industry, trade, tourism, and services and revolves around six major objectives, namely:

  1. Increased and diversified production;

  2. Guaranteed food security;

  3. Improved socioeconomic conditions for the population in rural, urban and peripheral areas (small villages and localities);

  4. Conservation of natural resources;

  5. Development of women and youth;

  6. Promotion of goods and services exports.

5.1. Increased and diversified production

160. The rural world is the greatest employer (over 50 percent) and virtually the sole producer of export revenue, but it also has the highest incidence of poverty. As a result, the government is stepping up a number of measures in partnership with the local governments and nongovernmental organizations (NGOs) in each district with a view to:

  • - Fostering economic activities that generate employment, self-employment, income, promoting the emergence and development of microenterprises in agricultural, livestock, and forestry production, industrial processing, cottage industry, trade, and services;

  • - Helping to improve the population’s diet by increasing productive activity, technical-occupational training, education, and health;

  • - Reducing the socioeconomic disparities between the two islands and the various districts, seeking to adopt a plan of physical land management in which spaces in the national territory will be used, to the extent possible, in accordance with their environmental advantages, natural suitability, and socioeconomic infrastructure;

  • - Creating four poles of socioeconomic development in accordance with the national physical development plan and the natural and human potential of each district, namely in the capital, in Lembá, in Portalegre and in the autonomous region of Príncipe;

  • - Supporting policies on urban and environmental development, and restructuring of rural areas;

  • - Developing ferry services;

  • - Acquiring the proper equipment to supply the necessary energy for each stage of general and agroindustrial development;

  • - Implementing an irrigation program that includes the construction of reservoirs (micro-dams) for use when rainfall is low and in periods of prolonged drought, taking steps to prevent the possible negative effects on public health, such as the proliferation of mosquitoes, which are vectors of malaria;

  • - Supporting small farmers in gaining access to factors of production;

  • - Regulating the ownership rights of small farmers who received plots of land;

  • - Providing incentives, credit, support with agricultural implements, and extension;

  • - Furthering customs, fiscal, financial, and agrarian reform;

  • - Laying the foundations of a new model of infrastructure management, in particular in the water, energy, and communications sectors;

  • - Implementing free zones;

  • - Rehabilitating the social and economic infrastructure (highways, rural roads, water, energy, sewage, research and survey stations);

  • - Exploring the country’s natural resources in a balanced and rational manner;

  • - Reviving and making profitable the former training centers that still exist (CATAP, Água Izé, Uba Budo, Polytechnic Center, and others).

5.1.1. Guaranteed food security

161. Food security must be achieved by increasing local food production, better distribution of food, adoption of policies to reduce the prices of local products, increasing their supply while maintaining quality so that they can be competitive with other imported goods, and education for consumption of local products first and foremost.

162. Per capita food production will grow at a rate higher than the population growth rate, resulting in better incomes for rural populations and, consequently, greater access to imported commodities. This objective will be attained through:

  1. Support for marketing, preserving, and processing of foodstuffs, improved quality and sanitary conditions;

  2. Improvement in storage, conservation, processing, and marketing systems for foodstuffs, exploring new regional and international markets;

  3. Incentives and support for horticultural production, making good-quality seeds available and dissemination of appropriate technologies;

  4. Incentives or support for livestock production, focusing on small animals through a development plan that includes improving the stock and distribution of animals to farmers, and dissemination of husbandry techniques;

  5. Improvement in the varieties of crops and cultivation techniques used through research and extension;

  6. Research and experimentation into animal feed rations, based on local components;

  7. Government financing, in the form of incentives, to develop, repair, and construct social welfare infrastructure in rural areas;

  8. Support for supplies of inputs and other materials.

5.1.2. Improvement in the socioeconomic conditions of the population in rural, urban, and peripheral areas (small villages and localities)

163. The social development of the poorest peoples well as an increase in their material well-being through education, skill, and health levels is a good way to channel the nation’s financial resources into creating basic infrastructure and even investment in agriculture, forestry, and livestock, and in other activities, such as fishing, small processing industries, cottage industry, and tourism. This could be a powerful and compelling stimulus for poverty reduction in the country.

164. In that connection, there must be coordinated and intense action on the part of all public services to:

  • - improve the conditions of households and housing;

  • - ensure the social development of women and children;

  • - implement small local projects, change the current diet, and educate the population on hygiene, sanitation, and public health;

  • - establish an adequate network of child care centers and primary health care units;

  • - guarantee access to basic education for children, particularly girls;

  • - develop literacy courses for adults;

  • - improve the conditions of occupational training;

  • - orient underemployed manpower toward other activities;

  • - offer incentives for the construction and/or rehabilitation of water distribution systems thereby eliminating the supply of water from rivers, and of toilet and washroom facilities so that the population need no longer meet its physiological needs in the open air;

  • - motivate people to join the socioeconomic process;

  • - disseminate and develop cultivation methods for traditional products and new products that would rapidly improve daily diet and household income;

  • - promote social mobility and occupational training by all available means, namely a large-scale education program covering all levels, creation of a network of accelerated occupational training centers, and establishment of a coherent policy on employment and wages;

  • - reduce regional imbalances by transferring to the districts the capacity to research and make decisions on interventions;

  • - guarantee public access to quality health care.

5.1.3. Conservation of natural resources

165. This objective seeks to maintain the natural resource balance through acceptable levels of use of these resources, taking into account their rate of renewal. In the forestry sector, in addition to the objectives already stated, the following policy measures for growth must be taken:

  1. Ensure the renewal of forest resources;

  2. Meet the national demand for wood;

  3. Restructure the wood cutting industry;

  4. Promote tree planting on distributed plots of land, using species of economic interest that are already adapted to the conditions in the country, in combination with the plan to combat erosion.

5.1.4. Development of women and youth

166. Regarding youth, the need for a development strategy is recognized and the following actions must be studied and implemented:

  • a credit system for youth to carry out income generating activities, namely manufacturing craft products, creating microenterprises, livestock rearing, small processing units, small stores;

  • occupational and job market training;

  • creation of youth cooperatives for production and marketing.

167. Concerning women, in addition to the measures articulated in the previous points, the following is envisaged:

  • - introduction of a national micro-credit program for rural women and those in the informal sector;

  • - support for the establishment of production and marketing cooperatives, and for strengthening the existing associations;

  • - development of literacy and occupational training programs in the agricultural, commercial, industrial, and services sectors;

  • - better understanding of the status of women in the informal sector;

  • - establishment of community child care centers in various regions of the country.

5.1.5. Promotion of goods and services exports

168. Owing to the small size of its population and their purchasing power, the country’s domestic market cannot absorb all production, therefore it is imperative to implement a general strategy to develop economic activities that would end the country’s relative isolation. Its key features would be: i) renewed support for export growth and promotion; ii) professionalism among economic operators; iii) extricating the archipelago from its enclave and trade diversification.

169. However, out of concern for the weakness of the national business sector, faced with a lack of information and technical expertise, the government should support private sector implementation in the industry, trade, and services sectors, in addition to the above-mentioned agriculture, livestock, fishing, forestry, and tourism sectors.

5.1.6. Industry

170. The fundamental objectives should be to set up and develop industries that would cater to domestic and external consumption, in particular through:

  • - Producing and refining edible oils, either by making the EMOLVE agroindustrial complex profitable and modernizing small oil plants, or by installing and/or modernizing copra processing plants;

  • - Processing cocoa paste and dry cocoa adds considerable value, guaranteeing an increase in income for small farming households. There are some efforts under way in this area, and these should be expanded and supported as community economic activities;

  • - Producing juices, preserves, and jams;

  • - Producing cassava flour and “bombom” flour by processing cassava. It should be noted that some initiatives related to exports of these products have been successful;

  • - Producing sugar cane brandy (currently produced by rural households in substandard technical and sanitary conditions), improving its manufacture both qualitatively and quantitatively;

  • - Producing tomato paste and concentrate;

  • - Creating a domestic base for animal feed by setting up animal ration plants using copra, fish, and other local products as inputs;

  • - Developing the fish salting process, to produce goods for export as well;

  • - Supporting the handicraft sector in producing quality articles made of coconut palm (mats, bags, twine, etc.);

  • - Introducing appropriate technologies for sawing wood that allow the remnants and waste these units currently produce to be used;

  • - Industrial use of mineral water for commercial purposes;

  • - Increasing local production of beer and soft drinks and improving quality standards, so that products of this kind would not have to be imported;

  • - Using animal products by developing the production of sausages and stuffed meat products;

  • - Developing the ice factory.

171. Policy measures should also be adopted to:

  • - Coordinate the development of industry with other economic activities, particularly with regard to the creation of economic and social infrastructure;

  • - Develop and revive industrial sectors, promoting their balanced growth and strengthening their competitiveness;

  • - Improve the sectoral composition of industry;

  • - Fuel or support the creation of industrial poles of regional development, mindful of the specific conditions of particular regions and the requirements for overall development.

5.1.7. Trade and Services

172. This sector faces the following constraints:

  • - Competition from the informal sector, which is proliferating due to poverty and rural exodus;

  • - Little or no prospects for industrial growth that justify investing raw materials in the production of consumer goods as substitutes for traditional consumer imports;

  • - No policies on restricting imports;

  • - Inability to access alternative markets and failure to identify new export goods and services;

  • - Outdated legislation on commercial activities and absence of proper policies for implementing a consumer protection system;

  • - No mechanisms to support the development of small local business, nor any proper network that would guarantee access to supplies for the rural population.

5.2. Political measures

173. Of the multiplicity of actions to be taken by the state and private sectors, special emphasis should be placed on the following:

  • - Alternative market studies to guarantee better use of the external market;

  • - Negotiations between the STP government and other governments of arrangements for the free movement of persons and goods between countries, with a view to regional and international integration;

  • - Drafting of legislation to regulate and provide a legal framework for commercial activity and to protect the rights of the consumer;

  • - Tailoring a policy mainly to supporting small business, in partnership with the Chamber of Commerce, Industry, Agriculture and Services, and the private sector in general, as key partners in the development process.

5.3. Policies to Promote Microfinancing and Microenterprises

174. The government will form partnerships with economic operators individually or in groups, to:

  • - consolidate the rural savings and loan associations that already exist in rural communities;

  • - create credit unions of merchants, farmers, craftspeople, and fishermen;

  • - set up teams of local professionals trained in the methodology and techniques of microfinancing, to support and monitor the growth of microfinance funds;

  • - implement a national microcredit program;

  • - strengthen existing associations and production and marketing cooperatives;

  • - promote activities that create employment and self-employment;

  • - develop occupational training in the areas of agriculture, livestock, fishing, trade, agroindustrial construction, integrated into the general school curricula;

  • - conduct a study aimed at assessing basic needs in terms of occupational training in the sectors under reference;

  • - draft a framework law, which defines the role and different types of partners in occupational training activities;

  • - draft a national policy and action plan for occupational training, covering the capital and other localities.

5.4. Safety nets for the poorest and most vulnerable

175. The incidence of poverty in STP (1 in every 2 Sãotomean lives below the poverty line) and its severity (15.1 percent of the population lives in conditions of extreme poverty) has had a more marked effect on the most vulnerable groups.

176. This fact further justifies the implementation for a relatively long period (up to 10 years) of specific policies and programs to protect the most vulnerable populations. The government’s strategy in this area should have two facets: (i) the general, meaning food security, and (ii) the specific, namely combating social marginalization in urban areas.

177. The elderly, who make up almost 5 percent of the country’s total population, are almost always systematically left out of all processes in the country, with the exception of election campaigns. There is the need to design, draft, and implement a National Policy for Senior Citizens, to provide them the support needed for their proper integration into society and validation as social beings.


6.1. Education, Literacy, Training

6.1.1. Education

178. Intervention in the area of education, as a means of improving access to basic social services, must take into account the following:

    • - decentralization of the education process and greater inclusiveness of all the agents involved;

    • - prioritization of basic education and improvement of the effectiveness and quality of teaching;

    • - adoption of positive discrimination measures for children from low-income households;

    • - linkage of education, training, and employment systems, to prepare children, youth, and adults for working life.

6.1.2. Literacy

179. Interventions in this area are:

  • - conduct of a study on the status of literacy in the country and survey and coordination of literacy initiatives;

  • - revival of literacy initiatives related to training/preparation for working life/apprenticeship in a trade or vocation;

  • - community involvement in initiatives to combat/prevent illiteracy, resorting to IEC/social mobilization to make communities aware of the relevance and importance of education;

  • - coverage of children who never went to school (coordination with the STP school map);

  • - support for nonformal basic education initiatives and inclusion in formal education of children and youth who learned to read and write in these programs;

  • - creation of post-literacy mechanisms (community leadership, IEC, interest centers, etc.);

  • - training of specialists and leaders to use the proper teaching techniques.

6.1.3. Training

180. The strategy in this area is predicated upon close coordination between education and training, to develop the capacity for self-employment, providing sound, practical, and lasting knowledge. The schools should produce individuals with an enterprising spirit, capable of creating their own employment and employment for others.

181. To this end, consideration needs to be given to the adoption and implementation of a structure for the education system whereby graduation from one level would create access to a branch of training at home or abroad (practical, technical/occupational, secondary or higher).

182. With the aim of reducing poverty, intervention in the area of training seeks to:

    • - Promote measures for incorporating youth in occupational training and creating the conditions for establishing microenterprises of young men and women;

    • - Organize nonformal education for entry into the world of work;

    • - Adopt a training plan based on a study of the labor market and manpower needs;

    • - Analyze the operating structures of the occupational education subsystem and expand its scope (diversification, level of training);

    • - Promote the science and technology in school curricula and teacher training;

    • - Adopt a training program for instructors giving preference to domestic training, to avoid the risks associated with training abroad (brain drain, costs without returns);

    • - Train specialists in a number of areas (human resources, promotion of microenterprises).

6.2. Health, Nutrition, and Population

6.2.1. Health1

National Health Policy

183. The National Health Policy (PNS) recognizes the social nature of health services as a factor of development, social justice, and poverty reduction.

General Objectives

184. The general health objectives in the area of poverty reduction are centered on increasing the life expectancy of the population, equitable access for all to proper and good quality health care, thereby contributing to a decline in the current levels of mortality and morbidity.

Specific Objectives

185. The specific objectives are as follows:

  • - create the conditions whereby the population can independently assume attitudes, behaviors, and practices that help improve and maintain their health;

  • - restructure and organize basic health services to better respond to demand, guaranteeing equitable access to health care;

  • - take comprehensive action to combat the diseases that contribute most to morbidity/mortality in the country;

  • - devise and implement promotional, preventive, and protective measures targeting population groups, namely, young children, teenagers, young adults, women of child-bearing age, workers, and senior citizens;

  • - help improve the nutritional status of the population, particularly in the target groups;

  • - guarantee access to specialized (tertiary) care by improving the quality of services provided by the Dr. Ayres de Menezes Hospital;

  • - assist the national effort to eliminate the environmental factors that contribute to the poor quality of life of the population and influence its development.

6.2.2. Population Policy

186. It is imperative to define a population policy that focuses on improving the living conditions of the people and encompasses all actions in the areas of education, ealth, environment, poverty relief, etc., which affect population and development.

6.3. Water

187. A large portion of the population, mainly in rural areas, still does not have access to drinking water and uses river water or water from existing springs without any protection or control.

188. The strategy here seeks to increase the rate of access to water supply systems for the public and to improve the quality of water supplied to both urban and rural areas.

6.4. Sewage

189. There are still serious problems with environmental sanitation that are a major threat to public health and have had the following effects, among others:

  • - high morbidity and mortality rates related to water-borne diseases;

  • - proliferation of vectors of malaria and other diseases:

  • - threat of epidemics related to unhealthy conditions;

  • - environmental pollution caused by trash and human waste having a serious impact on health and the economy.

190. In light of this, the following objectives have been established in accordance with the National Environmental Plan for Sustainable Development:

  • - raise to 100 percent the rate of coverage of solid waste collection and transportation in urban and peri-urban areas;

  • - provide sanitary facilities to 100 percent of houses nationwide;

  • - properly inventory all swamp areas in São Tomé and Príncipe so that a coherent policy on such areas can be defined;

  • - rehabilitate old drainage systems for disposing of rainwater in the city of São Tomé and construct new systems;

  • - promote a campaign of healthy habits and lifestyles.


7.1. Mechanisms for monitoring, evaluation, and updating

191. The NPRS is an ambitious project, notwithstanding its relevance and the urgent need for its implementation. However, its execution touches almost all sectors of life in the country and poses a challenge for coordination between the state, the private sector, and organized civil society, taking into account current institutional weaknesses and volume of resources required for the task. A general coordination unit is needed to make the connections and have an overview of all the actions to be taken.

7.2. Poverty Monitoring and Evaluation System

192. The design, preparation, and definition of indicators needed to monitor poverty depends first of all on the information requirements stipulated, in light of the specific objectives of the policy to combat poverty in the country.

193. It is therefore highly advisable to create an adjustable and flexible structure, which can evolve over time to better respond to the demands of the stages ahead, and designed to take on projects and studies on a regular and ongoing basis. It should also be able to act as the institution that monitors, coordinates, assesses, and periodically updates the strategy (NPRS), in cooperation and partnership with other national, regional, and international institutions, as it would be responsible for setting up and coordinating the Poverty Monitoring and Evaluation System in the country.

194. However, given the country’s current constraints, particularly as regards financial, and logistical difficulties and weaknesses linked to the reporting of statistical data, it might be advisable to use the existing capacity in the Economic Planning Directorate of the Ministry of Planning and Finance initially, and to organize a team to install Poverty Monitoring and Evaluation System units throughout the country. These would evolve into an autonomous structure with its own authority, responsive to the duties and functions for which it was created.

7.3. Measurement of poverty and the different data needed to assess its development in the country

195. The type of information needed on monetary poverty, living conditions, and potential is based on a certain number of indicators that reflect income and consumption levels, the food situation, education, health and sanitation, housing, and other basic needs.

196. Thus, in order to scrupulously meet the medium- and long-term objectives of the strategy (NPRS) Quantitative Objectives for Reducing Poverty in the country were developed (see Annex 2) for measuring, monitoring, and assessing the problem in São Tomé and Príncipe. Naturally, this is only one basis for the work, to which the missing data will have to be added and improvements made in areas where they are needed.

7.3.1. Indicators for monitoring and evaluation of the status of poverty in the country

197. Monetary indicators, such as the poverty line, make comparisons over time possible and track developments. Specific analyses can then be made, such as measuring the new poor (those falling below the poverty line) or the ex-poor (those rising above the poverty line), to show the origin of poverty and make the relationship between different forms of poverty, etc. The indicators that make it possible to monitor other forms of poverty, such as monetary poverty, are integrated in a Poverty Monitoring, Tracking, and Assessment System in the country (see Annex 3). This system will be used to connect and incorporate in an operating system all the institutions, entities, agencies, and social partners who, by their nature of their work, are addressing the issue of poverty.

7.3.2. Action Plan

198. The proposed action plan to address the problems, situations, challenges, and issues concerning the different dimensions of poverty in the country is given in Annex 1.

The External Debt Reduction Initiative (HIPC Initiative)

1. Throughout 1999, the government worked on attaining program objectives, particularly in the macroeconomic sphere. The climate of relative political stability throughout the period made it possible to complete negotiations with the IMF, which led to the signature of a Poverty Reduction and Economic Growth Program in the first half of 2000. That program, scheduled over three years, should enable São Tomé and Príncipe to meet the conditions for renegotiating its external debt under the HIPC Initiative.

2. Based on the positive results achieved in macroeconomic management, the country reached decision point under the HIPC Initiative on December 21, 2000.

3. This achievement enabled the country to use the financial resources earmarked for external debt service in the areas of national life defined by the government at this stage (health, education, and infrastructure).

4. Consequently, a number of process and performance indicators must be designed, defined, and constructed to measure the impact of allocating these financial resources to priority intervention programs and projects geared towards particular regions or target population groups.

5. According to the Annual Activities Report of the HIPC Funds Control Committee, during 2001, the financial resources deposited in the HIPC account, which the country received as a result of debt relief from the WB and the AfDB, amounted to Dbs 23,617,936,868.97.

6. During the same period, Dbs 19,364,648,218.75 were disbursed. It should be noted that this amount also included the reincorporation of January’s debt to the AfDB/FAD (Dbs 2,203,986,668.00), which was not considered an actual HIPC expenditure. There is an available balance (on a cash basis) of Dbs 4,253,288,650.22.

7. These resources were effectively used in the areas defined above (education/training, health, and infrastructure).

8. According to information provided by the Secretariat of the HIPC Funds Control Committee, Dbs 20,779,506,863.50 had been used as at October 2002. These financial resources were deployed in education (Dbs 3,392,190,663.50), health (Dbs 8,630,489,693.50), infrastructure (Dbs 7,545,830,398.00), and other sectors (Dbs 1,210,996,108.50).

9. A total Dbs 31,909,943,000.00 was allocated to the HIPC Funds for 2003. These funds are expected to be allocated as follows: education (Dbs 9,904,449,000.00), health (Dbs 9,111,011,000.00), infrastructure (Dbs 11,944,483,000.00), and other (Dbs 950,000.0).


8.1. Prior Issues

199. This chapter addresses the budgetary framework for the resources needed to implement the Action Plan. Budget projections were made for the period 2003–2010 (8 years). However, the analysis of the budgetary implications of the NPRS was restricted to the period 2003–2005.

200. The principal limitations and factors determining projections are as follows:

    1. Exogenous factors: The degree of uncertainty of the macroeconomic projections to 2015, taking into account the world economic outlook and its impact on the availability of resources for development assistance and tourism flows;

    2. Endogenous factors: The impact of the inclusion of oil resources in the economic and social matrix, as regards economic growth and redistribution of national income. The most optimistic scenarios point to a radical change in the structure of macroeconomic indicators starting in 2006, which makes it impossible to construct homogenous and consistent statistical series for more than two to three years ahead. This limitation highlights the pressing need for cyclical indicators and economic monitoring;

    3. The spread of HIV and other endemic diseases could be a factor that belies population projections and resource allocation;

    4. Changes in attitudes and behaviors as regards the individual motives of citizens and the ruling class in terms of consumption patterns, understandings on equity, equality, opportunities, etc.

    5. One must still take account of the conceptual limitations of the indicators used, namely the concept of per capita GDP, which does not reflect the changes in income redistribution in the NPRS target groups.

    6. Even taking into account these limitations, the budgetary impact of the strategy, as measured by the weight of the priority sectors in the PIP and OGE 2002, is an adequate indicator confirming the importance the government places on the poverty reduction strategy in its policy mix.

8.2. Priority Action Areas

201. Education, health, infrastructure (roads, energy, and water), agriculture and rural development, good governance and economic and financial policies were defined as strategic sectors of the NPRS and warranted more detailed budgeting for the following reasons:

  1. The initiatives and actions of citizens and institutions require that the administration take the appropriate measures, which would necessitate a change in behaviors. This is particularly true for action in the areas of good governance, drafting legislation, and access to justice. Deconcentration and decentralization involve the enhancement of local authority, which promotes greater interaction between populations and institutions in the fight against poverty through socioeconomic development.

  2. Financial and macroeconomic policies are fundamental for ensuring better allocation of domestic resources, and transparency in the preparation and implementation of the budget and the PIP. The efficiency of the fiscal machinery is an important factor of the policies for redistributing the wealth generated by productive process in which the poorest segments of the population contribute the most.

  3. Human resource development is the main contributing factor in the identifying specific actions to be implemented by economic agents and institutions. Education and health are vital components of the behaviors and skills that foster efficiency in work, increased production of goods and services, and their distribution. In connection with education, basic education and literacy, in addition to technical-occupational training, are important in the NPRS.

  4. The availability of infrastructure, in particular roads, energy, and water is the determining factor in implementation. It facilitates the mobility of factors of production, improves the productive process, expands the market, mostly access to basic health and sanitation services. Tourism, which is of crucial importance to development, was also considered vital to the NPRS owing to the high gross value added it generates and the natural environment the country offers. It is also assumed that economic growth driven by the private sector is a prerequisite of poverty reduction. At the same time, if poverty reduction policies are properly implemented, they contribute decisively to economic growth.

  5. Taking into account that the majority of the poor population lives in rural areas, in addition to giving priority to the income generation component (agriculture, livestock, forestry), living conditions can only be improved by human development and the creation of community infrastructure.

202. The selection and ranking of priority actions was based on the following criteria:

(i) the recognition, coming out of the consultative process undertaken with beneficiaries and civil society, that the action contributes to well-being;

(ii) ability to generate sustainable economic growth and vital importance to sectoral strategies;

(iii) economic, financial, and institutional viability—the actions promote a sound social and political climate and macroeconomic stability.

8.3. Impact of the oil economy

203. In the short term, revenue from “leasing blocks” cannot have a direct impact on the real economy and consequently on GDP growth. In the initial years (2003–2006), as there will be no prospects for export production, the impact will be felt only on domestic demand and investment variables. As a result of the excess liquidity in the economy, the prices of essential items could soar in the absence of sufficient internal production capacity. This scenario may create pockets of poverty with a higher incidence among rural populations, urban dwellers with low levels of education, senior citizens, and women.

204. The most optimistic scenario is based on the hypothesis that resources from the oil sector are injected into the national economy primarily for: (i) development of human capital (basic education, training, health); (ii) strengthening the rural economy through community infrastructure, ensuring that population distribution is balanced, and avoiding imports of goods that are produced locally at lower prices and that have a strong impact on the formation of gross value added; (iii) acquisition and construction of basic equipment that promotes productivity and an “economic base” that is balanced and diversified—energy, support services for the oil economy (light metal mechanics, repairs, transportation), agricultural techniques, the hospitality industry; and finally (iv) development of innovation and management capacity in business and institutions.

8.4. Required resources

205. Taking into account the principles and criteria stated above, actions under the NPRS were allocated the following resources by objectives (PILLARS):

Programming by Objectives and Priority Sectors

(value in thousands of US$)

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206. In the short term (2003–2005), the actions that generate income, centered on basic infrastructure and primary sector activities, absorb 64.9 percent of the resources. Activities related to access to basic social services account for 31.2 percent of the total, with education and health having virtually the same weight.

207. Another important factor to recall is the change in the relative weight of expenditure on education and health, which represented, respectively, 9 percent and 7 percent of current expenditure in the OGE and are now estimated at 13 percent and 17 percent.

208. Noticeably, only 31.0 percent of the total cost of the actions planned is concentrated in the period 2003–2005, which is indicative of the difficulties with medium-to-long-term planning and the underlying limitations on execution capacity in the sectors in the initial stages of implementation of the strategy.

Programming by Objective (2003–2005)

Citation: IMF Staff Country Reports 2005, 332; 10.5089/9781451835069.002.A001

Programming by Type of Resources

(in thousands of US$)

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8.5. Sources of Financing

209. The budget was broken down by sources of financing only in 2003. If this exercise is to be continued in subsequent years, the Medium-Term Expenditure Framework (MTEF) must be in place.

210. Implementation of the activities planned for 2003 will require raising US$22,519,727 with sources of financing divided as follows:

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