Democratic Republic of São Tomé and Príncipe
Poverty Reduction Strategy Paper: Update
Author: International Monetary Fund
Publication Date:
14 Sep 2005
eISBN:
9781451835076
Language:
English
Keywords:
ISCR; CR; state; State General budget approval; State treasury; state's functioning; private sector; revenue; governments' accounting; responsibilities of the State; poverty profile; economic planning
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This paper presents an update to the Poverty Reduction Strategy Paper (PRSP) for the Democratic Republic of São Tomé and Príncipe. It discusses that a tendency toward continual growth of the unemployment levels was verified in the urban region between 2000 and 2003 while during the same period, a tendency of continual decrease in the rural zone was detected, with a few variations. The variation rate of unemployment in the urban zone during the period between 2000 and 2003 was 48 percent while the variation rate of unemployment in the rural region was 16.5 percent.

Abstract

This paper presents an update to the Poverty Reduction Strategy Paper (PRSP) for the Democratic Republic of São Tomé and Príncipe. It discusses that a tendency toward continual growth of the unemployment levels was verified in the urban region between 2000 and 2003 while during the same period, a tendency of continual decrease in the rural zone was detected, with a few variations. The variation rate of unemployment in the urban zone during the period between 2000 and 2003 was 48 percent while the variation rate of unemployment in the rural region was 16.5 percent.

1. PREVIOUS CONSIDERATIONS

1. Since São Tomé and Príncipe reached the Point of Decision on the HIPC Initiative in December of 2000, it has benefited with financial aid from this Initiative.

2. The amount corresponds to a substantial portion of what the country would have to pay back for its regular debt services, but this amount has been channeled to fund projects considered priority for poverty-reduction.

3. On the other hand, Sao Tomean authorities and Breton Wood institutions, namely the World Bank and the International Monetary Fund, established two conditions in order for the country to reach the Point of Conclusion of the HIPC Initiative in 2006:

  1. the consolidation of adequate efforts at the macroeconomic level;

  2. the establishment of a national strategy for poverty reduction through a participative process with the engagement of all active agents of the country and the satisfactory implementation of these.

4. As a matter of fact, from the analysis of the poverty situation and the identification of its major indicators, the government projected five principal axes in the document entitled National Strategy for Poverty Reduction (NSPR), namely:

  • Reform of public institutions, capacity reinforcement and the promotion of a good governance policy;

  • Accelerated and redistributive growth;

  • Creation of opportunities for growth and diversification of income for the poor;

  • Human resource development and access to basic social services;

  • Adoption of mechanisms for follow-up, evaluation and strategies for updating.

5. Through the development of actions around the strategic axes above mentioned, the government envisions achieving poverty reduction by 2015 through the accomplishment of the following global objectives:

  • To reach an average growth rate of 8% of the gross domestic product (GDP) starting 2005 in order to achieve the millennium goals;

  • To reduce by half the percentage of the Sao Tomean population living at the poverty level by 2010, and to less than 1/3 by 2015;

  • To reach by 2015 universal access to all basic social services, and to promote an improvement of the population’s quality of life;

  • To considerably reduce differences along social class and gender, among districts and within the Autonomous Region of Príncipe, as well as among rural and urban populations;

  • To promote and reinforce institutional capacities and a good governance policy.

6. The document named National Strategy for Poverty Reduction (Estratégia Nacional de Reduçao da Pobreza, ENRP), validated in the National Symposium which took place on December 10, 2002, was approved by decree of the advise ministries during an ordinary session on December 19 and was approved by the nation’s president on January 23rd, 2003.

7. Since its finalization until now, however, changes have occurred to some of the information and data considered for the creation and elaboration, making an update necessary for a reconsideration of the poverty phenomenon and, consequently, with the purpose of mobilizing resources adjusted for the needs of the financing strategy.

8. To this end, the present document constitutes an addendum and an integral part of the National Strategy for the Poverty Reduction, in addition to introducing some changes happening to the actions already taken or in the process contemplating the revision of the proposed actions and the readjustment in regards to some of the reconceived goals.

2. CHANGES AND UPDATES

9. During the conceptualization of the National Strategy for Poverty Reduction, taking into consideration the principal determinants of poverty and basing itself on an optimist scenario inspired by national long-term studies, a significant reduction of poverty was projected during a time interval that extended until 2015.

10. In order to fulfill the requirements of this challenge, the government recognizes the need to better take advantage of the human potential and of the natural and material resources of the nation, as well as of the availability of bilateral and multilateral cooperation.

11. However, considering that the possibilities for mobilization of susceptive resources must be utilized for the implementation of the strategy which requires a more updated knowledge of the poverty situation, it became necessary to proceed with the changes and updates as a consequence of more recent institutional, political, social and economic developments.

12. As such, we present the following information that is currently updated in relation to:

  • Public Debt;

  • Rural and urban unemployment;

  • Fluctuations in the price of cocoa;

  • Tourism growth;

  • The development of telecommunications;

  • Oil resources management;

  • Education and health expenditure;

  • Macroeconomic context

  • National roadmap for the implementation of the ENRP;

  • Plan of action;

  • Result indicators for the short and medium term;

  • Budget prevision.

2.1. The foreign public debt and the effects on the resources from the HIPC fund

13. Confronted with structural and socio-economic difficulties, the subsequent governments of Sao Tome and Principe will engage in making efforts to impose the plan of fulfilling the inherent conditions of the HIPC initiative, or that will permit them to obtain debt relief for the country whose deficit evolved from 2001 to 2004 in the following manner:

Table 1:

Foreign public debt

(in millions of U.S. dollars)

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Source: Statistical Bulletins of the Central Bank and the Cabinet of Treasury

14. One of the conditions was to fulfill the goal of the government program, in particular the macroeconomic control. In the course of negotiations with the IMF throughout 1999, accords were concluded that would lead to a signing of a Poverty Reduction and Economic Growth program. Planned for 3 years and with visible effects starting in 1998, this program should allow Sao Tome and Principe to satisfy the conditions for renegotiation of its foreign debt in the plans of the HIPC initiative.

15. The successful achievement of this program allowed Sao Tome and Principe to reach the point of decision of the HIPC initiative in December of 2000 and, starting in January of 2001, to benefit from the upcoming aid of this initiative.

16. However, as one can deduce, in light of the plan presented above, the accumulated foreign debt continues to grow from year to year increasing from $302.00 million (USD) in the year 2000 to $306.5 million (USD) in 2003.

17. In the year 2004, the government, pressured by the financial need to facilitate pressing problems of the state’s functioning, celebrated two new loan contracts of $10,000,000 (USD) and $1,000,000 (USD) with the countries of Nigeria and Angloa, respectively, thus provoking an increase in the mounting foreign debt the ended up reaching $317.5 million (USD) in November of 2004.

2.2. Urban and Rural Unemployment

18. The district of Água Grande, considered to be the only urban zone1 in the country and where the highest concentration of unemployed population is registered, corresponds to 48.5% of the total unemployed population registered in the country.

19. As far as men are concerned, 55.8% of all unemployed men in the country are concentrated in of this large region of the country in comparison of 44.3% of the total women.

20. However, the largest level of unemployment affects women in all the districts with the exception of the district of Lembá.

21. Also concerning women, it is in the urban zone where we find one of the largest levels of unemployment in the country being surpassed only by the female rural population of the Mé-Zóchi district by only 0.3 percentage points.

Table 2:

Unemployed Population by Gender and District (2003)

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Source: INE, Survey of Active Employed and Unemployed Population – 2003

22. A tendency toward continual growth of the unemployment levels was verified in the urban region between 2000 and 2003 while during the same period a tendency of continual decrease in the rural zone was detected, with a few variations.

23. The variation rate2 of the unemployment in the urban zone during the period between 2000 and 2003 was 48% while the variation rate of unemployment in the rural region was 16.5%; this means that there was a decrease of that same level in the order of 16.5%.

Graph 1.
Graph 1.

Evolution of the Unemployment Level (2000–2003)

Citation: IMF Staff Country Reports 2005, 334; 10.5089/9781451835076.002.A001

Source: INE, IPAED-2003

24. It is relevant to underscore the fact that the unemployment levels in the urban region registered from 2000 to 2003 evolved almost three-fold of the average observed in the entire country (48% in comparison to 14%, respectively.) It should also be noted that the decrease in the unemployment level observed in the country during 2003 in regards to the same period is due to the fact that it had decreased in the rural regions by a proportion that is 13 times greater than the unemployment growth registered in the urban region during the same period of time (- 20.3% in comparison to 1.6%, respectively.)

2.3. Fluctuations in the price of cocoa

25. According to the table presented below, one part of the cocoa for export of the national economy surpassed 2,603,050 kilograms in 2001 and reached 3,274,590 kilograms and 3,356,056 kilograms in 2002 and 2003, respectively.

Table 3:

Volume and Price of Exported Cocoa (2001–2003)

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Source: INE, 2004

26. The increase in kilograms was 25.8% between 2001 and 2002 while between 2002 and 2003 was only 2.5%.

27. It should be noted that, notwithstanding, the increase of the prices recorded in the table above, referring to the export of dry cocoa in the international market, the internal price of fresh cocoa did not surpass 2,000.00 dobras. This reveals that the differential in prices between the cocoa that the growers sell for export and that it is sold dry for the international market was respectively 5,407.1, 10,778.8, 15,203.9 between the years 2001 and 2003.

28. This situation does not stimulate cocoa producers to sell fresh cocoa which is more anachronistic when we know that the growers who produce cocoa and sell for export because of the lack of knowledge and access to the international market, are confronted with an increase in the price of insumos for the treatment of cocoa.

29. The studies that were carried out reveal that in one area of a hectare with 1111 cocoa plants, the grower needs the following in order to fight against illnesses and plagues during one year:

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30. Such costs imply that the grower would have to produce 240 kilograms of cocoa to support the cost of the fertilizers. Since we need to add to these costs the expense of man labor for cleaning, grass-cutting, rat poison and work tools, cocoa sold at less than 2,000.00 does not pose a benefit for the growers.

31. Because of this and other reasons, we witness the abandonment of lands that were given by the State through a process of privatization. Activities are then transposed to other types of products that are more advantageous such as the extraction of palm wine, the production of sugar cane for spirits, among others.

2.4. Tourism Growth

32. According to the data in Table 3, the influx of tourism grew by an annual average rate of 36.5% between the years 1999 and 2003. The year 2003, for diverse reasons, yielded the highest entry of tourists to the country reaching a variation of 46.3% in relation to the same period.

33. From 1998 to 2003, based on the data from Table 4, we can observe that there was no investment in hotel infrastructure (hotels, motels, inns) which is a basic condition for attracting tourists.

Table 4:

Entry of passengers into national territory according to country of origin

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Source: Tourism and Hotel Directory/Migration and Frontier Service *1st semester of 2004
Table 5:

Major indicators of Tourism

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Source: Tourism and Hotel Directory/Migration and Frontier Service

34. As one of the envisioned goals in the Strategy for the Promotion of Tourism and the increase of tourist influx to 7.5% per year, it is necessary that the competent entities do more in the area of tourism, namely creating incentives and competition.

35. The government already possesses a Strategic Plan for the Development of Tourism (Plano Estratégico de Desenvolvimento do Tourismo, PEDT) that contemplates the study of the market as one of the guiding factors to make the sector become a major engine of increase and diversification of the national income from now until the year 2008/2010.

36. These objectives/strategies envision the following: increase in a significant way the contribution of the sector for the PIB (excluding the oil sector) from 5% to 7%, starting 2005, toward the promotion of tourism as one of the principal engines of increase for the medium term; develop direct employment in the sector and maximize its revolving effect; value the natural, architectural and socio-cultural patrimonies; develop ecotourism and resort tourism; ensure for private enterprises the necessary conditions for development in its sector.

2.5. The Liberalization of Telecommunications

37. The Directive Plan of Telecommunications was elaborated in 1989 and has since been readapted to take into consideration the numerous changes in the realm of technology, of international regulations and of internal institutional evolutions.

38. The process of creation in 1990 of the Companhia Santomense de Telecomunicaçoes (CST) (Sao Tomean Company of Telecommunications), an entity of mixed economy, the development of the sector is narrowly linked to the concession contract signed December 1st, 1989 between the government and the Campanhia Portuguesa Radio Marconi where an agreement of exclusivity was reached for 20 years.

39. However, although the society created is allowed to reach relatively satisfactory results in terms of the development of networks and of the quality of borrowed services, taking into consideration the global evolution of telecommunications and the opportunities afforded by the opening of the market to new operators, and in the process of more recent negotiations established that this status of exclusivity would prevail only until December 31st of 2005.

40. In the meantime, Law 3/04 was approved which defines the applicable rules for the establishment, the management and the exploration of national telecommunication networks and of telecommunication services and established that the regulation of the telecommunications sector would be realized by a Regulation Authority with the purpose of favoring the emergence of an open market that favors competition with new partners.

Law that defines the applicable rules for the establishment, the management and the exploration of national telecommunication networks and telecommunication services

Law 3/04, published in Diário da República no. 6 of July 2, 2004, recognizes that telecommunications constitute a key sector for the economic development of the country because of its geographic isolation as well as because it is indispensable for the implementation of industry and services.

This law also recognizes that telecommunications also constitute a monopoly of the State and that it is necessary to take measures to promote new services and to rationally manage the tariffs.

As a consequence, this law seeks to constitute the base of a regulation adequate to the modernization of nets and of telecommunication services and to the progressive opening of the telecommunications market to the competition.

By the same token, this law seeks to clarify the responsibilities of the State and of the net operators and of the telecommunications service providers, limiting them to new guidelines (licenses for public networks, authorizations for independent networks or simple declarations for the establishment of services utilized as independent networks or simple declarations for the establishment of services utilizing complete or partial third-party networks.)

In order to assure the regulation of the telecommunications sector, with the purpose of favoring the emergence of an open market, this law establishes the creation of a Regulation Authority in charge also of providing advice to the government in matters of telecommunications whose orientations and priorities seek to guarantee the extension of the coverage area for telephone services, namely favoring the implantation of public posts.

2.6. Oil resources management

41. The mindful management of oil resources is at the center of the citizens’ concerns considering the possibilities that could emerge for the improvement of their life conditions.

42. It is not known with certainty the potential of the existing hydro carbonates and of their commercial viability, but negotiations culminating in the delimitation of marine borders with neighboring countries, namely Gabon and Equatorial Guinea, will be carried out at the right time.

43. In the meantime, there are plans to register a progress for both conducive procedures toward oil prospects and for future production and exploration from the perspective of rules that should define the forms of use as well as the utilization of oil revenues.

44. In July of 2004 Sao Tome and Principe and Nigeria signed the Declaration of Abuja, outlining the transparency and good governance in the Zone of Joint Development that will need to be upheld in all the shared contracts of oil business production between the two countries.

45. In October of 2003, the first bidding of blocs in the Zone of Joint Development was organized in S. Tome, and, as a consequence, it was projected that in January of 2005 the signing of the first joint contract of production related to one of the blocs (bloc 1) will take place.

46. The process for the second bidding to take place in Abuja, during the last trimester of 2004 (December of 2004), expects to see the signing of new joint contracts of production encompassing five blocs which will enable the collection of revenues that could contribute to the maintenance of economic development.

47. In the meantime, the Law of Oil Revenues (see Box 1) was approved in December of 2004, after its elaboration and approval by the National Assembly on November 26, 2004, having previously had a broad discussion around this matter such as the involvement of civil society.

Law on Oil Revenues

On December 29, 2004 the president of the Republic ratified the oil revenues law approved by the National Assembly plenary that regulates payment and utilization of oil revenues related with operations of oil exploration both in the joint development zone (JDZ) of Sao Tome and Principe with Nigeria in the Exclusive Economic Zone of Sao Tome and Principe.

The law utilizes the principal lessons learned from international experiences whereby the Sao Tomean people become major beneficiaries of this mineral richness.

To that effect, the law created an account - The National Oil Account - where all oil revenues should be directly deposited and there were also defined mechanisms to assure that the revenues be utilized to the benefit of national development. Thus, it foresees mechanisms to prevent the revenues from being channeled to other accounts. The revenues can only be deposited in a State National Treasury Account or in opened accounts created for that purpose, with an authorization of the national Assembly on behalf of the State.

Quantitative and qualitative limits will be introduced to oil revenues that could be channeled to annual budget expenditures. The first will define with certain amplitude the maximum amount of annual financial expenditures related to oil. The second set of limits will establish the basic principles that define the calculation of those expenditures within the maximum fixed limits. Despite these limits, the guiding principle applied to oil revenue utilization should be a prudent fiscal policy. The No. 5 of article 8., foresees that an annual figure should always be in conformity with inflation goals. This amount will be determined by the minister of Planning and Finance, in consultation with the Central Bank, and taking in consideration the capacity of economy for absorption. The law also prohibits the santomean State from making loans utilizing current or future oil revenues as the guaranty for the same.

The transparency of the annual figure in the National Oil Account for the National Treasury should be approved by the National Assembly within the parameters of the State General Budget approval, and will be utilized mainly to finance objectives and programs defined in the National Strategy for Poverty Reduction.

The finite nature of oil resources was also considered as well as the need to introduce mechanisms that allow Sao Tome and Principe to face the era after the oil boom with a minimum of economic repercussions. Because of this, a sub-account of reserve was created- the permanent Fund of Sao Tome and Principe - where part of the oil revenues should be deposited and whose utilization is strongly limited only to revenues generated by its applications. When the oil resources are depleted, the intention is that the Sao Tomean people can still continue benefiting from the revenues generated by applications of this sub-account.

The management and investment of oil revenues are assigned to a committee for management and investments, which is an institution with competence and accredited by law for said purpose. It should act as a prudent investor, based on principles established in the same law and in the policy of management and investment.

Another aspect that the law centralize on is transparency. The law also defined the mechanisms of auditing, advertising and fiscalization of oil resources management.

Two annual audits are planned for the oil accounts where the revenues will be deposited. One audit will be conducted by the National Accounting Court (Tribunal de Contas) and the other will be carried out by an audit firm with international reputation.

Clear rules about transparency and advertising are established in connection to all acts and documents related to exercises of oil activity. On the other hand, this law introduces mechanisms that limit the confidentiality of contracts that have oil resources or revenues as their goals, and includes registry and mandatory advertising of all documents and information related to the sector. Conversely, everyone has ample access to the information.

A commission for Oil Fiscalization is also created with characteristics of independence and with administrative and financial autonomy, which permits an efficient exercise of power to audit, investigate and sanction.

Lastly, the law establishes a set of incompatibilities to the exercise of responsibilities in the organisms created by the law and aggravates by at least one third, the sanctions normally stipulated in the law to punish conduct that violates dispositions of the present law.

2.7. Education and health expenditure

48. According to Table 6, the study carried out for the National Strategy for Poverty Reduction (ENRP) in Sao Tome and Principe allocated a mounting total of $26,517 millions (USD) for the sectors of health and education for the period between 2005 and 2007.

Table 6:

ENRP Programming for the 2005–2007 period

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Source: ENRP, PIP-2005

49. Of the amount allocated for the above-mentioned period, the distribution of monies for the health and education sectors will be $14,050 million (USD) and $12,458 million (USD) corresponding to the 53% and 47% levels, respectively.

50. According to that data in the table above, there is a somewhat similar distribution between these two sectors which shows the importance that these two areas have for the nation’s development strategy. The expenditures allocated for the education sector represent a trend of growth within three years whereas the projection for those three years in the health sector demonstrates an equal distribution. This is due to the fact that the PIP of 2005 was utilized as a reference base assuming that the revenues during the next two years (2006 and 2007) would revolve around more or less around what was budgeted for this sector in the PIP of 2005, depending on the circumstances and on the country’s needs.

51. According to Table 7, in comparative terms to the level of accomplishment in both sectors, it is stated that the education sector achieved a positive level of growth in the amount of 80.2% while the growth for the health sector was negative (-65.95%) during the same period of analysis.

Table 7:

PIP for the Health and Education Sectors from 2003 to 2004

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Source: Planning Directive – PIP, 2003 and 2004

52. Of the total accomplishments, it is indicated here that both the education and the health sectors reveal a level of growth in the amount of 5.14% during the years 2003 and 2004 (1st semester.)

2.8. Macroeconomic context

53. Between 2000 and 2003, significant progress was achieved in raising investment and growth while containing inflation. Growth in real GDP accelerated during that period, reaching 4.5 percent by 2003, while inflation was remained stable at around 9 percent. Investment averaged 36 percent of GDP.

54. The strong growth performance was achieved against the backdrop of continued diversification of the economy and expansion of private sector activity. In a reflection of the success of the new sectoral strategies for tourism and agriculture the economy has become primarily service-oriented, with tourism now the principal foreign exchange earner, from an economy that until the end of the 1990s was predominantly reliant on cocoa. The agricultural sector itself has also witnessed significant diversification, with the cultivation of pepper and vanilla having taken off and plans are currently under way for the commercialization and export of these activities. To support the diversification process and create the necessary conditions that would be conducive to further expansion of the private sector, a broad-based privatization program has been prepared and a new investment code will shortly be presented to the National Assembly for approval.

55. Success in implementing structural reforms has also played a key role in supporting growth. With assistance from the World Bank and the IMF, Sao Tome and Principe has implemented a series of structural reforms including privatization of public enterprises, adoption of a semi-automatic pricing mechanism for petroleum products, that better reflect production cost while protecting the most vulnerable groups. Moreover, in 2001 a civil service reform was implemented, which involved downsizing of the civil service by 320 public and 158 utility employees, and the establishment of a single computerized system of civil service and payroll management.

56. To minimize the degree of external vulnerability, maximum efforts have been made to meet the conditions that would enable Sao Tome and Principe to reach the completion point under the HIPC Initiative. Most of the HIPC completion point triggers have been satisfied, including: (i) the preparation and approval by the National Assembly of transparent legislation for management of petroleum resources; (ii) the establishment of a technical petroleum unit dealing with the sectoral issues such as re-negotiations of old contracts since 2002; the establishment of a National Committee on Petroleum (NCP); and (iii) the creation of the National Petroleum Agency (NPA) (in charge of designing the necessary legal framework and institutions to supervise and regulate the sector). Other completion point triggers including in the social areas and the creation of the Fiscal Tribunal (Tribunal de Contas) that has been functional since mid-June 2003, have also been met.

57. Important reform in the area of fiscal administration has also been implemented during 2000-03. The governments’ accounting and budgeting systems have been updated to bring them more in line with international standards; the tax code is being modernized, customs rates have been simplified; the information system has been modernized, including adoption of the SYDONIA information system; human capacity has been reinforced; and the services of the Ministry of Planning and Finance has been decentralized from a single Directorate of Finance to individual directorates (Treasury; Budget; Tax, Planning etc). Moreover, a revised tax code and package of tax reform that includes the recommendations of the 2001 FIAS report will shortly be submitted to the National Assembly for approval.

58. Despite the significant progress in boosting growth and implementing structural reform, policy implementation suffered a setback in 2001 because of fiscal and structural reform slippages. The fiscal situation worsened in 2003 as the government, reestablished after the July 2003 military coup, increased expenditure as it sought to address social and political pressures brought about by extreme poverty. The fiscal imbalances widened further in 2004 as a result of expenditure pressures in anticipation of very large oil signature bonuses that had been expected for this year. In the event, the bonuses did not arrive, resulting in a larger than expected fiscal deficit. Provisional data show a primary fiscal deficit of 22 percent of GDP, from 12 percent of GDP in 2003, mainly reflecting rapid growth in government expenditure, including increases in the government wage bill, spending on goods and services, and transfers. Meanwhile, external debt arrears had continued to accumulate. As a result, the economy remains fragile and important internal and external remain.

59. Recognizing that the large imbalances caused by the high expenditure are unsustainable and could undermine the prospects for growth and poverty reduction the São Toméan government has decided to implement a package of measures over the period 2005–2007 that would aim at correcting the widening macroeconomic imbalances. The program, for which the authorities are seeking the support of the Bretton Woods institutions, will aim at fiscal consolidation, monetary stabilization, implementation structural reform and improvement the sustainability of the country’s external debt.

60. While GDP growth is expected to slow down in 2005 in response to tight financial policies, the program aims at realizing real GDP growth of 5.5 percent by 2007, in anticipation of increased in activity in the services sector. Inflation is projected to return to single digits by end-2007. The program also envisages maintaining gross international reserves at around 3½ months of imports, while the current account deficit will be contained in response to the expected improvement in the fiscal sector.

61. Structural reform will remain an important element of the medium-term strategy to achieve macroeconomic stability. These will include reform of public enterprises to improve the financial position of these enterprises, notably the utility enterprise, EMAE for which a strategy will shortly be implemented. In the communication sector, following the renegotiation of the exclusivity agreement the telecom parastatal CST, will now only continue until January 2006, after which the market will be open for competition. A commission to address land tenure reform will shortly be established.

62. Satisfactory performance under the program would also allow São Tomé and Príncipe to reach the completion point under the HIPC initiative in the second half of 2006. São Tomé and Príncipe’s will nevertheless, continue to be donor-dependent over the medium term. The main features of macro-economic scenario are summarized in the attached tables. The government is of the view that the macro-economic objectives would be achievable under the following conditions:

  • Peace and political stability

  • Prudent macroeconomic and financial management

  • Transparency in oil sector activity

  • Strong investment in social spending and toward poverty-reduction

  • Further diversification of the economy

  • Expansion of trade through regional integration and renegotiation of new trade agreements

  • Improved communication and transportation

  • Reform of public enterprise to improve efficiency and make these enterprises more commercially oriented

  • Implementation of further structural reforms

2.9. Implementation structure

63. The National Strategy for Poverty Reduction (ENRP) defined the creation of an implementation, follow-up procedure and evaluation mechanism as one of two fundamental axes of this strategy. This mechanism would not be subject to institutional changes but would, instead, correspond to the needs of the performance evaluation.

64. As a consequence of the considerations made and taking into account the institutional reality of the country, the government projects the creation of an implementation structure, part of the National Strategy for Poverty Reduction, with the following characteristics:

  • A Ministerial Council;

  • A Consulting Council;

  • A Poverty Reduction Observatory;

  • Focal Points (Antennas)

65. The Ministerial Council will carry out the orientation and supervision of the activities related to the achievement of the ENRP’s Plan of Action.

66. The Ministerial Council will convene at least twice a year under the chairmanship of the Prime Minister and the chief of government. In his or her absence or inability to attend, the minister of planning should chair.

67. The members of the Ministerial Council will be the ministers responsible for the areas of planning, cooperation, education, youth, health, labor, solidarity, social communication, agriculture and rural development.

68. Other members of government who have programs or projects enrolled the ENRP’s Plan of Action can also be invited to participate in the Ministerial Council.

69. After listening to non-governmental organizations, such as civil society organizations and representatives of the private sector, the Consulting Council will need to emit recommendations about the periodic reports associated with the achievement of the National Strategy of Poverty Reduction, before being submitted to the Ministerial Council.

63. The Consulting Council will meet at least twice a year with the request of the presiding minister responsible for planning.

64. Public individuals or representatives of collective entities - namely the local officials, the Federation of NGOs, the Sao Tome Women’s Forum, youth organizations, labor unions, the private sector, professional associations, churches and civil society in general - will participate in the Consulting Council.3

65. The Observatory of Poverty Reduction (Observatório da Redução da Pobreza, ORP) will be created in direct consultation with the minister in charge of planning and will have the following capabilities:

  1. to ensure the implementation the ENRP’s Plan of Action and the accomplishment of the defined goals;

  2. to update and adjust the ENRP;

  3. the make compatible the goals of strategic poverty reduction with the goals of the development of the millennium;

  4. to analyze all the debt reduction initiatives in the country and promote the coordination of these;

  5. to promote surveys and inquiries that will allow the collection of data and information about the evolution of poverty;

  6. to establish a reliable database envisioning a periodic update of the country’s poverty profile and to develop studies about its different dimensions;

  7. to elaborate periodic reports about the process of implementation, follow-up procedure and evaluation of the government;

  8. to carry out any other functions determined by a superior power.

66. The organization and functioning of the Observatory of Poverty Reduction will be subject to self-regulation to be approved by the consulting minister who will contemplate the following:

  • The Multi-Sector Technical Commission;

  • The Coordinator.

67. The Multi-Sector Technical Commission will generally meet with the presiding consulting minister to analyze matters that relate to the functioning of the Observatory of Poverty Reduction and the accomplishment of the respective plan of activities.

68. Besides, the specialists or technicians of the Observatory will integrate to the Technical Commission the focal points of the ministries and the remaining institutions responsible for the sectorial actions of the ENRP, as well as the representatives of the National Institute of Statistics and of the institutions responsible for planning together with the Ministry of Planning and Finance.

69. The Coordinator will be named by the consulting minister and will represent the Observatory of Poverty Reduction before public or private entities and will coordinate all its activities.

70. It will be the Coordinator’s responsibility to present the plans and reports of activities and to organize the different meetings of the Ministerial and Consulting Councils as well as those of the Multi-Sector Technical Commission.

71. The technical staff of the Observatory of Poverty Reduction will be subject of the approval by the consulting minister taking into consideration the availability of the Economic Planning Directive.

72. With the purpose of coordination and follow-up procedures, the ministries and remaining institutions responsible for the actions integrated into the ENRP’s Plan of Action will need to indicate the respective Focal Points (Antennas) of the Observatory of Poverty Reduction.

73. The activities of the Observatory of Poverty Reduction will be carried out as often as necessary in close collaboration with the assigned institution for economic and social planning together with the ministry responsible for planning and with the National Institute of Statistics, all of whom will be obligated to cooperate.

74. It will be the responsibility of those institutions to organize themselves in a way that will allow them to effectively respond to the requests made by that institutional collaboration.

2.10. Expected Consciousness-Raising Meetings

75. During the period that will follow the approval of the ENRP, the country will experience episodes of significant social tension and changes in officials or representatives of institutions responsible for the implementation of the programmed actions.

76. This fact will make the renewal of contact with the officers necessary for its implementation. On the other hand, once the mechanism is created, the consequential and sustainable success of the process will not be guaranteed while there is still a risk of quantitatively superior resources being used outside of the defined strategy.

77. On the other hand, the creation of Focal Points (Antennas) in ministries and other institutions that are directly compromised or involved in strategic projects of poverty reduction will determine the urgency of a preparation envisioning the exchange of information about the progress of the respective projects to be able to offer a systematic appreciation and evaluation of the accomplishments made.

78. In what follows, the subsequent consciousness-raising meetings are anticipated:

  • A symposium on the role that the military and paramilitary forces will play in poverty reduction;

  • A symposium about the contribution social communication organisms to inform, raise consciousness and mobilize the public on the issue of poverty reduction;

  • Meetings among leaders and/or representatives of institutions directly involved in the creation of information about the need for Focal Points (Antennas);

  • A seminar for the preparation of Focal Points (Antennas) about the importance of their participation in the methodology of the procedure manual to be elaborated.

2.11. Plan of action and current situation relative to its implementation

79. Changes and updates made will be necessary in order to proceed with the revision of the Plan of Action taking into fundamental account the new periods considered for the implementation priority actions. That process also allowed the recording of an actual situation associated with some of the programs and projects whose completion was projected for 2003 and 2004.

80. For the purpose of evaluation of the progress reached, during the process of the ENRP implementation there was the inclusion of indicators associated with priorities or measures susceptible of being periodically verified.

81. The Plan of Action thus reviewed, includes synthesized information of the current situation, as well as a list of indicators, contained in appendix.

2.12. Budget

82. Considering that education, health, infrastructure, agriculture and rural development, good governance and economic and financial policies were defined as priorities, the projected budget deserves to be discussed in greater detail.

Table 8:

Programming Organized by Goals and Priorities

(values are indicated in thousands of U.S. dollars)

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Graph 2:
Graph 2:

Percentage of the Expenditure of Strategic Axes

Citation: IMF Staff Country Reports 2005, 334; 10.5089/9781451835076.002.A001

83. On the short term (2005–2007), the actions leading to the creation of revenue, centered in basic infrastructures and in the activities of the primary sector (which includes energy, water and sanitation, agriculture, livestock, fishing, forestry and infrastructures), will absorb 66.4% of the resources.

84. The activities related to the Access to Basic Social Services represent 31.7% of the total resources during the period between 2005 and 2007. It is important and necessary to understand that the levels of expenditure by sectors are adjusted according to the circumstances and economic needs of the country.

85. It should be noted that only 39.8% of the total programmed actions are concentrated during the 2005–2007 period which creates difficulties in formulating medium/long-term provisions due to the fact that production varies too much from year to year, besides, most of the production factors are imported in foreign currency that has subjacent monetary policies that often don’t go in line with our objectives.

Table 9:

Programming by type of resources

(value are presented in thousands of U.S. dollars)

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Graph 3:
Graph 3:

Programming by type of resources

Citation: IMF Staff Country Reports 2005, 334; 10.5089/9781451835076.002.A001

86. Regarding the expenditure category, most of the resources will be channeled toward Civil Construction (51.5%), not giving more priority to this sector, but due to the fact that this sector has subjacent raw materials in large part imported in currency that is strongly valued in relation to the national currency (like the Euro, for example.)

Table 9:

Financing Sources for the PIP – 2005

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87. The completion of the programmed activities for 2005 (Table 9) requires the mobilization of $30,483,700 USD with a distribution of the financing sources above illustrated.

3. APPENDIX

Table 11.

São Tomé and Principe: Financial Operations of the Central Government, 2001-07 (Concluded)

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Table 12.

São Tomé and Principe: Financial Operations of the Central Government, 2001-07 (Concluded)

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Sources: São Tomé and Príncipe authorities; and staff estimates and projections.

During 2004-07, includes US$1.4 million in re-exports of oil arising from aid in kind from Nigeria.

Savings from assistance under the HIPC Initiative.

Under the arrangement with Nigeria, São Tomé and Príncipe could defer payments on its 2002-04 contributions to the Joint Development Agency until after receipt of the first oil signature bonus.

Severance packages totaling Db 8,000 million were financed by a Structural Adjustment Facility grant from the European Union in 2001-02.

Interest arrears on Paris Club debt.

For 2002-04, includes three US$5 million loans from Nigeria to be repaid in 2005. Repayment of these loans have been rescheduled to 2008. In 2004, it also includes a US$1 million loan from Angola. A further US$ 1 million is expected to be borrowed from Nigeria in 2005 but to be repaid within the same year.

For 2006–10, drawings from the oil fund are equivalent to 20 percent of the fund at end-2004 (in line with the draft oil legislation). Interest income is not included here.

For 2004, reflects arrears on external debt service payments to the Paris Club. For 2005, reflects impact of prospective Paris Club rescheduling.

Includes HIPC Initiative-related social expenditure.

Excluding oil revenue, grants, interest earned and scheduled interest payments, foreign-financed capital outlays. For 2002-04, it also excludes arrears to the JDA to be repaid with proceeds from the oil signature bonus.

ACTION PLAN

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