Gabon
Second and Third Reviews Under the Stand-By Arrangement and Requests for Waiver of Nonobservance of Performance Criteria and Modification of Performance Criterion: Staff Report; Press Release on the Executive Board Discussion; and Statement by the Executive Director for Gabon
Author: International Monetary Fund
Publication Date:
01 Apr 2009
eISBN:
9781451814040
Language:
English
Keywords:
ISCR; CR; government; price; Executive Board discussion; plan; factor income; Eurobond proceeds; tertiary sector; primary sector; after-tax profits; Oil; gas and mining taxes; Arrears; Global
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This paper presents key findings of the Second and Third Reviews for Gabon under the Stand-By Arrangement. Performance under the program has been mixed. Non-oil economic growth was robust prior to the onset of the international financial crisis, spurred by high oil and commodity prices. However, little progress has been made to bring the non-oil fiscal deficit to a sustainable position. IMF staff supports the authorities’ request for waivers for nonobservance of the performance criteria and recommends completion of the second and third reviews.

Abstract

This paper presents key findings of the Second and Third Reviews for Gabon under the Stand-By Arrangement. Performance under the program has been mixed. Non-oil economic growth was robust prior to the onset of the international financial crisis, spurred by high oil and commodity prices. However, little progress has been made to bring the non-oil fiscal deficit to a sustainable position. IMF staff supports the authorities’ request for waivers for nonobservance of the performance criteria and recommends completion of the second and third reviews.

I. Recent Developments and Program Performance

1. Economic performance in 2008 has been influenced by developments in international oil and commodity markets (Table 1):

  • GDP growth fell to 2 percent in 2008. Non-oil growth was robust in the first half of 2008, spurred by high oil and commodity prices. It subsequently slowed as Gabon's three main industries—oil, timber, and manganese—were hard hit by the weakening global economy. Oil sector GDP declined 1.2 percent in 2008 due to a 2-week labor strike and delays in bringing marginal fields on-stream.

  • After peaking at 6.9 percent in January, inflation fell to 5.6 percent at end-2008, with the continued high inflation in part reflecting high food prices. In April 2008 the government suspended the import duties, value-added tax, and fees charged by public entities on key food products; capped profit margins on rice and flour; and increased subsidies on flour and rice, as well as on diesel for the fishing sector. The measures, which have been renewed, are estimated to cost 0.36 percent of non-oil GDP in 2008.

  • Fiscal policy was tightened less than planned. The non-oil primary deficit (NOPD) was an estimated 13.8 percent of non-oil GDP in 2008—down from 18 percent in 2006, but 3.8 percent above the program target. This was largely due to lower non-oil revenue, reflecting lower VAT and customs revenues, higher than planned fuel subsidies in the face of rising oil prices and the absence of adjustment to domestic fuel prices, and spending overruns related to local elections.

  • The regional central bank (BEAC) lowered interest rates on its credit and deposit facilities in December 2008 in response to the international financial crisis. The international financial crisis and the resulting global recession have thus far had little impact on bank soundness, as Gabonese banks avoided counterparty-risk induced losses (Table 8).

  • The real effective exchange rate (REER) rose almost 9 percent over 2007–08, as the US dollar weakened against the euro and inflation was higher than in trading partners. The recent strengthening of the dollar has reversed some of the earlier gains.

  • Gabon's external position has been strong and the BOP in surplus. However, as a result of the larger NOPD and repayments of state-owned enterprise debts, the accumulation of public assets fell short of projections.

uA01fig01

Gabon: Real GDP Growth

Citation: IMF Staff Country Reports 2009, 107; 10.5089/9781451814040.002.A001

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Gabon: Inflation

Citation: IMF Staff Country Reports 2009, 107; 10.5089/9781451814040.002.A001

uA01fig03

Gabon: Fiscal Balance

Citation: IMF Staff Country Reports 2009, 107; 10.5089/9781451814040.002.A001

uA01fig04

Gabon: Government Revenues (+) and Expenditures (-) in percent of GDP

Citation: IMF Staff Country Reports 2009, 107; 10.5089/9781451814040.002.A001

uA01fig05

Gabon: Effective Exchange Rates

Citation: IMF Staff Country Reports 2009, 107; 10.5089/9781451814040.002.A001

uA01fig06

Gabon: Balance of Payments, 2003-13

(percent of GDP)

Citation: IMF Staff Country Reports 2009, 107; 10.5089/9781451814040.002.A001

Table 1.

Gabon: Selected Economic Indicators, 2006–11

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Source: Gabonese authorities, and IMF staff estimates and projections.Notes: Country Report 08/24 is the Board document for the first review under the SBA issued in Jan. 2008.

Based on the new Harmonized Consumer Price Index with weights derived from Gabon's 2005 household expenditure survey.

Excluding oil revenue, restructuring costs, and, since 2008, capital transfers related to assumption of debt from public enterprizes undergoing privatization or restructuring. Prior to 2008, government assumption of debt from public enterprizes was not recorded in the budget. Calculated on a payments order basis.

Table 2.

Gabon: Summary of Real Sector Developments, 2007–11

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Source: Gabonese authorities, and IMF staff estimates and projections.
Table 3.

Gabon: Central Government Accounts, 2007–11

(Billion of CFA francs unless otherwise indicated)

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Source: Gabonese authorities and IMF staff estimates and projections.

Country Report 08/24 is the Board document for the first review under the SBA issued in Jan. 2008.

Excluding oil revenue, restructuring costs, and, since 2008, capital transfers related to assumption of debt from public enterprizes undergoing privatization or restructuring. Prior to 2008, government assumption of debt from public enterprizes was not recorded in the budget. Calculated on a payments order basis.

Table 4.

Gabon: Central Government Accounts, 2007–11

(Percent of non-oil GDP)

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Source: Gabonese authorities and IMF staff estimates and projections.

Country Report 08/24 is the Board document for the first review under the SBA issued in Jan. 2008.

Excluding oil revenue, restructuring costs, and, since 2008, capital transfers related to assumption of debt from public enterprizes undergoing privatization or restructuring. Prior to 2008, government assumption of debt from public enterprizes was not recorded in the budget. Calculated on a payments order basis.

Table 5.

Gabon: Balance of Payments 2007–11

(Billion of CFA francs)

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Sources: Gabonese authorities and IMF staff estimates and projections.Note: The latest official BOP statistics are for 2005. The presented data are Fund staff estimates. Official external trade data are mostly based on estimates, which are not cross-checked with customs data. Data on other items of the current account are not very reliable due to low response rates to enterprise surveys, despite partial correction through adjustments. Foreign direct investment in the financial account is likely to be underestimated owing to insufficient detail in the oil sector survey. The magnitude and detailed breakdown of private capital flows, particularly short term, suffer because data are not comprehensive.

Primarily by oil, logging, and mining companies.

In Fund staff estimates, this item balances the BOP (i.e., includes net errors and omissions).

Gabon is a member of the Central African Economic and Monetary Community (CEMAC) and its regional central bank (BEAC). Gross reserves in the table are BEAC gross reserves imputed to Gabon.

Table 6.

Gabon: Monetary Survey, 2007–09

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Source: Gabonese authorities and IMF staff estimates and projections.

The spike of net foreign assets and central government deposits at end-2007 is related to the financing of the Paris Club debt buyback. Gabon issued US$1 billion Eurobond in December 2007, the proceeds of which were credited to a government account in a local bank that placed the funds in a bank abroad. In January 2008 the Eurobond proceeds were used to finance the Paris Club debt buyback.