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IMF Country Report No. 20/139

DEMOCRATIC REPUBLIC OF SÃO TOMÉ AND PRÍNCIPE

REQUEST FOR DISBURSEMENT UNDER THE RAPID CREDIT FACILITY—PRESS RELEASE; STAFF REPORT; AND STATEMENT BY THE EXECUTIVE DIRECTOR FOR THE DEMOCRATIC REPUBLIC OF SÃO TOMÉ AND PRÍNCIPE

April 2020

In the context of the Request for Disbursement Under the Rapid Credit Facility , the following documents have been released and are included in this package:

  • A Press Release including a statement by the Chair of the Executive Board.

  • The Staff Report prepared by a staff team of the IMF for the Executive Board’s consideration on April 21, 2020, following discussions that ended on April 20, 2020 with the officials of the Democratic Republic of São Tomé And Príncipe on economic developments and policies underpinning the IMF arrangement under the Rapid Credit Facility. Based on information available at the time of these discussions, the staff report was completed on April 14, 2020.

  • A Debt Sustainability Analysis prepared by the staffs of the IMF and the International Development Association (IDA).

  • A Statement by the Executive Director for the Democratic Republic of São Tomé And Príncipe.

The documents listed below have been or will be separately released.

  • Letter of Intent sent to the IMF by the authorities of the Democratic Republic of São Tomé And Príncipe *

  • *Also included in Staff Report

The IMF’s transparency policy allows for the deletion of market-sensitive information and premature disclosure of the authorities’ policy intentions in published staff reports and other documents.

Copies of this report are available to the public from

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PO Box 92780 • Washington, D.C. 20090

Telephone: (202) 623–7430 • Fax: (202) 623–7201

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International Monetary Fund

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© 2020 International Monetary Fund

Front Matter Page

DEMOCRATIC REPUBLIC OF SÃO TOMÉ AND PRÍNCIPE

REQUEST FOR DISBURSEMENT UNDER THE RAPID CREDIT FACILITY

April 14, 2020

Executive Summary

Context. The COVID-19 pandemic is taking a heavy toll on São Tomé and Príncipe. Tourist arrivals came to an abrupt halt in mid-March, externally financed projects are being delayed, and international supply-chains are disrupted. The challenging circumstances are further affected by the fragility of the economy and a weak health care system.

Request for Fund support. In the attached Letter of Intent (LOI), the authorities request financial assistance of SDR 9.028 million (US$12.263 million, which is 61 percent of quota, or 3 percent of GDP) under the exogenous shocks window of the Rapid Credit Facility (RCF) to meet the urgent balance of payments and fiscal needs caused by the COVID-19 pandemic.

Policies. The authorities’ policies focus on immediate measures to protect against the virus, assistance to the most vulnerable, and countercyclical measures during this crisis. Public financial management will be reinforced to ensure the disbursement is used appropriately and steps will be taken to speed up the recovery next year. The authorities are committed to the ECF-supported program approved in October 2019, for which the first review will be conducted as soon as the current crisis situation stabilizes.

Staff assesses that the eligibility requirements for the RCF are met and supports the authorities’ request. While the country is in debt distress due to long-standing external arrears, the debt level is deemed sustainable, and there is adequate capacity to repay the Fund. The financing would help prevent a much more severe and prolonged contraction, with a substantial social impact.

Approved By

David Owen (AFR) and Kevin Fletcher (SPR)

An IMF team consisting of X. Li (head), C. Amo-Yartey, T. Iyer, L. Kolovich, and G. Srour (all AFR) held discussions with the authorities by video conferences led by Minister of Planning, Finance, and the Blue Economy Osvaldo Vaz, Governor of the Central Bank Américo Soares De Barros, and other senior government officials during April 9–10, 2020 via video conferences. Nadia Margevich, Vicky Pilouzoue (AFR) provided administrative support, and Weronika Synak (AFR) provided research support. Kelvio Carvalho da Silveira (OED) participated in the meetings. João Paulo Galvão, Alexandra Da Souza Costa, and André Marques Fernandes provided interpretation and translation during the mission.

Contents

  • CONTEXT

  • IMPACT OF THE PANDEMIC AND OUTLOOK

  • AUTHORITIES’ RESPONSE AND POLICY DISCUSSIONS

  • MODALITIES OF SUPPORT

  • RISKS

  • STAFF APPRAISAL

  • TABLES

  • 1. Selected Economic Indicators, 2016–24

  • 2a. Financial Operations of the Central Government, 2016–2024(Millions of new dobra)

  • 2b. Financial Operations of the Central Government, 2016–24 (In percent of GDP)

  • 3a. Balance of Payments, 2016–24, (Millions of Dollars)

  • 3b. Balance of Payments, 2016–24, (In percent of GDP)

  • 4. Indicators of Capacity to Repay the Fund, 2020–34

  • APPENDIX

  • I. Letter of Intent

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DEMOCRATIC REPUBLIC OF SÃO TOMÉ AND PRÍNCIPE

REQUEST FOR DISBURSEMENT UNDER THE RAPID CREDIT FACILITY—DEBT SUSTAINABILITY ANALYSIS1

April 14, 2020

Approved By David Owen and Kevin Fletcher (IMF) and Marcello Estevão (IDA)

Prepared by the staffs of the International Monetary Fund and International Development Association.