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International Monetary Fund. African Dept.
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Publication Date:
26 Aug 2021
eISBN:
9781513592107
ISBN:
9781513592107
Language:
English
Keywords:
reform agenda; IMF's transparency policy; emergency financing from the IMF; Gabon staff team; ho me-grown program; Oil prices; Financial inclusion; Fiscal stance
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IMF Country Report No. 21/189

GABON

REQUEST FOR A THREE-YEAR EXTENDED ARRANGEMENT UNDER THE EXTENDED FUND FACILITY—PRESS RELEASE; STAFF REPORT;

SUPPLEMENTARY INFORMATION, AND STATEMENT BY THE EXECUTIVE DIRECTOR FOR GABON

August 2021

In the context of the Request for a Three-Year Extended Arrangement under the Extended Fund 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 July 28, 2021 following discussions that ended on June 7, 2021, with the officials of Gabon on economic developments and policies underpinning the Extended Arrangement under the Extended Fund Facility. Based on information available at the time of these discussions, the staff report was completed on July 16, 2021.

  • A Staff Supplement updating information on recent developments.

  • A Statement by the Executive Director for Gabon.

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

International Monetary Fund • Publication Services

PO Box 92780 • Washington, D.C. 20090

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

E-mail: publications@imf.org Web: http://www.imf.org

Price: $18.00 per printed copy

International Monetary Fund

Washington, D.C.

© 2021 International Monetary Fund

Press Release

PR21/233

IMF Executive Board Approves US$553.2 Million Extended Arrangement Under the Extended Fund Facility for Gabon

FOR IMMEDIATE RELEASE

  • The COVID-19 pandemic and the fall in oil prices have severely hit the Gabonese economy, deteriorating fiscal and external balances, and increasing unemployment and poverty.

  • The IM F Executive Board approved today a 36-month arrangement under the Extended Fund Facility (EFF) for Gabon, with access equivalent to US$553.2 million. The Board’s approval allows for an immediate disbursement equivalent to US$115.25 million for budget support.

  • The program aims to support the short-term response to the COVID-19 crisis and lay the foundations for green and inclusive private sector-led growth and a strong and sustainable recovery that benefits all Gabonese. Reforms will focus on creating fiscal space for priority social spending, reducing debt vulnerabilities, strengthening governance and transparency, and enhancing financial inclusion.

Washington, DC-July 28,2021: On July 28, 2021, the International Monetary Fund (IMF) approved a three-year extended arrangement under the Extended Fund Facility (EFF) for Gabon for SDR 388.8 million (about US$553.2 million), or 180 percent of Gabon’s quota, to navigate the COVID-19 pandemic crisis and support the implementation of the authorities’ 2021–23 Economic Recovery Strategy. The Board’s approval allows for an immediate disbursement equivalent to US$115.25 million for budget support.

The government’s proactive response helped contain the spread of COVID-19 and save lives. However, the pandemic and the fall in oil prices have severely hit the economy, increasing macroeconomic imbalances, and weighing on economic activity, unemployment, and poverty. While the economy is showing incipient signs of recovery, the outlook remains challenging and contingent on the pandemic path, effective rollout of the vaccines, and the implementation of structural reforms.

The authorities’ program aims at bolstering the country’s response to the pandemic, reducing fiscal and public debt vulnerabilities, and fostering sustainable, green, and inclusive private sector-led growth. To this end, efforts, including in improving governance and transparency to enhance domestic revenue, including from the oil and mining sectors, and spending efficiency, are essential to create fiscal space for much-needed investment and social spending. The Extended Arrangement will also support the broader CEMAC regional strategy reform agenda.

At the conclusion of the Executive Board’s discussion, Mr. Mitsuhiro Furusawa, Deputy Managing Director and Acting Chair stated:

“Gabon’s economy is gradually recovering after the COVID-19 pandemic-induced economic downturn in 2020. However, the pandemic and the sharp fall in oil prices have aggravated pre-existing economic and financial vulnerabilities, and the near-term outlook remains subject to considerable uncertainty and downside risks. A slow rollout of vaccines or further infection waves could delay the recovery to 2022 or beyond.

“The new arrangement under the Extended Fund Facility will support the country’s post-pandemic recovery and anchor reform implementation. The overriding priority remains saving lives and livelihoods. As the crisis abates, the focus will shift to tackle longstanding structural issues to put public debt on a firm downward trajectory and foster a high, sustainable, green, and inclusive private sector-led growth.

“The pace of fiscal consolidation should be aligned with the recovery needs. Fiscal policy should continue supporting the recovery in the near term. Once the recovery is on a solid footing, a more ambitious fiscal consolidation will be needed to reduce public debt levels and vulnerabilities while securing a high and inclusive growth. To this end, efforts, including in improving governance and transparency to enhance domestic revenue and spending efficiency, are essential to create fiscal space for much-needed investment and social spending.

“Advancing the structural reform agenda will also be important to sustain a durable and inclusive recovery. Enhancing the banking sector and financial inclusion, improving the business environment, and strengthening the anti-corruption framework would address some longstanding bottlenecks in the economy and promote private investment and inclusive growth.

“Gabon’s program is supported by the implementation of policies and reforms by the CEMAC regional institutions in the areas of foreign exchange regulations and monetary policy framework, and to support an increase in regional net foreign assets, which are critical to program’s success.”

Gabon: Selected Economic Indicators

article image
Sources: Gabonese authorities; World Development Indicators; and IMF staff estimates and projections.

Title page

GABON

REQUEST FOR A THREE-YEAR EXTENDED ARRANGEMENT UNDER THE EXTENDED FUND FACILITY

July 16, 2021

EXECUTIVE SUMMARY

Context. The Gabonese economy was gradually recovering from the 2014 oil price shock when it was hit by the Covid-19 pandemic. Decisive confinement measures have helped save lives, but the pandemic and the fall in oil prices have severely hit the economy, increasing unemployment and poverty. With a weak economy and increased COVID-19 related spending, the fiscal deficit has widened, with a sharp increase in public debt. Emergency financing from the IMF through the Rapid Financing Instrument (US$299.61 million) helped meet urgent balance of payment needs in 2020. Growth is expected to resume in 2021 but the pandemic has made the economic outlook very challenging and generated sizable financing needs over the medium term.

Program. The authorities have requested a new three-year EFF-arrangement of 180 percent of quota or SDR 388.8 million. In addition to bolstering the country’s response to the pandemic, the new IMF-supported ho me-grown program aims at reducing fiscal and debt vulnerabilities and fostering a high, sustainable, green, and inclusive private sector-led growth. The program envisages frontloading critical governance measures that lock in higher domestic revenue collection and better public resource management. Additional revenue, and improved expenditure composition and public finance management will expand room for large and urgent development needs while preserving debt sustainability. Furthermore, the program will strengthen financial sector soundness, promote financial inclusion, and enhance the business environment. The new Extended Arrangement will help the country address protracted external and fiscal needs and support the reform agenda and the broader CEMAC regional strategy.

Staff views. Staff supports the authorities’ request for an EFF arrangement. The Letter of Intent and Memorandum of Economic and Financial Policies provide for appropriate policies to reach the goals of the authorities’ program. Nevertheless, the uncertainty surrounding the Covid-19 pandemic and oil prices, institutional capacity weaknesses and a fragmented political landscape ahead of the presidential elections in 2023 could slow program implementation. These risks are mitigated by the authorities’ strong ownership of the reform agenda and a tailored CD strategy to support the implementation of structural reforms.

Approved By

Vitaliy Kramarenko (AFR) and Geremia Palomba (SPR)

Prepared by the Gabon staff team, comprising Boileau Loko (head), Jemma Dridi, Mahamoud Islam and Désiré Kanga (All AFR), Yuanchen Yang (SPR), Bruno Imbert (FAD), Jean Portier (MCM), and Marcos Poplawski-Ribeiro (Resident Representative). Mr. Nguema Affane (OED) joined the mission. The team met with General Coordinator of Presidential Affairs, Noureddine Bongo Valentin; Prime Minister, Rose Christiane Ossouka Raponda; Minister of Economy and Recovery, Nicole Janine Roboty Mbou; Minister of Budget and Public Accounts, Sosthène Ossoungou Ndibangoye; Minister of Employment, Public Service, Labor and Vocational Training Madeleine, Berre; Minister of Investments Promotion, Carmen Ndaot; Minister for the Promotion of Good Governance and the Fight against Corruption, Francis Nkea Ndzigue; Minister of Water, Forests, Sea, and Environment, Lee White; Minister of Health, Guy Patrick Obiang Ndong; Minister of Oil, Gas, and Mining, Vincent de Paul Massassa; BEAC National Director, Patrick Romuald Alili, and other senior officials. Ms. Félicité Adjahouinou and Linnet Mbogo also contributed to the preparation of this report. Discussions took place during May 3−June 7, 2021, through video and teleconference.

Contents

  • CONTEXT

  • RECENT ECONOMIC DEVELOPMENTS

  • OUTLOOK AND RISKS

  • NEW EFF-SUPPORTED PROGRAM: OBJECTIVE AND POLICIES

  • A. Fiscal Policy—Navigating the Pandemic and Securing a Healthy Recovery

  • B. Financial Sector Soundness and Financial Inclusion

  • C. Structural Reforms

  • PROGRAM DESIGN, FINANCING, AND RISKS

  • STAFF APPRAISAL

  • BOXES

  • 1. Covid-19 Development and Vaccination

  • 2. Reforming Tax Exemption

  • 3. Closing Leakages and Collecting Higher Oil Revenue through the Budget

  • 4. Reforming Special Accounts in Gabon

  • FIGURE

  • 1. Developments from Last EFF Scenario, 2016–19

  • TABLES

  • 1. Selected Economic Indicators, 2018–26

  • 2. Balance of Payments, 2018–26

  • 3a. Central Government Accounts, 2018–26 (Billions of CFA francs)

  • 3b. Central Government Accounts, 2018–26 (Percent of GDP; Billions of CFA francs)

  • 3c. Central Government Accounts, 2018–26 (Percent of non-oil GDP; Billions of CFA francs)

  • 4a. Financing of the Fiscal Deficit, 2018–24 (Billions of CFA francs)

  • 4b. Financing of the Fiscal Deficit, 2018–24 (Percent of GDP)

  • 5. Monetary Survey, 2018–22

  • 6. Financial Soundness Indicators for the Banking System, 2015–20

  • 7. Indicators of Capacity to Repay the Fund, 2021–31

  • 8. Proposed Schedule of Disbursement and Timing of Reviews under the Extended Arrangement, 2021–24

  • ANNEXES

  • II. Stock-Taking of the Last EFF-Supported Program, (2017–19)

  • III. Estimating the Impact of Covid-19 Using Input–Output Tables

  • III. External Sector Assessment

  • IV. Risk Assessment Matrix

  • V. Debt Sustainability Analysis

  • VI. Capacity Building and Technical Assistance Framework

  • APPENDIX

  • I. Letter of Intent

    • ATTACHMENTS

    • I. Memorandum of Economic and Financial Policies

    • II. Technical Memorandum of Understanding

  • Collapse
  • Expand
Cover IMF Staff Country Reports
Gabon: Request for a Three-Year Extended Arrangement under the Extended Fund Facility-Press Release; Staff Report; Supplementary Information, and Statement by the Executive Director for Gabon
Author:
International Monetary Fund. African Dept.
Volume/Issue:
Volume 2021: Issue 189
Publisher:
International Monetary Fund
ISBN:
9781513592107
ISSN:
1934-7685
Pages:
133
DOI:
https://doi.org/10.5089/9781513592107.002