IMF Completes First and Second Reviews Under Extended Arrangement under Extended Fund Facility with Gabon

Washington, DC: On June 27, 2022, the Executive Board of the International Monetary Fund completed the First and Second Reviews of the Extended Arrangement under the Extended Fund Facility (EFF) for Gabon. The completion of the reviews enables the immediate disbursement of SDR 116.1 million (US$155.29 million), bringing total disbursements under the extended arrangement to SDR 197.1 million (about US$263.63 million). The extended arrangement was approved by the IMF Board on July 28, 2021, to help Gabon respond to the economic fallout from the COVID-19 pandemic and to support the authorities’ economic and financial reform program (seePress Release No. 21/233).

Gabon’s economy was hit by the COVID-19 pandemic, with a decline in real output of 1.9 percent in 2020. Growth recovered to an estimated 1.5 percent in 2021, on the back of a booming mining sector and the rebound in the wood and construction sectors. Growth in the services sector remained subdued as containment measures weighed on the trade and transportation sectors. Higher oil prices contributed to strengthening the fiscal and external positions and reducing public debt.

The outlook remains positive. GDP growth is expected at 2.4 percent in 2022 driven by a continued recovery in wood and construction and a rebound in services. Russia’s war in Ukraine and related surge in commodity prices will boost oil exports and revenues and further improve the fiscal and external positions. However, the cost of fuel subsidies will weigh on the budget and higher food prices will add to inflationary pressures. Higher oil revenues will help accommodate the increase in fuel and food subsidies to the most vulnerable and rebuild fiscal and external buffers.

Uncertainty around the economic outlook is elevated, with the balance of risks tilted to the downside . Outbreaks of highly contagious COVID-19 variants, particularly in view of the slow vaccination uptake, a potentially sharper slowdown in China, the intensification of the Russia’s war in Ukraine, and possible social tensions ahead of the 2023 presidential elections, pose significant risks to the outlook. On the upside, higher oil prices and accelerated reforms are expected to strengthen domestic revenue and improve public financial management; governance and the business environment will support a return to strong and inclusive growth while safeguarding debt sustainability.

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

“The economy is gradually recovering from the 2020 recession owing to the strong policy response to the COVID-19 pandemic and the rise in oil prices. Growth has gained momentum, the fiscal and external positions have strengthened, and public debt has declined. The outlook is broadly positive but remains subject to various risks, including from the spillovers from Russia’s war in Ukraine, a possible sharper slowdown in China, and a potential resurgence of the COVID-19 pandemic.

“Fiscal policy should continue to support the ongoing recovery while preserving debt sustainability and protecting the most vulnerable groups amid the rising fuel and food prices and inflationary pressures. Increasing domestic revenue collection and improving public finance management will help rebuild policy space for essential development outlays. Expediting the design of well-targeted social safety nets will also be critical to providing adequate support to vulnerable households and strengthening social protection.

“Addressing structural reforms, including governance and corruption weaknesses is paramount to achieve strong and inclusive growth. Enhancing the banking sector and implementing an effective financial inclusion strategy, improving the business environment, and strengthening the anti-corruption framework will help address bottlenecks in the economy and promote private investment.”