Washington, DC: On August 27, 2021 the Executive Board of the International Monetary Fund (IMF) completed the third review of the Extended Credit Facility (ECF) arrangement for São Tomé and Príncipe. The Board’s decision enables the immediate disbursement of SDR 1.90 million (about US$2.70 million). This brings São Tomé and Príncipe’s total disbursements under the arrangement to SDR 9.09 million (about US$12.91 million).
São Tomé and Príncipe’s 40-month ECF arrangement was approved on October 2, 2019 for SDR 13.32 million (about US$18.15 million or around 90 percent of the country’s quota) (see Press Release No. 19/363 ). [1] The program aims to support the government’s economic reform program to restore macroeconomic stability, reduce debt vulnerability, alleviate balance of payments pressures, and create the foundations for stronger and more inclusive growth.
The second review was completed in February 2021, with a disbursement of about US$2.73 million. The first review was completed in July 2020, with a disbursement of about US$2.67 million, and, at the same time, an augmentation of the ECF arrangement of US$2.08 million was approved by the IMF Executive Board (see Press Release No. 20/272 ). In April 2020, the Executive Board also approved emergency financing of US$12 million for São Tomé and Príncipe under the Rapid Credit Facility (RCF) and IMF debt service relief under the Catastrophe Containment and Relief Trust (CCRT) to address external financing needs arising from the COVID-19 pandemic (see Press Release No. 20/179).
Executive Board Assessment [2]
Following the Executive Board discussion, Mr. Bo Li, Deputy Managing Director and Acting Chair, made the following statement:
“The authorities’ swift actions and international support have helped São Tomé and Príncipe mitigate the impact of the pandemic-related crisis. However, uncertainties remain high and continued steadfast program implementation and structural reforms together with adequate vaccination are critical to ensure more resilient, sustained, and inclusive green growth.
“The authorities’ program performance remains favorable, despite the difficult pandemic environment. Addressing immediate social and economic needs and implementing gradual fiscal consolidation are key to supporting the economic recovery and preserving debt sustainability. In this context, introducing the VAT in 2021, reining in spending dynamics, particularly on personnel, and the continued reliance on grants and highly concessional loans are critical.
“The authorities’ efforts in fostering increased transparency are welcome. Reviewing the procurement legislation to enable the collection and publication of beneficial ownership information is an important step towards enhancing transparency, along with completing audit reports of COVID-19 related spending.
“Monetary policy should support the exchange rate peg and the recovery. In this context, the continued active liquidity management, and efforts to strengthen the capacity to manage financial sector risks and vulnerabilities are important. A new legal framework for the central bank and financial sector should also enable much needed modernization.
“In view of recent electricity shortages, accelerating reforms in the energy sector would contribute to providing lower-cost and reliable electricity supply, support the country’s development and growth potential, and reduce pressures on public debt and foreign exchange reserves. Pressing ahead with broad-based structural reforms should also facilitate private investment, help the development of the tourism sector, and promote more resilient and inclusive growth.”
Table 1. São Tomé and Príncipe: Selected Economic Indicators, 2017-26 (Annual change in percent, unless otherwise indicated) | ||||||||||||
2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | |||
Second Rev. | Proj. | Second Rev. | Proj. | Proj. | Proj. | Proj. | Proj. | Proj. | ||||
National income and prices | ||||||||||||
GDP at constant prices | 3,9 | 3,0 | 2,2 | -6,5 | 3,0 | 3,0 | 2,1 | 2,9 | 3,3 | 3,5 | 3,7 | 4,0 |
GDP deflator | 2,0 | 2,6 | 7,0 | 4,0 | 5,6 | 4,0 | 2,7 | 2,0 | 2,8 | 2,9 | 2,9 | 3,9 |
Consumer prices (End of period) | 7,7 | 9,0 | 7,7 | 9,3 | 9,4 | 4,9 | 8,4 | 6,2 | 5,0 | 5,0 | 5,0 | 5,0 |
Consumer prices (Period Average) | 5,7 | 7,9 | 7,7 | 9,9 | 9,8 | 5,6 | 8,3 | 7,8 | 5,8 | 5,2 | 5,0 | 4,4 |
External trade | ||||||||||||
Exports of goods and nonfactor services | -10,8 | 13,9 | -1,9 | -47,3 | -46,3 | 61,0 | 18,4 | 48,0 | 23,4 | 6,4 | 9,0 | 8,5 |
Imports of goods and nonfactor services | 5,5 | 4,3 | -5,3 | -7,2 | -10,4 | 8,5 | 9,4 | 2,9 | 8,9 | 4,5 | 5,0 | 5,8 |
Exchange rate (new dobras per US$; end of period) 1 | 20,7 | 21,5 | 22,0 | … | 20,1 | … | … | … | … | … | … | … |
Real effective exchange rate (period average, depreciation = -) | 4,9 | 8,8 | 5,3 | … | 5,7 | … | … | … | … | … | … | … |
Money and credit | ||||||||||||
Base money | -9,6 | 0,8 | -7,4 | 22,6 | 31,0 | -6,6 | -10,8 | 1,3 | 13,8 | … | … | … |
Broad money (M3) | -0,4 | 14,3 | -2,2 | 1,2 | 10,9 | 7,1 | 7,5 | 5,2 | 6,3 | … | … | … |
Credit to the economy | 2,5 | -1,6 | 3,2 | 1,9 | -1,6 | 0,5 | 0,4 | 4,7 | 5,5 | … | …. | …. |
Velocity (GDP to broad money; end of period) | 3,1 | 2,9 | 3,0 | 3,0 | 2,8 | 3,0 | 3,0 | 3,0 | 3,0 | … | … | … |
Central bank reference interest rate (percent) | 9,0 | 9,0 | 9,0 | … | 9,0 | … | … | … | … | … | … | … |
Average bank lending rate (percent) | 19,6 | 19,9 | 19,1 | … | 19,1 | … | … | … | … | … | … | … |
Government finance (in percent of GDP) | ||||||||||||
Total revenue, grants, and oil signature bonuses | 24,9 | 24,1 | 22,0 | 28,2 | 25,3 | 21,5 | 25,7 | 24,8 | 24,0 | 23,9 | 23,8 | 23,5 |
Of which : tax revenue | 12,7 | 12,8 | 12,3 | 14,5 | 13,1 | 14,8 | 13,3 | 14,4 | 14,9 | 15,1 | 15,5 | 15,6 |
Nontax revenue | 1,7 | 3,1 | 3,3 | 2,5 | 2,4 | 2,9 | 2,5 | 2,8 | 2,5 | 2,7 | 2,8 | 3,0 |
Grants | 10,5 | 8,3 | 6,4 | 11,2 | 9,7 | 3,8 | 9,9 | 7,6 | 6,6 | 6,1 | 5,5 | 5,0 |
Total expenditure and net lending | 27,6 | 26,0 | 22,1 | 25,0 | 23,1 | 23,5 | 27,2 | 24,2 | 25,0 | 24,4 | 24,0 | 23,8 |
Personnel costs | 8,3 | 9,3 | 9,0 | 10,9 | 9,3 | 11,1 | 10,0 | 9,8 | 9,6 | 9,5 | 9,5 | 9,5 |
Interest due | 0,5 | 0,4 | 0,7 | 0,5 | 0,3 | 0,4 | 0,4 | 0,4 | 0,4 | 0,3 | 0,3 | 0,2 |
Nonwage noninterest current expenditure | 6,9 | 7,0 | 7,5 | 8,4 | 7,2 | 8,3 | 7,4 | 7,3 | 7,2 | 7,2 | 7,3 | 7,3 |
Treasury funded capital expenditures | 0,7 | 1,4 | 0,1 | 0,3 | 0,2 | 0,3 | 0,3 | 0,4 | 0,4 | 0,4 | 0,4 | 0,7 |
Donor funded capital expenditures | 11,0 | 7,8 | 4,7 | 1,3 | 3,0 | 1,4 | 7,4 | 6,1 | 7,2 | 6,7 | 6,3 | 5,9 |
HIPC Initiative-related capital expenditure | 0,2 | 0,1 | 0,1 | 0,2 | 0,1 | 0,2 | 0,2 | 0,2 | 0,2 | 0,2 | 0,2 | 0,2 |
COVID-19 spending | … | … | … | 3,5 | 2,9 | 1,7 | 1,5 | … | … | … | ||
Domestic primary balance 2 | -2,4 | -4,2 | -1,8 | -5,3 | -3,2 | -3,9 | -3,5 | -2,0 | -0,2 | 0,3 | 0,6 | 0,6 |
Net domestic borrowing | 1,8 | 3,4 | -1,5 | -1,7 | -1,7 | 4,3 | 1,3 | -0,1 | -1,0 | -1,0 | -1,0 | -1,1 |
Overall balance (commitment basis) | -2,7 | -1,9 | -0,1 | 3,2 | 2,2 | -2,0 | -1,5 | -0,5 | -1,0 | -0,5 | -0,2 | -0,3 |
Public Debt 3 | 81,1 | 93,2 | 99,9 | 103,0 | 87,4 | 101,4 | 87,9 | 86,5 | 84,3 | 80,9 | 76,8 | 71,2 |
Of which: EMAE’s debt to ENCO | 19,6 | 23,3 | 28,9 | 31,5 | 24,2 | 32,9 | 26,0 | 29,0 | 29,5 | 29,1 | 27,9 | 26,5 |
External sector | ||||||||||||
Current account balance (percent of GDP) | ||||||||||||
Including official transfers | -13,2 | -12,3 | -12,1 | -17,4 | -14,1 | -16,3 | -11,3 | -7,5 | -6,7 | -6,3 | -6,0 | -5,7 |
Excluding official transfers | -24,3 | -21,0 | -18,5 | -28,6 | -23,9 | -20,1 | -21,2 | -15,1 | -13,3 | -12,4 | -11,5 | -10,7 |
PV of external debt (percent of GDP) | 31,5 | 26,6 | 27,2 | 32,2 | 25,4 | 30,0 | 24,4 | 24,2 | 23,9 | 23,3 | 22,6 | 21,7 |
External debt service (percent of exports) 4 | 3,8 | 2,6 | 4,5 | 8,5 | 5,0 | 7,5 | 11,6 | 8,4 | 6,8 | 8,7 | 9,0 | 7,4 |
Export of goods and non-factor services (US$ millions) | 86,1 | 98,0 | 96,2 | 50,7 | 51,7 | 81,6 | 61,2 | 90,5 | 111,7 | 118,9 | 129,5 | 140,5 |
Gross international reserves 5 | ||||||||||||
Millions of U.S. dollars | 51,4 | 35,1 | 40,4 | 54,7 | 67,6 | 58,1 | 63,4 | 70,3 | 72,0 | 75,1 | 76,6 | 76,5 |
Months of imports of goods and services | 3,1 | 2,2 | 2,8 | 3,5 | 4,3 | 3,6 | 4,0 | 4,0 | 3,9 | 3,9 | 3,8 | 3,8 |
Months of imports of goods and nonfactor services 6 | 4,2 | 3,0 | 4,0 | 5,1 | 6,4 | 5,0 | 5,7 | 5,9 | 6,0 | 6,1 | 5,9 | 6,2 |
National Oil Account (US$ millions) | 11,3 | 19,5 | 18,8 | 16,2 | 16,6 | 13,2 | 13,5 | 12,5 | 10,2 | 8,3 | 6,8 | 5,6 |
Memorandum Item | ||||||||||||
Gross Domestic Product | ||||||||||||
Millions of new dobra | 8.154 | 8.619 | 9.424 | 8.976 | 10.247 | 9.615 | 10.750 | 11.281 | 11.972 | 12.748 | 13.602 | 14.693 |
Millions of U.S. dollars | 375,8 | 415,6 | 430,7 | 418,1 | 477,3 | 478,2 | 533,6 | 572,9 | 616,4 | 662,2 | 711,0 | 771,6 |
Per capita (in U.S. dollars) | 1.842 | 1.989 | 2.022 | 1.918 | 2.190 | 2.144 | 2.393 | 2.524 | 2.657 | 2.794 | 2.938 | 3.002 |
Sources: São Tomé and Príncipe authorities’ data and IMF staff estimates and projections. | ||||||||||||
1 Central Bank (BCSTP) mid-point rate. | ||||||||||||
2 Excludes oil related revenues, grants, interest earned, scheduled interest payments, and foreign-financed capital outlay. | ||||||||||||
3 Total public and publicly guaranteed debt as defined in DSA, which includes EMAE’s debt to ENCO (and excludes the government’s arrears to EMAE due to consolidation). | ||||||||||||
4 Percent of exports of goods and nonfactor services. | ||||||||||||
5 Gross international reserves exclude the National Oil Account and commercial banks’ foreign currency deposits at the BCSTP in order to meet reserve requirements, for new licensing, and for meeting capital requirements. | ||||||||||||
6 Imports of goods and services excluding imports of investment goods and technical assistance. | ||||||||||||
[1] U.S. Dollar exchange rates as of the date of approval
[2] At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country’s authorities. An explanation of any qualifiers used in summings up can be found here: https://www.IMF.org/external/np/sec/misc/qualifiers.htm .