Press Release No. 17/482

The Executive Board of the International Monetary Fund (IMF) today completed the third and fourth reviews of the arrangement under the Extended Credit Facility (ECF) [1] for São Tomé and Príncipe. The Board’s decision enables the immediate disbursement of SDR 1,268,570 (about US$1.8 million), bringing total disbursements under the arrangement to roughly SDR 3.17 million (about US$4.5 million).

In completing the review, the Executive Board granted the authorities’ request for waivers for nonobservance of the end-December 2016 performance criteria on the domestic primary balance and changes in net bank financing of the central government, based on the corrective measures introduced by the authorities. In addition, the Executive Board established targets and structural benchmarks for 2018. The ECF arrangement for São Tomé and Príncipe in the amount of SDR 4.44 million (about US$6.2 million or 60 percent of the country’s quota at the time of approval) was approved on July 13, 2015 (see Press Release No. 15/336) to support the government’s economic reform program for stronger and more inclusive growth.

Following the Executive Board’s discussion, Mr. Tao Zhang, Deputy Managing Director and Acting Chair, said:

“São Tomé and Príncipe’s economy continues to grow steadily and the outlook is favorable. However, implementing sound policies to bring the fiscal deficit and public debt to sustainable levels will be key to achieving sustained, robust growth and reducing poverty. In this context, the 2017-21 National Development Plan is expected to help diversify the economy and improve the business environment.

“The authorities have taken decisive action to bring the program back on track. Program targets have been met and good progress was made on structural reforms, including the planned adoption of a VAT. Measures have been taken to meet the end-2017 fiscal targets. In addition, the 2018 budget appropriately targets further consolidation to lower the domestic primary deficit.

“The authorities aim to strengthen public financial management. Efforts will be made to prevent new domestic arrears, reduce the current stock of arrears, and tackle fiscal risks posed by the large operational losses at the state-owned electricity and water enterprise. To ensure debt sustainability while meeting the large investment needs, external borrowing should be at concessional terms.

“In the financial sector, banking supervision has been strengthened and financial soundness indicators have improved. The liquidation of Banco Equador has resumed. Steps will be taken to reduce the stock of non-performing loans and further enhance financial stability.”