Gabon and the IMF
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IMF Completes First Review Under Gabon's Stand-By Arrangement and Approves US$20 Million Disbursement
The Executive Board of the International Monetary Fund (IMF) today completed the first review of Gabon's economic performance under a 14-month Stand-By Arrangement to support the country's economic program. The completion of the review enables the release of a further SDR13.9 million (about US$20 million), which will bring the total amount drawn under the arrangement to SDR 27.8 (about US$41 million).
Following the Executive Board's discussion on Gabon's economic performance, Agustín Carstens, Deputy Managing Director and Chair, said:
"Gabon's implementation of the program supported by the 14-month Stand-By Arrangement with the Fund, was off to a good start. Budgetary performance in the first half of 2004 was in line with program objectives and progress was made in the implementation of structural reforms, particularly in the fiscal area. Gabon's economic outlook is positive because of favorable oil prices, improved prospects for oil production, and the authorities' commitment to economic adjustment and reform.
"Nevertheless, Gabon's economy remains subject to considerable vulnerabilities—including in oil prices and the heavy debt burden—and social indicators are weak. Sustained fiscal adjustment and steadfast pursuit of structural reforms are needed to place the debt on a sustainable path, free resources for the growth of the non-oil private sector, and increase spending in priority areas to reduce poverty while containing the wage bill and controlling expenditures. The authorities should seize the opportunity provided by the current favorable commodity prices to make progress in this regard. They have wisely chosen to use the oil revenue windfall to repay public debt, strengthen the government's position in the banking system, and accumulate deposits in the Fund for Future Generations. Particular care will be needed to avoid embarking on unsustainable spending programs.
"There has been progress in improving the transparency and efficiency of budgetary management, including through a review of the implementation of priority investment projects. These efforts should be intensified. The public expenditure review to be conducted in the coming months will be important in this regard.
"The authorities expect to complete their poverty reduction strategy paper (PRSP) in early 2005. The PRSP will set the medium-term priorities and policies for tackling Gabon's poverty problem. High on the agenda will be structural reform to complement prudent macroeconomic policies. The authorities are making progress in implementing a comprehensive set of reforms to promote economic diversification and non-oil growth. The key reforms that are being tackled include privatization of Gabon Télécom, restructuring of Air Gabon and admitting private capital in the enterprise, improvement of the investment climate and the regulatory framework, reform of the forestry sector, and strengthening of governance," Mr. Carstens said.
A Stand-By Arrangement is a decision of the IMF by which a member is assured that it will be able to make purchases (drawings) from the General Resources Account up to a specified amount and during a specified period of time, normally between 12 and 18 months, provided that the member observes the terms of the arrangement.
IMF EXTERNAL RELATIONS DEPARTMENT