IMF Concludes 2013 Article IV Consultation and Second ECF Review Mission to the Democratic Republic of São Tomé and PríncipePress Release No. 13/368
September 27, 2013
A team from the International Monetary Fund (IMF), led by Mr. Ricardo Velloso, visited São Tomé and Príncipe during September 13-26, 2013, to conduct discussions for the 2013 Article IV consultation and second review of the Government’s economic and financial program supported by the IMF’s three-year Extended Credit Facility (ECF) arrangement in the amount of SDR 2.59 million (US$ 4.00 million).1 This arrangement was approved by the IMF Executive Board on July 20, 2012 (see Press Release No. 12/272).
The IMF team held constructive discussions with Prime Minister Gabriel Costa, Finance Minister Hélio Almeida, Central Bank Governor Maria do Carmo Silveira, Public Works Minister Osvaldo Abreu, Health Minister Leonel Pontes, Agriculture Minister Antonio Dias, and their respective senior staffs. The team also met with representatives of the National Assembly, labor unions, financial and nonfinancial private sector, and São Tomé and Príncipe’s development partners.
At the conclusion of the mission, Mr. Ricardo Velloso, the IMF’s Mission Chief for São Tomé and Príncipe, issued the following statement:
“São Tomé and Príncipe’s economic growth is projected at 4 percent in 2013 (unchanged from 2012), reflecting the effects of a difficult international environment, particularly in Europe. For 2014, growth has been revised downward, from 5½ to 5 percent, in light of lingering uncertainties in the world economy and weak external financing prospects for both private and public sector investment projects. Annual inflation has continued to decline since the adoption of the fixed exchange rate regime, falling to 6.3 percent in July 2013 (its lowest level in two decades). Annual inflation could reach low single digits sooner than expected, if the current disinflation trend holds. Central Bank’s international reserves stand comfortably above 3 months of imports.
“The ECF-supported program implementation in the first half of 2013 was good: all performance criteria were observed; and structural reforms progressed. The IMF mission encouraged the authorities to expedite negotiations between the Government, the Water and Electricity Company, EMAE, and the National Fuels Company, ENCO, on a plan to clear cross-arrears over time and to avoid a recurrence of this problem in the future.
“The mission advised the authorities to continue managing prudently budget execution in the remainder of 2013. In addition, it encouraged the authorities to prepare a 2014 draft budget based on cautious assumptions given that, unfortunately, the external environment is likely to remain challenging. In the run up to next year’s local and parliamentary elections, it will be important to manage the budget prudently and to avoid spending overruns typical of previous election cycles.
“The mission discussed with the authorities economic policy options for the remainder of 2013 and beyond that, in the context of the fixed exchange rate regime, would strengthen the resilience of the economy to shocks, bolster the financial system, foster sustainable medium-term economic growth, and reduce external debt vulnerabilities. These discussions progressed very well and will continue in Washington, D.C. during the 2013 Annual Meetings of the International Monetary Fund and the World Bank.”
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1 The Extended Credit Facility (ECF) is the IMF’s main tool for medium-term financial support to low-income countries. It provides for a higher level of access to financing, more concessional terms, enhanced flexibility in program design, and more focused, streamlined conditionality. Financing under ECF currently carries a zero interest rate, with a grace period of 5½ years, and a final maturity of 10 years.