## 1gabea2019002 ## Source details **Canonical URL:** [1gabea2019002](https://www.imf.org/-/media/files/publications/cr/2019/1gabea2019002.pdf) ## Other formats - [Markdown version](/-/media/files/publications/cr/2019/1gabea2019002.pdf.md) - [Structured JSON version](/-/media/files/publications/cr/2019/1gabea2019002.pdf.json) --- ### Context and recent macroeconomic developments - Macroeconomic conditions improving after the 2014 oil price shock; three-year Extended Arrangement (approved in June 2017) supported stabilization, fiscal and external position strengthening, and rebuilding of regional international reserves. - Public debt started to decline; authorities cleared all external arrears, including commercial arrears. - Poverty and human development: Almost one-third of the population below the poverty line; Gabon ranks 110 out of 189 in the 2019 UNDP Human Development Index. Key statistics (as reported) - Real GDP growth: 2014: 4.4; 2015: 3.9; 2016: 2.1; 2017: 0.5; 2018 (Est.): 0.8 - Non-oil growth: 2014: 5.1; 2015: 3.8; 2016: 3.3; 2017: 1.7; 2018 (Est.): 1.9 - Inflation (y-o-y): 2014: 1.7; 2015: -1.2; 2016: 4.1; 2017: 1.1; 2018 (Est.): 6.3 - Overall fiscal balance (percent of GDP): 2014: 2.3; 2015: -4.0; 2016: -6.6; 2017: -3.4; 2018 (Est.): -1.6 - Non-oil primary balance (percent of non-oil GDP): 2014: -11.5; 2015: -9.0; 2016: -11.0; 2017: -9.7; 2018 (Est.): -7.6 - Current account balance (percent of GDP): 2014: 7.6; 2015: -5.6; 2016: -10.4; 2017: -6.9; 2018 (Est.): -3.2 - Public debt-to-GDP ratio: 2014: 34.1; 2015: 44.7; 2016: 64.2; 2017: 62.6; 2018 (Est.): 60.6 ### Recovery momentum and financial sector - 2018 growth 0.8 percent; preliminary first eight months of 2019 indicate strengthening driven by oil production (17.7 percent, y-o-y) and expansion in mining and agribusiness. - Inflation decelerated to 0.9 percent at end-September 2019. - Private sector credit growth at end-September 2019: 4.0 percent (y-o-y). - Non-oil fiscal balance improved by 2 percentage points in 2018 to -7.6 percent of non-oil GDP, but was 1.2 percent below program target. - Budget execution first nine months of 2019: non-oil revenues broadly in line with program targets; expenditures were 0.7 percent of NOGDP short of the indicative target in September. - Financial sector: - Reported bank solvency and liquidity slightly improved in 2018. - Liquidation of three public banks progressing slowly; repayments to insured depositors delayed. - Strategy and action plan to reduce overdue loans by end-March 2019 exist but implementation weak due to domestic arrears audit delays. - Legal/institutional strengthening: new law creating commercial courts adopted in early 2019; training for 10 judges and 5 bailiffs in banking and credit disputes. - Government received COBAC approval for temporary holding of a bank’s shares in March 2019 but acquisition not completed. - Assessment: Gabon’s external position is substantially weaker than implied by fundamentals and desirable policy settings. ### Outlook and projections (medium-term) - GDP growth projections: 2019: 3.4; 2020: 3.8; 2021: 3.8; 2022: 4.5; 2023: 4.5; 2024: 4.7 - Oil growth projections: 2019: 7.9; 2020: 2.5; 2021: 1.6; 2022: 1.7; 2023: 1.7; 2024: 1.8 - Non-oil growth projections: 2019: 2.5; 2020: 4.0; 2021: 4.3; 2022: 5.1; 2023: 5.1; 2024: 5.3 - Overall fiscal balance (percent of GDP) projections: 2019: 1.7; 2020: 1.5; 2021: 1.2; 2022: 1.1; 2023: 1.2; 2024: 1.2 - Non-oil primary balance (percent of non-oil GDP) projections: 2019: -4.6; 2020: -4.2; 2021: -3.1; 2022: -2.8; 2023: -2.3; 2024: -2.0 - Current account balance (percent of GDP) projections: 2019: -1.1; 2020: -2.0; 2021: -1.0; 2022: 1.5; 2023: 2.0; 2024: 2.8 - Public debt (percent of GDP) projections: 2019: 56.5; 2020: 55.6; 2021: 52.5; 2022: 48.9; 2023: 45.6; 2024: 42.5 - Outlook summary: - Non-oil growth expected to rise above 5 percent over the medium term as agri-business, wood processing, and mining projects mature. - Overall growth rising to 4–5 percent in 2022–24. - Inflation projected to remain below 3 percent absent major supply shocks. - Continued fiscal consolidation expected to reduce public debt-to-GDP ratio below 45 percent. - Current account projected to turn positive in 2022 and rise to about 3 percent of GDP by 2024. ### Risks - Immediate risk: slowdown in reform momentum. - Downside risks: decline in international oil prices, lower global growth, incomplete adjustment by CEMAC members. - Upside potential: higher medium-term growth if all FDI-financed projects materialize; staff baseline incorporates only part of expected FDI inflows. ### Fiscal policy — near-term implementation and 2019–20 budget specifics - 2019 program commitment: achieve non-oil primary deficit of CFAF 308 billion (4.6 percent of NOGDP), 3 pp lower than the 2018 deficit. - 2019 composition changes: - Capital spending expected lower by 0.7 pp of NOGDP due to absorptive capacity constraints. - Net lending to public enterprises and special accounts expected higher than initially envisaged. - Near-term implementation priorities agreed with staff: - Strengthen revenue administration: provide resources to intensify control, recover tax arrears, better monitor tax exemptions. - Strengthen budget execution and treasury management: implement the expenditure regulation mechanism established in May 2019. - 2020 draft budget highlights: - Target non-oil primary deficit: 4.2 percent of NOGDP (0.4 pp below 2019). - Revenue/expenditure assumptions: - Increase in tax revenues by 1 pp of NOGDP via administration strengthening and limiting exemptions. - Upgrade IT systems: E-tax for internal revenue; ASYCUDA World for customs. - Overall revenue increases only by 0.2 pp of NOGDP owing to declining non-tax revenues. - Significant cut in non-interest current spending: -1.3 pp of NOGDP (mainly wage bill streamlining). - Domestically-financed capital expenditure increases by 1.1 pp of NOGDP; absorptive capacity constraints may lead to under-execution. - Staff advice: any overperformance (particularly in oil revenues) and savings in domestically financed capital spending should be used to rebuild buffers. Selected 2019–20 central government operation figures (percent of non-oil GDP) - Oil Revenue: 2019 (Proj.): 10.7; 2020 (Proj.): 9.5; Change: -1.2 - Non-oil revenue: 2019: 17.1; 2020: 17.3; Change: 0.3 - Taxes: 2019: 15.8; 2020: 16.8; Change: 1.0 - Non-taxes: 2019: 1.3; 2020: 0.5; Change: -0.7 - Current expenditure: 2019: 19.2; 2020: 17.8; Change: -1.4 - Wage bill: 2019: 10.0; 2020: 9.2; Change: -0.8 - Interest: 2019: 3.5; 2020: 3.4; Change: -0.1 - Goods and services: 2019: 2.4; 2020: 2.2; Change: -0.1 - Transfers and subsidies: 2019: 3.4; 2020: 3.0; Change: -0.4 - Capital expenditure: 2019: 4.7; 2020: 7.1; Change: 2.4 - Domestically financed: 2019: 2.0; 2020: 3.1; Change: 1.1 - Non-oil Primary Balance: 2019: -4.6; 2020: -4.2; Change: 0.4 - Overall balance (cash basis): 2019: 2.6; 2020: 2.0; Change: -0.7 ### Fiscal policy — medium-term challenges and reform recommendations Key fiscal reform recommendations - Boost revenue mobilization. - Limit and reform tax expenditure. - Strengthen revenue administration capacities, including IT. - Implement property taxes and simplify income taxes. - Rationalize current spending and streamline the wage bill. - Enhance monitoring of public entities and restructure loss-making SOEs. - Improve efficiency of public investment: prepare comprehensive PIP, revamp PIM organization and legal framework, enhance PIM capacities, update procurement and PPP legal framework, implement PIMA recommendations. - Enhance fiscal governance: improve cash management, implement budget execution regulation mechanisms, modernize IT systems and expand coverage, strengthen budget credibility, transparency and control, fully implement PFM reform. Increasing non-oil revenue mobilization — observations - Non-oil domestic revenue remains low relative to other upper middle-income countries. - 2017 tax and customs exemptions estimated higher than 7 percent of NOGDP. - IMF analysis: Gabon on high end of SSA tax gaps at 5.8 percentage points of GDP (IMF, 2018). - Staff recommendations include identifying and costing exemptions, strengthening control and monitoring, revamping exemption granting processes, and medium-term tax reforms (property tax, PIT simplification). ### Arrears, fiscal governance, and public financial management - Domestic arrears stock reduced from 9.7 percent of GDP at end-2016 to 3.3 percent of GDP as of end-September 2019. - PwC audit indicates stock of domestic arrears for 2015–17 not yet recorded amounted to about 3 percent of GDP (authorities confirming results). - External arrears entirely cleared as of March 2019. - Steps taken to avoid arrears accumulation: - Merging economic and budget ministries. - Implementing IMF TA recommendations on cash management; weekly Treasury and Debt Unit meetings. - Implementation of the Treasury Single Account (TSA). - Expenditure regulation mechanism. - Improvements in information systems to monitor payment deadlines. - Additional planned measures: - Strengthen internal control and audit frameworks. - Modernize IT system; systematize IT use for all expenditure. - Make the TSA fully operational and revamp the VAT escrow account. - With domestic arrears audit completion, design and launch growth-friendly clearance plan starting with SMEs. ### Debt sustainability and Eurobond strategy (Annex IV) - Public debt stock end-2018: FCFA 5,676 billion (about US$9.9 billion), equal to 61 percent of GDP. - External debt share: 66 percent of public debt; Financial market (Eurobonds) share: 22 percent. - Debt-service burden: projected at 55 percent of total fiscal revenues in 2019 and average 48 percent of revenues over 2020–24. - Gross financing needs: projected 6 percent of GDP in 2019 and average 7 percent of GDP over 2020–24. - Eurobond maturities and refinancing: - US$2 billion in Eurobonds due 2022–24. - Authorities budgeted for a US$1 billion Eurobond issuance next year; baseline assumes at least 75 percent used for pre-payment/rollover. - Eurobond terms assumed: approximately a 7 percent interest rate and a 10-year maturity. - Stress tests: - Primary balance shock (deterioration of 2.4 pp of GDP in 2020) raises public debt to 46 percent of GDP by 2024. - Growth shock (one standard deviation for 2 years) raises debt-to-GDP to about 59 percent during shock and to 49 percent by 2024. - Interest rate shock (real rates +200 bps) raises debt-to-GDP and gross financing needs to 59 percent and 19 percent of GDP by 2024. - Combined shock raises debt to around 84 percent of GDP and gross financing needs to about 28 percent of GDP in 2024. - Policy recommendations: - Build a track record of remaining current on debt service; avoid accumulation of external arrears; address domestic arrears. - Use majority of Eurobond proceeds for rollover/pre-payment. - Strengthen Medium-Term Debt Management Strategy (MTDS); broaden debt coverage to include contingent liabilities and SOEs. ### Program performance, conditionality, and financing - Program performance through end-December 2018 was weak; improvement observed through September 2019. - End-December 2018: four out of five end-December 2018 quantitative performance criteria (PCs) missed; continuous zero ceiling on external arrears missed; two indicative targets missed. - End-June 2019: out of five end-June 2019 PCs, three met and two missed; continuous PC on accumulation of external arrears breached early in year but no further breaches since March 2019. - End-September 2019: most end-September ITs met. - Structural benchmarks: eight out of nine SBs through end-October implemented albeit with delays; EITI application SB not yet implemented (proposal to reset to end-March 2020). - New proposed SBs and prior actions: - Establish list of all tax and custom exemptions and assess fiscal impact (end-December 2019). - Transmit contracts signed with mining and oil companies to the BEAC (end-December 2019). - Prepare comprehensive Public Investment Program (PIP) with all public investment projects (End-April 2020). - Adopt and implement Treasury Committee decree repealing/replacing 2018 decision (end-January 2020). - Financing and rephasing: - Program remains fully financed with firm assurances in place for the rest of 2019 and 2020. - Remaining purchases from the IMF are rephased due to delays in completing the fourth review and a revised macroeconomic framework. - Selected financing figures (presented under 2019 column in Text Table 7): - Overall fiscal deficit (cash basis): -1.5, -1.7, -1.5 (period labels in source). - Other financing needs: 9.2 9.5 13.8 - Amortization (including arrears) 6.2 6.2 9.7 - BEAC 1.2 1.2 2.9 - Other 1.8 2.1 1.2 - Total financing needs 7.6 7.8 12.3 - Identified sources of financing 3.6 4.2 10.5 - External 1.8 1.8 8.5 - Domestic 1.8 2.3 2.0 - Financing gap 4.0 3.7 1.8 - Exceptional external financing 2.9 3.0 1.1 - Multilateral 2.4 2.5 1.1 - African Development Bank 0.0 1.3 0.0 - World Bank 2.4 1.2 1.1 - Bilateral 0.5 0.5 0.0 - Residual financing needs 1.1 0.7 0.7 - IMF-EFF 1.1 0.7 0.7 - Capacity to repay the Fund: - "IMF credit outstanding peaks at 3.7 percent of GDP in 2020." - "Repurchases under the Extended Arrangement will peak at 1.2 percent of exports in 2024." ### Financial sector soundness and inclusion - Capital adequacy ratio increased to 15.1 percent at end-March 2019 (up from about 8 percent at end-2016); CEMAC regulatory requirement 10.5 percent. - Non-performing loans (gross) to total loans (gross): 11.4 (2019 Mar.). - Financial intermediation weak; only 34 percent of population have an account at a financial institution. - Staff-supported actions: - Implement arrears clearance and overdue loans reduction strategy. - Support swift liquidation of three distressed banks and timely repayment of insured depositors. - Develop national financial inclusion strategy and strengthen SME financing. ### Structural reforms, business environment, and governance - Structural constraints: narrow economic base, weak governance, unattractive business environment. - World Bank Doing Business rank: 169 out of 190 countries. - 2018 Global Competitiveness Index (GCI) rank: 108 out of 137 countries. - Recommended actions: - Strengthen anti-corruption institutions and transparency (CNCLEI capacity, asset disclosures). - Bring AML/CFT regime in line with FATF standard; next AML/CFT mutual evaluation in 2021. - Improve transparency in oil sector; efforts to join EITI. - Business facilitation: reduce regulatory burden, provide e-government services, enhance jurisdictional coordination. - Favorable business environment over costly tax incentives for FDI attraction. ### External sector assessment (Annex II) - 2018: Terms of trade improved by 27 percent; oil prices rose 32 percent. - Current account deficit: -3.2 percent of GDP in 2018 vs -6.9 percent in 2017. - Exports increased by 14.0 percent in 2018: oil exports +18.4 percent; non-oil exports +7.0 percent. - FDI estimated at 8.2 percent of GDP in 2018, majority related to non-oil sector. - EBA-Lite estimates suggest 2018 exchange rate overvalued by 6 to 17 percent. - Model-based resource exporter estimates: - Consumption-based model implied exchange rate overvaluation: 35 percent; medium-term CA norm: 13 percent. - Investment-based model medium-term CA norm: 4 percent. - Bottom-line assessment: external position substantially weaker than implied by medium-term fundamentals; overall overvaluation assessment cited 9 to 16 percent in 2018. ### Risk Assessment Matrix (Annex III) — selected entries - Domestic risks: - Disruption in domestic oil production: Relative Likelihood: Medium; Impact if Realized: Medium; Recommended responses: use fiscal buffers, enhance maintenance and exploration. - Deterioration of domestic political conditions: Relative Likelihood: Medium; Impact if Realized: Medium; Recommended responses: communicate benefits of program, improve governance and fight corruption. - Spillover risks: - Weaker-than-expected global growth: Relative Likelihood: Medium (U.S.), High (Europe), High (China); Impact: Medium; Responses: consolidate fiscal buffers, energize external support. - Rising protectionism and retreat from multilateralism: Relative Likelihood: High; Impact: High; Responses: improve business environment, diversify exports. - Rise in risk premia and cost of debt on regional markets: Relative Likelihood: High; Impact: High; Responses: optimize debt portfolio, reduce borrowing needs, remain current on debt service. - RAM interpretation: "low" <10 percent; "medium" 10–30 percent; "high" 30–50 percent. ### Capacity building and technical assistance priorities (Annex V) - Overarching priorities: - Prudent macroeconomic policies, fiscal discipline, increase domestic revenue, increase spending efficiency, address banking sector weaknesses, strengthen statistics, continue PFM reforms under Organic Law of 2014. - Revenue administration and policy (2019–22) milestones: - Identification and costing of tax exemptions (early 2020). - Tax exemptions below 5 percent of non-oil GDP by 2021. - Implementation of ASYCUDA World (early 2020) and extension of E-Tax to all taxes (2021). - Public Finance Management (2020–22) milestones: - TSA fully implemented (2020). - Published investment program attached to budget law (2020). - Approved strategy of domestic arrears clearance (2020). - Financial sector (2020–22) milestones: - NPLs reduced to single digits (2020–21). - Liquidation of three failed banks completed (2020: BHG, 2021: Postbank and BGD). - National financial inclusion strategy developed (2021). - Macroeconomic statistics and data transparency (2020–22) milestones: - Quarterly national accounts developed and SNA 2008 implemented (2020–21). - CPI revised using weights from 2018 household budget survey (2020). - Balance of Payments for 2015 finalized; work underway for 2016–18. - Risks to TA implementation: weakening political commitment (Probability: Medium; Impact: High); implementation capacity constraints (Probability: Medium; Impact: High); financing risk (Probability: Medium; Impact: High). ### Program monitoring and technical memorandum highlights - Monitoring via prior actions, semi-annual reviews, quantitative performance criteria (QPCs), indicative targets (ITs), continuous PCs, and structural benchmarks. - Sixth and final review scheduled for June 2020; QPCs include floors/ceilings on non-oil primary balance, net banking system claims, central bank claims, external debt contracting/guarantees, government tax revenue (excluding oil), and zero ceiling on new external arrears. - Reporting requirements: monthly data and reports to IMF within six weeks after month-end for most fiscal and monetary series; external arrears reporting lag not more than three weeks. - Program accounting exchange rates and TMU definitions specified (e.g., CFAF to US$ official 584.05 as of June 1, 2019; cross-rates and treatment of oil revenue and payment orders defined). *Source: IMF staff report excerpt (Gabon — selected chapters and tables as provided).* ### 1. Public Investment Management Assessment __________________________________________________ 13 ### 1. Public Investment Management Assessment __________________________________________________ 13 ### Context and recent macroeconomic developments - Macroeconomic conditions are improving; growth is slowly picking up after the 2014 oil price shock. - Supported by a three-year Extended Arrangement (approved in June 2017), policies have stabilized the economy, strengthened fiscal and external positions, and contributed to rebuilding regional international reserves. - Public debt has started to decline, and the authorities have cleared all external arrears, including commercial arrears. - Traction of policy advice from the 2015 Article IV Consultation has been broadly satisfactory, with several recommendations still ongoing (Annex I). Key statistics and indicators (as reported) - Real GDP growth: 2014: 4.4; 2015: 3.9; 2016: 2.1; 2017: 0.5; 2018 (Est.): 0.8 - Non-oil growth: 2014: 5.1; 2015: 3.8; 2016: 3.3; 2017: 1.7; 2018 (Est.): 1.9 - Inflation (y-o-y): 2014: 1.7; 2015: -1.2; 2016: 4.1; 2017: 1.1; 2018 (Est.): 6.3 - Overall fiscal balance (percent of GDP): 2014: 2.3; 2015: -4.0; 2016: -6.6; 2017: -3.4; 2018 (Est.): -1.6 - Non-oil primary balance (percent of non-oil GDP): 2014: -11.5; 2015: -9.0; 2016: -11.0; 2017: -9.7; 2018 (Est.): -7.6 - Current account balance (percent of GDP): 2014: 7.6; 2015: -5.6; 2016: -10.4; 2017: -6.9; 2018 (Est.): -3.2 - Public debt-to-GDP ratio: 2014: 34.1; 2015: 44.7; 2016: 64.2; 2017: 62.6; 2018 (Est.): 60.6 - Poverty and human development: Almost one-third of the population below the poverty line; Gabon ranks 110 out of 189 in the 2019 UNDP Human Development Index. ### Recovery momentum and financial sector - 2018 growth was 0.8 percent; preliminary data indicate strengthening in the first eight months of 2019 driven by oil production (17.7 percent, y-o-y) and expansion in mining and agribusiness. - Inflation decelerated to 0.9 percent at end-September 2019, mainly due to a decline in food prices. - Private sector credit growth at end-September 2019: 4.0 percent (y-o-y). - The non-oil fiscal balance improved by 2 percentage points in 2018 to -7.6 percent of non-oil GDP, but was 1.2 percent below the program target. - Budget execution improved in the first nine months of 2019: non-oil revenues broadly in line with program targets; expenditures were 0.7 percent of NOGDP short of the indicative target in September. - Non-oil primary fiscal deficit outperformed the program target by 0.1 pp of NOGDP, largely offset by higher-than-projected net lending (0.4 pp of NOGDP). - Current account balance improved from -6.9 percent of GDP in 2017 to -3.2 percent of GDP in 2018; regional reserves at the BEAC stood at 3.3 months of imports at end-June 2019. - Assessment: Gabon’s external position is substantially weaker than implied by fundamentals and desirable policy settings (Annex II). Financial sector status and reforms - Reported bank solvency and liquidity slightly improved in 2018. - Liquidation of three public banks has progressed slowly despite liquidation support groups established in April 2019; repayments to insured depositors delayed. - Strategy and action plan to reduce overdue loans by end-March 2019 exist, but implementation weak due to delays in audit finalization of domestic arrears. - Legal/institutional strengthening ongoing: new law creating commercial courts adopted in early 2019; training for 10 judges and 5 bailiffs conducted in banking and credit disputes. - Government received COBAC approval for temporary holding of a bank’s shares in March 2019 but acquisition not completed. ### Outlook and risks - Medium-term projections (Text Table 3 highlights): - GDP growth projections: 2019: 3.4; 2020: 3.8; 2021: 3.8; 2022: 4.5; 2023: 4.5; 2024: 4.7 - Oil growth projections: 2019: 7.9; 2020: 2.5; 2021: 1.6; 2022: 1.7; 2023: 1.7; 2024: 1.8 - Non-oil growth projections: 2019: 2.5; 2020: 4.0; 2021: 4.3; 2022: 5.1; 2023: 5.1; 2024: 5.3 - Overall fiscal balance (percent of GDP) projections: 2019: 1.7; 2020: 1.5; 2021: 1.2; 2022: 1.1; 2023: 1.2; 2024: 1.2 - Non-oil primary balance (percent of non-oil GDP) projections: 2019: -4.6; 2020: -4.2; 2021: -3.1; 2022: -2.8; 2023: -2.3; 2024: -2.0 - Current account balance (percent of GDP) projections: 2019: -1.1; 2020: -2.0; 2021: -1.0; 2022: 1.5; 2023: 2.0; 2024: 2.8 - Public debt (percent of GDP) projections: 2019: 56.5; 2020: 55.6; 2021: 52.5; 2022: 48.9; 2023: 45.6; 2024: 42.5 - External debt (percent of GDP) projections: 2019: 40.5; 2020: 42.3; 2021: 40.9; 2022: 38.8; 2023: 36.3; 2024: 32.5 - Domestic debt (percent of GDP) projections: 2019: 16.0; 2020: 13.3; 2021: 11.6; 2022: 10.1; 2023: 9.3; 2024: 10.0 - Outlook summary: - Non-oil growth expected to increase steadily above 5 percent over the medium term as agri-business, wood processing, and mining projects mature. - Increasing investment in the oil sector should help stabilize oil production, with overall growth rising to 4–5 percent in 2022–24. - Inflation projected to remain below 3 percent absent major supply shocks. - Continued fiscal consolidation expected to reduce public debt-to-GDP ratio below 45 percent. - Current account projected to turn positive in 2022 and rise to about 3 percent of GDP by 2024 as investments boost non-oil exports. - Risks (Annex III): - Immediate risk: slowdown in reform momentum. - Downside risks: decline in international oil prices, lower global growth, incomplete adjustment by CEMAC members. - Upside potential: higher medium-term growth if all FDI-financed projects materialize; staff baseline incorporates only part of expected FDI inflows due to uncertainty. ### Policy challenges and priorities for higher, inclusive, and resilient growth - Consensus: deeper reforms required to promote private investment and achieve higher, more inclusive, and resilient growth. - Main policy priorities discussed: - Boost domestic revenue, reorient expenditures toward growth-enhancing spending, improve spending efficiency, and build cushions against future shocks. - Strengthen banking sector soundness and financial inclusion. - Improve the business environment to facilitate private sector activity. - Address governance and corruption vulnerabilities as essential to achieving objectives. A. Fiscal policy — near-term challenges and measures - 2019 program commitment: achieve non-oil primary deficit of CFAF 308 billion (4.6 percent of NOGDP), 3 pp lower than the 2018 deficit. - Composition changes in spending for 2019: - Capital spending expected lower by 0.7 pp of NOGDP due to absorptive capacity constraints. - Net lending to public enterprises and special accounts expected higher than initially envisaged. - Overall balance (commitment basis) expected to turn positive for the first time since 2014 oil price shock and be 0.7 percent of NOGDP higher than initially projected. Near-term implementation priorities agreed with staff - Strengthen revenue administration: - Provide resources to intensify control, recover tax arrears, and better monitor tax exemptions. - Strengthen budget execution and treasury management: - Implement the expenditure regulation mechanism established in May 2019 to control spending and prevent new external arrears. 2020 draft budget highlights and risks (Text Table 5) - 2020 draft budget targets non-oil primary deficit: 4.2 percent of NOGDP (0.4 pp below 2019). - Revenue and expenditure assumptions: - Increase in tax revenues by 1 pp of NOGDP via strengthening revenue administrations and limiting tax exemptions. - Upgrade IT systems: E-tax for internal revenue; ASYCUDA World for customs. - Overall revenue increases only by 0.2 pp of NOGDP owing to declining non-tax revenues. - Significant cut in non-interest current spending: -1.3 pp of NOGDP (mainly wage bill streamlining). - Domestically-financed capital expenditure increases by 1.1 pp of NOGDP, but absorptive capacity constraints may lead to under-execution. - Staff advice: any overperformance (particularly in oil revenues) and savings in domestically financed capital spending should be used to rebuild buffers. Selected 2019–20 central government operation figures (percent of non-oil GDP) - Oil Revenue: 2019 (Proj.): 10.7; 2020 (Proj.): 9.5; Change: -1.2 - Non-oil revenue: 2019: 17.1; 2020: 17.3; Change: 0.3 - Taxes: 2019: 15.8; 2020: 16.8; Change: 1.0 - Non-taxes: 2019: 1.3; 2020: 0.5; Change: -0.7 - Current expenditure: 2019: 19.2; 2020: 17.8; Change: -1.4 - Wage bill: 2019: 10.0; 2020: 9.2; Change: -0.8 - Interest: 2019: 3.5; 2020: 3.4; Change: -0.1 - Goods and services: 2019: 2.4; 2020: 2.2; Change: -0.1 - Transfers and subsidies: 2019: 3.4; 2020: 3.0; Change: -0.4 - Capital expenditure: 2019: 4.7; 2020: 7.1; Change: 2.4 - Domestically financed: 2019: 2.0; 2020: 3.1; Change: 1.1 - Non-oil Primary Balance: 2019: -4.6; 2020: -4.2; Change: 0.4 - Overall balance (cash basis): 2019: 2.6; 2020: 2.0; Change: -0.7 A. Fiscal policy — medium-term challenges and reform recommendations - Authorities and staff agree on the need for a more revenue-based and growth-friendly fiscal consolidation while recognizing development spending needs to close infrastructure gaps and promote private investment. - Staff emphasis: create fiscal space via increased domestic revenue, restraint of non-priority spending, and enhanced public investment management and fiscal governance. Key fiscal reform recommendations (Text Table 6 summary) - Boost revenue mobilization - Limit and reform tax expenditure - Strengthen revenue administration capacities, including IT - Implement property taxes and simplify income taxes as well as other taxes - Rationalize current spending and streamline wage bill - Enhance monitoring of public entities and restructure loss-making SOEs - Improve efficiency of public investment: prepare a comprehensive PIP, revamp PIM organization and legal framework, enhance PIM capacities, update procurement and PPP legal framework, implement other PIMA recommendations - Enhance fiscal governance: improve cash management, implement budget execution regulation mechanisms, modernize IT systems and expand coverage, strengthen budget credibility, transparency and control, fully implement PFM reform Increasing non-oil revenue mobilization — specific observations and recommendations - Non-oil domestic revenue remains low relative to other upper middle-income countries. - Key weaknesses: weak tax and customs administration, poor tax policy prioritization, and large tax exemptions. - Use of exemptions to attract FDI (including in the Special Economic Zone) has limited impact on domestic revenues; 2017 tax and customs exemptions estimated higher than 7 percent of NOGDP. - IMF analysis: Gabon on high end of SSA tax gaps at 5.8 percentage points of GDP (IMF, 2018). - Authorities attached a list of tax and customs exemptions, with impact assessment, to the FY 2020 budget law; staff encouraged expanding this list per July 2019 IMF TA report (new proposed structural benchmark). - Staff recommendations (from recent IMF TA reports and MEFP ¶12–13): - Strengthen tax and customs administration capacities and provide resources to modernize information systems. - Enhance control and monitoring of tax and customs exemptions and remove those not in compliance with legal texts. - Revamp the process for granting new exemptions and conduct systematic cost-benefit analysis. - Over the medium term, implement property tax, simplify the personal income tax regime, and conduct analytical studies for future tax and customs reform. Italic source attribution line: *Source: IMF staff report excerpt (Gabon — selected chapters and tables as provided).* ### 17. The authorities recognized that strong ### 17. The authorities recognized that strong ### Fiscal consolidation and wage bill - Despite recent progress, Gabon’s wage bill remains above the level of its peers (Text Figure 4). - FAD TA report suggested that streamlining could generate up to 1 percent of GDP in the medium to long term. - Measures needed to contain and streamline the wage bill: - Complete the biometric census of all civil servants to streamline the payroll (MEFP, ¶7). - Implement the new hiring control mechanism in connection with the BOP reform. - Implement the new performance management system to promote staff based on performance. - Implement the new budget classification standards. ### Subsidies, transfers, and public entities - Subsidies and transfers to SOEs and autonomous public agencies continue to represent a significant burden and fiscal risk. - Measures to enhance monitoring and reduce fiscal risks from public entities: - Review the financial situation of key public enterprises with a view to close and/or develop restructuring plans for key loss-making enterprises (e.g., the national oil refinery). - Accelerate the elimination and merger of existing multiple autonomous public agencies. - Strengthen the monitoring, control, and reporting on special accounts (MEFP, ¶16). - Enhance oversight and enforce a stronger accountability framework for all public enterprises and agencies (MEFP, ¶29). ### Improving public investment and procurement - Authorities agreed on importance of enhancing efficiency of public investment and public procurement to foster growth; the 2020 budget includes a series of mega projects to overhaul infrastructure. - Staff stressed urgent need to address weaknesses highlighted in the Public Investment Management Assessment (PIMA). - Key policy actions: - Renew the public investment management framework and reorganize the monitoring process; revise the legal framework for public procurement, particularly by strengthening the role of the Public Procurement Regulatory Agency (MEFP, ¶15). - Prepare a comprehensive Public Investment Program (PIP) including all public investment projects (New proposed structural benchmark). - Consider careful prioritization of investment projects. - Revise the 2017 PPP legal framework to guarantee sustainability and limit exemptions. - Strengthen the role and independence of the Public Procurement Regulatory Agency (ARMP) and expand its oversight to PPPs to help manage fiscal costs and risks. ### Social spending and human capital - Increasing the level and efficiency of social spending is a priority: - Gabon spends less on education and health than its income comparators, and the efficiency of such spending is far below its peers (SIP III). - The social protection system remains fragmented and inefficient and often fails to reach intended beneficiaries. - Priorities going forward: - Gradually bring social expenditures in line with peers. - Develop and expand social programs that better target the most vulnerable groups. - Implement recommendations of the World Bank’s Public Expenditure Review (PER), including greater use of performance targets in budgetary resource allocation decision-making (SIP III). ### Addressing external and domestic arrears; fiscal governance - The large stock of domestic arrears is weighing on private investment and the banking system; urgent action is needed to clear existing arrears and enhance budget execution to eliminate payment delays and accumulation of new arrears. - Arrears progress: - Total stock of arrears reduced from 9.7 percent of GDP at end-2016 to 3.3 percent of GDP as of end-September 2019. - External arrears were entirely cleared as of March 2019. - PwC’s audit results indicate that the stock of domestic arrears for 2015–17 not yet recorded amounted to about 3 percent of GDP (authorities are confirming results). - External arrears totaling FCFA 25 billion or about 0.3 percent of GDP were accumulated from January to March 2019 for brief periods (<90 days) before measures took full effect. - Steps taken to avoid arrears accumulation: - Merging of the economic and budget ministries. - Implementing IMF TA recommendations on cash management, including weekly meetings between Treasury and Debt Units. - Implementation of the Treasury Single Account (TSA). - Expenditure regulation mechanism to help control spending. - Improvements in information systems to monitor payment deadlines. - The PC on new external arrears has not been breached since March 2019. - Additional planned measures: - Strengthen internal control and audit frameworks. - Modernize the IT system and systematize IT use for all expenditure, including agencies. - Revamp and operationalize the Treasury committee and budget execution monitoring mechanisms. - Make the TSA fully operational and revamp the VAT escrow account. - With completion of the domestic audit of arrears for 2015–17, design and launch a growth-friendly clearance plan, starting with SMEs (MEFP, ¶23). - Fiscal transparency and PFM improvements needed: - Improve quality of fiscal data and reduce extra-budgetary spending. - Enhance fiscal transparency through publication of fiscal and budget data (e.g., quarterly reports on arrears and budget) and disclosure of contingent liabilities, public investment program quarterly statistics on awarded contracts and procedures. - Fully operationalize the TSA and forbid any outside cash transactions, including by adopting and implementing a Treasury Committee decree that repeals and replaces the 2018 decision, in line with IMF TA recommendations (New proposed structural benchmark) (MEFP, ¶25 and ¶26). ### Strengthening debt management - Public debt remains sustainable, but debt service as a share of revenue is expected to remain high. - Government plans to issue a new Eurobond to reduce refinancing risks related to large Eurobond payments over 2022–25; authorities intend to use proceeds mainly for debt smoothing operations and may retain a small amount in deposits for potential investment opportunities. - Staff view using all proceeds for Eurobond repayment as the preferred option and stress that any issuance should not undermine the fiscal consolidation path. - Authorities agreed that use of Eurobond proceeds for other purposes would only be considered after a rigorous cost benefit analysis and remain consistent with planned fiscal adjustment (MEFP, ¶32). - Further IMF TA recommendations to improve medium-term debt management strategy include: - Managing interest rate and refinancing risks. - Enhancing the institutional framework for managing debt. - Strengthening cash management and coordination between the debt unit and the treasury to build a track record of remaining current on debt service. - Strengthening presence on domestic financing markets. - Implementing a communication strategy with Eurobond investors to prepare for refinancing. - Improve monitoring of public debt by including contingent liabilities, mainly from SOEs and PPPs. ### Financial sector soundness and inclusion - Banking sector indicators and challenges: - Capital adequacy ratio increased to 15.1 percent at end-March 2019, up from about 8 percent at end-2016, well above the CEMAC regulatory requirement of 10.5 percent. - Banks remained relatively liquid and profitable. - Decline in oil revenues, cash constraints, and weak PFM practices contributed to a rapid increase in domestic arrears and subsequently in NPLs. - Financial intermediation remained weak due to subdued lending activity, undermining banks’ potential contribution to economic growth. - Staff-supported actions: - Timely implement the strategy and action plan to reduce overdue loans and the agreed clearance plan of domestic arrears under the Club de Libreville. - Support swift liquidation of the three distressed banks by the liquidators, including eliminating technical impediments to asset sales and timely repayment of insured depositors. - Initiate investor search now and complete sale of the bank right after its acquisition by the government is finalized (MEFP, ¶36). - Financial inclusion: - Only 34 percent of the population have an account at a financial institution, far below Gabon’s income comparators. - Authorities committed to developing a national financial inclusion strategy in line with the regional one and strengthening financing of small and medium-size enterprises (MEFP, ¶38). ### Facilitating private sector activity and governance - Structural constraints to private sector growth include narrow economic base, weak governance, and unattractive business environment: - World Bank Doing Business rank: 169 out of 190 countries. - 2018 Global Competitiveness Index (GCI) rank: 108 out of 137 countries. - Gabon underperforms SSA and Emerging Market Economies in most worldwide governance indicators; weaknesses include corruption, rule of law, contract enforcement, property rights, and government effectiveness (SIP I). - Recommended actions to promote private sector activity: - Strengthen anti-corruption institutions and increase transparency by: - Enhancing capacity and independence of the Commission to Combat Illicit Enrichment (CNCLEI). - Enforcing asset disclosures and enhancing their quality. - Bringing Gabon’s AML/CFT regime into line with the current FATF standard; next AML/CFT mutual evaluation is coming up in 2021. - Effectively engaging stakeholders through easy and timely access to information, such as court decisions and CNCLEI reports. - Improve transparency in the oil sector, including efforts to join the Extractive Industry Transparency Initiative and provide contracts and licenses to the BEAC (New proposed structural benchmark). - Implement comprehensive business facilitation reform by: - Reducing regulatory burden (lower costs and procedures for licenses and permits, tax statements, and customs) and providing administrative services electronically (e-government). - Enhancing coordination across multiple jurisdictions to reduce excessive and overlapping demands on businesses. - Emphasize a favorable business environment rather than costly tax incentives to promote private investment and FDI inflows (SIP II). ### Climate action and sustainable development - Gabon is a regional leader in nature preservation and climate action: - Occupies 85 percent of its territory; currently hosts 60 percent of the remaining tropical forest of the Congo Basin. - Capacity to store more than 70 gigatons of carbon. - Sustainable development strategy commitments and impacts: - Strategy aims for a national reduction of at least 50 percent in greenhouse-gas (GHG) emissions by 2025. - Reform scenario incorporates policies committed after 2000, including the Forest code; national parks creation in ten percent of natural habitats; National Flaring Reduction Plan; PSGE low carbon industrial development; Climate plan; market mechanism from the Law on the Orientation of Sustainable Development; and adoption of a National Plan of Land Allocation. - Transparency and law enforcement in natural resource management to be improved via the World Bank funded Forest, Fisheries, Biodiversity and Environment Sector Program (FESP). - International support: - Recent agreement with the Norwegian government: a ten-year deal (around USD 150 million) with Norway paying Gabon a floor price of USD 10 per certified ton of reduced GHG emissions. *Source: 1gabea2019002 - 17. The authorities recognized that strong (IMF chapter excerpt).* ### 29. While program performance through end-December 2018 was weak, it has improved ### 29. While program performance through end-December 2018 was weak, it has improved ### Program performance: December 2018 to September 2019 - End-December 2018: - "Four out of the five end-December 2018 quantitative performance criteria (PCs) and the continuous zero ceiling on external arrears were missed" (Text Figure 9, and MEFP, Table 1). - "The two indicative targets were also missed." - Political uncertainty likely slowed reform implementation and economic management. - End-June 2019: - "Out of the five end-June 2019 PCs, three were met and two were missed" (Text Figure 8; and MEFP, Table 2). - Two PCs on central bank and banking system net credit to the government were missed owing to "lower-than-projected issuance of government securities, and budget support." - "The continuous PC on accumulation of external arrears was also breached early in the year," but subsequent measures prevented further breaches since March 2019. - Indicative target on social spending missed at end-June, mainly due to under execution of capital spending; execution trend shows noticeable improvement. - End-September 2019: - "Most end-September ITs were met," including ITs on non-oil tax revenue, contracting or guaranteeing external debt, and net claims on the banking sector. - The non-oil fiscal balance is below the projected deficit but above the adjusted target, reflecting faster-than-anticipated execution of the domestically-financed capital budget in the third quarter (expected to be offset later in the year). - "No further breaches of the accumulation of external arrears PC have occurred since March 2019." - "The targets on central bank net credit to the government was missed but the issuance of debt on the regional securities market in early October should help meet the end-year target." ### Structural reforms and benchmarks - Noteworthy progress on program-related structural reforms (MEFP, Table 4): - Quarterly reports on budget execution and quarterly reports on arrears are now available online. - Closing of accounts at the Caisse des Depots et Consignations and in commercial banks completed, though the TSA is not fully operational. - The unit supervising autonomous agencies and SOEs is now operational. - Financial sector reforms advancing with delays. - Implementation status through end-October: - "Overall, eight out of the nine structural benchmarks (SBs) through end-October were implemented, albeit with delays." - SB related to the EITI application not yet implemented. Civil society selected representatives for the EITI committee in September 2019; the government has yet to select its own representatives. - Proposal to reset the EITI SB to "end-March 2020." - Authorities committed to: - Transmitting contracts signed with mining and oil companies to the BEAC (New proposed structural benchmark). - Continue publishing a bi-annual report on total production and revenues from the oil and mining sectors. ### End-year outlook, preliminary data, and remedial measures - Preliminary September data and risks: - Special accounts: end-September imbalance "0.8 percent of NOGDP" vs expected end-December target "0.6 percent of NOGDP." End-year target achievable if projected revenues materialize in Q4; authorities started eliminating noncompliant earmarked revenues. - Net lending: September outturn "0.7 percent of NOGDP" vs projected "0.6 percent of NOGDP," suggesting a higher end-December outcome; authorities improving financial supervision of public entities (MEFP ¶29). - Remedial and corrective measures: - Continued application of the expenditure regulation mechanism set up in May 2019 with IMF support, which contributed to meeting end-June targets. - Contingency measures ("reserve") on both capital and current spending (MEFP ¶5) to monitor spending and offset overruns in net lending and special accounts expenditure. - Issuance of debt on the regional securities market "FCFA 167.8 billion" in early October 2019 expected to help meet end-year targets on net government claims to the central bank. - Commitment to ensure future budget execution meets the end-December IT on social spending (MEFP ¶17); third-quarter over-execution of domestically-financed capital spending reflects projects in education and health. - Waiver and requests: - Authorities request waivers for non-observance of the two performance criteria for June 2019 that were not observed and the continuous performance criterion on the non-accumulation of new external arrears (Appendix I). ### Program modalities, new conditionality, and financing - New program conditionality proposed: - New PCs for December 2019, ITs for December 2019 and March 2020 (MEFP, Tables 2 and 3). - Prior actions implemented ahead of the Board meeting: - Submission to Parliament of the law establishing harmonized statutes for public administrative institutions and repealing earlier provisions. - Submission to Parliament of a draft 2020 budget in line with the macroeconomic framework. - New proposed SBs (based on IMF TA on tax expenditure, cash management, and PIM): - Establish the list of all existing tax and custom exemptions and assess fiscal impact (end-December 2019). - Transmit contracts signed with mining and oil companies to the BEAC to enforce new foreign exchange repatriation regulations (end-December 2019). - Prepare a comprehensive Public Investment Program (PIP) with all public investment projects (End-April 2020). - Adopt and implement a Treasury Committee decree that repeals and replaces the 2018 decision, in line with IMF TA, to help avoid accumulation of arrears (end-January 2020). - Financing and rephasing: - "The program remains fully financed with firm assurances in place for the rest of 2019 and 2020." - Financing needs will be met by external borrowing, budget support and Fund financing (Text Table 7). - "The remaining purchases from the IMF are rephased (LOI, Attachment III), due to delays in completing the fourth review and a revised macroeconomic framework." - Selected financing figures (as presented): - Overall fiscal deficit (cash basis): -1.5, -1.7, -1.5 (period labels in source). - Other financing needs: 9.2 9.5 13.8 - Amortization (including arrears) 6.2 6.2 9.7 - BEAC 1.2 1.2 2.9 - Other 1.8 2.1 1.2 - Total financing needs 7.6 7.8 12.3 - Identified sources of financing 3.6 4.2 10.5 - External 1.8 1.8 8.5 - Domestic 1.8 2.3 2.0 - Financing gap 4.0 3.7 1.8 - Exceptional external financing 2.9 3.0 1.1 - Multilateral 2.4 2.5 1.1 - African Development Bank 0.0 1.3 0.0 - World Bank 2.4 1.2 1.1 - Bilateral 0.5 0.5 0.0 - Residual financing needs 1.1 0.7 0.7 - IMF-EFF 1.1 0.7 0.7 - (Figures presented under the 2019 column heading in Text Table 7.) - Capacity to repay the Fund: - "IMF credit outstanding peaks at 3.7 percent of GDP in 2020." - "Repurchases under the Extended Arrangement will peak at 1.2 percent of exports in 2024." - Vulnerabilities remain due to elevated gross financing needs and significant debt-profile risks; a Eurobond issuance for debt smoothing operations and strengthened debt management could help mitigate these risks. ### Regional assurances and BEAC actions - BEAC policy assurance: - BEAC provided updated policy assurance on end-December 2019 and end-June 2020 NFAs in support of CEMAC countries’ Fund-supported programs. - BEAC presented revised NFA projections reflecting strong performance through mid-2019 and reiterated commitment to adequately tight monetary policy together with member states implementing fiscal adjustment. - "The regional assurances on regional NFA are critical for the success of Gabon’s program and will help bolster the region’s external sustainability." - BEAC continues to implement remaining recommendations of the 2017 safeguards assessment. ### Other issues - Exchange regime: - Gabon maintains a "1.5 percent tax on wire transfers abroad" that is not consistent with Article VIII, Section 2(a) of the Articles of Agreement. Proceeds fund Gabon’s health insurance scheme. Staff urged removal; authorities noted several transactions are exempt (including all interbank transactions) but do not propose eliminating the tax. - Safeguards assessment: - BEAC to implement remaining recommendations of the 2017 safeguards assessment, including full transition to IFRS for FY 2019 and revisions to secondary legal instruments for alignment with the BEAC Charter. - Statistics: - Data provision "is broadly adequate." - On October 11, 2019, Gabon launched a National Summary Data Page (NSDP) implementing e-GDDS recommendations. - Authorities committed to conducting surveys, improving economic statistics including rebasing of GDP (MEFP, ¶40), and encouraged to develop capacity to report IIP data regularly as required under Article VIII, Section 5. - Capacity development and technical assistance: - Fund and authorities agreed on a capacity development strategy for the next three years (Annex V). - TA focus: tax policy and revenue administration; PFM (cash management, budget execution, public investment management, budget credibility and reporting, financial information system); debt management; banking sector; and government statistics. ### Staff appraisal: assessment and recommendations - Economic assessment: - "The economy is gradually recovering, supported by prudent domestic macroeconomic policies." - Economic activity has rebounded, fiscal and external positions improved, Gabon contributed to build-up of regional international reserves, public debt started to decline, and authorities cleared all external arrears. - Remaining challenges: insufficient buffers and deep institutional and structural weaknesses constraining private investment, growth, and poverty reduction. - Fiscal policy recommendations: - "A more revenue-based and growth-friendly fiscal consolidation is needed." - Rebalance spending toward infrastructure and social spending by increasing revenue, restraining non-priority spending, and improving public spending efficiency. - Revenue efforts should focus on increasing compliance and broadening the tax base, including "strictly limiting tax exemptions." - Improve payroll monitoring and control and closer monitoring of public entities; restructure loss-making enterprises such as the national refinery. - Public investment and governance: - "Improving the efficiency of public investment is critical for growth prospects." - Staff urges authorities to implement recommendations of the PIMA and work closely with development partners to strengthen project design, execution, reporting, control, and procurement practices. - A measured approach to scaling up investment is warranted. - Address shortcomings in fiscal governance: strengthen cash management, budget execution credibility and transparency, clear domestic arrears, and eliminate payment delays to boost business confidence and financial stability. - Structural reforms and program implementation: - Accelerate structural reforms to achieve higher, resilient, inclusive growth (infrastructure, human capital, financial development, governance, anti-corruption). - Authorities have taken decisive actions to improve program implementation; several end-June 2019 quantitative targets met and corrective actions taken. - Regional role and staff recommendation on reviews: - Gabon supports regional stability as the second largest economy in CEMAC; strong implementation of fiscal consolidation by all four countries with Fund programs and possible approval of new programs for Equatorial Guinea and CAR would support recovery in BEAC net foreign asset position. - "Staff supports the completion of the fourth and fifth reviews under the EFF-supported program" in light of adequate implementation of regional policy assurances by the BEAC, program progress, and authorities’ commitment. - Staff supports authorities’ request for waivers of non-observance of end-June 2019 PCs on net government claims on the banking system and net government claims on the central bank, and the continuous PC on new external payment arrears, on grounds of corrective actions and a rephasing of access. - Staff proposes that completion of the sixth review be conditional on implementation of critical union-level policy measures as established in the December 2019 union-wide background paper. *Source: IMF staff report content (1gabea2019002 - 29. While program performance through end-December 2018 was weak, it has improved).* ### 49. Staff recommends that the next Article IV consultation for Gabon be held on the ### Staff recommends that the next Article IV consultation for Gabon be held on the 24-month cycle. ### Economic outlook and key macro indicators - GDP at constant prices (annual percent change): 2.1 (2016 Act.), 0.5 (2017 Act.), 1.2 (2018 Act.), 0.8 (2019 Est.), 3.1 (2020 Prog.), 3.4 (2021 Proj.), 3.8 (2022 Proj.), 3.8 (2023 Proj.), 4.5 (2024 Proj.), 4.5 (2025 Proj.), 4.7 (2026 Proj.). - Oil sector growth (annual percent change): -2.7 (2016), -4.8 (2017), -2.0 (2018), -4.1 (2019), 1.6 (2020), 7.9 (2021), 2.5 (2022), 1.6 (2023), 1.7 (2024), 1.7 (2025), 1.8 (2026). - Non-oil growth (annual percent change): 3.3 (2016), 1.7 (2017), 1.9 (2018), 1.9 (2019), 3.5 (2020), 2.5 (2021), 4.0 (2022), 4.3 (2023), 5.1 (2024), 5.1 (2025), 5.3 (2026). - GDP deflator (annual percent change): -4.3 (2016), 3.8 (2017), 8.0 (2018), 7.2 (2019), 2.4 (2020), 2.6 (2021), 0.2 (2022), 0.4 (2023), 1.1 (2024), 1.3 (2025), 2.4 (2026). - Consumer prices (yearly average): 2.1 (2016), 2.7 (2017), 4.0 (2018), 4.8 (2019), 3.0 (2020), 3.0 (2021), 3.0 (2022), 3.0 (2023), 2.5 (2024), 2.5 (2025), 2.5 (2026). - Nominal GDP (billion CFAF): 8,311 (2016), 8,669 (2017), 9,475 (2018), 9,369 (2019), 10,011 (2020), 9,937 (2021), 10,332 (2022), 10,774 (2023), 11,375 (2024), 12,049 (2025), 12,917 (2026). - Oil prices (Brent, U.S. Dollar/BBL): 43 (2016), 54 (2017), 72 (2018), 71 (2019), 64 (2020), 60 (2021), 58 (2022), 57 (2023), 57 (2024). ### Fiscal indicators and outlook - Total revenue and grants (billion CFAF): 1,424 (2016 Act.), 1,423 (2017 Act.), 1,722 (2018 Act.), 1,581 (2019 Prel.), 1,842 (2020 Prog.), 1,868 (2021 Proj.), 1,946 (2022 Proj.), 2,042 (2023 Proj.), 2,154 (2024 Proj.), 2,298 (2025 Proj.), 2,458 (2026 Proj.). - Oil revenue (billion CFAF): 423 (2016), 574 (2017), 682 (2018), 583 (2019), 694 (2020), 719 (2021), 684 (2022), 657 (2023), 645 (2024), 642 (2025), 644 (2026). - Non-oil revenue (billion CFAF): 1,001 (2016), 849 (2017), 1,040 (2018), 997 (2019), 1,148 (2020), 1,148 (2021), 1,245 (2022), 1,385 (2023), 1,509 (2024), 1,656 (2025), 1,814 (2026). - Total expenditure and net lending (billion CFAF): 1,833 (2016), 1,649 (2017), 1,679 (2018), 1,702 (2019), 1,711 (2020), 1,692 (2021), 1,806 (2022), 1,919 (2023), 2,033 (2024), 2,156 (2025), 2,309 (2026). - Current expenditure (billion CFAF): 1,413 (2016), 1,350 (2017), 1,276 (2018), 1,270 (2019), 1,313 (2020), 1,293 (2021), 1,278 (2022), 1,393 (2023), 1,465 (2024), 1,549 (2025), 1,652 (2026). - Capital expenditure (billion CFAF): 405 (2016), 133 (2017), 256 (2018), 248 (2019), 369 (2020), 317 (2021), 513 (2022), 526 (2023), 568 (2024), 607 (2025), 657 (2026). - Overall balance (commitment basis, percent of GDP): -5.0 (2016), -2.6 (2017), 0.5 (2018), -1.3 (2019), 1.3 (2020), 1.8 (2021), 1.4 (2022), 1.1 (2023), 1.1 (2024), 1.2 (2025), 1.2 (2026). - Overall balance (cash basis, percent of GDP): -6.6 (2016), -3.4 (2017), -0.6 (2018), -1.6 (2019), 1.5 (2020), 1.7 (2021), 1.5 (2022), 1.2 (2023), 1.1 (2024), 1.2 (2025), 1.2 (2026). - Non-oil primary balance (percent of non-oil GDP): -11.0 (2016), -9.7 (2017), -6.4 (2018), -7.6 (2019), -4.5 (2020), -4.6 (2021), -4.2 (2022), -3.1 (2023), -2.8 (2024), -2.3 (2025), -2.0 (2026). - Non-oil primary basic balance (percent of non-oil GDP): -6.9 (2016), -8.6 (2017), -3.6 (2018), -5.0 (2019), -1.8 (2020), -1.8 (2021), -0.4 (2022), 0.7 (2023), 0.9 (2024), 1.2 (2025), 1.5 (2026). - Total public debt (percent of GDP): 64.2 (2016), 62.6 (2017), 57.3 (2018), 60.6 (2019), 53.0 (2020), 56.5 (2021), 55.6 (2022), 52.5 (2023), 48.9 (2024), 45.6 (2025), 42.5 (2026). - External public debt (percent of GDP): 37.4 (2016), 38.7 (2017), 39.4 (2018), 40.0 (2019), 39.1 (2020), 40.5 (2021), 42.3 (2022), 40.9 (2023), 38.8 (2024), 36.3 (2025), 32.5 (2026). - Domestic public debt (percent of GDP): 26.8 (2016), 24.2 (2017), 17.9 (2018), 20.6 (2019), 13.9 (2020), 16.0 (2021), 13.3 (2022), 11.6 (2023), 10.1 (2024), 9.3 (2025), 10.0 (2026). - Gross government deposits in BEAC (billion CFAF): 2.8 (2016), 3.6 (2017), 3.8 (2018), 3.4 (2019), 4.7 (2020), 4.4 (2021), 7.1 (2022), 7.4 (2023), 7.6 (2024), 7.9 (2025), 8.5 (2026). ### Balance of payments and external sector - Current account (billion CFAF): -864 (2016), -602 (2017), -204 (2018), -296 (2019), -99 (2020), -110 (2021), -209 (2022), -107 (2023), 176 (2024), 245 (2025), 360 (2026). - Exports of goods (f.o.b., billion CFAF): 2,633 (2016), 3,100 (2017), 3,764 (2018), 3,535 (2019), 4,054 (2020), 3,963 (2021), 3,986 (2022), 4,107 (2023), 4,332 (2024), 4,481 (2025), 4,712 (2026). - Hydrocarbons (billion CFAF): 1,941 (2016), 2,069 (2017), 2,678 (2018), 2,450 (2019), 2,725 (2020), 2,596 (2021), 2,389 (2022), 2,267 (2023), 2,223 (2024), 2,216 (2025), 2,222 (2026). - Imports of goods (f.o.b., billion CFAF): -1,572 (2016), -1,667 (2017), -1,713 (2018), -1,634 (2019), -1,791 (2020), -1,769 (2021), -1,875 (2022), -1,897 (2023), -1,911 (2024), -1,976 (2025), -2,042 (2026). - Current account (percent of GDP): -10.4 (2016), -6.9 (2017), -2.2 (2018), -3.2 (2019), -1.0 (2020), -1.1 (2021), -2.0 (2022), -1.0 (2023), 1.5 (2024), 2.0 (2025), 2.8 (2026). - CEMAC Foreign Reserves (US$ billions, end-of-period): 5.0 (2016), 5.8 (2017), 6.5 (2018), 6.6 (2019), 8.5 (2020), 8.2 (2021), 10.5 (2022), 12.4 (2023), 13.8 (2024), 15.0 (2025). - Gross official reserves imputed to Gabon (US$ billions): 0.6 (2016), 0.5 (2017), 0.75 (2018), 1.19 (2019), 1.94 (2020), 2.52 (2021), 3.08 (2022), 3.74 (2023), 4.39 (2024). - Imputed reserves (end of period, billions CFAF): 358 (2016), 230 (2017), 307 (2018), 242 (2019), 422 (2020), 141 (2021), 859 (2022), 693 (2023), 1,134 (2024), 1,462 (2025), 1,775 (2026). ### Central government accounts and debt dynamics - Central government total revenue and grants (percent of GDP): 17.1 (2016), 16.4 (2017), 18.2 (2018), 16.9 (2019), 18.4 (2020), 18.8 (2021), 18.8 (2022), 19.0 (2023), 18.9 (2024), 19.1 (2025), 19.0 (2026). - Total expenditure and net lending (percent of GDP): 22.1 (2016), 19.0 (2017), 17.7 (2018), 18.2 (2019), 17.1 (2020), 17.0 (2021), 17.5 (2022), 17.8 (2023), 17.9 (2024), 17.9 (2025), 17.9 (2026). - Wages and salaries (percent of GDP): 8.8 (2016), 8.5 (2017), 7.4 (2018), 7.5 (2019), 6.7 (2020), 6.8 (2021), 6.4 (2022), 6.5 (2023), 6.7 (2024), 6.8 (2025), 6.9 (2026). - Interest payments (percent of GDP): 2.3 (2016), 2.5 (2017), 2.5 (2018), 2.4 (2019), 2.6 (2020), 2.4 (2021), 2.3 (2022), 2.7 (2023), 2.6 (2024), 2.5 (2025), 2.3 (2026). - Non-oil primary balance excluding capital transfers (billion CFAF): -646 (2016), -582 (2017), -406 (2018), -479 (2019), -307 (2020), -308 (2021), -303 (2022), -239 (2023), -228 (2024), -204 (2025), -195 (2026). - Gross government deposits in BEAC (percent of GDP): 2.8 (2016), 3.6 (2017), 3.8 (2018), 3.4 (2019), 4.7 (2020), 4.4 (2021), 7.1 (2022), 7.4 (2023), 7.6 (2024), 7.9 (2025), 8.5 (2026). ### Financing of the fiscal deficit - Overall fiscal deficit (cash basis, billion CFAF): 296.6 (2017 Act.), 59.6 (2018 Prog.), 146.5 (2019 Proj.), -152.4 (2020 Proj.), -166.8 (2021 Proj.), -152.4 (2022 Proj.). - Total financing needs (billion CFAF): 992.0 (2017 Act.), 776.4 (2018 Prog.), 696.7 (2019 Proj.), 765.8 (2020 Proj.), 780.1 (2021 Proj.), 1,270.7 (2022 Proj.). - Identified sources of financing (billion CFAF): 390.2 (2017 Act.), 380.1 (2018 Prog.), 375.5 (2019 Proj.), 364.6 (2020 Proj.), 412.4 (2021 Proj.), 1,083.7 (2022 Proj.). - External (billion CFAF): 177.8 (2017), 175.1 (2018), 165.8 (2019), 183.6 (2020), 183.6 (2021), 878.7 (2022). - Domestic (billion CFAF): 212.5 (2017), 205.0 (2018), 209.7 (2019), 181.0 (2020), 228.8 (2021), 205.0 (2022). - Financing gap (billion CFAF): 601.8 (2017 Act.), 396.3 (2018 Prog.), 321.2 (2019 Proj.), 401.2 (2020 Proj.), 367.6 (2021 Proj.), 187.0 (2022 Proj.). - Exceptional external financing (billion CFAF): 487.8 (2017 Act.), 284.2 (2018 Prog.), 207.3 (2019 Proj.), 288.7 (2020 Proj.), 295.5 (2021 Proj.), 115.0 (2022 Proj.). - Residual financing needs covered by IMF-EFF (billion CFAF): 113.9 (2017 Act.), 112.1 (2018 Prog.), 113.9 (2019 Proj.), 112.6 (2020 Proj.), 72.1 (2021 Proj.), 72.0 (2022 Proj.). - Stock of government deposits at the BEAC (billion CFAF): 314.9 (2017), 396.0 (2018), 315.0 (2019), 517.4 (2020), 438.4 (2021), 732.9 (2022). ### Monetary and financial indicators - Broad money (M2, annual percent change): -5.2 (2016), -3.9 (2017), -2.9 (2018), 17.5 (2019 Q1 Act.), 23.0 (2019 Q2 Act.), 14.3 (2019 Q3 Act.), 15.7 (2019 Q4 Act.), 12.9 (2020 Prog.), 14.2 (2021 Proj.), 16.0 (2022 Proj.). - Credit to the economy (annual percent change): -5.6 (2016), -3.0 (2017), 6.1 (2018), 6.2 (2019 Q1 Act.), 6.9 (2019 Q2 Act.), 9.7 (2019 Q3 Act.), 11.2 (2019 Q4 Act.). - Net foreign assets (billion CFAF): 445 (2016 Act.), 549 (2017 Act.), 369 (2018 Act.), 487 (2019 Q1 Act.), 449 (2019 Q2 Act.), 650 (2019 Q3 Act.), 600 (2019 Q4 Act.). - Financial soundness indicators (selected, percent): - Regulatory capital to risk-weighted assets: 24.7 (2010), 12.9 (2011), 10.9 (2012), 12.3 (2013), 9.4 (2014), 8.3 (2015), 8.1 (2016), 12.9 (2017), 13.7 (2018), 15.1 (2019 Mar.). - Non-performing loans (gross) to total loans (gross): 3.2 (2010), 2.8 (2011), 2.5 (2012), 2.7 (2013), 4.1 (2014), 5.3 (2015), 6.6 (2016), 9.1 (2017), 9.6 (2018), 11.4 (2019 Mar.). ### IMF program, capacity to repay, and schedule under the Extended Arrangement - Outstanding Fund credit (millions of SDRs): 375.1 (2019), 464.4 (2020), 458.5 (2021), 434.6 (2022), 387.0 (2023), 317.1 (2024), 239.7 (2025), 162.3 (2026), 90.8 (2027), 37.2 (2028), 7.5 (2029), 0.0 (2030 onwards). - Total obligations based on existing and prospective credit (in millions of SDRs): 0.5 (2019), 14.6 (2020), 33.5 (2021), 57.0 (2022), 78.2 (2023), 84.3 (2024), 83.0 (2025), 75.7 (2026), 65.5 (2027), 31.4 (2028), 8.3 (2029), 0.3 (2030), 0.2 (2031). - Schedule of purchases and timing (current schedule, amounts in millions of SDRs and US$): - June 19, 2017: Approval of the extended arrangement under the EFF, 71.430 (millions of SDRs), 96.649 (millions of US$). - December 1, 2017: First review, 71.430 (SDR), 98.615 (US$). - June 1, 2018: Second review, 71.430 (SDR), 100.618 (US$). - December 1, 2018: Third review, 71.430 (SDR), 100.618 (US$). - June 1, 2019: Fourth review, 71.430 (SDR), 44.670 (SDR available amount listed), 63.032 (US$ available amount), 220.681 (percentage of quota shown). - December 1, 2019 and April 30, 2020: subsequent reviews with specified disbursement conditions. - Total under current schedule: 464.400 (millions of SDRs), 648.990 (millions of US$), 215.000 (amount column preserved as presented). *Source: IMF staff estimates and projections contained in the provided material.* ### Annex I. Implementation of Past IMF Advice (Article IV 2015) ### Annex I. Implementation of Past IMF Advice (Article IV 2015) ### Fiscal Policy and Public Financial Management - Eliminate inefficient and costly tax exemptions and exonerations — Status: Ongoing. Comment: Partly done. The list of exempted products as part of the fight against "la vie chere" has not been substantially reduced. - Widen the non-oil revenue tax base by improving tax administration — Status: Ongoing. Comment: While the authorities' plan to establish a Revenue Authority has been shelved, FAD has fielded many TA missions with recommendations to widen the tax base, including the introduction of property tax. - Modernize customs drawback system — Status: Done. Comment: Addressed through FAD TA. - Adopt a risk-based approach to VAT reimbursement — Status: Ongoing. Comment: A dedicated account has been opened at the Central Bank for VAT reimbursement. - Rescind the prohibition of imports of vehicles over three years old — Status: Done. Comment: This prohibition has been rescinded in 2017. - Review of the tax policy regime — Status: Done. Comment: A review of the tax policy regime was carried out by an FAD TA missions. - Greater control of the wage bill — Status: Ongoing. Comment: Partly done. Reforms implemented include: incentives for early retirement, recruitment freezes, elimination of an inefficient incentive system, and improvements in human resource management such as merit-based recruitments and promotions. - Fuel subsidies reform — Status: Done. Comment: After removing subsidies on commercial diesel in 2014, importation of fuel was liberalized in 2015. Petrol and diesel subsidies reform were implemented in 2016. - Performance budgeting reforms — Status: Ongoing. Comment: Following the adoption of the organic law (LOLFEB) in 2015, a new program classification has been implemented and is currrrently used for budget laws. Related budget documentation still needs to be improved and completed. ### Financial Sector Policies - Address financial situation of weak public banks — Status: Ongoing. Comment: The government appointed administrators for all three public banks. One insolvent public bank has been liquidated. - Creating credit bureaus and upgrading the operations of land and commercial registries — Status: Ongoing. - Streamline procedures for recording and enforcing loan guarantees — Status: Ongoing. - Strengthening creditor rights enforcement — Status: Ongoing. ### Structural Policies - Improve quality of investment projects — Status: Ongoing. Comment: A PIMA TA has been completed in 2019. - Improve business climate — Status: Ongoing. Comment: A one-stop-center for business has been created at the Special Economic Zone. Plans are underway to extend it to the rest of the economy. - Improve labor market legislation — Status: Ongoing. Comment: A preliminary draft of the new Labor Code, prepared by the Ministry of Labor, is being reviewed by stakeholders, including civil society. It would then be submitted to the Council of Ministers. - Strengthen anti-corruption efforts and the AML/CFT framework — Status: Ongoing. Comment: A new president of the anti-corruption entity has been nominated and the government has taken several specific measures in response to big recent cases of corruption, including the dismissal of the Vice President and the Minister of Forestry in light of the scandal relating to exports of the precious wood "Kewazingo." In addition, other popular politicians have been put on trial for corruption, but so far none has been found guilty. Regarding AML/CFT, Gabon is still monitored by the FATF-style regional body (FSRB) for teh CEMAC countries (GABAC), owing to the substantial deficiencies revealed during the most recent (2013) AML/CFT assessment. Gabon's next AML/CFT assessment is scheduled to take place in 2021. ### Improve Statistics - Address weaknesses in economic statistics — Status: Ongoing. Comment: Important progress has been made: a national statistics agency has been created, a population census adopted, a household survey completed, production of quarterly GDP has begun, health and firms surveys are underway, and work towards high frequency indicators are ongoing. Gabon has submitted its fiscal statistics to the GFS in 2018 and is the first CEMAC country to have done it. *Source: Annex I (Article IV 2015) implementation summary as presented in the PDF.* --- ### Annex II. External Sector Assessment ### Key external developments (2018) - Terms of trade improved by 27 percent. - Oil prices rose 32 percent. - REER appreciated by 5 percent, owing to higher domestic prices despite depreciation of the Euro relative to the US dollar. - Current account (CA) deficit: -3.2 percent of GDP in 2018, compared with -6.9 percent of GDP in 2017. - Exports increased by 14.0 percent (y -o-y) in 2018. - Oil exports increased 18 .4 percent year-over-year. - Non-oil exports increased 7.0 percent year-over-year. - Imports as a share of GDP declined slightly (-2.0 percent). - FDI estimated at 8.2 percent of GDP in 2018, the majority related to the non-oil sector. - Disbursements of external debt for project and external financing (excluding the IMF) slowed to 4 percent of GDP, compared with 6 percent in 2017. - Gabon’s imputed net foreign assets at the BEAC increased for the first time since 2013. ### Data limitations - Official balance of payments statistics subject to delays; latest official series from 2016. - Gaps include exclusion of activities in the Special Economic Zone. - Lack of available data for the net international investment position precludes the use of the External Sustainability approach. - Authorities are working with IMF technical assistance to address these issues. ### EBA-Lite regression-based estimates (2018) - Revised EBA-Lite regression results suggest the 2018 exchange rate is overvalued by 6 to 17 percent. - CA regression estimates: - Cyclically-adjusted actual CA: -4.9% of GDP. - Cyclically-adjusted CA norm: -0.2% of GDP. - CA gap: -4.7% of GDP. - Policy gap component: 0.6%. - REER regression estimates: - Actual REER (log): 4.63. - Equilibrium REER norm (log): 4.57. - Residuals and model notes: - Residual: -0.05 (CA), 0.04 (REER). - Natural disasters and conflicts contribution: 0.1% (CA) and -0.3% (REER) in table. - Elasticity of CA to REER gap is -0.3. ### Model-based approaches for resource exporters - Consumption-based model: - Medium-term CA norm: 13 percent. - Underlying CA projection: 3 percent. - Implied exchange rate overvaluation: 35 percent. - Medium-term fiscal norm: 4 percent of GDP; projected fiscal value: 1 percent. - Key assumptions: total oil reserves of 2.0 billion barrels (end-2018 proven reserves); population growth of 1.3 percent per annum; 1 percent long-run oil production growth; trade balance elasticity of 0.3. - Investment-based model: - Assumes public and private investment efficiency of 0.5 (only half of investment turns into productive capital, based on PIMA 2019 findings). - Projects a medium-term CA norm of 4 percent of GDP, below baseline projections. ### Bottom-line assessment - External position is substantially weaker than implied by medium-term fundamentals and desirable policies. - Range of overvaluation estimates: 6 to 17 percent (based on REER and CA results). - Overall assessment cited: 9 to 16 percent overvaluation in 2018. - CA gap estimates: below -4.0 percent of GDP and -4.7 percent of GDP in the assessment; 2019 projections suggest a CA gap of -2.6 percent (consistent with a “weaker than fundamentals assessment”). - Upside risks: stronger returns from recent FDI and higher than anticipated oil production could improve the external position. ### Policy implications to strengthen external position - Continued fiscal consolidation under the program. - Improve efficiency of public investment. - Enhance governance and improve the business environment to diversify the export base. - Structural competitiveness indicators and selected metrics: - Doing Business rank: 169 out of 190 countries in 2019. - WEF Enabling Trade Index overall rank (out of 136): 129. - Domestic market access: 125. - Tariff rate (%): 13.4. - Complexity of tariffs: 31. - Share of duty free imports (%): 22.1. - Foreign market access: 128. - Tariff rate faced (%): 4.7. - Margin of preference in destination markets: 132. - Border administration ranking: 119. - Customs service index: 105. - Efficiency of clearance process: 120. - Time to import (documentary, hours): 120. - Time to import (border compliance, hours): 84. - Cost to import (documentary): US$170. - Cost to import (border compliance): US$1320. - Time to export (documentary, hours): 60. - Time to export (border compliance, hours): 96. - Cost to export (documentary): US$200. - Cost to export (border compliance): US$163. - Irregular payments and bribes: 90. - Time predictability of import procedures: 103. - Customs transparency index: 86. - Infrastructure rankings: Transport infrastructure 119; Transport services 130; Availability and use of ICTs 107. - Operational environment ranking: 110. - Protection of property: 93. - Efficiency and accountability of govt: 118. - Access to finance: 124. - Openness to foreign participation: 109. - Physical security: 82. - Border indicators and rankings reflect substantial room for improvement to support trade and diversification. *Source: Annex II. External Sector Assessment (PDF chapter).* --- ### Annex III. Risk Assessment Matrix (RAM) ### Domestic risks - Disruption in domestic oil production caused by aging fields and lower than expected production from new projects. - Relative Likelihood: Medium - Impact if Realized: Medium - Recommended Policy Response: - Use fiscal buffers to temporarily sustain priority spending and support non-oil activity during shutdowns. - Enhance facility maintenance and plan adequate investment for refurbishment, and encourage exploration and discovery of new oil. - Notes: Fiscal revenues and exports are susceptible to oil production declines, with potential spillovers to the non-O&G sector. - Deterioration of domestic political conditions. - Relative Likelihood: Medium - Impact if Realized: Medium - Recommended Policy Response: - Communicate the benefits of the government’s macroeconomic program and enhance the inclusiveness of the approach to economic management. - Step up efforts to improve governance and fight corruption. - Notes: Given growing perception of poor governance and corruption it may be difficult to maintain a sustainable consensus to govern. This could compromise the macroeconomic stabilization gains made over the last three years and derail key reforms. ### Spillover risks - Weaker-than-expected global growth. - Relative Likelihood: Medium (U.S.), High (Europe), High (China), Medium (large stressed emerging economies) - Impact if Realized: Medium - Recommended Policy Response: - Consolidate fiscal buffers through domestic revenue mobilization and enhancing the efficiency of public investment. - Energize external support through better compliance to donors’ conditionality and emphasizing the merits and needs of Gabon’s development strategy. - Notes: Adverse impact via lower FDI inflows and external support; demand for export products and prices would fall. - Rising protectionism and retreat from multilateralism. - Relative Likelihood: High - Impact if Realized: High - Recommended Policy Response: - Continue improving the business environment to attract further investments and diversify the economy. - Use fiscal buffers to temporarily sustain priority spending and support non-oil activity. - Diversify the structure of the economy and export products and markets. - Notes: Demand for export products and their prices would fall, hurting the domestic economy. - Rise in risk premia and the cost of debt on regional financial markets. - Relative Likelihood: High - Impact if Realized: High - Recommended Policy Response: - Optimize debt portfolio and management. - Reduce borrowing needs. - Ensure to remain current on debt service obligations. - Adjust non-priority spending level, if necessary. - Notes: Higher costs of borrowing for government and business reduce economic activities. Note on RAM interpretation: The RAM shows events that could materially alter the baseline path (staff’s most likely scenario). Relative likelihood categories: "low" <10 percent, "medium" 10–30 percent, "high" 30–50 percent. "Short term (ST)" and "medium term (MT)" indicate risks could materialize within 1 year and 3 years, respectively. Non-mutually exclusive risks may interact and materialize jointly. *Source: Annex III. Risk Assessment Matrix (PDF chapter).* *Italic: Source: 1gabea2019002 - Annex I. Implementation of Past IMF Advice (Article IV 2015) — PDF chapter content provided.* ### Annex IV. Debt Sustainability Analysis (DSA) ### Annex IV. Debt Sustainability Analysis (DSA) ### Public debt level, coverage, and composition - Debt coverage is narrow: limited to central government and direct government guarantees; local and SOE debt are not captured. - External debt is defined on a currency basis. - Public debt stock at end-2018: FCFA 5,676 billion (about US$9.9 billion), equal to 61 percent of GDP (from 63 percent in 2017). - 2018 stock included FCFA 293 billion in domestic arrears and FCFA 37 billion in external arrears to commercial creditors (the external arrears have since been cleared). - External debt share of overall stock: 66 percent. - Financial market debt (Eurobonds) share of overall debt: 22 percent. - 40 percent of external debt carries variable interest rates, mostly related to the Eurobond. - Public debt stock by component (Billions of CFA francs, Table 1): - External Debt: 2016: 3,107.0; 2017: 3,355.8; 2018: 3,743.7 - Bilateral: 2016: 742.8; 2017: 678.9; 2018: 804.6 - Multilateral: 2016: 376.8; 2017: 913.5; 2018: 1,056.8 - Commercial: 2016: 641.4; 2017: 566.5; 2018: 629.5 - Financial Markets: 2016: 1,346.0; 2017: 1,196.9; 2018: 1,252.8 - Domestic Debt: 2016: 2,228.3; 2017: 2,081.9; 2018: 1,932.4 - Banking: 2016: 810.7; 2017: 826.4; 2018: 772.3 - Non-Banking System: 2016: 1,417.6; 2017: 1,255.5; 2018: 1,160.1 - Total: 2016: 5,335.3; 2017: 5,437.7; 2018: 5,676.1 ### Baseline projections and realism - Growth projections: growth reaching 3.4 percent in 2019 and averaging 4 percent over 2020–24, driven by non-oil growth and oil-sector investment stabilizing production. - Projections are conservative given volatility in oil production and external financing disbursements; they incorporate part of expected FDI inflows and activity from existing projects. - Fiscal adjustment: non-oil primary balance improves over 2019–24 driven by higher non-oil revenues from tax policy and administration reforms; spending rises from 17 percent of GDP in 2019 to 18 percent of GDP in 2024 as capital spending increases while current expenditure remains broadly contained. - MAC-DSA realism module: cumulative fiscal adjustment characterized as somewhat optimistic on a cumulative basis but reflects reforms already in place. - Borrowing strategy: authorities committed to reducing debt below the regional target of 45 percent of GDP; baseline assumes issuance of a Eurobond next year with at least 75 percent used to rollover Eurobonds maturing starting in 2022. ### Debt trajectory and arrears - Under baseline, gross public debt projected to decline from 61 percent of GDP in 2018 to about 43 percent of GDP by 2024 due to fiscal consolidation and prudent borrowing. - Completion of audit of 2015–17 domestic expenditure arrears (not included in baseline pending confirmation) could add up to 3 percent of GDP to the debt stock, pending confirmation from authorities. - As of March 2019, Gabon cleared the entire stock of external arrears (which stood at 1 percent of GDP at the 2018 DSA) and has not accumulated new external arrears since then. - Authorities are clearing VAT arrears at a faster rate; once audit of domestic arrears is complete, authorities plan a growth-friendly clearance plan. ### Debt-service burden and financing needs - Debt service projected at 55 percent of total fiscal revenues in 2019 and projected to average 48 percent of revenues over 2020–24. - Gross financing needs projected at 6 percent of GDP in 2019 and average 7 percent of GDP over 2020–24. - Gabon refinanced a commercial bridge loan originally scheduled to be fully repaid in 2019: CFA 158 billion loan repayment now equally split over 2019–20 (CFA 79 billion each year). ### Eurobond maturities and refinancing scenarios - Gabon has US$2 billion in Eurobonds (approximately 11 percent of GDP) coming due during 2022–24. - Authorities budgeted for a US$1 billion Eurobond issuance next year; baseline assumes at least 75 percent of proceeds used for pre-payment/rollover. - Eurobond terms assumed in baseline include approximately a 7 percent interest rate and a 10-year maturity. - Table 2: Eurobond amortization pre-payment scenarios (Percent of GDP): - No pre-payment: 2022: 2.5; 2023: 2.4; 2024: 2.2 - Partial pre-payment (baseline, assumes 75 percent of US$1 billion used for pre-payment): 2022: 1.3; 2023: 1.2; 2024: 1.1 - Full pre-payment scenario (assumes 100 percent of US$1 billion used for pre-payment): 2022: 0.8; 2023: 0.8; 2024: 0.7 - Even with partial pre-payment, remaining Eurobond-related principal due would average 1.2 percent of GDP per year or 6 percent of fiscal revenues. ### Stress tests and vulnerability analysis - Primary balance shock: a deterioration of 2.4 percentage points of GDP in the primary balance in 2020 raises public debt to 46 percent of GDP by 2024; gross financing needs increase slightly. - Growth shock: reducing real output growth by one standard deviation for 2 consecutive years starting in 2020 causes the nominal primary balance to deteriorate by 2.1 percent of GDP by 2021; debt-to-GDP increases to about 59 percent during the shock and to 49 percent by 2024; gross financing needs increase to 11 percent of GDP by 2024. - Interest rate shock: real interest rates increase by 200 basis points starting in 2019; implicit average interest rate reaches almost 18 percent by 2024 (almost 12 percentage points higher than baseline); debt-to-GDP and gross financing needs increase to 59 percent and 19 percent of GDP, respectively, by 2024. - Real exchange rate shock: a permanent real depreciation of 17 percent increases debt by about 5 percentage points of GDP by 2024; gross financing needs increase by about 1.5 percentage points of GDP by 2024. - Combined shock: combining largest effects of individual shocks raises debt to around 84 percent of GDP and gross financing needs to about 28 percent of GDP in 2024. - Additional liabilities shock: adding 5 percent of GDP in year-two projections (upper audit estimate of domestic arrears 3 percent + median SOE liabilities 2 percent) raises debt from 57 percent of GDP to 61 percent in 2020; gross financing needs reach 12 percent of GDP in 2024. - Heat map findings: debt held by non-residents and foreign-currency denominated debt breach upper risk-assessment benchmarks; market perception, short-term debt, and external financing indicators fall between upper and lower benchmarks; gross financing needs are elevated and would breach the 15 percent benchmark under interest rate shock scenarios. ### Policy recommendations and priorities - Build a track record of remaining current on debt service payments; avoid accumulation of external arrears and address domestic arrears. - Implement improved coordination and cash management measures: develop weekly cash flow forecasts and organize monthly transfer of debt service data from the Debt Department to the Treasury. - Use the majority of proceeds from any near-term Eurobond issuance for rollover/pre-payment to address maturing Eurobonds. - Strengthen the Medium-Term Debt Management Strategy (MTDS) in line with IMF TA recommendations, including: - Mitigating interest rate and refinancing risks. - Strengthening the institutional framework for managing debt. - Strengthening presence on domestic financing markets. - Implementing a communication strategy with Eurobond investors to prepare for refinancing. - Broaden debt coverage to capture contingent liabilities; first step: establish a list of all SOEs to gather information on their financial status. *Source: Annex IV. Debt Sustainability Analysis (DSA).* ### Annex V. Capacity Building and Technical Assistance Framework ### Annex V. Capacity Building and Technical Assistance Framework ### A. Policy Priorities - Overarching priorities: - Conduct prudent macroeconomic policies and maintain fiscal discipline to preserve debt sustainability and avoid accumulation of payments arrears. - Increase domestic revenue by expanding the tax base to meet growing demand for public goods and services, accommodate growing social needs, and over time substitute for uncertain donor support. - Increase the efficiency of public spending. - Address weaknesses in the banking sector to reduce risks to financial stability. - Strengthen statistics to better inform policy decisions and the private sector. - Continue implementation of public finance reforms under the Organic Law of 2014 to strengthen budget credibility, allow transparent budget execution, and strengthen reporting and controls. ### B. Past Technical Assistance and Capacity Building - Gabon has been a high recipient of Fund TA (HQ and AFRITAC) and other donors (e.g., World Bank) on: - tax administration and policy; - public financial management, including cash management and public investment; - fiscal accounting and reporting; - management of natural resources; - macroeconomic statistics; - debt management; - financial markets; - public procurement. - Implementation status: - Legal and regulatory framework improved after adoption of the organic law on budget (Organic law 02/2014 on budget law and budget execution; Directive 01/11-UEAC-190-CM-22 on budget laws). - Effective implementation weaknesses have hampered PFM progress; budget credibility remains weak, with substantial changes at execution and difficulties preparing reliable fiscal reports. - Recent TA examples: - HQ-led mission (July 2019) looked at tax expenditure at DGI/DGD and provided estimates; - HQ-led mission (April 2019) on property taxation advising reform; - AFRITAC Centre follow-up TA visits on tax and customs administration. ### C. TA Priorities Going Forward (overall) - Continuity of TA in revenue (tax and customs) administration and PFM to strengthen budget credibility, transparency, and governance. - Leverage IT improvements and other "low hanging fruits" for immediate impact. - Enhance capacity to address financial sector weaknesses. - Expand support to real and external sector statistics. - Donors are not providing TA in the various areas the Fund plans to cover. Revenue Administration and Policy (2019–22) - Objective: - Increase tax compliance and broaden the tax base; - Promote tax compliance and collaboration between tax and customs administrations; - Broaden the base and unify rates of various taxes (including property); - Reduce the number of tax exemptions and special regimes; - Strengthen tax and customs administrations, increasing coverage, frequency and effectiveness of controls; - Pursue deployment of new IT tools to manage tax returns and payments and to assess, track and manage key tax and customs risks. - Outcomes: - Filing compliance better enforced; audits are risk-based and coverage extended; - Customs risk management operational and valuation capacity strengthened; - Abuse of duty and scope of tax and customs exemptions significantly reduced; - Tax and customs procedures documented and consistent with law and weaknesses addressed; - Tax-to-GDP ratio increases to 17.5 percent of non-oil GDP by 2022. - Milestones: - Further improve effectiveness of tax audits and extend coverage (2019–20); - Identification and costing of tax exemptions (early 2020); - Tax exemptions below 5 percent of non-oil GDP by 2021; - Implementation of ASYCUDA World (early 2020) and extension of the E-Tax to all taxes (2021); - Reduction of the tax rate paid in cash (end of 2020). - Input: - HQ-led mission in FY20 (July 2019 looked at tax expenditure at DGI/DGD and provided estimates of their size); - HQ-led mission in FY19 (April 2019) on property taxation; - AFRITAC Centre follow up TA visits on tax and customs administration. - Assumptions: - Improved customer services to facilitate taxpayer voluntary compliance; - Improved audit and inspection functions; - Elimination of inefficient and unjustified exemptions and gradual improvement of efficiency of other special exemptions and regimes; - Reforming property taxation; - Strengthening a culture of performance and integrity; - Acceleration and extension of computerization and digitization of revenue administration operations. Public Finance Management (2020–22) - Objective: - Improve cash management and operationalize the Treasury Single Account (TSA); - Strengthen budget processes (planning, preparation, implementation) with focus on wage bill; - Improve investment projects planning, budgeting and execution; - Improve transparency of fiscal reporting, including by autonomous public agencies; - Strengthen data management and capacity to make debt-sustainability analysis (DSA); - Ensure coordinated development of different information systems; - Strengthen coordination between the budget, the Treasury, and the debt department to ensure timely payment of debt service. - Outcomes: - Improved financial reporting and improved cash management (2020–22); - Full transition towards the TSA (2020); - Enhanced budget credibility; - Full transition to program budgeting starts (2019–20); - Transition to GFSM 2001/2014 completed (2020). - Milestones: - Published investment program developed and attached to the budget law (2020); - Approved strategy of domestic arrears clearance (2020); - TSA fully implemented (2020); - Reporting on wage bill execution following the budget programs nomenclature and increased internal controls on wage bill (2021); - Development and updating of procedures manuals and strengthening of internal controls; - Preparation of a Ministry of Economy and Finance IT master plan; - Preparation of a report on fiscal risks, including those emanating from the public enterprises and PPPs annexed to the budget law (2022). - Input: - PIMA follow-up STX visit (January 2020); - STX visit to assist in consolidation and operationalization of the TSA (March 2020) and posting of a resident advisor on cash management; - STX visit on arrears clearance strategy (2021); - HQ-led mission on wage bill planning, reporting and controls (2021); - Fiscal Transparency Evaluation (HQ-led mission, 2022); - Follow up TA from AFRITAC Centre on budget planning and execution and on quality of accounting; - AFRITAC TA on control of public institutions, budget execution, accounting quality, and fiscal risks; - AFRITAC Centre supports GFSM 2001/2014 implementation. - Assumptions: - Continued political support to PFM reforms; - Timely provision of adequate resources to enhance efficiency of PFM agencies; - Further enhancement of governance practices. Financial Sector (2020–22) - Objective: - Improve financial sector soundness by reducing NPLs in the banking system, rationalizing public financing entities, and supporting effective liquidation of the three public banks; - Improve access to finance by developing and implementing a comprehensive national financial inclusion strategy; - Improve the lending environment by strengthening the judicial system and improving governance. - Outcomes: - NPLs for the overall banking system reduced to single digits (2020–21); - Public financing entities grouped and have a new strategy exclusively focused on indirect financing (2020); - Liquidation of the three failed banks completed (2020: BHG, 2021: Postbank and BGD) at no significant cost to the state; - A national financial inclusion strategy developed (2021) and its implementation started (2021); - Reforms of the judicial system implemented, with trained judges, functioning commercial courts and security registries (2020–22). - Milestones: - Define and implement arrears clearance strategy to gradually reduce NPLs in the banking system (2020); - Develop a strategy to strengthen access to finance for SMEs (2020). - Input: - HQ-led TA missions to define the arrears clearance strategy ([March 2020]); - HQ-led TA mission to develop a strategy to strengthen access to finance for SMEs (September 2020). - Assumptions: - Strong commitment to strengthen existing banks and foster financial stability; - Avoid long-lasting and costly liquidations, minimize fiscal cost and treat all borrowers and depositors fairly; - Impose the rule of law; - Develop access to finance for all. Macroeconomic Statistics and Data Transparency (2020–22) - Objective: - Produce more frequent and timely indicators of economic activity, more comprehensive price statistics, and more representative and timely balance of payments data; promote data and transparency for better policy making. - Outcomes: - Improve economic policy making and inform private sector decisions. - Milestones: - Quarterly national accounts developed, and SNA 2008 implemented (2020–21); - Representative PPI index established (2020–21); - CPI revised to use weights derived from the 2018 household budget survey (2020); - Balance of Payments for 2015 finalized and disseminated; work underway to produce BOP for 2016–18; - National Data Summary Page established in October 2019 is running and up-to-date (continuous). - Input: - AFRITAC Centre mission to provide TA on developing quarterly national accounts and price indices; - HQ-led mission as part of the JSA-AFR project concluding in 2020 to improve external sector statistics, including BOP data (January 2020); - HQ-led e-GDDS mission undertaken (October 2019). - Assumptions: - Human and financial resources are available; - Good collaboration between national agencies involved in statistics; - Good cooperation between the BEAC Headquarters and BEAC National Directorate in Gabon. ### D. Risks and Mitigation Measures - Risk 1: Weakening political commitment to reforms - Probability: Medium - Impact: High - Description: Weakening support could reverse recent gains and weaken fiscal prospects. - Mitigation: Authorities aware of need to increase spending efficiency and raise revenue; initiatives to improve tax policy and administration with continued Fund and development partner support; Fund to provide TA to improve PFM and public investment. - Risk 2: Implementation capacity constraints - Probability: Medium - Impact: High - Description: Weak institutional and human resources capacity could cause delays or hamper implementation. - Mitigation: Hands-on training and support from short/long term experts to improve implementation capacity. - Risk 3: Financing risk - Probability: Medium - Impact: High - Description: Financing constraints can prevent implementation of TA recommendations that require equipment purchase or hiring of staff. - Mitigation: Authorities improving capacity to assess TA-related costs and committed to include such costs in annual budgets; spending efficiency gains could create fiscal space to facilitate implementation. ### E. Authorities’ Commitments - Authorities committed to continue building capacity for successful implementation of the Extended Arrangement. - Understandings reached with the Fund on a comprehensive capacity building strategy within the Fund Capacity Building Framework project (CBF). - Commitments: - Secure necessary political support, staffing, and other resources for CBF and complementary TA from other donors; - Provide adequate financial and human resources to priority sectors in the capacity building program, and budget resources to implement TA recommendations with financial implications; - Strengthen units tasked with monitoring reform implementation by providing resources to manage the overall capacity building program; - Ensure sectoral capacity building plans are discussed with individuals and units responsible for implementation. *Annex V. Capacity Building and Technical Assistance Framework (1gabea2019002 - Annex V)* ### 1. Memorandum of Economic and Financial Policies ### 1. Memorandum of Economic and Financial Policies ### A. Recent Developments and Economic Outlook - Macroeconomic performance continues to improve: - Growth rate expected to reach 3.4 percent this year compared to 0.8 percent in 2018. - Growth in oil production could be around 15 percent in 2019, compared with around 5 percent initially forecasted. - Non-oil sector growth projected at 2.5 percent compared to 1.8 percent in 2018. - Non-oil budget deficit declined from 9.6 percent in 2017 to 7.6 percent in 2018. - External current account improved by more than 3.5 percentage points of GDP. - Public debt declined from 62.6 to 60.6 percent of GDP. - Government cleared the entire stock of external debt arrears and has not accumulated new external arrears for the last eight months apart from some technical arrears which were promptly resolved. - Economic and financial outlook: - Non-oil growth projected to increase to 4 percent in 2020 and to above 5 percent in the medium term. - Overall growth expected to gradually increase to more than 4.5 percent in the medium term. - Investments in the oil sector and new offshore reserves expected to slow the decline in oil production. - Risks: - Downside: slowdown in fiscal consolidation in Gabon or other CEMAC member countries; lower global growth. - Upside: high volume of foreign direct investment in oil and non-oil sectors; renewed investment in infrastructure, agricultural and forestry projects; developments in industrial fishing sector. - Realization of upside potential depends on reforms to improve the business climate. ### B. Fiscal Policy — 2019 Performance and Commitments - End-June 2019 performance: - Revenues slightly higher than projected due to strong oil and non-oil revenues. - Expenditure lower than expected due to streamlining the wage bill and controlling transfers and subsidies. - Under-execution in capital expenditure; higher-than-anticipated special accounts-related spending due to delays in reforming public agencies and entities. - 2019 fiscal target and measures: - Committed to limit end-2019 non-oil primary deficit to 4.6 percent of non-oil GDP. - Measures: mobilize domestic revenues (address exemptions and earmarked revenues); control spending on special accounts and net lending; apply reserve mechanism that makes unavailable about one quarter of the budget appropriation; maintain budgetary regulation mechanism in place since April 2019. - Non-oil revenues: - Level expected to remain relatively unchanged at 17.1 percent of non-oil GDP. - Ongoing reforms include clearing expired custom suspensive procedures; updating cost-of-living scheme product list; enforcing manganese taxation and excise duties measures; identifying and collecting tax arrears; rationalizing special custom procedures; implement Sydonia World; improve corporate tax audits; strengthen internal and external audits; digitalization; draw up list of current exemptions by end-2019 (new proposed benchmark at end-December 2019). - Current spending: - Projected at 15.7 percent of non-oil GDP in 2019. - Wage bill targeted at around 10 percent of non-oil GDP with measures: - Physical monitoring of civil servants; enforce retirement at legal age; freeze recruitment except education, health, and security; clean-up of payroll records. - Expenditures on goods and services to be maintained at 2.4 percent of non-oil GDP with measures: - Strict supervision of foreign missions; streamline administrative lease expenditures; monitor utilities-related departmental expenditure. - Transfers and subsidies measures: - Revise scholarship criteria; establish unit for financial supervision of public institutions and agencies; continue merging/eliminating public entities (fourteen structures eliminated in 2019); monitor transfers via performance contracts. - Draft law on harmonizing status of public institutions to be submitted to Parliament (prior action). - Capital expenditure: - Revised downwards to 4.7 percent of non-oil GDP (compared to 5.4 percent in the program) in 2019 due to low execution rate in first six months. - Government agrees to implement recommendations from the June 2019 PIMA. - Special accounts and net lending: - Special accounts balance expected to be in deficit at CFAF 40 billion, about 0.6 percent of non-oil GDP. - Net lending to increase to CFAF 40 billion, compared with an initial target of CFAF 28 billion (notably to SOGARA refinery). - Overall fiscal outcome: - Overall fiscal surplus expected at 1.7 percent of GDP, slightly higher than expected. - Financing requirement of CFAF 780 billion to be mostly financed by: - Security issuance: CFAF 168 billion - World Bank budget support: CFAF 115.1 billion - AfDB: CFAF 131.2 billion - French Development Agency: CFAF 49.2 billion ### B. Fiscal Policy — 2020 Budget and Medium-Term Plans - 2020 fiscal adjustment objective: - Reduce non-oil primary deficit to 4.2 percent of non-oil GDP (adjustment of 0.4 percentage points compared to 2019). - Revenue expectations and reforms: - Oil revenues expected to decline due to contraction in oil production and prices. - Tax revenues to increase by 1 percentage point of non-oil GDP. - Overall non-oil revenues expected to increase by 0.2 percentage points of non-oil GDP due to decline in non-tax revenues. - Commitments: - Set up a tax policy unit (TPU) within the Ministry of Economy and Finance to produce/update the list of exemptions and assess relevance/effectiveness; provide recommendations to optimize tax system. - Amend law establishing the "Tax and Customs Advantages Commission" to extend its jurisdiction to derogations/exemptions on all types of public contracts and tenders and ensure enforcement; circulate a notice in the press. - Additional 2020 revenue measures: - Clear suspensive regimes (temporary admission regimes, fictitious warehouses). - Continue modernization and roll-out of e@Tax and ASYCUDA World. - Strengthen capacity of tax and customs administrations for systematic controls on exempted products. - General roll-out of the special hydrocarbon warehouse. - Gradual elimination of the deferred payment bond (crédit d’enlèvement) with target to fully eliminate it in 2021. - Launch studies: (i) assessment of reduced corporate tax rate (25 percent instead of 30 percent) on housing and tourism sectors; (ii) harmonization of different VAT rates; (iii) clarification between ad valorem and specific taxation by product type; (iv) implementation of alternative property tax (contribution foncière unique) as recommended by IMF TA June 2019. - Expenditure consolidation for 2020: - Current spending expected to decrease by about 1.1 percentage points of non-oil GDP, mainly due to decline in the wage bill (0.8 percentage points). - Expenditure on goods and services to decrease by 0.2 percentage points of non-oil GDP. - Transfers and subsidies to decrease by 0.4 percentage points of non-oil GDP. - Capital expenditure scaling-up: - Plan to increase capital expenditure by almost FCFA 200 billion (more than two percentage points of non-oil GDP). - Commit to implement IMF PIMA recommendations; prepare a Public Investment Program (PIP) presenting a comprehensive overview of investment projects, financing, and implementation status/programming over coming years (new proposed structural benchmark for end-April 2020). - Renew the Public Investment Management (PIM) framework and legal framework for public procurement. - Systematically prepare cost-benefit analyses for all investment projects budgeted over FCFA 20 billion. - Earmarked revenues and special accounts: - Exhaustive identification of earmarked revenues not yet included in the State budget to continue with AFRITAC Central’s support. - Structural benchmark as of end-October 2019: eliminate earmarked revenues that do not comply with Law 20/2014 (LOLFEB); transfer identified earmarked revenues to general State budget as revenue (reflected in 2020 draft budget law). - Elimination/merging of specialized public agencies to increase transparency and reduce scope of earmarked revenues. - Government to work with IMF staff to improve recording and monitoring of special accounts revenues and expenditures and earmarked revenues in the TOFE. - Expenditure adjustment mechanism in 2020: - Reserve on appropriated expenditure by budget law with rates: - 20 percent for expenditures on goods and services - 15 percent for transfer expenditures - 16 percent for capital expenditures - 10 percent for other expenditures - Reserved funds made unavailable until released; social expenditures identified under IMF program exempted. - Funding mobilization efforts for 2020: - Intensify recovery of outstanding tax arrears. - Planned issuances on regional financial market included in draft budget law amounting to CFAF 150 billion and asset sales amounting to CFAF 50 billion may be mobilized on a contingent basis. - Parliamentary procedure: - 2020 draft budget law in line with program commitments to be submitted to Parliament before the conclusion of the Fifth Review (prior action). - Medium-term objective: - Return to a near fiscal balance and then to a surplus. - Cash-based fiscal balance expected to turn positive as early as 2019 and stabilize at around 1.4 percent of GDP over the medium term. - Public debt level targeted to be reduced to below 45 percent of GDP in the medium term. ### C. Arrears Management - Clearance strategy: - Maintain clearance strategy for existing arrears. - Fully cleared stock of external arrears related to non-guaranteed commercial foreign debt since end of Q1 2019. - VAT domestic arrears to be cleared regularly until 2021. - Remaining exceptional Treasury budgetary float to be paid as planned in 2019. - Accumulation of new budgetary float in 2019 limited to 15 percent of total expenditures on goods and services, transfers, and domestically-financed investment. - Payment to the “Libreville Club” creditors consolidated to FCFA 285.7 billion, repayable over 62 months; Government agreed to pay FCFA 5 billion to the “Libreville Club” each month. Eight payments totaling FCFA 40 billion have been made so far in 2019. - Monitoring improvements: - Since June, payment terms closely monitored via activation of dedicated modules and alert procedures in VECTIS and e-BOP. - Report on changes and composition of stock of unpaid arrears for Q2 2019 published in October. - New domestic arrears clearance strategy: - Develop a clearance strategy based on independent (PriceWaterhouse Coopers) audit report on State and public institutions’ arrears incurred in 2015, 2016, and 2017. - Plan will seek to maximize impact of arrears clearance on growth and poverty; IMF assistance may be sought. - Special attention to SMEs: clear debts below FCFA 100 million, totaling an estimated FCFA 8 billion by mid-December 2019. - Larger claims to undergo on-site service checks, accounting adjustments, hearings, and legal protocol formalization starting in November 2019. - Clearance criteria: degree of labor intensity (agriculture, public works, etc.); sector potential (McKinsey study); existence of bank indebtedness; position vis-à-vis tax and social administration. - Cash flow and debt coordination: - Strengthen development of cash flow plan and coordination with debt management. - Implement IMF TA recommendations: regular updating of monthly cash flow plan; mobilize appropriate instruments to cover deficits proactively; strengthen expenditure adjustment mechanism in place since April 2019. ### D. Cash Management - Treasury Single Account (TSA): - Implementation of TSA remains a priority for 2020 to enhance transparency and efficiency of cash management. - Commit to continue closing public accounts outside the TSA and not open new ones. - Closure of these accounts and transfer of balances to be effective by end-February 2020. - Regular review of repayments due by CDC to public treasury and consideration of optimizing TSA operations (e.g., VAT escrow account, creation of an escrow account for the CNAMGS etc.). - Treasury Committee: - Establish an official and operational Treasury Committee to optimize cash management mechanisms. - Government commits to issue a decree to renew the way the Treasury Committee operates (new proposed structural benchmark for end-January 2020) in line with IMF TA November 2018 recommendations and to implement its provisions: - Weekly meetings for the technical committee and monthly meetings for the steering committee. - Ensure coordination between the Debt (DGD) and the Treasury (DGCPT) Departments. - Set up a weekly meeting between Budget and Treasury departments to regulate the pace of commitments execution relative to available cash. *Attachment I. Memorandum of Economic and Financial Policies — November 28, 2019* ### 27. Efforts to strengthen controls in budget implementation will be further developed at ### 1gabea2019002 - 27. Efforts to strengthen controls in budget implementation will be further developed at ### Strengthening budget implementation controls - Purchase orders are now systematically issued when expenses are incurred at central level via VECTIS and provincial level via E-BOP. - Objective: reduce use of exemption procedures and reduce creation of arrears by tighter control over expenditure implementation. - Next step: implement the same type of controls in public entities and institutions to better control special accounts expenditures. - Commitment: effectively implement enhanced controls in relevant structures by end-2019. - Continue documenting budgetary and accounting procedures by updating existing procedure manuals (revenue and expenditure) and preparing new manuals. ### Transparency of public finances and extractive sector governance - Commitment to further improve transparency of management of oil and mining revenues. - Intensify efforts to submit the country's application to the Extractive Industries Transparency Initiative (EITI). - Structural benchmark for end-September 2019 proposed to be reset to end-March 2020. - Submission expected to take time to ensure effective dialogue with civil society. - Interim measure: Ministry of Finance to transmit to the BEAC all contracts signed with mining and oil companies. - New proposed structural benchmark for end-December 2019. - Ensure contracts/conventions are compatible with regional foreign exchange regulations. - Government prepared a report on oil and mining assets in September 2019 estimating volumes and values of main natural resource assets and their sales and budget revenues for the previous year. - Structural benchmark as at end-June 2019. - Commitment to continue publishing a bi-annual report on total production and revenues from the oil and mining sectors. ### Financial supervision of public companies and state operators - New monitoring unit for public entities will: - Carry out regular audits and consolidate budgetary and financial information of public entities. - Produce and publish a report after audits. - Draft the annex relating to public institutions and entities in the budget law. - Prepare and publish a dashboard presenting all the government's holdings. - Aim: consolidate and sustain improvements in financial supervision. ### Modernizing financial reporting and IT systems - Ongoing efforts aimed at: 1. Mainstreaming use of the VECTIS information system (including for public agencies) to track all expenditures and perform necessary checks. 2. Continuing roll-out of revenue reporting information systems (e.g., e@Tax). 3. Ensuring automatic interfacing between different systems. - Prepare a ministerial IT master plan. - Conduct an assessment of existing systems to identify weaknesses and develop an action plan to strengthen the system. ### Accountability and accounting practices - Implement recommendations of the AFRITAC mission of September 2019 on clearance of suspense and temporary accounts and extend work to remaining years. - Put in place mechanisms to ensure accounts are cleared on time. - Commit to produce and transmit annual fiscal reports for the previous year within deadlines prescribed by the LOLFEB. ### Medium-term debt reduction strategy - Strengthen strategy to address debt servicing and refinancing risks. - Improve institutional framework for public debt management by relaunching project to create a National Public Debt Committee (CNDP) to coordinate debt activities and put in place a medium-term debt strategy. - Mitigate interest rate risks by preferring fixed interest rates for new commitments and reviewing variable rate debt portfolio to move from variable to fixed when loan agreements permit. - Next year's planned Eurobond issuance will mainly be used for debt smoothing operations to reduce refinancing risks. - Additional amounts from issuance will be considered only after a rigorous cost-benefit analysis and confirmation of consistency with planned fiscal adjustment. ### Social sector policies: predictability, quality, and targeting - Social expenditure execution weaknesses due to constraints initiating bidding for school construction, regulation during budget execution, and a reserve mechanism that made about one quarter of social spending appropriations unavailable as a buffer during execution. - Significant portion of scholarships paid only during the last quarter of fiscal year. - As of end-June 2019, implementation rate for social expenditure was 37 percent of the appropriated 2019 budget. - Government actions: - More exhaustive definition of social spending scope to include: - (i) social benefits and pensions for public officials, - (ii) subsidies on domestic butane gas for cooking and lighting, - (iii) costs of electrification program and water installations for rural areas without access to public grid, - (iv) burial and hospital charges for the poor, - (v) support for transportation costs. - Strengthen programming and monitoring of social expenditure despite difficult budgetary context. - Improve targeting of poor and vulnerable populations and monitoring of social spending by: - Relying on Law No. 001/2018 of September 18 for better definition of social protection program (Gabonais Economiquements Faibles, GEF) and the new poverty profile from the 2017 Gabonese Poverty Assessment Survey (EGEP). - Simplifying social safety nets, optimizing use of resources, and providing tailored responses to poverty and vulnerability. - Formalizing creation of a GEF commission to formulate legislation to reduce inclusion errors and produce a clear roadmap with steps, timelines, resources and responsibilities. - Implementing functional classification according to the Classification of the Functions of Government (COFOG) standards to improve monitoring. ### Financial sector: NPLs, bank liquidations, and judicial reforms - Strategy and action plan to reduce overdue loans finalized on March 31, 2019 (structural benchmark for end-March 2019) but implementation delayed. - Government commitments: - Immediately appoint a coordinator for the action plan to reduce overdue loans and a contact for the “Libreville Club” and the domestic arrears repayment strategy. - Clear the “Libreville Club” arrears. - Establish strategy for repayment of domestic arrears with IMF assistance by February 2020. - Make the Commercial Court of Libreville effective (rehabilitation, equipment, training). - Prioritize training of judges and clerks specialized in bank disputes. - Liquidation of public banks and the BICIG transaction: - Prime Minister order dated March 4, 2019 created a committee to support liquidators (structural benchmark as at end-January 2019). - Committee has started meeting; FOGADAC Deposit Guarantee Fund initiated procedure for repayment of depositors for one of three banks. - Sale of assets progressing slowly; liquidators urged to pursue loan collection by all means including legal proceedings and publication of exhaustive list of uncooperative debtors. - Authorities hired an international consultant to identify a buyer for temporary holding of a non-strategic participation in BICIG as authorized by COBAC; acquisition of bank shares to conclude as soon as sale secured. - Aim: minimize fiscal cost to Gabonese taxpayers and support independent liquidators. ### Promotion of the private sector and institutional reforms - Renewed commitment to implementing structural and institutional reforms to promote private-sector-led growth. - Recent legal and institutional reforms: - Draft law on organization of justice creating commerce courts with staffing and special training. - Law on organization of Gabon's court of justice and a new penal code adopted in 2019 addressing new forms of crime including finance, terrorism, and environment. - Trade Register (RCCM) being reinvigorated and modernized. - Reform objectives: - (i) Optimization of commercial justice to better secure investors and investments; - (ii) Reinforcement of investor support; - (iii) Improvement of the investment framework; - (iv) Reform of national vocational training and employment framework; - (v) Optimization and streamlining of tax and parafiscal framework; - (vi) Strengthening sectoral competitiveness. - Regulatory and structural reforms to be completed by 2020 with an investment code and a national investment promotion strategy. - Institutional reforms: operationalization and strengthening of National Agency for Investment Promotion (ANPI), support unit for public-private partnerships, and the special economic zone of NKOK (SEZ). - Plans to operationalize the Chamber of Arbitration, train specialized judges from the start of the academic year, and operationalize commercial courts; continue promoting OHADA Uniform Act on Arbitration and Mediation. ### Financial inclusion and SME financing - Develop a national financial inclusion strategy and an SME financing strategy guided by three principles: - (a) Consolidate all public financing instruments for SMEs to improve impact, coordination, and visibility. - (b) Allow only indirect public financing through commercial banks based on the CDC's experience. - (c) Support SMEs through greater formalization and improved access to financial services. - Commitments and timelines: - Submit a proposal to consolidate instruments and adopt new indirect financing strategy via commercial banks by end-March 2020. - Submit terms of reference for development of a national strategy for formalization and inclusion of SMEs by end-March 2020. - Develop national financial inclusion strategy in line with regional financial inclusion initiative, to the extent feasible. ### Statistics: reforms, dissemination, and planned activities for 2020 - Achievements in 2019: - Finalization of portal on enhanced General Data Dissemination System (e-GDDS) now available to users. - Work to provide a new harmonized national consumer price index (HICP) to measure inflation to be finalized by end of 2019. - Results of 2018 poverty survey published in 2019 to assist in defining economically vulnerable Gabonese. - Findings of recent survey on educational provision to be released by end of the year. - Activities envisaged for 2020: - Finalization of preliminary work for organization of General Census of Agriculture (GAM) and Demographic and Health Survey of Gabon (EDSG III). - Change base of national accounts to 2010. - Update and maintain National Data Summary Page established in October 2019. - Complete AIG enumeration phase and the EDSG III survey. - Launch General Census of Enterprises and start preliminary work on second Statistics Development Strategy (SNDS II) in the first quarter of 2020. - Ongoing: Data transmissions to international agencies including budget statistics in line with the IMF's MFSP 2014. - Public finance statistics: - Transposed and transmitted TOFE budget statistics for fiscal years 2012 to 2016 according to GFSM 2014 classification and transmitted to IMF's statistical databases; Gabon was first in CEMAC region to do so. - Continued in 2019 with transposition and transmission of 2017 TOFE to IMF. - Significant progress in preparing public finance statistics reports according to GFSM 2014 and transposition per 2014 GFSM methodology in accordance with 2011 Directive no. 05/11-UEAC-190-CM-22 of CEMAC on TOFE. - Exploitation of data sources from general accounts progressing, enabling gradual introduction of prerequisites for accrual basis recording as accounting reforms are adopted. - Government will continue adapting TOFE to format recommended by 2001/2014 IMF Public Financial Statistics Handbook (GFSM 2001/2014). - Government will request an IMF Fiscal Transparency Evaluation (FTE) prior to entry into force of the new format to ensure data quality. ### Technical assistance (TA) and capacity building - TA and national capacity building remain essential to strengthen technical and institutional capacities. - Gabon has received substantial TA from the IMF in recent years with overall positive assessment and significant contribution to capacity building and implementation of economic programs. - TA needs for 2020–22 identified: - (i) Pursue prudent macroeconomic policies and maintain fiscal discipline to preserve debt sustainability and avoid accumulation of arrears; - (ii) Increase domestic revenues by broadening tax base to meet growing demand for public goods and services, growing social needs and, over time, replace uncertain donor support; - (iii) Increase efficiency of public spending; - (iv) Address weaknesses in banking sector to reduce risks to financial stability. - Need to strengthen statistics to better inform policy decisions and private sector. - Understanding reached with IMF staff on a TA and capacity building strategy for next three years. - Government commitments: - Further improve technical and institutional capacities and make best use of TA from IMF and other development partners to avoid overlaps. - Ensure availability of adequate human and financial resources and good collaboration between national institutions involved in TA. *Source: IMF country document excerpt (Gabon).* ### 43. Program implementation will be monitored through prior actions, semi-annual ### Program implementation will be monitored through prior actions, semi-annual ### Monitoring framework and schedule - Program implementation monitored through: prior actions, semi-annual reviews, quantitative performance criteria (QPCs) and indicative targets (ITs), continuous performance criteria, and structural benchmarks. - The sixth and final review is scheduled for June 2020, based on: - quantitative performance criteria for end-December 2019, - continuous performance criteria, - and relevant structural benchmarks. - For all reviews, QPCs include: - a floor on the primary fiscal balance, excluding oil revenue (payment order basis); - a ceiling on the stock of net banking system claims on the central government; - a ceiling on the stock of central bank claims on the central government, excluding the use of IMF credit; - a ceiling on borrowing or guaranteeing external debt (program and project); - a floor on government tax revenue, excluding oil revenue; - a ceiling on the accumulation of new external arrears by the central government. - Quantitative targets and continuous QPCs for target dates up to end-December 2019 are shown in Tables 1 and 2 of the source. ### Key quantitative outcomes and status (selected figures from Tables 1–3) - Table 1 (2018, Billions of CFA francs, unless otherwise indicated) — selected QPC outcomes: - Floor on primary fiscal balance, excluding oil revenue (on a payment order basis): Unadjusted target (floor) -446.2; Adj.Est. -366.2; PC -479.2; Status: Not Met. - Adjustment for lower (higher) than expected external program disbursements: 80.0. - Ceiling on stock of net claims of the banking system on the central government: Unadjusted target (ceiling) 826.0; PC 906.0; Adj.Est. 848.3; Status: Met. - Ceiling on central bank net claims on central government, excluding use of IMF credit: PC 107.2; Adj.Est ... ; Unadjusted target 138.0; Status: Not Met. - Ceiling on contracting or guaranteeing of external debt (program and project): Unadjusted target (ceiling) 522.8; PC 522.8; Adj.Est. 442.8; Status: Met. - Floor on government tax revenue, excluding oil revenue: 941.3; Adj.Est. 870.0; Status: Not Met. - Continuous Performance Criterion — Ceiling on accumulation of new external arrears by the central government: PC 0; Adj.Est ...; Act. 19; Status: Not Met. - Indicative Targets — Ceiling on the stock of domestic arrears: 372.6; Adj.Est ...; Act. 542.9; Status: Not Met. - Indicative Targets — Floor on social protection spending: 214.3; Adj.Est ...; Act. 79.1; Status: Not Met. - Table 2 (2019, Billions of CFA francs, unless otherwise indicated) — selected QPC outcomes and status for months reported: - Floor on primary fiscal balance, excluding oil revenue (on a payment order basis): Unadjusted targets -125.6 (Mar) and -147.1 (Jun); reported Acts include -33.8 (Mar, Met), -64.5 (Jun, Met), and -307.7 (Dec). - Adjustment for lower (higher) than expected external program disbursements: 80.0 (applied to relevant months). - Ceiling on stock of net claims of the banking system on the central government: Unadjusted target (ceiling) 766.5 (Mar) and 802.3 (Jun); reported Acts include 927.8 (Mar, Not Met), 894.9 (Jun, Not Met), and 795.6 (Dec). - Ceiling on central bank net claims on central government, excluding use of IMF credit: Unadjusted target 57.0; reported Acts include 270.1 (Mar, Not Met), 244.2 (Jun, Not Met), and 13.7 (Dec). - Ceiling on contracting or guaranteeing of external debt (program and project): Unadjusted target (ceiling) 285.4 (Mar) and 412.2 (Jun); reported Acts include 92.5 (Mar, Met), 203.0 (Jun, Met), and 458.1 (Dec). - Floor on government tax revenue, excluding oil revenue: reported Acts include 249.3 (Mar, Met), 547.3 (Jun, Met), and 1,061.8 (Dec). - Continuous Performance Criterion — Ceiling on accumulation of new external arrears by the central government: PC 0; reported Acts include 25 (Mar, Not Met) and 0 (Jun and Dec). - Indicative Targets — Ceiling on the stock of domestic arrears: targets and Acts show Not Met for several months (e.g., Act. 479.8 (Mar), Act. 385.6 (Jun), Act. 335.3 (Dec)). - Indicative Targets — Floor on social protection spending: targets and Acts include 90.8 (Mar, Met), 181.6 (Jun), 363.2 (Dec). - Table 3 (2020 projected targets, Billions of CFA francs) — selected projected QPCs: - Floor on primary fiscal balance, excluding oil revenue (on a payment order basis): March -163.1; June -172.5; September -280.1; December -303.1. - Ceiling on stock of net claims of the banking system on the central government: March 686.9; June 678.6; September 660.6; December 644.6. - Ceiling on central bank net claims on central government, excluding use of IMF credit: March -16.3; June -41.3; September -71.3; December -285.7. - Ceiling on disbursing and guaranteeing of external debt (program and project): March 77.5; June 191.1; September 280.7; December 1,014.6. - Floor on government tax revenue, excluding oil revenue: March 235.8; June 605.7; September 870.3; December 1,205.6. - Continuous Performance Criterion — Ceiling on accumulation of new external arrears by the central government: PC 0 for March, June, September, December. - Indicative Targets — Ceiling on the stock of domestic arrears: March 293.5; June 260.8; September 305.4; December 269.7. - Indicative Targets — Floor on social protection spending: March 90.8; June 181.6; September 272.4; December 363.2. ### Structural conditionality and benchmarks (2018–19 and proposed new) - Table 4 (Structural Conditionality for 2018–19) — selected measures, previous timeframe, status, and proposed timeframe: - Submit to Parliament a draft 2020 budget in line with the macroeconomic framework agreed under the EFF: Prior Action (status not explicitly restated in the excerpt). - Publishing a new decree establishing harmonized statutes for public administrative institutions and repealing earlier provisions: End-Sep. 2018; Status: Not Met. The draft decree was converted into a law. (Proposed timeframe: Prior Action to submit to Parliament for approval the draft law.) - Publish quarterly reports on the amount and composition of the stock of unpaid payment orders: Met (published on 10/10/2019 for 2nd quarter 2019); Next: End-Nov. 2019 (for previous quarter). - Publish quarterly budget execution reports transmitted to Parliament within 55 days from end of quarter: Met (published on 06/23/19 for 2nd quarter 2019); Next: End-Nov. 2019 (for previous quarter). - Collect 40 percent of recoverable tax arrears: End-Dec 2018; Status: Not met. Collection was completed June 2019. - Clear 50 percent of expired suspensive customs procedures: End-Dec. 2018; Status: Not met. - Complete an independent audit of 2015, 2016, and 2017 domestic expenditure arrears: End-April 2019; Status: Not Met. Report transmitted Oct. 2019. - Develop a strategy for the clearance of loans in arrears: End-Oct. 2018; Status: Met. - TSA consolidation through closure of all central government accounts opened with commercial banks: End-Mar. 2019; Status: Met. - Publish a report disclosing the volume and value of major oil assets, as well as the volume and value of the previous year’s sales and fiscal revenue: End-Jun. 2019; Status: Not met. The report was published in Sept. 2019. - Submit application for EITI membership to EITI Secretariat: End-Sep 2019; Status: Not Met. March 2020 (proposed). - Eliminate noncompliant earmarking of revenues and limit it to exceptions provided for by law: End-Oct. 2019; Status: Met. Specific provision in the draft 2020 budget law. - Table 5 (New Proposed Structural Benchmarks) — selected measures and timing: - Transmit the contracts signed with mining and oil companies to the BEAC: Improve transparency of oil and mining revenues; Certification by the Ministry of Finance that contracts and agreements signed with oil and mining operators have been transmitted to the BEAC. Timing: End-Dec. 2019. - Establish the list of all existing tax and custom exemptions and assess their fiscal impact: Boost revenue collection; Timing: End-Dec. 2019. - Adopt and implement a decree on the Treasury Committee repealing and replacing the 2018 decision and in line with TA recommendations: Improve and rationalize cash flow management; Timing: End-Jan. 2020. - Prepare a comprehensive Public Investment Program (PIP) with all public investment projects (including PPPs and FINEX): Improve public investment management; PIP document approved by MEFSN including all investment project regardless of procurement or financing methods. Timing: End-April 2020. ### Technical Memorandum of Understanding — operational definitions and methodologies - TMU sets understandings between Gabonese authorities and the IMF on: - definition of QPCs and ITs, - QPC and IT adjusters, - and data reporting requirements for the Extended Arrangement under the Extended Financing Facility (EFF). - Exchange rate conventions for program accounting: - U.S. dollar denominated components of the BEAC balance sheet valued at official exchange rate of the CFAF to the U.S. dollar of 584.05 as of June 1, 2019. - Cross-rates for program purposes: - Euro valued at 1.1185 U.S. dollars; - Pound Sterling valued at 1.2647 U.S. dollars; - Chinese Yuan valued at 6.9062 U.S. dollars; - Special Drawing Right (SDR) valued at 1.38050 U.S. dollars. - All foreign currency-related assets, liabilities, and flows evaluated at “program accounting exchange rates” except items affecting government fiscal balances, which are measured at current exchange rates. - Definitions and fiscal accounting: - Central government (CG) includes all institutions, government units, and special funds (including the Road Fund) currently covered under the state budget; excludes local government authorities, the BEAC, and government-owned entities with separate legal status. - Fiscal year is the calendar year, January 1 to December 31. - Cumulative Floor on the Non-Oil Primary Fiscal Balance on a Payment Order Basis: - Measured as difference between: (i) total central government revenue on a cash basis (excluding oil revenue), and (ii) total central government expenditure on a payment order basis excluding interest payments. - Total CG revenue (excluding oil) measured on a cash basis and includes offsetting revenue and expenditure operations; oil revenue includes payments received in cash and in crude; revenue registered after encashment (at most 7 days after date of receipt); oil revenue received in kind recorded at transaction value on day of sale. - Total CG expenditure includes spending on a payment order basis (ordonnancements), treasury advances (avances à régulariser), outlays on special funds and from earmarked revenues, and recognizes additional government expenditures such as certain capital transfers and year-end current transfers used for financing deficits on Treasury accounts and local government accounts. *Sources: Gabonese authorities and IMF staff estimates.* ### 10. Definition: The financial operations specified in the TOFE relating to treasury ### 10. Definition: The financial operations specified in the TOFE relating to treasury ### A. Treasury accounts: definition, reporting, and adjuster for primary non-oil fiscal balance - Definition: - Financial operations relating to treasury correspondents (correspondants du Trésor), local governments (collectivités locales), and other treasury operations (autres opérations de trésorerie) correspond to the change from period to period in the balance of these accounts. - For accounts at the Treasury of treasury correspondents and local governments, a debit (i.e., negative) entry for the whole fiscal year, representing a reduction in the balance of such accounts, cannot exceed the balance of the account at the start of the fiscal year. - If for a given account, a debit entry for the whole fiscal year exceeds the balance on this account at the start of the fiscal year, the central government financing of the deficit run by the treasury correspondent or local government will be recorded in the TOFE as non-bank financing (a credit (i.e., positive) entry under “Assumption of end-fiscal year deficits on accounts at the Treasury of Treasury correspondents and local governments”) and as a corresponding increase of the same magnitude of current transfers. - Reporting: - Data will be provided to the Fund with a lag of no more than six weeks after the end of the month. - Adjuster for the floor on the cumulative primary non-oil fiscal balance of the CG on a payment order basis: - The floor will be adjusted downward (upward) to the extent that external financing is more (less) than external projected disbursements given in Text Table 1, to a maximum of CFAF 80 billion. - Text Table 1 — Cumulative flows from the beginning of the year (In US$ Millions): - External loans for budget support - End December 2019: 662.4 - End March 2020: 0.0 - External loans for project financing - End December 2019: 284.4 - End March 2020: 113.2 - External loans from commercial sources and international capital markets - End December 2019: 46.3 - End March 2020: 26.4 ### B. Ceiling on the Net Claims of the Banking System on the Central Government - Definition: - Net claims of the banking system on the CG is measured in accordance with the accounting practice at the BEAC, and is defined as the sum of: i. Central bank net claims on CG, including deposits, loans, advances, accounts receivable, and any other government claim or liability as defined in the monetary survey. ii. Other depository corporation net claims on CG, including securities of the CG, loans to central government, other advances to CG, and deposits of the central government with depository corporations. - Level and stock figure: - Thus defined, the net claims of the banking system on the central government amounted to CFAF 894.9 billion as of June 30, 2019 (Text Table 2). - Exclusions: - This ceiling does not apply to new agreements for the restructuring of domestic debt or the securitization of domestic arrears. - Reporting: - Data will be provided to the IMF with a lag of no more than six weeks after the end of the month. - Adjusters for the performance criterion on net claims: i. The program ceiling will be adjusted downward (upward) by the full amount of the cumulative excess (shortfall) in external program disbursements relative to the baseline projections in Text Table 1, up to a maximum of CFAF 80 billion. ii. Oil-price related adjusters (objective: shield fiscal objectives from uncertainties regarding oil prices): - a. If Brent oil price projections as reported by IMF-WEO decline by up to 25 percent relative to the program baseline (US$71.900 per barrel), the ceiling will be adjusted upward to accommodate the shortfall in oil revenue in a given quarter. - b. If Brent oil price projections as reported by IMF-WEO decline by more than 25 percent relative to the baseline program projection, then a consultation between the government and the IMF is required. - c. If Brent oil price projections as reported by IMF-WEO rise relative to the baseline program projection for 2018-19, the entirety of oil revenues additional to the baseline program projection should be deposited in Gabon’s Fund for Future Generations at the BEAC. iii. The program ceiling will be adjusted upward to reflect any purchase by commercial banks of outstanding contractual government credit (rachat de créances) and government bonds issued on the CEMAC market held by non-bank private sector creditors as of end-2017. - Text Table 2 — Gabon: Net Claims on Central Government (Billions of CFA francs, stock) - Dec-16 / Dec-17 / Jun-18 / Dec-18 / Jun-19 - Banking system, Net claims on central government: 653.7 / 664.5 / 876.8 / 848.3 / 894.9 - Central Bank, Net claims on central government: 220.6 / 249.3 / 451.3 / 365.5 / 475.7 - Claims on central government: 452.7 / 564.2 / 566.0 / 680.5 / 684.4 - Loans to central government: 452.5 / 452.5 / 452.5 / 452.5 / 452.9 - Use of IMF credit: 0.0 / 11.3 / 11.3 / 27.6 / 31.5 - Other: 0.2 / 0.5 / 0.0 / 0.5 / 0.0 - Liabilities to central government: 232.1 / 314.9 / 114.7 / 315.0 / 208.7 - Treasury vault cash: 36.8 / 41.5 / 40.4 / 40.9 / 56.0 - Fund for Future Generations/Sovereign Wealth Fund: 150.2 / 47.2 / 10.8 / 9.2 / 12.5 - Treasury current accounts at the BEAC: 45.1 / 226.2 / 63.5 / 264.8 / 140.2 - Other Depository Corporations, net claims on central government: 433.1 / 415.2 / 425.5 / 482.7 / 419.1 - Claims on central government: 621.7 / 528.5 / 538.3 / 542.1 / 472.7 - Securities Central Government: 517.6 / 461.0 / 446.9 / 470.0 / 385.9 - Regional bonds: 104.2 / 67.5 / 91.4 / 72.1 / 86.8 - Liabilities to central government: 188.6 / 113.3 / 112.8 / 59.4 / 53.6 - Treasury deposits: 42.2 / 24.8 / 27.2 / 30.2 / 19.7 - Other deposits: 146.4 / 88.6 / 85.6 / 29.2 / 33.9 - CCA: 0.0 / 0.0 / 0.0 / 0.0 / 0.0 - Source: BEAC ### C. Ceiling on Net Claims of the BEAC to the Central Government, Excluding the Use of IMF Credit - Definition: - Calculated as the gross claims of the BEAC on the central government, including BEAC statutory advances to the CG and other BEAC claims on the CG (excluding BEAC claims on the CG created by the on-lending of IMF credit), less the gross liabilities of the BEAC to the CG, including treasury vault cash, deposits of the Future Generation Fund, deposits of the Sovereign Wealth Fund, and other central government deposits held at the central bank. - Reporting: - Data will be provided to the IMF with a lag of no more than six weeks from the end of the month. - Adjusters (same oil-price framework as for banking system ceiling): - a. If Brent oil price projections as reported by IMF-WEO decline by up to 25 percent relative to the program baseline (US$71.900 per barrel), the ceiling will be adjusted upward to accommodate the shortfall in oil revenue in a given quarter. - b. If Brent oil price projections as reported by IMF-WEO decline by more than 25 percent relative to the baseline program projection, then a consultation between the government and the IMF is required. - c. If Brent oil price projections as reported by IMF-WEO rise relative to the baseline program projection for 2018–19, the entirety of oil revenues additional to the baseline program projection should be deposited in Gabon’s Fund for Future Generations at the BEAC. ### D. Ceiling on Disbursing or Guaranteeing of External Debt by the Central Government - Definition of debt (summary of applicable guidelines): - Debt is understood as a current, i.e., not contingent, liability created under a contractual arrangement through the provision of value in the form of assets (including currency) or services, which requires the obligor to make one or more payments in the form of assets (including currency) or services, at some future point(s) in time. - Primary forms include: i. loans (including deposits, bonds, debentures, commercial loans, buyers’ credits, repurchase agreements, and official swap arrangements); ii. suppliers’ credits (deferral of payments after delivery of goods or services); iii. leases (debt measured as the present value at inception of all lease payments expected during the agreement, excluding operation/repair/maintenance payments). - Arrears, penalties, and judicially awarded damages arising from failure to make payment under contractual obligation that constitutes debt are debt. - For purposes of the ceiling, external debt is defined as debt contracted or serviced in a currency other than the franc of the Financial Community of Africa (CFAF). - The ceiling applies to all external debt whether or not concessional. - Guaranteeing external debt triggers the nonobservance of the performance criterion regardless of whether or not a disbursement has been made. - The performance criterion will be assessed on a cumulative basis during the fiscal year. - Exemptions: - i. Normal import-related commercial debt having a maturity of less than one year; - ii. Rescheduling agreements. - Specific rule for eurobond issuance: - In the case of the issuance of euro bond, the amount deemed disbursed is the amount subscribed/purchased at the end of the subscription/purchase period as specified in the final documentation. - Adjusters: - i. The program ceiling applicable to new external debt is adjusted upward up to a maximum of 5 percent of the ceiling on new external debt in cases in which differences vis-à-vis the PC on new debt are caused by a variation in financing conditions (interest, maturity, grace period, payment schedule, front-end fees, management fees) of the debt or debts. The adjustor may not be applied when the differences are the result of an increase in the face value of the total debt contracted or guaranteed. - ii. The program ceiling will be adjusted upward (downward) in cases where early (late) disbursements of specifically agreed and identified financing flows take place. - Reporting: - The authorities will inform IMF staff within 2 weeks of any planned contracting or guaranteeing of external debt and the related conditions before the debt is either contracted or guaranteed by the CG. - Once there is agreement with IMF staff of the planned disbursement or guaranteeing of external debt and the debt is either contracted or guaranteed by the CG, their disbursement will become part of the monitored disbursements of existing debts. ### E. Ceiling on the Accumulation of New External Arrears by the Central Government - Definition: - The accumulation of external payments arrears by the CG will be a continuous performance criterion with a zero limit throughout the program period. - External payment arrears are defined as contractual external debt service obligations (interest and/or principal, including moratorium and later/penalty interest, where applicable) of the CG that have not been paid within 30 days after falling due. - It shall not apply to external payments arrears arising from external debt being renegotiated with external creditors, including Paris Club creditors; and more specifically, to external payments arrears in respect of which a creditor has agreed that no payment needs to be made pending negotiations. - Reporting: - This performance criterion will be monitored on an ongoing basis. - The Ministry of Economy will provide the final data on the stock of external arrears of the CG to the IMF, including any occurrence of new arrears accumulation, with a lag of not more than three weeks from the end of the month. ### F. Cumulative Floor on Central Government Tax Revenue, Excluding Oil Revenue - Definition: - The program will have a floor on CG non-oil revenue. - Non-oil revenue refers to revenue from tax and non-tax collection and exclude all revenue from asset sales, grants, and oil revenue. - The floor on government tax revenue, excluding oil revenue is a performance criterion beginning with the end-December 2018 quantitative program target. - Reporting: - Data will be provided to the IMF with a lag of no more than six weeks from the end of the month. ### II. Quantitative Indicative Targets: Definitions of selected variables - A. Cumulative Floor on the Net Reduction of the Stock of Domestic Arrears of the Central Government - Definition: - The stock of domestic payment arrears of the CG is defined as the sum of all contractual obligations that remained unpaid 90 days after the payment order date. - This stock includes payment obligations from procurement contracts for goods and services and other contracts providing for payment in domestic currency, as well as statutory obligations for payment (e.g., civil service wages, VAT reimbursements, and other entitlements). - The cumulative floor on the net reduction of the stock of domestic arrears of the CG is measured as the stock of outstanding domestic arrears on the test date minus the stock of outstanding domestic arrears as of January 1, 2018. - Reporting: - Data on repayment and new accumulation of domestic payment arrears and the remaining previous-year stock of domestic payment arrears will be provided to the IMF with a lag of no more than six weeks from the end of the month. - B. Cumulative Floor on Central Government Social Spending - Definition: - The program will have a floor on non-wage social spending as defined in the CG budget for a particular fiscal year. These programs are funded by government resources. - The floor includes: (i) spending on primary, secondary, and vocational education, including basic goods and services, and school infrastructure and rehabilitation; (ii) spending on health programs, including basic goods and services, and transfers for primary health care facilities; (iii) spending on social protection including health insurance and targeted safety nets. - Also taken into account are: (a) subsidies on domestic gas butane for cooking and lighting; (b) the costs of the electrification program and hydraulic installations for rural areas that do not have access to the public water and electricity network; (c) the cost of burial, hospitalization for the indigent; and (d) support for transportation costs. - Costs related to the statistical monitoring reform of economically weak Gabonese (GEF) are also included in the floor. - Performance relative to the program target on social spending is assessed on the basis of commitments versus initial budget appropriations for the above-mentioned social spending components. Monitoring is carried out on the basis of quarterly targets determined in agreement with the Gabonese authorities. - Reporting: - Data will be provided to the IMF with a lag of no more than six weeks from the end of the month. ### III. Program monitoring — Reporting requirements (summary) - Multiple reporting timelines specified: - Standard monthly reporting lag: no more than six weeks after the end of the month for most fiscal and monetary data series (treasury accounts, net claims, CG non-oil revenue, domestic arrears repayments, social spending). - External arrears reporting: lag of not more than three weeks from the end of the month for final data on the stock of external arrears of the CG, including any new arrears accumulation. - Notification requirement for planned contracting or guaranteeing of external debt: inform IMF staff within 2 weeks before contracting or guaranteeing. *Source: 1gabea2019002 - 10. Definition: The financial operations specified in the TOFE relating to treasury* ### 33. To facilitate monitoring of program implementation, the government of Gabon will prepare ### 33. To facilitate monitoring of program implementation, the government of Gabon will prepare ### Monitoring and reporting requirements (monthly, within six weeks) - The government will prepare and send to the IMF by e-mail data and monthly reports within six weeks following the end of the preceding month. - Required electronic files and reports include (but are not limited to): - the comprehensive monetary survey, the central bank balance sheet, and the consolidated balance sheet of the commercial banks (electronic file); - the central government financial operations (opérations financières de l’Etat) on a payment order basis (ordonnancements), identifying any discrepancy between the fiscal deficit and changes in domestic and external arrears and in the treasury float, on the one hand, and total net domestic bank/nonbank and net external financing, on the other (electronic file); - the detailed breakdown of oil revenue by type of revenue (royalties, profit tax, dividends, bonuses and other) and by company/type of contract, as well as the detailed breakdown of non-oil tax revenue (by type of tax) and nontax revenue (electronic file); - the detailed breakdown of total central government expenditure, on an adjusted commitment basis, adjusted payment order basis, and cash basis as presented in the Tableau Intégré (electronic file); - the details for domestic and external debt-service obligations, on a contractual and actual payments basis, respectively, with a breakdown into interest and principal and by creditor, as well as any possible accumulation of domestic or external arrears (electronic file); - the details on the stock of external and domestic debt at the end of each quarter prepared by the Generate Directorate of Debt. The external debt stock is to be evaluated at end-of-quarter exchange rates (electronic file); - the details for the outstanding stock of the treasury float (month to month) and the cumulative flows from January 1, 2018; the net accumulation of new float during 2018, defined in paragraph 6 as the difference between payment orders (ordonnancements) and payments made (cash basis), as well as the repayment of pre-2018 float, with both items to be broken down by wages and salaries, goods and services, transfers and subsidies, interest, capital expenditure, and net lending; any stock-flow adjustment not consistent with flows should be explained (electronic file); - information on the balance of the accounts relating to treasury correspondents (correspondants du Trésor), local governments (collectivités locales), and other treasury financial operations specified in the TOFE; - the amount of new external debt contracted or guaranteed by the central government, with the detailed information on the original terms and conditions (currency of denomination, interest rate, grace period, and maturity) and the envisaged path of disbursement; - actual disbursements on external debt, including on newly contracted loans, by creditors and by projects/programs and the amounts of debt relief, if any, granted to Gabon by external creditors (electronic file); - monthly information on the oil sector: export prices, effective exchange rate, production per oil field, volume of exports and volumes provided to SOGARA based on data from the Direction Générale des Hydrocarbures (electronic file); - quarterly report on numbers and value of procurement contracts treated by the Direction Générale des Marchés Publics (DMP) by type of contracting; - indicators and other statistical data on recent economic developments, such as the household consumer price index, merchandise imports and exports (in value and volume terms) by major categories on the basis of customs data, timber production and exports by categories (in value and volume terms), as well as the quarterly reports on economic activity prepared by the General Directorate of the Economy (DGE) and six-monthly report of the balance of payments by the BEAC; - a status report on the implementation of the structural reforms specified in Table 2 attached to the letter of November 28, 2019. - The Technical Committee in charge of monitoring the Fund-supported program will provide the African Department of the IMF with any other information that the latter may deem necessary or that may be requested by the staff of the IMF for the effective monitoring of the program. ### Attachment III — Schedule of Purchases and Timing of Reviews Under the Extended Arrangement, 2019–20 (selected entries) - Date of availability / Condition for disbursement / Amount (millions of SDRs) / Amount (millions of US$) / Percentage of Quota 1/ - June 19, 2017 — Approval of the extended arrangement under the EFF. — 71.430 96.64933.069 - December 1, 2017 — Observance of the PCs for end-June 2017, conituous PCs and completion of the first review. — 71.43098.61533.069 - June 1, 2018 — Observance of the PCs for end-December 2017, conituous PCs and completion of the second review. — 71.430 100.61833.069 - December 1, 2018 — Observance of the PCs for end-June 2018, conituous PCs and completion of the third review. — 71.430 100.61833.069 - June 1, 2019 — Observance of the PCs for end-December 2018, conituous PCs and completion of the fourth review. — 71.430 44.67063.03220.681 - December 1, 2019 — Observance of the PCs for end-June 2019, conituous PCs and completion of the fifth review. — 71.43044.67063.03220.681 - April 30, 2020 — Observance of the PCs for end-December 2019, continuous PCs and completion of sixth review. — 35.82089.340126.12541.361 - Total464.400648.990215.000 - Note: Source: IMF staff projections. - Gabon's quota is SDR 216.0 million. ### Relations with the Fund (as of October 31, 2019) — key factual items - Membership Status: Joined September 10, 1963 Article VIII. - General Resources Account: Quota 216.00 SDR Million (100.00 percent of quota); Fund holdings of currency (Exchange Rate) 484.62 (224.36 percent of quota); Reserve Tranche Position 17.18 (7.95 percent of quota). - SDR Department: Net cumulative allocation 146.72 SDR Million (100.00 percent of allocation); Holdings 118.81 (80.98 percent). - Outstanding Purchases and Loans: Extended Arrangements 285.72 SDR Million (132.28 percent of quota). - Latest Financial Arrangements: - EFF — Jun 19, 2017 to Jun 18, 2020 — Approved amount (SDR Million) 464.40 — Amount Drawn (SDR Million) 285.72. - Stand-By — May 07, 2007 to May 06, 2010 — 77.15 — 0.00. - Stand-By — May 28, 2004 to Jul 31, 2005 — 69.44 — 41.66. - Overdue Obligations and Projected Payments to Fund (SDR Million, based on existing use of resources and present holdings of SDRs): Forthcoming — 2019: Principal 5.95; Charges/Interest 1.43. 2020: Charges/Interest 5.40. 2021: Charges/Interest 5.39; Principal 23.81. 2022: Charges/Interest 5.23; Principal 47.62. 2023: Charges/Interest 4.67. Total by year shown as: 1.43 5.40 11.35 29.04 52.29. - Safeguards Assessments: A full safeguards assessment for the Bank of the Central African States (BEAC) was completed in August 2017; transition to IFRS beginning with the 2018 financial statements noted; recommendations on accounting, internal audit, risk management, and reserves governance to be implemented. - Exchange Rate Arrangement: The de jure and de facto exchange rate arrangement of the Central African Monetary Union (CAMU) is a conventional peg. The regional currency is the CFA franc pegged to the Euro at CFAF 655.95 = Euro 1. - Gabon maintains a 1.5 percent tax on wire transfers abroad that is not consistent with Article VIII, Section 2(a); proceeds are used to fund Gabon’s health insurance scheme. Authorities have exempted a number of transactions (including all interbank transactions) but do not propose eliminating the tax. - Article IV Consultations: Gabon is on a 24-month Article IV consultation cycle; the Executive Board concluded the last Article IV consultation on February 19, 2016. - FSAP Participation and ROSCs: First regional FSAP during January–March 2006; ROSCs in June 2006; FSAP update in November 2014–January 2015. - Resident Representative: There is currently a resident representative in Gabon. ### Technical assistance (AFRITAC and Headquarters) — selected items and timing - AFRITAC (area of focus and time of delivery) — examples: - Budget execution (Budget) — Oct. 2019 - Budget execution (Treasury) — Oct. 2019 - Dissemination of financial statistics — Oct. 2019 - Clearance of suspense accounts — Sep. 2019 - Fiscal risks — Sep. 2019 - Follow-up on recommendations (customs) — Sep. 2019 - Coverage and quality of public financial statistics — July 2019 - Audit and tax arrears — July 2019 - Earmarked revenues and public agencies — June 2019 - Seminar on public investment — June 2019 - MAC-DSA Training — June 2019 - Budget preparation — May 2019 - Enhance main functions of internal revenue administration — Mar. 2019 - Medium term debt management strategy — Feb. 2019 - National accounts — Jan. 2019 - CPI data improvement — Dec. 2018 - Treasury management — Nov. 2018 - Public finance statistics — Nov. 2018 - Headquarters (department, purpose, time of delivery) — examples: - FAD — Identification and evaluation of tax exemptions — Aug. 2019 - FAD — PIMA — June 2019 - FAD — Modernization of property tax — May 2019 - FAD — Tax and customs revenues mobilization — Nov. 2018 - FAD — Cash management and TSA — Nov. 2018 - FAD — Special accounts and earmarked revenues — Jul. 2018 - FAD — Expenditure arrears management — July 2017 - STA — Implementation of the GFSM 2001/2014 — Jun. 2019; Nov. 2018; Jan. 2018 - STA — National Accounts — June 2017 - STA — Balance of payments statistics — Jan 2017 ### Relations with the World Bank — selected programs and advisory services - Ongoing World Bank advisory services in areas including revenue agency, Ministry of Economy medium-term macro fiscal projection tools, civil service reform, Poverty Assessment (US$ 150k ASA), Digital Economy for Africa (US$ 200k ASA), Central Africa-Digital Economy policy dialogue (US$ 390k ASA), monitoring of small-scale cross border trade (US$ 290k ASA), support to targeting reform and social protection policy dialogue (US$ 50k ASA), strengthening DRM capacity in ECCAS (US$ 550k ASA), unlocking private investment to support job growth and economic transformation (US$ 200k ASA), CEMAC housing Finance Market Diagnostic (US$ 100k ASA), MAPS II (US$ 25k ASA). - World Bank lending examples: - US$35 million Strengthening the capacity of regional financial institutions in the CEMAC region — approved May 2018 — Final delivery date expected for July 2023. - US$18 million Investment Promotion and Competitiveness project — approved March 2014 — objective to improve investment climate and foster enterprise development in Gabon. *Source: IMF staff report excerpts (December 3, 2019).* ### 2019. It was an ### 1gabea2019002 - 2019. It was an ### World Bank and Other Donor-Financed Projects — Status, objectives, and timelines - CAB4 (Central African Regional and National Backbone) - Financing: A US$58 million IBRD Loan approved in March 2012; effective March 2013. - Objective: increase geographical reach and usage of regional broadband network services and reduce their prices in the territory of the Gabonese Republic. - Components: (i) Enabling environment; (ii) Connectivity; and (iii) Project management. - Additional Financing: A US$23 million AF to scale up the fourth series of projects (SOP4, formerly APL4) of the Central African Backbone (CAB) Program (P122776) prepared, coupled with a level two restructuring to extend the project. - Supervision and timing: Last supervision mission took place in November 2019. Revised closing date scheduled in March 2020. - Access to Basic Services in Rural Areas and Capacity Building Project (Energy) - Financing: A US$60 million project approved by the Board in September 2015; effective since October 2016. - Objectives: expand access to water and energy services in targeted rural areas and establish mechanisms to improve sustainability of service provision. - Supervision and timing: Last supervision mission took place in October 2019; new TTL of the project introduced to the GoG during this mission. - Status changes: Project restructured in June 2019 to change among others the development objectives and the result framework. - Expected closing date: November 2021. - GEF Wetlands Grant - Financing: A US$7.5 million GEF wetlands grant. - Objective: enhance protection of biodiversity in selected forested wetlands on the Ramsar list through knowledge creation and development of conservation measures for sustainable wetlands management. - Supervision and timing: Last supervision mission took place in July-August 2019. - Expected closing date: April 2020. - Infrastructure and Local Development Program II - Financing: A US$100 million program approved in December 2015. - Objective: improve access to urban infrastructure and services in selected underserviced neighborhoods and build basic capacities for municipal management in target cities. - Supervision and timing: Last supervision mission took place in September-October 2019. - Status changes: Project restructured in June 2019 to change among others the disbursement estimation and the risk analysis. - Expected closing date: January 2021. - Skills for Employability Support Project - Financing: A US$100 million project approved in February 2016; effective since December 2016. - Objective: support youth employability in Gabon to promote shared prosperity and reduce extreme poverty. - Supervision and timing: Last mission took place in September 2019 for the negotiation. - Status changes: Project restructured in April 2019 to change among others the components of the project. - Expected closing date: December 2021. - Wildlife and Human-Elephant Conflict Management Project - Financing: A US$9.33 million project effective since January 2017. - Objective: finance management of four parks in South Gabon (Loango, Moukalaba-Doudou, Mayumba and Waka); support anti-poaching and local community park management, including eco-tourism and income-generating activities. - Supervision and timing: Last supervision mission took place in July-August 2019. - Expected closing date: December 2021. - e-Gabon project (original and additional financing) - Original financing: A US$56 million e-Gabon project approved in June 2016. - Objective: increase efficiency of public health management and services delivery by rolling out a new National Health Information System and advance development of a digital innovation ecosystem in Gabon. - Supervision and timing: Last supervision mission took place in November 2019. - Expected closing date: January 2022. - Additional financing: A US$35 million e-Gabon additional financing project under preparation with expected Board date in July 2020. - Objective: (i) improve the timeliness and availability of information to support delivery and management of public health services; and (ii) foster development and roll-out of eHealth applications and services, and ICT services more generally. - Supervision and timing: Last supervision mission took place in November 2019. - Expected Board date: July 2020. - Statistical project - Financing: AUS$ 50 million statistical project under preparation; concept note review meeting took place in March 2016. - Objective: strengthen the statistical capacity of the borrower, fill key data gaps, improve statistical production, and enhance statistical dissemination practices. - Supervision and timing: Last supervision mission took place in February 2019; a mission to work on the new price index took place in November 2019. - Expected closing date: December 2021. - DPO series (Inclusive Growth and Spending Efficiency operation) - Status: Under preparation (amount to be defined). - Objective: support government's reforms to improve the efficiency of spending in the health sector and overall and promote a more inclusive and sustainable growth. - Bank approval meeting scheduled in July 2017; technical discussions to build the matrix of reforms have already started and the first preparation mission will take place in early December 2019. - Fiscal year reference: FY 2020. - IFC investments - Project: Société d’Exploitation du Transgabonais (SETRAG) concessionaire of 650-kilometer Transgabonais rail line between Franceville and Libreville. - Financing: A US$110.9 million investment (initially US$45.9 million but extended with an additional financing of US$65 million). - Objective: increase the railway’s transport capacity and improve reliability. - Bank requests to Fund - Request: Article IV documents. - Timing: FY20. - Joint products in the next 12 months - Collaboration: on various data issues. - Status: Ongoing. ### Relations with the African Development Bank — Projects, objectives, and timelines - Capacity building project on youth employability and social protection - Financing: loan of € 84.63 million; approved in December 2016. - Objectives: (i) increase and diversify supply of vocational training and technical education, and health; (ii) improve quality of training and sector governance; (iii) promote social inclusion and national solidarity. - Components: (i) skills development for employability; and (ii) Promotion of health and social inclusion. - Supervision and timing: Last supervision mission took place in November 2019. - Completion Date: March 2022. - Seed Program Support Project Phase I - Financing: loan of € 98.541 million; approved in November 2017. - Objectives: (i) contribute to reduction of the country's food dependency; (ii) create agricultural development zones; (iii) improve living conditions in rural areas through access to socio-economic infrastructures and services; (iv) improve supply of training in rural areas; (v) develop agricultural entrepreneurship, especially for young people. - Components: (i) rural infrastructure development; and (ii) capacity building. - Launch: The project was launched in October 2019. - Completion Date: December 2023. - Project to support diversification of the Gabonese economy - Financing: loan of 62.74 million euros; approved in June 2018. - Objectives: (i) improve the investment climate; (ii) strengthen mobilization of domestic resources to ensure sustainable financing of economic diversification; (iii) promote Gabonese priority sectors and SMEs. - Components: (i) support for investment climate reforms; and (ii) support for reforms in priority mine-timber sectors to diversify sources of growth. - Launch expectation: Project expected to be launched in December 2019. - Completion Date: March 2022. - Libreville Integrated Water Supply and Sanitation Program Phase I - Financing: two loans totaling 117.4 million euros; approved in October 2018. - Objectives: (i) development of sanitation infrastructure for drinking; and (ii) improving sector governance and capacity building. - Launch expectation: Project expected to be launched in November 2019. - Completion Date: June 2023. - Support program for economic and financial reforms phase III (budget support) - Financing: loan of 100 million euros; approved in November 2018. - Objectives: (i) strengthen fiscal consolidation through increased revenue mobilization and public expenditure rationalization, with emphasis on controlling the wage bill and enhancing efficiency of public investment; (ii) support diversification through improving investment climate and competitiveness of the agricultural sector. - Status: Final completion and evaluation mission for performance scheduled in the first quarter of 2020. - Legal closure: Legal closure took place in June 2019, but implementation of some reforms is ongoing. - GSEZ Private Harbor Project - Financing: € 40 million loan; approved in December 2018. - Objective: design, construction and operation of a new general-purpose cargo terminal at Owendo with capacity of four million tons of general cargo per year and additional storage facilities for palm oil and cereals. - Supervision and timing: Last supervision mission took place in October 2019. - Completion Date: February 2023. ### Statistical Issues — Data adequacy, main shortcomings, and ongoing TA - General assessment - Data provision: has some shortcomings but is broadly adequate for surveillance. - Main constraints: shortcomings in accuracy, reliability and adequacy of periodicity and timeliness for certain data; inconsistency between datasets; statistical producing agencies lack sufficient access to source data and an institutional framework to share information and coordinate compilation efforts. - Recommendation: household surveys should be conducted and disseminated regularly to monitor progress in PSGE implementation. - Publications and series - Tendances de l’Économie: published twice a year by DGSEE (Ministry of Economy, Trade, Industry, and Tourism); contains detailed economic and financial statistics, including long historical time series. - Tableau de Bord de l'Économie: issued quarterly by the Ministry of the Economy; describes more recent sectoral developments. - International Investment Position (IIP): Gabon does not provide IIP data. - National Accounts - TA and updates: AFRITAC Central (AFC) working with authorities to incorporate SNA 1993 methodological recommendations. - New series: covering the period 2001-2010 prepared; AFC TA mission assisted with compilation for 2011-2015; whole new series should be released after 2011-2015 accounts are completed. - Quarterly accounts: AFC assisted with implementation of quarterly national accounts and high frequency indicators, but no progress achieved. - Employment and unemployment - Data on unemployment and total labor force: not systematically available. - Price statistics - CPI improvements: In 2007 authorities began publishing an improved CPI index that covers the same basket as the CEMAC Harmonized Consumer Price Index (HCPI) and uses weighting from Gabon’s 2003 household expenditure survey. - Coverage notes: The CPI only covers the capital city of Libreville; improved CPI has 2004 as base year. - Government Finance Statistics (GFS) - Progress: Significant progress in adopting GFSM2001/2014 framework and producing a TOFE from government trial balance. - Coverage ambitions: Original aim to produce by end-2018 a TOFE covering budgetary central government, local authorities and social security scaled back to focus on budgetary central government; extension to other subsectors planned later. - Accruals: Adoption of full accruals awaits strengthening of public accounting system. - Staffing risk: risks around mobility of trained staff. - Reporting target: Gabon is on track to provide GFS budgetary central government data to the IMF for inclusion in the Government Finance Statistics Yearbook by the end of 2019. - Monetary and Financial Statistics - Reporting: Monetary statistics reported to the Fund by BEAC monthly in SRFs, with delays up to two months. - Gaps: Depository corporation survey excludes deposit taking microfinance institutions and does not report interest rates offered by financial institutions to non-financial entities on deposits and loans. - Financial Sector Surveillance - Reporting: Banking Commission of Central African States (COBAC) reports all core and some encouraged financial soundness indicators to STA for Gabon. - FAS reporting: BEAC has not reported data for Gabon to the Financial Access Survey (FAS) since 2013. - Delay: Financial soundness indicators (FSI) are received with over 6 months delay. - External Sector Statistics (Balance of Payments and related) - Compilation and validation: BOP statistics compiled by national directorate of BEAC and validated by BEAC headquarters staff. - Dissemination: Data are disseminated with considerable delay; 2018 IMF mission assisted to reduce dissemination backlog with submission of BOP data through 2015 to STA. - System assessment: Backlog in producing statistics exists, but systems and methods are in place and operate effectively when used. - IT improvements: New application BDP6+, in place since 2017, increases computerization at all stages of data production. - Specific data issues: External trade data have been largely based on estimates not cross-checked with customs data; other current account entries were not very reliable due to low enterprise survey response rates; FDI in the financial account likely underestimated due to insufficient oil sector survey detail and neglect of non-oil greenfield investments (e.g., OLAM activities); private capital flow magnitudes and breakdowns, particularly short term, suffer from incompleteness. - Staff practices: Mission teams have received simplified analytic BoP presentations focusing on recent past and medium-term projections; considerable revisions frequent, requiring Staff to rely on own calculations and estimations for several entries. - Technical assistance - TA under STA-JSA project: Country receiving TA; first mission (January 2017) found company-survey based compilation system well adapted to Gabonese economy where bulk of BOP flows are carried out by identifiable direct investment companies. - Further improvements: additional improvements were brought up (text ends). *Italicized source: 1gabea2019002 - 2019. It was an (IMF PDF).* ### introduction of the BDP6+ application for electronic collection of data for balance of payments purposes, ### introduction of the BDP6+ application for electronic collection of data for balance of payments purposes ### BDP6+ implementation and data issues - BDP6+ introduced for electronic collection of data for balance of payments purposes, designed for all the countries in the region, and aligned with the methodology of the sixth edition of the Balance of Payments and International Investment Position Manual (BPM6). - Subsequent STA-JSA project missions: - Assisted in closing the dissemination gap to 2015. - Proposed improvements to the new application. - Most recent TA (March 2019) mission findings: - Work underway to finalize the BOP for the years 2016–18 with the objective of transmitting the data for publication to STA by end-2019. - Several planned actions still lagging, including: - Production of the IIP for 2013 and 2014. - Updating of the business register. - A number of anomalies detected, most important relating to: - (i) weakness in the transaction coverage (inclusion of the SEZ operations is essential, with direct impact on the current and financial transactions/positions, and implicitly a generator of net errors and omissions). - (ii) the monetary statistics, transmitted directly by BEAC Headquarters, which are obviously erroneous. - Comprehensive data exist on the stock of external public debt and its composition, and detailed projections on debt service due. - Data are provided, usually to Fund missions, by the General Directorate of Public Debt and Accounting (Direction générale de la comptabilité publique) of the Ministry of Budget and Public Accounts. ### Data standards and dissemination - Gabon implemented the enhanced General Data Dissemination System (e-GDDS) in October 2019 by launching the National Summary data page. - No data ROSC is available. ### Selected timing and frequency of key macroeconomic and financial indicators (as of November 26, 2019) - Exchange Rates: Date of latest observation Oct. 2019; Date received Nov. 2019; Frequency of Data M; Frequency of Reporting M; Frequency of Publication M. - International Reserve Assets and Reserve Liabilities of the Monetary Authorities: Date of latest observation Jan. 2019; Date received Apr. 2019; Frequency of Data M; Frequency of Reporting M; Frequency of Publication M. - Reserve/Base Money: Date of latest observation Jan. 2019; Date received Apr. 2019; Frequency of Data M; Frequency of Reporting M; Frequency of Publication M. - Broad Money: Date of latest observation Jan. 2019; Date received Apr. 2019; Frequency of Data M; Frequency of Reporting M; Frequency of Publication M. - Central Bank Balance Sheet: Date of latest observation Jan. 2019; Date received Apr. 2019; Frequency of Data M; Frequency of Reporting M; Frequency of Publication M. - Consolidated Balance Sheet of the Banking System: Date of latest observation Jan. 2019; Date received Apr. 2019; Frequency of Data M; Frequency of Reporting M; Frequency of Publication M. - Interest Rates: Date of latest observation Oct. 2019; Date received Nov. 2019; Frequency of Data M; Frequency of Reporting M; Frequency of Publication M. - Consumer Price Index: Date of latest observation Sep. 2019; Date received Nov. 2019; Frequency of Data M; Frequency of Reporting M; Frequency of Publication M. - Revenue, Expenditure, Balance and Composition of Financing – General Government: Date of latest observation 12/16; Date received 03/15/17; Frequency of Data M; Frequency of Reporting Q; Frequency of Publication N/A. - Revenue, Expenditure, Balance – Central Government: Date of latest observation Dec. 2016; Date received 03/15/17.; Frequency of Data M; Frequency of Reporting Q; Frequency of Publication N/A. - Stocks of Central Government and Central Government-Guaranteed Debt: Date of latest observation Dec. 2016; Date received Mar. 2017; Frequency of Data Q; Frequency of Reporting Q; Frequency of Publication N/A. - External Current Account Balance: Date of latest observation Dec. 2015; Date received Mar. 2019; Frequency of Data A; Frequency of Reporting A; Frequency of Publication A. - Exports and Imports of Goods and Services: Date of latest observation Dec. 2015; Date received Mar. 2019; Frequency of Data A; Frequency of Reporting A; Frequency of Publication A. - GDP/GNP: Date of latest observation 2009; Date received Jan 2012; Frequency of Data A; Frequency of Reporting I; Frequency of Publication A. - Gross External Debt: Date of latest observation Dec. 2016; Date received Feb. 2017; Frequency of Data Q; Frequency of Reporting I; Frequency of Publication I. - International Investment Position: N/A across date and frequency fields. (Notes included in source: 1 Includes reserve assets pledged or otherwise encumbered as well as net derivative positions. 2 Both market-based and officially-determined, including deposit rate, discount rates, money market rates, rates on treasury bills, notes and bonds. 3 Foreign, domestic bank, and domestic nonbank financing. 4 The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments. 5 Including currency and maturity composition. 6 Includes external gross financial asset and liability positions vis-à-vis nonresidents. 7 Daily (D), Weekly (W), Monthly (M), Quarterly (Q), Annually (A); Irregular (I); Not Available (NA).) --- ### Statement by Mr. Mohamed-Lemine Raghani and Mr. Nguema-Affane (Executive Board Meeting, December 16, 2019) ### Overview and authorities’ requests - Authorities express thanks for Fund support and substantive technical assistance. - Committed to implement comprehensive capacity building strategy agreed under the Fund Capacity Building Framework project. - Request from authorities: - (i) a waiver for non-observance of the two performance criteria for June 2019 that were not observed as well as the continuous performance criteria on the non-accumulation of new external arrears, - (ii) the completion of the fourth and fifth reviews under the Extended Arrangement, - (iii) a rephasing of the remaining purchases. ### Recent developments and economic outlook - Macroeconomic performance continues to improve. - Growth: - Expected to reach 3.4 percent this year compared to 0.8 percent in 2018, mainly due to strong performance in the oil, mining, and timber sectors. - Growth in oil production could be around 15 percent in 2019, compared with around 5 percent initially forecasted. - Non-oil sector growth projected at 2.5 percent compared to 1.8 percent in 2018. - Inflation: - Declined by 0.9 percent at end-September 2019 due to reduction in food prices. - Private sector credit growth: - At end-September 2019 remain modest at 4.0 percent. - External current account: - Improved by more than 3.5 percentage points of GDP during the same period. - Banking sector: - Well capitalized, liquid and profitable but NPLs remain elevated. - Fiscal and public debt developments: - Fiscal performance at end-June 2019 was better than anticipated. - Non-oil budget deficit declined from 9.6 percent in 2017 to 7.6 percent in 2018, and expected to further decline to 4.6 percent of GDP in 2019. - Public debt declined from 62.6 to 60.6 percent of GDP and remains sustainable. - Outlook: - Recovery projected to strengthen in 2020. - Non-oil growth expected to increase to 4 percent in 2020 and to above 5 percent in the medium term. - Overall growth expected to gradually increase to more than 4.5 percent in the medium term. - Inflation should remain below 3 percent. - Current account should turn positive by 2022. - Authorities agree with staff assessment of downside risks but stress upside risks related to high volume of FDI in oil and non-oil sectors. ### Program performance - Program performance improved at end-June 2019. - Three out of five performance criteria at end-June 2019 were met, including the one on nonoil revenue. - Missed PCs: central bank and banking system net credit to the government (missed mainly due to difficulties early in the year in issuance of securities on the regional market). - Continuous performance criteria on the non-accumulation of new external arrears was missed due to accumulation of external arrears in early 2019. - Since April 2019 authorities have been current in servicing external debt payments and all existing arrears on external debt were cleared. - Social spending and payment of domestic arrears fell short of objectives; corrective measures underway to achieve social spending objectives for end-December 2019. - All structural benchmarks implemented except EITI membership (deferred until end-March 2020 to allow effective participation and collaboration among all stakeholders). --- ### Policies for 2020 and beyond ### Fiscal policy - Fiscal policy will remain the cornerstone of the program over the medium-term. - Growth-friendly fiscal consolidation will continue in 2020 and over the medium term by deepening 2019 reforms and introducing new measures. - Objective in the draft 2020 budget law: reduce the non-oil primary deficit to 4.2 percent of non-oil GDP. - Fiscal consolidation strategies: - Sustain revenue mobilization efforts. - Emphasize streamlining current spending by containing wage bill growth and rationalizing non-priority spending. - Pursue improvement in social spending execution and increase efficiency of public infrastructure investment. - Revenue mobilization measures: - Modernization of tax and custom administrations. - Streamlining of tax and customs exemptions. - Establishment of a tax policy unit (TPU) to provide recommendations to the Minister of Finance. - Amendment of the law establishing the "Tax and Customs Advantages Commission” to strengthen oversight over exemption requests and enforce decisions. - Public financial management reforms: - Improve controls and efficiency of public spending and reduce corruption vulnerabilities (in line with Fund TA, including PIMA report). - Improve cash management in relation to debt management. - Strengthen the expenditure adjustment mechanism in place since April 2019. - Establishment in early 2020 of a Treasury Committee. - Implementation of the treasury single account (TSA) remains a priority for 2020. - Modernize and improve financial reporting information system and strengthen controls in budget implementation at all levels. - Consolidate and sustain improvements in financial supervision of public companies and state operators using the new monitoring unit for public entities. - Review the Public Investment Management (PIM) framework and the legal framework for public procurement. - Transparency in extractive sector: - Commit to improve transparency in management of oil and mining revenues. - A report on the situation of oil and mining assets in September 2019 has been prepared. - Authorities will submit the country’s application to the Extractive Industries Transparency Initiative (EITI) following consultations with civil society. - All contracts signed with mining and oil companies will be transmitted to the BEAC; authorities will ensure compatibility with regional foreign exchange regulations. - Debt strategy: - Strengthen the medium-term debt reduction strategy to address debt servicing and refinancing risks. - Improve institutional framework for public debt management, including relaunching project to create a National Public Debt Committee (CNDP) and putting in place a medium-term debt strategy. - Planned Eurobond issuance in 2020 will mainly be used for debt smoothing operations to reduce refinancing risks; any additional amounts will be used consistent with fiscal objectives. - Develop a new clearance strategy for domestic arrears based on the independent audit report on public debt arrears. ### Social spending and targeting - Improve predictability and quality of social expenditure. - 2019 social expenditure budget execution rate: 37 percent. - Low execution reflects constraints in implementation of the school construction program and a reserve mechanism that made about one quarter of the social spending budget unavailable. - Improve targeting of poor and vulnerable populations and monitoring of social spending by using: - The definition of poor from the existing social protection program. - The new poverty profile derived from the 2017 Gabonese Poverty Assessment Survey (EGEP). ### Financial sector policies - Commit to clearing nonperforming loans and conducting financial development reforms to facilitate access to credit. - Strategy and action plan to reduce overdue loans finalized on March 31, 2019, but implementation delayed. - Ensure ongoing liquidation of public banks and sale of temporary holding of a non-strategic participation in a systemic domestic bank carried out at lowest possible cost to public finances. - Develop an SME financing strategy and a national financial inclusion strategy, in line with the regional financial inclusion initiative. ### Promotion of the private sector - Implement structural and institutional reforms to improve business climate and promote private-sector-led growth. - Legal and institutional reforms: - Drafting of a law on organization of justice to create commercial courts. - Adoption of the law on the organization of Gabon’s court of justice and of a new penal code in the year (addresses finance, terrorism and environment-related crimes). - Completion of current investment framework by 2020 with an investment code and a national investment promotion strategy. - Operationalization and strengthening of the National Agency for Investment Promotion (ANPI), the support unit for public-private partnerships, and the special economic zone of NKOK (SEZ). ### Statistics and data program - Significant progress in reorganization of economic statistics; reform momentum to continue in 2020. - Achievements and planned actions: - e-GDDS portal established and available to users (National Data Summary Page launched October 2019). - Work on a new, harmonized national consumer price index (HICP) to be finalized by the end of 2019. - Progress in transposition and reporting of public finance statistics according to the 2014 IMF’s Government Finance Statistics Manual (GFSM). - Activities for 2020 include: - Changing the base of national accounts to 2010. - Updating and maintaining the National Data Summary Page established in October 2019. - Launch of the General Census of Enterprises. - Start of preliminary work on the second Statistics Development Strategy (SNDS II) in the first quarter of 2020. --- ### Conclusion - Program implementation has improved thanks to remedial actions taken. - Gabonese authorities remain committed to the program and request completion of the 4th and 5th reviews under the Extended Arrangement. - Directors’ favorable consideration of the authorities’ requests is sought and will be appreciated. *Source: 1gabea2019002 - introduction of the BDP6+ application for electronic collection of data for balance of payments purposes (PDF chapter/section).* --- _Source: https://www.imf.org/-/media/files/publications/cr/2019/1gabea2019002.pdf_