## EXECUTIVE SUMMARY (1stpea2020001)

## Source details

**Canonical URL:** [EXECUTIVE SUMMARY (1stpea2020001)](https://www.imf.org/-/media/files/publications/cr/2020/english/1stpea2020001.pdf)

## Other formats

- [Markdown version](/-/media/files/publications/cr/2020/english/1stpea2020001.pdf.md)
- [Structured JSON version](/-/media/files/publications/cr/2020/english/1stpea2020001.pdf.json)

---

### Context
- COVID-19 shock: tourist arrivals halted in mid-March; externally financed projects delayed; international supply-chains disrupted.
- Socioeconomic vulnerabilities:
  - 67 percent of the population living in poverty.
  - Heavy reliance on external assistance and imports, including for staple foods.
  - Main exports: cocoa and tourism.
  - Limited social assistance institutions and credit facilities; large informal sector.
  - Weak health care system capacity.
- Pre-pandemic program and macro conditions:
  - New ECF-supported program launched in October 2019 with access of 90 percent of quota; preliminary data suggest all end-December 2019 performance criteria (PC) targets were met.
  - GDP growth slowed to 1.3 percent in 2019; projected to pick up to 3.5 percent in 2020 pre-crisis.
  - Domestic primary deficit (DPD) reduced by 2.4 percent of GDP in 2019.
  - Gross international reserves (GIR) rose from 4 to 4.3 months of imports; IMF reserve adequacy metric for low-income countries: 3.8 months.
  - Banking sector: legacy non-performing loans at 25 percent of total loans; provisions and capital adequacy for the system as a whole are adequate; some small banks may require recapitalization after Asset Quality Review recommendations.
- Debt situation:
  - Country remains in debt distress due to long-standing external arrears of 2.6 percent of GDP.
  - Public debt deemed sustainable after incorporating concessional terms of domestic debt to oil-supplier ENCO.
  - Failure to continue fiscal consolidation or reform EMAE could threaten debt sustainability.

### Impact of the pandemic and outlook
- Immediate impacts and fiscal effects:
  - Tourism (direct contribution to GDP of about 6-8 percent) has ground to a halt.
  - Expected drop in fiscal revenue of 1.5 percent of GDP across all categories except oil imports.
  - Increased health and social expenditures of 1.2 percent of GDP.
  - Higher market demand for liquidity constrains domestic budget financing.
- Macroeconomic projections (assumes pandemic winds down in third quarter):
  - Tourism sector expected to decline by over 70 percent in 2020.
  - GDP expected to decline by 6 percent in 2020.
  - Real GDP expected to grow by 5.5 percent in 2021.
- Fiscal and balance of payments gaps:
  - Balance of payments gap estimated at US$24 million (close to 6 percent of GDP).
  - Fiscal gap estimated at US$17 million (4.2 percent of GDP).
  - Without additional external financing, GIR projected to drop to below 2½ months of 2019 imports, or ⅔ of the IMF reserve adequacy metric for low-income countries.
- Selected table highlights (Percent of GDP, comparison Pre-virus / Program / Request):
  - GDP growth (2021 figures shown): Pre-virus 3.5; Program 6.0; Request 5.5.
  - Domestic revenue: 16.4; 14.9; 16.1.
  - Domestic spending: 19.7; 21.0; 18.4.
  - Domestic balance: -3.3; -6.1; -2.2.
  - Domestic primary balance: -2.8; -5.6; -2.0.
  - Fiscal gaps: 0.0; -4.2; -0.3.
  - BoP gaps: 0.0; -5.9; -1.2.

### Authorities’ response and short-run policy measures
- Health and containment:
  - Contingency plan prepared with WHO; implemented.
  - State of emergency declared on March 17; schools closed; public gatherings prohibited; international passenger flights suspended.
  - As of April 6, the country confirmed four initial cases; infected persons quarantined.
  - World Bank approved US$2.5 million under COVID-19 SPRP in early April.
  - Authorities requested support through CCRT Catastrophe Containment window and are seeking additional grants from partners.
- Social protection and countercyclical fiscal measures:
  - Implement COVID-19 contingency plan costed at about US$3 million.
  - Expand World Bank–supported cash-transfer program to cover additional vulnerable families.
  - Measures (LOI ¶5-7):
    - Allow automatic stabilizers to work.
    - Allow deferment for a limited period of some tax payments.
    - Offer incentives for businesses to retain workers, support the unemployed, and facilitate access to credit.
    - Keep retail fuel prices unchanged to generate revenue from lower international oil prices.
    - Introduce a small solidarity contribution on public servants’ salaries.
    - Authorities reaffirm agreement with ENCO to fully transfer the oil price differential to the State and for the State to pay off past fuel subsidy debt over time.
- Monetary and financial measures:
  - Safeguard the peg to the euro while alleviating liquidity pressures.
  - Central bank cut reserve requirements by four percentage points to 17 percent (foreign currency) and 14 percent (national currency).
  - Encourage banks to prudently restructure loans or grant a moratorium of six months to temporarily distressed but financially sound borrowers.
  - BCSTP will maintain prudential standards and reporting requirements (LOI ¶9) and request an eight-month moratorium on bank dividends.
  - A safeguards assessment was completed in mid-2019.
  - Memorandum of understanding between the central bank and government will outline responsibilities for servicing financial obligations to the IMF.
- Transparency and fiscal governance:
  - Issue decision to publish large public procurement contracts once signed and ex-post validation of delivery; publish monthly COVID-19 related expenditure.
  - COVID-19 related spending will be audited after the crisis (LOI ¶8).
  - Crisis-mitigation measures authorized by parliament; a revised budget to be sent to parliament when conditions allow.
  - Budgetary execution and expenditure plans, with COVID-19 related spending included, will be shared with the IMF monthly.
- Recovery preparations:
  - Authorities, in coordination with the National Institute for Civil Aviation, will prepare an action plan to address issues related to the European Union’s Air Safety blacklist (LOI ¶10).

### Modalities of support requested
- Authorities request financial assistance of SDR 9.028 million (US$12.263 million, which is 61 percent of quota, or 3 percent of GDP) under the exogenous shocks window of the Rapid Credit Facility (RCF).
- Staff assessment and proposal:
  - Staff assesses RCF eligibility requirements are met and supports the request.
  - Reasons include urgent BOP need, infeasibility of timely ECF augmentation amid pandemic, country in debt distress but debt deemed sustainable after pandemic impact, and authorities’ policy commitments.
  - Proposed access of 61 percent of quota is within revised PRGT limits and would not trigger high access procedures.
  - Proposed access is close to half of the estimated external financing gap; remaining needs expected to be filled by grants from other partners and policy adjustments.
  - RCF disbursements to be disbursed to the central bank and on-lent to the government to finance virus-related spending.
  - Authorities will prioritize measures to match spending with available resources.

### Risks and staff appraisal
- Downside risks:
  - Local outbreak not contained or persistence of pandemic globally would substantially exacerbate social and economic impacts.
  - Tourism may take longer to recover; shortages of essential imported supplies could worsen; impact on the economy and public revenue could be larger.
  - Financing gaps could increase in adverse scenarios.
- Mitigation efforts:
  - Authorities implementing COVID-19 contingency plans and recovery measures.
  - Prioritization and matching of spending with available resources.
  - External aid expected to be crucial to mitigate shocks.
- Staff appraisal and recommendation:
  - COVID-19 expected to cause a GDP decline of 6 percent in 2020, a contraction of 9.5 percentage points relative to the pre-COVID-19 estimate.
  - Staff supports authorities’ priorities to increase health spending, assist the most vulnerable, support the private sector, and safeguard the peg to the euro.
  - Staff supports the authorities’ request for a disbursement under the exogenous shocks window of the RCF in the amount of SDR 9.028 million (61 percent of quota), conditional on the stated policy commitments and recognition of substantial risks.

### Debt Sustainability Analysis (DSA) — key findings and indicators
- Country remains in debt distress due to prolonged unsettled external arrears.
- Composite Indicator score: 2.68; debt carrying capacity assessed to be medium.
- External debt (nominal, percent of GDP) selected years:
  - 2018: 47.7; 2019: 45.7; 2020: 51.7; 2021: 49.4; 2022: 48.2; 2023: 45.8; 2024: 42.8; 2025: 40.2; 2030: 31.4; 2040: 27.0.
- PV of PPG external debt-to-GDP ratio (selected):
  - 2020: 27.9; 2021: 32.7; 2022: 31.8; 2023: 31.6; 2024: 30.7; 2025: 29.1; 2030: 21.6; 2040: 16.7.
- PV of PPG external debt-to-exports ratio (selected):
  - 2020: 122.1; 2021: 247.3; 2022: 162.5; 2023: 159.5; 2024: 147.6; 2025: 136.1; 2030: 101.7; 2040: 81.3.
- PPG debt service-to-exports ratio (selected):
  - 2020: 11.8; 2021: 7.6; 2022: 7.7; 2023: 7.7; 2024: 10.1; 2025: 9.3; 2030: 8.5; 2040: 4.9.
- Public sector debt (percent of GDP, selected):
  - 2018: 96.2; 2019: 94.8; 2020: 104.9; 2021: 100.2; 2022: 96.4; 2023: 91.6; 2024: 86.9; 2025: 81.6; 2030: 63.7; 2040: 59.9.
- PV of public debt-to-GDP ratio (selected):
  - 2020: 77.2; 2021: 85.7; 2022: 82.6; 2023: 79.8; 2024: 76.5; 2025: 73.2; 2030: 53.8; 2040: 49.7.
- Gross external financing need (Million of U.S. dollars, selected):
  - 2018: 16.5; 2019: 27.4; 2020: 33.7; 2021: 17.3; 2022: 17.5; 2023: 12.7; 2024: 12.6; 2025: 13.2; 2030: 17.1; 2040: 8.2.
- Stress tests: Combined contingent liabilities produce the highest stress values; other shocks include natural disasters and a one-time 30 percent nominal depreciation.
- Mechanical risk ratings:
  - Risk of external debt distress: In debt distress.
  - Overall risk of debt distress: In debt distress.
  - Granularity in the risk rating: Sustainable.

### Macroeconomic and fiscal projections (selected exact values)
- Real GDP growth (percent): 2018: 3.0; 2019: 1.3; 2020: -6.0; 2021: 5.5; 2022: 3.5; 2023: 4.0; 2024: 4.5; 2025: 4.5; 2030: 4.5; 2040: 4.2.
- Consumer prices (end of period, percent): 2018: 5.1; 2019: 7.7; 2020: 10.0; 2021: 8.0; 2022: 6.0; 2023: 4.0; 2024: 3.0; 2025: 3.0; 2030: 3.0; 2040: 3.0 (as shown in the macro tables).
- Exports of goods and nonfactor services (annual change, percent): 2020: -44.0; 2021: 62.7.
- Imports of goods and nonfactor services (annual change, percent): 2020: -23.6; 2021: 17.9.
- Gross international reserves (millions of U.S. dollars, selected): 2019: 40.0; 2020 (proj): 40.4; later years: 45.8; 51.4; 53.7; 57.2 (table sequence).
- Months of imports of goods and nonfactor services (reserves coverage): 2019: 3.6; 2020: 4.1; 2021: 4.3; 2022: 4.6; 2023: 4.5; 2024: 4.5.

### Central government and budgetary items (selected levels)
- Total revenue, grants, and oil signature bonuses (percent of GDP): 2018: 28.2; 2019: 24.9; 2020: 24.1; 2021: 21.0; 2022: 22.5; 2023: 23.6; 2024: 22.4; 2025: 22.8.
- Tax revenue (percent of GDP): 2018: 12.3; 2019: 12.7; 2020: 12.8; 2021: 13.0; 2022: 12.8; 2023: 13.8; 2024: 14.8; 2025: 15.1.
- Domestic primary balance (percent of GDP, TMU basis): 2018: -4.1; 2019: -2.4; 2020: -4.2; 2021: -1.7; 2022: -5.6; 2023: -2.0.
- Total public and publicly guaranteed debt (percent of GDP, DSA definition): 2018: 80.9; 2019: 84.3; 2020: 96.2; 2021: 94.2; 2022: 94.8; 2023: 93.8; 2024: 104.9; 2025: 100.2.

### Appendix I — Letter of Intent: key policy measures and costing
- Requests and on-lending:
  - Request for additional IMF support: SDR 9.028 million (61 percent of quota) under the RCF.
  - Request for debt relief under the Catastrophic Containment and Relief Trust (CCRT).
  - RCF resources to be fully on-lent to the government.
  - Memorandum of Understanding to specify responsibilities for servicing IMF obligations.
- Crisis mitigation plan — objectives and specific measures:
  - Health spending: implement the WHO-coordinated health contingency plan; estimated cost around US$3 million.
  - Social protection:
    - Expand the World Bank cash-transfer program from 2600 to at least 5200 vulnerable households.
    - Switch to monthly cash payments over six months.
    - Support disadvantaged and nursing homes (elderly, disabled, abandoned children).
  - Support to businesses and workers:
    - Suspend for 3 months administrative penalties on certain tax arrears and liabilities.
    - State to contribute over 6 months two-thirds of workers’ salaries (cap of four times the minimum wage for civil servants: STD 1100, or US$50 per month), conditional on employer contribution; consumption tax and personal income tax to continue to be withheld at source.
    - State will contribute one-half of formally registered workers’ average base salary during January-February (cap STD 1100) over three months.
    - Support for unregistered/informal workers: payment of STD 600 over 3 months, provided they register with the labor force and social security.
  - Agricultural support: procure seeds, feedstock, and inputs to be sold to farmers at market price.
  - Measures to generate savings:
    - Keep retail fuel prices unchanged.
    - Reduce total wage bill at SOEs and autonomous public entities by 20 percent over 6 months.
    - Civil servants outside education and health to contribute between 5 and 10 percent of wages as solidarity tax for 6 months; savings also from absence of overtime normally paid to teachers.
  - Financing instruments:
    - Negotiations ongoing for a state-guaranteed credit line (around US$6 million with equal risk by state and banks) for SMEs.
- Estimated Costs of Key Crisis-Mitigation Measures — Central Government Expenses, 2020 (millions dobras):
  - Total domestic primary expenditure 1822
  - Current expenditure 1846
  - Personnel costs 880
  - Goods and services 314
  - Transfers 369
  - Other current expenditure 216
  - Capital spending financed by Treasury 20
  - HIPC Initiative-related social expenditure 22
- Transparency, procurement, and oversight:
  - Publish public procurement contracts requiring prior authorization and ex-post validation once signed.
  - Publish monthly COVID-19 related expenditure.
  - Revised budget to be submitted to parliament at the latest by end-July.
  - Independent audit of pandemic-related spending after the crisis.
- Monetary and financial sector measures in LOI:
  - BCSTP contingency plan; reduce minimum cash reserve requirement by 4 percentage points to 17 percent (foreign currency) and 14 percent (national currency).
  - Request 8-month moratorium on bank dividend payouts.
  - Banks to be advised to renegotiate debt payments or offer moratoria for temporarily distressed but fundamentally sound borrowers.
  - Maintain loan reporting, classification, and provisioning standards; restructured loans to be classified accordingly; loan forbearance limited to the crisis period.
- Medium-term and structural priorities:
  - Improve domestic revenue mobilization and contain public spending.
  - Introduce a VAT, reform EMAE, and improve the business environment.
  - Prepare plan with National Institute for Civil Aviation to remove country from EU Air Safety blacklist.
- DSA judgment:
  - PV of external PPG debt-to-exports ratio breaches its threshold in 2020 due to COVID-19 shock; other external PPG debt burden indicators remain below thresholds throughout projection horizon in baseline.
  - PV of total public and publicly guaranteed debt above high-risk benchmark but can be deemed sustainable when accounting for formalized concessional debt terms of EMAE and government to ENCO.

*Source: EXECUTIVE SUMMARY (1stpea2020001).*

### EXECUTIVE SUMMARY

### 1stpea2020001 - EXECUTIVE SUMMARY

### Context
- The COVID-19 pandemic is taking a heavy toll on São Tomé and Príncipe: tourist arrivals halted in mid-March, externally financed projects delayed, and international supply-chains disrupted. The situation is worsened by a fragile economy and a weak health care system.
- Socioeconomic vulnerabilities:
  - 67 percent of the population living in poverty.
  - Heavy reliance on external assistance and imports, including for staple foods.
  - Main exports: cocoa and tourism.
  - Limited social assistance institutions and credit facilities, large informal sector.
  - Weak health care system capacity.
- Pre-pandemic program and macro conditions:
  - New ECF-supported program launched in October 2019 with access of 90 percent of quota; preliminary data suggest all end-December 2019 performance criteria (PC) targets were met.
  - GDP growth slowed to 1.3 percent in 2019; projected to pick up to 3.5 percent in 2020 pre-crisis (Table 1).
  - Domestic primary deficit (DPD) reduced by 2.4 percent of GDP in 2019.
  - Gross international reserves (GIR) rose from 4 to 4.3 months of imports, compared with IMF reserve adequacy metric for low-income countries of 3.8 months of imports.
  - Banking sector: legacy non-performing loans at 25 percent of total loans; provisions and capital adequacy for the system as a whole are adequate; some small banks may require recapitalization after Asset Quality Review recommendations.
- Debt situation:
  - The country remains in debt distress due to long-standing external arrears of 2.6 percent of GDP.
  - Public debt is deemed sustainable after incorporating concessional terms of domestic debt to oil-supplier ENCO.
  - Failure to continue fiscal consolidation or reform EMAE could threaten debt sustainability.

### Impact of the pandemic and outlook
- Immediate impacts:
  - Tourism (direct contribution to GDP of about 6-8 percent) has ground to a halt.
  - Externally financed projects delayed; international supply disrupted.
  - Expected drop in fiscal revenue of 1.5 percent of GDP across all categories except oil imports.
  - Increased health and social expenditures of 1.2 percent of GDP.
  - Higher market demand for liquidity constrains domestic budget financing.
- Macroeconomic projections and gaps:
  - Assuming the pandemic winds down in the third quarter, with tourists gradually returning and some externally funded projects starting in the fourth quarter:
    - Tourism sector expected to decline by over 70 percent in 2020.
    - GDP expected to decline by 6 percent in 2020 (Table 1).
    - Real GDP expected to recover partially, growing by 5.5 percent in 2021.
  - Fiscal and balance of payments gaps:
    - Balance of payments gap estimated at US$24 million (close to 6 percent of GDP).
    - Fiscal gap estimated at US$17 million (4.2 percent of GDP).
  - Without additional external financing, GIR projected to drop to below 2½ months of 2019 imports, or ⅔ of the IMF reserve adequacy metric for low-income countries.
- Text Table 1 highlights (Percent of GDP):
  - GDP growth: Pre-virus 3.5; Program 6.0; Request 5.5 (2021 figures shown).
  - Domestic revenue: 16.4 (Pre-virus), 14.9 (Program), 16.1 (Request).
  - Domestic spending: 19.7, 21.0, 18.4.
  - Domestic balance: -3.3, -6.1, -2.2.
  - Domestic primary balance: -2.8, -5.6, -2.0.
  - Fiscal gaps: 0.0, -4.2, -0.3.
  - BoP gaps: 0.0, -5.9, -1.2.

### Authorities’ response and policy discussions
- Immediate health and containment measures:
  - Contingency plan prepared with WHO; implemented.
  - State of emergency declared on March 17; schools closed; public gatherings prohibited; international passenger flights suspended.
  - As of April 6, the country confirmed four initial cases; infected persons quarantined.
  - World Bank approved US$2.5 million under COVID-19 SPRP in early April.
  - Authorities requested support through CCRT Catastrophe Containment window and are seeking additional grants from partners.
- Short-run policy measures and social protection:
  - Implement the COVID-19 contingency plan, costed at about US$3 million, to protect the population.
  - Expand a current World Bank–supported cash-transfer program to provide additional support and cover additional vulnerable families.
  - Countercyclical measures (LOI ¶5-7):
    - Allow automatic stabilizers to work.
    - Allow deferment for a limited period of some tax payments.
    - Offer incentives for businesses to retain workers, support the unemployed, and facilitate access to credit.
    - Keep retail fuel prices unchanged to generate revenue from lower international oil prices.
    - Introduce a small solidarity contribution on public servants’ salaries.
    - Authorities reaffirm agreement with ENCO to fully transfer the oil price differential to the State and for the State to pay off past fuel subsidy debt over time.
- Monetary and financial measures:
  - Safeguard the peg to the euro while alleviating liquidity pressures.
  - Central bank cut reserve requirements by four percentage points to 17 percent (foreign currency) and 14 percent (national currency).
  - Encourage banks to prudently restructure loans or grant a moratorium of six months to temporarily distressed but financially sound borrowers.
  - BCSTP will maintain prudential standards and reporting requirements (LOI ¶9) and request an eight-month moratorium on bank dividends.
  - A safeguards assessment was completed in mid-2019.
  - A memorandum of understanding between the central bank and government will outline responsibilities for servicing financial obligations to the IMF.
- Transparency and fiscal governance:
  - Issue decision to publish large public procurement contracts once signed and ex-post validation of delivery; publish monthly COVID-19 related expenditure.
  - COVID-19 related spending will be audited after the crisis (LOI ¶8).
  - Crisis-mitigation measures authorized by parliament; a revised budget to be sent to parliament when conditions allow.
  - Budgetary execution and expenditure plans, with COVID-19 related spending included, will be shared with the IMF monthly.
- Recovery preparations:
  - Authorities, in coordination with the National Institute for Civil Aviation, will prepare an action plan to address issues related to the European Union’s Air Safety blacklist, which has significantly hindered tourism (LOI ¶10).

### Modalities of support
- Authorities request financial assistance of SDR 9.028 million (US$12.263 million, which is 61 percent of quota, or 3 percent of GDP) under the exogenous shocks window of the Rapid Credit Facility (RCF) to meet urgent balance of payments and fiscal needs caused by the COVID-19 pandemic.
- Staff support:
  - Staff assesses RCF eligibility requirements are met and supports the request.
  - Reasons:
    - Urgent BOP need that would result in immediate and severe economic disruption if not addressed.
    - Timely augmentation of access to the existing ECF arrangement not feasible due to uncertainty and practical constraints amid the pandemic.
    - Country is in debt distress, but debt is deemed sustainable after incorporating the pandemic’s impact; capacity to repay the Fund remains adequate (Table 4).
    - Authorities committed to appropriate economic policies to address the pandemic.
  - Proposed access of 61 percent of quota, in addition to existing ECF arrangement, is within revised PRGT limits and would not trigger high access procedures.
  - The proposed access is close to half of the estimated external financing gap; remaining needs expected to be filled by grants from other partners and policy adjustments.
  - RCF disbursements to be disbursed to the central bank and on-lent to the government to finance virus-related spending.
  - Authorities will prioritize measures to match spending with available resources.

### Risks
- Significant downside risks:
  - A local outbreak not contained or persistence of the pandemic globally would substantially exacerbate social and economic impacts.
  - Tourism may take longer to recover; shortages of essential imported supplies could worsen; impact on the economy and public revenue could be larger.
  - Financing gaps could increase in adverse scenarios.
- Mitigation efforts:
  - Authorities implementing COVID-19 contingency plans and recovery measures.
  - Prioritization and matching of spending with available resources.
  - External aid expected to be crucial to mitigate shocks.

### Staff appraisal
- Economic impact assessment:
  - COVID-19 expected to cause a GDP decline of 6 percent in 2020, a contraction of 9.5 percentage points relative to the pre-COVID-19 estimate.
  - Country faces urgent external and fiscal financing needs.
- Endorsement of authorities’ policies:
  - Staff supports authorities’ priorities to increase health spending, assist the most vulnerable, support the private sector, and safeguard the peg to the euro.
- Recommendation:
  - Staff supports the authorities’ request for a disbursement under the exogenous shocks window of the Rapid Credit Facility in the amount of SDR 9.028 million (61 percent of quota).
  - Support is based on urgent balance of payments needs from a sudden exogenous shock and the authorities’ policies, including commitment to seek additional external budget financing from development partners.
  - Acknowledgement of substantial risks, including protracted adverse impact of COVID-19 and existing debt distress due to long-standing external arrears, while noting debt is deemed sustainable and capacity to repay the Fund remains adequate.

*Source: EXECUTIVE SUMMARY (1stpea2020001).*

### 15.      Discussions for the first review under the program supported by the ECF are expected

### 15.      Discussions for the first review under the program supported by the ECF are expected to continue at a later stage. The authorities have reaffirmed their commitment under the program and wish to continue to benefit from IMF technical assistance.

### Program status and authorities' intent
- Discussions for the first review under the program supported by the ECF are expected to continue at a later stage.
- The authorities have reaffirmed their commitment under the program and wish to continue to benefit from IMF technical assistance.

### Macroeconomic outlook (selected indicators, 2016–24)
- GDP at constant prices (annual change, percent): 4.2; 3.9; 3.0; 2.7; 1.3; 3.5; -6.0; 5.5; 3.5; 4.0; 4.5 (years 2016–24 as in Table 1).
- GDP deflator (annual change, percent): 5.1; 2.0; 2.6; 3.7; 5.7; 3.5; 3.5; 3.0; 3.0; 2.9; 2.8.
- Consumer prices (end of period, percent): 5.1; 7.7; 9.0; 7.8; 7.7; 10.0; 8.0; 6.0; 4.0; 3.0; 3.0.
- Exports of goods and nonfactor services (annual change, percent): 8.9; -10.8; 13.9; 10.5; -1.8; 11.0; -44.0; 62.7; 8.6; 12.4; 10.7.
- Imports of goods and nonfactor services (annual change, percent): -0.4; 5.5; -3.6; 1.8; 2.5; 6.7; -23.6; 17.9; 5.2; 6.4; 6.8.
- Exchange rate (new dobras per US$; end of period): 23.4; 20.7; 21.5; 21.7; 22.0 (years shown in Table 1).
- Base money (annual change, percent): 5.0; -9.6; 0.8; -0.5; -7.4; 2.6; -3.9; 8.7; 6.6.
- Broad money (M3) (annual change, percent): -4.8; -0.4; 14.3; 0.0; -2.2; 7.1; 0.1; 8.7; 6.6.
- Credit to the economy (annual change, percent): 6.6; 2.5; -1.6; -6.7; 3.2; 0.6; 2.0; 3.2; 4.6.
- Central bank reference interest rate (percent): 10.0; 9.0; 9.0.
- Average bank lending rate (percent): 19.6; 19.6; 19.9.

### Fiscal accounts and public debt (central government and public sector)
- Total revenue, grants, and oil signature bonuses (percent of GDP): 28.2; 24.9; 24.1; 21.0; 22.5; 23.6; 22.4; 22.8; 23.3; 23.6; 23.4.
- Tax revenue (percent of GDP): 12.3; 12.7; 12.8; 12.5; 12.6; 13.0; 12.8; 13.8; 14.8; 15.1; 15.2.
- Nontax revenue (percent of GDP): 2.3; 1.7; 3.1; 1.8; 3.3; 1.8; 2.2; 2.4; 2.4; 2.4; 2.5.
- Grants (percent of GDP): 13.5; 10.5; 8.3; 6.7; 6.6; 8.9; 7.5; 6.7; 6.1; 6.1; 5.6.
- Total expenditure and net lending (percent of GDP): 32.4; 27.6; 26.0; 21.9; 22.5; 23.9; 26.9; 24.7; 24.3; 24.6; 24.5.
- Domestic primary balance (percent of GDP, excludes certain items per TMU): -4.1; -2.4; -4.2; -2.1; -1.8; -1.7; -5.6; -2.0; -1.0; -1.0; -1.0.
- Overall balance (commitment basis, percent of GDP): -4.2; -2.7; -1.9; -0.9; -0.1; -0.3; -4.5; -1.9; -1.0; -1.0; -1.0.
- Net domestic borrowing (millions of new dobra): 2.8; 1.8; 3.4; 0.7; -1.5; 1.2; -0.1; 1.0; 0.5; 0.7; 1.4 (Table 2a).
- Total public and publicly guaranteed debt (percent of GDP, DSA definition): 80.9; 84.3; 96.2; 94.2; 94.8; 93.8; 104.9; 100.2; 96.4; 91.6; 86.9.
- EMAE's arrears to ENCO (percent of GDP): 16.1; 19.3; 23.3; 23.2; 26.4; ...; 31.8; 31.8; 32.6; 32.8; 31.8.

### Central government financial operations (selected levels, millions of new dobra; Table 2a)
- Total revenue and grants (millions of new dobra): 2168; 2034; 2081; 1956; 2073; 2362; 2016; 2224; 2424; 2026; 2928; 01 (table sequence visible).
- Total revenue (millions of new dobra): 1130; 1174; 1365; 1335; 1468; 1472; 1342; 1574; 1788; 1954; 2127.
- Tax revenue (millions of new dobra): 949; 1036; 1099; 1166; 1160; 1297; 1147; 1342; 1540; 1687; 1823.
- Nontax revenue (millions of new dobra): 181; 138; 266; 170; 308; 176; 195; 232; 249; 267; 305.
- Grants (millions of new dobra): 1038; 860; 715; 562; 160; 588; 967; 465; 063; 167; 5673.
- Total expenditure (millions of new dobra): 2494; 2253; 2243; 2042; 2079; 2390; 2417; 2408; 2526; 2743; 2925.
- Domestic primary expenditure (millions of new dobra): 1370; 1316; 1536; 1472; 1568; 1550; 1822; 1746; 1870; 2046; 2228.
- Personnel costs (millions of new dobra): 684; 681; 798; 856; 848; 875; 880; 898; 957; 1024; 1100.
- Interest due (millions of new dobra): 34; 43; 34; 60; 66; 61; 66; 47; 45; 44; 42.
- Capital expenditure (millions of new dobra): 114; 195; 279; 55; 224; 54; 79; 95; 49; 64; 164; 471; 375; 3 (table shows sequence).
- Financing (millions of new dobra, selected): Financing 302; 151; 118; 5; -145; 945; 517; 4130; 138; 148 (table sequence).

(Note: Table 2a contains detailed line items and financing breakdowns, including net external, disbursements, program financing, National Oil Account movements, and memorandum items.)

### Balance of payments (selected aggregates, Tables 3a and 3b)
- Trade balance (US$ millions): -105.5; -112.1; -116.8; -119.0; -112.3; -125.1; -76.1; -95.2; -100.3; -106.9; -113.1.
- Exports, f.o.b. (US$ millions): 13.6; 15.6; 16.0; 16.2; 14.1; 19.7; 14.3; 18.6; 19.3; 21.6; 24.4.
  - Cocoa (US$ millions): 8.6; 8.6; 8.2; 8.0; 6.9; 11.0; 7.0; 11.2; 11.0; 11.5; 11.9.
  - Re-export (US$ millions): 3.2; 4.7; 6.8; 5.5; 3.4; 5.3; 3.4; 4.2; 3.8; 4.1; 4.5.
- Imports, f.o.b. (US$ millions): -119.1; -127.7; -132.9; -135.2; -126.4; -144.7; -90.5; -113.8; -119.6; -128.4; -137.4.
  - Food (US$ millions): -36.1; -31.6; -31.1; -32.6; -31.3; -34.3; -27.5; -29.0; -30.1; -31.4; -32.9.
  - Petroleum products (US$ millions): -21.7; -27.6; -33.6; -30.6; -34.2; -29.1; -16.6; -18.7; -20.9; -22.9; -24.9.
  - Oil sector related investment goods (US$ millions): -12.7; -21.2; -19.6; -36.6; -22.9; -40.4; -16.0; -23.5; -24.7; -26.6; -28.6.
- Services and income (net, US$ millions): 19.9; 3.9; 28.7; 25.0; 16.1; 26.2; -17.4; 8.6; 12.0; 18.6; 23.9.
  - Exports of nonfactor services (US$ millions): 82.9; 70.5; 82.0; 92.4; 82.2; 100.9; 39.6; 69.2; 76.0; 85.6; 94.2.
  - Travel and tourism (US$ millions): 68.8; 59.9; 68.0; 81.6; 66.6; 89.5; 23.3; 50.0; 55.8; 64.2; 71.5.
  - Imports of nonfactor services (US$ millions): -63.9; -65.5; -53.4; -66.1; -64.4; -70.1; -55.4; -58.1; -61.3; -64.0; -68.0.
- Private transfers (net, US$ millions): 15.9; 16.7; 16.3; 15.8; 15.9; 16.3; 14.8; 16.1; 17.2; 18.4; 19.7.
- Official transfers (net, US$ millions): 48.5; 41.7; 36.0; 28.6; 27.6; 41.2; 30.7; 29.9; 29.2; 31.3; 31.2.
- Current account balance (US$ millions, including official transfers): -21.1; -49.7; -35.9; -49.5; -52.7; -41.5; -48.0; -40.6; -41.9; -38.6; -38.2.
- Current account balance (percent of GDP, including official transfers): -6.1; -13.2; -8.6; -11.5; -12.5; -9.0; -11.8; -9.1; -8.7; -7.5; -6.9.
- Financial account: Foreign Direct Investment (US$ millions): 22.3; 33.0; 21.1; 38.5; 27.2; 43.2; 18.9; 28.0; 29.6; 31.8; 35.2.
  - Petroleum related investment (US$ millions): 19.3; 32.1; 20.6; 0.0; 24.1; 42.5; 16.8; 24.8; 26.0; 28.0; 30.1.
- Overall balance (US$ millions): -4.6; -10.4; -8.2; -2.4; -0.2; -0.4; -33.0; -7.5; -3.0; -0.1; 1.9.
- Change in official reserves, excl. NOA (increase = -) (US$ millions): 5.0; 6.6; 15.9; -0.8; -2.8; -5.3; 0.3; -5.9; -6.4; -3.5; -4.7.
- Gross international reserves (millions of U.S. dollars, excl. NOA and commercial bank deposits at BCSTP): 55.9; 51.4; 35.1; 36.0; 40.4; 40.0; 40.4; 45.8; 51.4; 53.7; 57.2.
- Months of imports of goods and nonfactor services (reserves coverage): 4.9; 4.7; 3.0; 3.3; 4.7; 3.6; 4.1; 4.3; 4.6; 4.5; 4.5.

### IMF obligations and indicators of capacity to repay the Fund (Table 4; as of April 2, 2020)
- Fund obligations based on existing credit (Principal, millions of SDRs): 0.00; 0.41; 0.60; 0.75; 0.76; 1.14; 0.95; 0.76; 0.51; 0.38; 0.00; 0.00; 0.00; 0.00; 0.00 (2020–2034).
- Fund obligations based on existing and prospective credit (Principal, millions of SDRs): 0.00; 0.41; 0.60; 0.75; 0.76; 2.23; 3.71; 4.28; 4.59; 4.47; 2.99; 1.33; 0.57; 0.00; 0.00.
- Total obligations based on existing and prospective credit (Millions of U.S. dollars): 0.01; 0.57; 0.84; 1.05; 1.07; 3.14; 5.22; 6.02; 6.46; 6.29; 4.21; 1.87; 0.80; 0.00; 0.00.
- Total obligations as percent of exports of goods and services: 0.03; 0.65; 0.88; 0.98; 0.90; 2.48; 3.84; 4.12; 4.09; 3.67; 2.31; 0.96; 0.39; 0.00; 0.00.
- Total obligations as percent of debt service: 0.22; 8.80; 12.13; 13.75; 9.52; 29.15; 49.95; 58.82; 64.72; 63.68; 40.85; 18.35; 7.97; 0.00; 0.00.
- Outstanding Fund credit (Millions of SDRs): 19.1; 22.5; 25.7; 24.9; 24.2; 21.9; 18.2; 14.0; 9.4; 4.9; 1.9; 0.6; 0.0; 0.0; 0.0.
- Outstanding Fund credit (Millions of U.S. dollars): 26.4; 31.2; 35.8; 34.8; 33.9; 30.9; 25.7; 19.6; 13.2; 6.9; 2.7; 0.8; 0.0; 0.0; 0.0.
- Outstanding Fund credit as percent of exports of goods and services: 49.0; 35.6; 37.6; 32.5; 28.6; 24.4; 18.9; 13.4; 8.3; 4.0; 1.5; 0.4; 0.0; 0.0; 0.0.
- Outstanding Fund credit as percent of gross international reserves: 65.4; 68.2; 69.7; 64.9; 59.3; 50.7; 42.4; 32.8; 22.2; 11.7; 4.6; 1.4; 0.0; 0.0; 0.0.
- Outstanding Fund credit as percent of GDP: 6.5; 7.0; 7.5; 6.8; 6.1; 5.2; 4.0; 2.8; 1.8; 0.9; 0.3; 0.1; 0.0; 0.0; 0.0.
- Net Use of Fund Credit (millions of SDRs): 12.8; 3.4; 3.2; -0.8; -0.8; -2.2; -3.7; -4.3; -4.6; -4.5; -3.0; -1.3; -0.6; 0.0; 0.0.
- Disbursements (millions of SDRs): 12.8; 3.8; 3.8; 0.0; 0.0; 0.0; 0.0; 0.0; 0.0; 0.0; 0.0; 0.0; 0.0; 0.0; 0.0.
- Repayments (millions of SDRs): 0.0; 0.4; 0.6; 0.8; 0.8; 2.2; 3.7; 4.3; 4.6; 4.5; 3.0; 1.3; 0.6; 0.0; 0.0.

### Key memorandum items (selected)
- Exports of goods and services (millions of U.S. dollars, 2016–2034 sequence): 53.9; 87.7; 95.3; 107.2; 118.6; 126.6; 135.8; 146.1; 157.9; 171.5; 181.8; 195.9; 207.9; 220.7; 234.3.
- Debt service (millions of U.S. dollars): 6.4; 6.5; 6.9; 7.6; 11.2; 10.8; 10.5; 10.2; 10.0; 9.9; 10.3; 10.2; 10.1; 10.0; 9.9.
- Gross international reserves (millions of U.S. dollars): 40.4; 45.8; 51.4; 53.7; 57.2; 60.8; 60.5; 59.9; 59.3; 58.7; 57.9; 57.0; 56.2; 55.3; 54.4.
- GDP (millions of U.S. dollars): 409; 448; 480; 516; 555; 597; 642; 690; 742; 798; 858; 923; 983; 1048; 1117.

*Sources: São Tomé and Príncipe authorities' data and IMF staff estimates and projections.*

### Appendix I.  Letter of Intent

### Appendix I. Letter of Intent

### Request and purpose
- Request for additional financial support from the IMF in an amount of SDR 9.028 million (61 percent of quota) under the exogenous shocks window of the Rapid Credit Facility (RCF).
- Request for debt relief under the Catastrophic Containment and Relief Trust (CCRT).
- RCF resources will be fully on-lent to the government to help mitigate revenue shortfalls and expenditure pressures.
- A Memorandum of Understanding will be signed by the central bank and the Ministry of Finance to specify responsibilities for servicing financial obligations to the IMF.
- The authorities are also seeking grants and concessional financing from development partners; a requested grant of US$2.5 million from the World Bank under its COVID-19 Strategic Preparedness and Response Program (SPRP) is noted.

### Economic impact and macroeconomic projections
- The pandemic severely affects the economy, the budget, and the balance of payments; first four cases were confirmed on April 6.
- Key immediate impacts: collapse of the tourism industry, delays in externally financed infrastructure projects, international supply-chain disruptions, urgent need to scale up health spending and social assistance amid declining revenues.
- Preliminary projection for 2020: economy will contract by 6 percent in 2020 with immediate and large fiscal needs.
- Scenarios for 2021:
  - Optimistic scenario: global demand and tourism partially recover to pre-crisis level; implementation of delayed construction projects could raise GDP close to 2019 level, implying a growth rate of 5.5 percent year-on-year.
  - Pessimistic/extended-impact scenario: if the negative impact lasts longer globally, the economy may grow at 2.2 percent, with tourism slow to recover and construction projects further delayed.
- DSA macro projections: Real GDP growth in 2020 is projected to decline to -6.0 percent, compared with pre-crisis projections of 3.5 percent.
- Average real growth and inflation revised to 4 percent and 3 percent, respectively, throughout the 2020-40 projection horizon (compared to 4.3 percent and 4 percent in the previous DSA).

### Crisis mitigation plan — objectives and short-term fiscal policy
- Immediate priority: implement COVID-19 contingency plan to protect the population, assist the most vulnerable, and apply countercyclical measures (incentivize businesses to retain workers, support unemployed, facilitate credit access).
- Countercyclical fiscal policy will be implemented in the short-term, taking into consideration available financing.
- Measures to mitigate revenue loss: keep retail fuel prices unchanged and reaffirm agreement with oil importer ENCO to fully transfer the oil price differential to the State.
- Levy a small solidarity contribution on public servants’ salaries (workers relatively insulated from shock).
- Continuous prioritization to match spending with available resources and avoid arrears.

### Crisis mitigation plan — specific measures
- Health spending:
  - Implementation of the health contingency plan prepared in coordination with the WHO, including medicine, equipment, staffing, and treatment centers.
  - Estimated cost around US$3 million, expected to be largely financed by the WB and WHO.
- Social protection:
  - Expand the WB-supported cash-transfer program from 2600 to at least 5200 vulnerable households.
  - Switch to monthly instead of bi-monthly cash payments over six months.
  - Provide support to disadvantaged and nursing homes (the elderly, disabled and abandoned children).
- Support to businesses (particularly tourism, expecting over a 50 percent drop in revenue in 2020):
  - Suspend for 3 months administrative penalties (interest on arrears, legal fees, foreclosure) on late payment of 2019 profit taxes, 2020 advance payments of profit taxes, and late payment of liabilities owed to the state.
  - Contribute over a period of 6 months two-thirds of workers’ salaries (based on the average base salary during January-February) with a cap of four times the minimum wage for civil servants (STD 1100, or US$50 per month), provided employers also contribute a small, uniform share of the salary (exact share to be determined). Consumption tax and personal income tax to continue to be withheld at source and transferred to the state.
  - Scheme to also apply to newly hired workers by any registered, already established business if employer demonstrates net addition to past employment.
- Support for formally registered workers affected by the shock:
  - State will contribute one-half of the worker’s average base salary during January-February, with a cap of four times the minimum wage (STD 1100), over a three-month period.
- Support for unregistered/informal workers:
  - Payment of STD 600 over a period of 3 months, provided they register with the labor force and social security.
- Agricultural support where supply chains disrupted:
  - State will procure seeds, feedstock, and other essential inputs to be sold to farmers at market price.
- Measures to generate savings:
  - Retail fuel prices will be kept unchanged at their present level.
  - Total wage bill at SOEs and autonomous public entities will be reduced by 20 percent over a period of 6 months to avoid dismissal of staff and cover losses.
  - Civil servants outside education and health sectors will contribute between 5 and 10 percent of their wages as a solidarity tax for a period of 6 months. Savings also generated from absence of overtime normally paid to teachers due to school closures.

### Estimated costs and budget breakdown
- The budget will be revised to incorporate the above policies.
- Negotiations ongoing with some commercial banks to establish a state-guaranteed credit line (around US$6 million with equal risk assumed by the state and banks) for SMEs affected by the slowdown; government may extend the line to finance viable businesses if resources are available.
- Estimated Costs of Key Crisis-Mitigation Measures — Central Government Expenses, 2020 (millions dobras):
  - Total domestic primary expenditure 1822
  - Current expenditure 1846
  - Personnel costs 880
  - Goods and services 314
  - Transfers 369
  - Other current expenditure 216
  - Capital spending fin. by Treasury 20
  - HIPC Initiative-related social expenditure 22

### Transparency, procurement, and oversight
- Commit to proper monitoring of all pandemic-related expenditure and improved transparency in public procurement.
- Adopt measures by end-April 2020 to ensure better transparency and publicity regarding public procurement, including publishing on the Ministry of Finance website or other media:
  - Public procurement contracts, once signed, that require prior authorization from the Court of Accounts as per the Organic Law (no. 11/2019) and the ex-post validation of delivery of the contracts.
  - Monthly COVID-19 related expenditure.
- Crisis mitigation measures in paragraphs 5-7 have been authorized by parliament; a revised budget consistent with the above policies will be submitted to parliament when conditions allow, at the latest by end-July.
- Government will conduct an independent audit of spending after the crisis abates and publish the results.
- An IMF safeguards assessment was completed in August 2019 and authorities are committed to addressing remaining issues.

### Monetary and financial sector policies
- BCSTP prepared a contingency plan to minimize COVID-19 impact.
- BCSTP will actively manage liquidity, taking into account liquidity from RCF-financed public spending, by reducing the minimum cash reserve requirement for both foreign and national currencies by 4 percentage points to 17 and 14 percent, respectively.
- Authorities will request a moratorium of 8 months on bank dividend payouts to ensure adequate capital to support lending.
- Banks will be advised to be flexible in renegotiating debt payments or offer moratoria on repayment for temporarily distressed but fundamentally sound borrowers.
- Loan reporting, classification, and provisioning standards will be maintained; restructured loans will be classified accordingly; any loan forbearance measures will be limited to the crisis period.

### Medium-term policies and structural reforms
- Medium-term macroeconomic policies guided by program supported by the Extended Credit Facility.
- Post-crisis priorities:
  - Improve domestic revenue mobilization and contain public spending to improve fiscal position, safeguard the peg, and reduce debt burden.
  - Follow through with plans to introduce a VAT, reform utility company EMAE, and improve the business environment.
  - Develop a plan, in coordination with the National Institute for Civil Aviation, to remove the country from the European Union’s Air Safety blacklist to facilitate tourism recovery.
- Authorities do not intend to introduce exchange measures, multiple currency practices, or trade restrictions that would worsen balance-of-payments difficulties.

### Debt sustainability analysis and risk assessment
- Joint IMF–World Bank DSA update: country remains in debt distress due to prolonged unsettled external arrears.
- Significant domestic arrears of loss-making SOE EMAE reflect severe public sector liquidity constraints.
- Staff assessment: country has capacity to repay external arrears over time as indicated by external debt ratios.
- PV of external PPG debt-to-exports ratio breaches its threshold in 2020 due to the COVID-19 shock; all other external PPG debt burden indicators remain well below their thresholds throughout projection horizon in baseline.
- PV of total public and publicly guaranteed (PPG) debt currently above high-risk benchmark but can be deemed sustainable when accounting for terms of formalized concessional debt of EMAE and government to fuel supplier ENCO.
- Authorities committed to implement EMAE’s planned reforms and borrow externally only on concessional terms at a measured pace.
- Likelihood of contingent liabilities materializing (particularly ENCO’s arrears to Sonangol) remains relatively low given close diplomatic ties.
- DSA mechanical risk ratings:
  - Risk of external debt distress: In debt distress
  - Overall risk of debt distress: In debt distress
  - Granularity in the risk rating: Sustainable
  - Application of judgement: No
  - Macroeconomic projections: Reflecting recent data and the COVID-19 shock, the projections have been updated.
  - Financing strategy: Other than the RCF, the financing gap will be filled with grants by other donors, including the World Bank. Authorities committed to prioritize spending to match available resources.
  - Mechanical risk rating under the external DSA: In debt distress
  - Mechanical risk rating under the public DSA: In debt distress

*Appendix I. Letter of Intent — April 14, 2020.*

### 1.1 percent of GDP through the projection horizon compared to 0.9 percent in the

### 1stpea2020001 - 1.1 percent of GDP through the projection horizon compared to 0.9 percent in the

### Summary
- Larger financing needs in 2020 are projected to be covered by the RCF disbursement and other international support in the form of grants.
- The economy is expected to recover in 2021 to close to 2019 levels with the implementation of long-delayed construction projects and a recovery in tourism and global demand.
- The DSA follows the IMF and World Bank Staff Guidance Note on the Application of the Joint Fund-Bank Debt Sustainability Framework (DSF) for Low-Income Countries (LICs) (February 2018).
- The country’s Composite Indicator score is 2.68 and its debt carrying capacity is assessed to be medium.
- World Bank staff simulated a scenario assuming full disbursement of annual IDA allocations under credit terms, which did not affect the risk of external debt distress rating.
- Reduction of arrears to domestic suppliers in 2019 of US$15 million dollars (3½ percent of GDP) by incorporating these into the 2019 budget largely offset the proposed borrowing from the IMF’s Rapid Credit Facility in 2020 to combat the COVID-19 pandemic.

### Debt Sustainability Findings (external and public)
- External debt (nominal) (in percent of GDP):
  - 2018: 47.7
  - 2019: 45.7
  - 2020: 51.7
  - 2021: 49.4
  - 2022: 48.2
  - 2023: 45.8
  - 2024: 42.8
  - 2025: 40.2
  - 2030: 31.4
  - 2040: 27.0
- Change in external debt:
  - 2018: -0.5
  - 2019: -2.0
  - 2020: 6.0
  - 2021: -2.3
  - 2022: -1.2
  - 2023: -2.4
  - 2024: -3.0
  - 2025: -2.6
  - 2030: -1.4
  - 2040: 0.2
- Identified net debt-creating flows (in percent of GDP):
  - 2018: -1.1
  - 2019: 5.3
  - 2020: 10.0
  - 2021: 0.2
  - 2022: 1.0
  - 2023: -0.5
  - 2024: -1.4
  - 2025: -1.1
  - 2030: -0.8
  - 2040: -1.2
- PV of PPG external debt-to-GDP ratio (selected):
  - 2020: 27.9
  - 2021: 32.7
  - 2022: 31.8
  - 2023: 31.6
  - 2024: 30.7
  - 2025: 29.1
  - 2030: 21.6
  - 2040: 16.7
- PV of PPG external debt-to-exports ratio (selected):
  - 2020: 122.1
  - 2021: 247.3
  - 2022: 162.5
  - 2023: 159.5
  - 2024: 147.6
  - 2025: 136.1
  - 2030: 101.7
  - 2040: 81.3
- PPG debt service-to-exports ratio:
  - 2018: 2.6
  - 2019: 4.5
  - 2020: 11.8
  - 2021: 7.6
  - 2022: 7.7
  - 2023: 7.7
  - 2024: 10.1
  - 2025: 9.3
  - 2030: 8.5
  - 2040: 4.9
- PPG debt service-to-revenue ratio:
  - 2018: 3.7
  - 2019: 5.6
  - 2020: 8.4
  - 2021: 7.6
  - 2022: 7.2
  - 2023: 7.3
  - 2024: 9.7
  - 2025: 8.7
  - 2030: 7.2
  - 2040: 3.3
- Gross external financing need (Million of U.S. dollars):
  - 2018: 16.5
  - 2019: 27.4
  - 2020: 33.7
  - 2021: 17.3
  - 2022: 17.5
  - 2023: 12.7
  - 2024: 12.6
  - 2025: 13.2
  - 2030: 17.1
  - 2040: 8.2

- Public sector debt (in percent of GDP):
  - 2018: 96.2
  - 2019: 94.8
  - 2020: 104.9
  - 2021: 100.2
  - 2022: 96.4
  - 2023: 91.6
  - 2024: 86.9
  - 2025: 81.6
  - 2030: 63.7
  - 2040: 59.9
- Change in public sector debt:
  - 2018: 11.9
  - 2019: -1.3
  - 2020: 10.1
  - 2021: -4.7
  - 2022: -3.8
  - 2023: -4.8
  - 2024: -4.7
  - 2025: -5.4
  - 2030: -3.0
  - 2040: 9.6
- PV of public debt-to-GDP ratio (selected):
  - 2020: 77.2
  - 2021: 85.7
  - 2022: 82.6
  - 2023: 79.8
  - 2024: 76.5
  - 2025: 73.2
  - 2030: 53.8
  - 2040: 49.7
- Debt service-to-revenue and grants ratio (selected):
  - 2020: 88.2
  - 2021: 72.1
  - 2022: 61.7
  - 2023: 51.0
  - 2024: 48.6
  - 2025: 46.7
  - 2030: 46.2
  - 2040: 39.3
- Gross financing need (percent of GDP):
  - 2018: 8.5
  - 2019: 5.2
  - 2020: 31.1
  - 2021: 23.4
  - 2022: 19.3
  - 2023: 15.7
  - 2024: 15.1
  - 2025: 13.4
  - 2030: 14.0
  - 2040: 25.0

### Stress Tests, Shocks, and Sensitivity
- The most extreme stress test reported: Combined contingent liabilities (most extreme shock in several charts).
- Tailored tests and bounds include:
  - Combined contingent liabilities
  - Natural disasters
  - One-time 30 percent nominal depreciation
  - Combination of shocks (B6)
- Borrowing assumptions for stress tests:
  - All additional financing needs generated by the shocks under the stress tests are assumed to be covered by PPG external MLT debt in the external DSA.
  - Default terms of marginal debt are based on baseline 10-year projections.
- Sensitivity Analysis highlights (selected thresholds and breaches):
  - PV of debt-to-GDP threshold: 40 (benchmark shown)
  - PV of debt-to-exports threshold: 180 (benchmark shown)
  - Debt service-to-exports threshold: 15 (benchmark shown)
  - Debt service-to-revenue threshold: 15 (benchmark shown)
  - C1. Combined contingent liabilities produces the highest stress values across multiple indicators (e.g., PV of debt-to-exports and PV of debt-to-GDP).

### Key Macroeconomic and Fiscal Assumptions (selected exact values)
- Real GDP growth (in percent):
  - 2018: 3.0
  - 2019: 1.3
  - 2020: -6.0
  - 2021: 5.5
  - 2022: 3.5
  - 2023: 4.0
  - 2024: 4.5
  - 2025: 4.5
  - 2030: 4.5
  - 2040: 4.2
- GDP deflator in US dollar terms (change in percent):
  - 2018: 7.3
  - 2019: 0.2
  - 2020: 3.0
  - 2021: 4.1
  - 2022: 3.5
  - 2023: 3.2
  - 2024: 3.0
  - 2025: 3.0
  - 2030: 2.9
  - 2040: 2.0
- Effective interest rate (percent):
  - 2018: 0.4
  - 2019: 1.2
  - 2020: 1.0
  - 2021: 0.9
  - 2022: 1.0
  - 2023: 1.0
  - 2024: 1.0
  - 2025: 1.1
  - 2030: 1.3
  - 2040: 1.6
- Growth of exports of G&S (US dollar terms, in percent):
  - 2018: 13.9
  - 2019: -1.8
  - 2020: -44.0
  - 2021: 62.7
  - 2022: 8.6
  - 2023: 12.4
  - 2024: 10.7
  - 2025: 6.8
  - 2030: 6.0
  - 2040: 6.3
- Growth of imports of G&S (US dollar terms, in percent):
  - 2018: -3.6
  - 2019: 2.5
  - 2020: -2
  - 2021: 3.6
  - 2022: 17.9
  - 2023: 5.2
  - 2024: 6.4
  - 2025: 6.8
  - 2030: 6.2
  - 2040: 6.8
- Grant element of new public sector borrowing (in percent):
  - 2020–2025 (selected): 36.6, 35.6, 35.6, 34.5, 34.5, 34.5 (repeated as shown)
  - 2030: 34.5
  - 2040: 34.9
- Government revenues (excluding grants, in percent of GDP):
  - 2018: 16.8
  - 2019: 18.5
  - 2020: 18.7
  - 2021: 19.6
  - 2022: 21.1
  - 2023: 21.9
  - 2024: 22.4
  - 2025: 22.8
  - 2030: 25.0
  - 2040: 30.5
- Aid flows (Million of US dollars):
  - 2018: 40.5
  - 2019: 31.1
  - 2020: 48.2
  - 2021: 36.7
  - 2022: 34.5
  - 2023: 31.3
  - 2024: 31.2
  - 2025: 30.3
  - 2030: 29.6
  - 2040: 51.5
- Grant-equivalent financing (in percent of GDP) (selected):
  - 2020: 9.8
  - 2021: 8.1
  - 2022: 7.2
  - 2023: 6.8
  - 2024: 6.3
  - 2025: 5.8
  - 2030: 4.1
  - 2040: 3.8
- Grant-equivalent financing (in percent of external financing) (selected):
  - 2020: 71.0
  - 2021: 79.9
  - 2022: 78.2
  - 2023: 83.8
  - 2024: 82.8
  - 2025: 81.5
  - 2030: 75.9
  - 2040: 74.5
- Nominal GDP (Million of US dollars) (selected):
  - 2018: 416
  - 2019: 422
  - 2020: 409
  - 2021: 448
  - 2022: 480
  - 2023: 516
  - 2024: 555
  - 2025: 597
  - 2030: 858
  - 2040: 1,639

### COVID-19 Emergency Financing and Authorities’ Statement
- Authorities requested emergency financing under the RCF in the amount of SDR 9.028 million, representing 61 percent of Sao Tome and Principe’s quota, to cover exceptional balance of payments and fiscal needs.
- The authorities report:
  - Performance under the current Extended Credit Facility (ECF) program approved in October 2019 has been broadly positive.
  - All end-December 2019 performance criteria (PCs) were met and most structural benchmarks (SBs) were implemented, except one related to the state-owned utility company (EMAE).
- Containment measures and economic impact:
  - As of April 17, 2020: 4 confirmed cases of coronavirus.
  - Government declared a state of emergency on March 17 with measures including:
    - Closing of schools, restaurants and bars;
    - Cancellation of social and religious gatherings;
    - Suspension of international flights;
    - Limitations on public transportation and telework flexibility in some sectors.
  - Real GDP is anticipated to drop from 1.3 percent in 2019 to -6.0 percent in 2020.

### Policy Implications and Recommendations (as implied in the text)
- Use of RCF disbursement and grants to cover 2020 financing gap and support the budget and international reserves.
- Continue engagement with IMF under the ECF arrangement to maintain macroeconomic stability during the pandemic.
- Leverage IMF disbursement to catalyze additional assistance from development partners.
- Implement contingency plan with WHO and World Bank assistance; protect lives, vulnerable groups, jobs, and businesses while preparing for quick rebound post-pandemic.
- Address structural vulnerabilities including high levels of poverty and informality that limit effectiveness of containment measures.

*Sources: Country authorities; and staff estimates and projections.*

### 6.0 percent in 2020 weighed by disruptions in the tourism and service industries, global supply

### 6.0 percent in 2020 weighed by disruptions in the tourism and service industries, global supply chains as well as delays in externally financed projects

### Economic impact and financing needs
- Growth projected at 6.0 percent in 2020 weighed by disruptions in the tourism and service industries, global supply chains as well as delays in externally financed projects.
- The slowdown will have a negative impact on fiscal revenues and, together with COVID-19 related expenditures, is creating urgent needs:
  - Balance of payment needs estimated at around $17 million (4.2 percent of GDP).
  - Fiscal needs estimated at $24 million (6 percent of GDP).
- Authorities recognize high uncertainty around the length and magnitude of the pandemic and stand ready to take additional measures and seek more external support should downside risks materialize.

### Policy response to the pandemic — strategic orientation
- Authorities remain fully committed to macroeconomic stability and reforms envisaged under the ECF arrangement.
- Short-term priority is to mitigate the human, social and economic impact of the pandemic.
- Authorities request Executive Directors’ support for their request for emergency financing under the Rapid Credit Facility.

### Fiscal measures and social support
- Key spending directions:
  - Execution of the health contingency plan, including staffing, equipment, information sharing and treatment centers.
  - Assistance to vulnerable groups through expansion of the current World Bank-cash transfer program to cover more households and nursing homes for the elderly, disabled and abandoned children.
  - Support to businesses via temporary suspension of administrative penalties on certain taxes, worker retention and recruitment incentives programs, amongst others.
- Contemplated and enacted measures:
  - Publicly guaranteed credit line for affected small and medium-sized enterprises (SMEs) being contemplated.
  - Financial assistance to those who lost their jobs in both formal and informal sectors, contingent on informal workers registering in the labor force and social security.
  - Introduction of a small solidarity tax surcharge on civil servants unaffected by the crisis.
  - Cut by 20% the wage bill of state-owned enterprises (SOEs) and autonomous public entities, both for a period of 6 months.
  - Fuel price at the pump will remain unaltered.
  - Agreement with ENCO, the national oil importer, signed to ensure the full transfer of the positive oil price differential to the Treasury to reduce existing fuel subsidy debt.
  - A revised budget for 2020 will be submitted to the Parliament to reflect new priorities as soon as conditions allow.
- Transparency and governance commitments:
  - Commit to publishing information on public procurement contracts and monthly COVID-19 related expenses, consistent with the legislative authorization granted by the Parliament.
  - Intend to undertake a thorough ex post financial and operational audit of all COVID-19 related operations.

### Debt management and external financing
- 2020 Debt Sustainability Analysis (DSA) indicates that the debt is sustainable, but with high risk of debt distress.
- Government will continue to prioritize grants and concessional borrowing and make efforts to reach agreement with bilateral external creditors to defer debt services falling due in 2020.
- Authorities are grateful to the Fund for the debt service relief under the Catastrophe Containment (CC) window of the Catastrophe Containment and Relief Trust (CCRT); this debt relief will help free up budgetary resources to address public health needs.
- Authorities believe further financing will be needed if the health crisis lasts longer than expected and wish they could benefit from additionality of Fund resources during these exceptional times.

### Monetary and financial sector measures
- Authorities emphasize coordination of fiscal, monetary, and financial policies to limit the negative impact of the pandemic while safeguarding financial stability.
- Central bank measures to prevent liquidity tension:
  - Reduction of the policy rate.
  - Reduction of the minimum cash reserves requirement.
  - Introduction of a moratorium on loans, with suspension of interests, charges, and other bank costs.
- Prudential standards and reporting requirements will remain unchanged to ensure financial sector resilience.
- Consideration being given to mobile money to minimize coronavirus risks associated with exchanging cash and to promote electronic transactions.

### Conclusion
- Authorities recognize the daunting economic challenges ahead brought about by the pandemic and are confident the policies outlined in their Letter of Intent will help mitigate the impact and support a quick recovery.
- They reiterate strong commitment to pursuing the reform agenda supported by the ECF arrangement approved in October 2019.
- Authorities are hopeful that the IMF disbursement will help catalyze donor support and request support for emergency financing under the Rapid Credit Facility.

*Source: 1stpea2020001 - 6.0 percent in 2020 weighed by disruptions in the tourism and service industries, global supply chains as well as delays in externally financed projects*

---


_Source: https://www.imf.org/-/media/files/publications/cr/2020/english/1stpea2020001.pdf_