## 1gabea2022001

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---

### Recent developments
- Real GDP:
  - Real GDP contracted by -1.9 percent in 2020 and grew by an estimated 1.5 percent in 2021.
  - Oil GDP fell by 4.9 percent in 2021, in part owing to compliance with the OPEC+ commitments.
  - Non-oil real GDP increased by 2.8 percent in 2021, supported by a booming mining sector and rebounds in the wood and construction sectors.
  - Q1 2022 indicators: construction and railway transport grew 21.0 percent and 23.5 percent (y/y), respectively; oil and manganese production expanded by 3.0 percent and 8.5 percent (y/y), respectively.
- COVID-19 and vaccination:
  - All restrictive anti-COVID measures were lifted on March 5, 2022.
  - Vaccination rate was 11.6 percent by mid-April 2022; authorities’ goal is to vaccinate 60 percent of the eligible population by end-2022.
- Inflation and monetary policy:
  - 12-month (end of period) inflation rose to 2.9 percent in March 2022 from 1.7 percent in December 2021, driven by increasing food prices related to the war in Ukraine.
  - BEAC Monetary Policy Committee raised the policy rate from 3.50 percent to 4 percent and the marginal lending facility rate from 5.25 percent to 5.75 percent on March 28.
- External sector and reserves:
  - Current account deficit improved by 1.7 percentage points to an estimated -5.2 percent of GDP in 2021.
  - CEMAC foreign reserves (months of extrazone imports): 3.6 (2019), 3.3 (2020), 3.9 (2021), 4.1 (2022), 4.3 (2023).
  - External debt (percent of GDP): 39.2 (2019), 46.0 (2020), 37.8 (2021), 31.5 (2022), 31.0 (2023).
  - Gabon’s international bond spread: declined to 474 basis points on April 21, 2022, and increased to 698 basis points on May 20, 2022.
- Banking sector and credit:
  - At end-August 2021, solvency ratio about 18 percent (minimum at 9.5 percent); short-term liquidity ratio 163.4 percent (minimum at 100 percent).
  - Overdue loans and NPL ratios reported at 10 percent and 8 percent, respectively (end-August 2021).
  - Banks’ sovereign exposure reached almost a fourth of bank assets in Q3 2021.
  - Credit to the private sector grew by an estimated 13.9 percent (y/y) at end-March 2022.

### Outlook and risks
- Growth projections and drivers:
  - GDP growth expected at 2.4 percent in 2022 driven by continued recovery in wood and construction and a rebound in services.
  - Non-oil GDP projections: 2.4 percent (2022), 4.5 percent (2023).
- Fiscal and external positions:
  - Central government finances (percent of GDP) — Revenue: 19.5 (2019), 17.6 (2020), 14.7 (2021), 16.2 (2022), 17.6 (2023); Expenditure and net lending: 18.2 (2019), 19.8 (2020), 16.6 (2021), 14.9 (2022), 14.5 (2023); Fiscal Balance (cash basis): 0.8 (2019), -2.4 (2020), -1.8 (2021), 0.9 (2022), 3.2 (2023); Total Public Debt: 59.8 (2019), 78.3 (2020), 65.8 (2021), 52.6 (2022), 50.8 (2023).
- Risks (balance tilted to the downside):
  - Outbreaks of highly contagious COVID-19 variants, given slow vaccination uptake.
  - Potentially sharper slowdown in China.
  - Intensification of Russia’s war in Ukraine leading to higher commodity price volatility.
  - Possible social tensions ahead of the 2023 presidential elections.
- Potential offsets and upside:
  - Higher oil prices could improve fiscal and external buffers and accommodate increased fuel and food subsidies for the most vulnerable.
  - Accelerated reforms could strengthen domestic revenue, improve public financial management, governance, and business environment.

### Fiscal performance and composition (FY21 and 2022 revisions)
- FY21 key outcomes and deviations:
  - Non-oil primary deficit (NOPD) contained at 7.1 percent of non-oil GDP.
  - Non-oil revenue underperformed due to difficulties implementing a new income tax on foreigners and subdued recovery in retail trade and transportation.
  - Primary current spending contained below revised budget appropriations by 0.5 ppt of NOGDP; transfer overruns reflect freezing the international fuel price passthrough mechanism in 2021 (about ½ percent of NOGDP).
  - Domestically financed capital spending exceeded the budget target by about 0.5 ppt of NOGDP; foreign-financed capital spending cut.
  - Higher oil revenue reduced the overall deficit (cash basis) to 1.8 percent of GDP (from 2.4 percent in 2020).
- Key 2021 fiscal figures (preliminary vs program):
  - Non-oil revenue and grants: Program 1,168.4; Prel. 1,057.5; Percent of non-oil GDP: 16.5 (Prog.), 15.2 (Prel.); Difference -1.4
  - Non-oil revenue: Program 1,113.4; Prel. 1,045.7; Percent of non-oil GDP: 15.7 (Prog.), 15.0 (Prel.); Difference -0.8
  - Grants: Program 55.0; Prel. 11.9; Percent of non-oil GDP: 0.8 (Prog.), 0.2 (Prel.); Difference -0.6
  - Current primary expenditure (incl. special accounts): Program 1,330.0; Prel. 1,279.2; Percent of non-oil GDP: 18.8 (Prog.), 18.3 (Prel.); Difference -0.5
  - Interest payments: Program 294.0; Prel. 308.5; Percent of non-oil GDP: 4.2 (Prog.), 4.4 (Prel.); Difference 0.3
  - Capital expenditure: Program 337.3; Prel. 272.8; Percent of non-oil GDP: 4.8 (Prog.), 3.9 (Prel.); Difference -0.9
    - Domestically financed: Program 165.0; Prel. 198.9; Percent of non-oil GDP: 2.3 (Prog.), 2.9 (Prel.); Difference 0.5
    - Foreign-financed: Program 172.3; Prel. 73.8; Percent of non-oil GDP: 2.4 (Prog.), 1.1 (Prel.); Difference -1.4
  - Non-oil primary balance: Program -498.8; Prel. -494.4; Percent of non-oil GDP: -7.1 (Prog.), -7.1 (Prel.); Difference 0.0
  - Oil revenue: Program 482.6; Prel. 595.2; Percent of GDP: 5.0 (Prog.), 5.3 (Prel.); Difference 0.3
  - Overall balance (cash basis): Program -335.7; Prel. -204.7; Percent of GDP: -3.5 (Prog.), -1.8 (Prel.); Difference 1.7
- Financing, arrears, and public debt:
  - Government deposits at the central bank declined by about 1.2 percent of GDP compared to end-December 2020.
  - Overall net financing from domestic sources reached 1.6 percent of GDP.
  - New payment arrears accumulated: external debt FCFA 32.8 billion; domestic debt FCFA 91.2 billion.
  - Total public debt declined to about 66 percent of GDP from 78 percent in 2020.
  - Revisions to arrears stocks: preliminary indication Refinery debt CFAF 12 billion at end 2021 (0.1 percent of GDP); 2020 stock of domestic public debt arrears revised from CFAF 220 billion (2.5 percent of GDP) to CFAF 305 billion (3.5 percent of GDP).

### Program performance, conditionality, and waivers
- IMF Extended Fund Facility (EFF):
  - On July 28, 2021, the IMF Executive Board approved a 36-month extended arrangement under the EFF with total access of SDR 388.8 million (180 percent of quota).
  - Staff supports completion of the first and second reviews, which would make available a purchase equivalent to SDR 116.1 million (53.75 percent of quota).
- Program implementation and missed targets:
  - One out of four end-July 2021 quantitative PCs and the continuous PC on external arrears accumulation were missed.
  - Two out of four end-December 2021 PCs and the continuous PC on external arrears accumulation were missed.
  - Corrective actions: government deposits at the Central Bank increased (about CFAF 100 billion, 0.7 percent of GDP, since end-December 2021).
- Waivers requested:
  - Waiver for non-observance of the NOPD due to temporary deviation from late AfDB budget support disbursement.
  - Waiver for non-observance of the PC on central bank net claims on government (NCG) missed by a large margin due to drawdown in deposits, larger domestic deficit, and higher domestic arrears repayments; waiver based on corrective actions and rebuilding of deposits.
  - Waiver for non-observance of the continuous PC on non-accumulation of new external arrears; causes included lack of coordination between General Directorate of Debt and the Treasury and weak cash management.
- External arrears clearance commitments:
  - Authorities cleared most external arrears as of June 14, 2022 and committed to clear remaining arrears of CFAF 11.09 billion before the Board meeting.

### Policy priorities and staff recommendations
- Fiscal:
  - Continue to support recovery while preserving debt sustainability and protecting the most vulnerable amid rising fuel and food prices.
  - Increase domestic revenue collection and improve public financial management to rebuild policy space for essential development outlays.
  - Sustain planned revenue reforms; preliminary indications show measures will yield 1.6 percent of NOGDP in 2023.
  - Gradually phase out fuel subsidies while developing targeted measures to protect the most vulnerable:
    - Return to automatic fuel price adjustment with full-pass-through on all products except Butane and Kerosene.
    - Staff advise ending subsidies by end-December 2022 for all products except kerosene and Butane.
    - Finalize database of the most vulnerable with the World Bank by end-December 2022 and develop well-targeted measures thereafter.
- Transparency and governance:
  - Ensure all oil revenues are channeled through the Treasury.
  - Audit cost oil and cross-debt (including VAT arrears) between government, SOEs, and the five largest private oil companies.
  - Revisit rules governing Gabon Oil Company (GOC) trading activity; carry out a financial audit of SOGARA.
  - Implement decree requiring publication of names and nationalities of beneficial owners of entities awarded public procurement contracts.
- PFM, arrears, and debt management:
  - Improve cash management procedures, including a full-fledged TSA, and revamp the VAT escrow account (end-June 2022 SB).
  - Automate communication between financial information systems and expand fiscal reports coverage to include all public entities in line with CEMAC directives.
  - Implement domestic arrears clearance plan: audited and validated domestic arrears stock CFAF 442.3 bn (5 percent of GDP) at end-December 2020; plan envisages clearing by 2025.
  - Adhere to a prudent debt strategy and improve debt management per TA delivered during FY2019.
- Financial sector and inclusion:
  - Enhance the banking sector, implement an effective financial inclusion strategy (2022–27), improve the business environment, and strengthen the anti-corruption framework to promote private investment.
- Structural reforms:
  - Address governance and corruption weaknesses; accelerate SOE reforms to reduce subsidies.
  - Improve public investment management, implement PIMA recommendations, and develop a national portfolio management strategy.

### Debt sustainability, DSA findings, and stress tests
- Overall assessment:
  - Public debt assessed to be sustainable without high probability; risks have moderated but vulnerabilities remain.
  - Public debt expected to reach 52.6 percent of GDP in 2022, down from 65.8 percent in 2021, and decline to 43.4 percent of GDP in 2027.
- Key projections and indicators:
  - Gross financing needs (GFN) projected to average 4.9 percent of GDP over 2022–27, down from 8.8 percent over 2011–21.
  - Debt service accounted for 48.9 percent of revenues in 2022, compared to 80 percent in 2021.
  - Public debt held by non-residents: 64 percent.
- Stress tests:
  - Combined macro-fiscal shock would raise public debt-to-GDP ratios to around 68 percent and GFN to 12 percent of GDP.
  - Standard shocks (real GDP growth shock, real exchange rate shock, real interest rate shock, primary balance shock) worsen debt outcomes relative to baseline.
- Policy implications:
  - Stronger assurances to cover short-term financing gaps in 2022 and 2023.
  - Resolve outstanding domestic arrears and build a track record of remaining current on external debt service payments.
  - Adopt prudent fiscal policies, including saving a large part of oil windfall to build fiscal buffers.

### Annex I — Impact of the War in Ukraine (selected effects)
- Price shocks and immediate impacts:
  - Oil prices increased sharply by 18.1 percent in 2022 Q1 compared to the January 2022 WEO forecast.
  - Food prices increased by 5.7 percent in 2022 Q1 compared to the January 2022 WEO forecast.
- Fiscal impacts:
  - Royalty (RMP and profit oil), about 17 percent of oil production, expected to increase by 0.1 percent of GDP in 2022 compared to initial budget law.
  - Fuel subsidies projected to rise to CFAF 130.7 billion (1 percent of GDP) in 2022 with no policy response; additional wheat subsidies estimated at CFAF 5.7 billion ([0.04] percent of GDP).
  - Tax decision delay implies non-oil tax revenue shortfall of CFAF 12 billion (0.1 percent of GDP).
  - Overall balance (cash basis) expected to improve by 1.1 percent of GDP; financial needs projected to decline to 5 percent of GDP per year over 2022–25.
  - Debt-to-GDP ratio expected to fall from 78 percent in 2020 to 52.6 percent in 2022.
- External sector:
  - Current account projected to reach a surplus of 0.7 percent of GDP in 2022 (improvement from -5.2 percent in 2021).
  - Nominal oil exports increased by about 73 percent (y/y) in 2022 Q1.
  - FDI projection for 2022 increased by about CFA francs 150 billion compared with January WEO.
- Inflation:
  - 12-month average inflation increased to 2.9 percent in March 2022.
  - CPI food inflation reached 3.5 percent in March 2022.
  - Staff estimates: direct impact of higher food prices on inflation is 0.8 percent.
- Policy response:
  - BEAC raised policy rate and reduced liquidity injections; continued fiscal consolidation and BEAC response should moderate aggregate demand.
  - Risks include further supply-chain disruptions and spillovers from global monetary tightening.

### Program financing, conditionality updates, and monitoring
- Financing, projected gaps, and IMF share:
  - Projected financing gap for 2022–24 amounts to 4.4 percent of GDP.
  - IMF expected to provide financing of 1.8 percent of GDP, contributing about 41 percent of exceptional financing.
  - Program is fully financed in the next 12 months; good prospects for full financing for remaining period.
  - EFF purchase on-lent to the government via the Central Bank as per currency union practice.
- Updated program conditionality and prior actions:
  - New PCs and ITs proposed for end-June 2022, end-December 2022, and end-June 2023; new ITs for end-September 2022 and end-March 2023.
  - Three prior actions established: submission to Parliament of the 2022 supplementary budget; publication of audits for COVID-19 related expenditures; publication of ministerial decree on beneficial ownership disclosure for bidders/awardees.
  - Seven new structural benchmarks proposed, based on IMF TA on tax expenditure, cash management, and PIMA.
- Reporting and TMU provisions:
  - TMU sets program accounting exchange rates, fiscal year, reporting lags, definitions of PCs/ITs and adjustors.
  - Program exchange rate: CFAF to U.S. dollar 612.300 (official rate as of May 31, 2022).
  - Oil revenue cumulative flows (CFAF billions): End March 2022: 101.1; End June 2022: 499.4; End September 2022: 757.5; End December 2022: 981.3.
  - External program disbursements baseline (US$ millions cumulative): End March 2022: 0.0 (budget support); End June 2022: 268.7; End December 2022: 429.4.
  - Net Domestic Financing and other ceilings include oil price and budget support adjustors.

### Financial sector actions and bank liquidation
- Liquidation of three public banks (BHG, Postebank and BGD):
  - Preliminary estimate cost of liquidation: CFAF 135 billion (1.2 percent of GDP).
  - Authorities to set up a defeasance structure by Prime Minister’s decree to gather relevant ministries and realize assets/settle liabilities; liquidation process to last until 2024.
  - Commitment to reinvigorate liquidation monitoring committee and produce by end-December 2022 a note listing litigation cases, expected proceeds from sale of assets, and creditor compensation plan.
- Financial inclusion and sector strengthening:
  - Financial inclusion strategy covering 2022–27 to be adopted by end-2022.
  - Strategy axes: improving access to financial services for vulnerable populations and promoting digital finance.
  - Measures to strengthen asset quality: repayment of domestic debt and strengthening the Commercial Court of Libreville.

### Carbon credits and climate-related initiatives
- Gabon is a net absorber of carbon emissions:
  - Rainforest absorbs a total of 140 million tons of CO2 every year.
  - Forest cover maintained on 91.4 percent of total land area.
  - Deforestation levels cut to less than 1 percent.
  - Gabon aims at reducing its emissions by half in the next four years.
- Carbon finance:
  - Under the Central African Forest Initiative, Gabon will receive US$150 million over ten years as reward for US$5 per ton.
  - September 2021 legislation passed to promote trade in carbon credits.
- Climate fund and economic linkages:
  - Climate change fund to promote adaptation/mitigation, finance environmental protection, develop human capacity, and build climate-resilient industries, especially in agriculture, forestry and fishing.
  - Agricultural, forestry and fishing sectors’ value added is growing and could support diversification.

### Reporting, monitoring, and program implementation status (as of June 2022)
- Reporting requirements: monthly transmission to IMF within six weeks following end of month (some items within four weeks); includes monetary survey, central government financial operations, detailed oil revenue breakdown, Treasury cash balance, debt-service details, monthly oil sector data, and status of structural reforms.
- Recent implementation outcomes:
  - All external arrears with multilateral, bilateral and commercial non-insured creditors were cleared as of June 14, 2022 (CFAF 11.09 billion) and Gabon remained current on external debt service since then.
  - Authorities implemented the three prior actions for first and second reviews: supplementary 2022 Budget submitted June 9, 2022; ministerial decree on beneficial ownership published June 17, 2022; publication of COVID-related audit reports June 17, 2022.
  - Macroeconomic outcomes for 2021: GDP growth 1.5 percent; inflation contained below 3 percent; NOPD 7.1 percent of NOGDP; public debt declined by 12.5 percentage points to 65.8 percent in 2021; NPLs 7.8 percent in 2021.
- Staff recommendation:
  - Staff recommends completion of the first and second reviews, waivers of nonobservance of performance criteria, establishment of quantitative PCs for the next 12 months, financing assurances review, and supports second and third purchases totaling SDR 116.1 million.
  - Completion of the third review proposed conditional on implementation of critical union-level policy assurances.

*Source: IMF staff report and accompanying documents (Gabon, document 1gabea2022001).*

### 1.9 percent in 2020. Growth recovered to an estimated 1.5 percent in 2021, on the back of a

### 1gabea2022001 - 1.9 percent in 2020. Growth recovered to an estimated 1.5 percent in 2021, on the back of a

### Recent developments
- Real GDP:
  - Real GDP contracted by -1.9 percent in 2020 and grew by an estimated 1.5 percent in 2021.
  - Oil GDP fell by 4.9 percent in 2021, in part owing to compliance with the OPEC+ commitments.
  - Non-oil real GDP increased by 2.8 percent in 2021, supported by a booming mining sector and rebounds in the wood and construction sectors.
  - Q1 2022 indicators: construction and railway transport grew 21.0 percent and 23.5 percent (y/y), respectively; oil and manganese production expanded by 3.0 percent and 8.5 percent (y/y), respectively.
- COVID-19 and vaccination:
  - All restrictive anti-COVID measures were lifted on March 5, 2022.
  - Vaccination rate was 11.6 percent by mid-April 2022; authorities’ goal is to vaccinate 60 percent of the eligible population by end-2022.
- Inflation and monetary policy:
  - 12-month (end of period) inflation rose to 2.9 percent in March 2022 from 1.7 percent in December 2021, driven by increasing food prices related to the war in Ukraine.
  - BEAC Monetary Policy Committee raised the policy rate from 3.50 percent to 4 percent and the marginal lending facility rate from 5.25 percent to 5.75 percent on March 28.
- External sector and reserves:
  - Current account deficit improved by 1.7 percentage points to an estimated -5.2 percent of GDP in 2021.
  - Trade developments Q1 2022: trade balance, exports, and imports (Billion CFAF) — Trade balance: 725 (Q1 2020), 1,044 (Q1 2021), 320 (Q1 2022) shown in Text Figure 2; exports and imports series reported in figure (see source).
  - CEMAC foreign reserves (months of extrazone imports): 3.6 (2019), 3.3 (2020), 3.9 (2021), 4.1 (2022), 4.3 (2023) (from Selected Economic Indicators).
  - External debt (percent of GDP): 39.2 (2019), 46.0 (2020), 37.8 (2021), 31.5 (2022), 31.0 (2023).
  - Gabon’s international bond spread: declined to 474 basis points on April 21, 2022, and increased to 698 basis points on May 20, 2022.
- Banking sector and credit:
  - At end-August 2021, solvency ratio about 18 percent (minimum at 9.5 percent); short-term liquidity ratio 163.4 percent (minimum at 100 percent).
  - Overdue loans and NPL ratios reported at 10 percent and 8 percent, respectively (end-August 2021).
  - Banks’ sovereign exposure reached almost a fourth of bank assets in Q3 2021.
  - Credit to the private sector grew by an estimated 13.9 percent (y/y) at end-March 2022.

### Outlook and risks
- Growth projections and drivers:
  - GDP growth expected at 2.4 percent in 2022 driven by continued recovery in wood and construction and a rebound in services.
  - Non-oil GDP projections (Selected Economic Indicators): 2.4 percent (2022), 4.5 percent (2023).
- Fiscal and external positions:
  - Higher oil prices are expected to boost oil exports and revenues, strengthening fiscal and external positions and reducing public debt.
  - Central government finances (percent of GDP) — Revenue: 19.5 (2019), 17.6 (2020), 14.7 (2021), 16.2 (2022), 17.6 (2023); Expenditure and net lending: 18.2 (2019), 19.8 (2020), 16.6 (2021), 14.9 (2022), 14.5 (2023); Fiscal Balance (cash basis): 0.8 (2019), -2.4 (2020), -1.8 (2021), 0.9 (2022), 3.2 (2023); Total Public Debt: 59.8 (2019), 78.3 (2020), 65.8 (2021), 52.6 (2022), 50.8 (2023).
- Risks (balance tilted to the downside):
  - Outbreaks of highly contagious COVID-19 variants, given slow vaccination uptake.
  - Potentially sharper slowdown in China.
  - Intensification of Russia’s war in Ukraine leading to higher commodity price volatility.
  - Possible social tensions ahead of the 2023 presidential elections.
- Potential offsets and upside:
  - Higher oil prices could improve fiscal and external buffers and accommodate increased fuel and food subsidies for the most vulnerable.
  - Accelerated reforms could strengthen domestic revenue, improve public financial management, governance, and business environment to support a return to strong and inclusive growth.

### Program performance and policy discussions
- IMF Extended Fund Facility (EFF) and reviews:
  - On July 28, 2021, the IMF Executive Board approved a 36-month extended arrangement under the EFF with a total access of SDR 388.8 million (180 percent of quota).
  - Staff supports completion of the first and second reviews, which would make available a purchase equivalent to SDR 116.1 million (53.75 percent of quota).
- Program implementation:
  - Implementation challenged by pandemic-related disruptions affecting public administration management and efficiency.
  - One out of four end-July 2021 quantitative performance criteria (PCs) and the continuous PC on external arrears accumulation were missed.
  - Two out of four end-December 2021 PCs and the continuous PC on external arrears accumulation were missed.
  - Preliminary end-March data suggest corrective actions: government deposits at the Central Bank increased.
- Policy priorities advised by IMF staff and Acting Chair Mr. Okamura:
  - Fiscal policy should continue to support recovery while preserving debt sustainability and protecting the most vulnerable amid rising fuel and food prices and inflationary pressures.
  - Increase domestic revenue collection and improve public financial management to rebuild policy space for essential development outlays.
  - Expedite design of well-targeted social safety nets to provide adequate support to vulnerable households and strengthen social protection.
  - Address structural reforms, including governance and corruption weaknesses, to achieve strong and inclusive growth.
  - Enhance the banking sector and implement an effective financial inclusion strategy, improve the business environment, and strengthen the anti-corruption framework to promote private investment.

### Key statistics (Selected Economic Indicators, 2019–23)
- Output (change in percent):
  - Real GDP: 3.9 (2019), -1.9 (2020), 1.5 (2021), 2.8 (2022), 3.7 (2023).
  - Non-oil GDP: 3.3 (2019), -1.8 (2020), 2.8 (2021), 2.4 (2022), 4.5 (2023).
- Prices (change in percent):
  - Inflation (End of period): 1.0 (2019), 1.6 (2020), 1.7 (2021), 4.6 (2022), 2.0 (2023).
  - Inflation (Average): 2.0 (2019), 1.3 (2020), 1.1 (2021), 3.5 (2022), 3.2 (2023).
- Central Government Finances (percent of Non-oil GDP):
  - Revenue and grants: 29.0 (2019), 23.4 (2020), 23.7 (2021), 29.6 (2022), 29.8 (2023).
  - o/w Oil: 11.2 (2019), 9.0 (2020), 8.5 (2021), 12.9 (2022), 12.6 (2023).
  - o/w Non-oil: 17.8 (2019), 14.4 (2020), 15.0 (2021), 16.0 (2022), 17.1 (2023).
  - Expenditure and net lending: 27.0 (2019), 26.3 (2020), 26.7 (2021), 27.3 (2022), 24.6 (2023).
  - Non-oil primary balance: -5.8 (2019), -7.4 (2020), -7.1 (2021), -6.2 (2022), -3.4 (2023).
  - Basic non-oil primary balance (excluding capital spending financed with external resources): -4.2 (2019), -4.2 (2020), -6.1 (2021), -6.2 (2022), -5.1 (2023).
- Money and credit:
  - Broad Money (change in percent): 1.2 (2019), 6.8 (2020), 5.5 (2021), 10.5 (2022), 16.5 (2023).
  - Credit to the private sector (change in percent): 2.5 (2019), 5.2 (2020), 15.8 (2021), 14.9 (2022), 11.1 (2023).
- Balance of Payments:
  - Current account (percent of GDP): -5.0 (2019), -6.9 (2020), -5.2 (2021), 0.8 (2022), -1.1 (2023).
  - FDI (percent of non-oil GDP): 7.3 (2020), 7.8 (2021), 7.9 (2022), 8.0 (2023), 7.9 (2024 shown in table).
- Social and structural indicators:
  - Population (2017, UN est.): 2.01 million.
  - Per capita GDP (2017): US$ 7,490.
  - Literacy rate (2012): 82.3 percent.
  - Poverty rate (2017): 32.4 percent.
  - Main products and exports: Crude petroleum; Manganese ore.
  - Key export markets: China; European Union; Australia.

*Prepared by the Gabon staff team; Executive Board discussion summary and staff views as presented in the document.*

### 7.      Fiscal performance faced

### 7.      Fiscal performance faced

### A. FY21 fiscal outturn and composition
- Non-oil primary deficit (NOPD) was contained at 7.1 percent of non-oil GDP (NOGDP), broadly in line with the program.
- Non-oil revenue underperformed due to:
  - difficulties implementing a new income tax on foreigners active mostly in the informal sector; and
  - subdued recovery in retail trade and transportation.
- Primary current spending was contained below the revised budget appropriations by 0.5 ppt of NOGDP, helped by better control of spending by public entities and special accounts, offsetting overruns in transfers and goods and services.
- Transfer overruns reflect freezing the international fuel price passthrough mechanism in 2021 (about ½ percent of NOGDP).
- Domestically financed capital spending exceeded the budget target by about 0.5 ppt of NOGDP as critical projects postponed in 2020 were implemented.
- Total capital expenditure was lower than budgeted due to a sizeable cut in foreign-financed capital spending.
- Higher oil revenue reduced the overall deficit (cash basis) to 1.8 percent of GDP (from 2.4 percent in 2020).

Key 2021 fiscal figures (Text Table 1, preliminary vs program):
- Non-oil revenue and grants: Program 1,168.4; Prel. 1,057.5; Percent of non-oil GDP: 16.5 (Prog.), 15.2 (Prel.); Difference -1.4
- Non-oil revenue: Program 1,113.4; Prel. 1,045.7; Percent of non-oil GDP: 15.7 (Prog.), 15.0 (Prel.); Difference -0.8
- Grants: Program 55.0; Prel. 11.9; Percent of non-oil GDP: 0.8 (Prog.), 0.2 (Prel.); Difference -0.6
- Current primary expenditure (incl. special accounts): Program 1,330.0; Prel. 1,279.2; Percent of non-oil GDP: 18.8 (Prog.), 18.3 (Prel.); Difference -0.5
- Interest payments: Program 294.0; Prel. 308.5; Percent of non-oil GDP: 4.2 (Prog.), 4.4 (Prel.); Difference 0.3
- Capital expenditure: Program 337.3; Prel. 272.8; Percent of non-oil GDP: 4.8 (Prog.), 3.9 (Prel.); Difference -0.9
  - Domestically financed: Program 165.0; Prel. 198.9; Percent of non-oil GDP: 2.3 (Prog.), 2.9 (Prel.); Difference 0.5
  - Foreign-financed: Program 172.3; Prel. 73.8; Percent of non-oil GDP: 2.4 (Prog.), 1.1 (Prel.); Difference -1.4
- Non-oil primary balance: Program -498.8; Prel. -494.4; Percent of non-oil GDP: -7.1 (Prog.), -7.1 (Prel.); Difference 0.0
- Oil revenue: Program 482.6; Prel. 595.2; Percent of GDP: 5.0 (Prog.), 5.3 (Prel.); Difference 0.3
- Overall balance (cash basis): Program -335.7; Prel. -204.7; Percent of GDP: -3.5 (Prog.), -1.8 (Prel.); Difference 1.7

### B. Financing, arrears, and public debt
- Authorities relied mostly on domestic financing and a drawdown in deposits to finance the fiscal deficit.
- Government deposits at the central bank declined by about 1.2 percent of GDP compared to end-December 2020, and were well below the end-December 2021 program objective.
- Factors: higher than programmed domestic debt payments (including repayment of debt due by SOGARA to oil companies), larger domestic deficit, and non-disbursement of AfDB budget support (CFAF 33 billion).
- Overall net financing from domestic sources reached 1.6 percent of GDP.
- New payment arrears accumulated: external debt FCFA 32.8 billion; domestic debt FCFA 91.2 billion.
- Total public debt declined to about 66 percent of GDP from 78 percent in 2020.
- Revisions to arrears stocks:
  - Preliminary indication: total debt due by the Refinery amounted to CFAF 12 billion at end 2021 (0.1 percent of GDP).
  - 2020 stock of domestic public debt arrears revised upward from CFAF 220 billion (2.5 percent of GDP) to CFAF 305 billion (3.5 percent of GDP).

### C. Outlook and risks
- Macro projections (Text Table 2 highlights):
  - Non-oil real GDP growth revised to 2.4 percent in 2022 (from 3 percent at program approval).
  - War in Ukraine expected to boost oil and manganese exports and improve the current account.
  - Inflation (e-o-p) projected to increase to 4.6 percent in 2022.
  - Overall fiscal balance (cash basis) projected to turn positive, reaching 0.9 percent of GDP in 2022 (from -1.8 percent of GDP in 2021).
  - Public debt projected to decline to 52.6 percent of GDP in 2022 and further below 50 percent over the medium term.
  - Current account deficit expected to remain below 3 percent of GDP in the medium term.
- Risks (downside and upside):
  - Downside: intensification of the war in Ukraine, global geopolitical tensions, sharper slowdown in China, COVID-19 variants, postponement of external budget support, political instability and pressure on spending ahead of the 2023 presidential election.
  - Upside: higher oil and manganese prices and accelerated reform implementation.

Selected macro projection series (2019–27, estimates/projections):
- Real GDP growth: 3.9 (2019); -1.9 (2020); 1.5 (2021); 2.8 (2022); 3.7 (2023); 3.7 (2024); 3.8 (2025); 3.8 (2026); 3.9 (2027)
- Oil growth: 7.0 (2019); -2.4 (2020); -4.9 (2021); 4.9 (2022); -0.5 (2023); -0.3 (2024); -0.2 (2025); -0.1 (2026); -0.1 (2027)
- Non-oil growth: 3.3 (2019); -1.8 (2020); 2.8 (2021); 2.4 (2022); 4.5 (2023); 4.5 (2024); 4.5 (2025); 4.5 (2026); 4.5 (2027)
- Inflation (eop, y-o-y): 1.0 (2019); 1.6 (2020); 1.7 (2021); 4.6 (2022); 2.0 (2023); 2.9 (2024); 1.6 (2025); 2.7 (2026); 1.8 (2027)
- Overall fiscal balance (cash-basis, percent of GDP): 0.8 (2019); -2.4 (2020); -1.8 (2021); 0.9 (2022); 3.2 (2023); 2.5 (2024); 2.1 (2025); 1.9 (2026); 1.5 (2027)
- Non-oil primary fiscal balance (percent of non-oil GDP): -5.8 (2019); -7.4 (2020); -7.1 (2021); -6.2 (2022); -3.4 (2023); -2.6 (2024); -2.1 (2025); -1.6 (2026); -1.2 (2027)
- Current account balance (percent of GDP): -5.0 (2019); -6.9 (2020); -5.2 (2021); 0.8 (2022); -1.1 (2023); -1.9 (2024); -2.2 (2025); -2.1 (2026); -1.5 (2027)
- Public debt (percent of GDP): 59.8 (2019); 78.3 (2020); 65.8 (2021); 52.6 (2022); 50.8 (2023); 48.5 (2024); 46.6 (2025); 45.0 (2026); 43.4 (2027)
  - External: 39.2 (2019); 46.0 (2020); 37.8 (2021); 31.5 (2022); 31.0 (2023); 29.8 (2024); 28.8 (2025); 28.9 (2026); 28.8 (2027)
  - Domestic: 20.6 (2019); 32.3 (2020); 28.0 (2021); 21.1 (2022); 19.8 (2023); 18.7 (2024); 17.8 (2025); 16.1 (2026); 14.6 (2027)

### D. Program performance to date
- Mixed performance with some delays in structural reforms.
- End-July 2021 PC results:
  - All end-July 2021 quantitative performance criteria (PCs) met except: continuous PC on external arrears accumulation and PC on net domestic financing of the central government (NDF).
  - The three end-July indicative targets (ITs) were missed.
- End-December 2021 PCs (four total, controlling QPCs for first and second reviews):
  - Two were missed: PC on NDF and PC on central bank net claims on government (NCG) was missed by a large margin.
  - The PC on disbursing and guaranteeing of external debt was met.
  - The NOPD was below the program nominal target but exceeded the adjusted target by ½ percent of NOGDP due to non-disbursement of 2021 AfDB budget support (parliamentary authorization delay).
  - Continuous PC on external arrears was missed in part due to lack of coordination between the General Directorate of Debt and the Treasury and weak cash management.
  - IT on social spending met; ITs on non-oil tax revenue and on domestic arrears missed.
- End-March 2022 data:
  - Some improvement: non-oil primary deficit is well below program target.
  - IT on central bank net claims on government missed, but government deposits at the central bank increased by about CFAF 100 billion (0.7 percent of GDP) since end-December 2021.
  - Continuous PC on external arrears was breached.
- Structural benchmarks (SBs) through May 2022:
  - Seven out of 14 SBs were met and four were subsequently implemented.
  - Two SBs are prior actions.
  - Final SB on review of tax exemptions to be implemented with pending tax exemptions measure in the 2022 revised budget; submission of the revised budget to Parliament is a prior action.

### E. Fiscal policy stance and staff recommendations
- Authorities plan to ease the pace of fiscal adjustment in 2022 to accommodate spending pressures from the war in Ukraine.
  - 2022 supplementary budget: keep pump prices constant for kerosene and butane gas; gradually increase prices of other petroleum products starting with those used by businesses.
  - Additional fuel and wheat subsidies estimated at about CFAF 80 billion (1 percent of non-oil GDP or 0.6 percent of GDP).
  - These measures, together with lower non-oil revenue (by 1 ppt of NOGDP), increased the NOPD to about 6.2 percent of NOGDP, 1.3 ppts of NOGDP above the initial program target for 2022 and 0.9 percent below the 2021 deficit.
  - Higher oil prices and oil revenue (+1.3 ppt of GDP) expected to improve the overall balance (cash basis) by 1.2 ppts of GDP relative to the program; interest payments to increase by +0.1 ppt of GDP.
  - Authorities will use the full amount of their 2009 SDR allocation and about 15 percent of the 2021 SDR allocation to repay domestic debt and improve composition of domestic financing; remaining SDRs to be kept in international reserves at the Central Bank to help rebuild regional reserves.
- Staff recommendations:
  - Gradually phase out fuel subsidies while developing targeted measures to protect the most vulnerable.
    - Return to automatic fuel price adjustment with full-pass-through on all products except Butane and Kerosene (mostly consumed by the poor).
    - Staff advise ending subsidies by end-December 2022 for all products except kerosene and Butane.
    - Urged authorities to finalize the database of the most vulnerable with the World Bank by end-December 2022 and develop well-targeted measures thereafter.
  - Sustain implementation of planned revenue reforms to revert to initial medium-term non-oil tax revenue program targets and support fiscal consolidation.
    - Non-oil revenue shortfalls projected at around 1 percent of NOGDP in 2022 versus the initial program.
    - Authorities committed to including remaining tax measures agreed in the initial program in the revised 2022 budget, enhance data exchange between tax and customs administrations, and fully implement the IT measures.
    - Preliminary indications show these measures will yield 1.6 percent of NOGDP in 2023.
    - Continue strengthening tax administration and rationalizing tax exemptions, ensure fiscal analysis of laws promoting new exemptions via a Tax Policy Unit and Overview Committee on Tax Benefits.
  - Enhance transparency in oil revenue reporting:
    - Ensure all oil revenues are channeled through the Treasury.
    - Audit cost oil and cross-debt (including VAT arrears) between government, SOEs, and the five largest private oil companies.
    - Revisit rules governing Gabon Oil Company (GOC) trading activity to ensure regular transfers of government profit oil.
    - Carry out a financial audit of SOGARA to assess viability.
  - Reprioritize and improve spending efficiency:
    - Tighten wage payment controls to contain the wage bill.
    - Accelerate SOE reforms to reduce subsidies.
    - Implement decree requiring publication of names and nationalities of beneficial owners of entities awarded public procurement contracts.
    - Implement February 2022 PIMA follow-up mission recommendations.
  - Improve fiscal framework and address domestic arrears:
    - Improve cash management procedures, including a full-fledged TSA, and revamp the VAT escrow account (end-June 2022 SB).
    - Enhance fiscal transparency, reporting, and fiscal risk management by automating communication between financial information systems, making budget execution more reliable, better recording earmarked revenues and special accounts in the budget, improving fiscal reports coverage to include all public entities in line with CEMAC directives, strengthening SOE governance and requiring audited annual reports, and creating tags on budget classification and Chart of Accounts for mapping between Treasury and Budget systems.
    - Robust expenditure control to minimize use of exceptional procedures and limit domestic arrears and corruption vulnerabilities.
  - Prioritize adequate social spending and stronger social safety nets:
    - Authorities updated the database of the most vulnerable (Gabonais Economiquement Faibles, GEF).
    - Next steps with World Bank: census of GEF based on new criteria by end-December 2022 (SB).
  - Adhere to a prudent debt strategy and improve debt management:
    - Debt sustainability analysis: public debt sustainable but not with a high probability.
    - Envisaged fiscal consolidation sufficient to put debt on a firm downward path absent adverse shocks or slippages.
    - Encourage improvements in debt management in line with TA delivered during FY2019.
  - Address domestic arrears:
    - Authorities developed a five-year clearance plan: audited and validated domestic arrears stock amounted to CFAF 442.3 bn (5 percent of GDP) at end-December 2020; plan envisages clearing this stock by 2025.
    - Staff urges authorities to identify all other existing domestic arrears (including salary arrears and arrears with certain public entities) and revise the clearance plan.

### F. Other structural reforms and program issues
- Banking sector:
  - Good progress on liquidation of three public banks; liquidators’ work almost over.
  - Completion requires setting up a defeasance structure to sell remaining assets and settle liabilities transparently.
  - Authorities should work with COBAC and monitor emerging risks; improve banks’ asset quality via repayment of domestic debt and strengthening the commercial court of Libreville.
- Governance and transparency of public financial institutions (CDC, FGIS):
  - Significant efforts to implement audit recommendations; both institutions certified their 2021 financial statements.
  - Authorities committed that GOC and SOGARA will publish certified statements.
- National financial inclusion strategy:
  - Draft covering 2022–27; next steps include finalization after stakeholder discussion, creation of a coordinating unit, and finalizing monitoring methodology.
- Anti-corruption and governance:
  - Progress in transparency, especially in the oil sector; Gabon joined EITI.
  - Commitments: audits of cost-oil and the national refinery; strengthen Commission to Combat Illicit Enrichment (CNLCEI) capacity; amend asset declaration legal framework to align with international best practice, including publishing an annual CNLCEI report with monitoring (25 percent) of asset declarations by category of public official by end-December 2022 (SB); publish audit results for all COVID-19 related expenditures on the government website (prior action).
- AML/CFT:
  - On-site component of Gabon’s AML/CFT mutual evaluation took place in April 2022; authorities should implement recommendations swiftly and effectively.
- Transition to a green economy:
  - Government intends to develop a national carbon credit trading mechanism in line with the Paris Agreement to finance forest conservation policies and actions.

*Source: IMF staff summary of "7.      Fiscal performance faced" (chapter/section from the provided IMF document).*

### 23.      The authorities are requesting waivers for non-observance of the two PCs for

### The authorities are requesting waivers for non-observance of the two PCs for December 2021 that were not observed as well as the continuous PC on the non-accumulation of new external arrears

### Waivers requested and reasons
- Waiver requested for non-observance of the NOPD (net outstanding payment delays) based on the temporary nature of the deviation, reflecting late disbursement of the AfDB budget support. Authorities will continue to apply their expenditure regulation mechanism to closely monitor spending and avoid fiscal slippages.
- Waiver requested for non-observance of the PC on NCG (net change in government deposits), missed by a large margin due to:
  - significant drawdown in deposits to compensate for the shortfall in budget support,
  - a larger domestic deficit, and
  - higher domestic arrears repayments.
  - Waiver request is based on corrective actions, including rebuilding of deposits since the beginning of the year, prudent fiscal policy, efforts to save oil revenue windfalls, and steps to enhance budget execution and cash management to limit accumulation of new domestic arrears.
- Waiver requested for non-observance of the continuous PC on non-accumulation of new external arrears. Causes included lack of coordination between the General Directorate of Debt and the Treasury and weak cash management. Waiver request is based on corrective actions.

### External arrears status and clearance commitments
- Authorities have cleared most of external arrears as of June 14, 2022 and are committed to clear the remaining arrears of CFAF 11.09 billion before the Board meeting (LOI, and MEFP, ¶27).
- Measures reinstated to avoid accumulation of external arrears (MEFP, ¶26):
  - weekly meetings between Treasury and Debt Units,
  - close monitoring of payment deadlines to ensure timely transfers of funds for payment to the Central Bank.
- Outstanding sovereign external arrears exist to multilateral, official bilateral and commercial creditors.
- Authorities are in the process of clearing external arrears to multilateral and official bilateral creditors and plan to complete clearance before the Executive Board meeting.
- For external commercial arrears, staff has ascertained that Gabon is making a good faith effort to clear arrears; Fund may provide financing notwithstanding arrears to commercial creditors, which authorities have committed to clear by the time of the Board meeting.

### Updated program conditionality and prior actions
- Understanding to propose updated program conditionality (MEFP, Tables 1, 3 and 4):
  - New PCs and ITs proposed for end-June 2022, end-December 2022, and end-June 2023.
  - New ITs proposed for end-September 2022 and end-March 2023.
  - A new PC proposed with a first test date at end-December 2022, elevating the indicative target on non-oil tax revenue.
- Three prior actions established:
  1. submission to Parliament of the 2022 supplementary budget consistent with program objectives;
  2. the publication on the government website of the results of the audit for all COVID-19 related expenditures;
  3. the publication of a ministerial decree requiring that legal persons bidding on public procurement contracts declare the names and nationalities of their beneficial owners, and that those names and nationalities be published online for all legal persons awarded such contracts.
- Seven new SBs are proposed (MEFP, Table 4), based notably on IMF TA on tax expenditure, cash management, and PIMA.

### Financing, projected gaps, and IMF financing share
- The program is fully financed in the next 12 months and there are good prospects of full program financing for the remaining period for the Fund-supported program.
- Financing needs for the next twelve months will be met by a combination of external borrowing, budget support, and Fund financing. The authorities are also discussing potential budget support from the World Bank and the BADEA, which have not been included in the macroeconomic framework.
- The projected financing gap for the period 2022–24 amounts to 4.4 percent of GDP.
- The IMF is expected to provide financing of 1.8 percent of GDP, contributing about 41 percent of exceptional financing.
- As normally the case for currency union members, the EFF purchase will be on-lent to the government via the Central Bank.

### Capacity to repay and debt/obligation metrics
- Total amount of outstanding credit from the Fund:
  - will amount to 367.4 percent of quota in 2022,
  - decline to 359.1 percent of quota in 2023.
- Outstanding obligations to the Fund based on existing and prospective drawings:
  - would peak at 4.7 percent of GDP in 2022,
  - and 10.6 percent of exports of goods and services in 2023.
- Obligations to the IMF relative to imputed international reserves:
  - will rise from 5.9 percent in 2022 to 14.5 percent in 2024.
- Vulnerabilities remain given gross financing needs and debt-profile risks; reliance on the regional reserve pool, which has not recovered despite higher oil prices.

### Regional assurances and BEAC measures
- BEAC provided updated policy assurances in CEMAC countries’ Fund-supported programs.
- The end-December 2021 regional policy assurance on NFA was not implemented but the deviation was temporary; the relevant target was reached in early January 2022.
- BEAC follow-up letter of policy support of June 2022 reiterated commitment to appropriate monetary policy stance and to member states implementing fiscal adjustment to support external reserves build-up.
- Measures taken by BEAC to support the reserve position:
  - raised the policy rate (TIAO) and marginal lending facility by 50 basis points in March 2022;
  - increased the interest rate on the liquidity absorption window by 25 basis points in February 2022;
  - reduced weekly liquidity injections to 180 billion in March 2022;
  - will continue to work towards effective application of foreign exchange regulation, including starting implementation of agreed adaptations for the extractive sector in January 2022.
- The regional assurances on regional NFA are considered critical for the success of Gabon’s Fund-supported program.

### Safeguards assessment
- 2022 update safeguards assessment findings for BEAC:
  - maintained strong governance arrangements following legal reforms in 2017;
  - completed multi-year transition to IFRS in 2019, strengthening financial reporting practices;
  - external audit arrangements remain robust.
  - Internal audit mechanism faces capacity constraints and is not yet fully aligned to international practices.
  - BEAC needs to strengthen risk management and cyber resilience and develop business continuity and disaster recovery plans.

### Statistical issues and data improvements
- Gabon will continue aligning its data to international standards with STA support.
- Current data weaknesses:
  - balance of payments and financial soundness indicators are provided with long delays and suffer serious weaknesses;
  - inadequate treatment of government securities in monetary data complicates reconciliation between fiscal and monetary data.
- Authorities committed to reducing data lags and improving quality of information provided to the Fund; staff encourages implementation of STA recommendations on improving timeliness of FSI indicators and treatment of government securities in monetary statistics.

### Staff appraisal — outlook, priorities, and implementation
- Economic outlook:
  - economy is gradually recovering; outlook remains positive but with significant downside risks.
  - war in Ukraine and surge in commodity prices will boost oil exports and revenues, improving fiscal and external positions.
  - cost of fuel subsidies and higher food prices will add fiscal and inflationary pressures.
  - risks include low vaccination rate, sharper slowdown in China, intensification of the war in Ukraine, and social tensions ahead of 2023 presidential elections.
- Policy priorities and recommendations:
  - reforms to strengthen domestic revenue and improve public financial management, governance and the business environment are critical to support strong and inclusive growth while safeguarding debt sustainability.
  - revised 2022 budget appropriately prioritizes protecting the most vulnerable while rebuilding fiscal and external buffers.
  - staff encourages continued strengthening of social protection and well-targeted social safety programs.
  - staff welcomes plan to save part of oil revenue windfall and part of the 2021 general SDR allocation to rebuild fiscal buffers, increase regional reserves and reduce domestic debt.
  - staff strongly encourages steady implementation of domestic arrears clearance plan and measures to avoid accumulation of new domestic arrears.
  - program focus on structural reforms and governance weaknesses in the oil sector remains critical; authorities should continue improving governance and transparency to enhance revenue and PFM and reduce corruption vulnerability.
  - staff encourages delivery on agenda to increase domestic revenue and improve PFM; stronger budget execution and cash management will help address domestic arrears.
  - enhancing the banking system, improving governance, and strengthening anti-corruption framework will help promote private investment and unlock growth potential.
- Program implementation:
  - several end-December 2021 quantitative targets were not met and many SBs were implemented with delays.
  - closer and more effective coordination across public institutions (Ministry of Economy, Ministry of Budget, Central Bank) is needed.
  - staff welcomes establishment of a new program implementation unit at the Ministry of Economy.
  - resumption of weekly meetings between Treasury and Debt Units and close monitoring of payment deadlines are important to avoid accumulation of external arrears.

*Source: Gabon — IMF staff report (excerpts).*

### 34.      Staff recommends the completion of the first and second reviews under the extended

### Staff recommendation on completion of reviews and purchases under the extended arrangement

### Recommendation summary
- Staff recommends the completion of the first and second reviews under the extended arrangement, waivers of nonobservance of performance criteria, establishment of quantitative performance criteria for the next 12 months, and the financing assurances review.
- Recommendation is based on: implementation, albeit with delay, of the end-December 2021 regional policy assurance and regional policy assurances established in the June 2022 union-wide paper; the temporary nature of the non-observance of the fiscal primary balance PC; implementation of corrective actions for the missed PC on central bank net claims and the missed continuous PC on external arrears; and important progress in structural benchmarks, including major steps to improve governance and the strength of the authorities’ economic policies for the rest of 2022.
- Staff supports the second and third purchases in the total amount of SDR 116.1 million.
- Staff proposes completion of the third review under the extended arrangement be conditional on the implementation of critical policy assurances at the union level, as will be established in the next union-wide background paper, expected in June 2022.

### Key real sector and price projections (selected)
- GDP at constant prices: 3.9 -1.9 1.5 1.5 3.9 2.8 3.7 3.7 3.8 3.8 3.9 (annual percent change series as presented)
- Oil GDP growth: 7.0 -2.4 -4.3 -4.9 8.8 4.9 -0.5 -0.3 -0.2 -0.1 -0.1
- Non-oil GDP growth: 3.3 -1.8 2.7 2.8 3.0 2.4 4.5 4.5 4.5 4.5 4.5
- GDP deflator: 1.6 -9.1 7.6 25.4 0.4 20.6 -4.3 -2.3 -1.1 -0.3 1.2
- Consumer prices (yearly average): 2.0 1.3 2.0 1.1 2.0 3.5 3.2 2.5 2.2 2.2 2.2
- Consumer prices (end of period): 1.0 1.6 2.0 1.7 2.0 4.6 2.0 2.9 1.6 2.7 1.8
- Oil prices (Brent, U.S. Dollar/BBL) (series fragment shown): 64 42 60 70 56 111 96878178 75 (values preserved as in source)

### External sector and balance of payments highlights
- Current account (Billions of CFAF): -494 -608 -461 -588 -294 113 -153 -260 -321 -306 -234
- Exports of goods (f.o.b.) series (Billions of CFAF): 3,706 2,966 3,409 4,197 3,605 6,117 5,551 5,269 5,145 5,149 5,306
  - Hydrocarbons component: 2,648 1,933 2,117 2,939 2,216 4,740 4,017 3,565 3,263 3,061 3,020
- Imports of goods (f.o.b.) series (Billions of CFAF): -1,850 -1,793 -1,829 -1,858 -1,867 -2,105 -2,149 -2,154 -2,197 -2,243 -2,360
- Financial account (Billions of CFAF): 158 164 332 755 233 -113 387 517 545 493 424
- Overall balance (Billions of CFAF): -336 -444 -129 167 -610 234 257 224 187 190
- Financing gap (Billions of CFAF): 230 661 666 414 425 214 892 000 (as presented)

### Fiscal accounts and public finances (central government)
- Total revenue and grants (Billions of CFA francs): 1,931 1,553 1,651 1,653 1,844 2,255 2,423 2,466 2,560 2,663 2,785
  - Oil revenue: 747 596 483 595 587 981 1,029 902 819 764 744
  - Non-oil revenue: 1,184 953 1,113 1,046 1,257 1,220 1,394 1,564 1,741 1,900 2,041
- Total expenditure and net lending (Billions of CFA francs): 1,796 1,742 1,961 1,860 1,883 2,075 2,003 2,116 2,267 2,393 2,521
  - Current expenditure: 1,320 1,431 1,456 1,491 1,362 1,563 1,458 1,511 1,567 1,652 1,741
  - Capital expenditure: 281 241 337 273 363 320 350 406 497 534 569
  - Interest payments: 225 297 294 309 262 330 330 327 330 339 347
- Overall balance (commitment basis) (Billions of CFA francs): 136 -189 -310 -208 -391 80.4 420 350 293 270 264
- Overall balance (cash basis) (Billions of CFA francs): 84 -213 -336 -205 -301 304 453 563 072 762 228 (values preserved as in table)
- Non-oil primary balance excluding capital transfers (Billions of CFA francs): -387 -489 -499 -494 -364 -471 -280 -225 -196 -154 -133
  - as percent of non-oil GDP: -5.8 -7.4 -7.1 -7.1 -4.9 -6.2 -3.4 -2.6 -2.1 -1.6 -1.2
- Gross government deposits in BEAC (Billions of CFA francs): 2.3 2.5 2.4 1.2 2.5 2.0 3.6 4.4 5.0 5.4 6.0
- Total public debt (percent of GDP): 59.8 78.3 74.7 65.8 72.2 52.6 50.8 48.5 46.6 45.0 43.4
  - External public debt (including to the IMF) (percent of GDP): 39.2 46.0 44.4 37.8 44.4 31.5 31.0 29.8 28.8 28.9 28.8
  - Domestic public debt (percent of GDP): 20.6 32.3 30.4 28.0 27.8 21.1 19.8 18.7 17.8 16.1 14.6

### Financing of the fiscal deficit (selected)
- Overall fiscal deficit (cash basis) (Billions of CFA francs) (A): -83.6 213.5 335.7 204.7 29.5 -130.1 -445.0 -355.7
- Other financing needs (B) (Billions of CFA francs): 630.3 988.9 1,008.3 765.7 716.2 1,029.1 1,124.7 1,076.6
- Total financing needs (C = A + B) (Billions of CFA francs): 546.7 1,202.4 1,344.0 970.4 745.8 899.0 679.7 721.0
- Identified sources of financing (D) (Billions of CFA francs): 243.8 963.7 1,178.3 906.7 601.4 527.3 531.4 628.6
  - External identified financing (Billions of CFA francs): 106.2 684.0 667.3 518.0 191.0 117.2 150.8 98.3
  - Domestic identified financing (Billions of CFA francs): 137.5 279.7 511.0 388.8 410.4 410.1 380.6 430.3
- Financing gap (E = C - D) (Billions of CFA francs): 302.9 238.7 165.7 63.7 144.4 371.7 148.4 92.4
- Exceptional external financing (F) (Billions of CFA francs): 230.2 65.8 39.6 0.0 90.0 247.6 90.9 22.0
- Residual financing needs (E - F) (Billions of CFA francs): 72.7 172.9 126.1 63.7 54.4 124.1 57.5 70.4
- IMF-related financing shown in memorandum: IMF-EFF 2017-2020 = 72.8; IMF-RFI-1 = 88; IMF-RFI-2 = 84.9; IMF-EFF = 126.1 63.7 54.4 124.0 57.5 70.4

### Monetary and financial indicators (selected)
- Broad money (M2) annual change (percent) series as presented: 1.2 6.8 11.7 5.5 12.4 10.5 16.5 ...
- Net foreign assets and net domestic assets movements shown across quarterly series in Monetary Survey table (values preserved in table).
- Credit to the economy (percent changes listed in Table 1): 2.2 5.4 6.2 14.8 7.0 15.0 11.1 (time series as presented)
- Financial Soundness Indicators and detailed monetary series are provided in Tables 5 and 6 (values preserved in source tables).

### IMF program design and financing schedule
- Staff supports second and third purchases totaling SDR 116.1 million.
- Table of scheduled purchases and reviews under the Extended Arrangement (amounts preserved):
  - July 28, 2021: Approval of the extended arrangement under the EFF. Amount: 81.000 (millions of SDRs) — Percentage of Quota: 37.500
  - December 1, 2021: Observance of the PCs for end-July 2021, continuous PCs and completion of the first review. Amount: 81.000 (millions of SDRs) — Percentage of Quota: 37.500
  - June 1, 2022: Observance of the PCs for end-December 2021, continuous PCs and completion of the second review. Amount: 35.100 (millions of SDRs) — Percentage of Quota: 16.250
  - December 1, 2022: Observance of the PCs for end-June 2022 continuous PCs and completion of the third review. Amount: 35.100 (millions of SDRs) — Percentage of Quota: 16.250
  - June 1, 2023: Observance of the PCs for end-December 2022, continuous PCs and completion of the fourth review. Amount: 35.100 (millions of SDRs) — Percentage of Quota: 16.250
  - December 1, 2023: Observance of the PCs for end-June 2023, continuous PCs and completion of the fifth review. Amount: 35.100 (millions of SDRs) — Percentage of Quota: 16.250
  - April 1, 2024: Observance of the PCs for end-December 2023, continuous PCs and completion of the sixth review. Amount: 86.400 (millions of SDRs) — Percentage of Quota: 40.000
  - Total: 388.800 (millions of SDRs) — Percentage of Quota: 180.000
- Note from schedule: "The PCs for end-December 2021 will be controlling as the first review was not completed after end-December 2021."
- Table 7 (Indicators of Capacity to Repay the Fund) projects Fund obligations and outstanding Fund credit with exact series (e.g., Outstanding Fund credit in millions of SDRs: 793.5 775.6 691.5 561.5 475.8 377.6 281.3 201.6 136.8 72.0).

*Source: IMF staff report and accompanying tables (Gabon).*

### Annex I. Estimating the Impact of the War in Ukraine

### Annex I. Estimating the Impact of the War in Ukraine

### Overview
- The war in Ukraine affects the Gabonese economy mainly through higher oil and food prices.
- Oil prices increased sharply by 18.1 percent in 2022 Q1 compared to the January 2022 WEO forecast.
- Food prices increased by 5.7 percent in 2022 Q1 compared to the January 2022 WEO forecast.
- Soaring oil and food prices will affect the fiscal and external position and intensify inflation pressures.

### Fiscal position: expected effects and projections
- Overall assessment: The fiscal position is expected to improve as the positive impact of the spike in oil prices on oil revenues should outweigh higher fuel and food subsidies.
- Revenue impacts:
  - Royalty (RMP and profit oil), which represents about 17 percent of oil production, is expected to increase by 0.1 percent of GDP in 2022 compared to the initial budget law.
  - Corporate taxes (CIT), equivalent to 35 percent of the previous year’s profit, will impact oil revenue in 2023.
- Subsidies and spending:
  - The authorities froze their automatic price adjustment mechanism in the second half of 2021; in January 2022 they adjusted business gasoline and diesel prices by 16 percent while maintaining household petroleum-related product prices unchanged.
  - With no policy response, fuel subsidies are projected to rise to CFAF 130.7 billion (1 percent of GDP) in 2022.
  - Additional wheat subsidies are estimated at CFAF 5.7 billion ([0.04] percent of GDP).
- Tax policy decision:
  - The authorities delayed a planned increase in import taxes (5 percent) on selected food items, implying a non-oil tax revenue shortfall of CFAF 12 billion (0.1 percent of GDP).
- Fiscal balance and debt outlook:
  - The overall balance (on cash basis) will improve by 1.1 percent of GDP.
  - Financial needs are projected to decline to 5 percent of GDP per year over 2022–25.
  - The debt-to-GDP ratio is expected to fall from 78 percent in 2020 to 52.6 percent in 2022, also supported by higher GDP.

### External position: trade, current account, and financing
- Current account and trade:
  - The current account is projected to reach a surplus of 0.7 percent of GDP in 2022, improving from a deficit of 5.2 percent of GDP in 2021.
  - This represents an improvement of 1 percentage point of GDP relative to the WEO January 2022 projection.
  - Booming exports driven by higher oil and manganese prices and recovered export volumes (oil, manganese, timber, palm oil) underpin the improvement.
  - Nominal oil exports (more than 75 percent of total exports) increased by about 73 percent (y/y) in 2022 Q1.
- Imports and composition:
  - Imports are projected to decrease moderately from 28.8 (in 2021) to 27.1 percent of GDP in 2022.
  - Cereals account for nearly 5 percent of total imports of goods.
  - Goods imports from Russia and Ukraine account for ½ percent and 0.2 percent of total imports of goods, respectively.
  - The war could continue to push up prices of imported food products and weigh on the import bill.
- Foreign direct investment and reserves:
  - Since the beginning of the war in Ukraine, the projection for FDI in 2022 increased by about CFA francs 150 billion compared with the January WEO, mainly reflecting increased FDI to the oil sector.
  - External financing conditions have been favorable; Gabon’s international bond spread stood at 698 basis points on May 20, 2022. A prolonged war and global monetary tightening could negatively impact financial market conditions.

### Inflation: transmission and outlook
- Recent inflation developments:
  - 12-month average inflation in Gabon increased to 2.9 percent in March 2022.
  - CPI inflation rose from 0.6 percent in September 2021 to 1.7 percent in December 2021 (y/y).
  - CPI food inflation reached 3.5 percent in March 2022.
  - Core inflation increased to 2.9 percent in March 2022, from 1.4 percent in December 2021.
- Pass-through and drivers:
  - Staff estimates suggest international commodity prices take up to a year to be reflected in domestic inflation due to contained domestic demand, price controls, and other distortions.
  - Under staff calculations, the direct impact of higher food prices on inflation is 0.8 percent.
  - The contribution of fuel price increases has been limited by government fuel subsidies.
- Policy responses and risks:
  - The BEAC monetary policy committee raised the policy rate from 3.5 percent to 4 percent and has reduced liquidity injections.
  - Continued fiscal consolidation (moving the non-oil primary deficit from 7.1 percent of NOGDP in 2021 to [6.2] percent of NOGDP in 2022) and the BEAC response should moderate aggregate demand.
  - Risks include further global supply-chain disruptions and spillovers from monetary policy tightening in larger economies, which could slow global activity and reduce capital flows into the region.

### External sector assessment: medium-term fundamentals and exchange rate
- 2021 external position:
  - The terms of trade increased by about 36 percent in 2021, reflecting higher oil prices.
  - The REER depreciated by 1.3 percent in 2021 due to Euro depreciation vis-à-vis the U.S. dollar and stable domestic prices.
  - The current account improved to an estimated -5.2 percent of GDP in 2021, from -6.9 percent of GDP in 2020.
  - Exports increased by 42 percent (y-o-y) in 2021; oil exports +52 percent, non-oil exports +22 percent; imports increased by 3.6 percent.
  - FDI was estimated at 7.5 percent of GDP in 2021.
- Data and methodology limitations:
  - Official balance of payments statistics are delayed (latest official preliminary data from 2018) and have gaps (exclusion of Special Economic Zone activities; lack of net international investment position series).
- EBA-Lite and model estimates:
  - Regression-based approaches using the revised EBA-Lite methodology suggest the 2021 exchange rate is overvalued by 1.4 to 13.2 percent.
  - These estimates imply CA gaps of -1.8 percent and -0.2 percent based on the EBA-Lite CA and REER models respectively.
  - The CA approach estimates a cyclically-adjusted CA norm of 2.7 percent of GDP compared with an actual cyclically-adjusted CA at -4.6 percent of GDP, producing a CA-gap of 1.9 percent of GDP, including a 2.9 percent policy gap.
  - The REER approach estimates a REER norm of 4.64 (log) compared with an actual level of 4.66 (log).
- Investment-based model:
  - Assuming an investment efficiency of 0.5, the investment-based model projects a medium-term CA norm of -4.7 percent of GDP, below baseline projections, illustrating sensitivity to public and private investment efficiency.
- Bottom-line assessment:
  - The external position is weaker than implied by medium-term fundamentals and the exchange rate is overvalued.
  - The overall assessment estimates an overvaluation of 1.4 to 13.2 percent based on the range of REER and CA results, compared with an overall assessment of 0.9 to 2.5 percent overvaluation in 2020.
  - Preliminary data suggest the assessment could further improve in 2022 given the anticipated strengthening of the current account; stronger returns from recent FDI and higher-than-anticipated oil production are medium-term upside risks.

### Policy implications and recommendations
- Sustain fiscal consolidation to support external position and debt sustainability (example pathway: reduce financing needs and lower debt-to-GDP ratio).
- Improve efficiency of public investment and governance to enhance structural competitiveness and diversify exports away from oil.
- Continue monetary policy normalization as needed to contain inflation while monitoring spillovers from global monetary tightening.
- Address data gaps in balance of payments and related series to strengthen external sector analysis and policy design.

*Source: Annex I. Estimating the Impact of the War in Ukraine (Gabon), IMF staff estimates and Gabonese authorities.*

### 1. Ranking unless otherwise inidcated. Red indicates ranking in bottom quartile,

### 1. Ranking unless otherwise inidcated. Red indicates ranking in bottom quartile,

### Risk Assessment Matrix — Domestic Risks
- Widespread social discontent due to intensified domestic transmission of the COVID-19 pandemic, delays in vaccination or unequal access to the vaccine.
  - Relative Likelihood: Medium
  - Impact if realized: Medium
  - Recommended Policy Response:
    - Continue to enforce social distancing regulations.
    - Ramp up crisis preparedness in the health system to cope with a potential surge.
    - Expand emergency assistance.
    - Intensify efforts to secure sufficient resources to address COVID-19 impact, including from development partners.
    - Ensure the efficient use of COVID-19-related emergency resources, including by closely monitoring their expenditure and ensuring full transparency and accountability, as per the commitments in the LOIs appended to Gabon’s 2020 RFI Purchase requests.
  - Impact summary: Could undermine economic activity, disrupt domestic supply and transportation, and could fuel unrest.

- 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:
    - Reprioritize fiscal spending and enhance the efficiency of spending, while supporting non-oil activity during shutdowns.
    - Enhance facility maintenance and plan adequate investment for refurbishment and encourage exploration and discovery of new oil.
  - Impact summary: 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.
  - Impact summary: Perceptions of poor governance and corruption could compromise macroeconomic stabilization gains and derail key reforms.

- Higher frequency and severity of natural disasters related to climate change.
  - Relative Likelihood: Medium
  - Impact if realized: Medium
  - Recommended Policy Response:
    - Implement policies to invest to protect critical financial, transport, communication, or energy infrastructure.
    - Pursue a credible medium-term fiscal consolidation path to build fiscal and external buffers.
  - Impact summary: Gabon is prone to natural disasters.

(Note: RAM reflects staff views as of April 2, 2022 update of the Global Risk Assessment Matrix. Relative likelihood interpretation: “low” <10 percent, “medium” 10–30 percent, “high” 30–50 percent.)

### Risk Assessment Matrix — External Risks
- Russia’s invasion of Ukraine leads to escalation of sanctions and other disruptions.
  - Relative Likelihood: High
  - Impact if realized: Medium
  - Recommended Policy Response:
    - Reinforce external buffers.
    - Enhance social safety net.
    - Diversify import sources.
  - Impact summary: Could further distort food supply chain; increase financing costs.

- Outbreaks of lethal and highly contagious COVID-19 variants.
  - Relative Likelihood: Medium
  - Impact if realized: High
  - Recommended Policy Response:
    - Continue to prioritize social and health-related spending, including vaccines, and enhance the efficiency of spending.
    - Continue supporting the population, along with clearly anchored policies when the pandemic subsides.
    - Energize external support to the economy and vaccination.
    - Strengthen crisis management and preparedness.
  - Impact summary: Adverse impact on growth through less FDI and external support; demand for export products and prices would fall, widening fiscal and BOP gaps; deterioration in debt sustainability.

- Rising and volatile food and energy prices.
  - Relative Likelihood: High
  - Impact if realized: High
  - Recommended Policy Response:
    - Save part of the oil proceeds towards policy buffers, including to support regional reserve target.
    - Roll-back crisis-related accommodative policy measures and adhere to the planned fiscal consolidation to boost confidence and promote private sector-led growth.
  - Impact summary: Materialization of this upside risk would improve fiscal and external balances and help reduce BOP and fiscal financing gaps faster.

- Abrupt growth slowdown in China.
  - Relative Likelihood: Medium
  - Impact if realized: High
  - Recommended Policy Response:
    - Diversify export destinations.
  - Impact summary: Will reduce exports as China is a significant destination for oil and manganese exports.

- Intensified geopolitical tensions and security risks.
  - Relative Likelihood: Medium
  - Impact if realized: Medium
  - Recommended Policy Response:
    - Enhance an already well-established policy framework for dealing with emigration.
  - Impact summary: Could intensify the flow of refugees/displaced people into Gabon from neighboring instability.

### Debt Sustainability Analysis — Key Findings and Projections
- Overall assessment:
  - Gabon’s public debt is assessed to be sustainable without high probability, and risks have moderated.
  - Public debt has decreased from the previous DSA.
  - The framework is more benign largely due to the inflating away of the debt and debt service burden via high oil prices, but such process is liable to be reversed.

- Public debt and projections:
  - Public debt expected to reach 52.6 percent of GDP in 2022, down from 65.8 percent of GDP in 2021.
  - Public debt expected to decline to 43.4 percent of GDP in 2027.
  - Gross financing needs (GFN) projected to average 4.9 percent of GDP over the medium term (2022–27), down from 8.8 percent over 2011–21.
  - Debt service accounted for 48.9 percent of revenues in 2022, compared to 80 percent in 2021.
  - Debt service-to-revenue ratio projected at 48.9 percent in 2022 and would average 53 percent over the medium term.
  - A large Eurobond repayment is scheduled in 2025, posing liquidity and rollover risks.

- Drivers of recent changes:
  - The downward revision of public debt-to-GDP in 2022 relative to previous DSA is mainly due to higher nominal GDP growth as oil prices increased.
  - Public debt in baseline projected at 52.6 percent of GDP in 2022, due to improvement of primary fiscal balance to 3.7 (from 0.9 percent of GDP in 2021), driven by spike in oil prices.
  - Gross financing needs projected to decline to 4.3 percent of GDP in 2022, compared with 8.2 percent of GDP in the previous DSA.

- Risks and vulnerabilities:
  - Debt remains vulnerable to macroeconomic shocks, particularly:
    - Real GDP growth shock.
    - Real exchange rate shock.
  - Standard shock scenarios would worsen debt; an adverse GDP growth shock and a real exchange rate shock could push public debt-to-GDP ratios to around 54 percent.
  - A combined macro-fiscal shock (GDP, primary balance, inflation, exchange rate, and interest rate) would raise debt levels and GFN to almost 68 percent and 12 percent of GDP, respectively.
  - Contingent liability risks exist given narrow debt coverage (central government and guaranteed debt).
  - Oil price volatility and the small banking sector are additional sources of risks.
  - Liquidity pressures persist with domestic and external arrears accumulated in 2021.

- Heat map and indicators:
  - Heat map shows improvement in vulnerabilities since previous DSA, but:
    - High risks related to external financing requirements and significant share of public debt held by non-residents exceed upper early-warning thresholds.
    - Public debt held by non-residents estimated at 64 percent (exceeds upper threshold).
    - External financing requirement indicator noted as high in heat map.

- Policy recommendations to ensure sustainability:
  - Stronger assurances to cover remaining short-term financing gaps in 2022 and 2023.
  - Resolve outstanding domestic arrears.
  - Build a track record of remaining current on external debt service payments.
  - Develop a credible medium-term debt management strategy.
  - Adopt prudent fiscal policies, including saving a large part of oil windfall to build fiscal buffers and create fiscal space for priority spending.

### DSA Baseline and Scenario Numbers (selected exact figures from tables and figures)
- Public debt (nominal gross public debt) by year:
  - 2020: 44.5
  - 2021: 78.3
  - 2022: 65.8
  - 2023: 52.6
  - 2024: 50.8
  - 2025: 48.5
  - 2026: 46.6
  - 2027: 45.0
  - (Percent of GDP as printed in Figure 3 table.)

- Public gross financing needs (percent of GDP):
  - 2022: 4.3
  - Projections average over 2022–27: 4.9 percent of GDP.

- Real GDP growth (selected years):
  - 2020: 3.7
  - 2021: -1.9
  - 2022: 1.5
  - 2023: 2.8
  - 2024: 3.7
  - 2025: 3.7
  - 2026: 3.8
  - 2027: 3.9

- Inflation (GDP deflator, percent):
  - 2020: 0.2
  - 2021: -9.1
  - 2022: 25.4
  - 2023: 20.6
  - 2024: -4.3
  - 2025: -2.3
  - 2026: -1.1
  - 2027: -0.3

- Nominal GDP growth (percent):
  - 2020: 4.0
  - 2021: -10.8
  - 2022: 27.3
  - 2023: 23.9
  - 2024: -0.7
  - 2025: 1.3
  - 2026: 2.6
  - 2027: 3.5

- Effective interest rate (percent):
  - 2020: 4.6
  - 2021: 4.9
  - 2022: 5.7
  - 2023: 6.7
  - 2024: 8.1
  - 2025: 8.9

- Change in gross public sector debt (percent of GDP, cumulative to 2027):
  - 2020: 4.3
  - 2021: 18.5
  - 2022: -12.5
  - 2023: -13.2
  - 2024: -1.7
  - 2025: -2.3
  - 2026: -1.9
  - 2027: -1.6
  - Cumulative: -22.3

- Identified debt-creating flows (cumulative):
  - Total identified: -21.0
  - Primary deficit: -26.3
  - Primary (noninterest) revenue and grants (cumulative): 105.0
  - Primary (noninterest) expenditure (cumulative): 78.7

- Automatic debt dynamics (contribution, percent of GDP):
  - 2020: 1.1
  - 2021: 6.7
  - 2022: -11.1
  - 2023: -10.2
  - 2024: 3.0
  - 2025: 2.2
  - 2026: 1.9
  - 2027: 2.1
  - Cumulative: 0.5

- Real interest rate and real GDP growth contributions (selected):
  - Real interest rate (2020): 1.6
  - Real interest rate (2021): 9.4
  - Real interest rate (2022): -13.1
  - Real GDP growth contribution (2020): -1.1
  - Real GDP growth contribution (2021): 1.2
  - Real GDP growth contribution (2022): -0.9

- Public debt held by non-residents:
  - 64 percent (noted as exceeding upper threshold in heat map).

### Stress Tests and Alternative Scenarios — Key Outcomes
- Stress tests show worsening debt outcomes under shocks:
  - Real GDP growth shock example: pushes debt higher relative to baseline (see Figure 5 scenarios).
  - Primary balance shock, real interest rate shock, real exchange rate shock, and combined macro-fiscal shock all increase gross nominal public debt and public gross financing needs relative to baseline.
  - Combined macro-fiscal shock would raise debt levels and gross financing needs to almost 68 percent and 12 percent of GDP, respectively (text summary).

- Alternative scenario assumptions (selected exact entries from Figure 4):
  - Baseline vs Historical vs Constant Primary Balance scenarios listed with exact series for Real GDP growth, Inflation, Primary Balance, Effective interest rate for 2022–27.
  - Constant Primary Balance scenario assumes Primary Balance 3.7 across 2022–27.

- Composition and maturity:
  - Charts indicate composition by maturity (medium and long-term vs short-term) and by currency (local vs foreign currency) for 2020–2027 projection years; highlighted vulnerability is significant share of foreign-currency-denominated and non-resident-held debt.

*Source: IMF staff.*

### Annex V. Carbon Credits and the Gabonese Economy

### Annex V. Carbon Credits and the Gabonese Economy

### Gabon’s carbon absorption and climate leadership
- In June 2021, Gabon was the first African country to receive financing for its reduction in carbon emissions since 2016.
- Gabon’s rainforest absorbs a total of 140 million tons of CO2 every year.
- Gabon has maintained forest cover on 91.4 percent of total land area.
- Deforestation levels have been cut to less than 1 percent.
- Gabon aims at reducing its emissions by half in the next four years.
- Gabon is a net absorber of carbon emissions and is positioned as a global leader in net zero carbon emissions initiatives despite its very small contribution to global emissions.

### Carbon finance and policy developments
- Under the United Nation’s Central African Forest Initiative, Gabon will receive US$150 million over ten years as reward for US$5 per ton.
- In September 2021, the Gabonese authorities passed legislation to promote trade in carbon credits.
- The authorities anticipate that net carbon emitters can compensate Gabon for absorbed emissions, possibly offsetting their own emissions.

### Complementary actions and economic linkages
- Gabon promotes eco-tourism and has issued bonds to preserve its forest.
- The climate change fund is linked to emissions-absorption financing and aims to:
  - promote climate change adaptation and mitigation measures,
  - finance increased environmental protection,
  - develop human capacity,
  - build climate resilient industries—especially in the agricultural, forestry and fishing sectors.
- The annex notes that the agricultural, forestry and fishing sectors’ value added is consistently growing and could form the foundation for higher and more diversified economic growth.

### Vulnerabilities and adaptation needs
- Despite being a net absorber and a global public service provider via protection of the Congo Basin Rainforest, Gabon is quite vulnerable to climate change and has large adaptation needs.
- The climate change fund is expected to address adaptation needs and support economic diversification.

*Sources: Annex V, "Carbon Credits and the Gabonese Economy," IMF staff compilation from Gabonese authorities and World Bank data.*

### 11.      The initial budget law adopted by the parliament in December 2021 reflects our

### 1gabea2022001 - 11.      The initial budget law adopted by the parliament in December 2021 reflects our

### Fiscal position and revised 2022 budget
- Initial budget law (Dec 2021) commits to fiscal consolidation with a non-oil primary deficit of 5.4 percent of NOGDP (compared to 7.1 percent in 2021), slightly above the initial program target (4.9 percent) to account for additional COVID-19-related spending of CFAF 40 billion (about 0.5 percent of NOGDP).
- Revised budget law to be submitted by June 2022 projects a widening of the deficit by CFAF 58.4 billion to reach CFAF 463.8 billion (6.2 percent of NOGDP).
- Key revisions reflecting the effects of the war in Ukraine:
  - Increase in oil revenues estimated at CFAF 318.6 billion based on an oil price per barrel assumption of US$ 80.
  - Increased subsidies for oil and wheat: subsidies re-evaluated at CFAF 92.7 billion (against CFAF 14.2 billion in the initial 2022 budget law).
  - Tax expenditures relating to the "Vie chère" program estimated at about CFAF 50 billion.
  - Use of SDR allocations: entire 2009 allocation (SDR 114.4 million equivalent to CFAF 93.8 billion) and part of the 2021 allocation (SDR 31.9 million equivalent to CFAF 26.2 billion) to accelerate repayment of domestic debt and support regional reserves.

### Subsidy policy and pump prices
- Decision to keep pump prices unchanged for kerosene and butane gas (most consumed by the most vulnerable households).
- Gradual price increases planned for other petroleum products (starting with those used by businesses) to limit subsidy costs.
- Objective to reinstate the automatic price indexation mechanism.
- Potential elimination of kerosene and butane gas subsidies through a well-targeted social transfer system towards Economically Weak Gabonese (GEF).
- For wheat: maintain permanent dialogue with businesses to contain upward pressure on bread prices.

### Fiscal risks and reserve mechanism
- Principal risks: war in Ukraine, uncertainty over prices of raw materials (oil, manganese) and food products leading to:
  - Non-oil revenue below program target,
  - Primary spending above program target,
  - External support below expectations.
- Policy for shortfalls: any revenue or financing shortfalls relative to program targets will be offset by reductions in non-critical expenditures, in consultation with IMF staff.
- Risk of subsidy slippage in 2022 judged high and dependent on oil prices.
- Use of existing reserve mechanism to preserve the planned level of the budget deficit; reserve estimated in 2022 at CFAF 80.9 billion (4.1 percent of total expenditure).

### Fiscal structural reforms — Revenues and oil transparency
- Progress on oil sector transparency: published notes in June, September and December 2021; Gabon joined EITI in October 2021.
- Commitments for oil sector governance:
  - Regular repatriation of revenue from Gabon Oil Company (GOC) to the government.
  - No resort to any form of pre-financing backed on future oil revenues.
  - Recruit independent company (End-October 2022 Structural Benchmark) to audit the oil sector: assess cost oil, evaluate agreements between oil companies/government/public companies, and establish level of cross-debt; audit will cover the five major companies (End-March 2023 structural benchmark).
  - Review agreements related to debt repayment for consistency with public financial management rules and ensure they are included in government accounts.
  - Financial audit of the national refinery (SOGARA) to assess viability (Structural benchmark for June 2023).
  - Centralize oil revenues in the Treasury Single Account (TSA).

### Tax and customs exemption reforms
- Revised 2021 budget transformed full exemptions into partial exemptions at a reduced rate of 5 percent for: social housing, tourism/hospitality, wood processing, cement and agriculture; exemption periods reduced from five (05) to three (03) years. Effective since January 1, 2022 for social housing, tourism/hotel and wood processing; cement provision deferred until 2024; agriculture implementation expected from July 1, 2022.
- Initial 2022 budget introduced a reform to subject twenty-three fully exempt tariff lines (related to the fight against high cost of living) to a 5 percent reduced customs rate; implementation on hold pending broad consultation given rising prices.
- Introduction of Single Property Tax (SPT) in the initial 2022 budget to simplify liquidation and enhance efficiency; SPT introduced in the budget but not effective until 2023. Parliamentary changes lowered expected revenue and require further consideration; reform requires revisiting property titling and management system.

### Additional tax reforms and institutional measures
- Further work required on:
  - Introduction of a specific tax for the banking sector.
  - Financing of social programs.
  - Taxation of the tourism sector (short-term support considered necessary due to coronavirus effects).
- Social solidarity contribution (CSS) reform: operators in oil and mining with fiscal stability clauses initially exempt; Mining and Hydrocarbon administrations to consult these operators.
- Revised 2022 budget proposal includes new general tax code provision (article 3 paragraph 3) stating that "natural or legal persons who have signed contracts or agreements with the government which enshrine a tax stability clause cannot invoke it with the Administration on matters of taxes for which they are only collectors. Fiscal stability clauses must be reviewed every five years".

### Environmentally friendly tax system and revenue IT modernization
- Joint study with UNDP on an environmentally friendly tax system completed; conclusions in process of publication.
- SYDONIA World migration continued in 2021 covering Port-Gentil and Franceville; planned continuation in 2022 for Oyem.
- Commitment to develop a dematerialized tax administration system: front office (e-T@ax) and back office (LIIR) in a single environment.
- Tax and customs administrations to draw up a master plan for continued deployment of information systems; IMF TA mission requested.
- Commitment to operationalize a tax policy unit to strengthen analytical capacity of the Ministry of Economy and launch a special commission to examine new tax exemption requests.

### Public finance management reforms
- Expenditure control and efficiency measures:
  - Payroll cleansing and update of civil servant numbers; legal text on recruitment procedure under review.
  - Creation of public agencies conditional on prior studies; institutional mechanism for financial monitoring of public enterprises.
  - Implement budget, accounting, financial and physical monitoring tool for projects; strengthen legal/methodological framework for public investment management; use Commitment Authorization/Payment Credit (AE/CP) approach.
  - Improve institutional framework and management of public finances per original MEFP commitments (¶40).
- Transition to GFSM 2014 and OHADA accounting standards; modernization of SIGFIP required for accrual data and extended public sector coverage.

### Cash management and procurement
- Cash management actions:
  - Full implementation of TSA by End-January 2023 (Structural benchmark), including repatriation of funds and closure of accounts in commercial banks.
  - Rationalization of compensation mechanisms that reduce central administration revenues for oil and non-oil sectors; heightened scrutiny for any new compensation agreements.
  - Full implementation of commitment plans in line with the monthly cash flow plan attached to the finance law.
  - Integration of commitment plans in VECTIS; AFRITAC Centre cooperation mission planned to support commitment realization.
- Other measures:
  - Reform of VAT escrow account delayed; TA mission from French Treasury expert occurred June 8–19, 2022 (End-June 2022 structural benchmark).
  - Reduction in public contracts awarded without call for tenders: percentage limited, on average, to 35 percent in 2020 and 2021; efforts to continue in 2022.
  - Systematic publication of tenders and awards in the public procurement journal (online), with indication on beneficiaries.

### Public enterprises, investment management, and SOE vulnerabilities
- Four (04) main public enterprises completed management audits required under the program and implemented reforms to address auditors’ observations; CDC and FGIS certified and published 2021 financial statements online; government committed to ensure the remaining two also certify and publish annual reports.
- Public investment management initiatives:
  - Organization of budget conferences focusing on investments (since 2020).
  - Harmonization with partners and CEMAC countries on a guide for common projects.
  - Drafting of a decree related to public investment management.
  - Establishment of a national directory for public investments (RNIP) updated annually (fiscal years 2021 and 2022).
  - Preparation of Public Investment Programs (PIP) attached to budget laws (2021–23 and 2022–24 programming).
- Remaining needs and structural benchmarks:
  - Adoption of a decree on Public Investment Management.
  - Develop strategy to progressively eliminate derogatory processes for public investment with timebound deadline by end-October 2022 (Structural benchmark).
  - Implement AE/CP methodology to manage public investment projects.

### Public debt, arrears, and fiscal risk management
- Measures to strengthen debt management: improve debt reporting, lengthen maturities, avoid bundling repayments, establish weekly ad hoc committee between Treasury and General Directorate of Debt, include debt management on Technical Committee and Treasury Coordination Committee agendas, verify timely transfer orders to BEAC.
- External arrears as of June 14, 2022:
  - Total external arrears: CFAF11.09 billion (US$20.0 million).
  - Of which CFAF 2.36 billion (US$4.25 million) vis-à-vis multilaterals.
  - CFAF 8.07 billion (US$14.57 million) vis-à-vis official bilateral creditors insured and from China CFAF 0.55 billion (US$1.00 million).
  - Non-insured arrears: CFAF 0.66 billion (US$1.18 million).
- Commitment to clear the full amount of external arrears prior to the Board meeting for completion of the first and second reviews under the EFF-supported program.
- Domestic debt stock at end-December 2021: 28.03 percent of GDP, comprising:
  - Regional financial market debt: CFAF 1540.6 billion.
  - Bank loans: CFAF 886.4 billion.
  - Moratorium: CFAF 394.4 billion.
  - Domestic arrears: CFAF 321.5 billion.
- Government adopted (Dec 2021) a plan for clearing audited and validated domestic arrears equivalent to 5 percent of GDP at end-2020; plan extends over five years.
- Continued identification and assessment of arrears not considered in the 2021 debt stock, including salary arrears and arrears with certain public entities.

### Budgetary risk reporting and portfolio monitoring
- Finalized annex on budgetary risks attached to the 2022 budget law emphasizing identification and prioritization of risk factors; further progress needed on quantification of budgetary risks.
- Monitoring of government equity portfolio in SPIN, GOC, SEM and FGIS through:
  - Clear provisions on monitoring responsibilities and reporting obligations.
  - Transparency measures via regular publications and submissions to budget institutions (legislative power, court of auditors).
  - Development of a public portfolio management strategy.

### Social protection
- Strengthen social protection with partners (including World Bank): updated existing database of Economically Weak Gabonese (GEF).
- Next steps: define new eligibility criteria for GEF; conduct a survey and establish a new GEF database based on new poverty indicators (End-December 2022 structural benchmark).

### Financial sector and access to finance
- Financial sector growth and stability: total balance sheet up by 15.2 percent in 2021.
- Reported share of overdue loans: 9.8 percent in 2020 to 8.5 percent in 2021.
- Caution: banking portfolio quality may deteriorate with lifting of temporary measures of the COBAC.

*IMF staff report excerpt (source PDF: 1gabea2022001).*

### 33.      We have continued the process of liquidating the three public banks (BHG,

### 1gabea2022001 - 33.      We have continued the process of liquidating the three public banks (BHG,

### Bank liquidation and legacy liabilities
- Continued liquidation of the three public banks (BHG, Postebank and BGD).
- Preliminary estimate of the cost of the liquidation: CFAF 135 billion (1.2 percent of GDP) based on an aggregation of the three banks’ outstanding liabilities.
- COBAC should officially announce the end of the bank liquidation process in the coming months.
- Authorities to set up, by Prime Minister’s decree, a defeasance structure placed under the supervision of the Ministry of Economy and Recovery that would gather the Ministries of the Budget, Housing and the Post Office.
- The defeasance structure will work in close collaboration with the Ministry of Justice to pursue realization of assets and settlement of residual liabilities, including judicial liquidation.
- Liquidation process timeline: this process would last until 2024 and will help put an end to the overall liquidation process.
- Commitment: reinvigorate the liquidation monitoring committee and produce and share with IMF staff by end-December 2022 a note on:
  - (i) the list of litigation cases,
  - (ii) the expected proceeds from the sale of assets,
  - (iii) the plan to compensate creditors.

### Financial inclusion and financial sector strengthening
- Financial inclusion strategy developed covering the period 2022–27; to be adopted by the end of 2022.
  - Strategy axes: (i) improving access to financial services for vulnerable and excluded populations, and (ii) promoting digital finance.
  - Governance: a coordinating body (steering) and an implementation committee (execution) will be put in place.
- Measures to strengthen the financial sector:
  - Strategy to reduce overdue loans based on the domestic debt clearance plan and strengthening capacity of the Commercial Court.
  - Development of a strategy for development of non-bank investment in government securities in cooperation with the BEAC to strengthen government financing capacity and stimulate savings and social welfare.

### Improvement of macroeconomic statistics
- General Business Census (RGE) carried out since January 2022; first results should be available at the end of the third quarter of 2022 and publication on the General Directorate of Statistics website will be completed before the end of the year 2022.
- Launched design of a multi-sectoral database management platform on key statistics; data portal will be online before the end of September 2022.
- Undertaken: rebasing of national accounts, transition to the 2008 SNA, production of the 2011–20 national accounts and production of quarterly GDP with IMF technical assistance.
- Remaining weaknesses: balance of payments and monetary statistics.
- With IMF and other partners, the Central Bank and authorities are stepping up efforts to improve statistical areas.

### Program monitoring, waivers, and arrears
- Requesting waivers for nonobservance of two PCs (fiscal deficit and central bank net claims on government) at end-December 2021 and the continuous PC on non-accumulation of new external arrears.
  - Waiver on fiscal deficit requested based on temporary deviation reflecting non-disbursement of AfDB budget support.
  - Miss on central bank net claims on government reflected significant drawdown in deposits due to domestic debt repayments; deposits have begun to be rebuilt since beginning of the year.
- External arrears status:
  - Cleared most external arrears as of June 14, 2022.
  - Outstanding amount of CFAF 11.09 billion to be cleared prior to the Board meeting on June 27, 2022.
  - Steps taken to avoid accumulation of new external arrears (MEFP, ¶26).

### Updated program conditionality and monitoring framework
- Agreement with the IMF to update program conditionality:
  - (i) PCs and ITs for end-June 2022 have been set. New PCs and ITs for end-December 2022 and end-June 2023, and new ITs for end-September 2022 and end-March 2023 proposed, reflecting changing international and domestic environment including the impact of the war in Ukraine.
  - (ii) The IT on non-oil tax revenue becomes a PC from end-December 2022.
  - (iii) Seven new structural benchmarks proposed, based on IMF technical assistance on tax expenditures, cash management and PIMA.
- Program implementation monitored by: prior actions, semi-annual reviews, quantitative performance criteria and indicative targets, a continuous performance criterion, and structural benchmarks.
  - Third review scheduled for December 2022 (based on end-June 2022 PCs, the continuous PC, and relevant structural benchmarks).
  - Fourth review scheduled for June 2023 (based on end-December 2022 quantitative targets, the continuous PC, and relevant structural benchmarks).
- For all dates, PCs will include:
  - a floor on the primary fiscal balance, excluding oil revenue (cash basis);
  - a ceiling on the central government's net domestic financing (excluding the use of IMF financing);
  - a ceiling on the central bank's net claims on the central government, excluding the use of IMF credit;
  - a ceiling on borrowing or guaranteeing external debt (program and project);
  - a ceiling on the accumulation of new external arrears by the central government.
- Proposal: the indicative target on revenue becomes a performance criterion with first date at end-December 2022.

### Domestic Debt Clearance Plan (figures in billion FCFA)
- Domestic resources: 50 (2021), 30 (2022), 30 (2023), 30 (2024), 20 (2025)
- Securitization: 93.3 (2021), 70.0 (2022), 70.0 (2023), 15.0 (2024), 0.0 (2025)
- SDRs: 0 (2021), 10.0 (2022), 10.0 (2023), 0.0 (2024), 0.0 (2025)
- Debt repurchases: 0 (2021), 8.7 (2022), 5.3 (2023), 0.0 (2024), 0.0 (2025)
- Total: 143.3 (2021), 118.7 (2022), 115.3 (2023), 45 (2024), 20 (2025)

*Source: IMF staff summary of Gabon authorities submissions and program documents.*

### Box 1. Gabon: Actions Undertaken as Part of the GEF Project

### Box 1. Gabon: Actions Undertaken as Part of the GEF Project

### GEF file cleaning and beneficiary reclassification
- Activities conducted to clean the CNAMGS GEF file based on current legislation included:
  - Making the CNAMGS files more reliable regarding the following tranches/Tiers: Tier 1 (private and semi-public sector), Tier 2 (public officials) and Tier 3 (GEF). This involved matching the CNAMGS files with each other, and matching the CNAGMS files with the files of sectoral administrations (CNSS, payroll, Tax administration, etc.).
  - Filling the Tier 4 (Self-Employed Mobile Workers) by transferring the GEFs that are currently included in Fund 3 (Economically Weak Gabonese) to Fund 4.
  - Deleting duplicates and unnecessary records included in the GEF database, changing the status of GEFs and migrating agents from Fund 3 to Funds 1 and 2.

### Publication of data online (Box 2)
- Actions carried out on public data publication:
  - The free public access online journal —for which publications were already available— was presented to members of the government in December 2021.
  - The publication of information on contracts (planning, award, execution and control) for 2021 has been available on the website since January 2022.
  - The release of information on contracts for 2022 is ongoing along with the continued loading of information for the remainder of 2021 through 2020.
  - All the information on the attributions (provisional subject to appeal) of public contracts for 2022 will be available in time from the approval of the analysis report of the offers by the General Directorate of Public Contracts (DGMP) on its website.

*Source: 1gabea2022001 - Box 1. Gabon: Actions Undertaken as Part of the GEF Project*

### Technical Memorandum of Understanding (TMU) — Key definitions and monitoring rules

### TMU scope and accounting conventions
- TMU sets understandings between Gabonese authorities and the IMF on definition of quantitative performance criteria (PC) and indicative targets (IT), adjusters, and reporting requirements for the extended arrangement under the Extended Financing Facility (authorities’ LOI dated June 14, 2022).
- Program accounting exchange rates (unless otherwise indicated):
  - CFAF to U.S. dollar: 612.300 (official rate as of May 31, 2022).
  - Euro: 1.0713 U.S. dollars.
  - Pound Sterling: 1.2589 U.S. dollars.
  - Chinese Yuan: 6.6612 U.S. dollars.
  - Special Drawing Right (SDR): 1.3497 U.S. dollars.
  - Official gold holdings: 1852.51 U.S. dollars per fine ounce.
- Fiscal year: calendar year, January 1 to December 31.
- Reporting timeline for most fiscal data: with a lag of no more than six weeks after end of month (exceptions noted below).

### Quantitative performance criteria: Non-oil primary fiscal balance (cumulative floor)
- Definition: Non-oil primary fiscal balance of the central government (CG) on a payment order basis = (i) total CG revenue on a cash basis (excluding oil revenue) and grants minus (ii) total CG expenditure on a payment order basis excluding interest payments.
- Total CG revenue (excluding oil) measured on cash basis; includes offsetting revenue/expenditure operations and earmarked revenues (Road Fund and special funds).
- Oil revenue: includes payments received in cash and in crude; revenue received by the treasury registered after encashment (at most 7 days after 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. TOFE presentation to recognize additional expenditure categories including capital transfers related to privatization/liquidation and end-fiscal-year current transfers financing deficits on Treasury accounts.

### Oil revenue cumulative flows (CFAF billions)
- End March 2022: 101.1
- End June 2022: 499.4
- End September 2022: 757.5
- End December 2022: 981.3

### External program disbursements (Baseline Projection) — cumulative flows from beginning of year (In US$ Millions)
- External loans for budget support:
  - End March 2022: 0.0
  - End June 2022: 268.7
  - End September 2022: 268.7
  - End December 2022: 429.4
- External loans for project financing:
  - End March 2022: 9.4
  - End June 2022: 81.0
  - End September 2022: 152.6
  - End December 2022: 224.2
- External loans from commercial sources and international capital markets:
  - End March 2022: 3.9
  - End June 2022: 4.9
  - End September 2022: 5.9
  - End December 2022: 6.9

### Ceilings and definitions for fiscal financing and debt
- Net Domestic Financing of the CG (ceiling): sum of (i) net bank credit to the government and (ii) net nonbank financing.
  - Net bank credit: change in balance between government's liabilities and assets with national banking system; includes central bank financing (statutory advances, net IMF financing, refinancing of guaranteed bonds, treasury paper held by central bank) and commercial bank financing.
  - Net nonbank financing: change in outstanding government securities issued in CFA francs on regional market not held by local banking system; privatization receipts; change in correspondent bank and consignment accounts; change in outstanding claims on government abandoned by private sector.
  - Net bank credit calculated from BEAC data; monthly reconciliations required between treasury and BEAC.
- Ceiling on net claims of the BEAC to the CG, excluding IMF credit: gross change in BEAC claims on CG (including statutory advances and other BEAC claims excluding on-lending of IMF credit) less change in BEAC gross liabilities to CG (treasury vault cash, deposits of Future Generation Fund, deposits of Sovereign Wealth Fund, other central government deposits). Ceiling applied from end-June 2022.
- Ceiling on disbursing or guaranteeing external debt by the CG:
  - Debt definition follows paragraph 8(a) of the Guidelines on Public Debt Conditionality in Fund Arrangements (IMF Executive Board Decision No. 15688-(14/107), adopted December 5, 2014, as amended).
  - For program purposes, external debt defined as debt contracted or serviced in a currency other than CFAF.
  - Guaranteeing external debt triggers nonobservance of the PC regardless of disbursement.
  - Exclusions: normal import-related commercial debt with maturity < 1 year; rescheduling agreements.
  - For Eurobond issuance, amount deemed disbursed = amount subscribed/purchased at end of subscription/purchase period as in final documentation.
  - Authorities to inform IMF staff within 2 weeks of any planned contracting or guaranteeing of external debt and related conditions before contracting/guaranteeing.

### External arrears (continuous PC)
- Accumulation of external payments arrears by the CG: continuous performance criterion with zero limit throughout program period.
- External payment arrears defined as contractual external debt service obligations (interest and/or principal, including moratorium and later/penalty interest, where applicable) of the CG not made after falling due.
- Exclusion: arrears resulting from nonpayment for which a rescheduling agreement is sought.
- Reporting: Ministry of Economy to provide final stock of external arrears to IMF with lag no more than six weeks; provide data immediately after any external arrears are incurred.

### Floors on CG tax revenue and social spending
- Cumulative floor on central government tax revenue, excluding oil revenue:
  - Defined as sum of direct domestic taxes, indirect domestic taxes, and international trade taxes per Government of Gabon’s revenue classification.
  - First test date: end-December 2022.
  - Reporting lag: no more than six weeks from end of month.
- Cumulative floor on central government social spending:
  - Floor on non-wage social spending as defined in CG budget for a fiscal year; funded by government resources.
  - Floor includes: (i) social services relating to social safety nets, free childbirth coverage, SAMU Social and seniors; (ii) legal assistance; (iii) electrification program and hydraulic installations for rural areas without access to public water and electricity network; and (iv) the special solidarity contribution (CSS) allocated to economically weak Gabonese (GEF).
  - Reporting lag: no more than four weeks from end of month.
  - If primary expenditure compression needed, social spending maintained to execution level estimated for 2022 regarding budget items included in the cumulative floor for CG social spending (1 percent of NOGDP).

### Domestic arrears (indicative target)
- Definition: Stock of domestic payment arrears of the CG = sum of all contractual obligations unpaid 90 days after accrual, consistent with regional directives (article 14 of directive on TOFE). Includes procurement contract obligations, statutory obligations (civil service wages, VAT reimbursements, other entitlements).
- Cumulative floor on net reduction of stock of domestic arrears measured as stock on test date minus stock as of January 1, 2022.
- Reporting lag: no more than six weeks from end of month.

### Reporting requirements (selected)
- General reporting: data to IMF with lag no more than six weeks after end of month unless specified otherwise (social spending: four weeks).
- Ministry of Economy to provide final external arrears stock within six weeks; immediate notification to IMF when external arrears incurred.
- Authorities must provide IMF staff prior notice (within 2 weeks) of planned contracting/guaranteeing of external debt.

### Adjustors to PCs and ITs
- Net Domestic Financing of the CG — oil price adjustor:
  - If Brent oil price projections as reported by IMF-WEO decline by up to 25 percent relative to the program baseline (US$111 per barrel), the ceiling will be adjusted upward to accommodate the shortfall in oil revenue in a given quarter.
  - If Brent oil price projections as reported by IMF-WEO decline by more than 25 percent relative to the baseline program projection, a consultation between the government and the IMF is required.
  - If Brent oil price projections as reported by IMF-WEO rise relative to the baseline program projection for 2022, one-half should be allocated to increase central government deposits at the BEAC, with a requisite downward adjustment of the cumulative ceiling on net claims of the banking sector on the CG.
- Budget support adjustor:
  - Program will be adjusted downward (upward) by the amount by which budget support exceeds (falls short of) the projected amounts.
  - Any upward adjustment capped to 10 percent of the amount set out in Table 1 of the MEFP.
- Non-oil fiscal balance adjustor:
  - Floor on cumulative primary non-oil fiscal balance of the CG on a payment order basis will be adjusted downward (upward) to the extent that external financing is more (less) than external program disbursements given in Text Table 2.
- Social spending:
  - Should primary expenditure compression be needed, social spending would nevertheless be maintained to the execution level estimated for 2022 regarding budget items included in cumulative floor for CG social spending (1 percent of NOGDP).
- Debt adjustors (ceiling on disbursing or guaranteeing external debt):
  - Upward adjustment up to a maximum of 5 percent of the ceiling on new external debt where differences vis-à-vis the PC on new debt are caused by variation in financing conditions (interest, maturity, grace period, payment schedule, front-end fees, management fees). Adjustor may not be applied when differences result from increase in face value of total debt contracted or guaranteed.
  - Upward (downward) adjustment where early (late) disbursements of specifically agreed and identified financing flows take place.

*Source: 1gabea2022001 - Box 1. Gabon: Actions Undertaken as Part of the GEF Project*

### 29.      To facilitate monitoring of program implementation, the government of Gabon will

### 29.      To facilitate monitoring of program implementation, the government of Gabon will prepare and send to the IMF by e-mail data and monthly reports within six weeks following the end of the preceding month. Such data will include (but are not limited to) the following:

### Reporting requirements and data to be transmitted
- 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, boni 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 Treasury cash balance (Excel 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 General 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, 2022; the net accumulation of new float during 2022, defined in paragraph 6 as the difference between payment orders (ordonnancements) and payments made (cash basis), as well as the repayment of pre-2022 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 (Excel 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;
- quarterly reports (table) presenting the stock of expenditure pending at the various execution, to be prepared jointly by the Direction Générale du Budget et des Finances Publiques (DGBFIP) and Direction Générale de la Comptabilité Publique et du Trésor (DGCPT);
- indicators and other statistical data on recent economic developments, such as the household consumer price index (Excel file), 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 Tables 2, 3 and 4 attached to the letter of Intent of June 14, 2022.
- 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.

### Recent program implementation, outcomes, and quantitative indicators
- All external arrears with multilateral, bilateral and commercial non-insured creditors were cleared as of June 14, 2022 (CFAF 11.09 billion) and Gabon remained current on external debt service since then.
- The authorities implemented the three prior actions (PAs) for the first and second reviews under the EFF Arrangement:
  - Supplementary 2022 Budget submitted to Parliament on June 9, 2022; the revised budget projects the non-oil primary deficit at 6.2 percent of non-oil GDP, with non-oil revenue and grants at 16.7 percent of non-oil GDP and total primary expenditure at 22.9 percent of non-oil GDP.
  - Ministerial decree issued on June 17, 2022 requiring legal persons bidding on public procurement contracts to declare the names and nationalities of their beneficial owners and publish them online for awardees.
  - Publication on June 17, 2022 of audit reports of all COVID-related expenditure for 2020–21 on the Ministry of Economy and Recovery website.
- Macroeconomic and fiscal outcomes for 2021:
  - GDP growth reached 1.5 percent in 2021.
  - Inflation remained contained below the regional convergence criterion of 3 percent.
  - Non-oil primary deficit was contained at 7.1 percent of non-oil GDP as programmed.
  - Public debt declined by 12.5 percentage points to 65.8 percent in 2021.
  - NPLs remained stable at 7.8 percent in 2021.
- Near-term outlook and projections:
  - Growth projected to reach 2.8 percent in 2022 as nonoil activity further picks up.
  - Preliminary information for 2022Q1 confirms an uptick in economic activity; fiscal and external balances at end-March 2022 improved thanks to higher commodity exports and prices.
- Program performance and corrective actions:
  - Observance of quantitative performance criteria and targets at end-December 2021 was mixed; the target on social spending for end-December 2021 was observed.
  - Corrective actions include steps to enhance budget execution, improve cash management, strengthen coordination between the Treasury and Debt departments, and establishment of a weekly meeting of an ad hoc committee for interdepartmental coordination on debt payments.
  - Authorities requested waivers for nonobservance of missed performance criteria and modification of performance criteria.

### Policies, reform commitments, and institutional measures for 2022
- Fiscal policy and budgetary measures:
  - Revised budget for 2022 adopted by Parliament on June 21, 2022 targets fiscal consolidation at a slower pace; part of oil windfalls will be used for petroleum and wheat subsidies targeted at vulnerable households.
  - Two petroleum products, kerosene and cooking gas, will remain subsidized; petroleum subsidies will be contained through price adjustments on other products and progressive resumption of the automatic petroleum setting mechanism suspended in 2021.
  - Non-oil primary deficit projected to decline from 7.1 percent of non-oil GDP in 2021 to 6.2 percent in 2022 and the overall fiscal balance will turn positive in 2022.
  - Use of SDR allocations: authorities intend to use the entire 2009 SDR allocation and only 15 percent of the 2021 allocation for domestic debt repayments and budget financing, while the remainder will support international reserves at BEAC.
- Revenue mobilization and PFM reforms:
  - Further streamlining of tax and customs exemptions; modernization of tax and customs administrations.
  - Completion of full implementation of the Treasury Single Account (TSA) by January 2023.
  - Rationalization of compensation mechanisms with emphasis on reform of the VAT escrow account.
  - Legal and methodological refinements of public investment management consistent with PIMA recommendations.
- Transparency and oil sector governance:
  - Audit of the oil sector to assess the cost oil, review agreements between oil companies, government, and public enterprises, evaluate viability of national refinery (SOGARA), and revisit trading activities of Gabon Oil Company (GOC).
  - Commitment to refrain from requesting prefinancing based on future oil revenues and ensure repatriation of oil revenues by public enterprises to the TSA at the central bank.
- SOE and public financial institution governance:
  - Reinforcement of governance for GOC, SOGARA, Caisse de Depots et de Consignations (CDC) and Fonds Gabonais d’Investissements Stratégiques (FGIS); implementation of management audit recommendations from 2021Q4.
  - CDC and FGIS have certified and published their 2021 financial accounts; same expected from GOC and SOGARA later in the year.
  - Preparation of a public portfolio management strategy to enhance monitoring of government equity in corporations.
- Financial sector and statistical system:
  - Ongoing liquidation of three public banks to be completed in coming months; plan to set up a special purpose entity to realize assets and settle residual liabilities.
  - Financial inclusion strategy for 2022-2027 developed and expected to be adopted by end-2022.
  - Improvements in macroeconomic statistics: rebasing of national accounts, transition to the 2008 SNA, production of 2011-2022 national accounts, production of quarterly GDP with IMF technical assistance; a database management platform expected to go live by end-September 2022.
- Climate and environmental commitments:
  - Gabon is a net carbon absorber; legislation adopted in September 2001 establishing a legal framework for carbon credit trading and a national climate change fund.
  - A payment from the Kingdom of Norway under the CAFI mentioned for June 2021.

### Conclusion and requests to the IMF
- Progress has been made in program implementation despite a challenging environment; all 14 structural benchmarks under the first and second EFF reviews were implemented, some with delay.
- Authorities remain committed to the program, stand ready to take additional measures if necessary, and request completion of the first and second reviews under the EFF-supported program and approval of related decisions.

*Source: 1gabea2022001 - 29. To facilitate monitoring of program implementation, the government of Gabon will*

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_Source: https://www.imf.org/-/media/files/publications/cr/2022/english/1gabea2022001.pdf_