## Fiscal Policies in 2024

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### Context
- Transition government in place until August 2025 following an August 2023 coup d’état.
- Population: 2.3 million people.
- Long-run challenges: years of poorly managed oil wealth, weak inclusion, stagnant incomes, underdeveloped infrastructure; about a third of the population is poor.
- Income per capita: "now barely above its level in the early 1960s" and "about a quarter below its level in the 1970s."
- Human Capital Index: "close to the average in sub-Saharan Africa (SSA) despite being among the richest countries in the region."
- Unemployment: 36 percent; youth unemployment "around 40 percent."
- Transition government initial actions:
  - Repayment of external and domestic arrears.
  - Corrected fiscal accounts for 2021–22 and adopted the 2024 budget reflecting previously unrecorded revenues and spending.
  - Adopted the National Development Plan of the Transition (2024–26) with five pillars: political and institutional reforms; development of strategic infrastructure; intensification of economic diversification; development of human capital and social inclusion; environmental sustainability and climate change resilience.

### Recent developments, outlook, and risks
- Growth and output:
  - 2022: "around its potential rate of 3 percent."
  - 2023: "slowed to 2⅓ percent."
  - 2024: "expected to bounce back to its potential growth rate in 2024."
  - Medium-term: "2⅔ percent" growth.
  - Drivers: services, construction, maturing palm oil and rubber plantations; secular decline in oil production.
  - Risk: income per capita expected to remain stagnant.
- Inflation:
  - Peaked at "6 percent year-on-year in 2022."
  - Fell to "2⅓ percent in December 2023."
  - Central bank ceiling: "3 percent."
  - Medium-term expectation: inflation should remain below "3 percent."
- External sector:
  - Foreign currency reserves (indicatively attributed from the currency union pool): "2.7 months of imports."
  - Current account surplus: staff estimate "7.5 percent of GDP on average in 2022–23."
  - Outlook: current account weakening to "near balance by the end of the projection horizon" due to declining oil prices and production.
  - Risks: large Eurobond amortizations during "2025–30", tighter global markets, negligible budget support under unchanged fiscal policies.
  - Assessment: external position "moderately weaker than implied by fundamentals and desirable policies."
- Fiscal developments:
  - Nonoil primary deficit widened from "7 percent of nonoil GDP in 2021" to "some 14 percent in 2022–23", about "11pp wider than the end-program target for end-2023."
  - Newly disclosed arrears stock: estimated "1 2.6  percent of GDP by end-2023." 
  - Overall public debt "breached the 70 percent of GDP CEMAC ceiling at end-2023 once all debts and overdue obligations are taken into account."
  - Authorities' reported public debt for end-2023: "57.4 percent of GDP" (excludes treasury bills "3.3 percent of GDP", arrears "estimated at 9 percent of GDP net of float", and debt from litigations "0.8 percent of GDP").
- Financial conditions and banking sector:
  - Policy rate tightened cumulatively by "175 bps to 5 percent since November 2021."
  - Bank exposure to the public sector increased to "26 percent of total assets", above the "17 percent average for emerging economies."
  - Sovereign spreads: "900–950bps" in 2023, receding to "500–550bps by early April 2024."
  - System-wide capital adequacy: "14.7 percent of risk-weighted assets."
  - Wind-down of three defunct public banks progressing; two already under judicial liquidation.
- AML/CFT:
  - 2023 FATF assessment: weak compliance and "a low level of effectiveness in all areas."
  - Terrorism financing risks rated "high."
- Upside risks:
  - Higher nonoil growth from accelerated iron production; stronger recovery of business confidence; looser fiscal policies in near term could boost growth.
- Downside risks:
  - Failure to implement transparency and structural reforms; persistent fiscal imbalances delaying investment inflows; tighter financial conditions; resurgence in inflation from looser fiscal policies; high oil price volatility.

### Key economic figures (selected from Text Table 1)
- Real GDP growth (annual):
  - 2020: -1.8
  - 2021: 1.5
  - 2022: 3.0
  - 2023: 2.3
  - 2024 (Proj.): 2.9
  - 2025 (Proj.): 2.7
  - 2026–2029 (Proj.): 2.6 each year
- Inflation (eop, y-o-y):
  - 2020: 1.6
  - 2021: 1.7
  - 2022: 5.4
  - 2023: 2.3
  - 2024 (Proj.): 2.2
  - 2025–2029 (Proj.): 2.2 to 2.5 (see table)
- Current account balance (percent of GDP):
  - 2020: -0.5
  - 2021: 3.3
  - 2022: 10.7
  - 2023: 4.4
  - 2024 (Proj.): 3.9
  - 2025–2029 (Proj.): 2.8, 1.8, 1.1, 0.5, 0.0

### Policy challenges and priorities
- Three fundamental challenges:
  - Poor governance.
  - Significant deterioration in fiscal sustainability.
  - Low per capita growth.
- Priority: improve data quality and transparency as prerequisite for fiscal sustainability and stronger growth.
- Governance and transparency issues:
  - Perceived systemic corruption under previous regime; low World Governance Indicators scores.
  - Nontransparent management of oil resources: lack of transparency about contracts, production, and revenue sharing.
  - Underreporting of spending (e.g., the presidency, the wage bill), lack of data on SOEs, undisclosed bank accounts outside and inaccessible to the Treasury.
  - Poor governance identified as driver of high and volatile borrowing costs.
- Transition government transparency measures:
  - Inclusion of previously unrecorded extrabudgetary expenditures in fiscal accounts for 2022–23 and in the 2024 budget.
  - Measures to better trace and manage public resources in the Treasury Single Account (TSA); new TSA platform likely fully operational in first half of 2024.
  - Digitalization of public finance processes, including tax payment systems.

### Transparency, governance, and AML/CFT: immediate priorities
- Publish all mining contracts, including oil; authorities working on arrangements for publishing oil contracts subject to confidentiality clauses.
- Consider a forensic audit by a reputable international firm to:
  - Assess oil extraction costs declared by operating firms that determine government revenue shares.
  - Clarify mutual financial obligations between stakeholders in the oil sector.
- Strengthen reporting under Extractive Industries Transparency Initiative (EITI).
- Formalize gold sector activities and assess potential revenues for budget inclusion.
- Centralize accounting, reporting, and responsibility for all government liabilities within the debt office.
- Continue and complete audit of domestic arrears, identify and publish the stock, and adopt a repayment strategy.
- Fold all fiscal transactions carried out by executive offices, including the presidency, into the budget for approval, monitoring, and transparent public reporting.
- Publish annual reports on government accounts by the Supreme Audit Institution (Cour des Comptes), including for previous years.

### Ensuring fiscal sustainability — findings and risks
- Without adjustment, fiscal position would become unsustainable and difficult to finance.
- Projected large financing needs: "19 percent of GDP in 2024–25."
- Large Eurobond amortizations (3 percent of GDP) add to financing needs in 2025.
- Debt sustainability analysis: debt at "high risk of distress" if current policies continue.
- Downside risks:
  - Ambitions for large-scale projects with unclear returns.
  - Fragmentation of fiscal policy across ministries and the presidency.
  - Continued extra-budgetary spending obscuring fiscal position and risks.

### Required fiscal adjustment and scenarios
- Staff estimate: reduce the nonoil primary deficit of "14 percent of nonoil GDP" under unchanged policies to around "2 percent by 2027–28" (an adjustment currently equivalent to some "6–7 percent of GDP") to stabilize and then reverse debt dynamics and reduce financing needs.
- Adjustment must be growth-friendly, protect the most vulnerable, and preserve space for capital spending on basic infrastructure and social needs.
- Debt would be sustainable under such an adjustment scenario (Annex IV).

### 2024 budget: stance, risks, and pending items
- 2024 budget aimed to reduce the nonoil primary deficit from "14 percent of nonoil GDP in 2023" to "6 percent."
- Budgeted revenue measures may not yield planned increase in revenues from "16 percent of nonoil revenues in 2023" to "17.5 percent in 2024."
- Spending measures that may increase spending relative to 2023 and to the budget:
  - Regularization of positions and announced large recruitments in 2024, increasing the wage bill by "1 percent of nonoil GDP."
  - New list of tax exemptions on food, transportation, and construction materials, at an annual cost of "about 0.6 percent of GDP."
  - Post-budget initiatives with potentially very large fiscal implications (purchase of Assala and Addax; setup of Fly Gabon; new development bank; government conference and administrative centers; second airport; purchase of majority holdings in the telecommunication company). Costing not yet known nor incorporated in staff projections.
- A revised 2024 budget expected by mid-2024; stance uncertain.

### Policy measures to achieve adjustment (summary)
- Revenue mobilization and spending cuts needed, including:
  - Reduce tax exemptions (including discretionary exemptions).
  - Close loopholes in direct taxation.
  - Phase out fuel subsidies and support to loss-making SOEs.
  - Rationalize the wage bill and state functions.
  - Finalize digitalization of revenue declarations, payments, and spending and operationalize interconnectivity of IT systems along the budget execution chain.
- Detailed possible revenue and spending measures discussed in Annex VI.

### Anchoring fiscal policy and institutional reforms
- Need for an operational fiscal framework, potentially via fiscal responsibility legislation including:
  - A debt anchor (ceiling for debt post-oil "at most 50 percent of GDP" and likely interim debt anchors).
  - An operational deficit rule to achieve the debt anchor.
  - Transparency requirements and principles for good governance, PFM, and responsibility for monitoring SOEs and entities outside the budget perimeter.

### Public Financial Management (PFM) weaknesses and reforms
- Key weaknesses inherited:
  - Fragmented management of fiscal resources; significant share bypassed the TSA.
  - Weak digitalization of revenue collections and expenditure processes; frequent use of emergency spending procedures.
  - Weak wage bill management: recruitment strategy lacking; wage bill IT system not updated; payroll payments not fully digitalized; salary disparities in sovereign entities.
  - Public investment projects often lack feasibility studies and transparent procurement.
  - No framework to manage contingent liabilities; many SOEs lack governance framework; three social security funds face financial challenges.
- Reforms launched:
  - Integrate all revenues and payments into the TSA; full operationalization by June 2024 targeted.
  - Integrate government resource management systems (revenues, Treasury, budget).
  - Digitalize government services, including tax payments.
  - Set up unit to monitor government holdings and SOEs.
  - Finalize reforms to strengthen investment processes.
- Immediate priorities:
  - Ensure compliance with existing PFM rules across all public sector levels; stop spending, issuing debt, or purchasing/selling assets without budget authorization or by bypassing the Treasury.
  - Strengthen regulatory framework for debt authorization, management and monitoring; ensure clear authority for debt issuance.
  - Ensure oil revenues set aside for social purposes (PID/PIH) currently kept in oil companies' accounts are paid into the TSA and managed within the budget.

### Contingent liabilities, SOEs, PPPs, and social security
- Contingent liabilities management is key to resilient public finances.
- SOE reforms:
  - Establish a single supervisory body for public enterprises under the Ministry of the Economy.
  - Adopt framework legislation for public enterprises defining governance rules and transparency obligations.
- PPPs:
  - Establish legal and regulatory framework for PPPs and their monitoring.
- Social security funds:
  - Initiate audit to assess financial viability; adopt restructuring plan as needed; clear arrears to the funds.
  - Public pension fund: adopt parametric reform and clear arrears to retirees (Annex V).

### Reviving per capita growth and economic diversification
- Key challenge: reviving per capita growth; Gabon lost about "20 percent" of its real per capita income over the last forty years.
- Current measured exposure to oil:
  - "39 percent of its output"
  - "50 percent of fiscal revenues"
  - "68 percent of exports"
- Nonhydrocarbon sectors:
  - Relative success in timber and mineral sectors (mainly manganese; Gabon is second largest producer in the world).
  - Diversification strategy relies on tax incentives, regulatory measures (e.g., export ban for logs), and business facilitation via special economic zones.
  - Progress insufficient; export basket remains low value added and complexity.
- Constraints on growth:
  - Weak governance and policy environment.
  - Poor physical infrastructure; frequent domestic supply chain disruptions; limited rural electricity access.
  - Poor health and education outcomes; low labor skills with high youth unemployment.
  - Shallow financial sector focused on lending to government.
- Transition government strategy:
  - Accelerate diversification by developing transport, energy and water infrastructure to support mining, wood, agriculture and tourism while continuing hydrocarbon development.
  - Actions: improve transparency and governance; remove excessive regulation; reduce public sector costs on private activity by repaying arrears, finalizing liquidation of public banks, and strengthening the fiscal position to reduce sovereign spreads and private credit costs.

### Data issues and safeguards
- National accounts: latest published in 2010; subsequent data rely on Ministry of the Economy estimates. Statistics Office national accounts not published.
- Balance of payments for 2016–21 finalized only in late 2023; continued revisions and inconsistencies for 2022–23.
- Labor market data, including unemployment, are not compiled.
- Fiscal data suffer from inadequate recording and coverage issues.
- Safeguards:
  - 2022 safeguards assessment: BEAC maintained strong governance and external audit arrangements; internal audit and risk management needed strengthening.
  - Safeguards monitoring mission end-2023 recommended onboarding for new senior management and Board members and enhanced delegation framework for executive decision-making.

### Staff appraisal and policy priorities (summary)
- Historic opportunity to pivot to more transparent and inclusive governance; authorities signaled high-level commitment.
- Reform effort required: profound transparency and accountability in public resource management and difficult fiscal choices to restore sustainability while addressing social and developmental needs.
- Macroeconomic context: recovery aided by strong oil prices; inflationary pressures abated; external position bolstered by favorable terms of trade though reserves accumulation likely held back by fiscal deficits.
- Urged actions:
  - Sustain and extend efforts to integrate fiscal accounts within the national budget.
  - Publish fiscal data regularly, publish oil and mining contracts, and publish past audits of government accounts.
  - Initiate comprehensive fiscal adjustment immediately by removing unproductive spending and tax exemptions, while focusing investment on basic infrastructure and social needs.
  - Avoid additional high-risk projects before fiscal sustainability is restored.
  - Centralize government resources through the TSA; strengthen monitoring of SOEs; strengthen wage bill management.

### Annex IV — Debt Sustainability: headline findings
- Overall assessment: "Gabon’s debt sustainability has deteriorated significantly" and there is a "high risk of distress" under unchanged policies.
- Drivers of deterioration:
  - Fiscal position weakened in 2022–23 with nonoil primary deficits "some 11 percentage points of nonoil GDP wider" than under the program.
  - Public debt as a share of nonoil GDP about "20 pp higher."
  - Spreads near "800–900 basis points" for much of 2023.
- Baseline assumptions:
  - Growth: "projected to remain around 2.6–2.9 percent"
  - Inflation: "below the central bank target of 3 percent"
  - Oil production: "assumed to decline at about 1 percent a year, exhausting by around 2050."
  - Fiscal: "nonoil primary balance will improve by some 2pp of nonoil GDP to hover around 13 percent of nonoil GDP over the medium term."
- Gross financing needs:
  - "Projected to average 19 percent of GDP per year over 2024–29" (factoring 2025 Eurobond amortization).
- Required policy response:
  - "A large adjustment effort (of around 11 percentage points of nonoil GDP over the next four years, equivalent to 6–7 percent of GDP under current oil price projections) will be needed" to bring debt and financing needs to safer ground.
- Final risk of sovereign stress assessment: Overall "High"; Medium term "High"; Long term "High."

### Financing, debt profile, and key debt figures (selected)
- Total financing needs (percent of GDP, selected):
  - 2024 Prog.: 16.7; 2025: 10.1; 2026: 15.7; 2027: 19.2; 2028: 17.8; 2029: 17.5
- Public debt (percent of GDP, selected series from Annex):
  - 2020: 78.3; 2021: 65.8; 2022: 63.7; 2023: 50.8; 2024 Prog.: 70.5; 2025 Prog.: 73.1; 2026: 78.9; 2029: 102.8
- Gross international reserves (billions of US$):
  - 2020: 1.3; 2021: 1.4; 2022: 1.7; 2023 (Prel.): 1.4; 2024 (Prog.): 2.3; 2025 (Proj.): 1.4
- Exports of goods and services (percent of GDP):
  - 2022: 45.2; 2023 Prel.: 43.3; 2024 Prog.: 41.1
- Capacity to repay the Fund (Table 7, selected):
  - Fund obligations (existing credit) — Principal (millions of SDRs): 2024: 70.5; 2025: 130.0; 2026: 85.7
  - Total obligations (existing and prospective credit) in millions of US$: 2024: 287.5; 2025: 218.1; 2026: 150.9
  - Outstanding Fund credit (millions of US$): 2024: 664.1; 2025: 492.3; 2026: 379.3

### Menu of fiscal measures — revenue and expenditure (selected)
- Revenue measures and tax reforms:
  - Replace corporate income tax holidays with investment tax credits (ITCs) supporting actual investment expenditures; introduce sunset clause (e.g., 5 years).
  - AMT reform: apply AMT to all businesses; repeal flat-rate minimum fee; consider lowering AMT from "one percent of turnover" if excessive (example "three-quarters of a percent").
  - PIT reforms: eliminate the family “quotient”; consider semi-dual tax system — progressive on labor income and proportional on capital income.
  - VAT: align with regional CEMAC Directive; eliminate one reduced VAT rate (5 percent and 10 percent) and review reduced/exempt supplies.
  - Excises: increase excise rates on alcoholic beverages, tobacco, sugary drinks; apply at least "12.5 percent" as mandated by regional directives; apply excises equally to imported and domestic products.
  - Taxing mobile transactions: tax mobile phone platform transactions (currently "3% of the transaction value").
- Revenue administration and digitalization:
  - Replace LIIR with DIGITAX for online declaration and payment; implement electronic invoices (possible in 2024); integrate mobile payments for small taxpayers.
  - Improve interfacing of DIGITAX with Treasury, Customs, social security, banks, utilities, and mobile companies to enable cross-checking.
- Spending and PFM measures:
  - Set wage bill trajectory consistent with medium-term fiscal sustainability; strengthen payroll controls; finalize audit of civil servants file; remove ghost workers.
  - Remove fuel subsidies by aligning pump prices with international reference prices, excluding kerosene and butane; accompany removal with enhanced social protection.
  - Strengthen SOE governance; conduct diagnostic audits and restructure loss-making SOEs; tighten disclosure and publication requirements.
  - Public investment management: adopt Public Investment Management decree; prioritize ongoing projects; incorporate climate change analysis into project selection; adopt AE/CP commitment and payment reforms.
  - Strengthen budget control: commitment plans and cash flow plans; consider decree defining order of priority for payments; limit derogatory payment procedures.

### Fiscal reporting, coverage, and external audit (priorities)
- Implement comprehensive register of state assets and liabilities, including guarantees; report fiscal risks.
- Fully implement reforms for accounting of non-financial assets.
- Undertake a fiscal transparency evaluation with IMF support to assess coverage of fiscal reports and fiscal risk analysis.
- Publish regular and timely quarterly budget execution reports and government finance statistics.
- Align budget classification (NBE) and chart of accounts (PCE).
- Strengthen internal audit mechanisms and external audit via general inspectorates and the Court of Auditors.
- Ensure transfer of all revenues, including oil revenues, to the TSA.
- Undertake audit of oil extraction costs to determine government take and clarify mutual financial obligations in the oil sector.

### Social protection and social security funds (high-level)
- Social security funds (CPPFAE, CNAMGS, CNSS) present fiscal risks requiring urgent reforms:
  - CPPFAE: unfunded liabilities concerns; government arrears about "1.2 percent of GDP" (2016–2022); potential retroactive pension obligation about "0.6 percent of GDP."
  - CNAMGS: government contribution arrears; GEF database issues (about "900,000 individuals").
  - CNSS: governance issues and pension arrears; 2022 dismissal of board/management and appointment of interim manager; authorities plan transfer of CNSS management to private sector.
- Recommendations: urgent parametric reform for pensions; clear government arrears via an arrears clearance plan; audit and governance reforms for CNSS; update and clean GEF database.

### Staff appraisal — overall priorities (selected)
- Sustain and deepen transparency and accountability measures; publish fiscal and extractive-sector data and contracts where feasible.
- Initiate comprehensive fiscal adjustment immediately by removing unproductive spending and tax exemptions while protecting the poor and preserving investment in basic infrastructure and human capital.
- Strengthen PFM: centralize resources in TSA; digitalize revenue and expenditure chains; strengthen debt authorization and monitoring; strengthen SOE oversight.
- Support diversification by restoring fiscal sustainability to lower sovereign spreads and private financing costs, improving business environment, and investing in logistics and energy infrastructure.

### Conclusion (authorities’ stance)
- Authorities committed to addressing social, environmental, and infrastructure needs while seeking economic stability and development.
- Authorities appreciative of staff recommendations and seek continued policy dialogue with the Fund.

*Source: IMF staff report (chapter "1. Fiscal Policies in 2024").*

### 1. Fiscal Policies in 2024 _________________________________________________________________________ 15

### 1. Fiscal Policies in 2024

### Context
- In August 2023, Gabon underwent a major political transition after a coup d’état; the transition government is set to be in place until August 2025.
- Population: 2.3 million people.
- Long-run issues: years of poorly managed oil wealth, weak inclusion, and stagnant incomes; infrastructure underdeveloped; a third of the population is poor.
- Income per capita: "now barely above its level in the early 1960s" and "about a quarter below its level in the 1970s."
- Human Capital Index: "close to the average in sub-Saharan Africa (SSA) despite being among the richest countries in the region."
- Unemployment: 36 percent; youth unemployment "around 40 percent."
- Transition government initial actions:
  - Repayment of external and domestic arrears.
  - Corrected fiscal accounts for 2021–22.
  - Adopted the 2024 budget reflecting previously unrecorded revenues and spending.
  - Adopted the National Development Plan of the Transition (2024–26) with five pillars: political and institutional reforms; development of strategic infrastructure; intensification of economic diversification; development of human capital and social inclusion; environmental sustainability and climate change resilience.

### Recent developments, outlook, and risks
- Growth and output:
  - 2022: "around its potential rate of 3 percent."
  - 2023: "slowed to 2⅓ percent."
  - 2024: "expected to bounce back to its potential growth rate in 2024."
  - Medium-term expected growth: "2⅔ percent" (broadly in line with projected population growth).
  - Drivers: services, construction, maturing palm oil and rubber plantations; secular decline in oil production.
  - Risk: income per capita expected to remain stagnant over the foreseeable future.
- Inflation:
  - Peaked at "6 percent year-on-year in 2022."
  - Fell to "2⅓ percent in December 2023."
  - Central bank ceiling: "3 percent."
  - Medium-term expectation: inflation should remain below the regional ceiling of "3 percent."
- External sector:
  - Foreign currency reserves (indicatively attributed to Gabon from the currency union pool) reached "2.7 months of imports."
  - Current account surplus: staff estimate "7.5 percent of GDP on average in 2022–23."
  - Outlook: weakening of the current account balance—to "near balance by the end of the projection horizon"—driven by decline in oil prices and lower oil production.
  - Risks: large Eurobond amortizations during "2025–30", tighter global markets, and negligible budget support under unchanged fiscal policies.
  - Assessment: external position "moderately weaker than implied by fundamentals and desirable policies."
- Fiscal developments:
  - Nonoil primary deficit widened from a reported "7 percent of nonoil GDP in 2021" to "some 14 percent in 2022–23", about "11pp wider than the end-program target for end-2023."
  - Newly disclosed arrears stock reached an estimated "1 2.6  percent of GDP by end-2023."
  - Overall public debt "breached the 70 percent of GDP CEMAC ceiling at end-2023 once all debts and overdue obligations are taken into account."
  - Authorities' reported public debt for end-2023: "57.4 percent of GDP" (which excludes outstanding treasury bills: "3.3 percent of GDP", arrears: "estimated at 9 percent of GDP net of float", and debt from litigations: "0.8 percent of GDP").
- Financial conditions and banking sector:
  - Monetary policy tightening: cumulative tightening of the policy rate by "175 bps to 5 percent since November 2021."
  - Despite tightening, monetary conditions remained accommodative due to higher oil-related inflows and stricter central bank controls over export profit repatriation.
  - Bank exposure to the public sector increased to "26 percent of total assets", above the "17 percent average for emerging economies."
  - Sovereign spreads: crossed into distressed territory ("900–950bps") in 2023, receding to "500–550bps by early April 2024."
  - System-wide capital adequacy: "14.7 percent of risk-weighted assets."
  - Asset quality deterioration during 2023, with provisioning rate decreased during the same period and recovering by end-2023.
  - Wind-down of three defunct public banks progressing; two already under judicial liquidation.
- AML/CFT:
  - 2023 FATF assessment shows weak compliance and "a low level of effectiveness in all areas."
  - Identified vulnerabilities to money laundering, notably relating to proceeds of corruption and environmental crimes in the extractive sector.
  - Terrorism financing risks rated "high."
- Risks to outlook (Annex III referenced):
  - Upside: higher nonoil growth from accelerated iron production; stronger recovery of business confidence; looser fiscal policies in near term could boost growth.
  - Downside: failure to implement transparency and structural reforms; persistent fiscal imbalances delaying investment inflows; tighter financial conditions; resurgence in inflation from looser fiscal policies; high volatility of oil prices affecting external position, growth, banking system, and fiscal position.

### Key economic figures (Text Table 1: Gabon: Key Economic Indicators, 2020–29)
- Real GDP growth:
  - 2020: -1.8
  - 2021: 1.5
  - 2022: 3.0
  - 2023: 2.3
  - 2024 (Proj.): 2.9
  - 2025 (Proj.): 2.7
  - 2026 (Proj.): 2.6
  - 2027 (Proj.): 2.6
  - 2028 (Proj.): 2.6
  - 2029 (Proj.): 2.6
- Oil contribution to growth:
  - 2020: -2.4
  - 2021: -4.9
  - 2022: 2.5
  - 2023: 2.7
  - 2024: 1.7
  - 2025: -0.8
  - 2026: -1.0
  - 2027: -1.0
  - 2028: -1.0
  - 2029: -1.0
- Nonoil contribution to growth:
  - 2020: -1.7
  - 2021: 2.8
  - 2022: 3.1
  - 2023: 2.2
  - 2024: 3.1
  - 2025: 3.3
  - 2026: 3.3
  - 2027: 3.2
  - 2028: 3.2
  - 2029: 3.2
- Inflation (eop, y-o-y):
  - 2020: 1.6
  - 2021: 1.7
  - 2022: 5.4
  - 2023: 2.3
  - 2024 (Proj.): 2.2
  - 2025 (Proj.): 2.2
  - 2026 (Proj.): 2.3
  - 2027 (Proj.): 2.3
  - 2028 (Proj.): 2.4
  - 2029 (Proj.): 2.5
- Current account balance (in percent of GDP):
  - 2020: -0.5
  - 2021: 3.3
  - 2022: 10.7
  - 2023: 4.4
  - 2024 (Proj.): 3.9
  - 2025 (Proj.): 2.8
  - 2026 (Proj.): 1.8
  - 2027 (Proj.): 1.1
  - 2028 (Proj.): 0.5
  - 2029 (Proj.): 0.0

### Policy challenges and priorities
- Three fundamental challenges identified:
  - Poor governance.
  - Significant deterioration in fiscal sustainability.
  - Low per capita growth.
- Priority: improve data quality and transparency as a prerequisite for fiscal sustainability and stronger growth.
- Governance and transparency issues highlighted:
  - Perceived systemic corruption under previous regime; low World Governance Indicators scores.
  - Nontransparent management of oil resources: lack of transparency about contracts, production, and revenue sharing.
  - Underreporting of spending (e.g., the presidency, the wage bill), lack of data on SOEs, undisclosed bank accounts outside and inaccessible to the Treasury.
  - Poor governance identified as a driver of high and volatile borrowing costs.
- Transition government initial transparency measures:
  - Inclusion of previously unrecorded extrabudgetary expenditures in fiscal accounts for 2022–23 and in the 2024 budget.
  - Measures to better trace and manage public resources in the Treasury Single Account (TSA); new TSA platform likely to be fully operationalized in the first half of 2024.
  - Digitalization of public finance processes, including tax payment systems.
  - Main obstacle: decades of entrenched practices in public administration that could slow reforms.
- Immediate fiscal transparency and accounting priorities (recommended focus areas):
  - Publish all mining contracts, including oil, in line with existing legislation; authorities working on practical arrangements for publishing oil contracts subject to confidentiality clauses.
  - Consider a forensic audit by a reputable international firm to:
    - Assess oil extraction costs declared by operating firms that determine revenues shared with the government.
    - Clarify mutual financial obligations between stakeholders in the oil sector.
  - Strengthen reporting under the Extractive Industries Transparency Initiative (EITI).
  - Formalize gold sector activities and assess potential revenues from gold mining for budget inclusion.
  - Centralize accounting, reporting, and responsibility for all government liabilities within the debt office.
  - Continue and complete audit of domestic arrears, identify and publish the stock of arrears, and adopt a repayment strategy.
  - Extend new transparency efforts to pre-2022 fiscal data, starting with the most recent years.
  - Fold all fiscal transactions carried out by executive offices, including the presidency (revenue inflows, spending, sales and purchases of assets), into the budget for approval, monitoring, and transparent public reporting.
  - Publish annual reports on government accounts by the Supreme Audit Institution (Cour des Comptes), including for previous years, in line with existing legislation.

*Source: IMF staff report (chapter "1. Fiscal Policies in 2024").*

### 16.      The transparency effort should then carry forward to  all public transactions. First, the

### 16.      The transparency effort should then carry forward to  all public transactions. First, the

### Transparency, governance, and AML/CFT
- Government should publish quarterly/yearly analytical fiscal accounts and debt data on a timely basis, including the income and balance sheet statements of oil and mining-related funds (e.g., PID/PIH, training funds, rehabilitation funds) that support budget execution.
- Certified financial statements of all SOEs and other parastatals outside the central government should be required to be reported and published.
- A new department of state assets under the Ministry of Economy was set up in early 2024 to strengthen the management and monitoring of SOEs and state owned assets.
- To systematically identify transparency gaps, the government could undertake a Fiscal Transparency Evaluation and a governance diagnostic assessment, both with assistance from the IMF.
- Anti-corruption and AML/CFT priorities:
  - Strengthen the reporting and analysis of suspicious activities.
  - Reinforce the investigation and prosecution of ML/FT.
  - Identify and monitor high-risk non-profit organizations.
  - Designate AML/CFT supervisory authorities for high-risk non-financial businesses and professions, including dealers in precious metals and stones.
  - Ensure greater transparency of beneficial ownership of legal persons.
- Authorities completed a national risk assessment and submitted a two-year action plan to the Groupe d’Action contre le Blanchiment d’Argent en Afrique Centrale.
- A new regional regulation applicable to financial institutions will enter into force in July 2024.
- Planned reforms (designation of AML/CFT supervisors for dealers in precious metals and stones and real estate agents; measures to improve transparency of beneficiary ownership of legal persons) should be accelerated.
- Authorities committed to publishing oil contracts once confidentiality and legal constraints related to past contracts are resolved, and to identifying and recording public assets, including those obtained illicitly.

### Ensuring fiscal sustainability — findings and risks
- Without adjustment, fiscal position would become unsustainable and difficult to finance.
- Projected large financing needs: 19 percent of GDP in 2024–25.
- Large Eurobond amortizations (3 percent of GDP) are adding to the financing needs in 2025.
- Debt sustainability analysis qualifies debt as at high risk of distress if current policies continue without correction.
- Downside risks include:
  - Authorities’ ambitions to pursue large-scale projects with unclear returns.
  - Fragmentation of fiscal policy across ministries and the presidency.
  - Continued practice of extra-budgetary spending obscuring fiscal position and risks.

### Required fiscal adjustment and scenarios
- Staff estimate: reduce the nonoil primary deficit of 14 percent of nonoil GDP under unchanged policies to around 2 percent by 2027–28 (an adjustment currently equivalent to some 6–7 percent of GDP) to stabilize and then reverse debt dynamics and reduce financing needs.
- Debt would be sustainable under such an adjustment scenario (Annex IV).
- Uncertainty around needed fiscal effort due to oil sector outcomes and potential untapped savings.
- Adjustment must be growth-friendly, protect the most vulnerable, and preserve space for capital spending on basic infrastructure and social needs.

### 2024 budget and Box 1 highlights
- 2024 budget aimed at reducing the nonoil primary deficit from 14 percent of nonoil GDP in 2023 to 6 percent.
- Budgeted revenue measures may not yield planned increase in revenues from 16 percent of nonoil revenues in 2023 to 17.5 percent in 2024.
- Spending measures that may increase spending relative to 2023 and to the budget:
  - Regularization of positions and announced large recruitments in 2024, increasing the wage bill by 1 percent of nonoil GDP.
  - New list of tax exemptions on food, transportation, and construction materials, at an annual cost of about 0.6 percent of GDP.
  - Post-budget initiatives with potentially very large fiscal implications (purchase of Assala and Addax; setup of Fly Gabon; setup of a new development bank; construction of a government conference center and an administrative center; building of a second airport; purchase of majority holdings in the telecommunication company). Costing not yet known nor incorporated in staff projections.
- A revised 2024 budget is expected by mid-2024, but its stance is uncertain.

### Policy measures to achieve the adjustment
- Revenue mobilization and spending cuts will both be needed, with possible actions including:
  - Reduce tax exemptions (including discretionary exemptions).
  - Close loopholes in direct taxation.
  - Phase out fuel subsidies and support to loss-making SOEs.
  - Rationalize the wage bill and state functions.
  - Finalize digitalization of revenue declarations, payments, and spending and operationalize interconnectivity of IT systems along the budget execution chain.
- Detailed possible revenue and spending measures discussed in Annex VI.

### Anchoring fiscal policy and institutional reforms
- Need for an operational fiscal framework to guide annual policies toward sustainability, potentially via fiscal responsibility legislation including:
  - A debt anchor (the debt anchor would need to establish a ceiling for the debt post-oil (at most 50 percent of GDP) and likely interim debt anchors).
  - An operational deficit rule to achieve the debt anchor.
  - Transparency requirements and principles for good governance, PFM, and responsibility for monitoring SOEs and entities outside the budget perimeter.

### Public Financial Management (PFM) weaknesses and reforms
- Key PFM weaknesses inherited by the transition government:
  - Fragmented management of fiscal resources; significant share of fiscal resources bypassed the Treasury Single Account (TSA), preventing efficient liquidity management and risking arrears or unrecorded liabilities.
  - Weak digitalization of revenue collections and expenditure processes; poor communication and frequent use of emergency spending procedures.
  - Weak wage bill management: lack of a recruitment strategy; wage bill IT system not updated (risk of ghost workers, salary arrears and abuse); payroll payments not fully digitalized; salaries in some sovereign entities out of line with civil service pay policies.
  - Public investment projects often lack feasibility studies and clear selection processes; public procurement not transparent; payments made without control of delivery.
  - No framework to manage contingent liabilities; no record of government guarantees; many SOEs lack governance framework and centralized monitoring; three social security funds face financial challenges (Annex V).
- Reforms launched:
  - Integrate all revenues and payments into the Treasury Single Account with a view to making it fully operational by June 2024.
  - Integrate the government’s resource management systems (revenues, Treasury, budget).
  - Digitalize government services, including tax payments.
  - Set up a unit to monitor government holdings and state-owned enterprises.
  - Finalize reforms to strengthen investment processes.
- Immediate priorities:
  - Ensure compliance with existing PFM rules across all public sector levels; stop spending, issuing debt, or purchasing/selling assets without budget authorization or by bypassing the Treasury.
  - Strengthen the regulatory framework for debt authorization, management and monitoring; ensure clear authority for debt issuance within a coherent fiscal sustainability framework.
  - Ensure oil revenues set aside for social purposes (PID/PIH), currently kept in the accounts of oil companies, are paid into the TSA and managed within the budget; identify and eliminate loopholes allowing management of general government resources outside the TSA.
- Digitalization and controls to implement:
  - Operationalize the expenditure commitment module; adequately integrate all stages of payments; ensure interface between budgetary, accounting and revenue management systems.
  - Digitalize the record of all state assets and liabilities; centralize available information on state holdings and publish balances of bank accounts held outside the central bank.
  - Strengthen expenditure controls and execution: design and implement a centralized recruitment policy and wage bill management, remove ghost workers, enforce pay scales across government units.
  - Adopt the draft decree on Public Investment Management to introduce methodology for examination, selection, budgeting and monitoring of projects.
  - Limit use of emergency procedures, prevent payments without service provision, and install expenditure control software in decentralized administrations.

*GABON — INTERNATIONAL MONETARY FUND*

### 31.      The analysis, management and control of contingent liabilities will be key to

### 1gabea2024001 - 31.      The analysis, management and control of contingent liabilities will be key to

### Contingent liabilities, SOEs, PPPs, and social security
- The analysis, management and control of contingent liabilities will be key to ensuring more resilient public finances.
- SOE reforms:
  - Establish a single supervisory body for public enterprises under the aegis of the Ministry of the Economy.
  - Adopt framework legislation for public enterprises defining governance rules and transparency obligations.
- PPPs:
  - Establish the legal and regulatory framework for PPPs and their monitoring.
- Social security funds:
  - Initiate an audit to assess financial viability.
  - Adopt a restructuring plan as needed.
  - Clear arrears to the funds.
  - For the public social security fund: adopt a parametric reform of the system and clear arrears to retirees (Annex V).
- Broader framework:
  - Develop a comprehensive framework for managing various contingent risks in the public sector under fiscal responsibility or similar legislation.

*Authorities’ Views (related points included elsewhere in the source)*
- Authorities noted strengthening cash management through pooling of all resources in the TSA could provide early gains; a new platform by the regional central bank will allow full operationalization of the TSA.
- Digitalization: recent experience with digitalization of customs clearance at ports is yielding results.
- Wage bill management: authorities agree on the need to centralize recruitments but highlighted that a multi-year freeze in recruitments—in the context of IMF program arrangements—in critical sectors, especially education and healthcare, created significant pressures and required an increase in hiring.
- Public investment: authorities want to end the ad hoc approach which caused low returns.
- Social security: authorities have initiated repayment of the pension arrears, indexed pension in line with the wage scale, and are planning reforms of the public pension funds to preserve sustainability.

### Reviving per capita growth and economic diversification
- Key challenge:
  - Reviving per capita growth is the main challenge.
  - Gabon lost about 20 percent of its real per capita income over the last forty years.
  - Outlook for per capita growth is muted by continued loss in oil resources.
- Nonhydrocarbon sectors:
  - Relative success in timber and mineral sectors (mainly manganese, where Gabon is the second largest producer in the world).
  - Diversification strategy relies largely on tax incentives, regulatory measures (such as an export ban for logs), and business facilitation via one-stop shop in special economic zones.
  - Progress insufficient: overall export basket remains of relatively low value added and complexity.
- Constraints on growth:
  - Weak governance and policy environment.
  - Inability to translate resource wealth into higher human and physical capital.
  - Physical infrastructure is poor; frequent disruptions in domestic supply chains; limited access to electricity in rural areas where mining and wood industries are located.
  - Poor health and education outcomes limit human capital; low labor skills coexist with high youth unemployment.
  - Financial sector remains shallow and largely focused on lending to the government.
  - Staff’s survey of 37 firms and meetings with the private sector indicated weak governance is the main factor stymieing the business environment, followed by lack of a predictable fiscal environment and lack of basic infrastructure (transport, electricity).
- Transition government strategy:
  - Accelerate diversification by developing infrastructure (transport, energy and water) to support mining, wood, agriculture and tourism sectors while continuing hydrocarbon development.
  - Specific required actions include:
    - Address constraints to the business environment to support higher private investment in non-extractive sectors through improved transparency and governance, identification and removal of excessive regulation, and a lighter footprint of the state.
    - Reduce costs imposed by the public sector on private activity by repaying arrears to suppliers, finalizing liquidation of public banks, and strengthening the fiscal position to reduce sovereign spreads, the cost of private credit and bank risks from an inflated bank-sovereign nexus.
    - Ensure fiscal adjustment needed to preserve macroeconomic stability is growth-friendly by safeguarding fiscal space for higher investment in infrastructure and human capital (education and healthcare).

*Authorities’ Views on diversification*
- Authorities agree with staff on urgent need to boost economic diversification to increase per capita growth and reduce unemployment; diversification is an objective of their 2024–26 development plan.
- As a stepping-stone, authorities intend to harness oil, gas and mining sectors to support development of the nonoil sector.
- Options noted: processing more gas, taking strategic positions through acquisition of oil companies, increasing local processing of mining products.
- Focus on boosting infrastructure to support nonhydrocarbon sectors, especially iron ore and timber where transporting output to ports is a key challenge.
- Plans to reform tourism and fishing to increase job creation; improve resource allocation in agriculture to develop rural areas, increase farmers’ income, and reduce food import dependency.

### Data issues and safeguards
- Data provision and quality require significant improvement.
  - Real sector: latest national accounts released in 2010; subsequent data rely on estimates by the Ministry of the Economy.
  - National accounts compiled by the Statistics Office are not published and could carry large discrepancies from what is currently used for surveillance.
  - Estimates of demand-side GDP components and short-term indicators are not published by the Statistics Office.
  - Labor market data, including unemployment, are not compiled.
  - External sector: balance of payments for 2016–21 was finalized only in late 2023; continued revisions and inconsistencies for 2022–23 data hinder effective utilization.
  - Primary reasons: inadequate IT infrastructure and human resource availability; authorities are working with multilateral partners to address them.
  - Fiscal side: data suffer from inadequate recording practices and coverage issues, complicating assessment of fiscal position.
- Staff advice: urgent need to address data gaps to ensure adequate basis for analysis and policy decisions.
- Safeguards assessment:
  - The 2022 safeguards assessment found BEAC maintained strong governance and external audit arrangements while internal audit and risk management practices needed strengthening.
  - A safeguards monitoring mission took place at end-2023 to follow up on outstanding 2022 safeguards recommendations, an external quality assessment of internal audit, and current implementation of the governance framework.
  - Mission’s preliminary recommendations include onboarding for new members of senior management and the Board and an enhanced delegation framework for executive decision-making.

*Authorities’ Views on data and safeguards*
- Authorities are keenly aware of data deficiencies and committed to addressing them.
- Emphasis on adequacy of national accounts and starting their publication by the Statistics Office, potentially with prior technical assistance.
- Continue working with the central bank and the IMF’s statistics department to improve balance of payments and monetary data, including addressing significant errors and omissions and some above-the-line items.
- On fiscal side, continuing efforts to piece together comprehensive data on fiscal position and debt, including supplier arrears, guarantees and PPP-related debt.

### Staff appraisal and policy priorities
- Governance and reforms:
  - Gabon has a historic opportunity to pivot towards a more transparent and inclusive model of governance; transition authorities signaled high-level commitment.
  - Sustained and serious reform efforts required, including profound transparency and accountability in management of public resources and difficult fiscal choices to put the fiscal position on a sustainable footing while addressing unmet social and developmental needs.
- Macroeconomic environment:
  - Reform efforts should benefit from a relatively propitious macroeconomic environment.
  - Economy recovered well from shocks since the pandemic, helped by strong oil prices.
  - Economy faltered somewhat in 2023 due to supply disruptions and coup-related political uncertainty but is already rebounding to potential as disruptions recede and demand remains strong, supported by expansionary fiscal policies.
  - Inflationary pressures have abated.
  - External position buoyed by favorable terms of trade and reserves continued to accumulate, although stronger contribution to regional reserves was likely held back by fiscal deficits.
- Transparency and accountability actions urged:
  - Sustain and extend efforts to shed light on fiscal accounts and integrate them within the national budget.
  - Extend transparency to public assets and liabilities, sectors outside the central government (especially state-owned enterprises), fiscal accounts before 2022, and extractive sectors.
  - Regular publication of fiscal data, publication of oil and mining contracts, and publication of past audits of government accounts.
- Fiscal sustainability:
  - Without return to sustainable fiscal position, sustained and inclusive growth cannot be achieved.
  - Fiscal position has become precarious; unsustainable expansion that started in 2022 looks set to continue as post-coup social demands replaced election-related spending.
  - Delivering quick results on infrastructure and social needs may be important politically but should not create excessive risks to sustainability.
  - Initiate comprehensive fiscal adjustment immediately by removing unproductive spending and tax exemptions, while focusing investment on basic infrastructure and social needs.
  - Do not undertake additional high-risk projects before needs are met or before fiscal position is sustainable.
  - Addressing Gabon’s fiscal challenges critical for ensuring CEMAC external stability, as Gabon is the second largest country in the currency union.
- Public financial management:
  - Commitment to strong PFM practices should be firm and not sacrificed for expediency.
  - Ensure collection of revenues, execution of public spending—and financing—are carried out through responsible entities and consistently with PFM rules.
  - End past practices of extra-budgetary spending.
  - Continue centralization of government resources through the Treasury Single Account; strengthen monitoring of state-owned enterprises and of investment processes.
  - Strengthen management of the wage bill and civil service to avoid hard-to-correct slippages.
- Diversification and growth enablers:
  - Transitioning to higher, more durable and inclusive growth hinges on successful economic diversification as oil production declines.
  - Preserve macroeconomic stability through sustainable fiscal position and strengthened governance to bolster investor confidence, a favorable business environment and lower private financing costs.
  - Required measures include repayment of government arrears, reduced risks from the bank-sovereign nexus, a predictable legal environment and upgraded public infrastructure, particularly in logistics and energy.

*GABON — INTERNATIONAL MONETARY FUND (excerpt).*

### 46.      Efforts to improve data quality should be stepped up. High quality data is critical for

### Efforts to improve data quality should be stepped up. High quality data is critical for policymaking, for assessing economic developments and performance, and taking informed decisions.

### Governance and procedural recommendation
- Efforts to improve data quality should be stepped up; high quality data is critical for policymaking, for assessing economic developments and performance, and taking informed decisions.
- Staff recommends that the next Article IV consultation for Gabon be held on the standard 12-month cycle.

### Oil dependency and outlook
- Gabon is one of the four SSA countries belonging to OPEC and among the top 10 countries in terms of oil production per capita.
- Under an assumption of a 1 percent reduction in annual oil production starting in 2027, crude oil reserves are expected to be depleted by mid-century (using 2P reserves and assuming no new discoveries).
- Current measured exposure to oil:
  - 39 percent of its output
  - 50 percent of fiscal revenues
  - 68 percent of exports
- Data and sources used for depletion estimates: Rystad (1980–2008), OPEC crude oil reserves (2009–2022); assumption: no new oil discoveries; remaining reserves = reserves − production.

### Income, social indicators, and human development
- Gabon has the fourth highest per capita income in sub-Saharan Africa (SSA), largely due to oil production.
- Human development outcomes lag relative to income level, reflecting:
  - high child mortality
  - limited years of schooling (expected years of learning-adjusted schooling used)
  - poor access to basic services compared to other upper middle-income economies
  - weak job market outcomes; a young population and a high youth unemployment rate
  - about a third of the population is poor and social protection is weak
- Social indicator specifics (selected):
  - Headcount ratio at $2.15 a day (2017 PPP): 2.5
  - Undernourishment (percent of population): 17.0
  - Total population (2022, millions): 2.4
  - Urban population (2022, percent of total): 90.7
  - Life expectancy at birth (2020, years): 67.0
  - Income share held by highest 10 percent of population: 27.7
  - Income share held by lowest 20 percent of population: 6.0
  - Gini index: 38.0

### Real sector developments and projections
- Overall Real GDP (annual percent changes shown):
  - 2020: -1.8
  - 2021: 1.5
  - 2022: 3.0
  - 2023 (Prel.): 3.7
  - 2024 (Prog.1/Prel.): 2.3
  - 2025 (Proj.): 2.9
  - 2026: 2.7
  - 2027: 2.6
  - 2028: 2.6
  - 2029: 2.6
- Oil sector (annual percent changes):
  - 2020: -2.4
  - 2021: -4.9
  - 2022: 2.5
  - 2023 (Prel.): -0.5
  - 2024 (Prog.): 2.7
  - 2025 (Proj.): 1.7
  - 2026: -0.8
  - 2027: -1.0
  - 2028: -1.0
  - 2029: -1.0
- Non-oil sector (annual percent changes):
  - 2020: -1.7
  - 2021: 2.8
  - 2022: 3.1
  - 2023 (Prel.): 4.5
  - 2024 (Prog.): 2.2
  - 2025 (Proj.): 3.1
  - 2026: 3.3
  - 2027: 3.3
  - 2028: 3.2
  - 2029: 3.2
- Growth driven almost exclusively by the nonoil sector; recent nonoil growth slowed to around 2.1 percent but projected to return to recent average pace largely due to pickup in primary commodity production (manganese and wood) and expansion in cash crop harvests (especially palm oil).
- Rapid price increases for essential goods are weighing on household budgets; significant fiscal expansion before August 2023 elections partly offset this, but continued loose fiscal policy could exacerbate inflationary pressures as in 2022.

### Fiscal sector developments and risks
- Fiscal position failed to improve over last eight years with relatively high debt and large deficits; debt-to-GDP ratio remained broadly stable due to GDP increase from high oil prices, while in nominal terms and relative to nonoil GDP debt increased notably.
- Oil revenue inflows into the budget decreased significantly over time and have been fully spent in recent years; nonoil revenues have remained stagnant.
- Fiscal and governance risks reflected in an increase in Gabon’s spreads to near distressed territory, increasing gross financing needs including due Eurobond amortizations in 2025.
- Selected central government metrics (percent of GDP, selected years):
  - Total revenue and grants (2021): 17.6; (2025 Prog.1/Prel.): 14.7; (2026 Budget): 18.4; (2029 Proj.): 17.0
  - Oil revenue (percent of GDP): 6.8 (2021); 5.3 (2022); 9.8 (2023 Prel.); 7.5 (2024 Prog.); 9.9 (2025 Prog.); 8.5 (2026 Budget); 8.2 (2027 Proj.); 6.9 (2028); 6.3 (2029)
  - Non-oil revenue (percent of non-oil GDP): 14.6 (2021); 14.6 (2022); 15.4 (2023); 17.1 (2024); 16.0 (2025); 16.2 (2026); 16.2 (2027); 16.2 (2028); 16.2 (2029)
  - Overall balance (commitment basis): -2.1 (2020); -1.9 (2021); -0.7 (2022); 3.0 (2023); -1.8 (2024 Prog.); 1.6 (2025 Prog.1/Prel.); -4.2 (2026 Budget); -6.4 (2027 Proj.); -7.0 (2028); -7.7 (2029); -8.2 (subsequent)
  - Total public debt (percent of GDP): 78.3 (2020); 65.8 (2021); 63.7 (2022); 50.8 (2023); 70.5 (2024 Prog.); 73.1 (2025 Prog.); 78.9 (2026); 84.6 (2027); 90.5 (2028); 96.5 (2029); 102.8 (later)
  - Total public debt (percent of non-oil GDP): 105.4 (2020); 103.3 (2021); 113.2 (2022); 80.6 (2023); 113.0 (2024); 115.5 (2025); 120.0 (2026); 124.9 (2027); 130.8 (2028); 136.3 (2029); 142.1 (later)
- Non-oil primary balance (percent of non-oil GDP): -7.5 (2020); -6.9 (2021); -14.1 (2022); -3.4 (2023); -14.3 (2024); -15.0 (2025); -14.9 (2026); -13.8 (2027); -13.2 (2028); -12.8 (2029); -12.5 (later)

### Financing and debt amortization profile
- Total financing needs (percent of GDP) and components (selected):
  - Total financing needs: 20.8 (2020); 17.1 (2021); 13.4 (2022); 3.5 (2023); 16.7 (2024 Prog.); 10.1 (2025); 15.7 (2026); 19.2 (2027); 17.8 (2028); 17.5 (2029); 19.1 (later)
  - Overall fiscal deficit (percent of GDP): 2.1 (2020); 1.9 (2021); 0.7 (2022); -3.0 (2023); 1.8 (2024 Prog.); -1.6 (2025); 4.2 (2026); 6.4 (2027); 7.0 (2028); 7.7 (2029); 8.2 (later)
  - Amortization (percent of GDP): 17.8 (2020); 12.3 (2021); 7.8 (2022); 5.6 (2023); 10.7 (2024 Prog.); 10.4 (2025); 9.2 (2026); 11.9 (2027); 9.7 (2028); 8.8 (2029); 9.9 (later)
- Financing sources (percent of GDP, selected):
  - External financing: 10.5 (2020); 5.2 (2021); 2.6 (2022); 2.2 (2023); 3.3 (2024 Prog.); 4.7 (2025); 1.1 (2026); 2.7 (2027); 1.7 (2028); 1.8 (2029); 4.6 (later)
  - Eurobond rollover: 6.8 (2020); 4.1 (2021); 0.0 (2022); 0.0 (2023); 2.4 (2024); 3.7 (2025); 0.0 (2026); 1.5 (2027); 0.0 (2028); 0.0 (2029); 0.0 (later)
  - Domestic financing: 10.3 (2020); 11.9 (2021); 6.2 (2022); 1.2 (2023); 8.7 (2024); 4.3 (2025); 8.4 (2026); 8.2 (2027); 9.2 (2028); 7.0 (2029); 6.7 (later)
  - Regional market (T-bills and bonds): 9.2 (2020); 6.7 (2021); 5.7 (2022); 2.7 (2023); 6.2 (2024); 3.3 (2025); 5.1 (2026); 5.2 (2027); 6.0 (2028); 4.7 (2029); 5.4 (later)

### External sector and reserves
- Current account (percent of GDP):
  - 2022: 10.7
  - 2023 (Prel.): -1.1
  - 2024 (Prog.): 4.4
  - 2025 (Proj.): 3.9
  - Projected future path narrows as terms of trade decline; current account strengthened in 2022 to 10.7 percent of GDP as terms of trade improved but will narrow going forward.
- Despite moderate strengthening of the current account in 2022, reserves have not increased much, reflecting likely offshoring of oil receipts or other financial outflows; surge in reported Gabonese deposits abroad at end-2022 noted.
- Gross international reserves (billions of US Dollars):
  - 2020: 1.3
  - 2021: 1.4
  - 2022: 1.7
  - 2023 (Prel.): 1.4
  - 2024 (Prog.): 2.3
  - 2025 (Proj.): 1.4
  - 2026: 1.4
  - 2027: 1.0
  - 2028: 1.1
  - 2029: 0.9
  - Later: 0.6; 0.3 (further)
- In months of next year's imports of goods and services:
  - 2020: 3.0
  - 2021: 2.6
  - 2022: 2.8
  - 2023 (Prel.): 4.1
  - 2024 (Prog.): 2.7
  - 2025 (Proj.): 2.5
  - 2026: 1.9
  - 2027: 1.9
  - 2028: 1.6
  - 2029: 1.0
  - Later: 0.5
- Exports of goods and services (percent of GDP): 31.8 (2020); 36.5 (2021); 45.2 (2022); 43.3 (2023 Prel.); 41.1 (2024 Prog.); 40.5 (2025); 38.7 (2026); 37.1 (2027); 36.1 (2028); 35.3 (2029); 34.7 (later)
- Imports of goods and services (percent of GDP): 28.1 (2020); 27.2 (2021); 27.1 (2022); -27.5 (2023 Prel.); 30.4 (2024); 30.5 (2025); 30.3 (2026); 30.2 (2027); 30.1 (2028); 30.2 (2029); 30.4 (later)

### Monetary sector and financial conditions
- Financial conditions remain accommodative; policy rate increases have not yet offset ample liquidity in the banking sector.
- Excess liquidity throughout most of 2023 reflected high oil inflows, loose fiscal policy, and repatriation of export profits in compliance with FX regulations, translating into rapid credit growth—over half due to government financing of large pre-electoral deficits.
- Bank exposure to the sovereign remained broadly stable, with bond financing through regional markets gradually replacing direct lending.
- Appreciation of the real effective exchange rate—reflecting appreciation of the Euro vis-à-vis the US dollar—has helped tighten monetary conditions somewhat.
- Broad money (M2) (annual percent changes):
  - 2020: 6.8
  - 2021: 5.5
  - 2022: 15.2
  - 2023 (Prel.): 16.5
  - 2024 (Prog.): 9.7
  - 2025 (Proj.): 2.7
  - 2026: 0.9
  - 2027: 1.7
  - 2028: 2.0
  - 2029: 2.5
  - Later: 2.5
- Credit to the economy (annual percent changes):
  - 2020: 5.4
  - 2021: 14.8
  - 2022: 15.1
  - 2023 (Prel.): 11.1
  - 2024 (Prog.): 16.4
  - 2025 (Proj.): 8.2
  - 2026: 4.7
  - 2027: 4.7
  - 2028: 4.5
  - 2029: 4.9
  - Later: 4.9
- Monetary survey highlights (billions of CFA francs, selected):
  - Net foreign assets (2020–2025 samples): 393 (2020); 204 (2021); 329 (2022); 239 (2023); 654 (2024 Prog.); 213 (2025 Prog.)
  - Broad money (M2): 2,461 (2020); 2,595 (2021); 2,868 (2022); 2,991 (2023); 3,340 (2024); 3,282 (2025)
  - Gross international reserves (billions of US Dollars): 1.3 (2020); 1.4 (2021); 1.7 (2022); 1.4 (2023); 2.3 (2024); 1.4 (2025)

### Banking sector financial indicators (2015–23, end of period)
- Capital adequacy:
  - Total bank regulatory capital to risk-weighted assets: 8.3 (2015); 8.1 (2016); 12.9 (2017); 13.7 (2018); 17.0 (2019); 17.5 (2020); 16.9 (2021); 16.1 (2022); 14.7 (2023)
  - Total capital (net worth) to assets: 4.5 (2015); 4.7 (2016); 7.7 (2017); 6.9 (2018); 9.9 (2019); 9.8 (2020); 10.2 (2021); 9.1 (2022); 8.6 (2023)
- Asset quality:
  - Non-performing loans (gross) to total loans (gross): 9.1 (2015); 9.0 (2016); 11.8 (2017); 15.7 (2018); 9.2 (2019); 9.0 (2020); 7.6 (2021); 7.6 (2022); 7.6 (2023)
  - Provisions to non-performing loans: 47.3 (2015); 60.1 (2016); 60.1 (2017); 64.9 (2018); 52.9 (2019); 74.0 (2020); 80.2 (2021); 81.7 (2022); 78.1 (2023)
- Earnings and profitability:
  - Return on equity: 5.1 (2015); 14.9 (2016); 13.7 (2017); 18.5 (2018); 18.5 (2019); 17.1 (2020); 16.9 (2021); 19.1 (2022); 20.7 (2023)
  - Return on assets: 1.1 (2015); 2.1 (2016); 1.9 (2017); 2.8 (2018); 2.7 (2019); 3.1 (2020); 3.1 (2021); 3.2 (2022); 3.2 (2023)
- Liquidity:
  - Liquid assets to total assets: 24.4 (2015); 25.0 (2016); 28.5 (2017); 28.7 (2018); 26.8 (2019); 27.2 (2020); 30.5 (2021); 36.3 (2022); 28.2 (2023)
  - Liquid assets to short-term liabilities: 148.3 (2015); 134.0 (2016); 157.1 (2017); 169.7 (2018); 140.1 (2019); 166.9 (2020); 180.8 (2021); 197.5 (2022); 176.7 (2023)

*Source: IMF staff report content as presented in the provided chapter.*

### 1. Calculated according to the Basel I guidance.

### 1. Calculated according to the Basel I guidance.

### Capacity to Repay (Table 7: Gabon: Capacity to Repay the Fund, 2022–31)
- Fund obligations based on existing credit (in millions of SDRs) — Principal:
  - 2022: 11.9
  - 2023: 8.1
  - 2024: 70.5
  - 2025: 130.0
  - 2026: 85.7
  - 2027: 89.4
  - 2028: 71.6
  - 2029: 47.7
  - 2030: 32.9
  - 2031: 32.9
- Fund obligations based on existing credit — Charges and interest (in millions of SDRs):
  - 2022: 7.8
  - 2023: 2.9
  - 2024: 45.9
  - 2025: 33.8
  - 2026: 27.4
  - 2027: 22.9
  - 2028: 18.5
  - 2029: 15.1
  - 2030: 12.8
  - 2031: 11.1
- Fund obligations based on existing and prospective credit — Principal (in millions of SDRs):
  - Same as existing-credit principal: 11.9, 8.1, 70.5, 130.0, 85.7, 89.4, 71.6, 47.7, 32.9, 32.9 (2022–2031)
- Fund obligations based on existing and prospective credit — Charges and interest (in millions of SDRs):
  - 2022: 8.0
  - 2023: 2.9
  - 2024: 45.9
  - 2025: 33.8
  - 2026: 27.4
  - 2027: 22.9
  - 2028: 18.5
  - 2029: 15.1
  - 2030: 12.8
  - 2031: 11.1
- Total obligations based on existing and prospective credit:
  - In millions of SDRs (2022–2031): 19.9, 131.0, 216.4, 163.8, 113.0, 112.3, 90.0, 62.9, 45.7, 43.9
  - In millions of US$ (2022–2031): 26.6, 174.8, 287.5, 218.1, 150.9, 150.2, 120.8, 84.5, 67.5, 64.9
  - In percent of exports of goods and services 1/ (2022–2031): 0.3, 2.1, 3.4, 2.7, 1.9, 1.9, 1.5, 1.1, 0.8, 0.8
  - In percent of debt service 2/ (2022–2031): 4.9, 27.4, 26.3, 22.4, 16.1, 14.1, 11.1, 7.7, 6.0, 5.4
  - In percent of GDP (2022–2031): 0.1, 0.9, 1.4, 1.0, 0.7, 0.7, 0.5, 0.4, 0.3, 0.3
  - In percent of Gross International Reserves (2022–2031): 1.9, 12.1, 21.3, 21.8, 14.4, 16.7, 19.8, 30.9, -45.0, -9.5
  - In percent of quota (2022–2031): 9.2, 60.7, 100.2, 75.8, 52.3, 52.0, 41.7, 29.1, 21.1, 20.3
- Outstanding Fund credit:
  - In millions of SDRs (2022–2031): 793.5, 740.5, 499.8, 369.8, 284.1, 194.7, 123.1, 75.4, 42.5, 9.7
  - In millions of US$ (2022–2031): 1,061.1, 987.8, 664.1, 492.3, 379.3, 260.4, 165.2, 101.3, 62.9, 14.3
  - In percent of exports of goods and services 1/ (2022–2031): 11.1, 11.7, 7.8, 6.0, 4.8, 3.3, 2.1, 1.3, 0.8, 0.2
  - In percent of debt service 2/ (2022–2031): 194.6, 154.9, 60.8, 50.6, 40.6, 24.5, 15.2, 9.3, 5.6, 1.2
  - In percent of GDP (2022–2031): 5.0, 4.8, 3.2, 2.3, 1.8, 1.2, 0.7, 0.4, 0.3, 0.1
  - In percent of Gross International Reserves (2022–2031): 74.8, 68.5, 49.1, 49.3, 36.1, 28.9, 27.1, 37.0, -41.9, -2.1
  - In percent of quota (2022–2031): 367.4, 342.8, 231.4, 171.2, 131.5, 90.1, 57.0, 34.9, 19.7, 4.5
- Net use of Fund credit (in millions of SDRs) (2022–2031): 104.2, -88.1, -170.5, -130.0, -85.7, -89.4, -71.6, -47.7, -32.9, -32.9
- Disbursements (in millions of SDRs) (2022–2031): 116.1, 0.0, 0.0, 0.0, 0.0, 0.0, 0.0, 0.0, 0.0, 0.0
- Repayments (in millions of SDRs) (2022–2031):
  - 2022: 11.9
  - 2023: 8.1
  - 2024: 70.5
  - 2025: 130.0
  - 2026: 85.7
  - 2027: 89.4
  - 2028: 71.6
  - 2029: 47.7
  - 2030: 32.9
  - 2031: 32.9

Memorandum items (selected exact series):
- Exports of goods and services (in millions of US$) (2022–2031): 9,535; 8,441; 8,503; 8,168; 7,949; 7,886; 7,882; 7,925; 8,111; 8,177
- Debt service (in millions of US$) (2022–2031): 545; 638; 1,092; 973; 935; 1,062; 1,085; 1,095; 1,131; 1,206
- Nominal GDP (in millions of US$) (2022–2031): 21,076; 20,524; 21,013; 21,099; 21,426; 21,827; 22,353; 22,868; 24,304; 24,730
- Gross Official Reserves Imputed to Gabon (in millions of US$) (2022–2031): 1,418; 1,441; 1,352; 999; 1,052; 901; 609; 274; -150; -685
- Quota (millions of SDRs): 216 (2022–2031)
- Source note: IMF staff estimates and projections. Exports for 2022 and 2023 are based on staff projections. Total debt service includes IMF repayments.

### Public Debt and Debt Service by Creditor (Table 8: Decomposition, 2022–23)
- Total debt stock (US$ mln) and percent of debt and GDP:
  - 2022: Total US$ mln 13,499; Percent of debt 100.0; Percent of GDP 63.7
  - 2023: Total US$ mln 14,582; Percent of debt 100.0; Percent of GDP 70.5
- External debt (2022 vs 2023):
  - 2022: US$ mln 7,303; Percent of debt 54.1; Percent of GDP 34.5
  - 2023: US$ mln 7,056; Percent of debt 48.4; Percent of GDP 34.1
- Multilateral creditors (2022 vs 2023):
  - 2022: US$ mln 3,081; Percent of debt 22.8; Percent of GDP 14.5
  - 2023: US$ mln 2,904; Percent of debt 19.9; Percent of GDP 14.0
  - Debt service (2022 vs 2023): 170; 330.1 (US$ mln)
  - Debt service percent of GDP (2022 vs 2023): 0.8; 1.6
- IMF (component of multilateral) (2022 vs 2023):
  - 2022: US$ mln 1,219; Percent of debt 9.0; Percent of GDP 5.8
  - 2023: US$ mln 1,023; Percent of debt 7.0; Percent of GDP 4.9
  - Debt service (2022 vs 2023): 41; 134.9 (US$ mln)
  - Debt service percent of GDP (2022 vs 2023): 0.2; 0.7
- World Bank (2022 vs 2023):
  - 2022: US$ mln 633; Percent of debt 4.7; Percent of GDP 3.0
  - 2023: US$ mln 647; Percent of debt 4.4; Percent of GDP 3.1
  - Debt service (2022 vs 2023): 26; 48.0 (US$ mln)
  - Debt service percent of GDP (2022 vs 2023): 0.1; 0.2
- AfDB/IADB (2022 vs 2023):
  - 2022: US$ mln 1,105; Percent of debt 8.2; Percent of GDP 5.2
  - 2023: US$ mln 1,096; Percent of debt 7.5; Percent of GDP 5.3
  - Debt service (2022 vs 2023): 79; 120.9 (US$ mln)
  - Debt service percent of GDP (2022 vs 2023): 0.4; 0.6
- Other multilateral (2022 vs 2023):
  - 2022: US$ mln 124; Percent of debt 0.9; Percent of GDP 0.6
  - 2023: US$ mln 1,387; Percent of debt 9.5; Percent of GDP 6.7
  - Debt service (2022 vs 2023): 334; 614.8 (US$ mln)
  - Debt service percent of GDP (2022 vs 2023): 1.6; 3.0
- Bilateral creditors (2022 vs 2023):
  - 2022: US$ mln 1,365; Percent of debt 10.1; Percent of GDP 6.4
  - 2023: US$ mln 1,299; Percent of debt 8.9; Percent of GDP 6.3
  - Debt service (2022 vs 2023): 160; 160.6 (US$ mln)
  - Debt service percent of GDP (2022 vs 2023): 0.8; 0.8
- Paris Club (2022 vs 2023):
  - 2022: US$ mln 495; Percent of debt 3.7; Percent of GDP 2.3
  - 2023: US$ mln 510; Percent of debt 3.5; Percent of GDP 2.5
  - Debt service (2022 vs 2023): 33; 43.8 (US$ mln)
  - Debt service percent of GDP (2022 vs 2023): 0.2; 0.2
- Non-Paris Club (China) (2022 vs 2023):
  - 2022: US$ mln 869; Percent of debt 6.4; Percent of GDP 4.1
  - 2023: US$ mln 789; Percent of debt 5.4; Percent of GDP 3.8
  - Debt service (2022 vs 2023): 127; 116.8 (US$ mln)
  - Debt service percent of GDP (2022 vs 2023): 0.6; 0.6
- Bonds (2022 vs 2023):
  - 2022: US$ mln 2,527; Percent of debt 18.7; Percent of GDP 11.9
  - 2023: US$ mln 2,521; Percent of debt 17.3; Percent of GDP 12.2
  - Debt service (2022 vs 2023): 200; 638.4 (US$ mln)
  - Debt service percent of GDP (2022 vs 2023): 0.9; 3.1
- Commercial creditors (2022 vs 2023):
  - 2022: US$ mln 330; Percent of debt 2.4; Percent of GDP 1.6
  - 2023: US$ mln 332; Percent of debt 2.3; Percent of GDP 1.6
  - Debt service (2022 vs 2023): 119; 119.5 (US$ mln)
  - Debt service percent of GDP (2022 vs 2023): 0.6; 0.6
- Domestic debt (2022 vs 2023):
  - 2022: US$ mln 6,197; Percent of debt 45.9; Percent of GDP 29.3
  - 2023: US$ mln 7,526; Percent of debt 51.6; Percent of GDP 36.4
  - Debt service (2022 vs 2023): 1,044; 1,043.1 (US$ mln)
  - Debt service percent of GDP (2022 vs 2023): 5.0; 5.1
- Domestic debt instruments (selected):
  - T-Bills (2022 vs 2023): US$ mln 452; 690; percent of debt 3.3; 4.7; percent of GDP 2.1; 3.3
  - Bonds (2022 vs 2023): US$ mln 2,443; 3,272; percent of debt 18.1; 22.4; percent of GDP 11.5; 15.8
  - Loans (2022 vs 2023): US$ mln 1,410; 1,313; percent of debt 10.4; 9.0; percent of GDP 6.7; 6.3
  - Other debt (2022 vs 2023): US$ mln 1,893; 2,251; percent of debt 14.0; 15.4; percent of GDP 8.9; 10.9
- Memo item — Nominal GDP:
  - 2022: 21,076 (US$ mln)
  - 2023: 20,524 (US$ mln)
- Sources: Gabonese authorities and IMF staff estimates. The debt-to-GDP ratio is derived from original data in CFA Francs. Arrears and legal debt as estimated by staff.

### EFF Program Performance: Taking Stock (Annex I.A)
- Program design and objectives:
  - Three-year extended arrangement under the Extended Fund Facility (EFF) approved in July 2021.
  - Aimed to support COVID-19 response, reduce fiscal and debt vulnerabilities, and foster high, sustainable, green, and inclusive private sector-led growth.
- Quantitative conditionality:
  - Targeted fiscal adjustment of about 4 percentage points of nonoil GDP.
  - Targets: (i) achieve a nonoil primary deficit of 3.4 percent of nonoil GDP by end-2023; (ii) reduce public debt to below 70 percent of GDP by 2024.
  - Adjustment emphasis: bolster nonoil revenues by 3.2 percent of nonoil GDP and reduce current spending.
- Structural reforms targeted:
  - Governance in the extractive sector, public financial management, financial sector soundness, and investment climate improvements.
- Frontloading and financing:
  - Bulk of adjustment targeted to 2021–22.
  - 70 percent of prior actions and structural benchmarks envisaged by end-2021.
  - 52 percent of financing linked to completion of prior actions and first two reviews.
- Implementation outcome:
  - Only two reviews were completed.
  - Delays due to unfinished reforms, external arrears, pre-electoral pressures, and inflationary/social fallout from Russia’s war in Ukraine.
  - Discussions paused in April 2023 at authorities’ request; resumption not feasible after significant deviations and change in government following August 2023 coup d’état.
- Financing note:
  - Financing under the program envisaged at SDR 388.8 million (about US$553.2 million at time of approval) or 180 percent of Gabon quota.
  - Program followed emergency financing under the Rapid Financing Instrument (US$299.61 million) in 2020.

### EFF Program Outcomes and Structural Reforms (Annex I.A continued)
- Fiscal outcomes by end-2023:
  - Revenue effort shortfall of some 2 percentage points of nonoil GDP relative to target.
  - Pre-electoral spending added some 6 percentage points of nonoil GDP relative to the program.
  - Nonoil primary deficit:
    - 2022: widened to 14.1 percent of nonoil GDP (compared to 5 percent under program targets).
    - 2023: 14.3 percent of nonoil GDP (compared to 3.4 percent under program).
  - Public debt: increased by some 20 percentage points above program plans as a share of nonoil GDP (decline as share of GDP attributed to higher oil prices rather than policies).
- Structural reform implementation:
  - Mixed outcomes: some resource transparency initiatives implemented in 2021 but not completed.
  - Treasury Single Account (TSA) reforms not finalized due to logistical delays at central bank and continued existence of accounts outside TSA.
  - Procurement, investment, accounting process reforms and social safety net targeting not implemented.
  - Only 1 of 16 structural benchmarks planned for 2022–23 was met (publication of procurement contract awards at end-July 2022).

### Implementation of Past Article IV Advice (Annex I.B)
- 2019 Article IV focused on:
  - (i) Revenue-based and growth-friendly fiscal consolidation,
  - (ii) Enhancing governance,
  - (iii) Deepening financial intermediation.
- Implementation status:
  - Limited implementation of key recommendations.
- Revenue-based consolidation:
  - Tax policy and administration measures picked up by EFF were not fully implemented.
  - Containment of non-priority spending failed; subsidies increased to protect population from fuel price increases and global inflationary pressures.
  - Public investment fell.
  - Social protection reforms (revision of vulnerable household profiles and GEF database) not completed.
  - Progress on PFM agenda (public procurement, TSA, SOE restructuring) limited.
- Enhancing governance:
  - Gabon regained EITI membership, published quarterly oil sector flow reports and first EITI report.
  - Anti-corruption measures, including asset declarations, stalled.
- Deepening financial intermediation:
  - Financial stability maintained.
  - Government initiated resolution of three public banks but not completed.

### External Sector Assessment (Annex II: Based on EBA-Lite3 methodology)
- Overall assessment:
  - External position indicators are mixed.
  - Staff assessment: external position in 2023 is weaker than implied by medium-term fundamentals and the exchange rate is overvalued.
  - Current account model estimates an overvaluation of 9 percent (vs. 13.2 percent in 2021) after adjustment for oil prices relative to historical average.
  - Commodity module suggests the current account is 5–16pp of GDP weaker than estimated norms.
  - REER model suggests an undervaluation of 6.5 percent (vs. 1.4 percent overvaluation in 2021).
  - Assessment based on staff estimates/projections for 2022–23; sensitive to revisions in BOP data.
- Policy response recommended:
  - Significant fiscal consolidation.
  - Measures to bolster structural competitiveness, including governance and business environment improvements to diversify away from oil.
- Current account background:
  - CA surplus estimated:
    - 2022: 10.4 percent of GDP.
    - 2023: 4.4 percent of GDP.
  - Improvement driven by higher oil prices in 2022 and 2023; higher oil and manganese exports offset increased imports.
  - Reserve coverage remained around 3 months of imports due to capital outflows and likely offshoring of oil receipts.
  - CA surplus expected to weaken to near zero by 2029 with lower oil prices and production.
  - Weaker fiscal position and paucity of budgetary support under unchanged policies projected to gradually reduce reserves.
  - Gabon’s BOP data subject to significant revisions; reserves are indicative for CEMAC members due to pooled reserves.
- EBA-Lite assessment details (2023):
  - CA-Actual: 4.4 (percent of GDP)
  - Cyclical contributions (from model) (-): 0.5
  - Natural disasters and conflicts (-): 0.0
  - Adjusted CA: 3.8
  - CA Norm (from model): 1.5
  - Adjustments to the norm (-): 4.6
  - Adjusted CA Norm: 6.1
  - CA Gap: -2.3 (percent of GDP)
  - Relative policy gap component: 0.9
  - Elasticity: -0.3
  - REER Gap (in percent): 9.1 (CA model), -6.5 (REER model)
- Commodity-module sub-model outcomes:
  - Investment-based sub-model: projected CA on average 5.2pp of GDP weaker than norms in medium term (2023–2028).
  - Consumption-based sub-model: medium-term CA norm 18 percent vs underlying CA projection 2.4 percent, implying a gap of 15.6pp of GDP; medium-term fiscal norm of 6.5 percent of GDP vs projected value of -6 percent.
  - Estimates subject to long-run assumption uncertainties (potential new oil discoveries, demographic changes).

*Source: IMF staff estimates and projections.*

### Annex III. Risk Assessment Matrix

### Annex III. Risk Assessment Matrix

### Global Risks
- Commodity price volatility
  - Likelihood: High
  - Expected Impact on Economy: High. "Given high dependence on commodity exports, commodity price volatility is a significant driver of the fiscal, external and real sector performance, but policies are not well equipped to respond. Higher prices will improve the performance in all sectors, but an expected increase in fiscal spending would prevent the appropriate buildup of fiscal and reserve cushions and increase risks, while looser credit conditions could increase inflation and build up financial sector risks. Under lower commodity prices, these risks would materialize, with a deterioration in fiscal, external and banking sector conditions."
  - Policy Responses:
    - "In the short term, anchor the fiscal position on the needed adjustment effort, while strengthening social safety nets for a more targeted support."
    - "In the medium term, build a fiscal framework that would maintain fiscal sustainability in the face of commodity price volatility."
    - "Continue diversification towards nonoil activities, including through bold structural reforms to improve the business environment, and preserving fiscal space for needed infrastructure spending."

- Intensification of regional conflict(s)
  - Likelihood: High
  - Expected Impact on Economy: Low-Medium. "Trade disruptions are most likely to affect imports, weighing on domestic activity and leading to higher core inflation given a narrow nonoil production base. On the export side, the likely increase in global oil prices would be a net positive for Gabon given high dependence on oil (see above)."
  - Policy Responses:
    - "In addition to the policy responses above, improved trade integration through stronger implementation of existing agreements."

- Abrupt global slowdown or recession
  - Likelihood: Medium
  - Expected Impact on Economy: Medium. "Lower external demand for commodities (the main channel through which a global slowdown would affect Gabon) would dampen real, external and fiscal sector performance as discussed above."
  - Policy Responses:
    - "Refocus the fiscal adjustment on preserving space for infrastructure investment and targeted social spending."
    - "Renew efforts at structural reforms to further alleviate bottlenecks, improve governance and boost confidence and private investment."

- Systemic financial instability
  - Likelihood: Medium
  - Expected Impact on Economy: Medium-High. "The financial system is not expected to be affected directly given small size and weak integration in    global markets, but higher costs of fiscal financing would expose banks to potential regional default risks given their exposure to the sovereigns in the currency union. The fiscal position will weaken due to higher interest costs, inducing a further reliance on regional bond markets."
  - Policy Responses:
    - "Frontload the fiscal adjustment if financing constraints become too binding"

- Extreme climate events
  - Likelihood: Medium
  - Expected Impact on Economy: Medium. "Gabon is vulnerable to climate events due to poor infrastructure, and disruptions to economic activity (agriculture, mining, transportation) can be expected due to infrastructure damage. Fiscal costs would increase, weakening the fiscal position."
  - Policy Responses:
    - "Persevere with the fiscal adjustment to restore fiscal space for critical spending needs. While adjusting, preserve fiscal space for infrastructure spending and undertake reforms to significantly strengthen public investment management."
    - "Develop a strategy for climate adaptation, including with assistance from the World Bank."

### Domestic Risks
- Failure to undertake transformational reforms, while attending sustainably to social needs
  - Likelihood: NA
  - Expected Impact on Economy: High (long-term impact). "Failure to use this pivotal moment to implement sweeping reforms would deprive the economy of a chance to accelerate, start convergence towards higher income per capita, create jobs and reduce poverty and inequality."
  - Policy Responses:
    - "Undertake transformational reforms as discussed in the report."
    - "Address increased social demands within a coherent fiscal policy and reform framework to avoid widening existing imbalances."

- Political and social unrests
  - Likelihood: NA
  - Expected Impact on Economy: Medium. "While economic performance may not be significantly affected relative to recent history, social and political instability could distract policy attention away from reforms and towards inefficient shortcuts, at the expense of fundamental long-term solutions."
  - Policy Responses:
    - "Frontload needed fiscal and structural reforms, including policy frameworks to preserve stability while focusing on spending that addresses basic social and infrastructure needs."

### Annex IV — Debt Sustainability Analysis: Key Findings and Risks
- Overall assessment
  - "Gabon’s debt sustainability has deteriorated significantly since the previous DSA, and there is a high risk of distress under unchanged policies on the back of upward debt trajectory and elevated gross financing needs. The deterioration relative to the previous assessment is due to a much weaker fiscal position and less favorable automatic debt dynamics as interest costs have increased. A strong and sustained fiscal adjustment would reduce the risk of debt distress."

- Recent deterioration and drivers
  - "Debt sustainability indicators have deteriorated significantly since the previous assessment."
  - "The fiscal position weakened significantly in 2022–23 (ahead of the August 2023 general elections), with nonoil primary deficits some 11 percentage points of nonoil GDP wider than envisaged under the program and public debt as a share of nonoil GDP about 20 pp higher."
  - "Spreads lingering in near-distressed territory (around 800–900 basis points) for large parts of 2023."

- Baseline macroeconomic and fiscal assumptions
  - Growth: "projected to remain around 2.6–2.9 percent"
  - Inflation: "below the central bank target of 3 percent"
  - Oil production: "assumed to decline at about 1 percent a year, exhausting by around 2050."
  - Fiscal: "nonoil primary balance will improve by some 2pp of nonoil GDP to hover around 13 percent of nonoil GDP over the medium term."
  - Fiscal spending path: "electoral spending falls off; wages and salaries increase to reflect recent announcements by the transition government to increase hiring and wages; investment spending—after some pickup in the near term—returns to its previous levels (average of the last five years), while interest payments move in line with global interest rates and public debt dynamics."

- Financing assumptions and risks
  - "Baseline scenario foresees no budget disbursements from external donors given the lack of progress on the program with the Fund, although project financing is assumed to continue."
  - "About half of the external debt amortizations over the projection horizon, including the Eurobond maturing in 2025, will be refinanced externally through commercial, bilateral, or multilateral creditors."
  - "Net issuances in regional/domestic capital markets are assumed at 1–2 percent of GDP."
  - "Remaining financing needs covered under 'unidentified financing', financed largely domestically (e.g., domestic arrears or additional syndicated loans from banks), or through bilateral external budget support."
  - Interest cost dynamics: "Interest costs for both domestic and external debt are assumed to grow with the level of debt and the dynamics of the effective interest rates to follow WEO projections for interest rates."

- Debt dynamics and projections under current policies
  - "Debt increase from some 70 percent of GDP in 2023 to over 100 percent in 2029, with the upward dynamics accelerating over the long term due to a sustained loss in oil revenues."
  - Stress scenarios: "Debt levels would increase further in the case of a commodity price shock and a real exchange rate shock further pushing public debt-to-GDP ratios in 2030 to 111 and 105 percent, respectively."
  - Contingent liabilities: "Debt levels are exposed to contingent liability risks given lack of data on guarantees and other contingent liabilities."

- Gross financing needs
  - "Projected to average 19 percent of GDP per year over 2024–29 factoring the expected 2025 Eurobond amortization, more than triple the 5 percent of GDP expected in the previous DSA and much higher than the historical average of roughly 4 percent of GDP over 2013–23, signaling a high risk of distress."
  - Financing environment: "International markets are costly (especially after a long history of external arrears) and official assistance dried up in the absence of an IMF program, leaving regional banks (already overexposed to the sovereigns) and domestic arrears as the main sources of financing, putting pressures on private activity and banking system health."

- Debt carrying capacity and revenue pressure
  - "Interest payments account for 20–30 percent of projected revenues (depending on oil prices) and total debt service for about 80–115 percent of revenues, at the very high end of the distribution for sub-Saharan Africa."

- Required policy response
  - "A large adjustment effort (of around 11 percentage points of nonoil GDP over the next four years, equivalent to 6–7 percent of GDP under current oil price projections) will be needed to bring debt and financing needs to safer ground."
  - Near-term priorities:
    - "(i) financing risks in 2025 and the pre-financing of some of the Eurobond amortization;"
    - "(ii) avoiding any external debt service arrears that have contributed to high borrowing costs for Gabon;"
    - "(iii) avoiding initiatives that lead to a permanent increase in spending;"
    - "(iv) strengthened commitment controls and cash and debt management functions;"
    - "(v) identifying all domestic arrears and planning their gradual settlement."

- Risk of sovereign stress (summary)
  - Final assessment: Overall "High"
  - Medium term: "High"
  - Long term: "High"
  - Commentary: "The risk of debt distress is high, because high deficits in the baseline scenario (of no policy change) will generate large financing needs and put debt on an explosive path. On the assessment of sustainability, debt is deemed to be sustainable according to the DSA framework because of staff assessment that a fiscal adjustment to correct such unfavorable dynamics is feasible. Going forward, if the fiscal position is not corrected and upward debt dynamics continue, debt could become unsustainable."
  - Additional note: "Staff assesses long term risks as high given the projected exhaustion of oil resources and a related deterioration in fiscal revenues, primary balance and debt over the long term."

_International Monetary Fund staff._

### 5. Debt consolidation across sectors:

### 5. Debt consolidation across sectors

### Public debt structure and currency/instrument composition
- Commentary: The currency composition of debt has been historically dominated by foreign currency denominated debt, overwhelmingly denominated in euros.
- Staff assumption: Partial rollover of external debt and reduced budgetary support over the projection horizon leads to an increasingly higher share of debt in local currency.
- Instrument structure:
  - Majority of Gabon's debt is marketable; non-marketable debt comprises multilateral debt.
  - A significant portion of the debt is medium term.
- Creditor composition:
  - External creditors: mix of private and official external creditors.
  - Domestic creditors: mostly regional (bank) creditors.
- Residual maturity: 11.7 years.

### Baseline scenario: public debt and drivers (Percent of GDP unless indicated otherwise)
- Public debt time series (selected years):
  - Prel. 2023: 70.5
  - 2024: 73.1
  - 2025: 78.9
  - 2026: 84.6
  - 2027: 90.5
  - 2028: 96.5
  - 2029: 102.8
  - 2030: 107.8
  - 2031: 114.1
  - 2032: 120.8
  - 2033: 128.0
- Change in public debt (annual percent of GDP):
  - 2024: 6.8
  - 2025: 2.6
  - 2026: 5.7
  - 2027: 6.0
  - 2028: 6.0
  - 2029: 6.3
  - 2030: 5.0
  - 2031: 6.3
  - 2032: 6.7
  - 2033: 7.2
- Contribution of identified flows (percent of GDP):
  - 2024: 4.7
  - 2025: 2.5
  - 2026: 4.3
  - 2027: 4.5
  - 2028: 4.7
  - 2029: 4.5
  - 2030: 4.6
  - 2031: 4.5
  - 2032: 6.0
  - 2033: 6.6
- Primary deficit (percent of GDP):
  - 2024: -1.0
  - 2025: 1.2
  - 2026: 2.9
  - 2027: 3.0
  - 2028: 3.3
  - 2029: 3.5
  - 2030: 3.7
  - 2031: 3.8
  - 2032: 3.9
  - 2033: 4.1
  - 2033 (alternate line): 4.2
- Noninterest revenues (percent of GDP):
  - 2024: 19.9
  - 2025: 18.8
  - 2026: 17.5
  - 2027: 17.3
  - 2028: 17.1
  - 2029: 17.0
  - 2030: 17.0
  - 2031: 17.1
  - 2032: 17.2
  - 2033: 17.2
  - 2033 (alternate): 17.3
- Noninterest expenditures (percent of GDP):
  - 2024: 18.8
  - 2025: 20.0
  - 2026: 20.4
  - 2027: 20.3
  - 2028: 20.4
  - 2029: 20.5
  - 2030: 20.8
  - 2031: 20.9
  - 2032: 21.1
  - 2033: 21.3
  - 2033 (alternate): 21.5
- Automatic debt dynamics (percent of GDP):
  - 2024: 5.3
  - 2025: 0.2
  - 2026: 1.5
  - 2027: 1.6
  - 2028: 1.5
  - 2029: 1.0
  - 2030: 1.0
  - 2031: 0.8
  - 2032: 2.2
  - 2033: 2.6
  - 2033 (alternate): 3.0
- Real interest rate and relative inflation (percent):
  - 2024: 3.9
  - 2025: 2.2
  - 2026: 3.4
  - 2027: 3.6
  - 2028: 3.6
  - 2029: 3.3
  - 2030: 3.4
  - 2031: 3.3
  - 2032: 4.9
  - 2033: 5.5
  - 2033 (alternate): 6.1
- Real interest rate (component, percent):
  - 2024: 7.7
  - 2025: 3.0
  - 2026: 4.6
  - 2027: 4.4
  - 2028: 4.2
  - 2029: 3.8
  - 2030: 3.8
  - 2031: 3.7
  - 2032: 5.3
  - 2033: 5.8
  - 2033 (alternate): 6.4
- Relative inflation (percent):
  - 2024: -3.8
  - 2025: -0.8
  - 2026: -1.2
  - 2027: -0.8
  - 2028: -0.6
  - 2029: -0.4
  - 2030: -0.4
  - 2031: -0.3
  - 2032: -0.4
  - 2033: -0.4
  - 2033 (alternate): -0.3
- Real growth rate (percent):
  - 2024: -1.4
  - 2025: -2.0
  - 2026: -1.9
  - 2027: -2.0
  - 2028: -2.1
  - 2029: -2.3
  - 2030: -2.4
  - 2031: -2.5
  - 2032: -2.7
  - 2033: -2.9
  - 2033 (alternate): -3.1
- Other identified flows (percent of GDP): 0.3 (2024), 1.1 (2025), then -0.1 each year through 2033.
- Contingent liabilities (percent of GDP): 0.0 across reported years.
- (minus) Interest Revenues (percent of GDP): 0.0 across reported years.
- Contribution of residual (percent of GDP):
  - 2024: 2.2
  - 2025: 0.2
  - 2026: 0.4
  - 2027: 1.2
  - 2028: 1.3
  - 2029: 1.5
  - 2030: 1.7
  - 2031: 0.5
  - 2032: 0.3
  - 2033: 0.1
- Gross financing needs (percent of GDP):
  - 2024: 11.5
  - 2025: 11.8
  - 2026: 20.8
  - 2027: 16.9
  - 2028: 17.5
  - 2029: 17.1
  - 2030: 26.0
  - 2031: 27.3
  - 2032: 31.3
  - 2033: 25.8
  - 2033 (alternate): 27.5
- Of which: debt service (percent of GDP):
  - 2024: 12.5
  - 2025: 10.6
  - 2026: 17.8
  - 2027: 13.8
  - 2028: 14.3
  - 2029: 13.6
  - 2030: 22.3
  - 2031: 23.5
  - 2032: 27.4
  - 2033: 21.7
  - 2033 (alternate): 23.3
- Local currency vs foreign currency gross financing needs (percent of GDP):
  - Local currency (selected): 7.7 (2024), 5.4 (2025), 10.1 (2026), 9.6 (2027), 10.1 (2028), 9.8 (2029), 16.1 (2030), 17.4 (2031), 21.4 (2032), 18.5 (2033), 20.3 (2033 alt).
  - Foreign currency (selected): 4.8 (2024), 5.2 (2025), 7.8 (2026), 4.2 (2027), 4.1 (2028), 3.8 (2029), 6.2 (2030), 6.0 (2031), 6.0 (2032), 3.2 (2033), 2.9 (2033 alt).
- Memo:
  - Real GDP growth (percent): 2.3 (2024), 2.9 (2025), 2.7 (2026–2033 reported as 2.6–2.7 variance), 2.7 (2033 alternate).
  - Inflation (GDP deflator; percent): -7.2 (2024), -0.2 (2025), -1.8 (2026), -0.9 (2027), -0.5 (2028), -0.1 (2029), -0.1 (2030), 0.0 (2031), -0.9 (2032), -0.8 (2033), -0.6 (2033 alt).
  - Nominal GDP growth (percent): -5.1 (2024), 2.7 (2025), 0.9 (2026), 1.7 (2027), 2.0 (2028), 2.5 (2029), 2.5 (2030), 2.6 (2031), 1.8 (2032), 1.8 (2033), 2.0 (2033 alt).
  - Effective interest rate (percent): 4.2 (2024), 4.1 (2025), 4.5 (2026), 4.7 (2027), 4.5 (2028), 4.2 (2029), 4.0 (2030), 3.7 (2031), 4.3 (2032), 4.5 (2033), 4.9 (2033 alt).

### Medium-term risk assessment and financing vulnerabilities
- Debt fanchart:
  - Fanchart width (percent of GDP): 91.0 (value) and 1.3 (contrib).
  - Probability of debt non-stabilization (percent): 95.7 and 0.8 (contrib).
  - Terminal debt-to-GDP institutions index: x80.9 and 1.8 (contrib).
  - Debt fanchart index (DFI): 3.9 — Risk signal: 3/High.
- Gross Financing Needs (GFN) module:
  - Average baseline GFN (percent of GDP): 18.3 and 6.3 (contrib).
  - Initial banks' claims on the gen. govt (pct bank assets): 14.3 and 4.6 (contrib).
  - Chg. in banks' claims in stress (pct banks' assets): 95.3 and 31.9 (contrib).
  - GFN financeability index (GFI): 42.8 — Risk signal: 4/High.
- Medium-Term Index: Risk signal: 5/ (final assessment).
- Commentary: Large gross financing needs, high rollover needs, and large amortizations are the key drivers of vulnerability in the near to medium term. High existing debt levels and the high probability of debt not stabilizing in the medium term contribute to the high risk signal. Lower commodity prices and exchange rate fluctuations can exacerbate vulnerabilities.
- Financing dynamics shown: significant role of banks' financing in actual, baseline, and stress scenarios.

### Realism of baseline assumptions
- Forecast track record and realism tools indicate no persistent forecast bias.
- Tools and comparisons use comparator group: Emerging Markets, Commodity Exporter, Program.
- Laubach (2009) rule referenced: rule assumes bond spreads increase by about 4 bps in response to a 1 ppt increase in projected debt-to-GDP ratio.
- Commentary: The realism tools do not indicate persistent forecast bias.

### Long-term risks: natural resources and fiscal implications
- Commentary: A reduction in oil extraction and the depletion of Gabon's oil reserves give rise to significant fiscal risks.
- Natural resource module result: Baseline scenario using the 10-year historical average may be underestimating the debt path given the projected scaling down of oil revenues and GDP growth.
- Predicted outcome: Gross financing needs and debt levels are predicted to rise substantially as a result of long-run oil production dynamics.

### Social Security Funds: fiscal risks and reform priorities
- Overall: Social security funds pose significant fiscal risks which would grow without urgent governance reforms.
- CPPFAE (Public Pension Fund):
  - Core risk: growing unfunded liabilities due to falling ratio of public service workers per retiree (from 5 in 2014 to 3 in 2020), hiring freeze since 2015, 5 percent annual increase in retirees, and longer life expectancy.
  - Government accumulated arrears (employer and worker contributions) from 2016 to 2022: about 1.2 percent of GDP.
  - 2015 wage reform (50 percent base salary increase) creates contingent obligation:
    - At end-2022, about 10,015 out of 26,359 retirees should have benefitted from a higher pension but the upward revision was not implemented.
    - Government would owe about 0.6 percent of GDP should the higher pension be paid retroactively.
  - Recommendation: Urgent parametric reform; adopt one of the reform options from the actuarial study.
  - Public Pension Parameters (as reported):
    - Employee's contribution rate: 6 percent
    - Government's contribution rate: 15 percent
    - Annuity rate: 2 percent
    - Retirement age: 60
    - Reference salary: Last base salary
- CNAMGS (National Health Insurance Fund):
  - Financial pressures from government contribution arrears leading to arrears vis-à-vis suppliers.
  - CNAMGS reliance on private sector contributions to cover liquidity shortfalls.
  - GEF database issues: about 900,000 individuals (40 percent of population vs poverty rate of 33 percent); database not properly updated, inclusion errors raise costs.
  - Recommendations: Clear government arrears via an arrears clearance plan; update/clean the GEF database (update initiated with World Bank support).
- CNSS (Private Sector Social Security Fund):
  - Poor governance and persistent pension arrears; operating costs high; lack of published financial statements and statistics.
  - 2022: government dismissed board and management and appointed an interim manager.
  - Authorities plan transfer of CNSS management from public to private sector; details pending.
  - Recommendation: Urgent audit of CNSS for diagnostic and governance reforms.

### State-Owned Enterprises (SOEs): governance and transparency priorities
- Scope: SOEs active across agriculture, electricity, mining, construction, manufacturing, services, and transport; mining SOEs significant given oil sector size.
- Information scarcity: Financial statements often not certified nor published; many SOEs do not hold board meetings.
- Governance weaknesses:
  - Regulatory framework nearly non-existent or not followed.
  - Multiple supervising entities, absence of clear government responsibilities in law, and lack of a centralizing unit within the Ministry of Finance.
  - SOEs divided across three portfolios overseen by: FGIS, Caisse des Dépôts et Consignations (CDC), and the Ministry of Hydrocarbons.
  - Poor recruitment practices and weak capacity.
- Prior work: Draft SOE governance law prepared before the coup to reinforce monitoring and ensure government access to financial information.
- Immediate priorities:
  - Adopt and implement SOE governance law in line with best practices.
  - Establish a single oversight unit within the Ministry of Finance responsible for monitoring and supervision.
  - Regular publication of reports on SOEs' financial well-being.
- Note: This SOE section relies on World Bank staff information from analytical work on SOEs in the CEMAC region (July 2022).

### Menu of fiscal measures to increase fiscal space — Revenue measures (selected)
- Objective: Increase revenues, simplify the tax system, and make it more neutral and equitable.
- 1. Replace corporate income tax (CIT) holidays with investment tax credits (ITCs):
  - ITCs should support actual investment expenditures (not investment plans).
  - Introduce sunset clause (e.g., 5 years) for evaluation.
  - Individual businesses should not be eligible; focus on large-scale investments.
  - Pre-requisite: strengthen governance and institutional framework around granting of tax preferences.
- 2. Alternative minimum tax (AMT) reform:
  - AMT should apply to all businesses without exception; repeal the flat-rate minimum fee (minimum de perception).
  - AMT to be presented as a de minimis charge for use of public infrastructure and not negotiable.
  - If current AMT rate of one percent of turnover is excessive, consider lower rate (e.g., three-quarters of a percent).
  - Eliminate flat-rate minimum fee as regressive and distortionary.
- 3. Personal income tax (PIT) reform — eliminate the family “quotient”:
  - Make individuals the unit of taxation.
  - Family quotient gives larger tax reductions to high-income households with many children and is regressive.
  - Repeal the family quotient while recalibrating tax brackets and rates.
  - Simultaneously increase the generosity (and possibly scope) of the family allowance to maintain support for families in a more equitable way.

*Source: IMF staff estimates and projections from the chapter "5. Debt consolidation across sectors."*

### 4. The PIT could be further simplified by adopting a semi-dual tax system. This would entail

### 1gabea2024001 - 4. The PIT could be further simplified by adopting a semi-dual tax system. This would entail

### Personal Income Tax (PIT) reform: semi-dual system and base broadening
- Proposal: adopt a semi-dual tax system — progressive taxation of labor income and proportional taxation on income associated with capital, with final rates varying according to the nature of this income (profits, dividends, interest, rents, etc.).
- Expected advantages:
  - Easier administration and compliance by facilitating the use of final withholding at source and limiting the need for year-end reconciliation through tax returns.
  - Broaden the tax base on investment income, facilitated by the adoption of a moderate proportional tax rate on such income.
- Interaction with other PIT amendments:
  - Reform should be considered alongside repeal of the family quotient or reductions to the deduction granted for presumptive professional expenses.
  - Such reforms would "necessarily require reconsidering tax rates/brackets."

### Presumptive professional expenses, bonuses, and special exemptions
- Current provision: universal deduction against labor income for presumptive professional fees at a rate of 20 percent, up to CFAF 10 million.
- Equity and efficiency concerns:
  - The deduction is highly regressive, yielding greater tax savings for individuals facing a higher marginal tax rate.
  - The deduction also applies to pension income despite likely absence of professional expenses.
  - Ministers and parliamentarians receive a higher deduction of 25 percent.
  - Performance allowances and other bonuses are currently exempted in practice and should be fully taxed.
- Recommended options:
  - First best: repeal the presumptive professional expenses provision entirely and adjust tax rate schedule consequentially.
  - Alternative: scale back the generosity of the deduction (both the 20 percent and CFAF 10 million), make pension income ineligible, and abolish the 25 percent higher deduction for ministers and parliamentarians.
  - Ensure performance allowances and other bonuses are not exempt from tax.

### Implementation prerequisites and data needs
- Reform implementation would require:
  - Strengthening the quality of the taxpayer database to assess distributional and revenue impacts of reform scenarios with reasonable certainty.
  - These amendments could provide authorities more flexibility in deciding additional revenue sources.

### Indirect taxes: VAT alignment and excises
- VAT:
  - Introduce necessary amendments to ensure Gabon’s VAT conforms with the new regional CEMAC Directive.
  - Specific actions: eliminate one of the two reduced VAT rates (5 percent and 10 percent) and review the list of supplies currently exempt or subject to a reduced rate.
  - Timeline: The new CEMAC VAT Directive was formally adopted in November 2022, with member countries given until 1 December 2023 to introduce necessary amendments to their domestic legislation.
- Excise taxes:
  - Increase excise rates on goods with negative health impacts: alcoholic beverages (beer, wine and champagne), tobacco, and sugary drinks.
  - Note: Gabon does not apply an excise tax as mandated by the regional directives, which should be at least at 12.5 percent.
  - Excise rates should be the same for imported and domestic products.
  - Imports of passenger vehicles should be subject to excise duties (CEMAC Directive 3/19 – art. 3).
- Taxing mobile transactions:
  - Tax transactions through mobile phone platforms, negotiated globally with phone companies to avoid increasing the cost to users (currently 3% of the transaction value).

### Revenue administration: digitalization and compliance
- Core digital reforms:
  - Replace LIIR with a new IT tax system (DIGITAX). Under DIGITAX, all taxpayers will have to declare incomes or turnovers and pay taxes online.
  - For small taxpayers, integrate a simplified tax declaration process with mobile payments to speed up collection.
  - Benefits: enable pre-filled tax returns, increase filing and payment rates, cross-check registered taxpayers’ data, and improve tax audit. Adopting electronic invoices would positively impact VAT performance.
  - Implementation note: the electronic invoice reform could be implemented in 2024.
- Ongoing digitalization priorities to speed up:
  - (i) creation of a database of the values of the main imported products;
  - (ii) use of the risk management and analysis module to improve selectivity criteria for customs controls;
  - (iii) activation of the litigation module to deal with violations;
  - (iv) online payment of customs duties;
  - (v) interconnection of the ASYCUDA accounting module to secure collection of customs duties and provide a framework for monitoring of credits.
- Information management and interconnection:
  - Use DIGITAX to improve interfacing with Treasury and Customs’ IT systems and third parties (social security agencies, public expenditure related administrations, banks, electricity and water suppliers, mobile phone companies, etc.) to enable data cross checking and detect non-registered taxpayers.
  - Treasury must review the registering process of tax payment to trace payments to the payer and tax type, and monitor flows through commercial banks, BEAC and the tax department (DGI) to guarantee timely recording and accounting of tax payments, on-time VAT credit refunds payments, and emission of receipts to taxpayers.

### Spending measures and public financial management reforms
- Wage bill trajectory and payroll controls:
  - Set a wage bill trajectory consistent with medium-term fiscal sustainability objectives.
  - Required measures:
    - Strengthen payroll controls, finalize ongoing audit of the civil servants file, ensure consistency between personnel records and payroll files, enforce pay-scales (including bonuses) at all levels.
    - Strengthen recruitment process and coordination with line ministries on personnel and wage bill processes.
    - Conduct a comprehensive evaluation to adjust civil service size to enhance efficiency.
    - Assess existing arrears on salaries and social security contributions, validate amounts, specify pace of repayment.
    - Include payment of bonuses to senior staff, including advisors, in the budget if not already included.
- Fuel subsidies:
  - Remove fuel subsidies by aligning pump prices with international reference prices, adjusted to fully reflect supply costs and taxation, excluding kerosene and butane (mostly consumed by poor households).
  - Passthrough could be gradual depending on fiscal space and must be preceded by a comprehensive communication campaign.
  - Removal should be accompanied by enhanced social protection to compensate poor households.
- Rationalize transfers to public entities (SOEs and agencies):
  - Strengthen SOE governance and the government’s role as main shareholder, align legal framework with the Uniform Act of the OHADA and OECD guidelines on corporate governance of SOEs.
  - Define roles and responsibilities of the SOE oversight entity under the ministry of economy and give it legal support to request timely information.
  - Conduct and publish diagnostic audits on financial viability of all SOEs and identify entities to be restructured to generate savings.
  - Tighten disclosure and publication requirements for SOEs, including disclosing guaranteed debts and contingent liabilities, and publish annually certified financial statements of all SOEs, including GOC, SEM, CDC, SOGARA, and the sovereign wealth fund (FSRG) and its Asset Manager (FGIS).
  - Take stock of work led by the task force dedicated to rationalization of public agencies (SPPs) and independent administrative authorities (AAI).
- Public investment management:
  - Address structural weaknesses identified in the 2022 PIMA that result in poorly designed projects, extra costs, and interrupted projects.
  - Sign a decree to improve institutional and organizational framework for public investments to formalize programming and budgeting, especially ex-ante evaluation, selection, execution and monitoring.
  - Incorporate climate change analysis into project evaluation and selection criteria.
  - Adopt commitment authorization and payment credit reform (AE/CP), particularly for infrastructure projects, to improve expenditure planning.
  - Prioritize ongoing investment projects and complete them before initiating new projects; support reforms initially with training and a pilot in the infrastructure sector.
  - Pay special attention to PPPs.
- Spending reviews and predictability:
  - Improve quality of public spending through periodic reviews: conduct annual reviews by line ministry/institution and proper spending reviews with World Bank support every three years.
  - Increase predictability and legibility of public action by elaborating a medium-term expenditure framework and adopting a functional classification of expenditures; this requires modifications to the budget IT system VECTIS.
  - Decentralize payment authorization to line ministries to ensure spending is prioritized by sector relevance.
- Budget execution and arrears control:
  - Strengthen budget control via a better-defined framework and tools such as commitment plans articulated with cash flow plans to avoid liquidity defaults and payment arrears.
  - Consider a decree to define order of priority for payments.
  - Curb derogatory payment procedures (cash advances, forecast commitments) that bypass commitment, liquidation and ordering stages or inadequately register liquidation.
  - Empower the budget department to take measures to control expenses; Article 64 of the organic law requires a decree of application to be fully implemented.

*Source: IMF staff summary of recommendations and measures contained in the chapter.*

### 20. Ensure adequate fiscal reporting and external audit. The state must control public

### 20. Ensure adequate fiscal reporting and external audit. The state must control public

### Fiscal reporting, coverage, and external audit
- The state must control public finances beyond the central budgetary government with a better register of the state assets and liabilities, including guarantees, and report on fiscal risks.
- Full implementation of current reforms for accounting of the non-financial assets is required.
- A fiscal transparency evaluation could be undertaken to assess the actual coverage of fiscal reports and fiscal risk analysis with the support of the IMF.
- Regular and timely publication of quarterly budget execution reports and communication of government finance statistics are key to ensuring close monitoring of the fiscal stance of the government.
- Ensure that the budget classification (NBE) and the chart of accounts (PCE) are aligned to facilitate a clear understanding of the State's financial situation.
- These actions would reinforce auditing of government finances, whether internally (by general inspectorates) or by the Court of Auditors (Cour des Comptes).

### Recent fiscal context and reforms (authorities’ measures and status)
- Upon arrival to power, the authorities uncovered several unrecorded revenues and spending which, when accounted for, depict a more fragile fiscal position.
- The non-oil fiscal deficit more than doubled in 2022-2023 to 14 percent of nonoil GDP, due to significant election-related spending, which was mainly financed through arrears.
- Public debt went above the regional ceiling of 70 percent of GDP at end-2023 when all obligations were accounted for.
- Key PFM reforms under way or accelerated since August 2023:
  - Treasury Single Account (TSA) implementation progressed with the new TSA platform expected to be fully operationalized by end-June 2024.
  - Modernization and digitalization of processes, including integration of revenue, budget and Treasury management systems, and payment of taxes.
  - A directorate general of state's participations was set up to better monitor public assets and help reduce fiscal risks from SOEs.
- A budget law for 2024 targeting fiscal consolidation was adopted in December 2023; a revised budget is being contemplated following newly disclosed fiscal data and new plans to scale up social and infrastructure spending.
- The 2024 budget envisages higher domestic revenue mobilization through rationalization of tax exemptions, broadening of the tax base, and modernization of customs and tax administrations.
- Authorities agree on the need to ensure compliance with existing PFM rules, strengthen the framework for debt authorization, and ensure that all revenues, including oil revenues, are transferred to the TSA.

### Policy recommendations and priorities
- Implement a comprehensive register of state assets and liabilities, including guarantees, and report fiscal risks.
- Fully implement reforms for accounting of non-financial assets.
- Undertake a fiscal transparency evaluation with IMF support to assess coverage of fiscal reports and fiscal risk analysis.
- Publish regular and timely quarterly budget execution reports and government finance statistics.
- Align budget classification (NBE) and chart of accounts (PCE).
- Strengthen internal audit mechanisms and external audit through general inspectorates and the Court of Auditors.
- Reduce regulatory gaps that lead to fragmented execution of fiscal functions.
- Ensure transfer of all revenues, including oil revenues, to the TSA.
- Undertake an audit of oil extraction costs to determine government take and clarify mutual financial obligations between stakeholders in the oil sector (authorities noted staff recommendation and commitment to publish oil contracts once confidentiality/legal constraints are resolved).

### Data and statistical constraints affecting fiscal transparency
- Fiscal data suffered from inadequate recording practices and coverage issues, but are starting to improve.
- Data on fiscal position of SOEs or on contingent liabilities such as guarantees do not exist.
- Debt data monitored by the Direction Générale de la Dette do not include T-bills, VAT arrears, and supplier arrears; current coverage of debt is the budgetary central government.
- Draft TOFE produced in line with GFSM 2014 for the central budgetary administration from the government trial balance, local authorities and public institutions are available; extension to other government subsectors (e.g., social security) is underway as sources become available.
- Significant progress reported on adoption of GFSM2001/2014 analytical framework and classifications and in producing a TOFE from government trial balance.

### Key statistics and economic context cited in the source
- Growth: 3.0 percent in 2022; 2.3 percent in 2023; projected 2.9 percent in 2024.
- Inflation: 5.4 percent in 2022; 2.3 percent in 2023; regional convergence ceiling of 3.0 percent.
- Current account surplus: 4.4 percent of GDP in 2023.
- Non-oil fiscal deficit: 14 percent of nonoil GDP in 2022-2023; projected to slightly widen in 2024 to 15 percent of nonoil GDP depending on execution and revenue efforts.
- Public debt: above the regional ceiling of 70 percent of GDP at end-2023.
- TSA platform expected to be fully operationalized by end-June 2024.

*GABON — STAFF REPORT FOR THE 2024 ARTICLE IV CONSULTATION—INFORMATIONAL ANNEX (May 10, 2024).*

### Conclusion

### Conclusion

### Context and authorities' objectives
- The transition regime in Gabon is raising high expectations amongst the population.
- The authorities are committed to addressing pressing social, environmental, and infrastructure needs while putting the country on a new path of economic stability and development.

### Engagement with IMF staff and policy dialogue
- The authorities are appreciative of staff’s pertinent policy recommendations which are helpful in finetuning their economic and financial policies.
- They look forward to continued policy dialogue with the Fund.

*Source: Conclusion (1gabea2024001)*

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_Source: https://www.imf.org/-/media/files/publications/cr/2024/english/1gabea2024001.pdf_