## _cr07174

## Source details

**Canonical URL:** [_cr07174](https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2007/_cr07174.pdf)

## Other formats

- [Markdown version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2007/_cr07174.pdf.md)
- [Structured JSON version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2007/_cr07174.pdf.json)

---

### Executive summary and program intent
- Government requests a three-year Stand-By Arrangement providing access at 50 percent of quota; intends to treat the arrangement as precautionary.
- Program pillars:
  - Make significant progress toward a permanently-sustainable fiscal position to avoid oil revenue-related boom-bust cycles and prepare for eventual exhaustion of oil reserves.
  - Strengthen oil revenue administration and public financial management to raise the quality and effectiveness of public spending.
  - Remove structural obstacles to private sector-led non-oil growth by improving the business climate, including enhanced governance and transparency.
- Staff recommendation: approval of the authorities’ request for a three-year Stand-By Arrangement.

### Fiscal adjustment, fuel subsidy reform, and public finances
- Key target:
  - Reduce the non-oil primary deficit (NOPD) to about 6 percent of non-oil GDP by 2011.
- 2007 front-loaded adjustment objective:
  - Reduce NOPD from 18 percent of non-oil GDP in 2006 to 11½ percent in 2007.
  - Supplementary budget to be submitted to Parliament before end-June 2007.
- Fuel price subsidy reform:
  - Ex-refinery prices frozen since August 2002; government compensates SOGARA for difference between IPP and frozen prices.
  - Total fiscal cost implied by the ex-refinery price freeze: 4.2 percent of non-oil GDP in 2006.
  - Distribution: top 10 percent of households received about one-third of the total subsidy; bottom 30 percent received about 13 percent.
  - Policy actions:
    - Retail prices for diesel and super gasoline increased by 27 and 25 percent, respectively, on March 3, 2007.
    - Authorities intend to re-activate mechanism for setting ex-refinery prices in April to pass future international price increases into retail prices.
  - Impact:
    - Staff projection: subsidies decline by 2.9 percentage points of NOGDP in 2007 to 1.3 percent of NOGDP, with about one-third of reduction from lower international prices.
    - Compensatory measures amount to 0.7 percent of NOGDP (targeted free electricity and water, waivers of school enrollment fees, strengthened public transport in Libreville, accelerated high social return investments).
- 2007 first-year fiscal measures (selected ceilings and amounts):
  - 2007 non-oil primary deficit target: CFAF 311 billion (11.5 percent of non-oil GDP).
  - Reduce fuel price subsidies by around CFAF 50 billion relative to level anticipated in 2007.
  - Limit sovereign and security expenditure to CFAF 27.5 billion.
  - Limit subsidies to parastatal enterprises to CFAF 20.6 billion.
  - Limit other public transfers to CFAF 110.7 billion.
  - Limit public sector wage bill to CFAF 294.0 billion.
  - Investment (capital expenditure) to reach CFAF 237.6 billion, including CFAF 42.6 billion of external financing.
  - Estimated fuel price subsidies in 2007: no more than CFAF 34.6 billion.
- Restructuring costs classified as “financing” (2007 cap and composition, CFAF billions):
  - Total cap: 22.45
  - Gabon Poste: 10.0; CNGS: 2.0; SOGATRA: 2.6; APIP: 0.5; SNBG: 2.5; Administrative/legal social plans: 4.0; Privatization Committee current expenditure: 0.85.

### Public financial management reforms and budget processes
- Core measures and timetable:
  - Introduce a three-year medium-term expenditure framework (MTEF) by end-2007; integrate into 2009 budget preparation.
  - Compile a functional classification of expenditure to be available by end-2007; include tax expenditures estimate in 2008 budget documentation.
  - Make the budget operational by end-January 2007; overhaul monitoring systems to strengthen treasury cash management.
  - Treasury payment period reduced from 120 to 90 days in late 2006; targets: 60 days by end-2007; 30 days in 2008.
  - Prepare a cash-flow plan available by September 15, 2007; Treasury Committee to steer cash management.
- Procurement and public investment quality:
  - DGMP publishes tenders and awards since September 30, 2006; government procurement gazette by end-June 2007.
  - Increase proportion of contracts awarded on competitive tender: 35 percent in 2006; target above 50 percent in 2007; target 70 percent by 2008 (World Bank reference: 75 percent good practice).
  - Fêtes tournantes spending to be subject to normal budgetary procedures; publish project lists and audit past fêtes tournantes.

### Oil revenue administration and non-oil revenue measures
- Oil revenue administration improvements:
  - Participation in EITI; second EITI report published April 6, 2007 covering 2005 and expanding coverage.
  - COSUREP (oil revenue monitoring committee) established July 10, 2006.
  - Contract signed April 12, 2007 with private firm to develop a monthly contract-based oil-revenue accounting model.
    - Model submission to government: end-September 2007.
    - Operational application to 2007 revenues: early 2008 / final quarter of 2007 operationalization timeline.
  - Aim: incorporate PID and PIH and other currently-excluded revenue streams into budget starting with 2008 budget law.
- Non-oil revenue measures:
  - Large Taxpayer Unit (LTU) operational (created September 2004).
  - New general tax code to be presented to Parliament by end-September 2007.
  - Inventory of tax exemptions to be compiled by end-June 2007 and estimate of cost included in 2008 budget report; comprehensive overhaul planned in 2008.
  - Seizure/return to public domain of forestry permits with tax arrears (first wave: 116 permits representing 1.8 million hectares, arrears since 2002–03).

### Private sector development, structural reforms, and governance
- Private sector strategy:
  - Privatize/restructure inefficient parastatals; improve legal and regulatory environment; enhance business environment and access to finance.
- Public enterprise actions:
  - Gabon Télécom: majority stake sold in February 2007 (51 percent).
  - Air Gabon: liquidation in final stages; assets sold; expected liquidation completion by end-September 2007.
  - Gabon Poste: restructuring underway; La Poste established; subsidy strictly limited and diminishing.
  - SOGATRA: immediate restructuring decided; new management models considered.
- Business climate and legal reforms:
  - Restructure APIP to reduce time to start a business to maximum of seven days.
  - Hiring international consultant for voluntary arbitration system; recommendations by end-2007; implementation envisaged in 2008.
  - Align Gabon law with OHADA provisions.
- Financial sector and credit access:
  - Private sector credit about 10 percent of GDP in 2006.
  - Work with CEMAC and BEAC to address regional regulatory constraints identified in 2006 regional FSAP.
  - Reforms to encourage registration of real property; foster microfinance development.
- Governance and transparency:
  - National Commission Against Illicit Enrichment (CNLCEI) pursuing investigations; asset declarations weak: 1,700 submitted out of target 3,000.
  - Publish names of non-compliant civil servants (deadline end-April 2007; publication by end-June 2007).
  - Launch "Gabon—Open Government" initiative; publish official gazette on government web site by end-2007.
  - Strengthen compilation and dissemination of economic statistics.

### Regional coordination, reserves, and debt management
- Regional coordination challenges (CEMAC / BEAC):
  - Investing long-term fiscal reserves: remuneration of FGF deposits increased from 1.90 percent in March 2006 to 3.15 percent in December 2006; rates remain below other oil funds.
  - Discussions ongoing between CEMAC oil producers and BEAC to ensure adequate remuneration of long-term fiscal reserves.
  - Create regional government securities market to reduce BEAC statutory advances and introduce tradable securities at regional level.
  - Trade reform: top common external tariff currently 30 percent; regional coordination important for EPA negotiations with EU and to streamline BEAC payment procedures.
- Public debt and reserves strategy:
  - DGCP completed census of public sector liabilities end-2006; stock of domestic debt and other liabilities documented.
  - By end-2007: finalize strategy with main creditors for paying off external debt; consider early repayment in return for creditor concessions.
  - Reduce BEAC statutory advances and move toward tradable securities; eventual elimination of investment credit (bons d’équipement).
  - Fund for Future Generations (stock in billions of CFA francs): 84; 120; 214; 316; 420; 522 (2005–2010).
- Debt sustainability analysis (staff findings):
  - End-2006: external public debt = 32.5 percent of GDP; total gross public debt = 44.1 percent of GDP.
  - Baseline projections: gross public debt falls to 10 ½ percent of GDP by 2012; external debt falls to about 8 percent of GDP by 2012.
  - PS-NOPD (permanently sustainable non-oil primary deficit) simulation assumptions and result:
    - Proven oil reserves: about 2 billion barrels.
    - Real long-term oil price: about US$55 per barrel.
    - Real rate of return on financial assets: 3.2 percent.
    - PS-NOPD estimated at 6 percent of non-oil GDP.
  - Sensitivity example: decline in real oil prices by 30 percent (to about US$39 per barrel) reduces PS-NOPD to 3.9 percent of non-oil GDP.
  - Stress scenario: oil prices falling below US$40 per barrel on average (38 percent below baseline) would open financing gaps requiring sharper fiscal adjustment.

### Macroeconomic performance, outlook, and key projections
- Recent developments (2006 estimates and Q1 2007):
  - Non-oil growth: rose from 4¼ percent in 2005 to an estimated 5 percent in 2006; non-oil growth 2005–06 reported as 4.5 percent in some tables.
  - Average inflation: reached 4 percent in 2006; 12-month inflation at end-March 2007: 6¼ percent.
  - Real effective exchange rate appreciated by 7½ percent in 2006.
  - Overall fiscal surplus: 9¼ percent of GDP in 2006.
  - External current account surplus: 18½ percent of GDP in 2006.
  - External public debt: fell from 39 percent of GDP in 2005 to 32½ percent in 2006.
  - Identified stock of domestic debt: 11½ percent of GDP at end-2006 (compared with 18 percent at end-2005).
- Selected growth and inflation projections (annual percentage change):
  - GDP at constant prices: 2005 = 3.0; 2006 = 1.2; 2007 = 5.6; 2008 = 4.2; 2009 = 4.3; 2010 = 3.5; 2011 = 2.8.
  - Oil: 2005 = -0.4; 2006 = -8.9; 2007 = 5.3; 2008 = 2.9; 2009 = 3.1; 2010 = -0.5; 2011 = -3.8.
  - Non-oil: 2005 = 4.3; 2006 = 4.9; 2007 = 5.7; 2008 = 4.7; 2009 = 4.7; 2010 = 4.7; 2011 = 4.8.
  - CPI (yearly average): 2005 = 0.0; 2006 = 4.0; 2007 = 5.5; 2008 = 3.0; 2009 = 2.5; 2010 = 2.0; 2011 = 2.0.
- Selected fiscal and external ratios (percent of GDP):
  - Overall fiscal balance (payment order basis): 2005 = 8.6; 2006 = 9.2; 2007 = 10.1; 2008 = 11.5; 2009 = 11.6; 2010 = 11.6; 2011 = 11.0.
  - External current account balance: 2005 = 19.5; 2006 = 18.4; 2007 = 16.9; 2008 = 16.7; 2009 = 14.7; 2010 = 12.8; 2011 = 8.9.
  - External public debt: 2005 = 39.1; 2006 = 32.5; 2007 = 27.6; 2008 = 21.3; 2009 = 16.2; 2010 = 13.3; 2011 = 10.4.
  - Non-oil revenue (percent of non-oil GDP): 2005 = 23.9; 2006 = 23.5; 2007 = 24.2; 2008 = 23.7; 2009 = 23.9; 2010 = 24.2; 2011 = 24.1.
  - Primary non-oil balance (percent of non-oil GDP): 2005 = -17.5; 2006 = -18.0; 2007 = -11.6; 2008 = -10.0; 2009 = -8.8; 2010 = -7.4; 2011 = -6.0.

### Program modalities, IMF access, and reviews
- Proposed SBA size and phasing:
  - Total access equivalent to SDR 77.15 million (50 percent of quota).
  - Purchase schedule highlights (SDR million / percent of quota / availability date / condition):
    - 5.50 SDR million, 7.1 percent, May, 2007 — Executive Board Approval.
    - 2.75 SDR million, 3.6 percent, September 15, 2007 — Completion of First Review and observance of end‑June 2007 performance criteria.
    - 2.75 SDR million, 3.6 percent, December 15, 2007 — Observance of end‑September 2007 performance criteria.
    - Subsequent tranches through June 15, 2009 (detailed schedule in program).
  - Access itemization later in program includes items of 8.00; 8.00; 13.15 (SDR million) tied to successive reviews.
- Reviews and conditionality:
  - Semi-annual reviews; first associated with performance at end June.
  - Program conditionality based on quarterly quantitative performance criteria and structural performance criteria and benchmarks.
  - Resources made available quarterly linked to performance criteria and semi-annual reviews by Executive Board.

### Monitoring, quantitative performance criteria, structural benchmarks, and reporting
- Quantitative performance criteria (examples, Billions of CFA francs; end-period cumulative from January 1):
  - Floor on primary fiscal balance (excluding oil revenue and restructuring costs, payments order basis):
    - 2006: -435.8; Mar. 2007: -83.2; Jun. 2007: -150.4; Sep. 2007: -246.5; Dec. 2007: -314.1.
  - Ceiling on net claims of banking system on central government:
    - 2006: -39.6; Mar. 2007: -71.5; Jun. 2007: -128.8; Sep. 2007: -125.4; Dec. 2007: -209.0.
  - Ceiling on contracting/guaranteeing of new external debt by central government:
    - 2006: 164.5; Mar. 2007: 129.5; Jun. 2007: 140.0; Sep. 2007: 155.0; Dec. 2007: 165.2.
  - Continuous zero ceilings on accumulation of external payments arrears and on new domestic payment arrears (Mar., Jun., Sep., Dec. 2007: 0.0).
- Memorandum items (Billions of CFA francs, selected):
  - Foreign financed projects: 2006: 63.3; Mar. 2007: 11.0; Jun. 2007: 21.0; Sep. 2007: 30.7; Dec. 2007: 42.6.
  - Oil revenue: 2006: 1,012.9; Mar. 2007: 234.0; Jun. 2007: 463.9; Sep. 2007: 685.8; Dec. 2007: 938.0.
  - Privatization receipts: 2006: 0.0; Mar. 2007: 13.1; Jun. 2007: 19.0; Sep. 2007: 19.0; Dec. 2007: 19.0.
  - External debt service (excluding IMF): 2006: 324.6; Mar. 2007: 105.1; Jun. 2007: 172.1; Sep. 2007: 273.4; Dec. 2007: 327.2.
  - Public enterprises restructuring costs: 2006: 39.8; Mar. 2007: 4.7; Jun. 2007: 12.9; Sep. 2007: 17.1; Dec. 2007: 22.5.
- Structural performance criteria, prior actions, and benchmarks (selected):
  - Prior actions completed:
    - Reach understanding on fiscal framework for 2007 consistent with NOPD reduction to 11½ percent of non-oil GDP.
    - Increase retail fuel prices consistent with reduction in subsidies of at least CFAF 50 billion.
    - Implement agreement with SOGARA on settlement of its tax arrears and resumption of government compensation.
    - Sign contract for development of contract-based monthly oil-revenue model.
    - Return to public domain of 116 forestry permits with tax arrears since 2002–03.
    - Conclude privatization of Gabon Telecom by divesting majority share.
  - First-year structural benchmarks include automatic fuel-price adjustment formula, subjecting fêtes tournantes 2007 spending to regular budget procedures, establish annual treasury cash plan by Sep. 15, 2007, compile tax expenditure inventory by Jun. 2007, submit new tax code to Parliament by Sep. 15, 2007.
- Reporting requirements (monthly/quarterly; timelines and content):
  - Monthly reports within six weeks after month-end (monetary survey, central bank and banking consolidated balance sheets, PNG with BEAC and banking system, TOFE on payment order basis, detailed oil revenue by type and company, debt-service details, treasury float and arrears breakdown, oil sector monthly indicators, procurement reports, macro indicators, quarterly local authorities finances, status of structural reforms).
  - Quarterly reports on stock of external and domestic debt, forestry permits status, procurement contracting activity, and other indicators.

### Risks, staff appraisal, and conclusions
- Key risks:
  - Pressure for increased public spending given buoyant oil revenue and urgent needs across the economy.
  - Vulnerability to sharp swings in oil prices, especially in next few years when debt service heavy.
  - Imperfect expenditure controls and past fiscal slippages in 2005–06.
  - Need for prudent borrowing strategy despite availability of foreign financing.
  - Effective management of long-term fiscal reserves requires CEMAC coordination.
- Staff appraisal:
  - Program ambitious but commensurate with challenges; risks manageable with strong implementation, particularly in first year.
  - Baseline DSA shows declining debt-to-GDP ratios and sustainability; stress tests indicate vulnerability to large oil-price declines.
- IMF Executive Board action:
  - Executive Board approved three-year SDR 77.15 million Stand-By Arrangement (Press Release No. 07/88, May 7, 2007); arrangement treated as precautionary.

*Source: IMF staff report material and government Memorandum on Economic and Financial Policies for 2007–10 (excerpts) as provided in content unit _cr07174.*

### 1. Gabon: Selected Economic Indicators, 2004–11 .................................................................18

### Gabon: Selected Economic Indicators, 2004–11

### Executive summary and program intent
- Gabon requests a three-year Stand-By Arrangement providing access at 50 percent of quota and intends to treat the arrangement as precautionary.
- Program pillars:
  - Make significant progress toward a permanently-sustainable fiscal position to avoid oil revenue-related boom-bust cycles and prepare for eventual exhaustion of oil reserves.
  - Strengthen oil revenue administration and public financial management to raise the quality and effectiveness of public spending.
  - Remove structural obstacles to private sector-led non-oil growth by improving the business climate, including enhanced governance and transparency.
- Staff recommendation: approval of the authorities’ request for a three-year Stand-By Arrangement.

### Historical context and recent policy developments
- Past three decades: repeated oil booms and busts, accumulation of unsustainable debt, repeated debt rescheduling.
- Since 2003: reforms under a staff-monitored program and a 14-month stand-by arrangement (2004–05) restored macroeconomic stability, eliminated external payments arrears, and introduced structural reforms.
- Non-oil primary deficit progress:
  - Fell to 9 percent of non-oil GDP by 2004 (from close to 17 percent in 2001–02).
  - Widened to 17½ of non-oil GDP in 2005 and an estimated 18 percent in 2006 (13¾ percent excluding fuel price subsidies).
- Fiscal slippages in 2005–06 were concentrated on the expenditure side (transfers and subsidies, fuel price subsidies) and in increased public investment funded by new foreign financing.

### Fuel price subsidy reform (Box 1) — facts and fiscal implications
- Core mechanism: ex-refinery prices of 7 petroleum products frozen in August 2002; SOGARA computes a monthly import parity price (IPP); government compensates SOGARA for the difference between IPP and frozen ex-refinery prices.
- Total fiscal cost implied by the ex-refinery price freeze: 4.2 percent of non-oil GDP (NOGDP) in 2006.
- Distribution: top 10 percent of households received about one-third of the total subsidy; bottom 30 percent received about 13 percent.
- Policy actions:
  - Authorities decided in early 2007 to sharply reduce fuel price subsidies by increasing retail prices for diesel and super gasoline by an average of 26 percent.
  - On March 3, retail prices of diesel and super gasoline were increased by 27 and 25 percent, respectively.
  - Authorities intend to re-activate the mechanism for setting ex-refinery prices in April to pass future international price increases into retail prices.
- Impact and compensatory measures:
  - Staff projection: subsidies will decline by 2.9 percentage points of NOGDP in 2007 to 1.3 percent of NOGDP, with about one-third of the reduction coming from lower international prices.
  - Compensatory measures amount to 0.7 percent of NOGDP and include: targeted provision of free electricity and water; waivers of school enrollment fees; strengthening public transportation in Libreville; and accelerating investment projects with a high social rate of return.

### Recent macroeconomic performance and vulnerabilities
- Real and nominal developments (2006):
  - Non-oil growth rose from 4¼ percent in 2005 to an estimated 5 percent in 2006.
  - Average inflation reached 4 percent in 2006.
  - Real effective exchange rate appreciated by 7½ percent in 2006.
- Fiscal and external balances (2006 estimates):
  - Overall fiscal surplus: 9¼ percent of GDP in 2006.
  - External current account surplus: 18½ percent of GDP in 2006.
  - External public debt: fell from 39 percent of GDP in 2005 to 32½ percent in 2006.
  - Identified stock of domestic debt: 11½ percent of GDP at end-2006 (compared with 18 percent at end-2005).
- Non-oil primary deficit: rose to 18 percent of non-oil GDP in 2006 (13¾ percent excluding fuel price subsidies).
- Foreign-financed debt: total debt contracted in 2005–06 reached CFAF 275 billion (about 5½ percent of 2006 GDP); corresponding annual spending limited to about 1 percent of GDP.
- Vulnerability to oil price shocks:
  - Baseline staff debt sustainability analysis (WEO oil price assumptions) shows declining debt-to-GDP ratios and sustainability over the medium term.
  - Stress scenario: if oil prices fall below US$40 per barrel on average (38 percent below the baseline assumption), financing gaps would open up, requiring sharper fiscal adjustment.

### Outlook, projections, and key macroeconomic figures (selected)
- Growth and inflation projections (2007–11 excerpted):
  - GDP at constant prices: 2005 = 3.0; 2006 = 1.2; 2007 = 5.6; 2008 = 4.2; 2009 = 4.3; 2010 = 3.5; 2011 = 2.8 (annual percentage change).
  - Oil: 2005 = -0.4; 2006 = -8.9; 2007 = 5.3; 2008 = 2.9; 2009 = 3.1; 2010 = -0.5; 2011 = -3.8 (annual percentage change).
  - Non-oil: 2005 = 4.3; 2006 = 4.9; 2007 = 5.7; 2008 = 4.7; 2009 = 4.7; 2010 = 4.7; 2011 = 4.8 (annual percentage change).
  - CPI (yearly average): 2005 = 0.0; 2006 = 4.0; 2007 = 5.5; 2008 = 3.0; 2009 = 2.5; 2010 = 2.0; 2011 = 2.0 (percent).
- Fiscal and external ratios (selected):
  - Overall fiscal balance (payment order basis): 2005 = 8.6 percent of GDP; 2006 = 9.2; 2007 = 10.1; 2008 = 11.5; 2009 = 11.6; 2010 = 11.6; 2011 = 11.0 (percent of GDP).
  - External current account balance: 2005 = 19.5 percent of GDP; 2006 = 18.4; 2007 = 16.9; 2008 = 16.7; 2009 = 14.7; 2010 = 12.8; 2011 = 8.9 (percent of GDP).
  - External public debt: 2005 = 39.1 percent of GDP; 2006 = 32.5; 2007 = 27.6; 2008 = 21.3; 2009 = 16.2; 2010 = 13.3; 2011 = 10.4 (percent of GDP).
  - Non-oil revenue (percent of non-oil GDP): 2005 = 23.9; 2006 = 23.5; 2007 = 24.2; 2008 = 23.7; 2009 = 23.9; 2010 = 24.2; 2011 = 24.1.
  - Primary non-oil balance (percent of non-oil GDP): 2005 = -17.5; 2006 = -18.0; 2007 = -11.6; 2008 = -10.0; 2009 = -8.8; 2010 = -7.4; 2011 = -6.0.

### 2007–08 program focus and risks
- Program aims for significant, front-loaded fiscal adjustment to place public finances on a more sustainable footing.
- Program includes a comprehensive strategy to strengthen public financial management to prevent renewed fiscal slippage and to raise spending quality.
- Program incorporates an agenda for private sector development to support long-term sustainable growth.
- Key risks:
  - Pressure for increased public spending given buoyant oil revenue and urgent needs across the economy.
  - Vulnerability to sharp swings in oil prices, especially in the next few years when debt service will be heavy.

*Source: IMF staff report material in "Gabon: Selected Economic Indicators, 2004–11" (excerpts).*

### 10.      The critical objectives of the government’s program are to prepare the economy

### _cr07174 - 10.      The critical objectives of the government’s program are to prepare the economy

### Program objectives and three pillars
- Critical objectives: prepare the economy for the post-oil era and make decisive progress in poverty reduction.
- Program rests on three pillars:
  - making significant progress toward a permanently-sustainable fiscal position, with the aim of avoiding harmful boom-bust oil-revenue related cycles and preparing for the eventual exhaustion of oil reserves;
  - strengthening oil revenue administration and public financial management, with the objective of encompassing all oil revenue and government spending in the budget, and raising the quality and effectiveness of public spending to ensure a higher return on physical infrastructure investment and improve social services;
  - removing structural obstacles to private sector-led non-oil growth, by improving the business climate, including through enhanced governance and transparency.

### Fiscal adjustment: placing public finances on a sustainable footing
- Problem statement:
  - Pro-cyclical fiscal policies have driven macroeconomic vulnerability; fiscal expansions during oil booms followed by painful adjustments when oil prices and government revenues fell.
  - Projected exhaustion of Gabon’s oil reserves over the next 30 years motivates a five-year fiscal adjustment strategy.
- Key target:
  - Reduce the non-oil primary deficit (NOPD) to about 6 percent of non-oil GDP by 2011.
- 2007 adjustment measures:
  - Supplementary budget to be submitted to Parliament before end-June to revise framework consistent with reduction in NOPD from 18 percent of non-oil GDP in 2006 to 11½ percent in 2007.
  - Bulk of adjustment to fall on expenditure side:
    - fuel price subsidies are set to be reduced by 3 percentage points of non-oil GDP;
    - security and sovereignty spending to be reduced by 1½ percentage points of non-oil GDP.
  - Revenue support from fast-growing imports, improved customs and tax administration, and temporary one-time collection of VAT arrears from Gabon Télécom in privatization context.
- Debt and asset management:
  - Authorities initiated discussions with external creditors regarding a debt pre-payment deal and have substantially reduced outstanding domestic liabilities.
  - Early repayment of the most expensive debt would reduce annual interest payments and lower vulnerability to future shocks.

### Public financial management reforms: raising quality and effectiveness of public spending
- Diagnostic and strategy:
  - Poor public financial management underlies disappointing returns on physical infrastructure and social services; Fund and World Bank diagnostics identified problems in budget preparation, presentation, execution, monitoring, and oil revenue administration.
  - Authorities prepared a comprehensive strategy to address these problems.
- Budget preparation and transparency:
  - Introduce a three-year medium-term expenditure framework (MTEF) by end-2007.
  - MTEF to draw on sectoral priorities, ensure more accurate evaluation of recurrent costs related to investment expenditure, and improve expenditure prioritization.
  - Enhance transparency and presentation by providing more information on past budgetary performance, including tax expenditures, in annual budget documentation to Parliament.
  - Compile a functional classification of expenditure, to be available by end-2007.
- Budget execution monitoring and payments:
  - Make the budget operational by end-January 2007 to improve budget execution.
  - Overhaul monitoring systems to strengthen treasury cash management and ensure timely and accurate budget execution reports.
  - Treasury payment period reduced from 120 to 90 days in late 2006; objectives:
    - reduce to 60 days by end-2007;
    - reduce to 30 days in 2008.
- Public investment quality and procurement:
  - Strengthen role of public procurement office (DGMP); DGMP established a web site with all tenders and awards.
  - Increase proportion of contracts awarded on competitive tender:
    - 35 percent in 2006;
    - target above 50 percent in 2007;
    - target 70 percent by 2008.
  - Target approximates the 75 percent target considered good international practice by the World Bank.
  - Improve effectiveness of expenditure under fêtes tournantes: prepare project lists earlier, make them publicly available, and subject all spending to normal budgetary procedures including public procurement.

### Oil revenue administration and non-oil revenue measures
- Oil revenue administration:
  - Gabon participates in the Extractive Industries Transparency Initiative (EITI); published two reports, most recent in early April 2007 covering oil revenue streams in 2005.
  - Reports show continued difficulties in fully reconciling company payments with government receipts.
  - Authorities contracted a private company to develop a monthly oil-revenue accounting model to allow ex-post monitoring and forecasting based on contract parameters, field-by-field production, prices, and costs.
  - Model should facilitate incorporation of currently-excluded revenue streams and associated spending into the government budget, notably Provisions pour Investissements Diversifiés (PID) and Provisions pour Investissements Hydrocarbures (PIH).
  - Model expected to be available by September 2007 and operationalized by applying it to 2007 revenues in early 2008.
- Non-oil revenue base:
  - Large Taxpayer Unit (LTU), created in 2004, is operational.
  - Authorities preparing a new general tax code incorporating recent revisions.
  - Launching in-depth review of tax exemptions:
    - compile inventory of exemptions and include estimate of their cost in the report accompanying the 2008 budget;
    - subsequently plan a comprehensive overhaul of the system of tax exemptions.
  - Seizure of tax-delinquent forestry permits likely to improve tax compliance in forestry sector.

### The permanently sustainable non-oil primary deficit (Box 2)
- Conceptual approach:
  - Forward-looking fiscal framework based on preserving the sum of oil reserves and financial assets, drawing on Friedman’s (1957) permanent-income hypothesis (PIH).
  - Set public spending equal to a constant path defined by the expected annuity value of oil wealth and non-oil revenue (government “permanent income”).
- Gabon simulation assumptions and result:
  - Proven oil reserves of about 2 billion barrels;
  - Real long-term oil price of about US$55 per barrel;
  - Real rate of return on financial assets of 3.2 percent.
  - Permanently sustainable non-oil primary deficit (PS-NOPD) estimated at 6 percent of non-oil GDP.
  - Realized levels were 17.5 percent of non-oil GDP in 2005 and 18 percent in 2006.
- Uncertainty and sensitivity:
  - Precautionary motives justify front-loading fiscal adjustment.
  - Upside risk: large unproven but probable oil and gas reserves could double hydrocarbon potential.
  - Downside risk example: a decline in real oil prices by 30 percent (to about US$39 per barrel) would reduce the PS-NOPD to 3.9 percent of non-oil GDP.
  - PS-NOPD hinges critically on the real rate of return on government financial assets, assumed at 3.2 percent.
  - Current rate of return on Gabon’s Fonds pour les générations futures is only 3.15 percent in nominal terms (implying the real rate of return was negative in 2006).

### Private sector development: enhancing governance and transparency
- Strategy and constraints:
  - Private sector development is crucial to diversification and poverty reduction.
  - Government three-pronged strategy:
    - privatize or restructure inefficient parastatal enterprises;
    - improve legal and regulatory environment, including governance and transparency;
    - enhance business environment, including by strengthening physical infrastructure and financial services.
  - Diagnostic findings (FIAS and Doing Business) highlight constraints: heavy regulatory environment for business creation, high cost of utilities/harbor/transportation, lack of access to financing for SMEs, cumbersome judicial system.
- Public enterprise restructuring:
  - Majority stake in Gabon Télécom sold in February 2007.
  - Air Gabon in final stages of liquidation; most assets sold and large part of obligations settled; expected liquidation conclusion by end-September 2007.
  - Gabon Poste restructuring well underway; postal services to remain public but severely downsized and budgetary subsidy strictly limited and diminishing over time.
  - Forestry reform program restarted; seizure of tax-delinquent forestry permits is an important step; World Bank supports forestry reform.
  - PID and PIH averaged about US$13.5 million in recent years (totaling 1¼ percent of total oil revenues and equivalent to ½ percent of non-oil GDP in 2006) and have been dedicated to infrastructure and defense expenditure, respectively, operated outside of the government budget.
- Improvements to business climate:
  - Restructuring investment promotion agency and streamlining administrative red tape to reduce time to start a new business to a maximum of seven days.
  - Hiring international consultant to assist in establishment of a system of voluntary arbitration for commercial dispute resolution; final recommendations expected by end-2007 and implementation envisaged in 2008.
- Financial sector and credit constraints:
  - Financial sector remains shallow; private sector credit reached about 10 percent of GDP in 2006.
  - Authorities working with CEMAC members to address regional regulatory constraints identified in the 2006 regional FSAP, including burdensome BEAC administrative procedures.
  - Reforms to encourage registration of real property should improve access to bank credit for private sector, especially SMEs; efforts to foster development of microfinance institutions ongoing.
- Governance and transparency:
  - National Commission Against Illicit Enrichment (CNLCEI) pursuing investigations and compulsory asset declarations for certain civil servants.
  - Campaign to place more documents of public interest in the public domain, including budget reports, Audit Court reports, and CNLCEI reports.
  - By end-2007, authorities intend to publish the official government gazette on the government web site.
  - Efforts underway to strengthen compilation and dissemination of economic statistics to guide and assess policy making.
- Regional coordination:
  - Trade policy formulated at regional level; Gabon will continue working with CEMAC partners to lower the high common external tariff.
  - Monetary policy, reserve management policy, and financial sector reform are addressed largely at regional level and require continued close coordination.

*Source: Gabon program documents and staff text as provided in the content unit.*

### Box 4. Regional Coordination Challenges

### Box 4. Regional Coordination Challenges

### Regional coordination areas and challenges
- Economic development in Gabon depends in part on policy decisions made at the regional level by the CEMAC (Communauté économique et monétaire de l’Afrique centrale) and the regional central bank BEAC (Banque des Etats de l’Afrique centrale).
- Areas where coordination at the regional level is critical to advance Gabon’s reform agenda:
  - Investing long-term fiscal reserves:
    - Accumulation of financial assets in the Fonds pour les générations futures (FGF)—at the level required to finance permanently sustainable primary deficits after oil reserves are depleted—presumes that these assets are managed differently than liquid foreign international reserves held at the BEAC to support the regional exchange rate arrangement.
    - Increases in the rate of remuneration of FGF deposits from 1.90 percent in March 2006 to 3.15 percent in December 2006 were steps in the right direction, but the rates remain well below the returns of other oil funds (for example, the Norwegian fund).
    - Discussions are ongoing between CEMAC oil producers and the BEAC on how to ensure adequate remuneration of long-term fiscal reserves.
  - Creating a regional government securities market:
    - To help integrate the regional financial market, provide financial investment instruments to the private sector, and streamline public debt management, CEMAC members have agreed, in principle, to reduce the use of BEAC statutory advances significantly and eventually replace them by securities, such as Treasury bills, to be traded at the regional level.
  - Trade reform:
    - The top rate of the common external tariff is 30 percent and remains high by international standards and should be reduced.
    - Regional coordination is important in ongoing discussions with the European Union on Economic Partnership Agreements (EPAs).
    - To facilitate efficient trade transactions, there is scope to streamline administrative payment procedures at the BEAC, which can represent a burden on efficient trade financing.

### Program modalities
- The proposed SBA has low access and the financial risk to the Fund is low.
  - Total access would be equivalent to SDR 77.15 million (50 percent of quota or about 17 percent on an annual basis) and would be back loaded.
  - Access and phasing reflect the absence of an immediate financing need.
  - The authorities have indicated that they would treat the program as precautionary.
- Reviews and conditionality:
  - The program envisages semi-annual reviews, the first one associated with performance at end June.
  - Program conditionality and monitoring is based on quarterly quantitative performance criteria and structural performance criteria and benchmarks in areas critical to achieving the program’s objectives.
  - Fund resources would be made available on a quarterly basis linked to the quantitative performance criteria and semi-annual reviews by the Executive Board.

### Staff appraisal and risks
- External environment and opportunity:
  - The current supportive global environment represents an opportunity for Gabon to make a decisive break from the past.
  - High oil prices and the welcome vigor in the non-oil economy allow Gabon to address pressing needs, including infrastructural development and the strengthening of social services, while at the same time reducing the vulnerability of the economy to swings in oil prices.
- Critical challenge (three-fold):
  - First, to achieve long-term sustainability and avoid the costly boom-and-bust cycles of the past, public finances must be placed on a permanently-sound footing.
  - Secondly, to ensure that government spending is effective and yields high returns, the management of public finances must improve significantly.
  - Third, the development of a dynamic private sector needs to be fostered to prepare for the transition from an oil economy to a post-oil economy; in the long term, non-oil private sector growth will create jobs and deliver durable poverty reduction.
- Key risks:
  - Buoyant oil revenue and urgent needs across the economy mean that pressures on public spending will be significant.
  - Expenditure controls at present are imperfect and slippages in 2005 and 2006 illustrate the difficulties that the authorities can face to adhere to budgetary spending limits.
  - Gabon needs to pursue a prudent borrowing strategy, despite the easy availability of foreign financing.
  - In the longer term, accumulating significant fiscal savings, a pre-requisite for a smooth transition to the post-oil era, will require the effective management of long-term fiscal reserves; this is a regional issue requiring careful coordination with Gabon’s CEMAC partners.
- Assessment of the government’s three-year program:
  - The program aims for significant, and front-loaded, fiscal adjustment to put public finances on a more sustainable footing.
  - It encompasses a comprehensive strategy to strengthen public financial management to guard against renewed fiscal slippage and to raise the quality and effectiveness of public spending.
  - It incorporates an agenda for private sector development, including significant steps to improve governance and transparency, which is essential for long-term, sustainable growth.
  - The ambitious program is commensurate to the challenges that Gabon faces; the program is not without risks, but they are manageable.
  - Strong implementation, particularly in its first year, is the best guarantee of success.

*IMF staff analysis as presented in Box 4. Regional Coordination Challenges*

### 32.      On this basis, the staff supports the authorities’ request for a three-year

### On this basis, the staff supports the authorities’ request for a three-year Stand‑By Arrangement

### Selected Economic Indicators (2004–11)
- GDP at constant prices (annual percent change): 1.3; 3.0; 1.2; 5.6; 4.2; 4.3; 3.5; 2.8 (2004–2011, Prel./Est./Program projections).
- Oil GDP growth (annual percent change): -1.0; -0.4; -8.9; 5.3; 2.9; 3.1; -0.5; -3.8.
- Non-oil GDP growth (annual percent change): 2.3; 4.3; 4.9; 5.7; 4.7; 4.7; 4.7; 4.8.
- GDP at current prices (annual percent change): 7.8; 20.5; 9.2; 2.3; 9.0; 5.3; 2.9; 1.3.
- GDP deflator (annual percent change): 6.3; 17.0; 7.9; -3.1; 4.6; 1.0; -0.6; -1.5.
- Consumer prices, yearly average: 0.4; 0.0; 4.0; 5.5; 3.0; 2.5; 2.0; 2.0.
- Exports, f.o.b. (CFA francs, annual percent change): 19.6; 35.3; 5.9; -2.1; 9.8; 3.2; -0.6; -4.3.
  - Of which: oil exports: 16.0; 38.5; 4.5; -4.7; 10.5; 2.8; -2.0; -6.9.
- Imports, f.o.b. (CFA francs, annual percent change): 7.2; 10.3; 15.6; 15.1; 8.5; 7.5; 7.1; 6.5.
- Terms of trade (deterioration - , percent change): 8.6; 26.8; 12.2; -6.1; 11.8; 5.1; 0.6; -0.7.
- Central government: Total revenue (percent of GDP): 7.2; 25.7; 10.5; 0.4; 8.1; 4.2; 2.2; -2.8.
  - Oil revenue (percent of GDP): 7.6; 44.4; 11.7; -7.4; 9.3; 1.3; -2.2; -10.7.
  - Non-oil revenue (percent of GDP): 6.8; 2.6; 8.5; 14.4; 6.2; 8.4; 8.3; 7.2.
  - Total expenditure (percent of GDP): 6.6; 21.7; 7.8; -4.0; 0.8; 2.7; 2.1; 0.9.
- Money and credit (change in percent of beginning-of-period broad money): Net domestic assets: -23.8; -11.9; -3.4; -7.0; -25.1; -22.5; -20.6; -14.5.
  - Broad money (annual percent change): 11.6; 26.0; 17.4; 14.1; 8.3; 7.7; 7.0; 7.3.
- Nominal GDP (Billions of CFA francs): 3,792; 4,571; 4,992; 5,106; 5,565; 5,861; 6,032; 6,108.
- Non-oil primary balance (in percent of non-oil GDP): -9.1; -17.5; -18.0; -11.6; -10.0; -8.8; -7.4; -6.0.
- Overall balance (payment order basis, percent of GDP): 7.6; 8.6; 9.2; 10.0; 11.4; 11.5; 11.5; 10.3.
- External current account balance (including official transfers, percent of GDP): 10.3; 19.5; 18.4; 16.9; 16.7; 14.7; 12.8; 8.9.
- External public debt (including the Fund, percent of GDP): 49.8; 39.1; 32.5; 27.6; 21.3; 16.2; 13.3; 10.4.
- Total gross public debt (percent of GDP): 76.9; 57.1; 44.1; 36.7; 27.5; 20.4; 16.6; 13.4.

### Summary Fiscal Operations of the Central Government (2005–10)
- Total revenue and grants (Billions of CFA francs): 1,434.2; 1,582.6; 1,594.9; 1,722.9; 1,794.9; 1,834.8 (2005–2010, Program projections).
- Revenue (Billions of CFA francs): 1,432.2; 1,582.6; 1,589.5; 1,717.5; 1,789.5; 1,829.4.
  - Oil revenue: 907.2; 1,012.9; 938.0; 1,025.6; 1,039.3; 1,016.7.
  - Non-oil revenue: 525.0; 569.7; 651.5; 691.9; 750.2; 812.6.
- Total expenditure (including net lending, Billions of CFA francs): 1,041.1; 1,122.1; 1,076.8; 1,085.5; 1,114.4; 1,138.0.
  - Current expenditure: 789.3; 827.5; 776.3; 776.1; 792.1; 803.9.
  - Wages and salaries: 227.8; 252.4; 294.0; 311.0; 327.4; 342.2.
  - Capital expenditure: 193.4; 238.8; 237.6; 246.4; 259.4; 271.1.
- Primary balance (on a payment order basis, Billions of CFA francs): 522.2; 577.0; 623.9; 731.9; 762.0; 764.7.
- Overall balance (payment order basis, Billions of CFA francs): 393.0; 460.4; 518.1; 637.4; 680.4; 696.8.
- Overall balance (cash basis, Billions of CFA francs): 355.7; 426.9; 497.1; 612.1; 654.4; 698.2.
- Financing (total, Billions of CFA francs): -355.7; -426.9; -497.1; -612.1; -654.4; -698.2.
  - External (net): -92.4; -167.9; -197.6; -218.2; -245.4; -162.6.
  - Domestic (net): -263.3; -259.0; -299.5; -393.9; -409.0; -535.6.
- Memorandum (percent of non-oil GDP): Non-oil revenue and grants: 23.9; 23.5; 24.2; 23.7; 23.9; 24.2.
  - Non-oil primary balance: -17.5; -18.0; -11.6; -10.0; -8.8; -7.4.

### Detailed Fiscal Operations and Composition (2005–10)
- Oil revenue (on budget and transfers): oil revenue total 907.2; 1,012.9; 938.0; 1,025.6; 1,039.3; 1,016.7 with on budget 835.2; 951.0; 905.1; 997.0; 1,009.5; 985.7 and SOGARA transfer 71.9; 61.9; 32.9; 28.7; 29.9; 31.0.
- Non-oil revenue composition (Billions of CFA francs): Direct taxes: 138.6; 159.4; 182.8; 196.5; 211.7; 226.4. Indirect taxes: 113.7; 113.7; 131.8; 130.7; 145.6; 165.9.
- Interest payments (Billions of CFA francs): 129.2; 116.6; 105.8; 94.4; 81.5; 68.0.
  - External interest payments: 99.9; 92.2; 87.0; 77.0; 65.2; 51.8.
- Change in arrears (Billions of CFA francs): -37.3; -33.5; -21.0; -25.4; -26.0; 1.5.
- Memorandum (percent of GDP): Total revenue and grants: 31.4; 31.7; 31.2; 31.0; 30.6; 30.4. Total expenditure: 22.8; 22.5; 21.1; 19.5; 19.0; 18.9.
- Fund for Future Generations (stock in billions of CFA Francs): 84; 120; 214; 316; 420; 522 (2005–2010).

### Balance of Payments (2005–11)
- Current account (including transfers, Billions of CFA francs): 89; 192; 086; 192; 085; 97; 73; 54; 45 (table formatting preserved from source).
- Exports, f.o.b. (Billions of CFA francs): 2,989; 3,166; 3,101; 3,404; 3,513; 3,491; 3,340.
  - Oil sector exports: 2,489; 2,602; 2,480; 2,740; 2,815; 2,758; 2,568.
  - Other sectors exports: 499; 563; 621; 664; 698; 733; 772.
- Imports, f.o.b. (Billions of CFA francs): -716; -828; -953; -1,034; -1,111; -1,190; -1,267.
- Trade balance (Billions of CFA francs): 2,273; 2,338; 2,148; 2,370; 2,402; 2,301; 2,073.
- Services (net, Billions of CFA francs): -1,275; -1,314; -1,238; -1,393; -1,495; -1,482; -1,482.
  - Interest on public debt (gross): -79; -94; -89; -79; -62; -49; -39.
  - Profits (net): -701; -733; -652; -736; -811; -761; -731.
- Capital account (Billions of CFA francs): -793; -726; -661; -578; -509; -423; -245.
  - Medium- and long-term capital (Billions of CFA francs): -361; -457; -322; -241; -144; -71; -71.
    - Public sector (Billions of CFA francs): -134; -177; -219; -234; -239; -156; -161.
      - Drawings (gross): 47; 63; 34; 49; 55; 57; 62.
      - Amortization (gross): -181; -241; -262; -283; -294; -214; -223.
- Overall balance (Billions of CFA francs): 98; 194; 200; 350; 350; 350; 300.
- Gross official reserves (Billions of CFA francs): 375; 559; 742; 1,080; 1,430; 1,780; 2,080.
  - In months of imports of GNFS: 3.5; 4.7; 5.7; 7.6; 9.5; 11.1; 12.3.
- World oil price (U.S. dollars/barrel): 53.4; 64.3; 60.8; 64.8; 64.5; 64.3; 63.8.
- Oil production (in million tons): 13.3; 11.9; 12.5; 12.9; 13.3; 13.2; 12.5.
- GDP (in billions of CFA francs): 4,571; 4,992; 5,106; 5,565; 5,861; 6,032; 6,108.

### Monetary Survey (2004–09)
- Net foreign assets (Billions of CFA francs): 291.4; 541.9; 715.4; 922.1; 1,294.8; 1,659.4.
  - Central bank net foreign assets: 165.2; 334.0; 527.9; 729.0; 1,078.9; 1,428.9.
  - Deposit money banks net foreign assets: 126.2; 208.0; 187.5; 193.2; 215.9; 230.5.
- Net domestic assets (Billions of CFA francs): 369.3; 290.6; 262.4; 193.7; -86.6; -357.9.
- Net domestic credit (Billions of CFA francs): 498.6; 434.2; 416.1; 349.3; 130.2; -125.5.
  - Credit to the economy (Billions of CFA francs): 374.5; 417.9; 506.7; 610.7; 696.4; 781.8.
- Broad money (Billions of CFA francs): 660.6; 832.6; 977.8; 1,115.8; 1,208.2; 1,301.5.
  - Currency outside banks: 138.7; 190.2; 219.1; 265.5; 287.5; 309.7.
  - Demand deposits: 250.5; 330.3; 398.9; 447.1; 484.1; 521.5.
  - Time deposits: 271.5; 312.1; 359.8; 403.3; 436.6; 470.4.
- Changes in percent of beginning-of-period broad money:
  - Net foreign assets: 35.5; 37.9; 20.8; 21.1; 33.4; 30.2.
  - Net domestic assets: -23.8; -11.9; -3.4; -7.0; -25.1; -22.5.
  - Broad money: 11.6; 26.0; 17.4; 14.1; 8.3; 7.7.

### Banking Sector Soundness Indicators (2001–06)
- Regulatory capital to risk-weighted assets (percent): 17.2; 17.6; 19.9; 17.8; 24.0; 32.0.
- NPLs to total gross loans (percent): 8.6; 11.4; 13.8; 15.8; 14.3; 11.1.
- NPLs to total capital (percent): 35.2; 52.9; 59.4; 59.8; 41.9; 34.5.
- NPLs provisions to total NPLs (percent): 63.0; 66.5; 78.8; 78.4; 80.3; 84.5.
- Liquid assets to short-term liabilities (percent): 128.8; 134.0; 185.3; 219.5; 235.1; 210.4.

### Capacity to Repay the Fund (2006–14)
- Obligations from existing drawings (Millions SDR): Principal (repurchases): 9.8; 22.2; 15.6; - - - - -.
- Charges (Millions SDR): 2.6; 1.6; 1.2; 0.6; 0.6; 0.6; 0.6; 0.6.
- Credit outstanding (Millions SDR): 37.8; 15.6; - - - - - -.
  - Credit outstanding (percent of quota): 24.5; 10.1; - - - - - -.
- Obligations from prospective drawings (Principal repurchases, Millions SDR): - - - - -; 1.7; 8.8; 20.3; 28.1; 16.6; 1.6.
- Cumulative (existing and prospective) principal (repurchases, Millions SDR): 9.8; 22.2; 15.6; 1.7; 8.8; 20.3; 28.1; 16.6; 1.6.
- Cumulative charges (Millions SDR): 2.6; 1.8; 2.1; 2.1; 3.0; 4.3; 4.0; 2.7; 1.3.
- Cumulative credit outstanding (Millions SDR): 37.8; 26.6; 32.0; 62.3; 66.6; 46.3; 18.2; 1.6; -.
- Cumulative credit outstanding (percent of quota): 24.5; 17.3; 20.7; 40.7; 44.0; 33.2; 30.0; 11.8; 1.1.
- Memorandum: Percent of GDP, percent of exports, percent of external public debt, percent of gross foreign reserves are provided in the table (values preserved in the original).

### Indicators of External Vulnerability (2001–06)
- Exports (percent change, 12-month basis in U.S. dollars): -21.4; -2.0; 24.2; 31.5; 35.6; 6.8.
- Imports (percent change, 12-month basis in U.S. dollars): 6.0; 10.6; 11.3; 17.8; 10.5; 16.5.
- Terms of trade (percent change): -9.9; 4.2; 3.6; 8.6; 26.8; 12.2.
- Current account balance, incl. grants (percent of GDP): 11.0; 6.9; 9.5; 10.3; 19.5; 18.4.
- Gross official reserves (millions of U.S. dollars): 48.5; 139.9; 196.5; 442.0; 678.5; 1,125.2.
- Gross official reserves (in months of imports of goods and services of the following year): 0.4; 1.0; 1.0; 2.0; 3.1; 4.3.
- Total public and publicly guaranteed debt (millions of U.S. dollars): 3,030; 3,360; 3,687; 3,857; 3,234; 3,270.
- Total external debt to exports of goods and services (percent): 106.7; 117.6; 101.1; 80.9; 58.0; 49.8.
- Exchange rate (per U.S. dollar, period average): 732.4; 694.6; 580.1; 527.6; 526.6; 522.4.

### Purchase Schedule and Conditions Under the Proposed Stand‑By Arrangement (2007–10)
- Overall program size and tranches (SDR million / Percent of quota / Availability Date / Condition):
  - 5.50 SDR million, 7.1 percent, May, 2007 — Executive Board Approval.
  - 2.75 SDR million, 3.6 percent, September 15, 2007 — Completion of First Review and observance of end‑June 2007 performance criteria.
  - 2.75 SDR million, 3.6 percent, December 15, 2007 — Observance of end‑September 2007 performance criteria.
  - 4.00 SDR million, 5.2 percent, March 15, 2008 — Completion of Second Review and observance of end‑December 2007 performance criteria.
  - 4.00 SDR million, 5.2 percent, June 15, 2008 — Observance of end‑March 2008 performance criteria.
  - 6.50 SDR million, 8.4 percent, September 15, 2008 — Completion of Third Review and observance of end‑June 2008 performance criteria.
  - 6.50 SDR million, 8.4 percent, December 15, 2008 — Observance of end‑September 2008 performance criteria.
  - 8.00 SDR million, 10.4 percent, March 15, 2009 — Completion of Fourth Review and observance of end‑December 2008 performance criteria.
  - 8.00 SDR million, 10.4 percent, June 15, 2009 — Observance of end‑March 2009 performance criteria.

*Sources: Gabonese authorities and Fund staff estimates and projections.*

### 10.   SDR million

### _cr07174 - 10.   SDR million

### IMF access schedule and reviews
- Item 10: SDR million — 8.00; 10.4; September 15, 2009 — Completion of Fifth Review and observance of end-June 2009 performance criteria
- Item 11: SDR million — 8.00; 10.4; December 15, 2009 — Observance of end September 2009 performance criteria
- Item 12: SDR million — 13.15; 17.0; March 15, 2010 — Completion of Sixth Review and observance of end-December 2009 performance criteria
- Total access under the Stand-by Arrangement is SDR 77.15 million (50 percent of quota).

### Authorities’ letter: objectives and program request
- Date and place: Libreville, April 15, 2007.
- Government request: three-year Stand-By Arrangement in the amount of SDR 77.15 million, equivalent to 50 percent of Gabon’s IMF quota.
- Drawing intention: The government does not intend to make any drawing under this arrangement.
- Program monitoring: execution will be monitored through quarterly quantitative performance criteria and structural performance criteria and benchmarks set forth in Tables 1 and 2 of the Memorandum of Economic and Financial Policies for 2007-2010 and by means of six semi-annual reviews with the Fund; first expected to be completed by mid-September 2007, second by mid-March 2008.
- Authorization: government authorizes publication by the IMF of its Memorandum of Economic and Financial Policies for 2007-10 and of the IMF staff report on Gabon’s request.

*Signed: /sgd/ Paul Toungui, Minister of State in charge of Economy, Finance, Budget, and Privatization.*

### Program objectives and macroeconomic framework (2007–10)
- Overarching goals:
  - Prepare the economy for the post-oil era and reduce poverty.
  - Put public finances on an irreversible course toward long-term sustainability.
  - Increase the quality and efficiency of public spending.
  - Promote diversification of the economy.
- Three main policy objectives:
  - Significantly lower the non-oil fiscal deficit to a sustainable level by the end of the program.
  - Strengthen public financial management, ensuring inclusion of all revenue and expenditure in the government budget and improving spending quality and effectiveness.
  - Accelerate structural reforms to foster private sector development, job creation, and poverty reduction.
- Macroeconomic targets:
  - Achieve a non-oil growth rate of about 5 percent while containing inflation below 3 percent.
  - Reduce the non-oil primary deficit to about 6 percent of non-oil GDP by 2011.
  - Planned trajectory of the non-oil primary deficit (including subsidies on oil products):
    - 2006: 18 percent of non-oil GDP
    - 2007: 11.6 percent of non-oil GDP
    - 2008: 10 percent of non-oil GDP
    - 2009: 8.8 percent of non-oil GDP
    - 2010: 7.4 percent of non-oil GDP
  - Note on sustainability: sustainable non-oil primary deficit should be limited to around 6 percent if oil reserves deplete within 30 years; would fall to 3.75 percent of non-oil GDP if oil prices return to the 2000-05 average (US$30/bbl).

### Context and recent developments
- Progress since 2004–05 program: restored macroeconomic stability, eliminated all external and most domestic payment arrears, launched structural reforms.
- Non-oil performance:
  - Non-oil growth of 4.5 percent in 2005-06.
  - Non-oil primary deficit reached 17.5 percent of non-oil GDP in 2005 and 18 percent in 2006.
- Inflation: average inflation accelerated to 4 percent in 2006.
- Structural measures taken: liquidation of Air Gabon; privatization of Gabon Télécom; participation in the Extractive Industries Transparency Initiative (EITI).

### First-year program (April 2007–March 2008): fiscal policy measures
- 2007 non-oil primary deficit target:
  - Contain non-oil primary deficit to CFAF 311 billion, that is, 11.5 percent of non-oil GDP.
- Expenditure-side measures and ceilings:
  - Reduce fuel price subsidies by around CFAF 50 billion relative to level anticipated in 2007 based on February 2007 IPPs.
  - Limit sovereign and security expenditure to CFAF 27.5 billion.
  - Limit subsidies to parastatal enterprises to CFAF 20.6 billion.
  - Limit other public transfers to CFAF 110.7 billion.
  - Limit public sector wage bill to CFAF 294.0 billion.
  - Investment (capital expenditure) to reach CFAF 237.6 billion, including CFAF 42.6 billion of external financing.
- Revenue estimates for 2007:
  - Oil revenues estimated at CFAF 938 billion.
  - Non-oil revenues could reach CFAF 651.5 billion, excluding grants (CFAF 5.4 billion).
- Supplementary budget: framework to be fully reflected in a supplementary budget presented to parliament by end-June 2007.
- Civil service reform measures:
  - Prior budget approval for creation of new posts.
  - Remuneration linked to post; promotion merit-based; facilitation of early retirement.
  - Implementing legislation for new staff regulations to follow only after a simulation of effect on the wage bill to ensure neutral overall budget impact.
- Fuel subsidy and price policy:
  - Fuel price subsidies: over CFAF 70 billion in 2005 and exceeding CFAF 100 billion in 2006.
  - Measures already taken:
    - Increased Jet A1 price by raising SOGARA ex-refinery price to import price parity (IPP) as of August 1, 2006.
    - On March 3, 2007, premium gasoline and diesel prices increased by about 25 percent.
    - As of April 23, 2007, any increase in international prices will be passed through to the price structure in Gabon.
    - Automatic adjustment: any increase in IPPs over and above March 2007 levels will trigger automatic adjustment in step with ex-SOGARA prices.
  - Estimated fuel price subsidies in 2007: no more than CFAF 34.6 billion.
  - Strategy: prepare fuel price adjustment strategy in second quarter of 2007 to ensure further reduction of subsidies by end-2008; gradual adjustment for socially sensitive products (e.g., domestic kerosene), faster adjustment for other products.
- Mitigating measures for social impact of subsidy reduction (offsetting measures):
  - Provide water at no charge to households with monthly water bill < CFAF 2,288 (threshold for the low-income rate, 15m3/month).
  - Provide electricity free of charge to households with electricity bill < CFAF 13,625 (threshold for the low-income rate, 240 kwh/month).
  - Waiver of school fees and free textbooks.
  - Benefits for lower income citizens and single mothers.
  - Higher budget allocation for retroviral drugs to fight AIDS.
  - Support for microcredit.
  - Appropriation to Banque gabonaise de l’habitat to subsidize interest rates on loans.
  - New census of the poorest households before reassessing benefits.
  - Planned increase in capital expenditure on social projects (health, rural electrification, drinking-water supply).
  - Restructure SOGATRA to improve service in Libreville.
  - Estimated total cost of these social projects: CFAF 19.3 billion over and above the 2007 budget.

### Public debt and reserves strategy
- Reserve and debt management approach:
  - Work with BEAC and subregional members to seek solutions ensuring financial stability while allowing greater flexibility to invest reserves on a long-term basis for higher returns.
  - BEAC increased remuneration of deposits made in the Fund for Future Generations; considered insufficient.
- Debt assessment and strategy:
  - Directorate General of Government Accounting (DGCP) completed a census of all public sector liabilities, including government guarantees for local governments and state enterprises (end-2006).
  - By end-2007, finalize strategy with main creditors for paying off external debt, with view to significantly reducing debt burden; strategy could include early repayment in return for creditor concessions.
  - Pursue prudent borrowing policy mindful of long-term sustainability.
  - Domestic debt actions:
    - Continue to reduce BEAC statutory advances significantly and support eventual elimination in favor of tradable securities within the CAEMC.
    - Intend to eventually eliminate investment credit (bons d’équipement).
  - Recent debt operations: liquidation of public enterprises led to government assumption of debt; early 2007 concluded fourth agreement on rescheduling and settlement of long-standing claims within the Libreville Club.
  - FER arrears: final agreement could be considered pending confirmation by an Audit Office audit report by end-2007.

### Public financial management reforms and budget processes
- Core reforms: improve quality and effectiveness of expenditure management and budgetary processes, and management of oil and non-oil revenues.
- Medium-term expenditure framework (MTEF):
  - MTEF being prepared to facilitate multiyear budget programming.
  - By end-2007: prepare, for each ministry, a priority action program with strategic objectives, timetables, and borrowing requirements.
  - Projects already underway are high priority; no new projects without feasibility studies.
  - Consolidate sectoral programs into a three-year global MTEF by end-2007.
  - Aim to fully integrate MTEF into 2009 budget preparation.
- Budget transparency and classification:
  - Since 2006, fuel price subsidies included in the budget.
  - Introduce summary budget execution reports for previous two fiscal years by major category in the economic and financial report annexed to the 2008 budget law.
  - Introduce functional classification to facilitate expenditure monitoring in priority sectors; functional classification already available for most current expenditure and intended to cover all government expenditure by end-2007.
  - Include estimate of tax expenditures in the economic and financial report attached to the 2008 budget law.
- Budget execution monitoring and cash management:
  - 2007 budget law promulgated before end-December 2006; budget took effect at end-January 2007.
  - Overhaul reporting system so that by end-2007 the Directorate General of the Budget will produce execution reports recording appropriations confirmed, appropriations committed, appropriations authorized within a maximum of two months.
  - Directorate General of the Treasury to produce overall balance of treasury accounts within same two-month period.
  - Implement automatic compilation of the TOFE from general government accounts and budget execution reports by end-2008.
  - Prepare a cash-flow plan available by September 15, 2007, to optimize expenditure management.
  - Cash-flow management to be steered by the Treasury Committee chaired by the Minister of Finance and comprising the Treasurer/Paymaster General, Commissioner General for Planning, Director General of the Budget, Director General of Public Accounting, and Director General of Taxes.
  - Reduce treasury settlement period:
    - Reduced from 120 to 90 days since October 2006.
    - Target progressive reduction to 60 days by end-2007 and to 30 days by end-2008.
  - Banking procedure: agreed with commercial banks to accelerate check-cashing procedure to no longer than five days to reduce oil revenue collection backlogs.
  - Strengthen single treasury account principle: created inside the Treasury a central accounting agency for deposits and consignments to bring all state financial resources under a single accounting post; structure and operations to be discussed with staff during the first review.
  - Prepare an enhanced mechanism for future monitoring of Security and Sovereignty Fund expenditure.
  - Improve coordination among monitoring bodies for physical monitoring of services rendered.

*Source: Attachment I. Memorandum on Economic and Financial Policies of the Government of the Gabonese Republic for 2007–10 under a Three-Year Stand-By Arrangement (excerpts).*

### 17.      We have begun to implement certain measures to raise the quality of public

### _cr07174 - 17.      We have begun to implement certain measures to raise the quality of public

### Public investment and procurement
- Measures adopted to achieve more efficient government procurement and strengthen monitoring of execution.
- Since September 30, 2006, all tenders for government contracts and actual awards published on the Directorate General of Government Procurement (DGMP) website.
- Government procurement gazette to be published by end-June 2007.
- Objective: ensure all contracts of CFAF 30 million or more are processed by the DGMP.
- Targets to reduce directly negotiated government contracts for contracts of CFAF 30 million or more:
  - bring down to below 50 percent of the total value by end-2007;
  - bring down to 30 percent by end-2008.
- Fêtes tournantes (regional independence celebrations) expenditure:
  - No obligation to complete work before the start of fêtes tournantes if this compromises quality.
  - Plan to submit fêtes tournantes spending fully to current budgetary procedures, including government procurement.
  - Publish in the national press by end-April 2007 a list of the 2007 fêtes tournantes projects in the Estuaire province.
  - Publish list of 2008 fêtes tournantes projects in the national press by end-2007.
  - Submit the 2005-06 fêtes tournantes to a new audit to be completed by end-2008.

### Oil revenue transparency and management
- Response to 2004 EITI report: strengthen oil revenue administration to assure all oil revenue due under current laws and contracts is received.
- Oil revenue monitoring committee (COSUREP) established on July 10, 2006, composed of departments responsible for finance and oil.
  - Mission: identify all government oil revenues; ensure actual receipt; help prepare oil revenue forecasts; facilitate information-sharing among departments; check consistency of oil information.
  - Responsible for monitoring consultants preparing a model to verify and forecast oil revenues.
- Oil-revenue model characteristics and timetable:
  - Model should calculate monthly oil revenues receivable by applying tax and contract parameters, field by field, to production, prices, and real costs.
  - Contract with a consultant signed on April 12, 2007 (recruited by international call for tender).
  - Model to be submitted to the government by end-September 2007.
  - Model to become operational in the final quarter of 2007.
  - Model will be applied to evaluate monthly oil revenue payments collected by the Treasury in 2007 and identify reasons for discrepancies.
- Transparency in budgeting of oil-related items:
  - Ensure all oil revenues—including provisions for diversified investments (PID) and hydrocarbon investments (PIH)—are reflected transparently in the budget beginning with the 2008 budget law.
  - COSUREP to set up mechanism for regular monitoring of transactions relating to government shareholding interests in exploration and production sharing contracts (CEPP).

### Non-oil revenue administration
- Large Taxpayer Unit (LTU) created in September 2004 now operational; responsible for collecting taxes from enterprises with sales of more than CFAF 1.5 billion, exclusive of taxes.
- Finalizing new general tax code incorporating past changes; to be presented to parliament by end-September 2007.
- Rethinking prevailing tax exemptions that reduce assessment of VAT, tax on individuals, and customs duties.
  - Aim to start thorough reform of exemptions and tax expenditure in 2008, based on an inventory of all tax expenditure prepared by end-June 2007.
- Return to the public domain of the first wave of forestry permits held by delinquent taxpayers expected to positively impact tax collection in the sector (see forestry reforms).

### Governance and transparency
- Strengthened anti-corruption and fiscal oversight:
  - Audit Court (highest fiscal oversight agency) has enhanced its role.
  - National Commission Against Illicit Enrichment (CNLCEI), established in 2004, has advanced public education; asset disclosure remains weak.
    - Only 1,700 civil servants have submitted declarations out of an initial target group of 3,000.
    - Chair of the commission sent a list of recalcitrants to competent authorities for penalties.
    - Civil servants not submitting declarations by end-April 2007 will have names published in the national press by end-June 2007.
- International engagement:
  - Participation in NEPAD’s Peer Review Mechanism; Gabon expected to be evaluated in 2007 and public report prepared by end-2008.
  - Ratified the United Nations Convention against Corruption in 2005.
- Oil sector licensing:
  - Expectation to institute bidding procedures for exploration and production licenses in the oil sector as of 2008.
- Transparency initiatives:
  - Second EITI report published on April 6, 2007; coverage expanded to include all oil revenue flows (including profit oil excluded from the first report) and the mining sector.
  - Special EITI website established containing taxation of oil and mining activities and model contracts.
  - Launched "Gabon—Open Government" national initiative to make public documents available.
    - Posted on Ministry of Finance website: (i) 2004, 2005, and 2006 supplementary budgets; (ii) Audit Court report on budget execution in 2003 and 2004; (iii) audit report on fêtes tournantes and arrears of the Road Maintenance Fund (FER) prepared in 2005; (iv) annual reports of the CNLCEI for 2005 and 2006.
  - Begin timely publishing of the official gazette of Gabon on the Internet by end-2007.

### Structural reforms and public enterprise restructuring
- Air Gabon liquidation:
  - Liquidation being finalized; majority of assets sold; liquidator begun repaying liabilities.
  - Expect liquidation to be completed by end-September (year specified in source).
  - Government to assume remaining liabilities at completion.
  - A wholly private airline is being set up and will not receive government budget support.
- Gabon Télécom privatization:
  - Government sold 51 percent of capital to a private investor in February 2007.
- Postal sector:
  - Gabon Poste in liquidation replaced by La Poste, a new state enterprise.
  - Payment of allowances to former staff and settlement of social security debts begun and should be completed by end-June 2007.
  - New entity to have appreciably smaller staff and continue to receive a gradually diminishing budget subsidy.
- SOGATRA (urban transport) on verge of bankruptcy; immediate restructuring decided with aim to introduce more efficient management model (e.g., management contract).
- Forestry sector reforms:
  - Begun revoking forestry permits held by persons in breach of tax obligations.
  - Decree adopted in early April to return to the public domain, in a first wave, 116 permits in arrears since 2002 or 2003, representing a surface area of 1.8 million hectares.
  - Remaining permits in arrears to be subject to same procedures by end-2007.
  - Suspended parliamentary consideration of draft law on the National Forestry Fund due to major risks, particularly earmarking provisions that run counter to good budgetary practice.

### Financial sector, business climate, trade, and statistics
- Financial system strengthening:
  - Supported liberalization of interest rates within CEMAC, especially minimum lending rates.
  - Will work with subregional partners to streamline BEAC administrative procedures to facilitate banking transactions.
  - Strengthen the credit bureau (centrale des risques) to improve credit analysis and private-sector access to bank credit.
  - Reforms to encourage registration of real property to improve access to bank credit for private sector, especially SMEs.
  - Continue to foster microfinance development per national strategy to expand viable local financial services for poor and low-income households and micro entrepreneurs.
- Business climate:
  - Action plan under GPRSP endorses restructuring of Private Investment Promotion Agency (APIP); APIP focusing on improving one-stop-shop to reduce business startup time to a maximum of seven days.
  - APIP to post on its website all legislation on private investment (examples listed in source).
  - Legal work to align Gabon law with OHADA provisions to improve incorporation and enforcement of uniform acts.
  - PAPSUT study identified infrastructure constraints; in 2007 priority projects to be defined, including study of port of Owendo (handles 90 percent of Gabon’s non-oil trade).
- Trade liberalization:
  - Continue to work within CEMAC to lower high common external tariff.
- Statistics:
  - National Statistical Development Strategy (SNDS) launched; drafting to start in 2007 and end in 2008.
  - SNDS to redefine institutional framework (statistical law, National Statistical Council, bylaws of DGSEE) and establish a medium-term work program.
  - 2008 budget law to include a budget allocation based on detailed formulation of needs.
  - Publish new price index by end-June 2007: CAEMC Harmonized Consumer Price Index (HCPI).
  - Overhaul national accounts based on United Nations SNA93; first usable results expected in 2009-10.

### Program monitoring — quantitative and structural performance criteria
- Monitoring of first year of three-year Fund-supported program conducted based on quarterly quantitative performance criteria at end-June, end-September, and end-December 2007 and structural performance criteria and benchmarks.
- Key quantitative performance criteria (Billions of CFA francs; end-period data; cumulative flows from January 1st):
  - Floor on the primary fiscal balance, excluding oil revenue and restructuring costs (on a payments order basis):
    - 2006: -435.8
    - Mar. 2007: -83.2
    - Jun. 2007: -150.4
    - Sep. 2007: -246.5
    - Dec. 2007: -314.1
  - Ceiling on the net claims of the banking system on the central government:
    - 2006: -39.6
    - Mar. 2007: -71.5
    - Jun. 2007: -128.8
    - Sep. 2007: -125.4
    - Dec. 2007: -209.0
  - Ceiling on the contracting or guaranteeing of new external debt by the central government:
    - 2006: 164.5
    - Mar. 2007: 129.5
    - Jun. 2007: 140.0
    - Sep. 2007: 155.0
    - Dec. 2007: 165.2
  - Ceiling on the accumulation of external payments arrears by the central government:
    - 2006: 0.0
    - Mar. 2007: 0.0
    - Jun. 2007: 0.0
    - Sep. 2007: 0.0
    - Dec. 2007: 0.0
  - Ceiling on the accumulation of new payment arrears on domestic liabilities by the central government:
    - 2006: ...
    - Mar. 2007: 0.0
    - Jun. 2007: 0.0
    - Sep. 2007: 0.0
    - Dec. 2007: 0.0
- Memorandum items (Billions of CFA francs):
  - Foreign financed projects:
    - 2006: 63.3
    - Mar. 2007: 11.0
    - Jun. 2007: 21.0
    - Sep. 2007: 30.7
    - Dec. 2007: 42.6
  - Non-project external financing:
    - 2006: 14.5
    - Mar. 2007: 0.0
    - Jun. 2007: 0.0
    - Sep. 2007: 0.0
    - Dec. 2007: 0.0
  - Oil revenue:
    - 2006: 1,012.9
    - Mar. 2007: 234.0
    - Jun. 2007: 463.9
    - Sep. 2007: 685.8
    - Dec. 2007: 938.0
  - Privatization receipts:
    - 2006: 0.0
    - Mar. 2007: 13.1
    - Jun. 2007: 19.0
    - Sep. 2007: 19.0
    - Dec. 2007: 19.0
  - External debt service (excluding IMF):
    - 2006: 324.6
    - Mar. 2007: 105.1
    - Jun. 2007: 172.1
    - Sep. 2007: 273.4
    - Dec. 2007: 327.2
  - Domestic debt service:
    - 2006: 107.9
    - Mar. 2007: 38.1
    - Jun. 2007: 75.3
    - Sep. 2007: 107.5
    - Dec. 2007: 145.1
  - Public enterprises restructuring costs:
    - 2006: 39.8
    - Mar. 2007: 4.7
    - Jun. 2007: 12.9
    - Sep. 2007: 17.1
    - Dec. 2007: 22.5
  - Net change in unpaid payment orders at the treasury:
    - 2006: -27.8
    - Mar. 2007: -5.3
    - Jun. 2007: -10.5
    - Sep. 2007: -15.8
    - Dec. 2007: -21.0
  - Change in outstanding wage arrears (rappels de solde):
    - 2006: -20.6
    - Mar. 2007: -5.0
    - Jun. 2007: -10.0
    - Sep. 2007: -15.0
    - Dec. 2007: -20.0
  - Banks' purchases of outstanding government domestic debt (rachat de creances):
    - 2006: ....
    - Mar. 2007: 0.0
    - Jun. 2007: 0.0
    - Sep. 2007: 0.0
    - Dec. 2007: 0.0

### Structural performance criteria, prior actions, and benchmarks (high-level)
- Prior actions completed (as listed in source):
  - Reaching an understanding on a fiscal framework for 2007 consistent with reduction in the NOPD to 11½ percent of non-oil GDP.
  - Increase in retail fuel prices consistent with a reduction in subsidies of at least CFAF 50 billion over the expected level in 2007.
  - Implement agreement between government and oil refinery SOGARA for settlement of its tax arrears and resumption of the government’s compensation payments.
  - Signature of a contract between the government and a private company for development of a contract-based, monthly oil-revenue model.
  - Return to the public domain of 116 forestry permits with tax arrears since 2002-03, representing 1.8 million hectares.
  - Conclude privatization of Gabon Telecom by divesting a majority share to a private investor.
- First-year structural benchmarks and performance criteria (examples and dates from source):
  - Continuous PC: apply automatic adjustment formula to ex-refinery fuel product prices to reflect changes in international prices.
  - Continuous PC: subject all 2007 spending for the fêtes tournantes to regular budgetary procedures.
  - Sep. 15, 2007 PC: establish an annual treasury cash plan to strengthen treasury cash management.
  - Jun. 2007 BM: prepare compilation of all tax expenditures.
  - Sep. 15, 2007 BM: submit new tax code to Parliament.
  - Jun. 2007 BM: publish names of government officials who have not complied with asset declaration requirement by end-April 2007.
  - Jun. 2007 BM: disseminate key public-interest documents on Ministry of Finance website (specified documents).
  - Jun. 2007 BM: adopt new CPI with weights based on 2005 household expenditure survey.
- Subsequent review benchmarks and multi-year benchmarks listed in the program (dates and specifics preserved in the source).

*Source: IMF staff report text as provided in the supplied content unit.*

### 1.      This memorandum spells out the understandings for the monitoring of program

### 1.      This memorandum spells out the understandings for the monitoring of program implementation, and the reporting requirements for the period April 2007–March 2010.

### A. Monitoring of Program Implementation
- Monitoring is based on assessment of observance of quarterly quantitative performance criteria and of structural performance criteria and benchmarks at specified dates.
- The Memorandum for Economic and Financial Policies (MEFP) of the government of Gabon (attached to the letter dated April 15, 2007) presents the program for 2007–10 and is the reference for definitions, computation, and adjusters.

### B. Quantitative performance criteria (specified in Table 1 of the MEFP)
- Quantitative performance criteria include:
  - a floor on the primary fiscal balance of the central government on a payments order basis, excluding oil revenue and restructuring costs posted as “financing”;
  - a ceiling on the net claims of the banking system on the central government;
  - a zero limit on the accumulation of external payments arrears by the central government (a continuous performance criterion);
  - a zero limit on the accumulation of arrears on central government domestic liabilities;
  - a ceiling on new external debt contracted or guaranteed by the government with original maturities of more than one year.
- The program includes adjusters for the quantitative performance criteria as specified in paragraph 16 and summarized in footnotes 2, 3 and 4 of Table 1 of the MEFP.

### C. Definitions and computation (selected definitions used for monitoring)
- "Central government" covers all agencies, institutions, and special funds (including the Road Fund) whose operations fall under the IMF Government Finance Statistics Manual, 2001, paragraphs 2.48-50. Authorities will inform Fund staff of any new funds or special programs created during the program period for incorporation.
- Non-oil primary fiscal balance, on a payment order basis (ordonnancements), is defined as: total central government revenue on a cash basis (excluding oil revenue) minus total central government expenditure on a payment order basis (ordonnancements) excluding interest payments.
- Total central government revenue:
  - Measured on a cash basis and includes offsetting revenue and expenditure operations, including private sector tax obligations offset against central government obligations to the private sector.
  - Tax receipts are specified in the Table of central government financial operations (TOFE), including all earmarked revenues (Road Fund and special funds).
  - Oil revenue includes payments received in cash and in crude.
  - Oil revenue under PID and PIH, which have so far been excluded from reporting in budget documents, will be included once they become available.
  - Revenue received by the treasury will be registered after encashment, which will be at most 7 days after the date of receipt; oil revenue received in kind will be recorded at transaction value on the day of sale.
- Total central government expenditure:
  - Includes spending on a payment order basis (ordonnancements), treasury advances (avances à régulariser), and outlays on special funds and from earmarked revenues.
  - Excludes restructuring costs for public enterprises (paragraph 9) and other financial treasury operations (paragraph 10).

### D. Restructuring costs classified as “financing” (2007 cap and composition)
- Restructuring costs excluded from total government expenditure and posted as “financing” represent redundancy costs and operating/legal/administrative costs related to divestiture of productive sector holdings.
- The restructuring costs to be classified as financing in 2007 are capped at CFAF 22.45 billion and comprise:
  - Gabon Poste: 10.0 (CFAF billions)
  - CNGS: 2.0 (CFAF billions)
  - SOGATRA: 2.6 (CFAF billions)
  - APIP: 0.5 (CFAF billions)
  - SNBG: 2.5 (CFAF billions)
  - Administrative and legal cost related to social plans: 4.0 (CFAF billions)
  - Current expenditure of Privatization Committee: 0.85 (CFAF billions)
  - Total: 22.45 (CFAF billions)

### E. Financial operations in the TOFE
- Financial operations relating to treasury correspondents (correspondants du Trésor), local governments (collectivités locales), and other treasury operations (autres opérations de trésorerie) correspond to the change from period to period in the balance of these accounts.

### F. Net claims of the banking system on the central government (measurement and end-2006 stock)
- Measured according to BEAC (“IMF format”) accounting practice, excluding deposits of the postal checking account system.
- As of December 31, 2006, outstanding amount was CFAF 39.6 billion, breakdown:
  - Statutory advances from the BEAC: 60.9 (CFAF billions)
  - Plus: CFA franc counterpart of use of Fund resources: 28.4 (CFAF billions)
  - Plus: consolidated advances: 0.7 (CFAF billions)
  - Minus: deposits at the BEAC and treasury cash: 176.4 (CFAF billions)
    - Of which: Account for Future Generations: 120.1 (CFAF billions)
  - Plus: Commercial banks claims on government: 88.3 (CFAF billions)
    - Of which: Bons d’équipements: 70.4 (CFAF billions)
  - Minus: government deposits with commercial banks: 41.7 (CFAF billions)
  - Total: 39.6 (CFAF billions)

### G. External payments arrears definition
- Accumulation of external payments arrears (continuous performance criterion, zero limit) is calculated as:
  - (a) amount of each maturity falling due on account of contractual external debt-service obligations (interest and/or principal, including moratorium and late/penalty interest, where applicable); minus
  - (b) amount of actual payments made for each debt service payment due during the period.
- Arrears resulting from nonpayment for which a rescheduling agreement is sought are excluded.

### H. Stock of central government domestic liabilities (definition and end-2006 stocks)
- Total stock defined as outstanding liabilities to bank and non-bank domestic creditors scheduled to be extinguished in the future.
- Non-bank domestic liabilities include domestic debt registered at the DGCP, other documented domestic liabilities registered at the treasury not accounted for at the DGCP, and the stock of wage arrears. Excludes intragovernmental debt and the treasury float.
- Outstanding stock as of end-December 2006:
  - Stock of domestic debt: 475.6 (Billions of CFA francs)
  - Liabilities to the domestic Banking system: 178.2 (Billions of CFA francs)
    - BEAC: 89.9 (Billions of CFA francs)
      - of which Avances statutaires: 60.9 (Billions of CFA francs)
    - Commercial banks: 88.3 (Billions of CFA francs)
      - of which Bons d'Equipement: 70.4 (Billions of CFA francs)
  - Non-Bank domestic debt: 297.4 (Billions of CFA francs)
    - Registered at the DGCP: 75.5 (Billions of CFA francs)
    - Registered at the treasury: 109.9 (Billions of CFA francs)
    - Club de Libreville: 17.9 (Billions of CFA francs)
    - Other: 92.0 (Billions of CFA francs)
  - Wage arrears (rappels de la solde): 112 (Billions of CFA francs)

### I. Treasury float (definition and end-2006 stock)
- Treasury float consists of “payment orders at the treasury” and “other treasury float.”
  - “Payment orders at the treasury” = cumulative payment orders (ordonnancements) minus cumulative actual payments on a cash basis.
  - “Other treasury float” includes accounts on “subsidies,” “consignments,” “accounting agencies,” including “transfers between accounting offices” related to budgetary operations, and “installments to be allocated.”
- At end-December 2006, the treasury float amounted to CFAF 26.8 billion, comprising:
  - Payment orders: 39.2 (CFAF billions)
  - Other treasury float: -12.4 (CFAF billions)
- For 2007, the net reduction of the treasury float is defined as the reduction in the float existing at end-2006, less the accumulation of new float during 2007.

### J. Performance criterion on new external debt (scope)
- Applies to debt as defined in point 9 of the Guidelines on Performance criteria With Respect to Foreign Debt (IMF, August 24, 2000) and also to commitments contracted or guaranteed for which no value has yet been received.

### K. Adjustments to quantitative performance criteria (paragraph 16)
- The quarterly performance criteria will be adjusted as follows:
  - The primary non-oil fiscal balance will be adjusted to reflect expenditure related to inclusion of PID and PIH oil revenue into budget reporting.
  - The floor on the non-oil primary fiscal balance will be adjusted downward for higher-than-programmed external financing up to the equivalent of CFAF 25 billion per year.
  - The ceiling on the net claims of the banking system will be adjusted upward/downward if oil revenue is below/above baseline projections in a given quarter.
    - If the Brent oil price projections as reported by the IMF-WEO decline by more than 30 percent from the baseline program projection for 2007 (US$60.75 per barrel), then a consultation between the IMF and the government is required.
  - The ceiling on net credit from the banking system to the central government will be adjusted upward/downward for higher/lower-than programmed external debt service effectively paid.
    - (Footnote: External debt service due minus any accumulation of external arrears minus debt relief obtained. Programmed amounts calculated in CFA franc terms based on end 2006 exchange rates. Actual amounts calculated in CFA franc terms based on actual transactions in foreign currency and Fund-published exchange rates.)
  - The ceiling on net claims will be adjusted upward/downward for higher/lower-than programmed domestic debt service payments. The upward adjustment is limited to CFAF 5 billions.
  - The ceiling on net claims will be adjusted upward/downward for lower/higher-than-programmed net reduction in the treasury float. The upward adjustment is limited to CFAF 5 billions.
  - The ceiling on net claims will be adjusted downward for lower-than-programmed restructuring costs as defined in paragraph 8.
  - The ceiling on net claims will be adjusted upward to reflect any purchase by commercial banks of outstanding contractual government credit held by non-bank private sector creditors as of end 2006 (rachat de créances).
  - The ceiling on net claims will be adjusted downward/upward for higher/lower-than-programmed privatizations receipts.
  - The ceiling on contracting or guaranteeing new external debt will be adjusted to reflect new debt that could be contracted in the context of an external debt buy-back/restructuring operation that would result in a net present value reduction of Gabon external public debt.

### L. Structural performance criteria and benchmarks (Table 2 of the MEFP; definitions)
- Structural performance criteria and benchmarks are specified in Table 2 of the MEFP; relevant definitions are in paragraphs 18–20.

- Fuel price subsidy (definition and calculation):
  - Defined as the transfer by the government to the refinery (SOGARA)—including through delivery of crude oil valued at the official sale price—to compensate for differences between import parity prices (PPI) and government controlled ex-refinery fuel prices.
  - PPI calculated on basis of formula in government decree No. 01217/PR/MFEBPP of September 25 1998.
  - Ex-ante subsidy projected as difference between expected PPI and ex-SOGARA price for each fuel product multiplied by expected sale volumes.
  - Ex-post subsidy equals difference between actual PPI and ex-SOGARA prices multiplied by actual sale volumes.
  - Example: Calculation of Fuel Price Subsidy, June 2005 (values in CFAF/M3 or T and million CFAF):
    - Import parity price, PPI (in CFAF/M3 or T):
      - Super gasoline: 1,288,424
      - Lighting kerosene: 269,293
      - Jet kerosene: 321,021
      - Diesel: 277,369
      - Butane: 229,663
      - Fuel oil: 181,701
      - Asphalt: 200,432
    - Actual ex-refinery price (in CFAF/M3 or T):
      - Super gasoline: 214,404
      - Lighting kerosene: 145,693
      - Jet kerosene: 197,693
      - Diesel: 172,313
      - Butane: 155,717
      - Fuel oil: 142,348
      - Asphalt: 146,857
    - Difference (in CFAF/M3 or T):
      - Super gasoline: 74,020
      - Lighting kerosene: 123,600
      - Jet kerosene: 123,328
      - Diesel: 105,056
      - Butane: 73,946
      - Fuel oil: 39,353
      - Asphalt: 53,575
    - Quantity sold on domestic market (M3 or T):
      - Super gasoline: 4,735
      - Lighting kerosene: 3,707
      - Jet kerosene: 5,959
      - Diesel: 31,609
      - Butane: 2,098
      - Fuel oil: 8,897
      - Asphalt: 122
    - Fuel price subsidy for the month (million CFAF):
      - Super gasoline: 350.54
      - Lighting kerosene: 458.27
      - Jet kerosene: 734.9
      - Diesel: 3,320.7
      - Butane: 155.13
      - Fuel oil: 350.1
      - Asphalt: 6.5
    - Note: Asphalt, butane, and fuel oil quantities are in metric tonnes (T); remaining products in cubic meters (M3).

- Adjustment mechanism of ex-refinery SOGARA prices:
  - Any increase in the PPI will be fully and automatically reflected in the relevant ex-refinery price.
  - Once ex-refinery price has converged to PPI, any decrease in PPI will be fully passed through to ex-refinery price.
  - However, for products with ex-refinery prices lower than PPI, PPI declines will not be passed through into the ex-refinery price.

- Treasury payment period:
  - Time lag between date the budget general direction (DGB) certifies the payment order (visa de la journée comptable) and the date the payment is effectively made by the Treasury.

### M. Reporting requirements (paragraph 21; monthly and quarterly reporting timelines and content)
- Government will prepare and send to the IMF by e-mail or by fax data and monthly reports within six weeks following the end of the preceding month. Required data include (but are not limited to):
  - (a) comprehensive monetary survey, central bank balance sheet, consolidated balance sheet of commercial banks (electronic file);
  - (b) net financial position of the central government (PNG) with the BEAC and the banking system, with separate lines for (i) the balance on the account of the Fund for Future Generations and (ii) the outstanding amount of government securitized domestic debt purchased by the banks from commercial creditors (electronic file);
  - (c) central government financial operations (opérations financières de l’Etat) on a payment order basis (ordonnancements), identifying any discrepancy between the fiscal deficit and changes in domestic and external arrears and in the treasury float, and total net domestic bank/nonbank and net external financing (electronic file);
  - (d) detailed breakdown of oil revenue by type (royalties, profit tax, dividends, boni and other) and by company/type of contract, and underlying information when available (production, prices, turnover, costs, etc.), and detailed breakdown of non-oil tax revenue (by type) and nontax revenue (electronic file);
  - (e) detailed breakdown of total central government expenditure, on an adjusted commitment basis, adjusted payment order basis, and cash basis as presented in the Tableau Intégré produced by the Statistical Committee (electronic file);
  - (f) details for domestic and external debt-service obligations, on contractual and actual payments basis, with breakdown into interest and principal and by creditor, and any possible accumulation of domestic or external arrears (electronic file);
  - (g) details on the stock of external and domestic debt at the end of each quarter prepared by the DGCP; external debt stock to be evaluated at end-of-quarter exchange rates (electronic file);
  - (h) details for outstanding stock of the treasury float (month to month) and cumulative flows from January 1, 2007; net accumulation of new float during 2007 (difference between payment orders and payments made), repayment of pre-2007 float, both items broken down by wages and salaries, goods and services, transfers and subsidies, interest, capital expenditure, and net lending; any stock-flow adjustment not consistent with flows should be explained (electronic file);
  - (i) information on balances of accounts relating to treasury correspondents, local governments, and other treasury financial operations specified in the TOFE;
  - (j) amount of new external debt contracted or guaranteed by the central government, with detailed information on original terms and conditions (currency of denomination, interest rate, grace period, and maturity) and envisaged path of disbursement;
  - (k) actual disbursements on external debt, including on newly contracted loans, by creditors and by projects/programs and amounts of debt relief, if any, granted to Gabon (electronic file);
  - (l) monthly information on the oil sector: export prices, effective exchange rate, production per oil field, volume of exports and volumes provided to SOGARA based on data from the Direction Générale des Hydrocarbures (electronic file);
  - (m) quarterly information on number of forestry permits with tax arrears returned to the public domain, number of outstanding forestry permits with tax arrears, forestry tax arrears recovered and forestry tax arrears outstanding;
  - (n) quarterly report on numbers and value of procurement contracts treated by the Direction Générale des Marchés Publics (DGMP) by type of contracting;
  - (o) indicators and other statistical data on recent economic developments, such as household consumer price index, merchandise imports and exports (value and volume) by major categories on customs data, timber production and exports by categories (value and volume), quarterly reports on economic activity prepared by the General Directorate of the Economy (DGE) and six-monthly report of the balance of payments by the BEAC;
  - (p) quarterly data on the finances of local authorities;
  - (q) status report on implementation of structural reforms specified in Table 2 attached to the April 15, 2007 letter.

*Source: Memorandum attached to the letter from the Minister of Economy, Finance, Budget, and Privatization to the Managing Director of the International Monetary Fund dated April 15, 2007.*

### 22.      The Technical Support Unit of the Interministerial Committee for Monitoring the

### 22.      The Technical Support Unit of the Interministerial Committee for Monitoring the Structural Adjustment Program will provide the African Department of the IMF with any other information that the latter may deem necessary or that may be requested by the staff of the IMF for the effective monitoring of the program.

### Debt sustainability analysis
- Staff analyzed sustainability of Gabon’s external and public sector debt using the debt sustainability framework for market-access countries, focusing on debt-to-GDP ratios as indicators of solvency.
- Analysis compares baseline projections with an “unbiased” scenario where variables follow historical averages and subjects the baseline to standard stress tests.

### Key baseline projections and findings (external debt)
- At end 2006: external debt-to-GDP = 32.5 percent; total gross public debt = 44.1 percent of GDP.
- Under the baseline scenario:
  - Gross public debt would fall to 10 ½ percent of GDP by 2012.
  - External debt would fall to about 8 percent of GDP by 2012.
- Table 1 (selected series, percent of GDP unless noted):
  - Baseline: External debt: 2002 = 63.0; 2003 = 55.9; 2004 = 49.8; 2005 = 39.1; 2006 = 32.5; 2007 = 27.6; 2008 = 21.3; 2009 = 16.2; 2010 = 13.3; 2011 = 10.4; 2012 = 7.9.
  - Change in external debt: 2002 = 0.0; 2003 = -7.1; 2004 = -6.2; 2005 = -10.6; 2006 = -6.6; 2007 = -4.9; 2008 = -6.3; 2009 = -5.1; 2010 = -2.9; 2011 = -2.8; 2012 = -2.5.
  - Identified external debt-creating flows (4+8+9): 2002 = -11.0; 2003 = -21.6; 2004 = -21.9; 2005 = -24.9; 2006 = -18.8; 2007 = -16.9; 2008 = -17.9; 2009 = -17.3; 2010 = -14.8; 2011 = -10.8; 2012 = -6.7.
  - Current account deficit, excluding interest payments: 2002 = -10.4; 2003 = -12.7; 2004 = -12.7; 2005 = -21.2; 2006 = -20.3; 2007 = -18.6; 2008 = -18.1; 2009 = -15.7; 2010 = -13.6; 2011 = -9.6; 2012 = -5.4.
  - External debt-to-exports ratio (in percent): 2002 = 117.6; 2003 = 101.1; 2004 = 80.9; 2005 = 58.0; 2006 = 49.8; 2007 = 44.2; 2008 = 33.9; 2009 = 26.3; 2010 = 22.3; 2011 = 18.6; 2012 = 14.9.
  - Gross external financing need (in billions of US dollars): 2002 = 0.0; 2003 = -0.2; 2004 = -0.3; 2005 = -1.3; 2006 = -1.3; 2007 = -1.2; 2008 = -1.3; 2009 = -1.1; 2010 = -1.1; 2011 = -0.7; 2012 = -0.2.
  - Gross external financing need (in percent of GDP): 2002 = 0.5; 2003 = -3.6; 2004 = -4.4; 2005 = -15.5; 2006 = -13.6; 2007 = -11.7; 2008 = -11.6; 2009 = -9.6; 2010 = -9.3; 2011 = -5.3; 2012 = -1.6.
- Key macroeconomic assumptions underlying baseline (selected):
  - Real GDP growth (in percent): 2002 = -0.3; 2003 = 2.5; 2004 = 1.3; 2005 = 3.0; 2006 = 1.2; 2007 = 5.6; 2008 = 4.2; 2009 = 4.3; 2010 = 3.5; 2011 = 2.8; 2012 = 3.0.
  - GDP deflator in US dollars (change in percent): 2002 = 5.2; 2003 = 19.6; 2004 = 16.9; 2005 = 17.2; 2006 = 8.8; 2007 = 0.4; 2008 = 5.0; 2009 = 1.4; 2010 = 0.0; 2011 = -0.7; 2012 = -0.2.
  - Nominal external interest rate (in percent): 2002 = 5.8; 2003 = 6.2; 2004 = 5.1; 2005 = 4.2; 2006 = 5.3; 2007 = 5.7; 2008 = 5.6; 2009 = 5.3; 2010 = 5.2; 2011 = 5.0; 2012 = 4.4.
  - Growth of exports (US dollar terms, in percent): 2002 = -4.8; 2003 = 26.6; 2004 = 31.6; 2005 = 32.5; 2006 = 6.7; 2007 = 1.3; 2008 = 10.0; 2009 = 3.6; 2010 = 0.0; 2011 = -3.4; 2012 = -2.9.
  - Growth of imports (US dollar terms, in percent): 2002 = 9.0; 2003 = 11.0; 2004 = 22.0; 2005 = 5.0; 2006 = 13.5; 2007 = 13.8; 2008 = 8.7; 2009 = 7.1; 2010 = 6.7; 2011 = 6.4; 2012 = 4.3.
  - Current account balance, excluding interest payments (percent of GDP): 2002 = 10.4; 2003 = 12.7; 2004 = 12.7; 2005 = 21.2; 2006 = 20.3; 2007 = 18.6; 2008 = 18.1; 2009 = 15.7; 2010 = 13.6; 2011 = 9.6; 2012 = 5.4.

### Historical averages and stress-test scenarios (external)
- Historical-average scenario assumptions differ from baseline by:
  - Lower average annual GDP growth of 0.8 percent.
  - Lower primary surplus in every projection year.
  - Current account surplus lower than baseline up to 2010 reflecting much lower oil prices pre-2005.
- Even under the “historical averages” scenario:
  - Public sector debt ratio would gradually decline to about 32 percent of GDP in 2011 and stabilize at that level.
  - External debt would hover at about 30 percent up to 2010 and then decline to about 15 percent by 2012.
- Stress-test result:
  - Under standard stress tests, projected external debt remains below the critical range of 40-60 percent of GDP.
  - A decline in oil-price of 38 percent from the baseline would eventually lead to fiscal and external financing gaps and trigger increasing debt dynamics.

### Public sector debt framework and projections (Table 2)
- Baseline: Public sector debt (percent of GDP):
  - 2002 = 104.9; 2003 = 90.2; 2004 = 76.9; 2005 = 57.1; 2006 = 44.1; 2007 = 36.7; 2008 = 27.5; 2009 = 20.4; 2010 = 16.6; 2011 = 13.4; 2012 = 10.5.
  - Debt-stabilizing primary balance = 0.3 (percent of GDP).
- Foreign-currency denominated share (percent of GDP):
  - o/w foreign-currency denominated: 2002 = 58.4; 2003 = 51.4; 2004 = 46.1; 2005 = 41.1; 2006 = 30.9; 2007 = 27.7; 2008 = 21.5; 2009 = 16.3; 2010 = 13.4; 2011 = 10.5; 2012 = 8.1.
- Change in public sector debt: 2002 = 3.0; 2003 = -14.7; 2004 = -13.4; 2005 = -19.7; 2006 = -13.1; 2007 = -7.4; 2008 = -9.2; 2009 = -7.1; 2010 = -3.8; 2011 = -3.2; 2012 = -2.9.
- Identified debt-creating flows (4+7+12): 2002 = -9.8; 2003 = -19.8; 2004 = -18.3; 2005 = -16.4; 2006 = -14.4; 2007 = -11.6; 2008 = -14.5; 2009 = -13.0; 2010 = -12.1; 2011 = -10.6; 2012 = -11.3.
- Primary deficit (percent of GDP): 2002 = -7.9; 2003 = -11.1; 2004 = -11.5; 2005 = -11.4; 2006 = -11.6; 2007 = -12.3; 2008 = -13.2; 2009 = -13.0; 2010 = -12.7; 2011 = -11.3; 2012 = -11.8.
- Revenue and grants (percent of GDP): 2002 = 31.7; 2003 = 29.8; 2004 = 30.1; 2005 = 31.4; 2006 = 31.7; 2007 = 31.2; 2008 = 31.0; 2009 = 30.6; 2010 = 30.4; 2011 = 29.2; 2012 = 28.6.
- Primary (noninterest) expenditure (percent of GDP): 2002 = 23.8; 2003 = 18.8; 2004 = 18.6; 2005 = 20.0; 2006 = 20.1; 2007 = 19.0; 2008 = 17.8; 2009 = 17.6; 2010 = 17.7; 2011 = 17.9; 2012 = 16.8.
- Automatic debt dynamics (percent of GDP): 2002 = -1.8; 2003 = -8.7; 2004 = -6.8; 2005 = -5.0; 2006 = -2.8; 2007 = 1.1; 2008 = -1.3; 2009 = 0.0; 2010 = 0.6; 2011 = 0.7; 2012 = 0.5.
- Public sector debt-to-revenue ratio: 2002 = 330.8; 2003 = 302.3; 2004 = 255.3; 2005 = 182.1; 2006 = 139.1; 2007 = 117.3; 2008 = 88.7; 2009 = 66.6; 2010 = 54.6; 2011 = 46.0; 2012 = 36.7.
- Gross financing need (percent of GDP): 2002 = 3.4; 2003 = 1.3; 2004 = 0.7; 2005 = -0.5; 2006 = -1.3; 2007 = -2.9; 2008 = -5.0; 2009 = -5.3; 2010 = -7.1; 2011 = -6.5; 2012 = -7.6.
- Gross financing need (in billions of U.S. dollars): 2002 = 0.2; 2003 = 0.1; 2004 = 0.0; 2005 = 0.0; 2006 = -0.1; 2007 = -0.3; 2008 = -0.6; 2009 = -0.6; 2010 = -0.9; 2011 = -0.8; 2012 = -1.0.
- Scenario results:
  - Scenario with key variables at their historical averages: public sector debt (percent of GDP) = 38.7; 35.0; 32.3; 32.5; 31.8; 32.4; -0.3 (table format preserved in source).
  - Scenario with no policy change (constant primary balance) in 2007-12: 37.4; 29.7; 24.1; 21.5; 18.3; 15.5; 0.2.

### Bound tests and shocks (figures summary)
- Figures 1 and 2 present bound tests for external and public debt sustainability, using:
  - Individual permanent one-half standard deviation shocks.
  - Combined permanent 1/4 standard deviation shocks to real interest rate, growth rate, and current account (external) or primary balance (public).
  - One-time real depreciation of 30 percent in 2007 (external) and one-time real depreciation of 30 percent plus 10 percent of GDP contingent-liabilities shock in 2007 (public).
- Key qualitative outcomes from figures:
  - External debt under baseline and historical scenarios remains below crisis-critical range of 40-60 percent of GDP for presented horizons.
  - Public debt bound tests show baseline public debt falling to low single digits by 2012 under baseline but substantial increases under combined or depreciation plus contingent liabilities shocks.
  - Specific figure box values and historical averages are presented in the source figures (not reproduced here beyond cited numerical series).

### Annex I — Relations with the Fund (as of February 28, 2007)
- Membership: Joined: September 10, 1963; Article VIII.
- General Resources Account:
  - Quota = 154.30 SDR Million = 100.00 percent.
  - Fund holdings of currency = 191.90 SDR Million = 124.37 percent.
  - Reserve position in Fund = 0.24 SDR Million = 0.16 percent.
- SDR Department:
  - Net cumulative allocation = 14.09 SDR Million = 100.00 percent.
  - Holdings = 1.89 SDR Million = 13.41 percent.
- Outstanding Purchases and Loans (SDR Million; %Quota):
  - Extended arrangements = 1.38 = 0.89.
  - Stand-By Arrangements = 36.46 = 23.63.
- Latest Financial Arrangements (Approval Date / Expiration Date / Amount Approved / Amount Drawn):
  - Stand-By May 28, 2004 — July 31, 2005: 69.44 / 41.66 (SDR Million).
  - Stand-By Oct 23, 2000 — Apr 22, 2002: 92.58 / 13.22 (SDR Million).
  - EFF Nov 8, 1995 — Mar 7, 1999: 110.30 / 60.67 (SDR Million).
- Projected Payments to Fund (Obligations Basis; SDR Million):
  - Principal forthcoming: 2007 = 1.3820.83 15.62 20.00 0.00 0.00 (table formatting as in source).
  - Charges/Interest: 1.91 2.20 1.11 0.54 0.52 (table formatting as in source).
  - Total: 3.29 23.03 16.73 0.54 0.52 (table formatting as in source).
- HIPC Initiative: Not Applicable.
- Safeguards Assessments:
  - BEAC updated safeguards assessment completed on August 30, 2004; found progress since 2001 but further progress needed; summary reported in Country Report No. 05/3.
- Exchange Rate Arrangement:
  - Gabon participates in CEMAC currency union; common currency CFA franc pegged to the euro at CFAF 655.957 = €1.
  - Exchange system free of restrictions on payments and transfers for current international transactions.
- Last Article IV Consultation:
  - Consultations on 12-month cycle; last consultation concluded by Executive Board on June 5, 2006.
- FSAP Participation: Missions visited Libreville in 2001 and 2006; FSSA reports discussed by Executive Board in March 2002 and July 2006.
- Technical Assistance (selected entries and dates as in source):
  - FAD Fiscal ROSC Mar./Apr. 2006.
  - FAD Budget management March 2004.
  - FAD Tax policy and administration November 2003.
  - LEG Law against illicit enrichment June, July, and October 2003.
  - FAD Budgetary procedures and expenditure control November 2000.
  - STA Multisector statistics mission May 1998.
  - FAD Value-added tax administration issues August 1997.
  - FAD Poverty and social impact analysis of fuel subsidies reform January 2007.
- Resident Representative:
  - Resident representative office in Libreville. Current resident representative Mr. Richard Randriamaholy assumed post in October 2003.

### Annex II — Relations with the World Bank (updated as of March 31, 2007)
- Country context:
  - Gabon is resource rich, small, highly urbanized; GNI per capita estimated at US$4,130 in 2004.
  - Oil is key sector, driving growth; oil revenues projected to decline over next few years; government exploring diversification.
- Bank Group Strategy and Lending Operations:
  - CAS approved May 24, 2005 with two pillars:
    1. Strengthening management of public resources for improved social outcomes.
    2. Improving investment climate to foster sustainable, private sector led non-oil growth.
  - Cross-cutting themes: capacity development in Government and civil society; improving governance and participation.
  - Current base-case assistance program includes:
    - US$15 million Natural Resources Management Development Policy Loan approved November 2005.
    - US$25 million Public Investment Program for Local Infrastructure Development approved March 2006.
    - US$25 million Infrastructure Project planned in FY08.
  - Program emphasis: improving transparency and efficiency in use of public resources (including natural resources) and improving environment for private sector participation.

*Source: _cr07174 - 22.      The Technical Support Unit of the Interministerial Committee for Monitoring the Structural Adjustment Program will provide the African Department of the IMF with any other information that the latter may deem necessary or that may be requested by the staff of the IMF for the effective monitoring of the program.*

### 4.      Currently IFC has an exposure of US$32.5 million in the oil, gas, electricity and

### _cr07174 - 4.      Currently IFC has an exposure of US$32.5 million in the oil, gas, electricity and telecommunications sectors, and the World Bank Group’s Foreign Investment Advisory Services (FIAS) has completed a diagnostic study of the investment climate in late 2004. A US$61 million MIGA guarantee facility for rehabilitation and modernization of a professional training institute was approved by the Board in May 2005. This project is MIGA’s first in the education sector.

### IFC / MIGA engagements and projects
- IFC exposure: US$32.5 million in the oil, gas, electricity and telecommunications sectors.
- FIAS: completed a diagnostic study of the investment climate in late 2004.
- MIGA: US$61 million guarantee facility approved by the Board in May 2005 for rehabilitation and modernization of a professional training institute — MIGA’s first project in the education sector.

### IMF–World Bank collaboration: overall objectives and division of labor
- Purpose: support reforms to foster economic diversification and coordinate policy advice to Gabonese authorities.
- Emphasis areas where World Bank action is complementary to IMF medium-term structural measures:
  - Business climate improvements
  - Effective and efficient public resources management (MTEF)
  - Poverty reduction policies
  - Nonrenewable resource management
  - Identification and development of sources of growth in the non-oil sector

- Bank/Fund Collaboration — Area of Structural Reform and Lead Institution:
  - Fiscal area
    - Civil service reform: IMF
    - Expenditure monitoring and control: IMF
    - Public Financial Management review: World Bank
    - Tax administration & Fiscal ROSC: IMF
  - Governance
    - Anticorruption law implementation: IMF
    - Code of ethics for government officials: IMF
    - Extractive Industries Transparency Initiative (EITI): World Bank/IMF
  - Private sector development
    - FIAS study of the business climate: World Bank/IFC
    - Diversification and non-oil sector development: World Bank
  - Other
    - Price controls: IMF
    - Forestry, environment, fisheries, mining/oil: World Bank/IMF
    - PRSP: World Bank/IMF
    - External trade: IMF
    - Transport: World Bank
    - Urban development: World Bank

### World Bank–led programs and inputs to IMF
- Poverty reduction and statistics
  - Poverty Assessment (PA): initiated late 1994, finalized March 1997; main conclusion: relative inefficiency and low quality of public expenditures, particularly in social sectors, impede poverty alleviation.
  - Bank supported Government’s poverty reduction strategy; will continue support for strengthening statistical capacity and assisting NSO.
  - Summer 2005: Bank provided financial and technical assistance for household surveys using CWIQ to update key social indicators for annual monitoring.
  - CWIQ results used in finalizing the GPRSP.
  - Bank plans to assist NSO in creating monitoring and evaluation system for the poverty reduction strategy.
  - New Poverty Assessment based on CWIQ expenditure module completed December, 2005.
- Natural resources and environment
  - November 2005: Bank board approved a $15 million Natural Resources Management Development Policy Loan (DPL) covering forest, environment, fisheries, and mining/oil sectors; in oil sector, DPL limited to supporting EITI implementation.
  - March 2006: Board approved a $10 million grant from the Global Environment Facility for Gabon’s national parks.
  - DPL objectives: improve transparency, law enforcement, remove policy distortions, implement reform programs, empower civil society and local communities in resource management.
  - Expected outcomes: broaden beneficiaries, raise social and environmental standards in forestry, fishing, and mining sectors; assist diversification and reduce oil dependence.
- Community infrastructure and urban projects
  - June 2004: US$7 million Pilot Community Infrastructure Development Project (Learning and Innovation Loan) completed to test community-based infrastructure methods, support local contractors, and build capacity for larger programs.
  - March 14, 2006: Bank approved a US$25 million loan to:
    - increase access to basic services for populations in low-income settlements; and
    - sustain access of local SMEs to civil works and construction contracts with the public sector.
  - Expected impacts: increase poor populations’ access to infrastructure and services; strengthen role of SMEs; improve public works quality via transparency and efficient procurement and contract management.
- Public finance management
  - End 2006: combined Public Expenditure Review/Country Financial Accountability Assessment/Country Procurement and Audit Review completed to improve public expenditure management and control systems.
  - Bank leading multi-donor assistance to help authorities develop and implement a medium term expenditure framework (MTEF).
- Investment climate and infrastructure
  - FIAS diagnostic of investment climate completed September 2004; validation workshop February, 2005 to establish action plan.
  - Two further studies proposed (conditional on action taken): identification of private investment constraints (administrative barriers) and in-depth review of tax and incentive regime to propose concrete reforms.
  - Infrastructure Framework Report (IFR) being prepared to present environment for private participation and main opportunities in transport, telecommunications, water, and power; will outline recommendations and action plan to put in place laws, policies, and institutions for enhanced private-sector participation.

### Areas of shared responsibility and IMF lead roles
- Shared focus: private sector environment (Bank lead) and macroeconomic governance (IMF interest), with complementary objectives:
  - IMF primary focus: good governance in fiscal area and promotion of transparency in public and private sectors.
  - Bank additional concerns: efficiency of resulting market structures and improved enterprise operation.
- Financial sector collaboration:
  - 2002: joint Financial Sector Assessment Program (FSAP) prepared.
  - FSAP findings: financial sector overall profitable and stable, but structural weaknesses and risks identified, including lack of bank portfolio diversification and underdevelopment of non-bank financial institutions.
- IMF lead roles and inputs to Bank programs:
  - IMF leads dialogue on fiscal matters that set the overall envelope for public expenditures; provides technical assistance in governance and anticorruption.
  - IMF leads dialogue on policies to contain public sector expenditures (wage bill, ceilings for public investment expenditures); Bank ensures consistency with IMF recommendations.
  - IMF follows implementation of OHADA Uniform Acts and CEMAC trade liberalization measures to improve business climate and complement Bank/IFC investment facilitation work.
  - IMF-only areas: monetary policy, interest rates, exchange rate, balance of payments, and related statistical and measurement issues.

### Statistical issues — key findings and data shortcomings
- General
  - Gabon’s economic database is fairly comprehensive, but consistency between sectors is poor.
  - Tendances de l’Économie: semiannual publication by DGSEE (Ministry of Planning) with detailed economic and financial statistics and long historical time series.
  - Tableau de Bord de l'Économie: quarterly publication by DGE (Ministry of Economy, Finance, Budget, and Privatization) describing recent sectoral developments.
- GDDS participation
  - Gabon participates in the General Data Dissemination System (GDDS).
  - Metadata posted on Fund’s Dissemination Standards Bulletin Board on October 1, 2002, but Gabon has not updated this information at least once a year.
  - Except for consumer prices, authorities do not report real sector statistics for publication in IFS, nor fiscal data for publication in IFS or GFS Yearbook.
- National accounts
  - Base for calculation of national accounts aggregates at constant prices changed from 1989 to 1991.
  - Coverage of oil and other key export sectors based on indicators that may not fully capture profits.
  - Significant inconsistencies remain between national accounts and balance of payments statistics.
  - More frequent household surveys needed to improve income distribution and consumption data.
- Employment and unemployment
  - Data on unemployment and total labor force are not systematically available.
- Prices
  - Monthly consumer price indices for low- and middle-income households available only for Libreville.
  - Indices based on outdated expenditure survey from 1975 and attach large weight to food and basic consumer goods.
- Government accounts
  - Limited coverage of fiscal data: no estimates of consolidated general government reported to STA; social security operations not yet included in government finances.
  - Audited accounts of oil sector operations not published with adequate periodicity (at least quarterly).
  - Needed improvements: statistical treatment of oil companies’ tax advances; recording in budget accounts of government investment financed by oil companies; recording of government domestic payment arrears.
  - Public enterprises data: fairly good database exists, but information communicated to staff on an ad hoc basis; current data cover wholly owned and mixed enterprises where government equity participation is at least 25 percent.
- Monetary statistics
  - Monthly monetary data reported regularly for Gabon and other CEMAC members, though with some delay; reported electronically by BEAC and published in IFS.
  - Institutional coverage comprehensive, but accuracy affected by cross-border currency movements among CEMAC countries.
  - In Gabon, about 96 percent of notes are nationally issued; remaining notes from Cameroon, Republic of Congo, and Equatorial Guinea.
  - Gabon exports about 15 percent of its notes: 10 percent to Cameroon and 3 percent to the Republic of Congo.
  - May 2001 MFSM technical assistance to BEAC headquarters addressed coverage, methodology, compilation procedures, and timeliness; action plan discussed for MFSM implementation and area-wide IFS page for CEMAC (new page published January 2003 issue of IFS).
  - May 2002 regional workshop in Libreville organized by BEAC to support MFSM implementation; priorities for Gabon include:
    - adapt the bridge table linking bank data with monetary statistics to new format for monthly reporting by banks;
    - implement accrual recording of interest on loans;
    - revise sectorization of public entities.
- External public debt
  - Comprehensive data on outstanding stock of external public debt and composition, with detailed projections on debt service due; data provided by the General Directorate of Public Debt and Accounting.
- Balance of payments and trade statistics
  - Balance of payments data usually disseminated with considerable delays; some progress recently with transmission of data up to 2005.
  - Balance of payments compiled and disseminated by national agency of BEAC with cooperation from BEAC headquarters.
  - Since 1995, BOP dissemination in accordance with BPM5.
  - Source data primarily from: (i) surveys of enterprises by the central bank; (ii) bank and postal reports on foreign exchange transactions; (iii) BEAC reports on banknote movements.
  - External trade data mostly based on estimates, not cross-checked with customs data.
  - Reliability of other current account items poor due to low enterprise survey response rates despite partial corrections.
  - Foreign direct investment in the financial account likely underestimated owing to insufficient detail of oil sector survey.
  - Magnitude and detailed breakdown of private capital flows, especially short-term, suffer from lack of comprehensiveness.

### Gabon: Table of Common Indicators Required for Surveillance (As of April 9, 2007) — selected data points
- Exchange Rates: Date of latest observation: n/a; Date received: n/a; Frequency of Data: D; Frequency of Reporting: D; Frequency of Publication: D
- International Reserve Assets and Reserve Liabilities of the Monetary Authorities: Date of latest observation: 1/31/07; Date received: 3/23/07; Frequency of Data: M; Frequency of Reporting: M; Frequency of Publication: M
- Reserve/Base Money: 1/31/07 (Date received 3/23/07) — M / M / M
- Broad Money: 1/31/07 (Date received 3/23/07) — M / M / M
- Central Bank Balance Sheet: 1/31/07 (Date received 3/23/07) — M / M / M
- Consolidated Balance Sheet of the Banking System: 1/31/07 (Date received 3/23/07) — M / M / M
- Interest Rates: Jan. 2007 (Date received 2/26/07) — M / M / M
- Consumer Price Index: Feb. 2007 (Date received 3/19/07) — M / M / M
- Revenue, Expenditure, Balance and Composition of Financing – General Government: 1/31/07 (Date received 3/19/07) — M / M / M
- Revenue, Expenditure, Balance and Composition of Financing – Central Government: 1/31/07 (Date received 3/19/07) — M / M / M
- Stocks of Central Government and Central Government-Guaranteed Debt: 12/31/06 (Date received 2/19/07) — Q / Q / I
- External Current Account Balance: 12/31/05 (Date received 09/26/06) — A / I / A
- Exports and Imports of Goods and Services: 12/31/05 (Date received 09/26/06) — M / M / I
- GDP/GNP: 2005 (Date received 1/18/07) — A / I / A
- Gross External Debt: 12/31/06 (Date received 2/19/07) — Q / I / I

*Statement by the IMF Staff Representative May 7, 2007*

### 1.      This statement provides information that has become available since the circulation of

### _cr07174 - 1.      This statement provides information that has become available since the circulation of

### Recent developments and staff appraisal
- This statement provides information that has become available since the circulation of the staff report. It does not alter the thrust of the staff appraisal.
- Non-oil growth remained buoyant during the first quarter of 2007; strong production and exports in timber and mining, and robust services activity could, if maintained, raise non-oil GDP growth in 2007 above program projections of 5¾ percent.
- 12-month inflation at end-March reached 6¼ percent, a slight decline from end-December.
- Oil production during Q1 2007 remained below expectations; this downward trend, which started in 2006, would need to reverse for program projections for the full year to be attained.
- Renewed rise in international oil prices buoyed export receipts and fiscal oil revenue, which reached targeted levels.

### Monetary and financial developments
- International reserves at the regional central bank have continued to increase.
- Commercial banks’ credit to the private sector expanded by 43 percent in the year ending February 2007, reflecting strengthening non-oil sector prospects.
- Monetary developments are described as consistent with robust economic expansion.

### Fiscal and budgetary developments
- Budgetary developments through February are in line with fiscal consolidation objectives; the non-oil primary deficit remained below expectations.
- Both current and capital expenditure were below target, more than offsetting a shortfall in non-oil revenue.
- Fiscal policy for 2007 targets a non-oil primary deficit reduction by 6.5 percentage points of non-oil GDP.
- Authorities increased gasoline and diesel petroleum prices by about 25 percent in March 2007; this measure is expected to reduce fuel subsidies by 3 percentage points of the non-oil GDP.

### IMF Stand-By Arrangement (Press Release No. 07/88, May 7, 2007)
- The Executive Board approved a three-year SDR 77.15 million (about US$117.3 million) Stand-By Arrangement for Gabon.
- The Gabonese authorities intend to treat the arrangement as precautionary.
- Program pillars emphasized by Deputy Managing Director (acting Chairman) Mr. Murilo Portugal:
  - Placing public finances on a permanently sustainable basis.
  - Strengthening public financial management, including oil revenue administration.
  - Removing structural obstacles to private sector non-oil growth (restructuring public enterprises, improving regulatory framework, enhancing governance and transparency).
- Program measures highlighted:
  - Sharp reduction in fuel price subsidies effective in Q1 2007, with well-targeted spending to mitigate impact on poorest households.
  - Introducing a medium-term expenditure framework and reinforcing public procurement.
  - Strengthening oil revenue administration, public debt and asset management, and a prudent debt strategy with effective management of long-term fiscal reserves.
  - Restructuring public enterprises and improving the business environment to foster private sector development.
  - Publication of Gabon’s second EITI report expanding coverage to oil and mining sectors.

### Recent economic background (Annex summary)
- Since 2003 authorities embarked on comprehensive reform; under a 14-month Stand-By Arrangement in 2004-05 they restored macroeconomic stability, eliminated external payments arrears, and introduced structural reforms.
- Non-oil primary deficit developments:
  - Fell to 9 percent of non-oil GDP by 2004 (from close to 17 percent in 2001-02).
  - Widened to 17½ percent of non-oil GDP in 2005.
  - Estimated at 18 percent in 2006 due to fiscal stimulus and spending overruns.
- Inflation:
  - Reached 6.4 percent at end-December 2006.
- Program objective: reduce the non-oil primary deficit to about 6 percent of non-oil GDP by 2011 through front-loaded fiscal adjustment.

### Structural and governance reforms reported by Gabonese authorities (Statement by Executive Director Laurean W. Rutayisire, May 7, 2007)
- Implemented reforms since mid-2002 targeting diversification away from oil, privatization, improved governance, and enhanced investment climate.
- Measures and accomplishments cited:
  - Large Taxpayer Unit (LTU) operational (created in 2004).
  - Committee of Finance and Oil ministries set up in July 2006 to monitor oil revenues; an oil model to be developed with an international firm.
  - Publication of second EITI report covering broader oil revenues and the mining sector.
  - National initiative "Gabon – Open Government" launched to make public documents available.
  - Privatization milestones: divestment of 51 percent of Gabon Telecom to Maroc Telecom in February 2007; liquidation of Air Gabon proceeding with finalization expected September 2007; Gabon Poste liquidated and replaced by La Poste.
  - Decree adopted to withdraw tax permits with arrears dating 2002-2003, effective April 2007; process of withdrawing these permits is in force.
  - Parliamentary examination of draft law on the National Forestry Fund suspended due to provisions contrary to good budgetary practice.
  - Elections internationally testified as free and fair, contributing to democratization and governance institution building.

### Selected economic indicators and key statistics (highlights from table "Gabon: Selected Economic Indicators, 2004–10")
- GDP at constant prices (annual percent change):
  - 2004: 1.3
  - 2005: 3.0
  - 2006: 1.2
  - 2007 (Prel.): 5.6
  - 2008 (Est.): 4.2
  - 2009 (Program projections): 4.3
  - 2010 (Program projections): 3.5
- Non-oil GDP (annual percent change):
  - 2004: 2.3
  - 2005: 4.3
  - 2006: 4.9
  - 2007 (Prel.): 5.7
  - 2008 (Est.): 4.7
  - 2009 (Program projections): 4.7
  - 2010 (Program projections): 4.7
- Consumer prices (end of period):
  - 2004: -0.5
  - 2005: -0.5
  - 2006: 6.4
  - 2007 (Prel.): 4.5
  - 2008 (Est.): 2.7
  - 2009 (Program projections): 2.3
  - 2010 (Program projections): 2.0
- Exports, f.o.b. (CFA francs) (annual percent change):
  - 2004: 19.6
  - 2005: 35.3
  - 2006: 5.9
  - 2007 (Prel.): -2.1
  - 2008 (Est.): 9.8
  - 2009 (Program projections): 3.2
  - 2010 (Program projections): -0.6
- Central government: Non-oil primary balance (percent of non-oil GDP):
  - 2004: -9.1
  - 2005: -17.5
  - 2006: -18.0
  - 2007 (Prel.): -11.6
  - 2008 (Est.): -10.0
  - 2009 (Program projections): -8.8
  - 2010 (Program projections): -7.4
- Overall balance (payment order basis) (% of GDP):
  - 2004: 7.6
  - 2005: 8.6
  - 2006: 9.2
  - 2007 (Prel.): 10.0
  - 2008 (Est.): 11.4
  - 2009 (Program projections): 11.5
  - 2010 (Program projections): 11.5
- External current account balance (including official transfers) (% of GDP):
  - 2004: 10.3
  - 2005: 19.5
  - 2006: 18.4
  - 2007 (Prel.): 16.9
  - 2008 (Est.): 16.7
  - 2009 (Program projections): 14.7
  - 2010 (Program projections): 12.8
- External public debt (including the Fund) (% of GDP):
  - 2004: 49.8
  - 2005: 39.1
  - 2006: 32.5
  - 2007 (Prel.): 27.6
  - 2008 (Est.): 21.3
  - 2009 (Program projections): 16.2
  - 2010 (Program projections): 13.3
- Total gross public debt (% of GDP):
  - 2004: 76.9
  - 2005: 57.1
  - 2006: 44.1
  - 2007 (Prel.): 36.7
  - 2008 (Est.): 27.5
  - 2009 (Program projections): 20.4
  - 2010 (Program projections): 16.6
- Nominal GDP (Billions of CFA francs):
  - 2007 (Prel.): 5,106
  - 2008 (Est.): 5,565
  - 2009 (Program projections): 5,861
  - 2010 (Program projections): 6,032
- Nominal Non-oil GDP (Billions of CFA francs):
  - 2007 (Prel.): 2,713
  - 2008 (Est.): 2,938
  - 2009 (Program projections): 3,165
  - 2010 (Program projections): 3,386

### Program objectives and policy priorities
- Program aims:
  - Prepare the economy for the post-oil era.
  - Make decisive progress in poverty reduction consistent with the GPRSP.
  - Bring the non-oil fiscal deficit to a more sustainable path by the end of the program through strengthened public financial management and accelerated structural reforms to foster private sector development.
- Specific medium-term objective stated by authorities:
  - Reduce the non-oil primary deficit to about 6 percent of non-oil GDP by 2011 through front-loaded fiscal adjustment.
- Key policy levers mentioned:
  - Front-loaded fiscal consolidation in 2007 including reduction of fuel subsidies.
  - Strengthening public financial management (medium-term expenditure framework, reinforced public procurement).
  - Strengthening oil revenue administration and public debt/asset management.
  - Structural reforms to improve business climate, governance, transparency, and access to credit.

*Source: IMF staff report and associated statements, Press Release No. 07/88, May 7, 2007.*

### 1.5 percentage points of the security and sovereignty spending. The remainder of the

### _cr07174 - 1.5 percentage points of the security and sovereignty spending. The remainder of the

### Fiscal adjustment and revenue measures
- Adjustment target: 1.5 percentage points of the security and sovereignty spending.
- Remainder of the adjustment to be achieved through non-oil revenue-enhancing measures and the proceeds of the privatization of Gabon Telecom.
- Updated tax code to be presented to Parliament by end-September 2007.
- Inventory of exemptions and tax expenditures to be carried out by end-June 2007, with the objective to start a thorough reform of these exemptions and tax expenditures in 2008.

### Expenditure management and budgetary processes
- Authorities preparing a medium-term expenditure framework (MTEF) expected to be finalized by end-2007.
- Aim to fully integrate the MTEF in the preparation of the 2009 budget.
- Intention to include all fiscal-related operations into the budget from 2008 onwards.
- Introduction of the functional classification to better monitor spending in priority sectors.

### Investment spending and procurement
- Authorities resolved to improve the quality of investment spending.
- Continued strengthening of the Directorate General of Government Procurement (DGMP).
- Spending related to the celebrations of Gabon’s accession to independence will be submitted to normal budgetary procedures following audits.
- Projects related to the celebrations will be ensured to be in line with the GPRSP and the CMDT.

### Structural reforms and anti-corruption measures
- Redoubled efforts to fight misappropriation of public funds and corruption.
- CNLCEI to move from education and collection of asset statements to enforcing asset disclosure by publishing names of civil servants that did not submit declarations by end-June 2007.
- The Audit Court has enhanced its role as the highest fiscal oversight agency.

### Private sector development and economic diversification
- Support for economic diversification through measures to promote the private sector.
- Strengthening of the financial system, including microfinance, to increase access to credit.
- Emphasis on improving the business climate.
- Restructuring of the Private Investment Promotion Agency (APIP).
- Continued work on harmonization of Gabon law with provisions of the OHADA to improve enforcement by the courts.
- Address infrastructure constraints, starting with the port of Owendo, through which 90 percent of Gabon’s non-oil trade passes and which constitutes a major obstacle to the country’s growth.

### Regional engagement
- Continued proactive role within CEMAC region to advance issues of regional interest such as trade liberalization and BEAC operations.

### Debt management strategy
- Recognition that Gabon’s debt level imposes a heavy burden on efforts to reduce poverty and achieve growth despite higher budgetary allocations to social sectors.
- Authorities view a definitive resolution of the debt problem as critical to their development strategy.
- Since expiration of the previous arrangement with the Fund in 2005, discussions with external creditors regarding a prepayment deal have been initiated, with the objective of exiting definitively from the vicious circle of debt rescheduling.
- Authorities hopeful that an agreement on such a deal is reached soon to create fiscal space for the investment program and progress towards the MDGs.

### Conclusion and Fund assistance request
- Authorities determined to pursue sound adjustment policies aimed at restructuring the economy and making it less oil-dependent while further progressing in poverty reduction.
- Program features: strong fiscal consolidation, a strategy to strengthen public financial management, and an agenda for private sector development covering the 2007 2010 period.
- Given the program’s ambitiousness, authorities are requesting Fund assistance in the form of a three-year SBA.
- As Gabon is currently not faced with a balance of payments needs, the SBA will be treated as precautionary; authorities seek Directors’ support for the request.

*Source: _cr07174 - 1.5 percentage points of the security and sovereignty spending. The remainder of the*

---


_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2007/_cr07174.pdf_