## _cr1197 — Executive Summary (IMF staff report excerpt)

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### Executive Summary — key findings and outlook
- Real GDP is forecast to increase to 5.7 percent in 2010 and remain broadly at that level in 2011, reflecting public investment and a rebound in mining.  
- Low prices and weak demand for commodities shrank the fiscal and current account surpluses in 2009 and turned growth moderately negative.  
- Over the long term, dwindling oil reserves will cause a decline in income and fiscal revenues unless non-oil GDP growth accelerates.  
- The government announced a plan to transform Gabon into an emerging economy through diversification away from oil and promotion of a business friendly environment, and has embarked on an ambitious public investment program that will deteriorate the near-term fiscal position.  
- Main policy challenges identified: (i) ensuring fiscal sustainability and external competitiveness because of dwindling oil reserves over the long term, (ii) accelerating growth to prepare for the post-oil era, and (iii) reforming the financial sector.

### A. Ensuring Fiscal Sustainability and External Competitiveness
- Recent fiscal dynamics and projections:
  - The non-oil primary deficit (NOPD) increased from 14 percent of non-oil GDP (NOGDP) in 2009 to about 21 percent of NOGDP in 2010.  
  - The 2011 draft budget includes a further acceleration of capital spending; projected NOPD: 22.5 percent of NOGDP in 2011 compared to 21.1 percent in 2010.  
  - Authorities consider the investment program temporary and plan to reduce capital spending during 2012–15 by 6 ½ percent of NOGDP.
  - Under the authorities’ scenario the NOPD would drop by 14 percent of NOGDP by 2015; the sustainable NOPD (7½ percent of NOGDP) will be reached by 2019 assuming continued adjustment at the same pace as during 2012–15.
- Staff views and recommended adjustments:
  - Medium-term fiscal consolidation is vital given dwindling oil production; public investment plans should be embedded in a realistic multiyear investment plan and annual budgets cast within a medium-term fiscal framework.  
  - Staff recommends not further accelerating capital spending in 2011 and enhancing risk analysis of investment projects and fiscal plans.  
  - Staff identified measures to achieve an additional adjustment of the NOPD of 6½ percentage points of NOGDP by 2015, including:
    - Eliminating unproductive capital spending and anchoring the investment plan in a credible medium-term fiscal framework; by 2015, capital spending should be brought back to historical levels.  
    - Bringing the wage bill down to sustainable levels by pursuing wage and employment reforms; staff supports the authorities’ plan to cut annual hiring by half after 2011.  
    - Allowing the fuel price adjustment mechanism to operate in 2011; abolishing subsidies not well targeted to benefit the poor by 2012.  
    - Reducing tax exemptions gradually (consider reducing non-EPZ related exemptions in the VAT and income tax in line with the IMF’s Fiscal Affairs Department recommendations).  
    - Implementing tax administration reforms already initiated, in line with advice from FAD.
- Public Financial Management (PFM) issues:
  - Authorities’ initiatives: introduction of program budgeting and modern principles of financial management; setting up a Caisse de Relance to carry funds for capital projects into the next budget year; creating a national oil company; converting the Fund for Future Generations to a Strategic Sovereign Fund (SSF) which will take equity stakes in strategic companies.  
  - Staff concerns:
    - The Caisse de Relance could undermine budget execution, cash management, and accountability; risk that governance and accountability will suffer if new funds are established outside the budget.  
    - Liquidity management of the SSF should account for fiscal risks from fluctuating commodity prices.  
  - Authorities’ response: they intend the new institutions not to be extrabudgetary and to have strong governance structures.
- Real exchange rate and competitiveness (summary):
  - Sustainable NOPD: PIH approach estimates the sustainable NOPD deficit at around 7½ percent of NOGDP.  
  - If the authorities’ adjustment scenario were implemented, the REER overvaluation would be small and within margins of error; if the fiscal deficit was maintained at the 2010 level, the overvaluation would be moderate at close to 10 percent by 2015.  
  - Non-commodity exports growth between 2000 and 2008 was 3.3 percent compared with 14.2 percent for SSA. Gabon’s market share in world goods exports dropped from 0.03 percent in the 1980s to 0.01 percent in 2000–06. Structural constraints cited include poor World Bank Doing Business indicators, high wage level, and a rigid labor market.

### B. Accelerating Growth to Prepare for the Post-Oil Era
- With oil reserves depleting, priority areas for promoting and diversifying private sector non-oil growth:
  - Improve the business climate.  
  - Build basic infrastructure.  
  - Facilitate access to financing for small and medium-size enterprises (SMEs).
- Authorities’ initiatives to facilitate SME access to financial services:
  - Reforming dispute settlement.  
  - Streamlining procedures for guarantees.  
  - Establishing a corporate balance sheet centralization system.
- Staff emphasis:
  - Better PFM will free resources for growth-enhancing spending and social outlays, supporting the transition to a more diversified non-oil economy.
- Authorities’ infrastructure and business-environment plans:
  - Five economic development centers identified to be equipped with transport, energy, and communications infrastructure; a national agency for major public works was set up; the American engineering corporation Bechtel is providing technical expertise; a service agreement signed with the World Bank.  
  - A service agreement with the International Finance Corporation (IFC) signed in November 2010 to help identify measures to enhance the business environment.  
  - Budget envisages hiring new staff for health and education in 2010 and 2011 and building new classrooms and several clinics.

### C. Reforming the Financial Sector
- Diagnosis:
  - Access to financial services is limited; the penetration rate is low at 2 percent. Credit to the private sector is well below the average for SSA oil-exporting countries. Microfinance role is limited. The government controls two out of the nine banks and holds significant shares in most of the others. Authorities decided to set up the Caisse des Dépôts et Consignations (CDC).
- Staff recommendations:
  - Emphasize improving the institutional environment rather than creating specialized and government-sponsored financial institutions like the CDC.  
  - Institutional reforms should focus on improving land and commercial registries, streamlining procedures for recording and enforcing guarantees, and strengthening creditor rights enforcement by enhancing governance of relevant courts.  
  - To improve SME and household access to financial services: create credit history centers on SMEs and move ahead quickly with implementation of the new microfinance strategy.
- Authorities’ actions on credit infrastructure and SME access:
  - Improved mechanisms and procedures to settle loan contract disputes; streamlined procedures for realization of guarantees; creation of a corporate balance sheet centralization system at the central bank.  
  - Plans to subscribe to the capital of the African Guarantee and Economic Co-operation Fund; finalize the microfinance development strategy; restructure several public agencies involved in SME and housing financing.

### Staff appraisal and recommendations (summary)
- Sustained fiscal consolidation is vital to long-term growth and fiscal sustainability as oil production dwindles.  
- The ambitious capital budget should be anchored in a credible medium-term fiscal strategy to safeguard macroeconomic stability even if oil prices decline.  
- Improve public financial management to enhance spending quality and release resources for growth-enhancing spending and social outlays; avoid extrabudgetary entities that weaken accountability.  
- Reform priorities to promote non-oil growth: improve the business climate, build infrastructure, and facilitate SME access to finance.  
- Staff recommends consolidating the fiscal position faster than under current policies; identified measures could achieve an additional adjustment of the NOPD of 6½ percentage points of NOGDP by 2015.

### Selected macroeconomic projections and key statistics (selected series)
- Real GDP (annual percent change): 2008: 2.3; 2009: -1.4; 2010: 5.7; 2011: 5.6; 2012: 3.3; 2013: 1.6; 2014: 2.6; 2015: 2.5.  
- Oil GDP (annual percent change): 2008: -1.4; 2009: -4.5; 2010: 4.1; 2011: 1.5; 2012: -0.8; 2013: -6.1; 2014: -0.6; 2015: -0.7.  
- Non-oil GDP (annual percent change): 2008: 3.4; 2009: -0.5; 2010: 6.1; 2011: 6.7; 2012: 4.3; 2013: 3.6; 2014: 3.3; 2015: 3.2.  
- Consumer prices, yearly average: 2008: 5.3; 2009: 2.1; 2010: 0.4; 2011: 2.3; 2012: 3.4; 2013: 3.1; 2014: 3.0; 2015: 3.0.  
- Non-oil primary balance (percent of non-oil GDP): 2008: -14.8; 2009: -13.9; 2010: -21.1; 2011: -22.5; 2012: -18.7; 2013: -16.7; 2014: -15.1; 2015: -14.0.  
- Overall balance (commitment basis, percent of GDP): 2008: 11.4; 2009: 6.5; 2010: 4.8; 2011: 5.0; 2012: 6.1; 2013: 5.0; 2014: 5.5; 2015: 5.8.  
- External current account balance (percent of GDP): 2008: 23.3; 2009: 7.9; 2010: 10.5; 2011: 11.6; 2012: 10.2; 2013: 6.2; 2014: 6.0; 2015: 5.2.  
- External public debt (percent of GDP): 2008: 15.6; 2009: 18.8; 2010: 15.7; 2011: 14.3; 2012: 13.1; 2013: 12.6; 2014: 12.2; 2015: 11.7.  

### Debt sustainability analysis — external and public sector highlights
- External debt (end-2009): US$2.1 billion (18.8 percent of GDP); bilateral debt accounted for 45 percent; bonds issued in 2007 made up 41 percent; remainder owed to multilateral institutions.  
- Baseline assumptions:
  - Assumes medium-term NOPD declines from 21.1 percent of NOGDP in 2010 to 14 percent in 2015.  
  - Real non-oil GDP growth increases from -0.5 percent in 2009 to about 6.1 percent in 2010, then declines gradually to 3.2 percent in 2015.  
  - Under baseline: external debt-to-GDP ratio declines to 11.7 percent by 2015.
- Stress-test outcomes (shocks relative to baseline):
  - Permanent increase in the real interest rate of 90 basis points → debt-to-GDP ratio increases to 13.4 percent.  
  - Permanent decrease of non-oil GDP of around 1 percentage point → debt-to-GDP ratio increases to 14.8 percent.  
  - Permanent oil price decrease of around 13 dollars per barrel → debt-to-GDP ratio increases substantially to 37 percent.  
  - Combination of the three shocks (a quarter standard deviation each) → debt-to-GDP ratio increases to 24 percent.  
  - Real depreciation shock of 30 percent (one-time) → debt-to-GDP ratio increases by 5 percentage points and stabilizes around 19 percent by 2015.
- Public sector debt baseline and projections:
  - Under the baseline scenario, the public sector debt ratio would decline gradually and stabilize at 14.4 percent of GDP in 2015.  
  - Debt-stabilizing primary balance: 0.6.  
  - Baseline: Public sector debt (percent of GDP) by year: 2005: 53.8; 2006: 42.1; 2007: 43.2; 2008: 20.8; 2009: 26.4; 2010: 21.4; 2011: 18.6; 2012: 16.3; 2013: 15.5; 2014: 15.0; 2015: 14.4.
- Debt sustainability stress tests (public sector):
  - Baseline public debt in 2015: 14.4 (percent of GDP).  
  - Scenario averages shown: Growth shock average: 23.1; Primary balance shock average: 18.7 (baseline: 14.4; no policy change scenario: 12.4); Real interest rate shock average: 21.3; Combined shock average: 23.2; Contingent liabilities / Real depreciation and contingent liabilities: 25.8.

### Data quality, compilation issues, and statistical assistance
- Balance of payments statistics compiled by the national directorate of the BEAC and validated by BEAC headquarters; compilation conforms to BPM5 since 1995.  
- External trade data are mostly based on estimates not cross-checked with customs data; data on current account items are affected by low enterprise survey response rates. Data are disseminated with considerable delay; latest available official statistics for some series are for 2006.  
- Staff noted shortcomings in balance of payments statistics, timeliness of fiscal, monetary, and financial sector data, and lack of high-frequency indicators for economic activity.  
- Gabon participates in the General Data Dissemination System (GDDS) but has not updated metadata or plans for improvement since 2002. Except for consumer prices, authorities do not report real sector or GFS to STA for IFS publication or electronic dissemination.  
- Technical assistance and engagement:
  - The World Bank signed a US$10 million service agreement to assist on sectoral analysis and PFM reform.  
  - AFRITAC and IMF headquarters provided technical assistance across Bank supervision, PFM, Statistics, Revenue administration, Debt management, and more (missions and trainings spanning 2008–2010).  
  - The Fund no longer has a resident representative in Libreville; the IMF office is staffed with a local economist.

### Executive Board conclusions and policy recommendations (selected)
- Directors welcomed Gabon’s recovery and highlighted long-term challenges: preparing for the post-oil period through diversification, increased external competitiveness, and poverty reduction.  
- Policy priorities emphasized:
  - Maintain long-term fiscal sustainability while addressing development needs and link annual budgets to a credible medium-term fiscal strategy.  
  - Anchor capital spending in a realistic multiyear investment plan and strengthen PFM to improve spending quality.  
  - Enhance transparency and accountability in management of extractive-sector resources and avoid extrabudgetary entities that weaken accountability.  
  - Step up structural reforms to improve the business climate, build basic infrastructure, enhance health and education services, and increase labor market flexibility.  
  - Improve access to financial services for SMEs by prioritizing institutional and regulatory reforms.  
  - Eliminate as soon as possible the tax on wire transfers, which gives rise to an exchange restriction under Article VIII.  
  - Further improve the quality of economic and financial data with technical assistance from the Fund and donors.

*Source: IMF staff report — Executive Summary and selected annexes (pages 3–14 and informational annexes).*

### Executive Summary ......................................................................................................

### _cr1197 - Executive Summary

### Executive Summary — Key findings and outlook
- Real GDP is forecast to increase to 5.7 percent in 2010 and remain broadly at that level in 2011, reflecting public investment and a rebound in mining.  
- Low prices and weak demand for commodities shrank the fiscal and current account surpluses in 2009 and turned growth moderately negative.  
- Over the long term, dwindling oil reserves will cause a decline in income and fiscal revenues unless non-oil GDP growth accelerates.  
- The government announced a plan to transform Gabon into an emerging economy through diversification away from oil and promotion of a business friendly environment, and has embarked on an ambitious public investment program that will deteriorate the near-term fiscal position.  
- Main policy challenges identified: (i) ensuring fiscal sustainability and external competitiveness because of dwindling oil reserves over the long term, (ii) accelerating growth to prepare for the post-oil era, and (iii) reforming the financial sector.

### Introduction — structural context and political developments
- Oil production over the last 40 years transformed Gabon into a middle-income country; income inequality is high and noncommodity sectors are stagnant. The richest quintile receives half of national income, yet one-third live in poverty.  
- Government spending has often been inefficient; oil revenue, channeled through government spending, has driven economic activity and contributed to boom and bust cycles exacerbated by rising and downwardly inflexible wages in a fixed exchange rate regime.  
- Political transition: Ali Bongo Ondimba won the August 2009 presidential election. Parliamentary elections are scheduled for November 2011.  
- To increase non-oil potential output the government has embarked on an ambitious investment plan that will test the country’s limited administrative capacity.

### Recent developments and outlook
- Performance under the Fund-supported program was mixed: the three-year Stand-By Arrangement expired in May 2010 with only the first three reviews completed. Recurrent fiscal slippages have made it difficult to sustain Fund-supported programs.  
- The non-oil primary deficit (NOPD) increased significantly from 14 percent of non-oil GDP (NOGDP) in 2009 to about 21 percent of NOGDP in 2010, reflecting higher government investment and wages.  
- Staff expects the recovery to be sustained, with downside risks from commodity prices and possible slippages in policy implementation. Economic activity is projected to remain robust in 2011, supported by mining, wood processing, and public investment. Inflation is forecast to pick up, mostly driven by higher food and energy prices.  
- The foremost risk to the economic outlook is a decline in oil and manganese prices, because these commodities accounted for about 90 percent of total exports of goods and 45 percent of nominal GDP on average during the last decade.  
- Plans to further increase investment spending in 2011 would be procyclical and increase the risk of a sudden reversal in policies if commodity prices declined. Politically, episodic strikes for higher wages and social benefits could intensify ahead of the parliamentary elections.

### Policy discussions — overarching themes
- Policy discussions focused on three themes: ensuring fiscal sustainability and external competitiveness; accelerating growth to prepare for the post-oil era; and reforming the financial sector.

H3: A. Ensuring Fiscal Sustainability and External Competitiveness

- Recent fiscal dynamics and projections:
  - The 2011 draft budget includes a further acceleration of capital spending, which will worsen the gap with the sustainable NOPD.  
  - The increase in capital spending would be partly offset by a decline in current spending (in percent of NOGDP). Goods and services expenses are projected to rise only in line with inflation. Wages are projected to decline because the government plans no nominal wage increase.  
  - Projected NOPD: 22.5 percent of NOGDP in 2011 compared to 21.1 percent in 2010.  
  - In the medium term, the government considers the investment program temporary and expects a decline in capital spending to lower the NOPD.

- Authorities’ medium-term framework objectives and measures:
  - Reducing capital spending during 2012–15 by 6 ½ percent of NOGDP.  
  - Reforming public wage and employment policies, beginning with civil service audits scheduled for 2011.  
  - Rationalizing current spending, in particular moderately reducing transfers and subsidies while making space for increased maintenance costs from the investment program.  
  - With such policies, the NOPD would drop by 14 percent of NOGDP by 2015 under the authorities’ scenario; the sustainable NOPD (7½ percent of NOGDP) will be reached by 2019 assuming continued adjustment at the same pace as during 2012–15.

- Staff views and recommended adjustments:
  - Medium-term fiscal consolidation is vital to ensuring fiscal sustainability and external competitiveness as oil production dwindles over time. Public investment plans should be embedded in a realistic multiyear investment plan and annual budgets cast within a medium-term fiscal framework.  
  - Given Gabon’s vulnerability to shocks and capacity constraints, risk analysis of investment projects and fiscal plans need to be enhanced. Fiscal policies should be prudent to ensure adequate buffers against commodity price changes.  
  - Staff recommends not further accelerating capital spending in 2011. A fall in oil prices could significantly worsen the debt position (debt sustainability analysis referenced).  
  - Staff identified measures to achieve an additional adjustment of the NOPD of 6½ percentage points of NOGDP by 2015, consistent with a sustainable long-term fiscal path. Key measures include:
    - Eliminating unproductive capital spending and anchoring the investment plan in a credible medium-term fiscal framework; by 2015, capital spending should be brought back to historical levels.  
    - Bringing the wage bill down to sustainable levels by pursuing wage and employment reforms; staff supports the authorities’ plan to cut annual hiring by half after 2011.  
    - Allowing the fuel price adjustment mechanism to operate in 2011; abolishing subsidies not well targeted to benefit the poor by 2012.  
    - Reducing tax exemptions gradually (consider reducing non-EPZ related exemptions in the VAT and income tax in line with the IMF’s Fiscal Affairs Department recommendations).  
    - Implementing tax administration reforms already initiated, in line with advice from FAD.

- Public Financial Management (PFM) issues:
  - Authorities initiatives: introduction of program budgeting and modern principles of financial management; setting up a Caisse de Relance to carry funds for capital projects into the next budget year; creating a national oil company; converting the Fund for Future Generations to a Strategic Sovereign Fund (SSF) which will take equity stakes in strategic companies.  
  - Staff concerns:
    - The Caisse de Relance could undermine budget execution, cash management, and accountability; the objective of carrying over funding for investment projects could be achieved without a Caisse de Relance.  
    - There is substantial risk that governance and accountability will suffer if new funds are established outside the budget. Liquidity management of the SSF should account for fiscal risks from fluctuating commodity prices.  
  - Authorities’ response: they intend the new institutions not to be extrabudgetary and to have strong governance structures.

- Real exchange rate and competitiveness (Box 1 summary):
  - Sustainable NOPD: the permanent income hypothesis (PIH) approach estimates the sustainable NOPD deficit at around 7½ percent of NOGDP.  
  - If the authorities’ adjustment scenario were implemented, the REER overvaluation would be small and within margins of error. If the fiscal deficit was maintained at the 2010 level, the overvaluation would be moderate at close to 10 percent by 2015.  
  - Alternative ES-approach (Bems and Carvalho) gives a smaller current account norm and a lower degree of overvaluation.  
  - Export performance and competitiveness indicators:
    - Non-commodity exports growth between 2000 and 2008 was 3.3 percent compared with 14.2 percent for SSA.  
    - Gabon’s market share in world goods exports dropped from 0.03 percent in the 1980s to 0.01 percent in 2000–06.  
    - Structural constraints cited: poor World Bank Doing Business indicators (Gabon ranked poorly among upper-middle-income countries; among 46 SSA countries Gabon ranked 27th), high wage level, and a rigid labor market.

H3: B. Accelerating Growth to Prepare for the Post-Oil Era
- With oil reserves depleting, reforms are critical to promoting and diversifying private sector non-oil growth. Priority areas identified:
  - Improve the business climate.  
  - Build basic infrastructure.  
  - Facilitate access to financing for small and medium-size enterprises (SMEs).

- Authorities’ initiatives to facilitate SME access to financial services:
  - Reforming dispute settlement.  
  - Streamlining procedures for guarantees.  
  - Establishing a corporate balance sheet centralization system.  
- Staff emphasizes that better PFM will free resources for growth-enhancing spending and social outlays, supporting the transition to a more diversified non-oil economy.

H3: C. Reforming the Financial Sector
- Policy discussions included the need to reform the financial sector to support private sector development and diversify sources of growth. (Detailed measures and financial sector-specific indicators are presented elsewhere in the document.)

### Staff appraisal and recommendations (summary)
- Sustained fiscal consolidation is vital to long-term growth and fiscal sustainability as oil production dwindles.  
- The ambitious capital budget should be anchored in a credible medium-term fiscal strategy to safeguard macroeconomic stability even if oil prices decline.  
- Improve public financial management to enhance spending quality and release resources for growth-enhancing spending and social outlays. Avoid extrabudgetary entities that weaken accountability.  
- Reform priorities to promote non-oil growth: improve the business climate, build infrastructure, and facilitate SME access to finance.  
- Staff recommends consolidating the fiscal position faster than under current policies; identified measures could achieve an additional adjustment of the NOPD of 6½ percentage points of NOGDP by 2015, consistent with a sustainable long-term fiscal path.

*Source: IMF staff report — Executive Summary (pages 3–14).*

### 18.      Gabon suffers from a small tradable sector, constrained by high wages, low

### _cr1197 - 18.      Gabon suffers from a small tradable sector, constrained by high wages, low

### Overview and main constraints
- Gabon suffers from a small tradable sector constrained by high wages, low skilled labor, and a poor infrastructure and business environment, resulting in non-oil growth rates below those of its peers.
- Poor quality of health and education services has kept labor productivity low and explains limited progress in achieving the Millennium Development Goals.
- Rapid scaling-up of investment, as planned by the government, poses a high risk of compromising spending quality given Gabon’s weak administrative capacity.

### Staff’s views — reforms critical to sustaining non-oil growth
- Refocus public investment on key infrastructure that will help relieve major supply bottlenecks (e.g., electricity, trade-enabling roads, dam, and ports).
  - Seek World Bank technical assistance to strengthen the appraisal, selection, and monitoring of investment projects and the budgeting of operation and maintenance costs.
  - Over the medium term, private public partnerships could complement public investment.
- Complement the ambitious infrastructure program with equally important reforms in health and education to strengthen labor productivity, generate employment, and alleviate poverty over time.
- Improve the business climate by strengthening governance, enhancing the one-stop window for investors, and streamlining administrative procedures.
- Increase labor market flexibility by reforming labor laws and refraining from government-mandated wage increases in the private sector.
  - Public sector wage increases should be moderated to avoid spillover effects on the private sector.

### Authorities’ views on public investment and infrastructure
- Five economic development centers have been identified to be equipped with high-quality transport, energy, and communications infrastructure. Selection of infrastructure will be guided by the need to boost and link the five development centers.
- A national agency for major public works was set up to plan, manage, and implement large public infrastructure projects.
  - The American engineering corporation, Bechtel, is providing the agency with technical expertise.
  - A service agreement was signed with the World Bank to enhance national capacities in this area.
- The budget envisages hiring new staff for health and education in 2010 and 2011 and building new classrooms and several clinics.

### Authorities’ views on business environment reforms
- Abolish burdensome regulations involving lengthy procedures, based on analysis of the World Bank’s Doing Business.
  - A service agreement with the International Finance Corporation (IFC) signed in November 2010 will help identify measures to enhance the business environment.
- Ease the tax burden on businesses; tax incentives will continue to play an important role with regular assessments of their effectiveness built into the strategy.

### Financial sector — diagnosis
- Access to financial services is limited, reflecting an underdeveloped payments system.
  - The penetration rate is low at 2 percent.
  - High operating costs lead banks to concentrate in the most profitable areas.
  - Credit to the private sector is well below the average for sub-Saharan Africa’s (SSA’s) oil-exporting countries.
  - Limited role of microfinance institutions makes it difficult for most SMEs to obtain credit.
- The government controls two out of the nine banks and holds significant shares in most of the others.
- Authorities decided to set up a new financial institution, the Caisse des Dépôts et Consignations (CDC).

### Staff’s views — financial sector reforms
- Emphasize improving the institutional environment rather than creating specialized and government-sponsored financial institutions like the CDC.
- Institutional reforms should focus on:
  - Improving the operations of land and commercial registries.
  - Streamlining procedures for recording and enforcing guarantees.
  - Strengthening creditor rights enforcement by enhancing governance of the relevant courts.
- To improve SME and private household access to financial services:
  - Create credit history centers on SMEs.
  - Move ahead quickly with implementation of the new microfinance strategy.

### Authorities’ actions on credit infrastructure and SME access
- Ongoing institutional reforms to enhance credit infrastructure:
  - Improved mechanisms and procedures to settle loan contract disputes.
  - Streamlined procedures for the realization of guarantees to obtain loans.
  - Creation of a corporate balance sheet centralization system at the central bank providing commercial banks access to companies’ balance sheets.
- Efforts to facilitate SME access to financial services:
  - Intend to subscribe to the capital of the African Guarantee and Economic Co-operation Fund, which guarantees bank loans to SMEs.
  - Finalize the microfinance development strategy to expand access to credit while limiting operational and security risks.
  - Restructure several public agencies involved in SME and housing financing to streamline financing instruments.

### Other issues discussed
- Trade policy: Government plans to streamline the work of several government agencies involved in export and investment promotion and to establish a competition authority expected to become operational shortly.
- Noncompliance with Article VIII: In 2008, the authorities introduced a tax on wire transfers inconsistent with Article VIII requirements; reforming this tax is politically sensitive because the funds finance the health insurance fund.
- Data quality: Shortcomings noted in balance of payments statistics; timeliness of fiscal, monetary, and financial sector data; and lack of high-frequency indicators for economic activity. With IMF and donor technical assistance, authorities are continuing efforts to strengthen economic and financial data.

### Staff appraisal — key findings and recommendations
- Recent performance:
  - After being hit hard by the global economic crisis, Gabon has recovered quickly.
  - Near-term growth is projected to rise, supported by public investment and a rebound in mining, while inflation would remain subdued.
  - The foremost risk to the economic outlook stems from a significant decline in oil and manganese prices.
- Fiscal and investment policy:
  - As oil reserves dwindle over the long term, sustained fiscal consolidation is vital to long-term growth, fiscal sustainability, and external competitiveness.
  - The government’s ambitious capital budget should be anchored in a realistic multiyear investment plan and a credible medium-term fiscal strategy to safeguard macroeconomic stability.
  - Annual budgets need to be linked to longer-term policies and to making progress toward fiscal sustainability.
- Governance and public financial management:
  - Good governance and accountability are critical for efficient use of public resources and to obtain long-term growth dividends from public investment plans.
  - Emphasis on PFM reforms is necessary to improve spending quality and release resources for growth-enhancing spending and social outlays.
  - Accelerate reforms to refocus public investment on key infrastructure and social projects and to strengthen appraisal, selection, and monitoring of projects.
  - Ensure stringent mechanisms for transparency and accountability in management of oil wealth.
- Real exchange rate and competitiveness:
  - The real effective exchange rate appears broadly in line with fundamentals if authorities implement their intention to lower public investment spending and the NOPD after 2011.
  - If the NOPD is maintained at the 2010 level, the real exchange rate would appear overvalued.
  - Structural factors are a significant constraint on external competitiveness.
- Policy priorities:
  - Accelerate competitiveness-enhancing reforms to promote and diversify private sector non-oil growth: improve the business climate, build basic infrastructure, and enhance health and education services.
  - Prioritize improving institutional and regulatory environment for SMEs to address limited access to financial services.
- Data and surveillance:
  - Data provided to the Fund are generally adequate for surveillance, but improvements are needed in balance of payments statistics and timeliness of fiscal, monetary, and financial sector data.
- Article VIII compliance:
  - Gabon maintains a tax on wire transfers inconsistent with Article VIII obligations; staff does not recommend approval.

*IMF staff report excerpt.*

### 39.      It is expected that the next Article IV consultation will be held on the standard

### _cr1197 - 39.      It is expected that the next Article IV consultation will be held on the standard

### Real sector, prices, and external sector (selected indicators)
- GDP at constant prices (annual percent change): 2008: 2.3; 2009: -1.4; 2010: 5.7; 2011: 5.6; 2012: 3.3; 2013: 1.6; 2014: 2.6; 2015: 2.5.
- Oil GDP (annual percent change): 2008: -1.4; 2009: -4.5; 2010: 4.1; 2011: 1.5; 2012: -0.8; 2013: -6.1; 2014: -0.6; 2015: -0.7.
- Non-oil GDP (annual percent change): 2008: 3.4; 2009: -0.5; 2010: 6.1; 2011: 6.7; 2012: 4.3; 2013: 3.6; 2014: 3.3; 2015: 3.2.
- GDP deflator (annual percent change): 2008: 14.7; 2009: -19.4; 2010: 18.0; 2011: 4.8; 2012: 2.8; 2013: 1.2; 2014: 1.0; 2015: 0.8.
- Consumer prices, yearly average: 2008: 5.3; 2009: 2.1; 2010: 0.4; 2011: 2.3; 2012: 3.4; 2013: 3.1; 2014: 3.0; 2015: 3.0.
- Exports, f.o.b. (US$ percent change): 2008: 34.4; 2009: -36.7; 2010: 25.5; 2011: 8.0; 2012: 2.0; 2013: -6.2; 2014: 0.2; 2015: 0.9.
- Imports, f.o.b. (US$ percent change): 2008: 7.7; 2009: 3.3; 2010: 21.9; 2011: 1.7; 2012: 3.9; 2013: 3.9; 2014: 0.2; 2015: 3.6.
- Terms of trade (deterioration = –): 2008: 13.4; 2009: -22.6; 2010: 11.0; 2011: 1.6; 2012: 1.8; 2013: 0.4; 2014: 0.4; 2015: 1.0.

### Fiscal sector (central government accounts: key aggregates and projections)
- Total revenue (percent of GDP): 2008: 27.0; 2009: -18.9; 2010: 17.3; 2011: 12.1; 2012: 8.6; 2013: 1.1; 2014: 3.0; 2015: 2.8.
- Oil revenue (percent of GDP): 2008: 42.0; 2009: -38.5; 2010: 40.0; 2011: 11.6; 2012: 1.6; 2013: -5.9; 2014: 0.3; 2015: 0.8.
- Total expenditure (percent of GDP): 2008: 13.7; 2009: -1.4; 2010: 23.3; 2011: 12.6; 2012: 4.8; 2013: 5.3; 2014: 0.9; 2015: 1.8.
- Non-oil primary balance (percent of non-oil GDP): 2008: -14.8; 2009: -13.9; 2010: -21.1; 2011: -22.5; 2012: -18.7; 2013: -16.7; 2014: -15.1; 2015: -14.0.
- Overall balance (commitment basis, percent of GDP): 2008: 11.4; 2009: 6.5; 2010: 4.8; 2011: 5.0; 2012: 6.1; 2013: 5.0; 2014: 5.5; 2015: 5.8.
- Net domestic financing (percent of GDP): 2008: 3.7; 2009: -1.4; 2010: -0.3; 2011: -4.9; 2012: -4.5; 2013: -3.5; 2014: -4.4; 2015: -4.6.
- Net external financing (percent of GDP): 2008: -13.1; 2009: -1.1; 2010: -0.1; 2011: 0.1; 2012: -1.5; 2013: -1.4; 2014: -1.1; 2015: -1.1.
- External public debt (including to the Fund, percent of GDP): 2008: 15.6; 2009: 18.8; 2010: 15.7; 2011: 14.3; 2012: 13.1; 2013: 12.6; 2014: 12.2; 2015: 11.7.

- Table 2 budget projections (selected percent of GDP and CFA francs):
  - Total revenue and grants (percent of GDP): 2010: 56.6; 2011: 60.3; 2012 (Proj.): 59.6; 2013 (Proj.): 59.6; 2014 (Proj.): 59.1.
  - Oil revenue (percent of GDP): 2010: 43.2; 2011: 28.6; 2012 (Proj.): 31.5; 2013 (Proj.): 35.7; 2014 (Proj.): 35.1; 2015 (Proj.): 35.1.
  - Non-oil revenue (percent of GDP): 2010: 22.7; 2011: 29.0; 2012 (Proj.): 24.5; 2013 (Proj.): 24.5; 2014 (Proj.): 24.5; 2015 (Proj.): 24.4.
  - Total expenditure and net lending (percent of GDP): 2010: 42.3; 2011: 46.1; 2012 (Proj.): 60.9; 2013 (Proj.): 50.8; 2014 (Proj.): 48.9; 2015 (Proj.): 50.0.
  - Overall balance (commitment basis, CFA francs, memorandum): 2008: 742; 2009: 338; 2010: -159; 2011: 312; 2012 (Proj.): 398; 2013 (Proj.): 355; 2014 (Proj.): 460.

### Monetary and financial sector indicators
- Broad money (M2) annual percent change: 2008: 8.8; 2009: 2.2; 2010: 8.3; 2011: 9.2; 2012: 9.5.
- Credit to the economy (annual percent change): 2008: 6.0; 2009: -7.9; 2010: 6.0; 2011: 10.8; 2012: 10.3.
- Reserve money (RM, annual percent change): 2008: 37.2; 2009: -4.3; 2010: 0.6; 2011: 9.2; 2012: 9.5.
- Financial soundness indicators (selected):
  - Regulatory capital to risk-weighted assets: 2008: 19.4; 2009: 24.0; 2010: 22.6.
  - Bank nonperforming loans to total loans: 2008: 7.6; 2009: 8.5; 2010: 7.2; 2010 note: ... = not available for some series.
  - Return on assets (percent): 2008: 1.8; 2009: 2.8; 2010: ... (not available).

### Balance of payments (high-level)
- Current account balance (percent of GDP): 2008: 23.3; 2009: 7.9; 2010: 10.5; 2011: 11.6; 2012 (Proj.): 10.2; 2013 (Proj.): 6.2; 2014 (Proj.): 6.0; 2015 (Proj.): 5.2.
- Goods exports (f.o.b., US$ millions, select detail): 2008: 940; 2009: 459; 2010: 507; 2011: 469; 2012: 807; hydrocarbons component in 2012: 678.
- Gross official reserves imputed to Gabon (months of CEMAC imports of GNFS): 2008: 6.6; 2009: 5.9; 2010: 7.0; 2011: 9.1; 2012 (Proj.): 11.3; 2013 (Proj.): 13.5; 2014 (Proj.): 15.6; 2015 (Proj.): 15.0.
- Memorandum current account components (percent of GDP): Oil: 2008: 32.9; 2009: 30.8; 2010: 31.1; 2011: 31.7; 2012: 30.6; Non-oil: 2008: -9.6; 2009: -22.9; 2010: -20.5; 2011: -20.1; 2012: -20.4.

### External debt and debt service (stocks and flows)
- Total external debt (including IMF, US$ millions): 2008: 2,264; 2009: 2,054; 2010: 1,999; 2011: 1,944; 2012 (Proj.): 1,879.
- Debt composition (2009 share): bilateral debt accounted for 45 percent; bonds issued in 2007 made up 41 percent; remainder owed to multilateral institutions (as of end-2009: external debt US$2.1 billion = 18.8 percent of GDP).
- Debt service (principal, total including IMF, US$ millions): 2008: 2,345; 2009: 329; 2010: 314; 2011: 302; 2012 (Proj.): 268.
- Interest (total including IMF, US$ millions): 2008: 183; 2009: 136; 2010: 159; 2011: 171; 2012 (Proj.): 172.
- Memorandum ratios: Debt service to exports ratio: 2008: 27.0; 2009: 8.1; 2010: 7.3; 2011: 5.8; 2012: 5.3. External public debt to GDP ratio: 2008: 15.6; 2009: 18.8; 2010: 15.7; 2011: 14.3; 2012: 13.1.

### Millennium Development Goals (selected social indicators, historical)
- Employment to population ratio, ages 15+, total (percent): 1990: 58; 1995: 60; 2000: 59; 2008: 58.
- Malnutrition prevalence, weight for age (percent of children under 5): 2008: 9.
- Primary completion rate, total (percent of relevant age group): 2000: 72; 2005: 70.
- Immunization, measles (percent of children ages 12/23 months): 1990: 76; 1995: 75; 2000: 55; 2005: 55.
- Maternal mortality ratio (modeled estimate, per 100,000 live births): 1990: 260; 1995: 250; 2000: 260; 2005: 260; 2008: 260.
- Prevalence of HIV, total (percent of population ages 15-49): 1990: 0.9; 1995: 3.0; 2000: 5.3; 2005: 6.0; 2008: 5.9.

### Debt sustainability analysis — external debt (Appendix I)
- Debt level and structure (end-2009): external debt amounted to US$2.1 billion (18.8 percent of GDP). Bilateral debt accounted for 45 percent; bonds issued in 2007 made up 41 percent; remainder owed to multilateral institutions.
- Baseline scenario assumptions and outcomes:
  - Assumes medium-term non-oil primary fiscal deficit declines from 21.1 percent of NOGDP in 2010 to 14 percent in 2015.
  - Real non-oil GDP growth increases from -0.5 percent in 2009 to about 6.1 percent in 2010, then declines gradually to 3.2 percent in 2015.
  - Gabonese interest rates follow projected world interest rates; international commodity prices follow World Economic Outlook projections through 2015.
  - Under baseline: external debt-to-GDP ratio declines to 11.7 percent by 2015.
- Stress-test scenarios and impacts (all shocks relative to baseline, magnitudes and outcomes preserved):
  - Permanent increase in the real interest rate of 90 basis points (one half standard deviation) → debt-to-GDP ratio increases to 13.4 percent.
  - Permanent decrease of non-oil GDP of around 1 percentage point (one half standard deviation) → debt-to-GDP ratio increases to 14.8 percent.
  - Permanent oil price decrease of around 13 dollars per barrel (one half standard deviation) → debt-to-GDP ratio increases substantially to 37 percent.
  - Combination of the three shocks (a quarter standard deviation each) → debt-to-GDP ratio increases to 24 percent.
  - Real depreciation shock of 30 percent (one-time) → debt-to-GDP ratio increases by 5 percentage points and stabilizes around 19 percent by 2015.
- Quantitative decomposition (selected lines from Table A1, percent of GDP):
  - Baseline external debt (2009): 18.8; 2010: 15.7; 2011: 14.3; 2012: 13.1; 2013: 12.6; 2014: 12.2; 2015: 11.7.
  - Change in external debt (2009→2015): 2009: 3.2; 2010: -3.0; 2011: -1.4; 2012: -1.2; 2013: -0.5; 2014: -0.4; 2015: -0.5.
  - Identified external debt-creating flows (sum of current account deficit excl. interest, net non-debt-creating inflows, and automatic debt dynamics) (2009): -8.2; 2010: -15.6; 2011: -17.8; 2012: -15.9; 2013: -11.6; 2014: -10.7; 2015: -9.4.
  - Current account deficit, excluding interest payments (percent of GDP): 2009: -9.1; 2010: -11.8; 2011: -12.9; 2012: -11.4; 2013: -7.4; 2014: -7.0; 2015: -6.0.
  - Gross external financing need (in percent of GDP): 2009: -7.9; 2010: -10.5; 2011: -11.6; 2012: -10.2; 2013: -6.2; 2014: -6.0; 2015: -5.2.
- Key macroeconomic assumptions underlying the baseline (selected series):
  - Real GDP growth (percent): 2009: -1.4; 2010: 5.7; 2011: 5.6; 2012: 3.3; 2013: 1.6; 2014: 2.6; 2015: 2.5.
  - GDP deflator in US dollars (change in percent): 2009: -23.6; 2010: 9.7; 2011: 1.4; 2012: 2.3; 2013: 0.7; 2014: 0.5; 2015: 0.3.
  - Nominal external interest rate (percent): 2009: 6.0; 2010: 7.7; 2011: 8.6; 2012: 8.9; 2013: 9.4; 2014: 7.8; 2015: 7.2.
  - Growth of exports (US dollar terms, percent): 2009: -34.5; 2010: 23.3; 2011: 8.5; 2012: 2.2; 2013: -5.4; 2014: 0.4; 2015: 1.0.

### Fiscal debt sustainability (summary)
- Analysis covers only central government debt due to limited data beyond central government.
- Findings mirror external debt analysis: scenarios based on historical averages and standard stress tests confirm a declining and benign profile of debt for the forecast period.
- Projections under historical scenarios differ from baseline in two respects: a higher average annual GDP growth (text ends here in source).

*Sources: Gabonese authorities and IMF staff estimates and projections; tables and Appendix I as provided in the source PDF.*

### 0.6 percent and a lower primary surplus of 4.2 percent. Under the baseline scenario, the

### _cr1197 - 0.6 percent and a lower primary surplus of 4.2 percent. Under the baseline scenario, the

### Public sector debt baseline and projections
- Under the baseline scenario, the public sector debt ratio would decline gradually and stabilize at 14.4 percent of GDP in 2015.
- Even under standard stress tests, the projected level of public debt would remain well below 40-60 percent of GDP.
- Debt-stabilizing primary balance: 0.6
- Baseline: Public sector debt (percent of GDP) by year:
  - 2005: 53.8
  - 2006: 42.1
  - 2007: 43.2
  - 2008: 20.8
  - 2009: 26.4
  - 2010: 21.4
  - 2011: 18.6
  - 2012: 16.3
  - 2013: 15.5
  - 2014: 15.0
  - 2015: 14.4
- Share of public debt that is foreign-currency denominated (percent of GDP) by year:
  - 2005: 41.6
  - 2006: 32.5
  - 2007: 34.9
  - 2008: 15.6
  - 2009: 18.8
  - 2010: 15.7
  - 2011: 14.3
  - 2012: 13.1
  - 2013: 12.6
  - 2014: 12.2
  - 2015: 11.7

### Identified debt-creating flows and decomposition (key lines from Table A2)
- Change in public sector debt (percent of GDP) by year:
  - 2005: -11.3
  - 2006: -11.7
  - 2007: 1.1
  - 2008: -22.4
  - 2009: 5.5
  - 2010: -5.0
  - 2011: -2.8
  - 2012: -2.3
  - 2013: -0.8
  - 2014: -0.5
  - 2015: -0.6
- Identified debt-creating flows (sum of 4+7+12) (percent of GDP) for selected years:
  - 2005: -19.8
  - 2006: -14.1
  - 2007: -15.5
  - 2008: -19.8
  - 2009: 0.0
  - 2010: -11.3
  - 2011: -8.3
  - 2012: -8.4
  - 2013: -6.7
  - 2014: -7.0
  - 2015: -7.1
- Primary deficit (percent of GDP) by year:
  - 2005: -11.4
  - 2006: -11.6
  - 2007: -10.6
  - 2008: -13.2
  - 2009: -8.1
  - 2010: -7.9
  - 2011: -7.9
  - 2012: -8.5
  - 2013: -7.3
  - 2014: -7.5
  - 2015: -7.6
- Revenue and grants (percent of GDP) by year:
  - 2005: 31.4
  - 2006: 31.7
  - 2007: 29.5
  - 2008: 31.9
  - 2009: 32.6
  - 2010: 30.7
  - 2011: 31.1
  - 2012: 31.8
  - 2013: 31.3
  - 2014: 31.0
  - 2015: 30.9
- Primary (noninterest) expenditure (percent of GDP) by year:
  - 2005: 20.0
  - 2006: 20.1
  - 2007: 18.9
  - 2008: 18.8
  - 2009: 24.5
  - 2010: 22.8
  - 2011: 23.2
  - 2012: 23.3
  - 2013: 23.9
  - 2014: 23.6
  - 2015: 23.3

### Automatic debt dynamics and contributions
- Automatic debt dynamics (percent of GDP) by year:
  - 2005: -8.3
  - 2006: -2.5
  - 2007: -4.6
  - 2008: -6.7
  - 2009: 8.1
  - 2010: -3.4
  - 2011: -0.4
  - 2012: 0.2
  - 2013: 0.7
  - 2014: 0.5
  - 2015: 0.5
- Contribution from interest rate/growth differential (percent of GDP) by year:
  - 2005: -8.3
  - 2006: -2.2
  - 2007: -2.1
  - 2008: -4.6
  - 2009: 7.0
  - 2010: -3.4
  - 2011: -0.4
  - 2012: 0.2
  - 2013: 0.7
  - 2014: 0.5
  - 2015: 0.5
- Contribution from real interest rate (percent of GDP) by year:
  - 2005: -6.6
  - 2006: -1.6
  - 2007: 0.0
  - 2008: -3.8
  - 2009: 6.6
  - 2010: -2.2
  - 2011: 0.7
  - 2012: 0.7
  - 2013: 0.9
  - 2014: 0.9
  - 2015: 0.9
- Contribution from real GDP growth (percent of GDP) by year:
  - 2005: -1.6
  - 2006: -0.6
  - 2007: -2.1
  - 2008: -0.9
  - 2009: 0.4
  - 2010: -1.2
  - 2011: -1.1
  - 2012: -0.6
  - 2013: -0.3
  - 2014: -0.4
  - 2015: -0.4
- Contribution from exchange rate depreciation (percent of GDP) by year (selected):
  - 2005: -0.1
  - 2006: -0.3
  - 2007: -2.6
  - 2008: -2.0
  - 2009: 1.1

### Other identified flows and residuals
- Other identified debt-creating flows (percent of GDP) are zero for most years shown, with privatization receipts (negative) equal to -0.2 in 2007.
- Residual, including asset changes (percent of GDP) by year:
  - 2005: 8.4
  - 2006: 2.4
  - 2007: 16.6
  - 2008: -2.5
  - 2009: 5.5
  - 2010: 6.3
  - 2011: 5.5
  - 2012: 6.0
  - 2013: 5.9
  - 2014: 6.5
  - 2015: 6.5

### Key macroeconomic and fiscal assumptions underlying baseline
- Real GDP growth (percentage change) by year:
  - 2005: 3.0
  - 2006: 1.2
  - 2007: 5.6
  - 2008: 2.3
  - 2009: -1.4
  - 2010: 5.7
  - 2011: 5.6
  - 2012: 3.3
  - 2013: 1.6
  - 2014: 2.6
  - 2015: 2.5
- Average nominal interest rate on public debt (in percent) by year:
  - 2005: 5.2
  - 2006: 4.7
  - 2007: 5.6
  - 2008: 4.8
  - 2009: 6.1
  - 2010: 8.4
  - 2011: 8.4
  - 2012: 7.1
  - 2013: 7.1
  - 2014: 6.8
  - 2015: 7.0
- Average real interest rate (in percent) by year:
  - 2005: -11.8
  - 2006: -3.2
  - 2007: 0.4
  - 2008: -9.9
  - 2009: 25.5
  - 2010: -9.5
  - 2011: 3.7
  - 2012: 4.3
  - 2013: 5.9
  - 2014: 5.7
  - 2015: 6.2
- Inflation rate (GDP deflator in domestic currency, percentage change) by year (selected):
  - 2005: 17.0
  - 2006: 7.9
  - 2007: 5.2
  - 2008: 14.7
  - 2009: -19.4
  - 2010: 18.0
  - 2011: 4.8
  - 2012: 2.8
  - 2013: 1.2
  - 2014: 1.0
  - 2015: 0.8
- Growth of real primary spending (deflated by GDP deflator, in percent) by year:
  - 2005: 10.6
  - 2006: 2.2
  - 2007: -1.1
  - 2008: 1.7
  - 2009: 28.6
  - 2010: -1.6
  - 2011: 7.5
  - 2012: 3.5
  - 2013: 4.5
  - 2014: 1.2
  - 2015: 1.2

### Debt sustainability stress tests and scenario summaries (Figure A2 highlights)
- Baseline public debt in 2015: 14.4 (percent of GDP).
- Scenario averages shown in figure boxes (selected):
  - Growth shock scenario average: 23.1 (baseline: 14.4)
  - Primary balance (PB) shock scenario average: 18.7 (baseline: 14.4; no policy change scenario: 12.4)
  - Real interest rate shock scenario average: 21.3 (baseline: 14.4)
  - Combined shock scenario average: 23.2 (baseline: 14.4); another combined-shock box shows 21.1
  - Contingent liabilities shock / Real depreciation and contingent liabilities: 25.8 (baseline: 14.4) in one combined presentation
- Notes on shocks:
  - Individual shocks are permanent one-half standard deviation shocks.
  - Permanent one quarter standard deviation shocks also applied to real interest rate, growth rate, and primary balance in an alternative specification.
  - One-time real depreciation of 30 percent and 10 percent of GDP shock to contingent liabilities occur in 2011 in a specific scenario.
- Baseline and historical scenarios show gross financing need under baseline (right scale) with baseline debt 14.4.

### Gross financing need and public sector debt-to-revenue
- Public sector debt-to-revenue ratio (percent) by year:
  - 2005: 171.6
  - 2006: 132.8
  - 2007: 146.4
  - 2008: 65.3
  - 2009: 81.0
  - 2010: 69.7
  - 2011: 59.8
  - 2012: 51.1
  - 2013: 49.5
  - 2014: 48.2
  - 2015: 46.6
- Gross financing need (in percent of GDP) series shown include negative and positive values in the PDF table; corresponding US dollar amounts in billions shown by year (selected):
  - 2005: -0.3
  - 2006: -0.4
  - 2007: -0.4
  - 2008: 1.0
  - 2009: 0.1
  - 2010: 0.1
  - 2011: -0.6
  - 2012: -0.6
  - 2013: -0.5
  - 2014: -0.6
  - 2015: -0.7

### Institutional relations and program history
- Relations with the Fund:
  - Gabon has been a member of the International Monetary Fund since 1963.
  - CEMAC member countries accepted the obligations of Article VIII in June/July 1996.
  - The three-year SBA for about US$118 million expired in May 2010, with only the first three reviews completed.
  - Recurrent fiscal slippages made it difficult to sustain the Fund-supported program.
- Relations with the World Bank:
  - The World Bank signed a $10 million service agreement with the government covering sectoral assistance, comprehensive growth analysis, and public financial management reform.
- Exchange rate regime:
  - Gabon is a member of the Central African Economic and Monetary Community (CEMAC).
  - The common currency, the CFA franc, is pegged at the fixed rate of 655.957 CFA franc per euro.
  - Gabon’s tax on wire transfers constitutes a restriction on the making of payments and transfers for current international transactions subject to approval under Article VIII, Section 2 (a) of the Articles of Agreement.
- Statistical issues:
  - Gabon has subscribed to the General Data Dissemination System (GDDS).
  - Data are broadly adequate for surveillance purposes, but staff analysis was affected by the timeliness and coverage of fiscal data, the poor quality of balance of payments data, and the limited information on labor cost and productivity.

### IMF operational and technical assistance details (selected)
- Membership and quota (as of October 31, 2010):
  - Quota: 154.30 (SDR Million) = 100.00 percent
  - Fund holdings of currency: 153.77 (SDR Million) = 99.66 percent
  - Reserve Position: 0.54 (SDR Million) = 0.35 percent
- Latest Stand-By Arrangements (dates and amounts):
  - Stand-By May 07, 2007 – May 06, 2010: 77.15 (SDR Million) approved; 0.00 drawn
  - Stand-By May 28, 2004 – Jul 31, 2005: 69.44 (SDR Million) approved; 41.66 drawn
  - Stand-By Oct 23, 2000 – Apr 22, 2002: 92.58 (SDR Million) approved; 13.22 drawn
- Projected payments to Fund (Expectation Basis) — Charges/Interest (SDR Million) by year:
  - 2010: 0.11
  - 2011: 0.06
  - 2012: 0.06
  - 2013: 0.06
  - 2014: 0.06
- Safeguards assessments:
  - The Bank of the Central African States (BEAC) safeguards assessment completed on July 6, 2009 found limited implementation of prior recommendations; BEAC adopted an action plan in December 2009 to reform governance and strengthen safeguards.
- Technical assistance (AFRITAC and Headquarters) and capacity building:
  - AFRITAC activities listed include Bank supervision, Public Financial Management, Statistics, Revenue administration, Debt management, and many specific trainings and workshops with dates spanning 2008–2010 (examples: Oct. 2010, Sep. 2010, Jul. 2010, Apr. 2010, Mar. 2010).
  - Headquarters departmental assistance included Implementing the new budget system law (FAD, Jul. 2010), Public Debt Management (AFC/MCM items, Jan. 2010; Oct. 2010; Feb. 2010; Feb. 2009), LEG Financial Intelligence Unit development (Jun. 2007), and FAD Poverty and social impact analysis of fuel subsidies reform (Jan. 2007).
- Resident representative:
  - The Fund no longer has a resident representative in Libreville; the IMF office is staffed with a local economist.

### World Bank engagement (selected)
- World Bank country relationship:
  - Gabon is an IBRD country; the Board approved the last Country Assistance Strategy (CAS) on May 24, 2005; existing CAS ended June 2009.
  - A US$75 million road transport operation was scheduled to go to the Board in 2011.
- Reimbursable Technical Assistance:
  - In August 2010, a three year US$10 million Reimbursable Technical Assistance Agreement (RTA) was signed to assist the authorities to update their PRSP, focusing on public financial management, assessing potential sources of growth in non-oil activities, and updating the poverty profile.
- World Bank active projects (as of September 2010):
  - Five active projects with a commitment value of approximately US$51 million, including:
    - Two IBRD-funded operations: Natural Resources Management Development Policy Loan (US$15 million) and Public Investment Program for Local Infrastructure Development (US$25 million).
    - A GEF-funded capacity building project for natural resource management (US$10 million).
    - Two trust fund operations: IDF grant (US$420,000) and Forest Carbon Partnership Facility Readiness Grant (US$200,000).
- IFC and MIGA involvement:
  - IFC exposure of US$32.5 million in oil, gas, electricity, and telecommunications.
  - A US$61 million MIGA guarantee for rehabilitation and modernization of a professional training institute approved in May 2005.

*International Monetary Fund Staff Report for the 2010 Article IV Consultation (Informational Annex), February 2, 2011.*

### 6.      The Bank provided support to develop statistical capacity in Gabon through a

### 6. The Bank provided support to develop statistical capacity in Gabon through a recipient-executed (Ministry of Plan) statistical capacity building grant

### Bank support and project implementation
- A recipient-executed (Ministry of Plan) statistical capacity building grant from the Statistical Capacity Building Program in the amount of US$399,850.
- Implementation period: September 2007 to June 2010.
- Objective: to support the government in the development of a national strategy for the development of statistics.

### Analytical work and complementary Bank activities (RTA context)
- Planned analytical work:
  - A poverty study.
  - Analytical work on sources and constraints to growth, economic and export diversification, and competitiveness.
- Bank-led programs and operations:
  - US$15 million Natural Resources Management Development Policy Loan (DPL) approved November 2005 covering forest, environment, fisheries, mining, and oil sectors. Objectives: improve efficiency of natural resources management, accelerate poverty reduction, protect the environment, and reduce the country’s oil dependence; support implementation of the EITI in the oil sector.
  - US$10 million grant from the Global Environment Facility approved March 2006 for Gabon’s national parks focusing on improving transparency, law enforcement, removing policy distortions, implementing reforms, and empowering civil society and local communities.
  - US$5 million Pilot Community Infrastructure Development Project (Learning and Innovation Loan) completed June 2004 to test community-based infrastructure methods and support local contractors; goal to improve living conditions in poor urban neighborhoods and build local capacity.
  - US$25 million loan approved March 14, 2006 to (i) increase access of people living in low-income settlements to basic services; and (ii) sustain access of local SMEs to civil works and public construction contracts.
  - Possible new projects include a US$35 million rural electrification project.
  - Options in electricity collaboration: (i) rural and peri-urban electrification, (ii) energy efficiency, (iii) institutional capacity building including climate change, and (iv) potential structural investments.
  - Option to provide Additional Financing to continue the Local Infrastructure Development Project which closes in December 2011.
- Sectoral analytical work planned within RTA: agriculture and livestock, the financial sector, fisheries, timber, information and communication technologies, and tourism, including market analysis, pre-evaluation of investments, and technical assistance for implementation of action plans.
- SEGOM (formerly COCPO) provided “how-to” guidance and initial technical support to assist Government, industry, and civil society understand EITI and its benefits.

### Areas of shared responsibility between Bank and Fund
- Strengthening public financial management (PFM):
  - FAD undertook a comprehensive PFM diagnostic mission in July 2010; more detailed diagnostic work to follow.
  - Expenditure Management: Bank to provide TA around development of a Medium-Term Expenditure Framework (MTEF) including work to (i) refine the priority action plan of the PRSP; (ii) strengthen systems for development of the macroeconomic and budgetary framework and sectoral MTEFs; and (iii) revise the circular for the budget preparation and the assessment of the integrated system in place for programming and monitoring. Coordination: Fund will use the MTEF as an instrument to link fiscal policies with the overall macroeconomic framework.
  - Debt Management: Based on a debt management performance assessment (which could commence immediately after a request is received from the government), the Bank will provide TA for the development of a debt strategy, the establishment of a debt office, and training and support in implementation of the reform plan.
  - Public investment management: Bank proposes TA to support development of a new framework for public investment management, its implementation, and training.
- Strengthening tax policies:
  - Fund received a request for TA on tax policy development, including corporate income and natural resource taxation.
  - Bank’s service contract includes tax policy issues as part of investment advisory services (component of its growth diagnostic).
  - Coordination mechanisms: Bank will consult with FAD on all tax policy missions; possible sharing of mission briefs and bilateral exchanges.
  - FAD focus: core tax policy advice. Bank focus: long-term sector and capacity building support on natural resource taxation.
- Strengthening the financial sector:
  - Fund has funding from the Japanese government for a project to strengthen regional financial agencies in the CEMAC region; to be coordinated with the Bank’s financial sector TA program.
- Improving natural resource management:
  - Fund will provide TA on natural resource (mining) taxation/tax policy.
  - Bank will undertake sector-specific analysis linked to government agenda on growth and diversification, providing TA in mining, forestry, and fisheries.
- Extractive industries TA to be provided by the Bank:
  - (i) establishment of a national oil company;
  - (ii) mapping of main mining sites to be developed;
  - (iii) preparation of a new/revised mining code;
  - (iv) preparation of a new/revised hydro-power code.

### Areas led by the Fund and not directly by the Bank
- Fiscal dialogue and expenditure ceilings:
  - Fund leads dialogue on policies to contain certain public expenditures (e.g., public wage bill) and definition of the ceiling for public investment; Bank ensures its policy advice is consistent with IMF recommendations.
- Regional trade liberalization monitoring:
  - IMF monitors implementation of trade liberalization measures at the CEMAC (regional) level; complements Bank and IFC work to support regional integration and facilitate investment.
- No direct World Bank involvement:
  - Dialogue on monetary policy, interest rates, the exchange rate, the balance of payments, and related statistical and measurement issues.

### Annex III — Gabon: Statistical issues (summary of main findings)
- General:
  - Data provision has some shortcomings, but is broadly adequate for surveillance.
  - Staff analysis affected by shortcomings in accuracy, reliability, adequacy of periodicity and timeliness for certain data, and consistency between datasets.
  - Statistical producing agencies lack sufficient access to source data and lack an institutional framework for sharing information and coordinating compilation efforts.
  - Gabon participates in the General Data Dissemination System (GDDS) but has not updated the metadata or plans for improvement since 2002.
  - Except for consumer prices, authorities do not report any real sector or government finance statistics (GFS) to STA for publication in International Financial Statistics (IFS) or for electronic dissemination.
  - Detailed economic and financial statistics, including long historical time series, are published in the Tendances de l’Économie, issued twice a year by the General Directorate of Statistics and Economic Studies (DGSEE) of the Ministry of Economy, Trade, Industry, and Tourism.
  - More recent sectoral developments are described in the Tableau de Bord de l'Économie, issued quarterly by the Ministry of the Economy.

- National accounts:
  - Central AFRITAC (AFC) is working with authorities to incorporate the System of National Accounts 1993 methodological recommendations, particularly in valuation of sectoral value added at basic prices.
  - Coverage of developments in oil and other key export sectors is based on a range of indicators that may not fully capture profits these sectors generate.
  - Despite recent improvements in collecting and processing oil sector statistics, significant inconsistencies remain between national accounts and balance of payments statistics.
  - More frequent household surveys are required to improve quality and quantity of data on income distribution and consumption.
  - Two 2008 AFC missions provided technical assistance on the treatment of statistics and fiscal statements (SFS), and implementation of Access software for SFS compilation.
  - Processing of the SFS of 2007 for the compilation of the national accounts of the same year is planned to be finalized by end-2008.

- Employment and unemployment:
  - Data on unemployment and the total labor force are not systematically available.

- Prices:
  - In 2007 authorities began publishing an improved CPI index that covers the same basket as the CEMAC Harmonized Consumer Price Index (HCPI) and uses weighting derived from Gabon’s 2005 household expenditure survey.
  - The CPI only covers the capital city of Libreville.

- Government finance statistics (GFS):
  - Major shortcoming: limited institutional coverage, as social security operations are not included in the statement of operations of central or general government.
  - Audited accounts of oil sector operations are generally available annually and sometimes quarterly, but with a significant reporting lag.
  - Other needed improvements: recording in budget accounts of government-owned capital formation financed by oil companies and recording of government domestic payment arrears.

- Monetary statistics:
  - Bank of Central African States (BEAC) regularly reports in electronic form monthly monetary, interest rate, and exchange rate statistics for Gabon and other CEMAC member countries for publication in IFS, but delays sometimes occur in submission of data.
  - Institutional coverage of monetary statistics for Gabon is comprehensive, but accuracy is affected by cross-border movements of currency among CEMAC member countries.
  - BEAC started in mid-2007 a project to migrate monetary statistics of CEMAC member countries to the methodology in the Monetary and Financial Statistics Manual (MFSM).
  - A regional workshop was organized by the BEAC in December 2007 to finalize mapping of source data from commercial banks to MFSM concepts and framework; STA participated to provide guidance.
  - BEAC submitted test monetary data for Gabon using standardized report forms for period January 2000–December 2007.

- External public debt:
  - Comprehensive data exist on the stock of external public debt and its composition, and detailed projections on debt service due.
  - Data are provided, usually to Fund missions, by the General Directorate of Public Debt and Accounting (Direction générale de la comptabilité publique) of the Ministry of Economy, Finance, Budget, and Privatization.

*Source: _cr1197 - 6.      The Bank provided support to develop statistical capacity in Gabon through a*

### 10.      Balance of payments statistics are compiled by the national directorate of the BEAC

### _cr1197 - 10.      Balance of payments statistics are compiled by the national directorate of the BEAC

### Balance of payments compilation and data sources
- Balance of payments statistics are compiled by the national directorate of the BEAC and the estimates are validated by staff from BEAC headquarters.
- Since 1995, compilation of balance of payments statistics has conformed to the Balance of Payments Manual, 5th edition.
- Source data are collected through:
  - surveys of enterprises by the central bank (the main source of data);
  - reports from banks and the postal administration on foreign exchange transactions of other enterprises, retailers, and private individuals;
  - BEAC reports on banknote movements between Gabon and other BEAC countries.
- External trade data are mostly based on estimates, which are not cross-checked with customs data.
- Data on other items of the current account are not very reliable or accurate due to low response rates to enterprise surveys, despite partial correction through adjustments.
- Foreign direct investment in the financial account is likely to be underestimated owing to insufficient detail in the oil sector survey.
- The magnitude and detailed breakdown of private capital flows, particularly short term, suffer because data are not comprehensive.
- Data are disseminated with considerable delay, and the latest available official statistics are for 2006.

### Data periodicity and selected reporting dates (Table of Common Indicators Required for Surveillance, As of December 31, 2010)
- Exchange Rates: Date of latest observation Aug. 2010; Date received Aug. 2010; 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 Aug. 2010; Date received Nov. 2010; Frequency of data M; Frequency of reporting M; Frequency of publication M.
- Reserve/Base Money: Date of latest observation Aug. 2010; Date received Nov. 2010; Frequency of data M; Frequency of reporting M; Frequency of publication M.
- Broad Money: Date of latest observation Aug. 2010; Date received Nov. 2010; Frequency of data M; Frequency of reporting M; Frequency of publication M.
- Central Bank Balance Sheet: Date of latest observation Aug. 2010; Date received Nov. 2010; Frequency of data M; Frequency of reporting M; Frequency of publication M.
- Consolidated Balance Sheet of the Banking System: Date of latest observation Aug. 2010; Date received Nov. 2010; Frequency of data M; Frequency of reporting M; Frequency of publication M.
- Interest Rates: Date of latest observation Aug. 2010; Date received Aug. 2010; Frequency of data M; Frequency of reporting M; Frequency of publication M.
- Consumer Price Index: Date of latest observation October. 2010; Date received Nov. 2010; Frequency of data M; Frequency of reporting M; Frequency of publication M.
- Revenue, Expenditure, Balance and Composition of Financing – General Government: Date of latest observation Sep. 2010; Date received Nov. 2010; Frequency of data M; Frequency of reporting Q; Frequency of publication N/A.
- Revenue, Expenditure, Balance and Composition of Financing – Central Government: Date of latest observation Sep. 2010; Date received Nov. 2010; Frequency of data M; Frequency of reporting Q; Frequency of publication N/A.
- Stocks of Central Government and Central Government-Guaranteed Debt: Date of latest observation Sep. 2010; Date received Nov. 2010; Frequency of data Q; Frequency of reporting Q; Frequency of publication N/A.
- External Current Account Balance: Date of latest observation Dec. 2006; Date received Mar. 2010; Frequency of data A; Frequency of reporting I; Frequency of publication A.
- Exports and Imports of Goods and Services: Date of latest observation Dec. 2006; Date received Mar. 2010; Frequency of data M; Frequency of reporting M; Frequency of publication I.
- GDP/GNP: Date of latest observation 2008; Date received Dec. 2010; Frequency of data A; Frequency of reporting I; Frequency of publication A.
- Gross External Debt: Date of latest observation Dec. 2009; Date received Mar. 2009; Frequency of data Q; Frequency of reporting I; Frequency of publication I.
- International Investment Position: N/A for Date of latest observation; Date received N/A; Frequency of data N/A; Frequency of reporting N/A; Frequency of publication N/A.

### Macroeconomic assessment, projections, and risks (Public Information Notice, March 4, 2011)
- Recent performance and projections:
  - Real Gross Domestic Product is estimated to increase to 5.7 percent in 2010 and remain broadly at that level in 2011.
  - Real GDP growth: 2008: 2.3; 2009: -1.4; 2010 Est.: 5.7; 2011 Proj.: 5.6; 2012 Proj.: 3.3; 2013 Proj.: 1.6; 2014 Proj.: 2.6; 2015 Proj.: 2.5.
  - Oil sector growth: 2008: -1.4; 2009: -4.5; 2010 Est.: 4.1; 2011 Proj.: 1.5; 2012 Proj.: -0.8; 2013 Proj.: -6.1; 2014 Proj.: -0.6; 2015 Proj.: -0.7.
  - Non-oil sector growth: 2008: 3.4; 2009: -0.5; 2010 Est.: 6.1; 2011 Proj.: 6.7; 2012 Proj.: 4.3; 2013 Proj.: 3.6; 2014 Proj.: 3.3; 2015 Proj.: 3.2.
  - Consumer prices (average): 2008: 5.3; 2009: 2.1; 2010 Est.: 0.4; 2011 Proj.: 2.3; 2012 Proj.: 3.4; 2013 Proj.: 3.1; 2014 Proj.: 3.
- Fiscal and external balances:
  - Overall balance (commitment basis) as percent of GDP: 2008: 11.4; 2009: 6.5; 2010 Est.: 4.8; 2011 Proj.: 5.6; 2012 Proj.: 5.5; 2013 Proj.: 5.8.
  - Non-oil primary balance (percent of non-oil GDP): 2008: -14.8; 2009: -13.9; 2010: -21.1; 2011 Proj.: -22.5; 2012 Proj.: -18.7; 2013 Proj.: -16.7; 2014 Proj.: -15.1; 2015 Proj.: -14.
  - External current account balance (with official transfers) as percent of GDP: 2008: 23.3; 2009: 7.9; 2010 Est.: 10.5; 2011 Proj.: 11.6; 2012 Proj.: 10.2; 2013 Proj.: 6.2; 2014 Proj.: 6.2; 2015 Proj.: 5.2.
  - External public debt as percent of GDP: 2008: 15.6; 2009: 18.8; 2010 Est.: 15.7; 2011 Proj.: 14.3; 2012 Proj.: 13.1; 2013 Proj.: 12.6; 2014 Proj.: 12.2; 2015 Proj.: 11.7.
- Key risks:
  - The foremost risk to the economic outlook is a decline in oil and manganese prices, because these commodities accounted for about 90 percent of total exports of goods and 45 percent of nominal GDP on average during the last decade.
  - Inflation is forecast to pick up, mostly driven by higher food and energy prices.

### Executive Board conclusions and policy recommendations
- Executive Directors welcomed that Gabon is on a path of recovery from the global crisis.
- Key long-term challenges highlighted: preparing the economy for the post-oil period through economic diversification, increased external competitiveness, and poverty reduction.
- Policy priorities emphasized by Directors:
  - Maintain long-term fiscal sustainability while addressing substantial development needs.
  - Link annual budgets to longer-term policies and a credible medium-term fiscal strategy.
  - Anchor capital spending in a realistic multiyear investment plan.
  - Strengthen public financial management to improve the quality of spending and release resources for growth-enhancing spending and social outlays.
  - Refocus public investment on key infrastructure and social projects; strengthen appraisal, selection, and monitoring of projects.
  - Enhance transparency and accountability in management of resources from the extractive sector, particularly with respect to new funds under consideration.
  - Step up efforts to enhance external competitiveness through structural reforms to improve the business climate, build basic infrastructure, enhance health and education services, and increase labor market flexibility.
  - Improve access to financial services by prioritizing institutional and regulatory reforms, especially for small and medium enterprises.
  - Eliminate as soon as possible the tax on wire transfers, which gives rise to an exchange restriction under Article VIII.
  - Further improve the quality of economic and financial data, using technical assistance from the Fund and donors.

### Authorities’ strategy and policy actions (Statement by Executive Director for Gabon)
- Growth and stabilization measures:
  - Authorities implemented measures in 2009 and 2010 to reduce nonessential expenditures, including a census of civil servants to detect and eliminate ghost workers, and reduction in the number of high-level positions in the civil service.
  - Savings enabled acceleration of hiring in health, education, and security sectors.
  - The investment program in 2010 focused on rehabilitation and development of transport, energy, and communication infrastructure; construction of new classrooms and health infrastructure upgrades.
- Fiscal stance:
  - Implementation of the economic program increased total spending by 4.9 percent of GDP in 2010, accommodated by higher oil revenue (4.5 percent of GDP).
  - Non-oil primary deficit (NOPD) widened from 14 percent of non-oil GDP in 2009 to 21.1 percent in 2010.
  - Authorities preparing a medium-term expenditure framework to gradually lower the NOPD by reducing gradually capital spending, pursuing wage and employment reforms, and rationalizing expenditures on goods and services and transfers and subsidies.
  - Ongoing tax and customs administration reforms and better control of tax exemptions expected to strengthen non-oil revenue over time.
  - Authorities working to resolve the issue of the tax on wire transfers, noting its political sensitivity because proceeds finance the health insurance fund.
- Public financial management and debt policy:
  - Introduction of program budgeting and modern principles of financial management to become effective in 2012.
  - Weekly meetings to monitor investment-related payments to avoid accumulation of arrears and strengthen accountability.
  - New institutions will not be extra-budgetary in nature and will have strong governance structures.
  - Proactive debt policy consistent with the 2011-2013 debt strategy: limits on annual new debt and criteria for new loans; creation of a Directorate General of Debt and establishment of a national committee on public debt.
- Public investment management:
  - Public investment program to address infrastructure needs, guided by linking five geographical development centers and supporting non-oil private sector and SEZ development for timber processing and high value-added wood exports.
  - A national agency for major public works set up to plan, manage, and implement large infrastructure projects; service contract signed in November 2010 with the World Bank to enhance national capacities.
- Financial sector and structural reforms:
  - Reforms to strengthen credit infrastructure, including improved mechanisms for loan dispute settlement, streamlined procedures for realization of guarantees, and creation of a corporate balance sheet centralization system at the central bank.
  - Streamlining of state-owned and sponsored financial institutions involved in SMEs and housing financing via mergers and restructuring.
  - Finalization of the microfinance development strategy and expansion of access to credit, and planned subscription to the capital of the African Guarantee and Economic Cooperation Fund.
  - Service agreement with the International Finance Corporation (IFC) signed in November 2010 to identify measures to abolish burdensome regulations based on World Bank Doing Business analysis.
  - Creation of a competition authority to guard against illicit price-setting arrangements.
  - Reform of the oil sector: creation of a national oil company and conversion of the Fund for Future Generations into a Strategic Sovereign Fund.
- Exchange rate and monetary context:
  - Gabon is a member of CEMAC; the CFA franc is pegged to the euro.
  - Membership in CEMAC has served the economy well; monetary policy described as appropriate and prudent.

*Source: IMF staff report and Public Information Notice (Article IV consultation with Gabon, concluded February 18, 2011).*

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