CORRECTED -- Public Information Notice: IMF Concludes 2003 Article IV Consultation with Gabon

November 20, 2003

Public Information Notices (PINs) are issued, (i) at the request of a member country, following the conclusion of the Article IV consultation for countries seeking to make known the views of the IMF to the public. This action is intended to strengthen IMF surveillance over the economic policies of member countries by increasing the transparency of the IMF's assessment of these policies; and (ii) following policy discussions in the Executive Board at the decision of the Board.

On November 10, 2003, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Gabon.1


Owing mainly to the drop in oil production, Gabon's economy continues to face major challenges, including a high debt burden, the need to diversify the economy more rapidly, to promote growth, and to combat poverty. The absence of sustained adjustment policies has contributed to Gabon's uneven economic performance over the past three years. In view of the weaknesses in the implementation of previous adjustment programs, the authorities have focused since 2002 on strengthening budgetary management and program monitoring to ensure that their long-term efforts are underpinned by solid foundations. Efforts in the second half of 2002 focused on improving governance, reforming tax and customs administrations, strengthening the Budget and Treasury Departments, restructuring public enterprises, and promoting private investment. An austerity budget was adopted for 2003, which aims at raising non-oil revenue and reducing substantially the non-oil primary fiscal deficit; its implementation in the first half of 2003 was satisfactory.

Oil production dropped by about 17 percent between 1999 and 2002, although in 2002 the decline was very small. An additional slight decline is expected in 2003. Activity in the non-oil sector, which in 2000 and 2001 showed significant recovery after the recession of 1999, weakened markedly in 2002, when real growth fell to less than 1 percent from 5 percent in 2001. Some pick-up is projected in 2003. Inflation, as measured by the consumer price index, was low over the period, averaging less than 2 percent.

On the policy front, following the relaxation of overall fiscal policy during the second half of 2001, efforts were made in 2002 to strengthen budget management, and non-oil revenue rose by 1.7 percentage points of GDP. However, efforts to contain expenditure were hampered by the costs related to the restructuring of public enterprises. Due to declining oil revenue, the primary budgetary surplus declined from 12 percent in 2001 to 7.9 percent in 2002. This contributed to a drop in the external current account surplus from 6.2 percent of GDP in 2000 to 0.7 percent in 2002. While Gabon was able to reduce the external public debt-to-GDP ratio from 80 percent at end-1999 to 63 percent at end-2002, substantial external payments arrears accumulated in 2001-02, reaching CFAF 278 million at end-2002 (8 percent of GDP).

In 2002, the government's net position vis-à-vis the banking system strengthened markedly, and Gabon's contribution to the international reserves of the Bank of Central African States (BEAC) reached CFAF 92 billion (about 3 percent of GDP). Credit to the economy increased substantially, at an annual rate of 8.7 percent. Broad money expanded by 5.7 percent, somewhat faster than nominal GDP. A small decline in broad money took place in the first half of 2003. The banking system as a whole remains sound; data from the regional banking commission for Central African States (COBAC) show that all banks respected the prudential standards, although two banks were only slightly over the minimum liquidity ratio.

The pace of structural reforms has accelerated since mid-2002, as the authorities took steps to strengthen significantly the budgetary management capacity, improve governance, and foster private sector development. Key reforms include restructuring and preparing the privatization of public enterprises, the adoption of the anticorruption legislation, the revamping of the computerized budget information system, and the reform of the procurement code.

Executive Board Assessment

Executive Directors commended the Gabonese authorities for moving to break with their past uneven record of economic performance and embarking on a program of prudent fiscal policies and far-reaching structural reforms that could facilitate the resumption of external financial support and lay the basis for higher sustainable economic growth and enhanced social sector development. They particularly welcomed the actions taken to enhance public resource management and governance, improve the private investment climate, foster competitiveness and strengthen social services.

Directors emphasized that the expected progressive contraction in the oil sector and oil revenues, with the depletion of hydrocarbon reserves over the coming years, lends urgency to the need to diversify the economy and foster environmentally sustainable, non-oil sector growth, in order to ensure that adequate resources will be available to address the key challenges facing the country: reducing poverty and improving social conditions, especially in rural areas. Directors encouraged the authorities to make bolder efforts to strengthen the medium-term fiscal position and cut debt, and to persist with structural reforms, including further privatization and civil service downsizing, and improving the investment climate.

Directors welcomed the authorities' medium-term program, which includes an ambitious fiscal adjustment and additional structural reforms aimed at attracting private investment and promoting economic diversification. They noted that the budget for 2003, which aims appropriately at a sharp reduction in the non-oil primary deficit, remains broadly on track. They commended the efforts to strengthen fiscal management and improve revenue collection. Directors welcomed the clearance of non-reschedulable debt arrears by end-June 2003 and stressed the need to avoid the re-emergence of arrears in the future.

Directors urged the authorities to lower the government wage bill to bring it into line with a shrinking of oil revenues, and to ensure that adequate resources can be provided to social services and basic infrastructure in support of non-oil sector activities. The wage and civil service reforms currently under way—including streamlining the regime of indemnities, reducing the number of senior staff at the Presidency, in ministries and other institutions, and introducing a merit-based promotion system—should be accelerated. Directors expressed concern about the recent overshooting of the program target for the wage bill and urged the authorities to redouble their efforts to keep the wage bill under control.

Directors welcomed steps taken in the area of structural reform, specifically, the adoption and implementation of the anticorruption legislation and ethics code for government officials, the revamping of the computerized budget information system, the reform of the procurement code, the acceleration of privatizations, and the creation of a one-stop center for investment promotion. Directors nevertheless encouraged the authorities to strengthen the structural content of their program, so as to tackle impediments to growth, improve competitiveness, and enhance the prospects for the non-oil private sector. The overall cost structure of the economy needs to be reduced, basic infrastructure upgraded, governance and transparency improved, in particular in the management of public resources, and a more business-friendly regulatory and legal environment set in place. Directors noted that structural reforms in the forestry sector would help the sector realize its full potential to contribute to economic diversification and the development of rural areas.

Directors observed that the exchange arrangement under the CFA franc monetary zone has served Gabon well. They agreed that the external competitiveness gain following the 1994 devaluation of the CFA franc appears to have been broadly maintained. Directors welcomed Gabon's large contribution to the international reserves of the Bank of Central African States during 2002.

Directors underscored that Gabon's medium-term economic prospects are subject to the risks posed by the continuing heavy debt burden, and that the authorities' program will need to be strengthened further in order to stimulate growth and place debt on a more sustainable path. They considered that the establishment of a solid track record of policy implementation under the authorities' medium-term program could help mobilize external support for Gabon, including debt relief from bilateral creditors.

Directors noted that the banking system remains sound, and that all banks respect the prudential standards. At the same time, the concentration of lending to a relatively few sectors, including forestry, and the increase in nonperforming loans need to be monitored closely. Directors encouraged the authorities to take steps to develop microfinance institutions for the financing of small-scale initiatives. Directors welcomed the adoption of the Central African Economic and Monetary Union's directive to combat money laundering and the financing of terrorism, providing for the establishment of national financial intelligence units to administer the relevant regulations. They encouraged the authorities to give high priority to its effective implementation, including by setting in place a legal framework to freeze assets.

Directors welcomed the importance placed by Gabon on the fight against poverty as reflected in the I-PRSP. They encouraged the authorities to proceed with the preparation of the full PRSP in the context of a participatory process which will help identify priority reform areas.

Directors welcomed the preparation of a draft statistics law and Gabon's participation in the General Data Dissemination System. However, they noted that weaknesses persist with regard to the quality and timeliness of balance of payments statistics, and encouraged the authorities to make further progress in this area, including through use of Fund technical assistance.

Directors stressed that a convincing track record of vigorous policy implementation under the staff-monitored program would be a precondition for the resumption of Fund financial support to Gabon. In that vein, they encouraged the authorities to continue to deal rapidly and forcefully with any emerging program slippages.

Gabon: Selected Economic Indicators







(Annual changes in percent)

Domestic economy


Real GDP growth rate





Of which: oil










Consumer prices (annual average)






(In percent of GDP)

Gross fixed investment





Gross national savings






(In millions of U.S. dollars, unless otherwise indicated)

External sector


Exports f.o.b.





Imports f.o.b.





Current account balance





In percent of GDP





External public debt(in percent of GDP)1





Real effective exchange rate (in percent change, average)






(In percent of GDP, unless otherwise indicated)

Financial variables


Central government revenues





Of which: non-oil





Total expenditure





Primary balance





Overall balance (commitment basis)





Change in broad money (in percent)






Sources: Gabonese authorities and IMF staff estimates.

1 Including obligations to the Fund.

1 Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board. At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities.


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