IMF Staff Completes Review Mission to São Tomé and Príncipe
IMF News, September 28, 2016
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Bibliographic details
- Published: September 28, 2016
Mission overview
- Mission dates: September 14 to 28, 2016.
- Mission led by Maxwell Opoku-Afari, IMF Mission Chief for São Tomé and Príncipe.
- Purpose: second review of the country’s economic program supported by the IMF’s three-year Extended Credit Facility (ECF).
- End-of-mission statement conveys preliminary staff findings; staff will prepare a report for IMF management and the Executive Board.
Economic performance and outlook
- GDP growth for 2016 is now estimated at 4 percent, somewhat lower than the projected 5 percent under the program.
- Factors contributing to lower growth:
- Delays in external financing ahead of the presidential elections held in July 2016 (and the run-off in August 2016) which impacted execution of externally-financed investment projects.
- Supply constraints resulting from ongoing pressures on foreign exchange supply.
- Lackluster credit growth.
- Inflation developments:
- Inflation increased to 5.5 percent at the end of August 2016 from 4.0 percent in December 2015.
- Inflation drivers: rising underlying inflationary pressures from ongoing supply constraints and, to some extent, a change in the CPI basket.
- Staff expectation: inflation could keep at 5.5 percent at the end of the year, instead of the 4 percent projected earlier.
- Near-term prospects:
- Prospects remain favorable as the government steps up efforts to address supply constraints that have impacted imports of capital and intermediate goods.
- Externally-financed capital spending is expected to pick up in the second half of the year to support growth.
Program performance and policy discussions
- Performance under the ECF-supported program through end-June 2016:
- Four of the six performance criteria (PCs) were met.
- All but one of the structural benchmarks were implemented.
- The PCs on the domestic primary fiscal balance and on net international reserves were missed.
- Domestic primary fiscal balance missed due to the bringing forward of some domestic primary spending ahead of the July and August presidential elections.
- Net international reserves missed due to delayed disbursement of external financing.
- Specific policy measures and near-term actions discussed/agreed at staff level (subject to IMF management and Executive Board approval):
- Vigorously implement tax arrears collection following the passage of legislation to transfer collection of tax arrears to the tax administration to address revenue shortfalls.
- Keep spending within the available resource envelope in the remaining months of the year.
- Manage the liquidation of Banco Equador to safeguard financial stability and minimize fiscal costs.
- Enhance liquidity management.
- Strengthen public financial management to anchor the debt reduction program.
- Introduce an automatic fuel price adjustment mechanism to address accumulation of domestic arrears (introduction delayed; authorities committed to introducing this measure by the end of November 2016).
- Next procedural step: The IMF mission reached staff-level agreement with Sãotoméan authorities on the set of policies needed to complete the second review under the ECF; the IMF Executive Board is expected to consider the second ECF review in December 2016.
ECF arrangement details
- The ECF for São Tomé and Príncipe:
- Amount: SDR 4.4 million (about US$6.2 million or 60 percent of quota).
- Approved by the IMF Executive Board on July 13, 2015 (see Press Release No. 15/336).
- Purpose of ECF: a lending arrangement that provides sustained program engagement over the medium to long term in case of protracted balance of payments problems.
Meetings and participants
- Mission delegation included Mr. David Owen, Deputy Director of the African Department at the IMF.
- Meetings held with:
- President of the Democratic Republic of São Tomé and Príncipe H.E. Evaristo Carvalho.
- Vice President of the National Assembly Levy Nazare.
- Minister of the Presidency of the Council of Ministers and Parliamentary Affairs Afonso Varela da Silva.
- Minister of Finance and Public Administration Americo d’Oliveira Ramos.
- Governor of the Central Bank of São Tomé and Príncipe Maria do Carmo Trovoada Silveira.
- Senior government officials, representatives of the private sector (including banks and the Chamber of Commerce), the international donor community, and student groups.
- Press contact: PRESS OFFICER: Andrew Kanyegirire; Phone: +1 202 623-7100; Email: MEDIA@IMF.org.
Press Release No. 16/430 — September 28, 2016