IMF Executive Board Approves US$642 Million Extended Arrangement Under the Extended Fund Facility (EFF) for Gabon

IMF News, June 20, 2017

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Canonical URL: IMF Executive Board Approves US$642 Million Extended Arrangement Under the Extended Fund Facility (EFF) for Gabon

On June 19, 2017, the International Monetary Fund (IMF) approved a three-year extended arrangement under the Extended Fund Facility (EFF) for Gabon for SDR 464.4 million (about US$642 million), or 215 percent of Gabon’s quota, in support of the authorities’ medium-term recovery program.
The Executive Board’s decision enables an immediate disbursement of SDR71.43 million, about US$ 98.8 million.
The remaining amount will be phased over the duration of the program, subject to semi-annual reviews.

Principal aims:
- Ensure macroeconomic stability and lay the basis for sustainable and equitable growth.
- Attain debt sustainability at the national level.
- Help contribute to restoring and preserving external stability for the Central African Economic and Monetary Union (CEMAC).
The EFF-supported program is built on three key pillars:
- Well-balanced fiscal consolidation that minimizes the impact on growth and protects vulnerable groups.
- Structural reforms to improve the efficiency and transparency of public spending.
- Policies to enhance financial sector stability and economic diversification.

Fiscal targets:
- Reduce the overall deficit (on a cash basis) to 4.6 percent of GDP in 2017 from 6.6 percent in 2016.
- Reduce the non-oil primary deficit to 8.9 percent of non-oil GDP from 11 percent.
Revenue and expenditure measures:
- Protect social sector expenditure and redirect a portion of budget resources to health care, education, and social protection.
- Improve non-oil revenue mobilization, boost tax compliance, and combat tax evasion.
- Modernize tax filing and payment procedures.
- Broaden the tax base through the reduction of special tax regimes and exemptions, particularly on VAT.
- Create a revenue authority.
Public finance management:
- Implement a strategy for the full repayment of arrears over the EFF-supported program period.
- Accelerate public finance management reforms, including implementing CEMAC directives, improving budget transparency and public investment management, and strengthening financial oversight of public companies and government agencies.

Financial sector priorities:
- Safeguard financial sector stability and promote financial inclusion.
- Expeditiously resolve the three distressed public banks.
- Strengthen the supervisory framework for commercial banks to support financial intermediation and private-sector led growth.
Structural reforms to support diversification:
- Further improvements to the business climate, especially in starting a business, dealing with construction permits, registering property, paying taxes, and enforcing contracts.
- Improve production and dissemination of economic statistics.
- Large scale investments in agriculture and logistics are projected to develop a competitive advantage in agri-business and unlock downstream activity in other non-oil commodity sectors.

Macroeconomic context since mid-2014:
- The decline in oil prices generated large drops in oil exports and fiscal revenues.
- Gabon is facing slowing growth, rising public debt levels, and insufficient fiscal and external buffers.
Key statistics and developments:
- Growth declined to 2.1 percent in 2016, down from 3.9 percent in 2015.
- Despite substantial fiscal adjustment since 2014, the overall fiscal position deteriorated substantially.
- The current account deficit widened sharply in 2016, moving to a deficit of over 10 percent of GDP, from an average surplus of about 14 percent of GDP over the 2010-14 period.
- Average inflation picked up to 2 percent in 2016, but remains within the CEMAC convergence criterion.
Medium-term outlook:
- The medium-term economic outlook remains favorable, provided prudent policies are implemented as planned.
- Growth can return to previous levels of 4-5 percent, supported by ongoing diversification strategy and large-scale investments in agriculture and logistics.

The program builds on the strategy set out by the CEMAC heads of state at their December 2016 summit in Yaoundé:
- Maintain the current exchange rate peg while implementing substantial fiscal adjustments in each country and tightening monetary policy at the regional level.
The success of Gabon’s program will depend on implementation of supportive policies and reforms by regional institutions.

Press Release No. 17/233 — IMF Communications Department, June 20, 2017.