IMF Executive Board Completes Fourth Review Under the Extended Credit Facility and Concludes the 2022 Article IV Consultation for São Tomé and Príncipe

March 30, 2022

  • Macroeconomic stability has been maintained and program performance under the Extended Credit Facility (ECF) has been steady, although the pandemic has delayed some structural reforms.
  • Exceptional international support and the authorities’ swift actions are helping address the health and socio-economic impacts of the COVID-19 pandemic. However, the outlook is clouded by the impact of the war in Ukraine, which is likely to put the economy under strain.
  • The IMF Executive Board decision allows for an immediate disbursement of about US$2.70 million to São Tomé and Príncipe to help meet the country’s financing needs, support social spending and the post-pandemic recovery.

Washington, DC – On March 30, 2022, the Executive Board of the International Monetary Fund (IMF) concluded the 2022 Article IV consultation [1] and completed the fourth review of the Extended Credit Facility (ECF) arrangement with São Tomé and Príncipe. The Board’s decision enables the immediate disbursement of SDR 1.90 million (about US$2.70 million [2]). This brings São Tomé and Príncipe’s total disbursements under the arrangement to SDR 10.99 million (about US$15.15 million).

In completing the fourth review, the Executive Board also approved the authorities’ request for waivers for nonobservance of performance criteria pertaining to net international reserves at end-June 2021 due to lower-than-expected external disbursements, and continuous performance criterion on non-accumulation of external arrears.

São Tomé and Príncipe’s 40-month ECF arrangement was approved on October 2, 2019 for SDR 13.32 million (about US$18.15 million or around 90 percent of the country’s quota) (see Press Release No. 19/363). The program aims to support the government’s economic reform program to restore macroeconomic stability, reduce debt vulnerability, alleviate balance of payments pressures, and create the foundations for stronger and more inclusive growth.


São Tomé and Príncipe has maintained macroeconomic stability, despite many challenges. Largely reflecting exogenous shocks, growth declined, and inflation increased in 2021. Power outages and the pandemic slowed growth to 1.8 percent in 2021, down from 3 percent in 2020. The economic outlook remains favorable. Growth is projected to rise to 2.3 percent in 2022 and 2.8 percent in 2023. Growth projections are lower than during the third review considering the impact of the floods on agriculture and trade, but and are expected to reach 4 percent in the medium term, supported by better infrastructure and a stronger potential for tourism. Expected domestic fuel price adjustments to reflect higher international fuel prices will impact inflation in 2022. Strengthening revenues with an introduction of the VAT in 2022, phasing out pandemic-related spending, and gradually consolidating the domestic primary balance would put public debt on a downward trajectory. Fiscal adjustment coupled with a gradual increase in tourism receipts is expected to strengthen the current account balance in the medium term. International reserves are expected to stabilize (at about 3.8 months of imports) in 2022.

The outlook is subject to downside risks. New COVID-19 variants and future pandemic waves pose risks to livelihoods and challenges to growth and stability. Inward spillovers from increasing international fuel prices may hinder the recovery, worsen power outages and inflation, adversely impact revenues and implicit subsidies. The war in Ukraine, extended global supply chains disruptions could lead to shortages of intermediate and final consumer goods, growth slowdowns, and price surges. Delays in revenue reforms could narrow the fiscal space for social and development spending, while lower-than-expected grant support or delayed disbursements from donors would deteriorate financing options. Delayed EMAE reforms and prolonged power outages could also put additional strain on revenue performance and delay the recovery of growth. On the upside, accelerated reforms and key infrastructure development projects could promote medium-term growth.

Executive Board Assessment [3]

Following the Executive Board discussion, Mr. Li, Deputy Managing Director and Acting Chair, made the following statement:

“São Tomé and Príncipe’s performance under the program supported by the IMF’s Extended Credit Facility Arrangement has been broadly satisfactory. Macroeconomic stability has been maintained despite multiple challenges. Looking ahead, an accelerated pace of implementing structural reforms is needed to support inclusive, green growth and improve external competitiveness.

“Implementing a medium-term fiscal framework and strengthening expenditure controls are critical to deliver on the authorities’ fiscal consolidation strategy. Efforts to boost domestic revenue, including the implementation of VAT in 2022, would support growth-enhancing social and infrastructure development programs and put the public debt on a downward trajectory.

“Efforts to modernize monetary and financial legal frameworks should remain a priority. Given inflationary pressures, active liquidity management should continue to anchor the peg to the Euro and support access to credit and economic recovery. Furthermore, the Banco Central São Tomé and Príncipe should enhance its capacity to actively manage risks and vulnerabilities in the financial sector.

“Sustained implementation of structural reforms is critical. Efforts to close the infrastructure gap, improve human capital, deepen financial intermediation, clear domestic arrears, reform the energy sector and improve energy efficiency, enhance governance of public enterprises, and support targeted social transfer programs would contribute to inclusive growth.”

[1] Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team collects economic and financial information and discusses with officials the country's economic developments and policies. The staff prepares a report, which forms the basis for discussion by the Executive Board.

[2] US dollar amounts have been calculated using today’s exchange rate: (1 USD = SDR 0.722916)

[3] 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. An explanation of any qualifiers used in summings up can be found here: .

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