IMF Staff Completes Visit to São Tomé and Príncipe
IMF News, June 6, 2024
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- Published: June 6, 2024
Visit summary
- An IMF team led by Mr. Slavi Slavov, Mission Chief for São Tomé and Príncipe, visited São Tomé during May 23 – June 5, 2024 to discuss IMF support for policies and reform plans.
- Press Release No. 24/206.
- IMF Press Officer: Pavis Devahasadin. Phone: +1 202 623-7100. Email: MEDIA@IMF.org.
Economic situation and shocks
- The economy continues to face serious challenges, experiencing large imbalances, sluggish growth, and high inflation.
- Recent shocks affecting the economy included COVID-19, floods, the commodity price shock following the war in Ukraine, and a massive external shock in early 2023 when a major fuel exporter stopped supplying fuel on credit, opening a large external financing gap.
- Energy shortages have added to economic pressures.
Key macroeconomic indicators
- Real GDP growth: 0.2 percent in 2022 and an estimated 0.4 percent in 2023.
- Inflation: 19.2 percent in April 2024, year-on-year.
- International reserves: fell sharply (no numeric value provided).
Policy measures implemented and progress
- Launched the Value-Added Tax in June 2023.
- Implemented a large fiscal adjustment in 2023.
- Fuel prices were adjusted and explicit fuel subsidies have been eliminated in the aggregate.
- The central bank (Banco Central de São Tomé e Príncipe or BCSTP) ended monetary financing of the budget and implemented some tightening measures to reduce excess reserves.
- Progress was made during the visit on policy measures to address domestic and external imbalances.
- Virtual discussions will continue in the next few weeks on the appropriate policy package.
IMF analysis, priorities, and policy recommendations
- The authorities are committed to an ambitious medium-term fiscal adjustment, identified as the key instrument to address high public debt and rebalance the economy under a pegged exchange rate, complemented by tighter monetary policy.
- Accelerating reforms of the energy sector is urgently needed to alleviate pressures on public debt and foreign exchange reserves, and to unlock growth.
- Strengthening transparency and addressing governance weaknesses to reduce vulnerabilities to corruption is key.
- It is critical that the authorities obtain financing commitments from external partners; such commitments are a prerequisite for a program that could be supported by the IMF.
- Given the country’s high public debt, it is important that external financing commitments come in the form of grants or highly concessional loans.
- The timely and decisive implementation of these policies and commitments would be critical for São Tomé and Príncipe to restore macroeconomic stability and advance sustainable development.
Meetings and next steps
- During the visit, the mission met with:
- President Carlos Vila Nova;
- Prime Minister Patrice Émery Trovoada;
- Minister of Planning and Finance Ginésio Valentim Afonso da Mata;
- Minister of Economy Disney Leite Ramos;
- Governor of the Central Bank Américo D’Oliveira dos Ramos;
- President of the Court of Auditors Ricardino Costa Alegre;
- other government officials; representatives of the private sector including banks; and development partners.
- The mission expressed deep appreciation for the authorities’ cooperation and constructive policy dialogue.
- Virtual discussions will continue in the next few weeks on the appropriate policy package.
IMF press release, June 6, 2024.