Press Release No. 13/32

Press Release No. 13/32
February 1, 2013

Mr. Ricardo Velloso, the International Monetary Fund (IMF) mission chief for São Tomé and Príncipe, visited São Tomé during January 25-31, 2013, to learn more about the economic policy intentions of the new government, follow-up on technical assistance needs and priorities, and hold meetings with the country’s main donors.

The authorities’ medium-term economic program is supported by the IMF under a three-year Extended Credit Facility (ECF)¹ arrangement in the amount of SDR 2.59 million (about US$4 million). The ECF arrangement was approved by the IMF Executive Board on July 20, 2012, and its first review mission is scheduled for March 2013 (see Press Release No. 12/272).

During this mission, Mr. Velloso held fruitful meetings with Prime Minister Gabriel Costa, Finance Minister Hélio Almeida, Central Bank Governor Maria do Carmo Silveira, and other senior government officials. He also met with representatives of the country’s main donors.

At the conclusion of the visit, Mr. Ricardo Velloso, the IMF Mission Chief for São Tomé and Príncipe, issued the following statement in São Tomé:

“The authorities of the new government fully understand the importance of maintaining fiscal discipline to give credibility to the fixed exchange rate regime and to help in the disinflation process. In this connection, the revised 2013 draft budget should be guided by the fiscal targets under the IMF-supported program and based on conservative assumptions given the challenging external environment. Also, the government should continue to avoid commercial borrowing and instead focus on grants and highly concessional loans to finance development programs given São Tomé and Príncipe’s still fragile external debt position.

“The new government should preserve the autonomy of the central bank and continue to provide this institution with the needed resources to conduct in the best possible way its highly technical work. Only an autonomous and technically equipped central bank will have the credibility to fulfill its mandate of promoting the monetary and financial stability of the country.”

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¹ The Extended Credit Facility (ECF) is the IMF’s main tool for medium-term financial support to low-income countries. It provides for a higher level of access to financing, more concessional terms, enhanced flexibility in program design, and more focused, streamlined conditionality. Financing under ECF currently carries a zero interest rate, with a grace period of 5½ years, and a final maturity of 10 years.