IMF Survey : Gabon Seeks to Diversify its Economy as Oil Revenues Decline
IMF News, March 21, 2016
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- Published: March 21, 2016
Macroeconomic shock and outlook
- Oil prices have declined by about 75 percent over the past 18 months; they used to be a little over $100 per barrel and now they’re about $30 per barrel.
- Growth declined to about 4 percent in 2015.
- Growth is expected to decline further to just over 3 percent—about 3.2 percent—in 2016.
- Between 2010 and 2014, the growth rate was around 6 percent.
- Oil in 2014 contributed to about 45 percent of government revenue and about 85 percent of exports.
Immediate fiscal and revenue responses (short run)
- Raise additional revenue outside of the oil sector, notably by reducing the extent of tax exemptions.
- Better control the growth of the wage bill to contain spending.
- Reprioritize capital spending to focus on projects with the highest benefits or highest economic returns so the government can live within its means.
Social protection and distributional considerations
- Adjust spending in line with available revenue while protecting the most vulnerable.
- Strengthen the social safety net by:
- Developing the agricultural sector (reduce food imports; produce food more cheaply locally).
- Improving rural access roads and availability of agricultural inputs.
- Introducing or expanding cash transfers for the most vulnerable segments of the population, particularly in urban areas.
Structural diversification and medium- to long-term reforms
- Principal strategic objective: diversify the economy to reduce dependence on oil and increase resilience to external shocks.
- Authorities’ strategic plan: PSGE (Plan Stratégique Gabon Emergent).
- Key areas of focus under PSGE:
- Development of infrastructure, especially transport (roads, ports, railways) and improving availability of electricity.
- Increase value added through Special Economic Zone (Nkok near Libreville) with emphasis on industries such as wood processing.
- Improve business climate nationwide to promote investment.
- Invest in human capital—particularly vocational training—to address shortage of qualified manpower and support diversification into new economic activities.
Key policy priorities (three stated priorities)
- Boost the growth rate through implementation of structural reforms to elevate long-run growth.
- Diversify the economy to make it more resilient to external shocks (for example, oil price declines).
- Safeguard long-run fiscal sustainability to avoid significant increases in public debt that would jeopardize strategic objectives in both the short run and the long run.
IMF Survey interview with Montfort Mlachila; March 21, 2016.