IMF Executive Board Completes Second ECF Review for São Tomé and Príncipe, and Approves US$0.9 Million Disbursement
IMF News, December 9, 2016
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- Published: December 9, 2016
Summary of action and financing
- The Executive Board completed the second review of São Tomé and Príncipe’s economic program under the Extended Credit Facility (ECF) arrangement.
- Completion of the review enabled the immediate disbursement of SDR 634,285 (about US$0.9 million).
- Total disbursements under the arrangement now amount to SDR 1.9 million (about US$2.6 million).
- The three-year ECF arrangement was originally for SDR 4.44 million (about US$6.2 million or 60 percent of quota at the time of approval), approved on July 13, 2015.
Macroeconomic outlook and performance
- Growth has been “subdued, though still positive, reflecting delayed external financing that affected spending on key growth-enhancing capital projects.” — Mitsuhiro Furusawa
- The macroeconomic outlook is described as positive, but fiscal and debt sustainability concerns remain critical.
- Recent program performance has been mixed:
- The structural reform agenda is broadly on track, except for delayed implementation of the automatic fuel price adjustment mechanism.
- Delayed disbursement of external financing led to slippages that resulted in missing both the domestic primary balance and net international reserves performance criteria for end-June 2016.
- Authorities introduced corrective measures to keep the end-2016 fiscal program on track.
- The Executive Board approved:
- A waiver for nonobservance of the end June 2016 performance criteria on the domestic primary deficit and net international reserves, based on corrective measures introduced by the authorities.
- Modification of the end-December target on net international reserves.
- New program targets for 2017.
Structural and sectoral reform priorities
- Introduction of the automatic fuel price adjustment mechanism at the end of November 2016 is expected to:
- Tackle longstanding problems of arrears.
- Prevent the accumulation of new domestic arrears.
- Support the authorities’ fiscal consolidation efforts.
- Planned energy-sector reforms aim to:
- Reduce cost and enhance efficiency.
- Further strengthen public finances.
- Encourage private sector participation.
- Banking-sector concerns and recommended measures:
- Banking sector vulnerabilities remain a source of concern.
- Authorities should implement the strategy to reduce the large stock of non-performing loans, backed by a comprehensive asset quality review.
- Authorities should push ahead with measures to reform debt enforcement and insolvency regimes, promote out-of-court workouts, and improve operational capacity of banks.
- During liquidation of Banco Equador, attention should be paid to safeguard financial stability and minimize costs to the budget.
- Continued commitment to the structural reform agenda, prioritizing export diversification and cost competitiveness, is emphasized to support growth and external stability.
IMF Executive Board Completes Second ECF Review for São Tomé and Príncipe, and Approves US$0.9 Million Disbursement — Press Release No. 16/549, December 9, 2016