IMF Staff Completes Review Visit to Gabon

IMF News, November 1, 2017

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IMF staff team led by Alex Segura-Ubiergo visited Libreville from October 18 to November 1 for the first review of Gabon’s extended arrangement under the Extended Fund Facility (EFF).
The EFF-supported program aims to restore macroeconomic stability and lay the foundation for inclusive growth, buttress debt sustainability at the national level, and contribute to the external stability of the Central African Economic and Monetary Union (CEMAC).
The IMF team reached a staff-level agreement with the authorities on the economic policies needed to complete the first review. The IMF Executive Board is expected to consider the staff report for the first review in mid-December 2017.
Completion of the first review would enable a second program disbursement of SDR71.43 (about US$98.8 million).

Growth expected at about 0.8 percent in 2017.
Signs of stabilization: recovery in international energy prices benefiting the oil sector; expansion in other resource sectors (manganese, timber, and agri-business).
Exports boosted by 38 percent (y/y) at end June, helping improve the trade balance and moderate the decline in the level of imputed international reserves of Gabon at BEAC.
Continued weaknesses: commercial and services sectors remain weak; bank deposits and credit to the economy continued to decline.

Strong efforts to contain public spending and larger than expected oil revenues have contributed to overperformance on the authorities’ fiscal adjustment program.
Overall fiscal deficit (on a cash basis) expected to decline to 3.6 percent of GDP in 2017 (compared to 6.6 percent of GDP in 2016).
Public debt projected to decline to 59 percent of GDP in 2017, as opposed to the initial projection of 64.2 percent of GDP, thanks to exchange rate appreciation and fiscal consolidation.
Fiscal consolidation will continue in 2018, with an overall fiscal deficit (cash basis) expected to decline to about 2.3 percent of GDP.
Identified fiscal risks: weaknesses in non-oil revenue collections and pressures from the government wage bill.

Program implementation: through the first half of 2017, most quantitative performance criteria and structural benchmarks were met, but authorities accumulated new external and domestic arrears.
The strategy to deal with arrears is identified as the most pressing short-term economic challenge for Gabon.
Domestic arrears, especially unpaid bills to government suppliers, are seriously impacting private sector activity and negatively affecting small and medium enterprises.
External arrears need to be cleared expeditiously to maintain creditworthiness and ensure adequate levels of foreign investment and external financing, including for projects supporting diversification.
Policy priorities include:
- Strengthening short term debt and cashflow management and expenditure control procedures to prevent accumulation of new arrears.
- Frequent communication with domestic and external creditors and implementation of a credible plan to deal with arrears.

Authorities reiterated commitment to pursue public sector reforms to support the arrears clearance and prevention strategy, mobilize non-oil tax revenues, and strengthen public financial management.
The IMF team emphasized protecting, and to the extent possible increasing, budgetary allocations for critical social programs, especially those that can more directly benefit low income groups.
Gabon should continue business environment reforms as part of the diversification strategy that seeks to raise growth toward 5 percent over the medium term.

On June 19, 2017, the IMF Executive Board approved an SDR 464.4 million (about US$642 million) extended arrangement under the Extended Fund Facility for Gabon, or 215 percent of Gabon’s IMF quota, in support of Gabon’s medium-term economic recovery program.

The team met with the Minister of Economy Immongault, Budget Minister Otandault, the Deputy National Director of BEAC, other senior government officials, representatives of the private sector, civil society, and the diplomatic community.
Quote: “The strategy to deal with arrears has become the most pressing short-term economic challenge for Gabon.” – IMF’s Segura-Ubiergo

Source: IMF Press Release No. 17/416, "IMF Staff Completes Review Visit to Gabon", November 1, 2017.