IMF Staff Completes Review Mission to Gabon

IMF News, June 25, 2018

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IMF mission led by Alex Segura-Ubiergo visited Libreville during June 13-25 to conduct discussions for the second review of Gabon’s extended arrangement under the Extended Fund Facility (EFF).
The EFF-supported program aims to restore macroeconomic stability, buttress debt sustainability at the national level, improve the transparency and efficiency of public spending, and contribute to the external stability of the Central African Economic and Monetary Union (CEMAC).

Economic growth is expected to recover in 2018 and reach 2 percent against 0.5 percent in 2017.
Growth in 2017 was about 0.5 percent, with weakness in traditional sectors (oil, commercial and service sectors) partly offset by robust activity in mineral extraction, agriculture and timber.
Inflation was modest at 2.7 percent.
Oil exports and new mining capacity helped reduce the current account deficit in 2017.
Medium-term outlook: favorable if adequate policies are implemented; prospects for gradual recovery driven by large-scale private investment in transportation infrastructure and expansion in export sectors. Potential positive spillovers from largely rural and labor-intensive agriculture and forestry projects depend on reforms to improve the business climate.

Financial sector vulnerabilities increased in 2017: bank deposits and credit to the private sector decreased, while loans in arrears increased.
Conditions worsened in Q1 2018, reflecting the impact of the government’s domestic arrears to its suppliers.
The mission stressed the need for decisive steps to accelerate repayment of domestic arrears, noting repayment plans, including under the “Club of Libreville” arrangement, should be executed transparently.
Slow progress in clearing domestic and external arrears is a serious burden on private-sector capacity to sustain growth and could weaken the health of the banking system.

Program performance was weak with substantial fiscal slippages and slow progress on structural reforms; the authorities agreed to take strong corrective action.
The overall fiscal deficit (cash basis) declined by about 3 percent of GDP, broadly in line with program projections.
Public debt (including domestic arrears) was contained at around 63 percent of GDP.
The composition of fiscal adjustment relied on a large drop in public investment, which can negatively impact growth.
Insufficient progress to contain current spending (wages and salaries, transfers, subsidies and special accounts) and weak non-oil revenue collections were noted.
Many important structural reforms have been delayed or not implemented as planned.

Authorities acknowledged the need to step up program implementation and agreed to implement decisive measures through the 2018 supplementary budget.
The draft supplementary budget includes measures to reduce the wage bill to help alleviate cashflow pressures and place public finances on a sustainable path.
The mission noted that additional measures will be needed:
- Strengthen revenue mobilization.
- Further reduce the total level of spending while ensuring social spending is adequately protected for the most vulnerable groups.
- Improve transparency and efficiency of the budget.
- Improve cashflow management to avoid new accumulation of domestic and external arrears.
- Execute the repayment plan for domestic arrears transparently (including under the “Club of Libreville” arrangement).
Discussions to finalize a package of economic measures and reforms are to continue, with a package that could be presented to the IMF Executive Board for discussion by end-July.

Mission dates: June 13-25.
Growth: 0.5 percent in 2017; expected 2 percent in 2018.
Inflation: 2.7 percent.
Overall fiscal deficit (cash basis): declined by about 3 percent of GDP.
Public debt (including domestic arrears): around 63 percent of GDP.
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; the first review of the program was concluded on December 21, 2017.

IMF Staff Completes Review Mission to Gabon — June 25, 2018