December 19, 2024
PRESS OFFICER: Pavis Devahasadin
Phone: +1 202 623-7100Email: MEDIA@IMF.org
Washington, DC – December 19, 2024: The IMF Executive Board today approved a 40-month ECF arrangement for São Tomé and Príncipe, in the amount of SDR 18.5 million (approximately US$24 million, or 125 percent of the country's quota), to support the nation’s economic and structural reforms. The Board’s decision enables an immediate disbursement of SDR 3.964 million (about US$5 million). The remaining amount will be disbursed over the duration of the arrangement, subject to semi-annual reviews.
São Tomé and Príncipe is facing major macroeconomic challenges, including high fuel import needs, limited export potential, and low international reserves. A severe balance of payments shock in early 2023 created a large external financing gap. The economy faced low growth in 2022 and 2023 due to foreign exchange and energy shortages, while inflation stayed high. Growth is expected to remain weak in 2024, although inflation has started to decline.
Building on critical steps already taken, the authorities' ambitious reform initiative seeks to restore macroeconomic stability, improve living conditions, and promote sustainable and inclusive growth. This plan entails a substantial fiscal adjustment, which is crucial for reducing high public debt and rebalancing the economy under a pegged exchange rate, while also ensuring the protection of vulnerable groups. It includes urgent reforms in the electricity sector and medium-term structural changes to facilitate the transition to green energy and unlock the country’s growth potential.
Following the Executive Board discussion, Bo Li, Deputy Managing Director and Chair, made the following statement:
“São Tomé and Príncipe has been facing significant challenges amid multiple shocks, low international reserves, and high debt vulnerabilities. In response, the authorities have designed a strong economic program to address protracted balance of payment needs, strengthen reserves, restore macroeconomic stability, and boost medium-term growth.
“While growth remains sluggish, stubbornly high inflation has finally started to decline. Decisive implementation of the authorities’ economic program will support the economic recovery. The outlook is subject to significant downside risks.
“To strengthen the external position the authorities are implementing short-term policies to reduce external financing needs and structural reforms to strengthen competitiveness, diversify the economy, and boost exports. Given sizeable financing needs, strong and timely support from donors is critical.
“The authorities are pursuing an ambitious and front-loaded fiscal adjustment while protecting priority social spending. They introduced a VAT and achieved a significant fiscal improvement in 2023. Developing and implementing a domestic revenue mobilization strategy will be critical to achieve the medium-term fiscal targets. The programmed fiscal adjustment and cautious borrowing will help place public debt on a downward path. The authorities are committed to strengthen the fiscal framework, increase transparency in public procurement, and enhance governance.
“The authorities remain committed to maintaining debt sustainability, including through prudent borrowing practices and a focus on securing grant financing and concessional loans. They are actively engaging with creditors on arrears and are working on developing a medium-term debt management strategy.
“The authorities continue their efforts to reduce inflation, maintain financial stability, and accumulate international reserves. They are committed to adopting the new central bank organic law and implementing the remaining safeguards recommendations.
“The envisaged comprehensive reform of the energy sector and gradual shift towards renewable energy sources will help to reduce fuel imports, boost international reserves, and contain fiscal risks. Further efforts to boost private sector-led growth and reduce poverty are appropriately focused on strengthening human capital, building infrastructure, increasing climate resilience, an+d promoting women’s economic empowerment.”
Program Summary
The proposed 40-month arrangement aims to underpin the authorities’ efforts to address protracted São Tomé and Principe’s balance of payments needs, strengthen the reserve position, restore macroeconomic stability, and boost medium-term growth. Key priorities under the ECF include:
Restoring fiscal sustainability and reducing debt vulnerabilities via a substantial and front-loaded fiscal adjustment, alongside efforts to boost domestic fiscal revenues and rationalize budgetary expenditures, all while protecting the most vulnerable.
Filling the external financing gap and strengthening reserves through a policy package to substantially reduce external financing needs.
Managing fiscal risks from loss-making SOEs through reforms of the energy sector and improving the financial oversight of SOEs.
Maintaining a tight monetary policy stance to reduce excess liquidity, address high inflation, and support the peg to the euro.
Accelerating structural reforms to foster inclusive and private sector-led growth, alleviate poverty, and enhance women’s economic empowerment.
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Table 1. São Tomé and Príncipe: Selected Economic Indicators, 2021–29 |
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(Annual change in percent, unless otherwise indicated) |
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2021 |
2022 |
2023 |
2024 |
2025 |
2026 |
2027 |
2028 |
2029 |
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|
Est. |
Proj. |
Proj. |
Proj. |
Proj. |
Proj. |
Proj. |
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National Income and Prices |
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GDP at constant prices |
1.9 |
0.2 |
0.4 |
0.9 |
3.1 |
4.8 |
4.1 |
3.5 |
3.5 |
|
|
GDP deflator |
5.2 |
15.7 |
21.7 |
14.9 |
9.8 |
6.2 |
4.5 |
4.4 |
4.5 |
|
|
Consumer prices (End of period) |
9.5 |
25.2 |
17.1 |
10.9 |
6.9 |
5.0 |
5.0 |
5.0 |
5.0 |
|
|
Consumer prices (Period Average) |
8.1 |
18.0 |
21.2 |
14.0 |
8.9 |
5.9 |
5.0 |
5.0 |
5.0 |
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External Trade |
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Exports of goods and nonfactor services |
57.2 |
18.5 |
12.0 |
33.0 |
6.0 |
9.6 |
7.2 |
9.7 |
8.0 |
|
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Imports of goods and nonfactor services |
24.0 |
22.8 |
2.5 |
14.1 |
-3.6 |
-2.0 |
3.9 |
7.6 |
6.4 |
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Exchange rate (dobras per US$; end of period) 1 |
21.7 |
23.1 |
22.5 |
… |
… |
… |
… |
… |
… |
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Real effective exchange rate (period average, depreciation = -) |
5.5 |
3.4 |
22.1 |
... |
... |
... |
... |
... |
... |
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Money and Credit |
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Base money |
12.7 |
-1.7 |
-11.6 |
-4.6 |
10.4 |
3.2 |
0.1 |
-3.9 |
-9.8 |
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Broad money (M3) |
-2.7 |
10.8 |
5.3 |
0.1 |
15.7 |
7.9 |
4.4 |
0.1 |
1.0 |
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Credit to the economy |
-5.0 |
-16.0 |
-24.2 |
-1.8 |
15.4 |
12.3 |
7.6 |
7.1 |
7.2 |
|
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Velocity (GDP to broad money; end of period) |
3.4 |
3.5 |
4.1 |
4.8 |
4.7 |
4.8 |
5.0 |
5.4 |
5.8 |
|
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Central bank reference interest rate (percent) |
9.0 |
9.5 |
10.0 |
... |
... |
... |
... |
... |
... |
|
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Average bank lending rate (percent) |
18.5 |
17.9 |
17.8 |
... |
... |
... |
... |
... |
... |
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Government Finance (in Percent of GDP) |
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Total revenue, grants, and oil signature bonuses |
24.1 |
25.5 |
22.2 |
24.2 |
25.0 |
22.3 |
22.6 |
22.6 |
22.1 |
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Of which: tax revenue |
12.1 |
10.6 |
11.5 |
10.9 |
13.8 |
14.4 |
14.9 |
15.0 |
15.0 |
|
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Nontax revenue |
2.5 |
3.1 |
2.6 |
2.8 |
2.6 |
2.6 |
2.6 |
2.6 |
2.6 |
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Grants |
9.5 |
11.7 |
8.1 |
10.5 |
8.5 |
5.3 |
5.1 |
4.9 |
4.5 |
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Total expenditure and net lending |
25.6 |
27.7 |
21.1 |
21.4 |
21.4 |
20.4 |
20.3 |
20.5 |
20.3 |
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Personnel costs |
9.1 |
9.2 |
7.8 |
7.4 |
8.3 |
8.4 |
8.4 |
8.4 |
8.4 |
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Interest due |
0.2 |
0.5 |
0.7 |
1.1 |
0.6 |
0.7 |
0.6 |
0.6 |
0.6 |
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Nonwage noninterest current expenditure |
7.3 |
7.0 |
6.2 |
5.6 |
6.1 |
6.0 |
6.0 |
6.0 |
6.0 |
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Treasury funded capital expenditures |
0.1 |
2.4 |
0.3 |
0.3 |
0.3 |
0.3 |
0.4 |
0.5 |
0.5 |
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Donor funded capital expenditures |
7.3 |
8.5 |
5.9 |
6.8 |
5.9 |
4.8 |
4.7 |
4.8 |
4.6 |
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HIPC Initiative-related capital expenditure |
0.1 |
0.1 |
0.1 |
0.2 |
0.2 |
0.2 |
0.2 |
0.2 |
0.1 |
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COVID-19 spending |
1.5 |
1.0 |
… |
… |
… |
… |
… |
… |
… |
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Domestic primary balance (commitment basis) 2 |
-2.5 |
-5.7 |
-0.9 |
-0.5 |
1.0 |
1.5 |
2.0 |
2.0 |
2.0 |
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Net domestic borrowing |
4.1 |
4.6 |
0.4 |
-2.7 |
-1.1 |
-1.5 |
-2.1 |
-2.0 |
-2.0 |
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Overall balance (commitment basis) |
-1.5 |
-2.2 |
1.1 |
2.8 |
3.5 |
1.9 |
2.3 |
2.1 |
1.9 |
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Public Debt 3 |
88.1 |
88.2 |
76.7 |
68.6 |
61.3 |
57.0 |
53.2 |
49.1 |
45.8 |
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Of which: EMAE's debt to ENCO |
28.9 |
33.1 |
28.5 |
27.0 |
25.6 |
24.3 |
22.9 |
21.7 |
20.0 |
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External Sector |
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Current account balance (percent of GDP) |
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Including official transfers |
-13.1 |
-14.4 |
-12.3 |
-7.9 |
-5.5 |
-5.2 |
-4.4 |
-4.2 |
-4.3 |
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Excluding official transfers |
-22.5 |
-26.1 |
-20.5 |
-18.4 |
-14.0 |
-10.4 |
-9.5 |
-9.2 |
-8.7 |
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PV of external debt (percent of GDP) |
26.6 |
27.2 |
30.5 |
29.0 |
26.2 |
24.2 |
22.8 |
21.4 |
20.0 |
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External debt service (percent of exports) 4 |
3.0 |
6.2 |
4.3 |
6.4 |
10.8 |
12.3 |
11.5 |
9.9 |
8.2 |
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Export of goods and non-factor services (US$ millions) |
81.8 |
97.0 |
108.6 |
144.4 |
153.1 |
167.7 |
179.8 |
197.2 |
212.9 |
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Gross international reserves (face value) 5 |
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Millions of U.S. dollars |
62.5 |
59.2 |
42.9 |
48.1 |
68.7 |
71.7 |
82.4 |
87.7 |
91.0 |
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Months of imports of goods and services |
2.9 |
2.7 |
1.7 |
2.0 |
2.9 |
2.9 |
3.1 |
3.1 |
3.1 |
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Months of imports of goods and nonfactor services 6 |
4.6 |
3.5 |
2.4 |
2.8 |
4.1 |
4.1 |
4.4 |
4.4 |
4.4 |
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National Oil Account (stock, US$ millions) |
13.6 |
15.7 |
16.6 |
19.2 |
20.8 |
22.7 |
24.7 |
26.9 |
29.2 |
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Prospective financing (US$ millions) |
… |
… |
… |
55.8 |
38.5 |
23.1 |
23.0 |
17.4 |
17.4 |
|
|
Prospective nonproject grants and concessional loans |
… |
… |
… |
50.5 |
30.3 |
17.4 |
17.4 |
17.4 |
17.4 |
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ECF disbursements |
… |
… |
… |
5.3 |
8.2 |
5.7 |
5.7 |
0.0 |
0.0 |
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Memorandum Item |
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Gross Domestic Product |
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Millions of dobra |
10,942 |
12,690 |
15,500 |
17,970 |
20,348 |
22,654 |
24,629 |
26,613 |
28,770 |
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Millions of U.S. dollars |
529 |
546 |
684 |
799 |
911 |
1,018 |
1,107 |
1,196 |
1,293 |
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Per capita (in U.S. dollars) |
2,370 |
2,405 |
2,949 |
3,372 |
3,767 |
3,961 |
4,222 |
4,472 |
4,740 |
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Sources: São Tomé and Príncipe authorities' data and IMF staff estimates and projections. |
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1 Central Bank (BCSTP) mid-point rate. |
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2 Excludes oil related revenues, ENCO debt repayment, grants, scheduled interest payments, and foreign-financed capital outlays as defined in the TMU. |
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3 Total public and publicly guaranteed debt as defined in the DSA, which includes EMAE's debt to ENCO. |
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4 Percent of exports of goods and nonfactor services. |
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5 Gross international reserves as defined in the TMU. |
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6 Imports of goods and services excluding imports of investment goods and technical assistance. |
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