Press Release No. 25/273

Washington, DC: The Executive Board of the International Monetary Fund (IMF) completed today the first review of the 40-month Extended Credit Facility (ECF) Arrangement and concluded the 2025 Article IV Consultation[1] with São Tomé and Príncipe. The completion of the first  review allows for an immediate disbursement of an amount equivalent to about SDR 3.964 million (about US$ 5 million), bringing São Tomé and Príncipe’s total disbursements under the ECF Arrangement to about US$ 10 million.

The authorities’ commitments under the ECF Arrangement approved on December 19, 2024, with total access of the equivalent of SDR 18.5 million (125 percent of quota) (see Press Release 24/490), are expected to support economic rebalancing and bolster medium-term growth. São Tomé and Príncipe’s structural impediments—including remoteness, small size, high exposure to climate risks, weak institutional capacity, narrow export base, and steady labor force losses from emigration—all pose challenges to achieving job-rich, inclusive, and blue growth.

Performance under the ECF Arrangement has been satisfactory with respect to the quantitative targets, with eight of the ten end-December 2024 quantitative performance criteria being met. The Executive Board approved the authorities’ request for waivers of nonobservance of the two missed performance criteria at end-December 2024 on the basis of the minor and temporary nature of the deviation with respect to the floor on net international reserves of the central bank, which has since been remedied, and on the basis of corrective actions with respect to the ceiling on the accumulation of central government's new external payment arrears. The implementation of key structural reforms was delayed, yet progress was made, including the enactment of the central bank organic law, the finalization of the draft financial institutions law, the alignment of domestic fuel prices with international market benchmarks, and the publication of key performance indicators by the electricity company EMAE.

The Executive Board also concluded the 2025 Article IV consultation with São Tomé and Príncipe. The authorities have consented to the publication of the Staff Report prepared for this consultation.[2]

São Tomé and Príncipe’s economy is gradually recovering from recent shocks. GDP growth strengthened to 1.1 percent in 2024 and is projected to accelerate to 2.9 percent in 2025 and 4.7 percent in 2026, remaining robust over the medium term. Inflation has been steadily declining from a peak of 25 percent in January 2023 and is expected to fall to 5 percent by end-2027. Fiscal and external current account imbalances have been narrowing since 2022, a trend that is expected to continue in the coming years. Gross international reserves are projected to increase gradually, reaching the equivalent of 3.1 months of goods imports by 2027. While the country is assessed to be in debt distress, due to prolonged unsettled external arrears, its debt remains sustainable.

Following the Executive Board discussion, Bo Li, Deputy Managing Director and Chair, made the following statement:[3]

“São Tomé and Príncipe’s economy is recovering from recent shocks, supported by an economic reform agenda under the Extended Credit Facility (ECF) arrangement. GDP growth has picked up, inflation is declining steadily, and the fiscal and current account positions have improved substantially. Notwithstanding, international reserves have remained at low levels, mainly reflecting lower-than-expected official development assistance. While the outlook is favorable, it is subject to considerable downside risks. The authorities remain focused on addressing macroeconomic imbalances, re-building reserve buffers, and supporting job-rich, inclusive growth.

“Several key structural reforms have been advanced, including the enactment of the central bank organic law, the finalization of the draft financial institutions law, and the alignment of domestic fuel prices with international market benchmarks.

“The authorities’ plans to formulate and implement a comprehensive domestic revenue mobilization strategy to support their ambitious fiscal consolidation targets are appropriate. They are also committed to maintaining a tight monetary policy stance until inflation falls below the target level, including by continuing to reduce excess reserves through the issuance of central bank certificates of deposit. In parallel, efforts to contain fiscal risks from the energy sector and put in place prudent borrowing and strengthened public debt management frameworks will be essential to preserve debt sustainability.

“The authorities are focused on strengthening governance frameworks, including by operationalizing the newly adopted central bank organic law, enacting the financial institutions and public procurement laws, and promoting greater transparency and accountability in public financial management.

“Accelerating the implementation of structural reforms is an imperative to enhance the export base and promote job-rich, inclusive growth. Important measures include addressing bottlenecks to private sector development and expanding air transport connectivity to stimulate tourism expansion. The authorities are also focused on enhancing resilience to climate-related shocks and accelerating initiatives that promote women’s economic empowerment.”

Executive Board Assessment

Executive Directors agreed with the thrust of the staff appraisal. They welcomed the authorities’ progress on addressing internal and external imbalances and the broadly satisfactory performance under the program. Directors highlighted the considerable downside risks to the outlook, including from commodity price movements, climate change‑related events, and reduced development assistance. They urged continued efforts to address imbalances and highlighted the importance of remaining committed to reforms to strengthen governance and support job‑rich, inclusive growth.

Directors welcomed the authorities’ focus on front‑loaded fiscal consolidation, highlighting the need to reduce debt and support macroeconomic rebalancing. They underscored the criticality of domestic revenue mobilization and welcomed the plans to adopt a comprehensive domestic revenue mobilization strategy. Noting the need to contain fiscal risks, Directors recommended steps to reform the energy sector, expedite the restructuring of the state‑owned electricity company, and improve the oversight and governance of state‑owned enterprises. Measures to strengthen debt management are also important.

Directors encouraged the authorities to maintain a tight monetary policy stance to curb inflation, noting that the central bank’s strategy to reduce excess reserves has proven effective. They welcomed the enactment of the central bank organic law and urged swift implementation of outstanding safeguards recommendations. Directors highlighted the importance of adopting the new Financial Institutions Law to improve financial sector oversight. Resolution of insolvent banks and efforts to expedite the National Financial Inclusion Strategy to broaden access to financial services are necessary.

Directors emphasized the importance of reforms to support medium‑term growth, improve governance, and reduce corruption risks. They recommended addressing infrastructure and human capital bottlenecks to support private sector development, and expanding air transport connectivity to stimulate tourism expansion. Initiatives to promote women’s economic empowerment are important.  Directors urged the authorities to accelerate reforms to strengthen public financial management, including the adoption of a public procurement law and the acquisition of a new Integrated Financial Management Information System (IFMIS). Directors also called for efforts to strengthen resilience to climate‑related shocks. They stressed that tailored capacity development by the Fund and close engagement with other development partners are critical to the success of the reform agenda.

It is expected that the next Article IV Consultation with São Tomé and Príncipe will be held in accordance with the Executive Board decision on consultation cycles for members with Fund arrangements.

 

Table 1. São Tomé and Príncipe: Selected Economic Indicators, 2022–30
(Annual change in percent, unless otherwise indicated)
	2022	2023	2024	2025	2026	2027	2028	2029	2030
	Act.	Act.	Est.	Proj.	Proj.	Proj.	Proj.	Proj.	Proj.
National Income and Prices
GDP at constant prices	0.2	0.4	1.1	2.9	4.7	3.9	3.5	3.5	3.5
GDP deflator	15.8	23.7	17.7	9.5	6.4	5.7	5.7	5.7	5.7
Consumer prices (End of period)	25.2	17.1	11.6	7.8	6.1	5.0	5.0	5.0	5.0
Consumer prices (Period Average)	18.0	21.2	14.4	9.7	7.0	5.6	5.0	5.0	5.0
External Trade
Exports of goods and nonfactor services	18.5	17.7	21.4	15.5	8.2	9.6	9.2	8.6	9.2
Imports of goods and nonfactor services	23.2	4.5	-1.0	17.3	-8.7	9.1	7.3	7.1	6.9
Money and Credit
Base money	-1.7	-11.6	23.6	3.6	5.0	4.0	3.8	4.1	4.4
Broad money (M3)	10.8	5.3	0.6	5.1	11.4	9.9	9.4	9.4	9.4
Credit to the economy	-16.0	-24.2	6.1	5.8	5.7	5.7	6.2	6.8	7.7
Government Finance (in Percent of GDP)
Total revenue, grants, and oil signature bonuses	25.5	21.8	25.6	27.7	22.1	22.5	22.4	22.0	22.0
Tax revenue	10.6	11.3	10.7	13.3	13.7	14.3	14.4	14.4	14.4
Nontax revenue	3.1	2.5	3.5	3.3	3.3	3.3	3.3	3.3	3.4
Grants	11.7	8.0	11.4	11.1	5.1	4.9	4.7	4.3	4.2
Total expenditure and net lending	27.7	23.9	24.7	26.4	19.7	18.8	18.8	18.6	18.3
Personnel costs	9.2	7.7	6.9	8.0	8.4	8.4	8.4	8.4	8.4
Interest due	0.5	0.7	0.7	1.1	0.6	0.6	0.6	0.5	0.5
Treasury funded capital expenditures	2.4	3.5	2.8	2.7	1.4	0.4	0.5	0.6	0.6
Donor funded capital expenditures	8.5	5.8	8.8	8.7	3.8	3.9	3.9	3.7	3.4
Domestic primary balance (commitment basis, TMU definition) 1	-5.7	-0.9	0.0	1.0	1.5	2.0	2.0	2.0	2.0
Overall balance (commitment basis)	-2.2	-2.1	0.9	1.3	2.4	3.8	3.6	3.4	3.7
Public Debt 2	86.8	73.2	64.8	54.0	47.7	43.2	39.3	35.9	31.9
External Sector
Current account balance (percent of GDP)
Including official transfers	-14.5	-12.3	-1.9	-3.4	-3.9	-4.1	-3.9	-3.9	-3.4
Excluding official transfers	-26.2	-20.3	-13.3	-14.6	-9.0	-9.0	-8.6	-8.2	-7.6
PV of external debt (percent of GDP)	26.6	27.2	26.3	24.1	21.5	19.4	17.3	15.7	13.9
External debt service (percent of exports) 3	6.2	4.7	8.0	10.3	11.9	10.9	9.4	7.8	7.4
Export of goods and non-factor services (US$ millions)	97.0	114.1	138.5	160.0	173.0	189.6	207.0	224.8	245.4
Gross international reserves (face value) 4
Millions of U.S. dollars	59.2	42.9	38.9	60.0	67.9	86.9	93.1	99.8	108.6
Months of imports of goods and services	2.6	1.9	1.5	2.5	2.6	3.1	3.1	3.1	3.2
Memorandum Item
Gross Domestic Product
Millions of dobra	12,690	15,762	18,756	21,130	23,532	25,854	28,272	30,942	33,863
Millions of U.S. dollars	546	696	828	929	1,040	1,143	1,250	1,367	1,497
Per capita (in U.S. dollars)	2,412	3,014	3,517	3,866	4,245	4,574	4,907	5,268	5,657
Sources: São Tomé and Príncipe authorities' data and IMF staff estimates and projections.
1 Excludes oil-related revenues, ENCO debt repayment, grants, scheduled interest payments, foreign-financed capital outlays and expenses related to fuel imports, as defined in the TMU.
2 Total public and publicly guaranteed debt as defined in the DSA, which includes EMAE's debt to ENCO.
3 Percent of exports of goods and nonfactor services.
4 Gross international reserves as defined in the TMU.

 

 

[1] Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.

[2] Under the IMF's Articles of Agreement, publication of documents that pertain to member countries is voluntary and requires the member consent. The staff report will be shortly published on the https://www.imf.org/en/Countries/STP page.

[3] At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summings up can be found here: http://www.IMF.org/external/np/sec/misc/qualifiers.htm.