Press Release No. 25/438

Washington, DC: The IMF Executive Board completed the second review under the Extended Credit Facility (ECF) Arrangement with São Tomé and Príncipe. The completion of the second review allows for an immediate disbursement of an amount equivalent to about SDR 2.1 million (about US$ 2.9 million), bringing São Tomé and Príncipe’s total disbursements under the ECF Arrangement to about US$ 13.7 million.

The authorities’ commitments under the ECF Arrangement approved on December 19, 2024, with total access of the equivalent of SDR 18.5 million (about US$ 25.3 million, or 125 percent of quota), 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.

In addition, São Tomé and Príncipe is facing unfavorable demographics, a shock to electricity supply, and delays in the energy transition. As a result, GDP growth forecasts have been revised downward from 2.9 to 2.1 percent, inflation is expected to decline at a slower pace, and an additional balance of payments gap is projected. In this context, the authorities requested a 12-month extension of the ECF Arrangement, along with an augmentation by the equivalent of SDR 4.44 million (about US$ 6.1 million, or 30 percent of quota), bringing total access to 155 percent of quota, combined with a more gradual and less front-loaded path for fiscal adjustment.

Performance under the ECF Arrangement has been broadly satisfactory, with four of the six end-June 2025 quantitative performance criteria being met. The Executive Board approved the authorities’ request for waivers of nonobservance of the two missed performance criteria at end-June 2025 on the basis of the minor and temporary nature of the deviation with respect to the domestic primary balance which was impacted by a shock to the energy sector, and on the basis of corrective actions with respect to the ceiling on the accumulation of central government's new external payment arrears. On the structural side, out of a total of fifteen structural benchmarks assessed, five were met, three were converted into prior actions, and one was implemented with a delay.

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

“São Tomé and Príncipe’s performance under the ECF arrangement has been broadly satisfactory. The authorities have made progress on structural reforms, including the adoption of a comprehensive domestic revenue mobilization strategy and the submission of the draft Financial Institutions Law to Parliament. However, São Tomé and Príncipe’s economic recovery is facing headwinds from unfavorable demographic trends, an energy crisis, and delays in the energy transition. GDP growth forecasts have been revised downward, while inflation remains persistently high. These shocks have opened an additional balance of payments gap, which justifies a more gradual and less front-loaded path for fiscal adjustment. Despite these challenges, the medium-term outlook remains broadly positive, provided that energy sector reforms are implemented steadfastly and supported by sustained donor engagement to advance the energy transition and restructure the public utility company.

“The authorities are committed to vigorously implementing their domestic revenue mobilization strategy to underpin fiscal consolidation. Key measures include strengthening VAT administration, rebalancing the tax mix away from import duties toward excise taxes, and enhancing overall revenue administration capacity. Fiscal consolidation will be complemented by reforms aimed at strengthening public financial management to enhance transparency, accountability, and the efficiency of public spending.

“To address persistent inflationary pressures, the authorities are determined to further tighten the monetary policy stance. The appointment of all the members of the new BCSTP Board of Directors is an urgent priority, in order to fully operationalize the new central bank organic law and implement key safeguards recommendations.

“The authorities have adopted a new National Strategy for Sustainable Development, formulated through an inclusive process. The strategy’s strong emphasis on enhancing human capital, reinforcing fiscal sustainability, and strengthening social protection aligns closely with the priorities of the ECF-supported program.”

 

 

Table 1. São Tomé and Príncipe: Selected Economic Indicators, 2024-28 (Annual Change in Percent, unless otherwise indicated)       2024   2025   2026 2027 2028       Est.   Prog. Proj.   Prog. Proj. Proj. Proj.                           National Income and Prices                       GDP at constant prices   1.1   2.9 2.1   4.7 3.9 3.9 3.3   GDP deflator   17.7   9.5 11.5   6.4 10.0 7.5 6.0   Consumer prices (End of period)   11.6   7.8 12.2   6.1 9.7 6.9 5.0   Consumer prices (Period Average)   14.4   9.7 11.9   7.0 11.0 8.3 6.0                           External Trade                       Exports of goods and nonfactor services   21.4   15.5 13.7   8.2 14.7 10.2 9.5   Imports of goods and nonfactor services   -0.1   17.3 11.4   -8.7 12.9 6.8 5.0   Exchange rate (dobras per US$; end of period) 1   23.4   … …   … … … …   Real effective exchange rate (period average, depreciation = -)   13.3   ... ...   ... ... ... ...                           Money and Credit                       Base money   23.6   3.6 24.9   5.0 13.5 8.4 5.6   Broad money (M3)   0.6   5.1 10.6   11.4 9.6 8.4 7.9   Credit to the economy   6.1   5.8 9.1   5.7 8.5 8.1 7.3   Velocity (GDP to broad money; end of period)   4.9   5.3 5.1   5.3 5.3 5.5 5.6   Central bank reference interest rate (percent)   10.0   ... ...   ... ... ... ...   Average bank lending rate (percent)   17.8   ... ...   ... ... ... ...                           Government Finance (in Percent of GDP)                       Total revenue, grants, and oil signature bonuses   24.7   27.7 21.2   22.1 20.5 21.4 22.2   Of which:  tax revenue   10.7   13.3 11.1   13.7 11.4 12.4 13.3   Nontax revenue   2.6   3.3 2.3   3.3 2.8 2.9 3.0   Grants   11.4   11.1 7.8   5.1 6.3 6.1 6.0   Total expenditure and net lending   23.8   26.4 21.2   19.7 20.4 19.8 19.3   Personnel costs   6.9   8.0 7.1   8.4 8.1 8.1 8.1   Interest due   0.7   1.1 0.8   0.6 0.9 0.6 0.6   Nonwage noninterest current expenditure   7.2   5.8 6.8   5.3 5.2 4.8 4.6   Treasury funded capital expenditures   0.1   2.7 0.1   1.4 0.3 0.4 0.4   Donor funded capital expenditures   8.8   8.7 6.3   3.8 5.7 5.8 5.5   HIPC Initiative-related capital expenditure   0.1   0.2 0.2   0.2 0.2 0.1 0.1   Domestic primary balance (commitment basis, including net capital grants for EMAE) 2   -1.8   -0.7 -1.1   1.2 0.0 1.5 2.6   Net domestic borrowing   0.0   -2.2 -2.4   -1.9 -0.1 -2.0 -2.9   Overall balance (commitment basis)   0.9   1.3 0.0   2.4 0.1 1.6 2.9   Public Debt 3   65.2   54.0 54.0   47.7 48.2 44.8 42.2       Of which: EMAE's debt to ENCO   23.1   20.5 19.3   18.2 16.2 14.5 13.1                           External Sector                       Current account balance (percent of GDP)                       Including official transfers   -2.2   -3.4 -4.6   -3.9 -5.3 -4.5 -3.6   Excluding official transfers   -13.6   -14.6 -12.4   -9.0 -11.6 -10.7 -9.6   PV of external debt (percent of GDP)   32.0   24.1 28.6   21.5 25.1 23.3 21.7   External debt service (percent of exports) 4   7.7   10.3 10.2   11.9 11.2 10.5 9.7   Export of goods and non-factor services (US$ millions)   138.5   160.0 157.5   173.0 180.6 199.1 218.0   Gross international reserves (face value) 5                       Millions of U.S. dollars   38.9   60.0 72.7   67.9 80.3 99.9 107.8   Months of imports of goods and services   1.5   2.5 2.6   2.6 2.6 3.1 3.1   Months of imports of goods and nonfactor services 6   2.2   3.7 3.9   3.8 4.1 4.9 4.7   National Oil Account (stock, US$ millions)   19.6   21.0 19.7   22.8 19.6 19.9 20.6                           Prospective financing (US$ millions)   …   47.8 55.9   23.1 22.7 22.7 23.0   Prospective nonproject grants and concessional loans   …   39.7 47.7   17.5 16.9 16.9 16.9   ECF disbursements   …   8.1 8.2   5.6 5.8 5.8 6.1   Memorandum Item                       Gross Domestic Product                       Millions of dobra   18,756   21,130 21,355   23,532 24,407 27,256 29,830   Millions of U.S. dollars   828   929 985   1,040 1,163 1,298 1,421   Per capita (in U.S. dollars)   3,517   3,866 4,098   4,245 4,746 5,198 5,580                           Sources: São Tomé and Príncipe authorities' data and IMF staff estimates and projections. 1 Central Bank (BCSTP) mid-point rate. 2 Excludes oil related revenues, ENCO debt repayment, grants, scheduled interest payments, foreign-financed capital outlays, as defined in the TMU. 3 Total public and publicly guaranteed debt as defined in the DSA, which includes EMAE's debt to ENCO. 4 Percent of exports of goods and nonfactor services. 5 Gross international reserves as defined in the TMU. 6 Imports of goods and services excluding imports of investment goods and technical assistance.