Press Release: IMF Executive Board Completes First Review Under Gabon's Stand-By Arrangement
December 19, 2007Press Release No. 07/300
The Executive Board of the International Monetary Fund (IMF) today completed the first review of Gabon's economic performance under a three-year SDR 77.15 million (about US$120.8 million) Stand-By Arrangement.
The Executive Board approved Gabon's request for waivers for the nonobservance of the performance criteria on the implementation of the fuel price adjustment formula and of the September ceiling on net bank credit to government. The Executive Board also approved the modification of the performance criterion on the implementation of the fuel price adjustment formula.
The Gabonese authorities have indicated that they intend to treat the arrangement as precautionary. The Executive Board of the IMF approved the Stand-By arrangement on May 7, 2007 (See Press Release N0 07/88) to support the country's economic program.
Following the Executive Board discussion, Mr. Murilo Portugal, Deputy Managing Director and Acting Chairman, stated:
"The performance of the Gabonese economy has been robust, underpinned by prudent macroeconomic policies and progress on structural reforms. Non-oil growth will likely exceed 6 percent, and oil production has rebounded marginally after a significant decline in 2006. Inflation is decelerating, after a spike caused by the one-off increase of domestic fuel prices and rising international food prices. The balance of payments is likely to record a strong surplus, while the fiscal deficit has been kept under control.
"The short-term outlook remains favorable with strong economic growth, low inflation, and large fiscal savings from high oil revenue. The main risks are a weakening world economy and increasing domestic pressure to ease fiscal policy.
"The authorities are committed to the gradual adjustment of the fiscal stance toward long-term sustainability. The 2008 budget submitted to Parliament is consistent with this objective. In addition, the completion of the buyback of most of Gabon's debt to the Paris Club, expected in January, should reduce debt service payments over the medium term, improve debt sustainability and further strengthen the fiscal outlook.
"Improved control over current non-priority spending, especially fuel subsidies, will be critical to the success of the authorities' fiscal efforts and of their targeted actions to reduce poverty. Looking ahead, the implementation of the formula for adjusting fuel product prices to reflect recent increases in international prices will contribute importantly to this effort.
"Improved competitiveness and economic diversification will depend on further structural reforms. Enhancing the investment climate by strengthening governance and increasing transparency, as well as by lifting the temporary price controls, will remove constraints to the growth of nonoil activity," Mr.Portugal said.