The Executive Board of the International Monetary Fund (IMF) on July 23, 2018 completed the fifth review of the arrangement under the Extended Credit Facility (ECF) for São Tomé and Príncipe.
The Board’s decision enables the immediate disbursement of US$0.9 million, bringing total disbursements under the arrangement to roughly US$5.3 million.
- São Tomé and Príncipe’s medium-term economic outlook is favorable.
- Structural reforms and prudent fiscal policy are key to maintaining macroeconomic stability and boosting growth to reduce poverty.
- Implementing measures to contain financial losses at the state-owned electricity and water supply company (EMAE) will minimize contingent fiscal liabilities and improve external balance.
The ECF arrangement for São Tomé and Príncipe in the amount of US$6.2 million or 60 percent of the country’s quota at the time of approval) was approved on July 13, 2015 to support the government’s economic reform program for stronger and more inclusive growth.
The Executive Board also concluded the 2018 Article IV consultation with São Tomé and Príncipe.
Following the Executive Board’s decision, Mr. Mitsuhiro Furusawa, Deputy Managing Director and Acting Chair issued the following statement:
“São Tomé and Príncipe’s economy continued to grow steadily in 2017 and the medium-term outlook is favorable. However, continued structural reforms and prudent fiscal policy are key to maintaining macroeconomic stability and boosting growth to reduce poverty and generate employment.
“The authorities have taken some encouraging steps to correct past policy slippages. The collection of past tax arrears from large taxpayers will not only help safeguard the fiscal targets but also strengthen the integrity of the tax collection system. Additional efforts are needed to address revenue shortfalls, while expenditure control measures should be enforced to prevent the recurrence of domestic arrears. The ratification of the VAT law by the Parliament as soon as possible will be essential to prepare the ground for the introduction of the VAT in 2019, which together with a closer monitoring of large taxpayers, will help revenue mobilization. Further fiscal consolidation and borrowing only on concessional terms and at a measured pace will be key to reducing the debt burden overtime.
“The authorities have made progress on other structural reforms—notably, the approval of the public-private partnership law and adopting a Tourism Development Strategy to promote inclusive growth. Implementing measures to contain financial losses at the state-owned electricity and water supply company (EMAE) will minimize contingent fiscal liabilities and reduce dependence on oil imports, which along with continued fiscal consolidation, will help rebuild reserves buffers.”