An International Monetary Fund (IMF) mission led by Boileau Loko in Libreville, Gabon, said economic activity is recovering, with growth estimated at about 1.2 percent in 2018 up from 0.5 percent in 2017, despite lower-than-expected oil production.
The team visited Libreville during November 7–16 to conduct discussions on the third review of Gabon’s extended arrangement under the Extended Fund Facility (EFF).
Mr. Loko said inflation increased to 3.4 percent (12-month average) in September 2018, reflecting higher food prices and the pass through of rising international oil prices, and that fiscal performance at end-September was better than expected, thanks to higher than targeted non-oil revenue collection.
He said the recovery is expected to firm up in 2019 and the medium-term outlook is still promising, with GDP growth projected to reach 3.1 percent in 2019 and 5 percent in the medium term, adding that downside risks to the outlook include the failure to implement the planned fiscal consolidation, lower global growth and a marked tightening of global financial conditions.
The team commended the authorities’ efforts to improve program implementation since the second review as most end-September 2018 targets were met and most program-supported structural reforms were implemented, albeit with some delays.
Fiscal consolidation remains a priority under the program. The mission took note of the authorities’ commitment to implement all critical measures in the 2018 supplementary budget to meet the end-year fiscal deficit target. Fiscal policy in 2019 aims at further enhancing non-oil revenue mobilization, containing the wage bill, and improving the composition of public spending to provide space for priority social and capital expenditure.
Improving budgetary execution, aligning expenditure commitments and cash flows plans, and fully operationalizing the Treasury Single Account will strengthen transparency, cash management, and budget monitoring. Continued efforts are also needed to enhance debt and cash management to prevent the accumulation of domestic and external arrears.
The mission highlighted the fiscal risks posed by public agencies. Despite some progress, the financial position of several public agencies and enterprises remains precarious, and unless improved, it could represent significant contingent liabilities for the government. The authorities have renewed their commitment to tighten controls on special accounts spending.
The mission underscored the need to speed up the liquidation of the three distressed banks and expeditiously tackle the NPL overhang to strengthen the banking sector and foster credit to the private sector. Further improving the business environment is also critical.
The mission welcomed the authorities’ commitment to implementing policies consistent with the stability of the region’s monetary arrangement. Continued fiscal consolidation and tangible actions to strengthen compliance with foreign exchange regulations, notably regarding the repatriation of export earnings, are critical to rebuild the BEAC’s foreign reserves.
The IMF Executive Board could consider the third review in December 2018.