Article

Transparent Management of Oil Revenue is Top Priority for São Tomé and Príncipe

Author(s):
International Monetary Fund. External Relations Dept.
Published Date:
June 2006
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Economic reforms pursued since 1998 have helped São Tomé and Príncipe increase real GDP growth, lower inflation, and push forward key structural reforms. Fiscal performance has been uneven, however, with the fiscal deficit reaching a peak in 2004. Since 2005, under an adjustment program supported by the IMF’s Poverty Reduction and Growth Facility (PRGF), the authorities have managed to attain significant fiscal consolidation.

Prospects for 2006 remain favorable despite a recent rise in inflation, with the expectation of strong growth and a relatively favorable external position, the IMF said in its economic review. Under the PRGF, the authorities are addressing tax arrears, overhauling customs administration procedures, and changing the composition of government spending in favor of the poor. Monetary policy is aimed at decelerating inflation, and structural reforms will focus on fostering private sector growth in the non-oil economy.

São Tomé and Príncipe
Est.Proj.
2003200420052006
(percent change)
Real GDP4.03.83.84.5
Consumer prices (end of period)10.215.217.013.0
(percent of GDP)
Current account balance1–56.7–58.9–59.2–59.8
Overall fiscal balance, including grants2–17.0–26.656.959.6

Excluding official transfers.

Includes oil signature bonuses in 2005 and 2006.

Data: Saotomean authorities and IMF staff estimates and projections.

Excluding official transfers.

Includes oil signature bonuses in 2005 and 2006.

Data: Saotomean authorities and IMF staff estimates and projections.

The IMF Executive Board welcomed the authorities’ continued commitment to address macroeconomic imbalances while strengthening the conditions for sustained economic growth and poverty reduction. The main challenge for the medium term, Directors said, will be to develop strong institutions that promote transparent oil-revenue management, strengthen growth in the non-oil economy, and support attainment of the Millennium Development Goals.

Directors welcomed the authorities’ decision to sustain the process of fiscal consolidation, which will be supported by a modernized budget and public expenditure management system. They observed that monetary policy remained broadly adequate, supporting the authorities’ inflation target and safeguarding the central bank’s international reserve position. Directors also welcomed improvements in banking sector supervision.

Directors urged the authorities to accelerate structural reforms, emphasizing the importance of implementing the plan to improve the finances of the water and electricity company and completing the feasibility studies of the airport and seaport authorities. They also recommended improving the business climate and approving new codes for personal and corporate income taxation.

For more information, please refer to IMF Public Information Notices Nos. 06/26 (Marshall Islands), 06/30 (Malaysia), and 06/36 (São Tomé and Príncipe) on the IMF’s website (www.imf.org).

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