The COVID-19 pandemic is taking a heavy toll on São Tomé and Príncipe’s economy; To address the urgent balance-of-payments needs, the IMF approved about US$12 million emergency assistance for São Tomé and Príncipe under the Rapid Credit Facility. The country will also benefit from IMF debt service relief under the Catastrophe Containment and Relief Trust; The authorities have acted swiftly by developing a contingency plan and declaring a state of emergency to help contain and mitigate the spread of the COVID-19.
The Executive Board of the International Monetary Fund (IMF) today approved a disbursement of SDR 9.028 million (about US$12.29 million or 61 percent of its SDR quota) for São Tomé and Príncipe under the Rapid Credit Facility (RCF). The financing provided under the RCF will help address Sao Tome and Principe’s urgent external and fiscal financing needs as a result of the outbreak of the COVID-19 pandemic.
The COVID-19 pandemic is taking a heavy toll on Sao Tome and Principe, with tourism and externally financed projects halted and international supply chains disrupted. The challenging circumstances are further affected by the fragility of the economy and a weak health care system.
São Tomé and Príncipe has also benefited from the IMF Executive Board decision of April 13, 2020 to provide debt service relief to all countries eligible for support from the International Development Association (IDA) in the form of grant assistance under the Catastrophe Containment (CC) window of the Catastrophe Containment and Relief Trust (CCRT). As a result, the country will receive relief from the CCRT on debt service falling due to the IMF in the next 6 months (about US$0.15 million). This relief could be extended for up-to 2 years, subject to the availability of resources under the CCRT.
The IMF continues to monitor São Tomé and Príncipe’s situation closely and stands ready to provide policy advice and further support as needed. In particular, the IMF will work with the authorities to complete the first review of the program supported by the IMF’s Extended Credit Facility once the current crisis stabilizes.
Following the Executive Board discussion, Mr. Tao Zhang, Deputy Managing Director and Acting Chair, issued the following statement:
“The authorities of São Tomé and Príncipe have moved swiftly to develop a plan to address the major challenges posed by the COVID-19 pandemic. In addition to posing a major health risk, the pandemic exerts strong fiscal and balance of payments pressures. Emergency support under the Rapid Credit Facility will help prevent a much more severe and prolonged economic contraction and provide space for critical health and social spending. It is also expected to help catalyze donor support, which is vital for closing the remaining financing gap.
“The authorities plan to increase well-targeted health and social spending to assist the most vulnerable, support the unemployed, incentivize private businesses to retain workers, and enhance fiscal transparency and good governance. These steps would help cushion the economic impact while ensuring that public funds are spent appropriately. Prudent loan restructuring while maintaining prudential standards will help alleviate liquidity pressures and safeguard financial stability.
“The authorities’ commitment to the reform program supported by the Extended Credit Facility is welcome. Over the medium term, continued fiscal reforms and redoubled efforts to expedite energy sector reforms will be essential to reduce debt vulnerability, unleash the country’s growth potential, and enhance macroeconomic stability. “Distributed by APO Group on behalf of International Monetary Fund (IMF).