Continued efforts to mitigate the heavy toll of the COVID-19 pandemic on São Tomé and Príncipe’s economy remain critical; Program implementation was off to a good start in late 2019, and it will be critical to resume fiscal consolidation once the crisis is over; Stepping up structural reforms, especially for the energy sector and revenue mobilization is essential for fiscal sustainability.
The Executive Board of the International Monetary Fund (IMF) today completed the first review of the Extended Credit Facility (ECF) arrangement for São Tomé and Príncipe. The Board’s decision enables the immediate disbursement of SDR 1.90 million (about US$2.67 million). The Board today also approved an augmentation of the ECF arrangement by SDR 1.48 million (about US$2.08 million or 10 percent of the country’s quota) to be also disbursed immediately. This brings São Tomé and Príncipe’s total disbursements under the arrangement to SDR 5.29 million (about US$7.35 million).
The ECF arrangement in the amount of SDR 13.32 million (about US$18.15 million at the time or 90 percent of the country’s quota) was approved on October 2, 2019 (see Press Release No. 19/363) to support the government’s economic reform program for stronger and more inclusive growth.
In April 2020, the Executive Board also approved US$12 million emergency financing for São Tomé and Príncipe under the Rapid Credit Facility (RCF) and IMF debt service relief under the Catastrophe Containment and Relief Trust (CCRT) to address external financing needs arising from the COVID-19 pandemic (see Press Release No. 20/179).
At the conclusion of the Board discussion, Mr. Tao Zhang, Deputy Managing Director and Acting Chair, made the following statement:
“Performance under the ECF-supported program was off to a good start in late 2019. However, the Covid-19 pandemic impacted São Tomé and Príncipe hard. The authorities responded by raising health spending and providing targeted and temporary support to households and the most affected sectors. This has temporarily raised the fiscal deficit.
“The authorities are committed to resuming fiscal consolidation once the crisis abates to improve internal and external balances. In this context, it is essential to keep the wage bill under control and complete the transition to the VAT by mid-2021 to increase revenue and create space for social spending and public investment. The authorities are also committed to improving public financial management by publishing public procurement contracts and a monthly COVID-19-related spending report, as well as regularizing external arrears.
“It will be important to continue financial sector reform, including implementing the recommendations of the safeguards assessment and the asset quality review. It will also be crucial to redouble efforts to reform the energy sector to reduce debt vulnerabilities, strengthen energy security, and support economic growth. Enhancing efforts to implement the recently adopted national strategy on gender equality, continuing to adapt to climate change, and developing a plan to remove the country from the EU air safety blacklist are also important.”
Distributed by APO Group on behalf of International Monetary Fund (IMF).