IMF Executive Board Completes Fifth Review of the Extended Credit Facility for São Tomé and Príncipe
August 31, 2022
- The IMF Executive Board decision authorizes an immediate disbursement of approximately $2.48 million to São Tomé and Príncipe to help meet the country’s financing needs, support social spending and post-pandemic recovery.
- São Tomé and Príncipe faced many challenges, including the impact of the COVID-19 pandemic, the war in Ukraine and the floods in late 2021. Despite these difficulties, the performance of the program under the Extended (ECF) has been broadly satisfactory, although some structural reforms have been delayed.
- Prompt actions by the authorities and timely international financial support have helped address the country’s socio-economic challenges.
The Executive Board of the International Monetary Fund (IMF) today completed the fifth review of the ECF arrangement with São Tomé and Príncipe. The Board’s decision allows for the immediate disbursement of 1.90 million SDRs (approximately US$2.48 million
). This brings São Tomé and Príncipe’s total disbursements under the arrangement to SDR 12.90 million (about US$16.79 million).
In completing the fifth review, the Executive Board also approved the authorities’ request for a waiver for nonobservance of the continuous performance criterion on the non-accumulation of external arrears, based on corrective actions taken by authorities.
São Tomé and Príncipe’s 40-month ECF arrangement was approved on October 2, 2019 for SDR 13.32 million (about US$18.15 million, or about 90 percent of the country’s quota) (see press release no. 19/363). The program aims to support the government’s economic reform agenda to restore macroeconomic stability, reduce debt vulnerabilities, ease balance of payments pressures, and lay the foundations for stronger and more inclusive growth.
Following the Board discussion, Mr. Bo Li, Deputy Managing Director and Acting Chairman, made the following statement
“The performance of São Tomé and Príncipe under the program supported by the IMF’s Extended Credit Facility arrangement has been generally satisfactory. Macroeconomic stability has been maintained despite multiple challenges. However, the near-term macroeconomic outlook is clouded by significant uncertainty and downside risks from the fallout from rising international food and fuel prices, which could dampen economic activity, worsen power outages and inflation, and have a negative impact on revenues and implicit subsidies. Accelerating the implementation of major infrastructure projects and structural reforms and maintaining a strong and flexible engagement of the Fund will be key to boosting growth over the medium term.
“Implementing growth-friendly fiscal consolidation and strengthening expenditure controls are key to achieving the authorities’ fiscal targets. Efforts to boost domestic revenue, including the implementation of the VAT in 2022, and streamline spending would support growth-enhancing social development and infrastructure programs and put public debt on a downward trajectory.
“Maintaining a tighter monetary policy would help fight rising inflation, strengthen safety reserves and support the exchange rate peg. In the short term, this needs to be complemented by continued mobilization external grant inflows and the implementation of other project financing commitments In the medium term, continued fiscal consolidation would help ease demand pressures, increase fiscal space and build a larger reserve cushion.
“Efforts to further strengthen the implementation of the monetary policy and financial legislative framework should remain a priority and focus on the approval of the new Central Bank Law and the Financial Institutions Law, and on the implementation of the remaining safeguard recommendations Further efforts are also needed to strengthen monitoring capacity.
“A more comprehensive approach to the implementation of structural reforms is essential. These should aim to develop tourism services, including a comprehensive approach focusing on human capital development through education programs, building climate-resilient infrastructure, expanding transport links and l improvement of the business environment. Efforts should also focus on improving the efficiency of the energy sector, improving the governance of public enterprises and supporting targeted social transfer programs.
US dollar amounts have been calculated using today’s exchange rate: (1 USD = SDR 0.768436).
At the end of the discussion, the Managing Director, as Chairman of the Board of Directors, summarizes the points of view of the Executive Directors, and this summary is transmitted to the authorities of the country. An explanation of all qualifiers used in the summaries can be found here: http://www.IMF.org/external/np/sec/misc/qualifiers.htm.
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PRESS OFFICER: Nico Mombrial
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