IMF Staff Concludes Visit to the Democratic Republic of São Tomé and Príncipe

SAO TOME, Sao Tomé, February 6, 2015/African Press Organization (APO)/ -- An International Monetary Fund (IMF) mission visited São Tomé and Príncipe from January 30-February 06, 2015 to discuss recent economic developments and support the preparation of the 2015 budget by the newly-elected government. São Tomé and Príncipe's medium-term economic program is supported by the IMF under a three-year, SDR 2.59 million (about US$4 million) Extended Credit Facility (ECF) [1] arrangement, which was approved by the IMF Executive Board on July 20, 2012 (see Press Release No. 12/272). The second ECF review was completed on December 16, 2013.

The mission met with the Minister of Finance and Public Administration Americo Ramos, Central Bank Governor Maria do Carmo Silveira, senior government officials, representatives of the National Assembly and the donor community.

At the end of the visit, Mr. Maxwell Opoku-Afari, the IMF Mission Chief for São Tomé and Príncipe, issued the following statement in São Tomé:

“Economic activity in 2014 remained strong. GDP growth is estimated at 4.5 percent, buoyed by higher foreign direct investment (FDI), even though donor-financed public investment projects slowed. Inflation has continued to recede following the peg to the euro in January 2010; reaching 6.4 percent at end-2014 (its lowest end-year rate in two decades). The Central Bank's international reserves, estimated at 4.7 months of imports cover, remained at comfortable levels. Due to slippages in the first half of 2014, the domestic primary fiscal deficit reached 3.6 percent of GDP at the end of 2014, higher than anticipated under the program.

“The new government is committed to restoring fiscal discipline to maintain the credibility of the fixed exchange rate regime and also to create the necessary fiscal space to support the country's much-needed public investment program. In this regard, the mission urged the new government to take steps, in the preparation of the 2015 budget, to strengthen domestic revenue mobilization and re-establish expenditure control (including strengthening public financial management) to correct the fiscal slippages in 2014. The IMF mission also re-emphasized the importance of continued reliance on grant and highly concessional financing as the new government seeks to ramp-up implementation of its public investment program. This is critical to mitigate São Tomé and Príncipe's high risk of debt distress.

“The new government expressed interest in continuing program relations with the IMF. Discussions with the authorities will continue in the period ahead.”

[1]The Extended Credit Facility (ECF) is the IMF's main tool for medium-term financial support to low-income countries. It provides for a higher level of access to financing, more concessional terms, enhanced flexibility in program design, and more focused, streamlined conditionality. Financing under ECF currently carries a zero interest rate, with a grace period of 5½ years, and a final maturity of 10 years.