A team from the International Monetary Fund (IMF) led by Maxwell Opoku-Afari, Mission Chief for São Tomé and Príncipe, visited São Tomé from March 9–24, 2016 to conduct the 2016 Article IV Consultation and the first review of São Tomé and Príncipe’s economic program supported by the IMF’s three-year Extended Credit Facility (ECF).[1]

At the end of the mission, Mr. Opoku-Afari issued the following statement:

“São Tomé and Príncipe’s recent economic performance has been favorable, with GDP growth averaging over 4 percent since 2012, faster than many small-island states, but not sufficiently strong to reduce poverty significantly. Economic growth in 2015, however, slowed as public investment projects were kept on hold due to the late approval of the 2015 budget. GDP growth in 2015 is estimated at 4 percent, lower than the projected 5 percent. Inflation fell further to 4 percent at the end of 2015, aided by weakened demand and falling international prices of oil and other commodities.

 “Overall performance under the ECF-supported program has been satisfactory. All quantitative performance criteria (PC) for end-December 2015 were met with the exception of the PC on domestic primary deficit which was not observed. The government also made strong progress in implementing structural reforms.

“The macroeconomic outlook is favorable in the near term but challenges remain. GDP is projected to grow by 5 percent in 2016 aided by higher and timely execution of public investments, recovery in cocoa production and increased foreign direct investment in the tourism sector. However, elevated lending risks in an environment marked by rising non-performing loans and highly indebted households and businesses will continue to hold back private sector credit growth. Inflation is expected to remain at about 4 percent on the back of falling international prices of food and petroleum products. Staff’s medium-term projection shows real GDP growth falling short of the authorities’ target of 6 percent; inflation gradually aligning with euro area inflation; and the current account deficit contracting further.

“The mission advised the authorities to continue to maintain fiscal prudence and the reform momentum, especially in an election year, to bring debt down from high levels and also to bring the benefits of reforms to a broader segment of the population.

“Good progress was made in program review discussions. The mission expects to discuss remaining policy issues with the authorities in the coming weeks. The discussions focused on policies to improve domestic revenue mobilization and strengthen public financial management to anchor the debt reduction program, enhance liquidity management, deepen understanding of macro-financial linkages and financial inclusion, and remove impediments to private sector development to support growth, while pursuing a careful debt management strategy. The IMF Executive Board is expected to consider the first ECF review and the 2016 Article IV Consultation in June 2016.

 “The mission met with the Minister of Finance and Public Administration Americo d’Oliveira Ramos, the Governor of the Central Bank of São Tomé and Príncipe Maria do Camo Travoada Silveira, Acting President of the autonomous Island of Príncipe Francisco Gula, other ministers and senior government officials, and representatives of the private sector, including banks and other financial institutions, labor unions, civil society, and the international donor community. We are grateful to the authorities for the warm hospitality and for the very constructive discussions.”