IMF Staff Completes Mission for the First Review of the Extended Fund Facility for the Republic of Gabon
Economic growth is expected to reach 1.5 percent in 2021 and accelerate in 2022 to 3 percent as the recovery gains steam
The mission held productive discussions with the authorities on steps to enhance program implementation and complete the first review, and on economic policies
The Gabonese authorities and IMF staff made significant progress in discussions on the actions needed to complete the first review supported by the Extended Fund Facility (EFF), and on economic policies and structural reforms that could form the basis for the program in 2022. Discussions will continue over the coming weeks; Economic growth is expected to reach 1.5 percent in 2021 and accelerate in 2022 to 3 percent as the recovery gains steam; The prospects for strong, durable and inclusive growth rest on steady progress on growth friendly fiscal consolidation and structural reforms.
An International Monetary Fund (IMF) staff team led by Mr. Boileau Loko visited Gabon from December 8 to 14, 2021 to conduct discussions on the first review of Gabon’s extended arrangement under the Extended Fund Facility (EFF), which was approved in July 2021 .
At the conclusion of the mission, Mr. Loko issued the following statement:
“The mission held productive discussions with the authorities on steps to enhance program implementation and complete the first review, and on economic policies and structural reforms that could form the basis for the program in 2022. These discussions will continue in the coming weeks.”
The economy is gradually recovering from last year’s sharp contraction, helped by higher oil prices, preventive actions and an increasing vaccination rate. Economic growth is expected to reach 1.5 percent in 2021 and accelerate to 3 percent in 2022 as the recovery gains steam. However, the economic recovery remains fragile and subject to risks from the pandemic and oil prices.
Despite the challenging circumstances brought on by the pandemic, performance on the program’s quantitative targets is broadly satisfactory. Fiscal developments appear to be broadly in line with program targets. However, the implementation of fiscal and governance reforms needs to be accelerated to further strengthen domestic revenue and public financial management to support the recovery and enhance debt sustainability.
In the extractive sector, the Extractive Industry Transparency Initiative (EITI) membership for Gabon is a commendable step but more is needed to reduce leakages and secure higher oil and mining revenue. Steps are also needed to reduce exemptions and bolster non-oil revenue. In addition, it is important to reduce compensations, particularly related to VAT to improve cash management and contain arrears accumulations.
Strengthening revenue and public finance management and governance will expand room for development needs and reduce fiscal and debt vulnerabilities. Staff stress the urgency of adopting a clearance plan for domestic arrears, finalizing and publishing the COVID-19 related spending audit report, and exploring ways to publish the names and nationalities of beneficiaries of public procurement contracts.
The 2022 budget draft submitted by the government will help reduce public debt, while allowing space for necessary social and infrastructure spending . With the pandemic still lingering, the 2022 budget includes additional COVID-19 related spending. Staff encourage the authorities to implement all tax measures as agreed in the initial program and those necessary to make-up for the potential revenue shortfalls in 2021. In that regard, it is critical to better target support measures to vulnerable Gabonese.
Staff encourages the authorities to prioritize debt sustainability and regional financial stability over fiscal expansion in the use of the new SDRs, particularly in view of the risks related to the pandemic and non-oil revenue collection. Higher oil revenue also presents the opportunity to rebuild regional reserves.
The prospects for strong, durable and inclusive growth rest on a growth friendly fiscal consolidation and steady progress on structural reforms . Staff encourages the authorities to accelerate reforms to enhance the banking sector, improve the business environment, foster private sector development, and protect the most vulnerable. Also, staff recommends strengthening coordination of the program implementation.
The IMF team met with His Excellency the President, the Prime Minister, Minister of Economy and Recovery, Minister of Budget and Public Accounts, Minister of Good Governance and fight against corruption, Minister of Social Affairs, Minister of Water, Forestry, Sea and Environment as well as their staff, the private sector leaders, and the diplomatic community.
The mission would like to thank the Gabonese authorities for the constructive discussions and for their warm hospitality.”
Distributed by APO Group on behalf of International Monetary Fund (IMF).