IMF Staff Completes Staff Visit to Gabon
The EFF-supported program will help Gabon restore macroeconomic stability and lay the basis for inclusive growth
Gabon’s near-term economic outlook remains difficult, with overall growth expected to be modest at about 1 percent in 2017
- Initial signs of economic recovery noted, but Gabon’s short-term outlook remains difficult.
- Arrears remain a drag on economic activity. Government expressed commitment to a rapid solution.
- Decisive Implementation will be key to ensure the success of the authorities’ program. Progress on structural reform implementation so far is welcome.
An International Monetary Fund (IMF) mission led by Alex Segura-Ubiergo visited Libreville from July 26 to August 2 to monitor economic developments and conduct discussions with the authorities.
On June 19, 2017, the IMF Executive Board approved an SDR 464.4 million (about US$642 million) extended arrangement under the Extended Fund Facility for Gabon, or 215 percent of Gabon’s IMF quota, in support of Gabon’s medium-term recovery program (See Press Release 17/233).
The EFF-supported program will help Gabon restore macroeconomic stability and lay the basis for inclusive growth. It seeks to attain debt sustainability at the national level and help contribute to restoring and preserving external stability for the Central African Economic and Monetary Union (CEMAC). The Executive Board’s decision has enabled a disbursement of SDR71.43 million (about US$98.8 million). The remaining amount will be phased over the duration of the program, subject to semi-annual reviews.
At the conclusion of the visit, Mr. Segura-Ubiergo issued the following statement:
“Gabon’s near-term economic outlook remains difficult, with overall growth expected to be modest at about 1 percent in 2017. Since 2014, the reduction in international oil prices has been associated with a slowdown in economic activity, large declines in oil exports and fiscal revenues, and a deterioration in the balance of payments.
“Despite the challenging outlook, there are some early signs that the economy has begun to stabilize during the first half of 2017. The oil sector has benefited from the recovery of international energy prices since their low point in early 2016. In addition, other resource sectors such as manganese mining, wood, and agri-business are expanding rapidly, and construction is showing greater signs of resilience than anticipated. Preliminary customs data show that growth in Gabon’s extractive industries boosted exports by 38 percent (y/y) at end June, while imports declined by 21 percent. This improving trade balance has helped to moderate the decline in the level of imputed international reserves of Gabon at BEAC. Nonetheless, the economy still faces significant vulnerabilities. The commercial and services sectors are in recession and bank deposits and credit to the economy have declined.
“The mission encouraged the authorities to pursue reforms to increase non-oil revenue collections, especially at customs where performance has been lagging. Greater revenue mobilization efforts should help protect spending on critical health, education and social protection programs in favor of vulnerable groups of the population. In addition, restoring confidence in the economy will require frequent communication with stakeholders and decisive progress in the implementation of the authorities’ plan to clear arrears.
“The mission welcomed recent progress on structural reforms, including the adoption of new expenditure procedures and stronger controls to prevent the emergence of extra budgetary spending. Additional reforms to increase the efficiency and transparency of public spending will also be key. This will require strict respect of budget rules, improvements in public procurement to reduce the use of non-competitive bids, more frequent use of feasibility studies to prioritize public investment projects, and greater dissemination of economic information. Going forward, the publication of quarterly reports on the amount and composition of arrears, and cost-benefit analysis of public investment projects that exceed CFAF 20bn will be crucial steps in this direction.
“The decisive implementation of the government plans to clear arrears will also be key to increase the resilience of the financial sector, while ongoing reforms to improve the business environment in support of the diversification strategy should also be pursued vigorously, as they have the potential to lift growth towards 5 percent over the medium term.
“The team will return to Libreville in October to conduct discussions for the first review of the Extended Fund Facility for Gabon.
“The mission met with Minister of Economy Immongault Tatagani, Budget Minister Otounga Ossibadjouo, the National Director of BEAC, and other senior government officials, representatives of the private sector, civil society, and the diplomatic community. The mission would like to thank the Gabonese authorities for the constructive discussions and warm hospitality.”
Distributed by APO Group on behalf of International Monetary Fund (IMF).