IMF Staff Completes Review Mission to São Tomé and Príncipe Under the Extended Credit Facility
November 24, 2020
End-of-Mission press releases include statements of IMF staff teams that
convey preliminary findings after a visit to a country. This mission has
been a virtual visit. The views expressed in this statement are those of
the IMF staff and do not necessarily represent the views of the IMF’s
Executive Board. Based on the preliminary findings of this mission, staff
will prepare a report that, subject to management approval, will be
presented to the IMF’s Executive Board for discussion and decision.
- The COVID-19 pandemic is expected to cause the economy to contract for the first time in decades, by about 6 percent in 2020, before gradually recovering over the next few years.
- Program performance under the Extended Credit Facility (ECF) has been steady, although the pandemic has delayed some structural reforms.
- The IMF mission reached a staff-level agreement on measures for the completion of the second review under the ECF arrangement subject to approval by the IMF Executive Board.
A staff team from the International Monetary Fund (IMF), led by Geremia
Palomba, held a virtual mission during November 13-23, 2020 to conduct the
second review of São Tomé and Príncipe’s economic program supported by the
IMF Extended Credit Facility (ECF) arrangement
At the end of the mission, Mr. Palomba issued the following statement:
“The IMF team and the authorities of São Tomé and Príncipe have reached a
staff level agreement on measures for the completion of the second review
under the ECF arrangement subject to approval by the IMF Executive Board.
The IMF Executive Board is tentatively scheduled to consider this second
ECF review in January 2021.
“The COVID-19 pandemic is having a severe impact on São Tomé and Príncipe’s
economy. Real GDP is expected to contract by about 6 percent in 2020 due to
weak external demand and pandemic-containment measures. As tourism and
domestic activities gradually recover, the economy is projected to grow by
about 2-3 percent in 2021, before approaching a long-term growth of about 4
percent. However, there are significant risks and uncertainties to this
outlook due to the pandemic.
“The ECF review discussions focused on measures to meet the country’s
immediate health, social and economic needs and support the upcoming
“Program performance under the Extended Credit Facility has remained
steady, although the pandemic has hampered progress on key structural
reforms. It is important to address the immediate health, social, and
economic needs arising from the pandemic while pushing forward with
medium-term fiscal and structural reforms to support a strong and inclusive
“The 2021 budget should provide room to expand social spending, while
delivering on the authorities’ gradual fiscal consolidation plans. Staff
welcome the authorities’ commitment to introduce the VAT in 2021, while
providing additional support to the education sector and the country’s
young population. Going forward, it is important to continue containing
spending dynamics, particularly personnel expenses thorough wage and
employment containment policies.
“The financial sector remains broadly sound but risks are rising. With the
pandemic likely to put pressure on banks’ asset quality, it is important
for the central bank of São Tomé and Príncipe (BCSTP) to actively monitor
and promptly act on credit risk pressures. The implementation of the
recommendations from the 2019 asset quality review is a welcome step.
Accelerating the resolution of legacy and fully provisioned non-performing
loans would support the system’s capacity to provide credit. Legislative
reforms to strengthen the central bank’s independence and align financial
sector regulations to best international standards need to be fast-tracked.
“Stepping-up the implementation of structural reforms to reduce the
country’s vulnerabilities, improve the business environment, and develop
key sectors like tourism is a must to speed up the recovery and lift the
long-term-potential of the economy. It is also important to fast-track
reforms in the energy sector and for the public utility company EMAE to
improve the country’s energy supply and reduce public debt vulnerabilities
and pressures on international reserves. The authorities’ commitment to
take steps to remove the country from the EU air safety blacklist of banned
operators would help support the recovery in the tourism sector. Other
reforms should focus on improving the business environment, promoting
gender equality, and adapting to climate change.
“The mission thanks the authorities for the productive and open
The ECF is a lending arrangement that provides sustained engagement
over the medium to long term in case of protracted balance of
IMF Communications Department
PRESS OFFICER: Gediminas Vilkas
Phone: +1 202 623-7100Email: MEDIA@IMF.org