Financial Sector Compliance Challenges Plague São Tomé and Principe as Economy Struggles to Diversify

The small West African nation of São Tomé and Principe is facing significant financial sector compliance challenges, hindering its ability to diversify the economy and reduce its reliance on international donors.

Economy in Crisis

According to recent estimates, a staggering 90% of the government’s budget comes from donor funding, leaving little room for economic growth. The country’s private sector is largely composed of informal operators and micro and small enterprises, which lack the investment capacity to drive significant economic change.

Only about one-third of the population has access to basic goods and services.
More than two-thirds of the population lives in poverty, according to World Bank estimates.

Infrastructure Challenges

The country’s infrastructure is severely lacking, making it difficult for businesses to operate efficiently. The lack of:

Roads
Electricity
Water

exacerbates the problem, particularly in relatively isolated locations where transportation costs are high.

Exporting Goods and Services

Accessing external markets is a major challenge for São Tomé and Principe due to:

Limited logistics capabilities
Competitiveness issues
Difficulties navigating international norms and regulations

These challenges hinder the country’s ability to export goods and services, making it difficult to diversify the economy.

Institutional Capacity Issues

The country suffers from a shortage of:

Human resources
Natural resources
Financial backing

This lack of capacity makes it difficult for government agencies to effectively regulate and oversee the financial sector, creating an environment ripe for non-compliance.

Conclusion

São Tomé and Principe must address these significant challenges to stimulate economic growth and reduce its reliance on donor funding. Only by addressing these issues can the country hope to create a more stable and prosperous financial sector.