São Tomé and Principe Meets Most Quantitative Performance Criteria Amid Pandemic Challenges

The International Monetary Fund (IMF) has announced that São Tomé and Principe has met most of its quantitative performance criteria (QPCs) for the end-2021 review period, with some exceptions.

Net International Reserves Target Missed Temporarily

According to the IMF’s report, the country’s net international reserves (NIR) target was temporarily missed due to lower-than-expected disbursements. However, the end-September NIR target was met with a substantial margin, partly due to the Special Drawing Rights (SDR) allocation and seasonality of inflows.

Tax Revenue Targets Missed

The report noted that the indicative targets on tax revenue were missed for both the end-June and end-September periods, citing power outages as a major factor. However, the country’s Development Policy Basket (DPB) QPC was met, with underperformance on revenues offset by lower spending.

Structural Reforms Progressing Slowly

Structural reforms are progressing slowly, according to the report. The structural benchmark on the rollout of Value Added Tax (VAT) has been delayed until 2022 pending the implementation of an information technology platform. Similarly, the stress testing exercise on banks’ loan portfolios was not met by end-December 2021 and was only completed at end-February 2022.

Governance Measures Implemented Gradually

Governance measures regarding COVID-19 spending are being gradually implemented with delays. The country’s procurement agency submitted a new draft procurement legislation in October 2021, requiring the collection and publication of beneficial ownership information. However, the publication of procurement contracts and related documents remains irregular.

Economic Outlook and Risks

The authorities have used about half of their SDR allocation for budget financing in 2021 and intend to use a quarter of their remaining allocation in 2022 to support pandemic-related spending needs if external financing is less than expected or delayed. Looking ahead, São Tomé and Principe’s economic outlook remains positive, with growth projected to rise to 2.3 percent in 2022 and 2.8 percent in 2023. However, the country faces several risks, including:

• The impact of floods on agriculture and trade
• Expected domestic fuel price adjustments to reflect higher international fuel prices

Conclusion

Overall, São Tomé and Principe’s economic performance remains resilient amid pandemic challenges, and the authorities’ commitment to fiscal consolidation and structural reforms is essential for sustainable growth and development.