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STP Public Financial Management Assessment Report Reveals Key Weaknesses

Sao Tome and Principe has undergone a comprehensive public financial management (PFM) assessment conducted by the PEFA team, which has highlighted several key weaknesses in the country’s fiscal discipline, strategic resource allocation, and efficient service delivery.

Assessment Findings

The assessment, which covered the period from 2016 to 2018, used the updated 2016 PEFA methodology and was carried out in three sequential phases. The report identified several areas that require improvement, including:

  • Internal control mechanisms
  • Revenue and expenditure forecasts
  • Budget execution
  • Cash management

Fiscal Discipline Limited

The aggregate fiscal discipline is limited due to weaknesses in internal control mechanisms, unreliable revenue and expenditure forecasts, and the lack of effective control over extrabudgetary entities’ expenditures and revenues. The country’s economic weaknesses also limit its ability to collect significant revenue, while technical limitations faced by the main revenue administrations hinder effective revenue collection.

Strategic Resource Allocation Lacking

The report found that there is no strong link between the government’s strategic plans, Mid-Term Expenditure Frameworks (MTEFs), and annual budgets. This lack of coordination hinders the achievement of steady results through strategic resource allocation. The current procedures for elaborating investment plans are also not well-established, leading to a lack of consideration of recurrent investment costs over the life of each project.

Efficient Service Delivery Impacted

The report identified several shortcomings in the procurement system’s competitive bidding process, which negatively impact the efficient delivery of public services, particularly in the education, health, and agriculture sectors. Weak internal control and accountability mechanisms also hinder effective use of public resources, while financial integrity shortcomings and considerable delays in consolidating annual and quarterly financial statements limit the effectiveness of audits.

Recommendations

The report provides several recommendations to address these weaknesses, including:

  • Strengthening internal control mechanisms
  • Improving revenue and expenditure forecasts
  • Enhancing budget execution and cash management
  • Promoting transparency and accountability in public resource use

Implementation Timeline

The government has committed to implementing these recommendations to improve its PFM systems and enhance the effective use of public resources. The implementation of these reforms is crucial for achieving sustainable economic development and improving the lives of citizens.

Scope and Coverage

The PEFA performance framework covers the entire General Government (GG), including:

  • Budgetary Central Government (BCG)
  • All management units
  • Local governments
  • Revenues collected by the Directorate of Taxes and the Directorate-General of Customs

Schedule

The assessment covered the last three fiscal years, namely 2016, 2017, and 2018, with some indicators evaluated on specific dates. The report provides a comprehensive analysis of the PFM system in STP, highlighting key strengths and weaknesses that will influence its performance.

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