Financial Crime World

Improving Governance in Gabon: Economic Effects and Recommendations

Introduction

Gabon, an oil-rich country in Central Africa, has a unique opportunity to leverage its governance improvements to drive economic growth. This report explores the potential effects of improving governance on firms’ distortion, public investment efficiency, and revenue mobilization.

Firms’ Distortion: Reducing Barriers to Growth

Improving governance by reducing distortions affecting private firms’ decisions can lead to significant economic benefits:

Optimistic Scenario

  • An additional annual non-oil growth of 1.12%
  • A decrease in public debt by 3.5% of GDP
  • Increased private consumption

Moderate Scenario

  • An additional annual non-oil growth of 0.57%
  • A decrease in public debt by 2% of GDP
  • Increased private consumption

Public Investment Efficiency: Maximizing Returns

Improving the efficiency of public investment can lead to:

Optimistic Scenario

  • An additional annual non-oil growth of 0.17%
  • Crowding-in of private demand (consumption and investment)
  • A reduction in the public debt-to-GDP ratio by 2.56%

Moderate Scenario

  • An additional annual non-oil growth of 0.09%
  • Crowding-in of private demand (consumption and investment)
  • A reduction in the public debt-to-GDP ratio by 1.25%

Revenue Mobilization: Boosting Private Sector Growth

Improving tax administration efficiency can lead to:

Optimistic Scenario

  • An expansion of the tax base, allowing for a reduction in the tax rate
  • A boost in private consumption, investment, employment, and non-oil output
  • A decrease in public debt by 12.7% of GDP

Moderate Scenario

  • An expansion of the tax base, allowing for a reduction in the tax rate
  • A boost in private consumption, investment, employment, and non-oil output
  • A decrease in public debt by 7.75% of GDP

Comprehensive Governance Reform Package: Unlocking Economic Potential

Implementing a comprehensive governance reform package that affects all three areas can lead to significant increases in:

  • Private investment
  • Private consumption
  • Non-oil output

Additionally, this package can lead to a decrease in public debt, allowing for further stimulation of private demand.

Conclusion

A comprehensive governance reform package is the most effective way to improve economic outcomes in Gabon. By addressing all three areas of improvement simultaneously, this package has the potential to drive significant economic growth and development.