Press Release No. 24/206

IMF Staff Completes Visit to São Tomé and Príncipe

June 6, 2024

• The IMF team had productive discussions with the São Tomean authorities on economic policy and reform plans to be supported under an arrangement with the IMF.
• São Tomé and Príncipe’s economy continues to face serious challenges and is experiencing large imbalances, sluggish growth, and high inflation.
• Progress was made on policy measures needed to restore macroeconomic stability and advance sustainable development. Virtual discussions will continue in the next few weeks on the appropriate policy package.

Washington, DC: An International Monetary Fund (IMF) team led by Mr. Slavi Slavov, Mission Chief for São Tomé and Príncipe, visited São Tomé during May 23 – June 5, 2024, to discuss with the São Toméan authorities IMF support for their policies and reform plans.

At the end of the visit, Mr. Slavov issued the following statement:

“São Tomé and Príncipe faced a very challenging 2023 and continues to struggle with high fuel import needs and depleted international reserves. Over the last few years, the country has been hit by multiple shocks—including COVID-19, floods, and the commodity price shock following the war in Ukraine—whose impact on the economy continues to reverberate. In addition, São Tomé and Príncipe suffered a massive external shock in early 2023 when a major fuel exporter stopped supplying fuel on credit, opening a large external financing gap.

“These factors, along with energy shortages, contributed to a slowdown of real GDP growth to 0.2 percent in 2022 and an estimated 0.4 percent in 2023. Inflation accelerated again, to 19.2 percent in April 2024, year-on-year. International reserves fell sharply.

“The authorities have already implemented significant reforms. They launched the Value-Added Tax in June 2023 and implemented a large fiscal adjustment in 2023. Fuel prices were adjusted, and explicit fuel subsidies have been eliminated in the aggregate. The central bank (Banco Central de São Tomé e Príncipe or BCSTP) ended monetary financing of the budget and implemented some tightening measures to reduce excess reserves.  

“Progress was made during the visit on policy measures to address domestic and external imbalances. The authorities are committed to an ambitious medium-term fiscal adjustment, which is the key instrument for addressing the country’s high public debt and rebalancing the economy under a pegged exchange rate, complemented by a tighter monetary policy. Accelerating reforms of the energy sector is urgently needed to alleviate pressures on public debt and foreign exchange reserves, and unlock growth. Strengthening transparency and addressing governance weaknesses to reduce vulnerabilities to corruption is also key. Finally, it remains critical that the authorities obtain financing commitments from their external partners, a prerequisite for a program that could be supported by the IMF. Given the country’s high public debt, it is also important that these financing commitments come in the form of grants or highly concessional loans.

“The timely and decisive implementation of these policies and commitments would be critical for São Tomé and Príncipe to successfully restore macroeconomic stability and advance its sustainable development. Virtual discussions will continue in the next few weeks on the appropriate policy package.

“During the visit, the mission met with President Carlos Vila Nova; Prime Minister Patrice Émery Trovoada; Minister of Planning and Finance Ginésio Valentim Afonso da Mata; Minister of Economy Disney Leite Ramos; Governor of the Central Bank Américo D’Oliveira dos Ramos; President of the Court of Auditors Ricardino Costa Alegre; other government officials; representatives of the private sector including banks; and development partners. The mission expresses its deep appreciation to the authorities for their cooperation and constructive policy dialogue.”