The IMF announced that it has reached a technical agreement with Sao Tome and Principe, which involves a 40-month program and a “major budget adjustment.” The program depends on the implementation of reforms.
The International Monetary Fund (IMF) announced this Monday a technical agreement for financial assistance to Sao Tome and Principe to implement a new economic reform program, which lasts 40 months and involves an “important initial budget adjustment.”
“The IMF team and the authorities of Sao Tome and Principe have reached a technical agreement on economic policies and reforms that will be supported by a new 40-month program under the Expanded Credit Line, updating the agreement reached last year. past,” reads the statement sent to Lusa, which states that the program must still be approved by management.
In the statement, The IMF says the program “includes a significant initial budget adjustmentwhich at the same time protects the most vulnerable”, and adds that the now agreed program also includes “short-term reforms in the electricity sector and structural reforms, in the medium term, to facilitate the transition to green energy and unblock the economy of the country”. growth potential.”
The Fund warns that “the initial and ambitious budget adjustment is crucial to reduce public debt and rebalance the economy under a fixed exchange rate,” but emphasizes that “it is carefully designed to protect the vulnerable.”
After pointing out that the program, which will increase from 20 to 25 million dollars (23 million euros), must still be approved by management, The IMF notes that “the authorities’ ambitious reform program aims to restore macroeconomic stabilitywhile laying the foundation for faster and more inclusive growth.”
Among the conditions agreed with the IMF, the Portuguese-speaking archipelago “will make more efforts to strengthen tax and customs administration and rationalize budget spending, creating space to implement growth acceleration programs that will help put public debt on a downward trajectory. ”.
Defending the importance of concessional financing to avoid worsening debt, the IMF highlights that the program “will urgently implement short-term reforms to address the electricity sector crisis, which should alleviate pressure on public debt and currency reserves.” foreigner.”
Among the ‘specifications’ presented to the government, the IMF also notes that, “to prevent illicit fuel subsidies and contain budgetary risks, authorities will apply the fuel price adjustment mechanism truly automatically, all the months”.
Last year, the real growth of the Gross Domestic Product (GDP) of Sao Tome and Principe was 0.4%, after having grown only 0.2% in 2022.
In recent years, “the country has been affected by multiple shocks, the impact of which on the economy continues to be felt,” said the head of the IMF mission in the archipelago, Slavi Slavov, quoted in the statement.
The head of the IMF warns that The program will only go ahead if Sao Tome and Principe “implements several reforms and confirms the necessary financing guarantees” of the partners for the development of the country.”
Since taking office in December 2022, the Government of São Tomé has been negotiating a credit program with the IMF, but the parties had not reached an understanding that would allow the Fund’s technical staff to present a proposal to management for its approval. approval.
On several occasions, the Prime Minister of São Tomé stated that the absence of an agreement with the IMF “has conditioned the execution of the public investment program and continues to negatively impact net international reserves”, the level of imports of goods and services and, “in short, the economic activity” of the archipelago.
In June, after an IMF technical team completed a mission to Sao Tome, Patrice Trovoada said he did not accept the proposal to increase the price of fuel and electricity in exchange for a financial agreement, so as not to worsen the social situation in the country. archipelago.
Source: Observadora
