Sao Tome and Principe: “Uncertainty” about oil requires “prudence” in use of exploration revenues, IMF says

15 May 2008

Washington, United States, 15 May – The uncertainty about the existence of commercially viable oil reserves in Sao Tome and Principe require prudence by the government in the use of revenues from exploration licenses, according to the International Monetary Fund (IMF).

In a report published Wednesday in Washington, the IMF recommended the archipelago’s poverty reduction programme be updated, taking into account developments in the oil sector, which require “careful revision” in terms of prospects.

“Exploratory work has not so far confirmed the existence of commercially viable oil reserves. Currently, it is expected that investors in blocs 2 and 4 will only start drilling in 2009,” the IMF said.

“As pressure grows to increase public spending, the [IMF] mission notes the importance of maintaining fiscal discipline (prudent use of oil companies’ signing bonuses) and careful management of the population’s expectations,” the report said.

Other recommendations made for the oil sector are joining the Extractive Industries Transparency Initiative (EITI), as well as the development of supervisory bodies, under the terms of the Sao Tome law.

The IMF also said it agreed with the principles of the poverty reduction strategy in Sao Tome: Maintenance of macroeconomic stability, debt reduction to make room for social expenditure and creation of a better business and investment environment. (macauhub)