São Tomé and Príncipe must restructure public debt, IMF says

São Tomé and Príncipe has to restructure its public debt to control its high level as well as its payment arrears, according to the International Monetary Fund (IMF) technical team, which has completed a support programme negotiation mission in São Tomé.

The document published in Washington also said that the São Tomé and Príncipe government needs to undertake fiscal consolidation and adopt comprehensive structural reforms, particularly in the energy sector, “while protecting the most vulnerable people.”

International Monetary Fund staff led by Xiangming Li visited São Tomé and Príncipe from 24 July to 6 August 2019 to discuss a new programme that could be supported by an agreement under the Extended Credit Facility (ECF) .

“The economy faces pressing challenges,” said the statement, which noted that the country’s economic growth slowed in 2018 to 2.7% reflecting declining foreign inflows, energy shortages and political uncertainty.

Rising fuel, fish and vegetable prices raised inflation to 9%, international reserves fell to US$16 million, and economic activity continued to slow in 2019, although reserves and inflation showed slight improvements.

The document mentions that public debt has been growing at a steady pace over the past decade and has reached a level that significantly increases the country’s vulnerability, resulting from the increased accumulation of losses of state water and electricity company EMAE, which increased by US$9 million in the first half of 2019.

“A significant portion of the debt is due to old fuel price subsidies and central government debt to its suppliers,” wrote the mission, which said that the 2018 spending slippage – including wage spending – increased the domestic primary deficit (including autonomous public borrowing) to more than 5% of GDP, far exceeding the 2018 target, which was slightly above 1% of GDP. (Macauhub)