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São Tomé and Príncipe has maintained macroeconomic stability, despite many challenges. The COVID-19 pandemic exacerbated long-standing socio-economic vulnerabilities, which were further compounded by persistent energy shortages and damages from the floods in end-2021. Growth declined in 2021 with power outages, while a targeted expansion of the cash transfer and food support programs provided needed relief to the most vulnerable. Strong grant financing remains critical for mitigating the impact of the pandemic. Vaccinations are proceeding, although the new COVID-19 variants pose risks for protracting the impact of the pandemic and require renewed actions to mitigate those risks. Parliamentary elections are expected in October 2022.

São Tomé and Príncipe, Democratic Republic of

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São Tomé and Príncipe has maintained macroeconomic stability in the period since the previous ECF review (February 2021). International support and the authorities’ swift actions helped mitigate the impact of the pandemic so far. Growth is estimated at 3 percent in 2020, supported by externally-financed spending. Growth is projected to slow to 2 percent in 2021, reflecting delays in the return of tourists, and to strengthen to 3 percent in 2022. The economic outlook is subject to high uncertainty and downside risks, notably the evolution of the pandemic.

São Tomé and Príncipe, Democratic Republic of

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The pandemic is taking a heavy toll on the fragile island nation of São Tomé and Príncipe. Tourist arrivals came to an abrupt halt in mid-March, externally financed projects are being delayed, and supply shipments are disrupted. In response to the local outbreak, emergency confinement measures have been in place since March to contain infection. The authorities began phasing out these measures in late June, aiming for a full reopening of the economy by end-July. A disbursement supported by the Rapid Credit Facility (SDR 9.028 million) was approved in April 2020. The authorities request an augmentation of the ECF program by 10 percent of quota (SDR 1.48 million).

COVID-19 (Disease) --- COVID-19. --- São Tomé and Príncipe, Democratic Republic of

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EXECUTIVE SUMMARY Context: São Tomé and Príncipe’s economic development is constrained by its insularity, fragility, limited resources, and low capacity as a small island state. The current ECF arrangement is set to expire on July 19, 2015, with four reviews outstanding. Program performance was satisfactory during the first year and half of implementation but went off track in early 2014 upon the contracting of a loan resulting in nonobservance of the performance criterion on non-concessional debt, and expenditure slippages in the run up to national elections further delayed program resumption. In the meantime, the key assumptions of the macroeconomic framework agreed under the current program changed significantly due to a lower probability of commercial oil production. Extended Credit Facility. The São Toméan authorities have requested a three-year arrangement under the ECF in an amount equivalent to SDR 4,440,000 (60 percent of quota) to rebuild buffers and catalyze financing in support of their medium-term economic reform program. The existing program would be cancelled. Main elements of the program. The program seeks to address the high debt vulnerability while also creating the conditions for sustained growth, anchored by the PRSP II. This involves reforms to: • Strengthen domestic revenue mobilization, expenditure rationalization, public debt management, and public financial management to restore fiscal discipline and reduce the risk of debt distress. • Introduce a comprehensive plan to eliminate the stock of arrears and also prevent the accumulation of new arrears. • Enhance the capacity of key government institutions through well-tailored technical assistance (TA). • Enhance financial sector stability through strengthened supervisory, regulatory, crisis management and bank resolution frameworks.

Economic indicators -- Sao Tome and Principe. --- Fiscal policy -- Sao Tome and Principe. --- International Monetary Fund -- Sao Tome and Principe. --- Monetary policy -- Sao Tome and Principe. --- Sao Tome and Principe -- Economic conditions. --- Banks and Banking --- Investments: Energy --- Exports and Imports --- Macroeconomics --- Public Finance --- Statistics --- International Lending and Debt Problems --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Debt --- Debt Management --- Sovereign Debt --- General Aggregative Models: General --- Monetary Policy --- International economics --- Banking --- Public finance & taxation --- Investment & securities --- Financial services law & regulation --- Arrears --- Public debt --- External debt --- Bank deposits --- Public and publicly-guaranteed external debt --- Financial services --- Debts, External --- Banks and banking --- Debts, Public --- National income --- Foreign exchange reserves --- São Tomé and Príncipe, Democratic Republic of

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São Tomé and Príncipe is very open and highly depends on imports resulting in high indirect tax revenue. At the same time, the production and export base are very narrow, leaving the authorities with a small domestic tax base. For these reasons, the country compares unfavorably with neighboring economies and other island countries, in terms of domestic revenue in percent of GDP. The paper describes the domestic tax system in São Tomé and Príncipe and uses cross-country empirical analysis to reach a benchmark tax potential for the country. The paper reaches the conclusion that whether São Tomé and Príncipe becomes an oil producer or not, it is more sustainable for it to rely on non-oil domestic revenue-a less volatile and less exhaustible resource-to finance current expenditures. To meet the country's increasing development and social objectives, the authorities need to mobilize sufficient domestic resources. The paper offers a number of fiscal reforms to reach this goal, including implementation of the new tax laws, reduction of exemptions, tax system reforms, and improvement of the tax administration.

Economic assistance, American -- Sao Tome and Principe. --- Fiscal policy -- Sao Tome and Principe. --- Sao Tome and Principe. --- Investments: Energy --- Public Finance --- Taxation --- Taxation, Subsidies, and Revenue: General --- Business Taxes and Subsidies --- Energy: General --- Public finance & taxation --- Excise taxes --- Investment & securities --- Revenue administration --- Tax administration core functions --- Excises --- Consumption taxes --- Oil --- Revenue --- Tax administration and procedure --- Excise tax --- Spendings tax --- Petroleum industry and trade --- São Tomé and Príncipe, Democratic Republic of