IMF staff completes review visit to Gabon
An International Monetary Fund (IMF) staff team led by Alex Segura-Ubiergo visited Libreville from October 18 to November 1 for the first review of Gabon’s extended arrangement under the Extended Fund Facility (EFF).
The EFF-supported programme will help Gabon restore macroeconomic stability and lay the foundation for inclusive growth. It seeks to buttress debt sustainability at the national level and contribute to the external stability of the Central African Economic and Monetary Union (CEMAC), building on the collective efforts of the other member states and regional institutions of the currency zone.
At the conclusion of the visit, Mr. Segura-Ubiergo issued the following statement:
“The IMF team reached a staff-level agreement with the authorities on the economic policies needed to complete the first review of the EFF. The IMF Executive Board is expected to consider the staff report for the first review in mid-December 2017. The completion of the first review would enable a second programme disbursement of SDR71.43 (about $98.8 million).
“Gabon’s near-term economic outlook remains difficult, with overall growth expected to be modest at about 0.8 per cent in 2017. However, there are signs that the economy is stabilising. The oil sector is benefiting from the recovery in international energy prices and other resource sectors (manganese, timber, and agri-business) are expanding rapidly. Growth in Gabon’s extractive industries helped boost exports by 38 per cent (y/y) at end June, helping improve the trade balance and moderate the decline in the level of imputed international reserves of Gabon at BEAC. Nonetheless, the economy still faces significant vulnerabilities. The commercial and services sectors remain weak and bank deposits and credit to the economy continued to decline.
“Strong efforts to contain public spending and larger than expected oil revenues have contributed to overperformance on the authorities’ fiscal adjustment programme. The overall fiscal deficit (on a cash basis) is expected to decline to 3.6 per cent of GDP in 2017 (compared to 6.6 per cent of GDP in 2016). Public debt is projected to decline to 59 per cent of GDP in 2017, as opposed to the initial projection of 64.2 per cent of GDP, thanks to exchange rate appreciation and fiscal consolidation. However, weaknesses in non-oil revenue collections and pressures coming from the government wage bill are sources of fiscal risk that need to be addressed.
The authorities reiterated their commitment to pursue public sector reforms to support the arrears clearance and prevention strategy, mobilise non-oil tax revenues, and strengthen public financial management. Fiscal consolidation will continue in 2018, with an overall fiscal deficit (cash basis) that is expected to decline to about 2.3 per cent of GDP. The IMF team emphasised the important of protecting, and to the extent possible, increasing budgetary allocations for critical social programmes, especially those that can more directly benefit low income groups.
“Programme implementation remains broadly on track. Through the first half of 2017, most quantitative performance criteria and structural benchmarks were met, but the authorities accumulated new external and domestic arrears. While a large share of external financial support is expected in the last quarter of the year, the authorities need to strengthen short term debt and cashflow management and expenditure control procedures to prevent the accumulation of new arrears. In addition, frequent communication with both domestic and external creditors and the implementation of a credible plan to deal with arrears will be key to preserve the credibility of Gabon’s economic policies and restore confidence.
“The strategy to deal with arrears has become the most pressing short-term economic challenge for Gabon. Domestic arrears, especially unpaid bills to government suppliers, are seriously impacting private sector activity, and negatively affecting small and medium enterprises that should remain an important source of innovation and employment creation. At the same time, external arrears need to be cleared expeditiously to maintain the creditworthiness of Gabon and ensure adequate levels of foreign investment and external financing, including for projects that are likely to support the authorities’ diversification strategy.
“Gabon should also continue to pursue business environment reforms, which are an important element of the country’s diversification strategy that seeks to raise growth toward 5 per cent over the medium term.
“The team met with the Minister of Economy Immongault, Budget Minister Otandault, the Deputy National Director of BEAC, and other senior government officials, representatives of the private sector, civil society, and the diplomatic community. The team would like to thank the Gabonese authorities for their constructive discussions and hospitality.”