The Executive Board of the International Monetary Fund (IMF) today completed the second review of Gabon’s economic program supported by an extended arrangement under Extended Fund Facility (EFF). Completion of the review enables the immediate disbursement of SDR 71.43 million (about US$ 100.2 million). This brings total disbursements under the arrangement so far to SDR 214.29 million (about US$ 300.7 million).
In completing the second review, the Executive Board approved the authorities’ request for waivers of non-observance and applicability of performance criteria.
Gabon’s three-year, SDR 464.4 million extended arrangement (about US$ 642 million at the time of approval, the equivalent of 215 percent of Gabon’s quota) was approved by the Executive Board on June 19, 2017 (see Press Release No. 17/233). The government’s reform program, supported by the IMF, aims to ensure macroeconomic stability and lay the basis for sustainable growth. It also seeks to attain debt sustainability at the national level and help contribute to restoring and preserving external stability for the Central African Economic and Monetary Union (CEMAC).
Following the Executive Board discussion on Gabon, David Lipton, First Deputy Managing Director and Acting Chair stated:
“Macroeconomic conditions are slowly improving in Gabon, but the recovery remains fragile. Estimates indicate that overall economic growth weakened due to declining oil production and the stronger-than-expected impact of fiscal consolidation on sectors linked to government expenditure. These weaknesses were moderated by a robust growth of the mineral extraction, agriculture, and timber sectors. In 2018, higher oil prices, new investment in the oil sector and export processing zones, and increasing manganese production will help support a modest recovery of economic growth to about 2 percent.
“Gabon’s performance under the EFF arrangement has been mixed, with fiscal slippages in late 2017 and early 2018 complicating cash management, undermining efforts to manage and clear external arrears. The authorities have reiterated their commitment to the program and have implemented a supplementary budget for 2018 aiming to bring the fiscal consolidation back on track. The new budget is supported by strong measures to contain the wage bill and other non-priority spending. The planned elimination of a large number of semi-autonomous government agencies and the strengthening of controls on the remaining agencies should improve the transparency and efficiency of public spending. Steps have also been taken to boost non-oil revenue collections, including by eliminating costly customs duty exemptions except for only a few items. To better manage fiscal risks should non-oil revenue collections underperform, the supplementary budget introduces an automatic adjustment mechanism for public spending.
“The authorities have renewed their commitment to the arrears clearance strategy. As a corrective action for completion of the second review, the authorities cleared all arrears owed to bilateral and multilateral creditors, as well as arrears owed to commercial creditors whose claims are guaranteed by a sovereign. The authorities intend to clear all remaining commercial non-guaranteed arrears by the end of the year. To avoid new arrears, the authorities committed to strengthening cash flow management, including through regular updates of their monthly fiscal cash flow plans. The authorities plan to clear domestic arrears per the agreed calendar under the Club de Libreville.
“Gabon’s near-term economic prospects will depend on continued financial sector stability. Decisive steps should be taken to accelerate the resolution of the three public banks in distress, and to develop the framework for the resolution of non-performing loans. Clear and regular communication of the domestic arrears clearance strategy would also be important to rebuild economic confidence.
“Social spending needs to be protected and expanded to maintain broad support for the economic recovery strategy. Strict implementation of the authorities’ announced measures is essential, including to establish a minimum floor of social assistance spending for vulnerable groups and stepped up public outreach efforts to better communicate social spending objectives.
“Gabon’s program is supported by the implementation of supportive policies and reforms by the regional institutions in the areas of foreign exchange regulations and monetary policy framework and to support an increase in regional net foreign assets, which are critical to the program’s success.”