December 21, 2017

• IMF Executive Board completes the first review of Gabon’s Extended Arrangement under the Extended Fund Facility arrangement, which enables the disbursement of about US$ 101.1 million.
• Gabon’s economic situation continues to be difficult, but there are signs that the country is coming out of the trough of the downturn.
• Fiscal consolidation is supporting external adjustment and helping to contain public indebtedness, but further deficit reduction is needed.

On December 21, 2017, the Executive Board of the International Monetary Fund (IMF) completed the first review of Gabon’s economic program supported by the three-year extended arrangement under the Extended Fund Facility.

Completion of the review enables the immediate disbursement of SDR 71.430 million (about US$ 101.1 million). This brings total disbursements under the arrangement so far to SDR 142.860 million (about US$ 202.3 million).

In completing the first review, the Executive Board approved the authorities’ request for a waiver of non-observance of the continuous performance criteria on the ceiling on the accumulation of new external payment arrears by the central government.

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, Mr. Tao Zhang, Deputy Managing Director and Acting Chair stated:

“Gabon’s performance under the program has been broadly satisfactory. While the economic situation continues to be difficult, there are signs that the country is coming out of the trough of the downturn. In 2017, oil output is likely to underperform, leading to a small markdown of overall growth from 1 percent to 0.8 percent. However, activity across the rest of the economy is stabilizing. A rebound in growth is expected in 2018 thanks to the recovery in oil prices, the strength of other commodity sectors, and improving private sector confidence.

“Fiscal consolidation is supporting external adjustment and helping to contain public indebtedness, but further deficit reduction is needed to place debt on a firm downward path and start saving a share of the country’s oil revenues to rebuild its resilience to shocks. Larger buffers would also reduce substantial near-term risks to Gabon’s economic recovery plan, including those arising from volatile oil revenues.

“The authorities should aim to mobilize non-oil revenues, which have dropped to historically low levels. While part of the decline is due to negative spillovers from the oil shock and strikes by tax officials, the authorities need to accelerate reforms to scale back the excessive use of ad hoc tax exemptions, and address weaknesses in tax and customs administration.

“The authorities should also aim to strengthen public financial management. The focus should be to strengthen short-term cash flow management and liquidity forecasting, particularly to avoid any new accumulation of arrears that could undermine confidence in the economic recovery. Reforms to improve monitoring of spending on critical social programs should also be pursued to ensure that the burden of fiscal consolidation does not fall disproportionately on the most vulnerable groups of the population.

“Continued economic diversification will require a supportive financial sector. Decisive steps should be taken to resolve the three distressed public banks while minimizing related fiscal costs. The authorities should also clearly communicate the government’s plans to gradually clear domestic arrears, which would help to reverse the rise of non-performing loans and support private sector credit growth. Further steps to bolster medium-term growth should focus on the business environment and the quality and dissemination of economic statistics.

“Gabon’s program is supported by the implementation of supportive policies and reforms by the regional institutions, including tighter monetary policy, elimination of statutory advances, sound bank regulation and supervision, and firm controls over the extension of credit to banks.”