A mission from the International Monetary Fund (IMF) led by Mr. Montfort Mlachila visited Libreville from October 22 to November 5, 2014 to conduct the 2014 Article IV consultation discussions1.
The mission had constructive meetings with Mr. Daniel Ona Ondo, Prime Minister; Mr. Régis Immongault, Minister of Economy, Investment Promotion and Prospective; Mr. Christian Magnagna, Minister of Budget and Public Accounts; Mr. Etienne Ngoubou, Minister of Oil and Hydrocarbons; Mr. Christophe Akagha-Mba, Minister of Mining, Industry and Tourism; Mme. Rose Rogombé, President of the Senate; Mr. Denis Meporewa, National Director of the BEAC; Members of the Finance Committees of the National Assembly and the Senate; and other senior government officials. The mission also exchanged views with representatives of the private sector, civil society, and development partners.
At the conclusion of the mission, Mr. Mlachila made the following statement:
“Against the backdrop of weak economic performance, especially low growth (less than 1 percent on average between 2000 and 2009) and relatively high unemployment of about 20 percent in 2010, the government appropriately launched an ambitious reform plan, the Emerging Gabon Strategic Plan (PSGE), to transform Gabon into an emerging and diversified economy by 2025. The plan is underpinned by a rapid scaling up of the public investment program in order to address infrastructure bottlenecks.
“Gabon’s growth performance has been strong over the last four years. Real GDP growth has averaged about 6 percent during the period 2010-13 on the back of substantial scaling-up of public investment. However, there has been a slowdown in growth in 2014, from an estimated 5.6 percent in 2013 to a projected 5.1 percent in 2014, in part reflecting a substantial reduction in public spending. The adjustment in government expenditure in 2014 responded to a considerable weakening of the fiscal position caused by rapid increases in public investment spending in the past few years. By 2013 overall budget surplus (commitment basis) had virtually disappeared from a high of about 6 percent of GDP in 2009, and significant payment arrears had accumulated. In line with developments in the sub-region, inflation pressures have risen.
“The growth outlook remains robust in the medium term, averaging about 6 percent for the next five years, notwithstanding a projected decline in oil production. Growth is projected to be driven by public investment, non-oil natural resources, and services. A number of projects underway in agro-industry, mining, and wood processing should help sustain the projected non-oil growth.
“The foremost downside risk to the economic outlook in the short to medium term is loose fiscal policy and weak investment execution capacity, leading to further depletion of fiscal buffers and insufficient fiscal space to address binding constraints to growth. This is particularly the case in the context of the weak commodity price outlook, especially for oil.
“Given the economic challenges facing Gabon, the Article IV consultation was centered on how to make the PSGE a reality while ensuring fiscal sustainability. Specifically, the discussion focused on the following issues: (i) creating the fiscal space necessary to finance the PSGE on a fiscally sustainable basis, notably by keeping rapid public debt accumulation in check; (ii) policies to strengthen competitiveness and promote economic diversification; and (iii) deepening the financial sector and enhancing financial stability.
“The mission commends the authorities for starting to address the emerging fiscal strains, including the accumulated arrears, in the context of the revised 2014 budget and the draft 2015 budget. Further efforts will be needed to ensure that the PSGE is well-financed on a fiscally-sustainable basis. This can be done by greater control of the wage bill and progressive reductions in costly and inequitable fuel subsidies, as well as enhanced prioritization within the investment budget to focus on infrastructure with the highest economic benefits. Nonetheless, well-targeted spending on key social areas should be protected. Given generous tax benefits already provided to some industries under the PSGE, it is necessary to expand the non-oil revenue tax base, notably by reducing tax exemptions.
“The mission supports the government’s efforts to improve the business environment and the quality of human capital. These are necessary ingredients for the success of the PSGE as they are needed to boost productivity. The success of the government’s program depends on the speed and intensity of structural reforms. Efforts such as strengthening the enforcement of creditor rights should foster financial deepening and access to credit. At the same time, the authorities need to address the financial situation of weak public banks to enhance financial stability.
“The mission underscored that the IMF is committed to strengthening relations with the Gabonese authorities to address these challenges. The Executive Board of the IMF is expected to consider the staff report on the Article IV consultation in January 2015.
“The mission wishes to thank the authorities for their warm hospitality as well as for their very close and constructive collaboration.”
1 Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country’s economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board. At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country authorities.
International Monetary Fund (IMF)