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An International Monetary Fund (IMF) team, led by Ms. Aliona Cebotari, visited Gabon on January 23-February 6, 2024, to meet with the authorities and private sector representatives for the 2024 Article IV consultation. Discussions focused on how to revive economic growth and raise living standards by accelerating structural reforms and fostering transparency, while ensuring fiscal sustainability and sound public financial management. At the end of the IMF team’s visit, Ms. Cebotari issued the following statement:
“Gabon is facing significant challenges including declining oil production, stagnating income per capita, high unemployment, weak governance, and a precarious fiscal situation. Staff welcomed the transition authorities’ initial steps towards greater transparency and strengthened public financial management, which clearly signal their willingness to tackle these challenges. Stronger action is, however, needed to ensure a sustainable fiscal position, step up transparency reforms, and revive growth.
“After some setback in 2023, growth is expected to accelerate in 2024-25 to reach 3 percent thanks to the momentum in the non-oil sector. In the medium term, growth should stabilize somewhat below these levels—not sufficient to meaningfully boost per capita incomes – but potential growth will depend strongly on the implementation of the necessary reforms. Towards end-2023, inflation fell below the regional ceiling of 3 percent and is expected to remain around this level in the absence of further shocks. Credit growth, financed by increasing deposits, is strong despite the tightening of the regional monetary policy. After a strong surplus in the last few years due to the increase in commodity prices, the current account balance is expected to decrease gradually over the medium term because of lower oil receipts.
“Transparency and governance reforms, some of which have already been initiated by the authorities, should be pursued because they will be key to addressing policy challenges. The efforts should include, in particular, an inventory of all state flows, assets, and liabilities (direct and contingent); full reporting of the financial positions of the government and state-owned enterprises; publication of the past reports of the government’s external auditor in accordance with the legal provisions in force; and, importantly, publication of the oil and mining contracts.
“The government has inherited a difficult fiscal position. In 2022 and 2023, election-related spending widened the non-oil deficit to double digits in terms of its share in the nonoil GDP, financed in part by substantial arrear accumulation. Without firm corrective action, the fiscal deficit in 2024-25 may be difficult to finance in the currently tight global financing environment, and public debt would continue to grow. At the same time, improvement of the population’s living conditions and boosting growth will require decisive prioritization of spending needs and re-invigorated revenue mobilization efforts, given such tight budget constraints. These difficult policy tradeoffs can be attenuated by a focus on high-impact, low-risk investments that remove barriers to growth, social spending, and broadening the tax base by tackling exemptions and bringing on board underutilized resources across the public sector.
“The authorities have initiated reforms to improve the management of public finances, which will be critical to strengthening the fiscal position. The centralization of all the funds and payment authority in the Treasury Single Account and careful liquidity management; the setting up a regulatory framework for the operation and monitoring of state-owned enterprises; and a better management of the public investment processes are among the reforms that should also yield strong dividends, some of which are already being launched.
“To accelerate the economic diversification required for growth in per capita income, the authorities are aware that efforts should focus on removing the main constraints on the business environment by prioritizing infrastructure spending, strengthening governance, ensuring a predictable fiscal environment, and paying government arrears.
“The mission would like to thank the Gabonese authorities and other partners for the open and fruitful discussions and for their warm hospitality.”
Distributed by APO Group on behalf of International Monetary Fund (IMF).
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