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IMF Country Report No. 22/216

GABON

FIRST AND SECOND REVIEWS OF THE EXTENDED ARRANGEMENT UNDER THE EXTENDED FUND FACILITY, REQUESTS FOR WAIVERS FOR NONOBSERVANCE OF PERFORMANCE CRITERIA, ESTABLISHMENT OF PERFORMANCE CRITERIA, AND FINANCING ASSURANCES REVIEW—PRESS RELEASE; STAFF REPORT; STAFF SUPPLEMENT; AND STATEMENT BY THE EXECUTIVE DIRECTOR

July 2022

In the context of the Gabon—First and Second Reviews of the Extended Arrangement under the Extended Fund Facility, the following documents have been released and are included in this package:

• A Press Release including a statement by the Chair of the Executive Board.

• The Staff Report prepared by a staff team of the IMF for the Executive Board’s consideration on June 27, following discussions that ended on May 20, 2022, with the officials of Gabon on economic developments and policies underpinning the Extended Arrangement under the Extended Fund Facility. Based on information available at the time of these discussions, the staff report was completed on June 14, 2022.

• A staff supplement updating information on external arrears clearance and on the completion of one prior action.

• A Statement by the Executive Director for Gabon.

The IMF’s transparency policy allows for the deletion of market-sensitive information and premature disclosure of the authorities’ policy intentions in published staff reports and other documents.

Copies of this report are available to the public from

International Monetary Fund • Publication Services

PO Box 92780 • Washington, D.C. 20090

Telephone: (202) 623-7430 • Fax: (202) 623-7201

E-mail: publications@imf.org Web: http://www.imf.org Price: $18.00 per printed copy

International Monetary Fund

Washington, D.C.

© 2022 International Monetary Fund

Press Release

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PRESS RELEASE

PR22/232

IMF Executive Board Completes the First and Second Reviews Under the Extended Arrangement under the Extended Fund Facility with Gabon

FOR IMMEDIATE RELEASE

• Program implementation has been mixed amid pandemic-related disruptions.

• A nascent economic recovery is underway, and the medium-term outlook is broadly positive amidst higher oil prices, but it remains subject to considerable uncertainty. The war in Ukraine will affect the economy through higher food and fuel prices.

• The completion of the first and second reviews under the EFF-supported program allows the authorities to draw SDR 116.1 million (US$155.29 million).

Washington, DC – June 27, 2022: On June 27, 2022, the Executive Board of the International Monetary Fund completed the First and Second Reviews of the Extended Arrangement under the Extended Fund Facility (EFF) for Gabon. The completion of the reviews enables the immediate disbursement of SDR 116.1 million (US$155.29 million), bringing total disbursements under the extended arrangement to SDR 197.1 million (about US$263.63 million). The extended arrangement was approved by the IMF Board on July 28, 2021, to help Gabon respond to the economic fallout from the COVID-19 pandemic and to support the authorities’ economic and financial reform program (see Press Release No. 21/233).

Gabon’s economy was hit by the COVID-19 pandemic, with a decline in real output of 1.9 percent in 2020. Growth recovered to an estimated 1.5 percent in 2021, on the back of a booming mining sector and the rebound in the wood and construction sectors. Growth in the services sector remained subdued as containment measures weighed on the trade and transportation sectors. Higher oil prices contributed to strengthening the fiscal and external positions and reducing public debt.

The outlook remains positive. GDP growth is expected at 2.4 percent in 2022 driven by a continued recovery in wood and construction and a rebound in services. Russia’s war in Ukraine and related surge in commodity prices will boost oil exports and revenues and further improve the fiscal and external positions. However, the cost of fuel subsidies will weigh on the budget and higher food prices will add to inflationary pressures. Higher oil revenues will help accommodate the increase in fuel and food subsidies to the most vulnerable and rebuild fiscal and external buffers.

Uncertainty around the economic outlook is elevated, with the balance of risks tilted to the downside. Outbreaks of highly contagious COVID-19 variants, particularly in view of the slow vaccination uptake, a potentially sharper slowdown in China, the intensification of the Russia’s war in Ukraine, and possible social tensions ahead of the 2023 presidential elections, pose significant risks to the outlook. On the upside, higher oil prices and accelerated reforms are expected to strengthen domestic revenue and improve public financial management; governance and the business environment will support a return to strong and inclusive growth while safeguarding debt sustainability.

At the conclusion of the Executive Board’s discussion, Mr. Okamura, Deputy Managing Director and Acting Chair stated:

“The economy is gradually recovering from the 2020 recession owing to the strong policy response to the COVID-19 pandemic and the rise in oil prices. Growth has gained momentum, the fiscal and external positions have strengthened, and public debt has declined. The outlook is broadly positive but remains subject to various risks, including from the spillovers from Russia’s war in Ukraine, a possible sharper slowdown in China, and a potential resurgence of the COVID-19 pandemic.

“Fiscal policy should continue to support the ongoing recovery while preserving debt sustainability and protecting the most vulnerable groups amid the rising fuel and food prices and inflationary pressures. Increasing domestic revenue collection and improving public finance management will help rebuild policy space for essential development outlays. Expediting the design of well-targeted social safety nets will also be critical to providing adequate support to vulnerable households and strengthening social protection.

“Addressing structural reforms, including governance and corruption weaknesses is paramount to achieve strong and inclusive growth. Enhancing the banking sector and implementing an effective financial inclusion strategy, improving the business environment, and strengthening the anti-corruption framework will help address bottlenecks in the economy and promote private investment.”

Gabon: Selected Economic Indicators

Sources: Gabonese authorities; World Development Indicators; and IMF staff estimates and projections.

^1/Excluding capital spending financed with external resources.

Gabon: Selected Economic Indicators

Population (2017, UN est.):	2.01 million		Per capita GDP (2017):			US$ 7,490
Quota:	SDR 216.0 million		Literacy rate (2012):			82.3 percent
Main products and exports:	Crude petroleum; Manganese ore.		Poverty rate (2017):			32.4 percent
Key export markets:	China; European Union, Australia
Macroeconomic Indicators		2019	2020	2021 Prel.	2022 Proj.	2023 Proj.
Output (change in percent)
Real GDP		3.9	-1.9	1.5	2.8	3.7
Non-oil GDP		3.3	-1.8	2.8	2.4	4.5
Prices (change in percent)
Inflation (End of period)		1.0	1.6	1.7	4.6	2.0
Inflation (Average)		2.0	1.3	1.1	3.5	3.2
Central Government Finances (percent of GDP)
Revenue		19.5	17.6	14.7	16.2	17.6
Expenditure and net lending		18.2	19.8	16.6	14.9	14.5
Fiscal Balance (cash basis)		0.8	-2.4	-1.8	0.9	3.2
Total Public Debt		59.8	78.3	65.8	52.6	50.8
Central Government Finances (percent of Non-oil GDP)
Revenue and grants		29.0	23.4	23.7	29.6	29.8
Oil		11.2	9.0	8.5	12.9	12.6
Non-oil		17.8	14.4	15.0	16.0	17.1
Expenditure and net lending		27.0	26.3	26.7	27.3	24.6
o/w Current		19.8	21.6	21.4	20.6	17.9
o/w Capital		4.2	3.6	3.9	4.2	4.3
Non-oil primary balance		-5.8	-7.4	-7.1	-6.2	-3.4
Basic non-oil primary balance 1/		-4.2	-4.2	-6.1	-6.2	-5.1
Money and Credit
Broad Money (change in percent)		1.2	6.8	5.5	10.5	16.5
Credit to the private sector (change in percent)		2.5	5.2	15.8	14.9	11.1
Balance of Payments
Current account (percent of GDP)		-5.0	-6.9	-5.2	0.8	-1.1
FDI (percent of non-oil GDP)		7.3	7.8	7.9	8.0	7.9
CEMAC Foreign Reserves (months of extrazone imp.)		3.6	3.3	3.9	4.1	4.3
External Debt (percent of GDP)		39.2	46.0	37.8	31.5	31.0

Sources: Gabonese authorities; World Development Indicators; and IMF staff estimates and projections.

^1/Excluding capital spending financed with external resources.

View Table

Gabon: Selected Economic Indicators

Population (2017, UN est.):	2.01 million		Per capita GDP (2017):			US$ 7,490
Quota:	SDR 216.0 million		Literacy rate (2012):			82.3 percent
Main products and exports:	Crude petroleum; Manganese ore.		Poverty rate (2017):			32.4 percent
Key export markets:	China; European Union, Australia
Macroeconomic Indicators		2019	2020	2021 Prel.	2022 Proj.	2023 Proj.
Output (change in percent)
Real GDP		3.9	-1.9	1.5	2.8	3.7
Non-oil GDP		3.3	-1.8	2.8	2.4	4.5
Prices (change in percent)
Inflation (End of period)		1.0	1.6	1.7	4.6	2.0
Inflation (Average)		2.0	1.3	1.1	3.5	3.2
Central Government Finances (percent of GDP)
Revenue		19.5	17.6	14.7	16.2	17.6
Expenditure and net lending		18.2	19.8	16.6	14.9	14.5
Fiscal Balance (cash basis)		0.8	-2.4	-1.8	0.9	3.2
Total Public Debt		59.8	78.3	65.8	52.6	50.8
Central Government Finances (percent of Non-oil GDP)
Revenue and grants		29.0	23.4	23.7	29.6	29.8
Oil		11.2	9.0	8.5	12.9	12.6
Non-oil		17.8	14.4	15.0	16.0	17.1
Expenditure and net lending		27.0	26.3	26.7	27.3	24.6
o/w Current		19.8	21.6	21.4	20.6	17.9
o/w Capital		4.2	3.6	3.9	4.2	4.3
Non-oil primary balance		-5.8	-7.4	-7.1	-6.2	-3.4
Basic non-oil primary balance 1/		-4.2	-4.2	-6.1	-6.2	-5.1
Money and Credit
Broad Money (change in percent)		1.2	6.8	5.5	10.5	16.5
Credit to the private sector (change in percent)		2.5	5.2	15.8	14.9	11.1
Balance of Payments
Current account (percent of GDP)		-5.0	-6.9	-5.2	0.8	-1.1
FDI (percent of non-oil GDP)		7.3	7.8	7.9	8.0	7.9
CEMAC Foreign Reserves (months of extrazone imp.)		3.6	3.3	3.9	4.1	4.3
External Debt (percent of GDP)		39.2	46.0	37.8	31.5	31.0

Sources: Gabonese authorities; World Development Indicators; and IMF staff estimates and projections.

^1/Excluding capital spending financed with external resources.

Title Page

GABON

STAFF REPORT FOR THE FIRST AND SECOND REVIEWS OF THE EXTENDED ARRANGEMENT UNDER THE EXTENDED FUND FACILITY, REQUESTS FOR WAIVERS FOR NONOBSERVANCE OF PERFORMANCE CRITERIA, ESTABLISHMENT OF PERFORMANCE CRITERIA, AND FINANCING ASSURANCES REVIEW

June 14, 2022

EXECUTIVE SUMMARY

Context

On July 28, 2021, the IMF Executive Board approved a 36-month extended arrangement under the Extended Fund Facility (EFF) with a total access of SDR 388.8 million (180 percent of quota) to help Gabon respond to the economic fallout from the COVID-19 pandemic and support the authorities’ economic and financial reform program. A nascent economic recovery is underway, and the outlook is broadly positive but remains subject to considerable uncertainty and a range of risks. The war in Ukraine will affect the economy through various channels, including higher food and fuel prices.

The first review, initially planned for December 2021, was delayed allowing additional time to implement the structural reform agenda. Recent and expected progress on the implementation of critical structural benchmarks (SBs), particularly in the governance area, availability of data for the second review, and cumulative performance up to date provides a credible ground to combine the first and second reviews.

Program

Program implementation has been challenging amid pandemic-related disruptions which weighed on public administration management and efficiency. One out of the four end-July 2021 quantitative performance criteria (PCs) and the continuous PC on external arrears accumulation were missed. Two out of the four end-December 2021 PCs and the continuous PC on external arrears accumulation were missed. Preliminary end-March data suggest that the authorities have taken corrective actions to improve program implementation. Government deposits at the Central Bank increased. The authorities have made good progress in implementing the structural reform agenda, notwithstanding some delays relative to the timetable under the program.

Policy Discussions

Discussions focused on the need to strike an appropriate balance between fiscal prudence and targeted support to the vulnerable population to cushion the impact of recent shocks, while completing key governance reforms. Returning to the fiscal consolidation path as initially agreed in the program will be important to build up fiscal buffers and regional reserves and support a return to strong and inclusive growth.

Staff Views

In light of program performance and the authorities’ commitments to the program’s objectives, staff supports the completion of the first and second reviews under the Extended arrangement. This would make available a purchase equivalent to SDR 116.1 million (53.75 percent of quota).

Approved By

Vitaliy Kramarenko (AFR) and Geremia Palomba (SPR)

Contents

• RECENT DEVELOPMENTS, OUTLOOK AND RISKS

• A. Recent Developments

• B. Outlook and Risks

• PROGRAM PERFORMANCE

• POLICY DISCUSSIONS

• A. Fiscal Policy

• B. Other Structural Reforms

• PROGRAM ISSUES

• STAFF APPRAISAL

• FIGURE

• 1. Real Sector Developments, 2020–22

• TABLES

• 1. Selected Economic Indicators, 2019–27

• 2. Balance of Payments, 2019–27

• 3a. Central Government Accounts, 2019–27 (billions of CFA francs)

• 3b. Central Government Accounts, 2019–27 (percent of GDP; billions of CFA francs)

• 3c. Central Government Accounts, 2019–27 (percent of non-oil GDP; billions of CFA francs)

• 4a. Financing of the Fiscal Deficit, 2019–24 (billions of CFA francs)

• 4b. Financing of the Fiscal Deficit, 2019–24 (percent of GDP)

• 5. Monetary Survey, 2019–23

• 6. Financial Soundness Indicators for the Banking System, 2015–21

• 7. Indicators of Capacity to Repay the Fund, 2022–31

• 8. Schedule of Purchase and Timing of Reviews Under the Extended Arrangement

• 9. Decomposition of Public Debt and Debt Service by Creditor, 2020–23

• ANNEXES

• I. Estimating the Impact of the War in Ukraine

• II. External Sector Assessment

• III. Risk Assessment Matrix

• IV. Debt Sustainability Analysis

• V. Carbon Credits and the Gabonese Economy

• APPENDIX

• I. Letter of Intent

• ATTACHMENTS

• I. Additional Memorandum of Economic and Financial Policies

• II. Technical Memorandum of Understanding