Click here for search results

Country Brief

Available in: Português, Français

Sao Tome and Principe: Country Brief

Economic Overview

São Tomé and Príncipe is an archipelago of just over 1,000 square kilometers in the Gulf of Guinea and one of the smallest economies in Africa with a gross national income (GNI) of US$1,140 in 2009. While economic performance improved and the real GDP growth increased to an average 5 percent over the period 2001 to 2007 from 2 percent in 1994 to 2000, approximately 54 percent of its population of 166,000 is poor and 15 percent live in extreme poverty. The country ranks 131 out of 182 countries in the 2009 UNDP Human Development Index. Life expectancy is 67 years and adult literacy rate is estimated at 83 percent.

After a lengthy economic crisis during the 1990s, a series of economic reforms were implemented starting in 1999. The country reached the HIPC decision point in December 2000 and Completion Point in March 2007, at which time the International Monetary Fund (IMF) and the World Bank Group's International Development Association (IDA) agreed to provide US$314 million in debt relief under the Enhanced HIPC Initiative.  Notwithstanding the HIPC relief, the debt burden is still high: São Tomé and Príncipe’s debt ratios to exports and government revenues remain among the highest in the world. The external debt to GDPratio in 2008 is estimated at 69.7 percent and is projected to fall to 52.2 percent in 2009, as the authorities conclude debt relief negotiations with non-Paris club members. São Tomé and Príncipe is vulnerable to exogenous shocks and was hit hard by the increase in international food and fuel prices in 2008. The global economic downturn resulted in a significant decrease in fiscal revenues, including lower than expected tourism receipts and donor assistance, lower remittances, and postponement of foreign direct investment.  Growth was 4 percent in 2009, and is not expected to pick up to 6 percent until 2012. 

São Tomé and Príncipe may see a dramatic change if oil resources within its territorial waters and in the shared zone with Nigeria materialize. Prospective off-shore oil production could significantly modify the medium and long-term economic outlook.  Reforms have been initiated to prepare the ground for managing future oil revenues into the budget; and the country has recently launched a competitive bidding process on exploration of its petroleum blocks located in its territorial waters.

Political Context

The Independent Democratic Action (ADI) was the winning party on the legislative elections that took place in August 2010, obtaining 26 out of the 55 parliament seats. Former opposition leader Patrice Trovoada (ADI) has been appointed prime minister, heading a minority government that includes a few independent ministries.   

Development challenges

São Tomé and Principe joined the Bank and IDA in 1977 and became a borrower in 1985. The Bank's previous involvement included structural adjustment operations, as well as support in the agriculture, health, and education sectors.

The country's PRSP was promulgated by the President of the Republic in January 2003 and presented to the IMF and Bank Boards in April 2005. The current IDA Country Assistance Strategy (CAS), adopted by the Bank Board in early June 2005, and covering the period of 2006 to 2009, supports the government in promoting the implementation of the PRSP, focusing on strengthening the macroeconomic and public finance management, and building the required institutions and capacity to ensure the sustainable use of expected future oil revenues. Going forward, the Bank will likely intensify its support on key structural reforms that will be part of a new PRSP, notably public finance management, petroleum sector governance and energy.

To date, the World Bank has approved fourteen IDA credits for São Tomé and Príncipe for a total amount of approximately US$83.3 million. STP continues to be eligible to receive 100 percent of its IDA allocation as grants, due to the country's high risk of debt distress.

Other main donors include Portugal, France, the EU, AfDB, the World Bank and the UN family, as well as Taiwan, Province of China. The United States has also become an active donor in the past three years, with São Tomé and Principe poised to benefit from the United States Millennium Challenge Corporation (MCC) threshold program.

 

A new Interim Strategy Note is under preparation and will build upon the success of the past Country Assistance Strategy and will continue to (i) support the preparation of a new Poverty Reduction Strategy, (ii) raise public sector governance to maximize the benefits of future oil revenues; and (iii) strengthen public sector service delivery in the energy, water and communication sectors.

The current portfolio consists of two ongoing IDA projects and two projects funded by Trust Funds.  The IDA projects include (i) Governance and Capacity Building Technical Assistance (US$5 million); and (ii) Social Sector Support ($6.5 million).  The Public and Natural Resources Management Development Policy Operation (DPO) (US$4 million) adopted in 2008 was supplemented with US$2 million in July 2009 to assist the country to confront the effects of the international economic downturn. Additional Financing for US$2.1 million was also approved in March 2010 to scale up the health components of the Social Sector Support project. This funding represents about 40 percent of the public investment planned for the health sector in 2010.

With respect to Trust funds, in 2007 Sao Tome and Principe joined the Education For All – Fast Track Initiative Program, and was awarded a US$3.6 million Catalytic Fund (CF) Grant to help implement its Education Strategic Plan.

Other projects are currently under preparation to support the Government to implement practical climate change adaptation actions to mitigate the adverse impacts of climate change in select sectors (e.g., agriculture, fisheries, water, health and energy).  São Tomé and Principe may also participate within a regional Central African Backbone project to provide broadband connectivity.

 

Petroleum Governance

Considerable support has been provided, through a series of Bank projects (DPOs and Technical Assistance), to develop the institutional and legislative reforms that are critical to govern STP’s offshore petroleum deposits (located in both the Joint Development Zone (JDZ) shared with Nigeria and STPs own Exclusive Economic Zone (EEZ)).  Some institutions have already been established, including the Petroleum Oversight Committee and the Public Registration and Transparency Information Office.  Other results include capacity building of the National Petroleum Agency and efforts to increase transparency in the sector through the EITI.  Legislation governing the EEZ, in line with best international standards, has been also been developed with Bank assistance and STP has recently launched a competitive bidding process for exploration of petroleum blocks located in its EEZ.

Public Finance Management

STP is focusing on building institutional and legal capacity to improve economic management and to strengthen accountability of public and natural resources.  Support from Bank projects has resulted in (i) improved legislation on Public Finance Management (including a new Procurement Law and new tax laws); and (ii) strengthened institutional capacity and key tools such as a computerized integrated financial management information system. A new DPL is under preparation to continue Bank assistance in the sector and ensure that the Public Accounts of the State are prepared for the first time, making the government more accountable to the National Assembly.

Health and Education

Additional financing has recently been approved to scale up the health component of the Bank’s Social Sector Support project. Overall, key performance indicators have shown good progress and a few indicators have exceeded the end of program target level. The education component of the project has successfully been completed and the sector is now supported by an Education for All-Fast Track Initiative (EFA/FTI) Catalytic Fund Grant. Examples of those gains include the Gross Enrollment Rate (GER), estimated at 121 percent, and the completion rate in primary education at 64 percent. The survival rate from first to sixth grade rose to 66.7 percent in 2009, from 47 percent in 2003, and the transition rate from fourth to fifth grade increased to 84.2 percent from 60 percent in the same period. The percentage of schools working on a triple shift regimen has dropped to 8 from 27 in 2003, and the ratio of one textbook per student has been achieved.

The health sector is also demonstrating encouraging results, particularly in the areas of maternal health and child health care. Most of the original project indicators have also been reached or surpassed. The proportion of births attended by skilled professionals increased to 86 percent in 2009 from 70 percent in 2003 (surpassing the project target of 85 percent) as a result of improvements in service delivery, particularly in rural areas. At the same time, the proportion of pregnant women receiving antenatal care increased from 65 percent to 82.3 percent during the same period. Progress was also registered in child health care.  The immunization rate for measles in 2009 is at 93.1 percent, and São Tomé and Príncipe has been a success story on the malaria front: the incidence of the disease in children under five years old has decreased to 34 per 1,000 in 2009 from 1,273 per 1,000 in 2004, primarily as a result of the use of bed nets, and the treatment of malaria cases with a combination of amodiaquine and artesunate. Mortality from malaria has dropped to close to zero in 2009. The HIV prevalence among pregnant women has dropped from 5.4 percent at the beginning of the project to an estimated 1.5 percent in 2009, although some concerns still remain. Civil society organizations have also played an important role in project implementation.

The World Bank works closely with Sao-Tome through its offices in Maputo, Mozambique. Others main country’s partners include:  European Union, the African Development Bank, UNDP and the World Health Organization.

 

Last updated September 2010




Permanent URL for this page: http://go.worldbank.org/S1B35TAGM0