- The archipelago of São Tomé and Príncipe today was informed it had met its economic reform goals set by the World Bank and the International Monetary Fund (IMF), meaning it is eligible for massive debt cancellation. Debt relief from all of São Tomé's creditors is set to amount to US$ 99 million.
According to a joint statement by the World Bank and the IMF, the two institutions had agreed that "São Tomé and Príncipe has made good progress to reach the completion point" under the so-called Enhanced Heavily Indebted Poor Countries (HIPC) Initiative. The HIPC initiative aims at cancelling debts of poor developing countries after they go through a list of economic reforms as prescribed by the Bank and the Fund.
To reach the completion point, the government of São Tomé had "met all the triggers aimed at maintaining macroeconomic stability, ensuring commitment to the national poverty strategy, strengthening public expenditure management, raising the quality of education, improving health outcomes and fighting malaria." In addition, the country was obliged to take steps to "improve governance, especially in its nascent petroleum sector, and fight corruption through an on going comprehensive judicial/administrative reform."
With the decision made that São Tomé had fulfilled its obligations, the World Bank and the IMF are to start cancelling parts of the nation's debt - a step that usually is followed by other major creditors. "Debt relief under the Enhanced HIPC Initiative from all of São Tomé and Príncipe's creditors amounts to US$ 99 million," according to the Bank and the Fund.
In reaching the HIPC completion point, São Tomé also became eligible for further debt relief from the World Bank, the IMF and the African Development Fund (AfDF). Debt service savings under the AfDF relief programme alone would amount to approximately US$ 50.3 million.
As a result of reaching the HIPC completion point, São Tomé is further "expected to receive the equivalent of US$ 317 million in total nominal debt relief" under programmes by these three institution "on principal as well as interest payments."
Marie Françoise Marie-Nelly of the World Bank office in São Tomé commented that "reaching the HIPC Completion Point was a key milestone for the country, which will have an important development impact as the funds that would have been used for debt servicing could now be deployed for poverty reducing expenditures."
"In order to achieve optimum results," Ms Marie-Nelly added, "São Tomé and Príncipe must continue on the path of macroeconomic stability, improvements in governance, including sustained public finance management reform, and structural reforms to foster private sector development and diversification of the economy."
Also the IMF's chief officer in the island nation, Arend Kouwenaar, noted that "São Tomé and Príncipe has made good progress toward securing macroeconomic stability and established a good track record of policy implementation. Looking forward, a main challenge will be to develop strong institutions to secure a transparent management of oil revenue and to secure a proper execution of the government's Poverty Reduction Strategy Paper (PRSP)."
São Tomé during the last few years has seen a massive growth in its foreign debt as the small nation has been preparing for the establishment of an offshore oil industry that could bring great wealth to the two islands' less than 200,000 inhabitants. The government has worked hard on seeing the majority of this debt cancelled before oil revenues start ticking in.
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