Democratic Republic of São Tomé and Príncipe : 2016 Article IV Consultation, First Review under the Extended Credit Facility, and Request for Waiver for Nonobservance of Performance Criterion and Modification of Performance Criteria-Press Release; Staff R

Context: São Tomé and Príncipe's economic development is constrained by its insularity, fragility, limited resources, and low capacity as a small island state. GDP growth has averaged over 4 percent per year since 2012, faster than many small island states. Inflation has also fallen sharply from 28 percent down to about 4 percent, the lowest in the past two decades. These developments notwithstanding, growth has not been sufficiently strong and diversified to meaningfully improve economic prospects and reduce poverty significantly. The poverty rate is high at 66 percent. Focus: Discussions centered on aligning fiscal policy to bring debt to a downward trajectory toward a moderate risk of debt distress; addressing the liquidity overhang to enhance monetary management; improving competitiveness; and safeguarding financial sector stability to support growth. São Tomé and Príncipe is participating in the second round pilot of countries to mainstream macro-financial linkages.