São Tomé and Príncipe : Request for a Three-Year Arrangement Under the Poverty Reduction and Growth Facility

This paper reviews the request from the São Tomé and Príncipe authorities for a Three-Year Arrangement Under the Poverty Reduction and Growth Facility (PRGF). In 2004, the economy continued to grow at a moderate pace, but inflation increased to 15 percent by year-end, as bank credit to the private sector rose sharply and the government loosened fiscal policy. The proposed program for 2005-07 aims at correcting macroeconomic imbalances and sets the conditions for sustained strong growth. Real GDP growth is envisaged to slow down in 2005 in response to tight financial policies.