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Democratic Republic of São Tomé and Príncipe: Selected Issues and Statistical Appendix

Author(s):
International Monetary Fund
Published Date:
October 2006
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III. A Note on Inflation, 1998–200520

A. Overview and Conclusions

1. This chapter discusses recent developments with inflation and monetary aggregates, and looks into determinants of inflation in São Tomé and Príncipe from a statistical point of view. The analysis is motivated by the fact that inflation has picked up since 2004, posing new challenges to policymakers in devising a strategy to keep inflation low and determining which policy variables to monitor toward this end.

2. The chapter builds upon analysis by Kuijs (2000) on the relationship between money growth, inflation, and exchange rate depreciation for the period 1992–98. The times series data have been expanded to include the disinflation period of 2000-03 and the recent inflation rebound of 2004–05. The econometric results from this chapter are consistent with those of Kuijs (2000) regarding the important role played by money growth and exchange rate depreciation in explaining inflation in São Tomé and Príncipe. The statistical analysis and results from this paper, however, would need to be revisited over time to address the lack of long time series for critical variables and remaining questions about the stability of the model on account of changing institutional relationships.

3. The chapter’s main conclusions are the following:

  • As predicted in theory, there exists a reasonable long-run relationship among prices, broad money, the exchange rate, and developments in the real economy in São Tomé and Príncipe. Over the long run, both broad money growth and changes in the exchange rate have an impact on inflation.
  • Statistical evidence suggests that exchange rate depreciation causes inflation and vice versa. Exchange rate movements may have an important effect on prices given the large share of imported products in the household consumption basket. Also, a more depreciated exchange rate reduces the demand for the dobras, thus increasing money velocity and creating inflationary pressures.
  • Our empirical results highlight the impact of exchange rate depreciation on inflation in the short run. In particular, a shock to the exchange rate has a larger and more lasting impact on inflation than an equivalent shock to broad money. Indeed, a shock to nominal money growth briefly leads to an increase in inflation, although this response is very small and statistically insignificant.
  • Empirical evidence suggests that there is substantial inflation inertia in São Tomé and Príncipe. Indeed, when inflation deviates from its long-term path, convergence to the latter persists, but the adjustment is very slow. Also, lagged inflation explains a relatively large part of current inflation.

4. A number of preliminary policy considerations could be derived from the analysis:

  • The paper finds evidence of a weak statistical relationship between money growth and inflation. This may suggest an ongoing step-increase in money demand (spurred from expectations about the growth of the domestic oil sector) which needs to be taken into account in designing monetary policy to secure adequate liquidity for non-inflationary economic growth.
  • Even assuming the existence of increasing money demand in the past, looking forward, the evidence of a relatively small but inflationary effect of money growth under such circumstances underscores the importance of controlling monetary conditions. This in turn highlights the need to maintain a sound fiscal stance and to avoid monetary financing of the budget deficits.
  • The analysis indicates that it takes around two years for a shock to the exchange rate to be fully-absorbed by inflation. This could be interpreted to mean that the formation of inflationary expectations is backward-looking, to a degree. In this regard, the development of the foreign exchange auction since 2004 could, in principle, improve the formation of expectations in the economy.

5. The structure of this paper is as follows. Section B presents background information on the evolution of inflation and monetary aggregates in São Tomé and Príncipe. Section C presents a simple monetary model to explain inflation. The model is estimated for the period 1998–2005 using monthly data for consumer price inflation, monetary aggregates, the dobra exchange rate against the dollar, and a proxy for monthly real GDP growth. In line with standard analysis, the monetary model is first estimated without imposing any restrictions on the coefficients for the explanatory variables. As a second step, and to enhance the statistical significance of the estimated coefficients, the model is re-estimated with the necessary restrictions over the specification of the equation, mainly in terms of the number of lagged explanatory variables. Section D presents impulse responses of inflation to shocks in the exchange rate and money growth using the restricted inflation model. The objective is to gauge how changes in key explanatory variables affect inflation over the short run. Section D also includes a discussion of Granger-causality tests estimates.

B. Inflation Trends in São Tomé and Príncipe, 1998–2005

6. After picking up in the late 1990s, inflation fell to almost single-digit levels during 2000–03, before increasing again in 2004–05 (Figure III.1). A significant hike in inflation in 1997 mirrored a sharp increase in domestic financing of a sizeable fiscal deficit. During 1998–2003, however, improved government policies helped sustain output growth and lower inflation. Over this period, real GDP growth increased from 2.5 percent to 4 percent, while inflation declined from 21 percent to 10 percent. 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. In particular, the government raised expenditures to an unsustainable level in anticipation of a large oil signature bonus, which in the event was not received in 2004. Inflation continued to increase in 2005, albeit in the context of a sharp increase in international oil prices which was passed-through to domestic consumers.

Figure III.1.Inflation (12-month percentage change), Jan. 1998–Sep. 2005

(In percent)

7. The volatility of inflation (measured by the standard deviation of the inflation rate) has mirrored the path of the inflation rate. Indeed, the standard deviation of the monthly and the 12-month inflation rate declined during the disinflation period of 2000–03, before increasing again during 2004–05 (Text Table III.1). While the average and the standard deviation of monthly inflation were 1.3 percent and 1.0 percent in 1998–99, they fell to 0.8 and 0.5 during 2000–03, respectively. During 2004–05, the average monthly inflation rate rebounded to 1.3 percent, while its standard deviation doubled to 1.1 percent.

Text Table III.1.Average Inflation, Jan. 1998–Sep. 2005(In percent)
Monthly12-month change
AverageStd. Dev.AverageStd. Dev.
Jan. 1998 - Sep. 20051.00.817.516.9
Jan. 1998 - Dec. 19991.31.033.927.2
Jan. 2000 - Dec. 20010.80.410.71.8
Jan. 2002 - Dec. 20030.80.510.00.5
Jan. 2004 - Sep. 20051.31.114.92.2
Source: IMF staff estimates.
Source: IMF staff estimates.

8. The relationship between key monetary variables and inflation remains puzzling in São Tomé and Príncipe.Text Table III.2 presents correlations among key monetary variables and inflation, while Figure III.2 shows the paths of inflation and growth of monetary aggregates (i.e., reserve money (M1) and broad money (M3)) during 1998–2005.21 There is a broadly positive relationship between inflation and money supply throughout the whole sample period. However, there exists unexpected irregularity in this relationship: while inflation is positively correlated with monetary aggregates in 1998–2002, such a relationship is not captured by the data for 2003–04. In 2005, inflation is again significantly correlated with reserve money growth.

Text Table III.2.Simple Correlations
(Correlation between 12-month rates of changes)
Jan. 1998–Sep. 2005
(ΔCPI, ΔM1)0.407
(ΔCPI, ΔM3)0.515
(ΔER, ΔM1)0.494
(ΔER, ΔM3)0.630
(ΔCPI, ΔER)0.941
(ΔCPI, INTR)0.904
Jan. 1998–Dec. 2002
(ΔCPI, ΔM1)0.430
(ΔCPI, ΔM3)0.584
(ΔER, ΔM1)0.522
(ΔER, ΔM3)0.696
(ΔCPI, ΔER)0.946
(ΔCPI, INTR)0.919
Jan. 2003–Dec. 2004
(ΔCPI, ΔM1)−0.314
(ΔCPI, ΔM3)−0.606
(ΔER, ΔM1)−0.345
(ΔER, ΔM3)−0.618
(ΔCPI, ΔER)0.859
(ΔCPI, INTR)−0.225
Jan. 2005–Sep. 2005
(ΔCPI, ΔM1)0.657
(ΔCPI, ΔM3)0.282
(dER, dM1)−0.601
(dER, dM3)−0.421
(ΔCPI, ΔER)−0.585
(ΔCPI, INTR)−0.020
Source: Staff estimates.
Source: Staff estimates.

9. Also, the data do not support a clear relationship between money growth and exchange rate depreciation. For example, while monetary aggregates grew at double digit rates in 2001–03, the nominal exchange rate depreciated only marginally during this period. The relatively weak correlation between money growth and the exchange rate depreciation persists even using monthly data (Text Table III.2).

São Tomé and Príncipe—Broad Money Growth and Exchange Rate Depreciation, 2001–05(In percent)
20012002200320042005

Est.
Broad money

growth
36.726.941.87.426.1
Exchange rate

Depreciation
4.81.92.96.918.7

Figure III.2.Inflation and Money Growth, Jan. 1998–Sep. 2005

(In percent)

10. The weak/unstable relationship either between money growth and inflation or between money growth and exchange rate depreciation might be explained by increases in money demand stemming from expectations about the domestic oil economy. Indeed, the recent increase in the number of commercial banks in the country (from one bank in 2003 to six banks in 2005) appears to have been instrumental in supporting an increase in the ratio of monetary aggregates to GDP. Also, rigidities in the functioning of the managed float during 2003–04 may have prevented the exchange rate from reflecting any excesses of money supply over money demand. However, the introduction of a foreign exchange auction system in late 2004, and its ongoing development, should help improve the formation of exchange rate expectations in the economy and better reflect in the future the underlying relationship between money growth and the depreciation of the exchange rate.

C. Empirical Analysis: Money, Exchange Rate and Prices

A vector error-correction model (VEC)

11. In order to explore the relationship among money, the exchange rate, real income/GDP and prices, we considered the following simple inflation forecasting model in which the price level (CPI) is determined by the behavior of the money supply and money demand:22

M3 is the money supply, which is in principle a policy variable and an increase in M3 should lead to an increase in general prices. Md is the money demand, which mitigates inflationary pressures and is assumed to be a function of the nominal interest rate (INTR), real GDP growth, and the exchange rate (ER). While higher interest rates make money holdings more costly, real economic expansion increases the transactions demand for money, thus leading to disinflation. A depreciation of the exchange rate lowers the relative returns on dobradenominated assets, reduces money demand, and fuels inflationary expectations.

12. Our statistical analysis uses a vector error-correction (VEC) methodology, which is the standard approach for the case when all dependent and independent variables in the model are co-moving with each other. We specify the above relationship as a VEC model with 7 lags, in which the equation for inflation is:23

where Δln is the first difference in logs of the variables, and ECM ln CPIt is an error correction term associated with disequilibrium from the long-term equilibrium in the money market, as defined in Equation (1):

We exclude the interest rate variable from our estimated econometric equation (3) because the central bank reference interest rate had been unchanged since 2000 (albeit in the aftermath of a period of discretionary reductions in this rate during the disinflation period that started in 1998).24

Data and empirical results (unrestricted VEC model)

13. The analysis uses monthly data from January 1998 to September 2005. Inflation is measured by the 12-month growth rate for the consumer price index (CPI). Money supply (M3) is defined as currency in circulation plus dobra-denominated deposits and foreign currency-denominated deposits. The amount of imported investment goods deflated by the CPI is used as a proxy of real GDP, in the absence of monthly GDP data. This variable (RGDP) is defined as the three-month moving average of this time series to accommodate the observed volatility of customs data. The exchange rate (ER) used is the dobra against the U.S. dollar.25

14. The augmented Dickey-Fuller unit root tests indicate that all variables (in logarithms) are non-stationary in levels, but stationary in their first differences (Text Table III.3). In addition, the trace test statistics reject the null hypothesis of no cointegration in favor of one cointegrating vector at the 1 percent significance level (Text Table III.4).26

Text Table III.3.Unit Root Test
Augmented Dickey-Fuller statistics
In levelsIn first differences
lnCPI−1.020−5.512 ***
lnM30.513−12.508 ***
lnER−0.073−20.090 ***
lnRGDP−1.923−11.675 ***

1 percent significance level.

1 percent significance level.

Text Table III.4.Cointegration tests
RankEigenvalueTrace1% critical
statisticsvalue
059.755154.46
10.237134.5861 ***35.65
10.1730216.918720.04

percent significance level.

percent significance level.

15. Given the above, we estimated an error-correction inflation equation of the unrestricted VEC model (see first three columns in Table I, Annex I). The fit of the inflation equation is satisfactory.27 The underlying cointegrating equation, which suggests a long-term equilibrium relationship among monetary aggregates, the exchange rate, real GDP and the price level, is estimated as follows:

All coefficients have the correct signs. Equation (4) shows that, in equilibrium, inflation tends to increase with money supply and depreciation of the exchange rate, and to decrease with real economic expansion.

A restricted VEC model

16. While the above unrestricted VEC model has reasonable coefficients and explains the systematic relationship among inflation, money supply, and the exchange rate, the estimated coefficients are only marginally significant in an econometric sense, possibly reflecting multicollinearity among variables in the sample period. Imposing constraints on statistically insignificant coefficients for a number of independent variables can result in a more concise specification of the error-correction inflation equation, while retaining the long-run relationship stated in equation (4). A restricted VEC model was estimated which significantly reduced the number of explanatory variables in the error-correction inflation equation (see last three columns in Table III.A, Annex I).

17. The restricted VEC model for inflation has broadly the correct signs of the coefficients for the explanatory variables.28 Notably, the model indicates that inflation is largely explained by the depreciation of the exchange rate and, to a lower extent, by the growth of broad money with a two-lag adjustment period. Also, there exists substantial inflation inertia. Specifically, the error correction terms enters negatively and significantly, implying that if inflation is 1 percent below its equilibrium level in one month, inflation will increase by roughly 0.02 percent in the following month. The role of inflation inertia is also highlighted by the high and significant coefficient of lagged inflation. Due to possible measurement errors, the estimated behavior of the real GDP variable remains statistically insignificant.

D. Impulse Analysis and Granger-causality Tests

18. An impulse response function, in which one-standard deviation of shock is given to an explanatory variable, is depicted in Figure III.3. The chart shows that, compared to other variables in the model, a shock to the exchange rate has the largest impact on domestic inflation in terms of magnitude, and it would take approximately two years for this transitory impact on inflation to be fully-absorbed in the inflation rate. This could be interpreted to mean that the formation of inflationary expectations is backward-looking, to a degree. A shock to nominal money growth briefly leads to an increase in inflation, although this response is very small and statistically insignificant. This outcome, along with the large increases in money growth observed in 2000–03, might be suggesting an ongoing step-increase in money demand.

19. When applying the Granger causality tests to the above restricted error-correction inflation model, we find that inflation Granger-causes depreciation of the exchange rate, and vice versa(Text Table III.5).29 This result can be interpreted to mean that inflation and depreciation expectations might be playing an important role in the economy given the past history of persistent inflation and continued exchange rate depreciation. At the same time, money supply does not seem to Granger-cause inflation.

20. Concerning the relationship between monetary aggregates and the exchange rate, the evidence indicates that there is two-way causality; while the former seems to weakly cause the latter in a statistical sense, exchange rate movements seem to affect monetary aggregates in a stronger manner.

Figure III.3.Impulse Response Function

Text Table III.5:Granger Causality 1/ 2/
Chi2Degree of

freedom
lnER−>lnCPI22.36***4
lnCPI−>lnER15.18***3
lnM3−>lnCPI3.762
lnCPI−>lnM35.963
lnM3−>lnER6.91**2
lnER−>lnM320.45***3
lnRGDP−>lnCPI4.002
lnCPI−>lnRGDP25.34***4
lnRGDP−>lnER14.24**7
lnER−>lnRGDP22.47***5
lnRGDP−>lnM38.34**3
lnM3−>lnRGDP1.831

** 5% significance level; *** 1% significance level.

The null hypothesis is that there is no causality.

** 5% significance level; *** 1% significance level.

The null hypothesis is that there is no causality.

E. References

    GashaJ. (2003) “A Note on Inflation,” in: Angola—Selected Issues and Statistical Appendix IMF Staff Country Report No. 03/292 by PastorG. and others (Washington:International Monetary Fund).

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    JohansenS. (1988) Statistical analysis of cointegration vectors,Journal of Economic Dynamics and Control12pp. 231254.

    JohansenS. (1995) Likelihood-Based Inference in Cointegrated Vector Autoregressive Models (New York:Oxford University Press).

    JohansenS. and JuseliusK. (1992) Testing structural hypotheses in a multivariate cointegration analysis of the PPP and the UIP for UK,Journal of Econometrics53pp. 211244.

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    KuijsA. (2000) “Monetary Policy, the Exchange Rate and Inflation,” in: São Tomé and Príncipe—Recent Economic Developments and Selected IssuesIMF Staff Country Report No. 00/69 byThiamI. and others (Washington:International Monetary Fund).

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    MuñozS. (2005) “High Inflation and Money Demand,” in: Zimbabwe—Selected Issues and Statistical Appendix IMF Staff Country Report No. 05/359byCooreyS. and others (Washington:International Monetary Fund).

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    NassarK. (2005) “Determinants of Inflation in Madagascar,”in:Republic of Madagascar—Selected Issues and Statistical AppendixIMF Staff Country Report No. 05/321 byFayolleA. and others (Washington:International Monetary Fund).

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Chapter III Annex I
Statistical Properties of the Error-Correction Inflation Equation

1. This annex presents the econometric estimates of the error-correction inflation equation estimated for São Tomé and Príncipe (Table III.A). As noted in the text, our error-correction inflation equation could be stated as follows:

Table III.A:Coefficients of Error-Correction Inflation Equation 1/ 2/
UnrestrictedRestricted
Coef.Std.Err.Coef.Std.Err.
ECMlnCPI(-1)−0.02150.0103 **−0.01580.0067 **
ΔlnCPI(-1)0.57240.1227 ***0.55820.0753 ***
ΔlnCPI(-2)−0.05360.1385
ΔlnCPI(-3)0.02870.1358
ΔlnCPI(-4)−0.03370.1334
ΔlnCPI(-5)−0.09960.1359−0.13540.0510 ***
ΔlnCPI(-6)−0.05420.1227
ΔlnCPI(-7)−0.05730.1083
ΔlnER(-1)−0.07700.0533−0.07050.0314 **
ΔlnER(-2)0.11630.0554 **0.11360.0327 ***
ΔlnER(-3)−0.07960.0562−0.05700.0338 *
ΔlnER(-4)0.01980.0590
ΔlnER(-5)0.11480.0530 **0.08190.0315 ***
ΔlnER(-6)0.02370.0560
ΔlnER(-7)0.03880.0456
ΔlnM3(-1)0.01000.0142
ΔlnM3(-2)0.01770.01450.01820.0104 *
ΔlnM3(-3)−0.00530.0150
ΔlnM3(-4)−0.00020.0147
ΔlnM3(-5)−0.01750.0134
ΔlnM3(-6)−0.01610.0137−0.00990.0094
ΔlnM3(-7)−0.00050.0127
ΔlnRGDP(-1)0.00130.0020
ΔlnRGDP(-2)0.00160.00190.00240.0014 *
ΔlnRGDP(-3)−0.00100.0019
ΔlnRGDP(-4)0.00140.0019
ΔlnRGDP(-5)0.00280.00180.00220.0014
ΔlnRGDP(-6)0.00130.0019
ΔlnRGDP(-7)0.00200.0019
Constant0.00240.00200.00240.0013 *

The dependent variable is ΔlnCPI.

*10% significance level, ** 5% significance level; *** 1% significance level.

The dependent variable is ΔlnCPI.

*10% significance level, ** 5% significance level; *** 1% significance level.

where Δln is the first difference in logs of the variables, and ECM ln CPIt is an error correction term associated with disequilibrium from the long-term equilibrium in the money market.

2. A number of tests was conducted to evaluate the statistical properties of our error-correction inflation model and the estimated long-run equilibrium relationship between inflation and key explanatory variables (equation 4 in text). The diagnostic tests are, in general, encouraging:

  • The corresponding adjustment matrix indicates that the estimated eigenvector is important for all four equations of the unrestricted error-correction model (Table III.B).
  • The standard weak exogenous tests based on the adjustment speed parameters in Table II suggest that all variables included in the model are endogenously-determined as a unit system.30 Inflation, money supply, exchange depreciation and real GDP cannot be treated as “weakly exogenous.”
  • Although there remain certain concerns about stability of the estimates in the error-correction inflation equation, the null hypothesis of no autocorrelation cannot be rejected at the 5 percent significance level,31 and the standard normality tests cannot be rejected at least at the 1 percent level.32
  • The coefficient associated with the error correction term is negative, as expected, and its absolute value indicates that the speed of the adjustment process toward equilibrium would be relatively slow in the short-run dynamics.
Table III.B.Unit Root Test
Augmented Dickey-Fuller statistics
In levelsIn first differences
lnCPI−1.020−5.512 ***
lnM30.513−12.508 ***
lnER−0.073−20.090 ***
lnRGDP−1.923−11.675 ***

:1 percent significance level.

:1 percent significance level.

Table 1.São Tomé and Príncipe: Gross Domestic Product and Expenditure at Current Prices, 2001–04(In billions of dobras, unless otherwise specified)
2001200220032004
Prel.
Primary sector80.987.494.5102.3
Agriculture66.071.477.383.7
Fishing14.916.017.218.6
Secondary sector70.275.581.287.5
Manufacturing and energy21.923.324.726.3
Construction48.352.356.561.1
Tertiary sector270.9323.8376.8439.5
Commerce and transport109.3129.0150.0175.0
Public administration108.0131.0156.8190.6
Financial institutions42.650.759.169.4
Other services11.013.110.94.4
Gross domestic product422.0486.8552.6629.3
Consumption527.8573.5657.3768.6
Private324.1392.4415.5433.7
Public203.8181.1241.9334.9
Gross fixed capital formation152.1159.3199.5221.7
Private59.987.688.795.0
Public92.271.7110.8126.6
Gross domestic expenditure680.0732.8856.8990.2
Resource balance−258.0−246.0−304.2−361.0
Exports of goods and services142.2168.2193.6196.5
Imports of goods and services400.2414.2497.9557.5
Memorandum items:
Gross domestic savings75.060.285.1104.9
Private domestic savings143.11.410.962.3
Public domestic savings−68.158.874.242.6
GDP deflator (annual percentage changes)9.810.89.29.7
Nominal GDP (annual percentage changes)14.215.413.513.9
Real GDP (annual percentage changes)4.04.14.03.8
Sources: São Tomé and Príncipe authorities; and staff estimates.
Sources: São Tomé and Príncipe authorities; and staff estimates.
Table 2.São Tomé and Príncipe: Gross Domestic Product and Expenditure at Current Prices, 2001–04(In percent of GDP)
2001200220032004
Prel.
Primary sector19.218.017.116.3
Agriculture15.614.714.013.3
Fishing3.53.33.13.0
Secondary sector16.615.514.713.9
Manufacturing and energy5.24.84.54.2
Construction11.510.710.29.7
Tertiary sector64.266.568.269.8
Commerce and transport25.926.527.227.8
Public administration25.626.928.430.3
Financial institutions10.110.410.711.0
Other services2.62.72.00.7
Gross domestic product100.0100.0100.0100.0
Consumption125.1117.8119.0122.1
Private76.880.675.268.9
Public48.337.243.853.2
Gross fixed capital formation36.132.736.135.2
Private14.218.016.015.1
Public21.914.720.120.1
Gross domestic expenditure161.1150.5155.1157.4
Resource balance−61.1−50.5−55.1−57.4
Exports of goods and services33.734.635.031.2
Imports of goods and services94.885.190.188.6
Memorandum items:
Gross domestic savings17.812.415.416.7
Private national savings33.90.32.09.9
Public national savings−16.112.113.46.8
Sources: São Tomé and Príncipe authorities; and staff estimates.
Sources: São Tomé and Príncipe authorities; and staff estimates.
Table 3.São Tomé and Príncipe: Gross Domestic Product and Expenditure at Constant Prices, 2001–04
2001200220032004
Est.
(In billions of dobras)
Gross domestic product at 1991 prices14.114.615.215.8
Primary sector4.54.64.84.9
Agriculture4.04.24.34.4
Fishing0.50.50.50.5
Secondary sector2.52.62.72.8
Manufacturing and energy1.01.01.01.0
Construction1.51.61.71.8
Tertiary sector7.17.47.78.1
Commerce and transport3.94.04.24.4
Public administration2.22.32.52.7
Financial institutions0.80.80.80.9
Other services0.20.30.20.1
Gross domestic expenditure22.722.023.624.9
Consumption17.617.218.119.3
Private10.811.811.410.9
Public6.85.46.78.4
Gross fixed capital formation5.14.85.55.6
Resource balance−8.6−7.4−8.4−9.1
Exports of goods and services4.75.15.34.9
Imports of goods and services13.312.513.714.0
(Annual percentage changes)
Gross domestic product at 1991 prices4.04.14.03.8
Primary sector2.82.82.82.9
Agriculture2.92.82.82.9
Fishing2.52.52.53.0
Secondary sector4.24.34.34.4
Manufacturing and energy2.32.52.52.6
Construction5.05.05.05.0
Tertiary sector4.74.94.74.2
Commerce and transport4.03.24.25.0
Public administration5.07.07.88.6
Financial institutions5.05.05.05.0
Other services30.713.3−16.4−64.4
Gross domestic expenditure13.5−2.77.15.3
Consumption16.4−1.95.06.6
Private−0.49.3−3.0−4.8
Public58.9−19.822.426.2
Gross fixed capital formation4.7−5.514.71.3
Resource balance33.6−13.913.38.2
Exports of goods and services4.96.85.4−7.5
Imports of goods and services21.7−6.610.12.1
Sources: São Tomé and Príncipe authorities; and staff estimates.
Sources: São Tomé and Príncipe authorities; and staff estimates.
Table 4.São Tomé and Príncipe: Land Distribution, 2001–04 1/
2001200220032004
(In hectares)
Total area distributed4,435866245223
Small farms (1–10 hectares)3,996263190129.3
Medium-sized farms (11–50 hectares)3501822551.8
Forest and other noncultivable areas894213042.2
(In percent of total area distributed)
Total area used to be distributed100.0100.0100.0100.0
Small farms (1–10 hectares)90.130.477.657.9
Medium-sized farms (11–50 hectares)7.921.010.223.2
Forest and other noncultivable areas2.048.612.218.9
Memorandum items:(In units indicated)
Total area distributed (in hectares; cumulative since 1993) 1/42,44143,30743,55243,775
Number of beneficiary families1,96917132142
Number of beneficiary families (cumulative since 1993)8,5328,7038,7358,877
Hectares per family (annual average) 2/2.22.66.71.3
Farm land redimentioned26,94627,39127,60627,787
Hectares per family (cumulative average) 2/3.23.13.23.1
Sources: São Tomé and Príncipe authorities; and staff calculations.

The land distribution project was initiated in 1993 with the objective of distributing land from

government agricultural estates to small and medium-sized farms. At end-1992, the government estates covered 65,367 hectares, of which 33,821 hectares were cultivated.

Computed using only small and medium-sized farms. Forest and other noncultivable areas are not owned by individual households.

Sources: São Tomé and Príncipe authorities; and staff calculations.

The land distribution project was initiated in 1993 with the objective of distributing land from

government agricultural estates to small and medium-sized farms. At end-1992, the government estates covered 65,367 hectares, of which 33,821 hectares were cultivated.

Computed using only small and medium-sized farms. Forest and other noncultivable areas are not owned by individual households.

Table 5.São Tomé and Príncipe: Production of Principal Agricultural Crops, 2001–04(In metric tons)
2001200220032004
Export crops
Cocoa3,6523,4623,8202,500
Copra36320
Coffee135610
Pepper234
Vanilla0.20.5
Food crops
Pineapples700
Sugar
Bananas27,02028,62029,05025,250
Breadfruit14,90018,40018,50013,500
Palm oil319160163104
Taro26,00024,65024,750
Maize900
Source: São Tomé and Príncipe authorities.
Source: São Tomé and Príncipe authorities.
Table 6.São Tomé and Príncipe: Energy Production and Consumption, 2001–05
20012002200320042005
Jan-Sept.
(In thousands of kilowatt-hours)
Electricity production 1/26,46731,20835,88937,24330,135
Hydroelectricity4,8355,7926,6616,1733,812
Thermoelectricity21,63225,41629,22831,07026,323
Electricity consumption17,16125,39527,00625,61621,679
Residential10,34413,19014,02713,30511,260
Industrial and other 2/6,81712,20512,97912,31110,419
(In billions of dobras)
Electricity consumption23.338.537.740.936.8
Residential11.817.917.519.017.1
Industrial and other 2/11.320.620.221.919.7
(In dobras per kilowatt-hour)
Electricity consumption1,3611,5161,3981,5951,697
Residential1,1501,3641,2571,4351,527
Industrial and other 2/1,6711,6871,5551,7751,889
(In percent of total production)
Memorandum items:
Losses in distribution35.218.624.731.228.1
Sources: São Tomé and Príncipe authorities; and staff estimates.

Production exceeds consumption, owing to losses in distribution.

Including the government.

Sources: São Tomé and Príncipe authorities; and staff estimates.

Production exceeds consumption, owing to losses in distribution.

Including the government.

Table 7.São Tomé and Príncipe: Imports of Petroleum Products, 2001–05
20012002200320042005
(In thousands of liters)
Volume of imports
Gasoline5,9815,8585,3556,9125,702
Diesel16,35713,21912,37516,45914,975
Kerosene and Jet A-16,2306,8265,4797,6407,133
(In millions of U.S. dollars)
Value of imports, c.i.f.6.05.65.59.912.6
Gasoline1.31.51.02.12.3
Diesel3.02.73.15.37.1
Kerosene and Jet A-11.71.51.32.53.2
(In dobras per liter)
Average retail price
Gasoline6,6006,6007,00010,50012,500
Diesel5,0005,0005,0009,50011,000
Kerosene3,1003,1002,8005,5006,000
Jet A-12,7662,6333,1324,9387,399
(In U.S. dollars per liter)
Average retail price
Gasoline0.750.680.751.071.19
Diesel0.570.530.530.971.05
Kerosene0.350.280.300.560.57
Jet A-10.320.290.340.500.70
Import price, c.i.f.
Gasoline0.220.250.200.300.40
Diesel0.180.200.250.320.47
Kerosene and Jet A-10.270.220.240.330.46
Sources: São Tomé and Príncipe authorities; and staff estimates.
Sources: São Tomé and Príncipe authorities; and staff estimates.
Table 8.São Tomé and Príncipe: Cost Structure of Petroleum Products, 2001–05
GasolineDieselKeroseneJet A-1
In percentIn dobrasIn percentIn dobrasIn percentIn dobrasIn percentIn dobras
of c.i.f. costper literof c.i.f. costper literof c.i.f. costper literof c.i.f. costper liter
Retail prices for 2001
Average import cost, c.i.f.1002,2371002,4521002,3151002,318
Import duty1543,445681,66515345496
Road maintenance tax4854930000
Airport authority tax00000000
ENCO’s handling and distribution costs 1/25560235591125711257
ENCO’s wholesale margin 1/5103486251251
Retail margin5103486369251
Residual3673593630−7
Average retail price2956,6002045,0001343,1001192,766
Retail prices for 2002
Average import cost, c.i.f.652,0191732,2737792,07326922,073
Import duty3101911439104135104
Consumption tax862,705921,2140000
Road maintenance tax2777860000
Airport authority tax0000005341
ENCO’s handling and distribution costs 1/2062545591125332431332
ENCO’s wholesale margin 1/516113170318310883
Retail margin7222131703910400
Contribution to operating expenses00000000
Residual226902938215240400
Average retail price2116,6003805,00011653,10034192,633
Retail prices for 2003
Average import cost, c.i.f.1002,3561002,5911002,3421002,342
Import duty5118513051175117
Consumption tax1343,158531,3840000
Road maintenance tax4904980000
Airport authority tax000000247
ENCO’s handling and distribution costs 1/39918369262251523532
ENCO’s wholesale margin 1/61417194494494
Retail margin18424123111023400
Residual−9−205−24−634−21−50200
Average retail price2977,0001935,0001202,8001343,132
Retail prices for 2004
Average import cost, c.i.f.1003,3091003,5251553,6411003,692
Import duty5165517681825185
Consumption tax1344,434531,8820000
Road maintenance tax412641340000
Airport authority tax00.00000274
ENCO’s handling and distribution costs 1/311,026291,0052660818679
ENCO’s wholesale margin 1/6199826461464148
Retail margin18596124231636400
Residual20645592,090245594160
Average retail price31710,5002699,5001515,5001344,938
Retail prices for 2005
Average import cost, c.i.f.1004,6181006,8381005,5331005,533
Import duty5231534252774227
Consumption tax1346,189533,6520000
Road maintenance tax417642600000
Airport authority tax0000002111
ENCO’s handling and distribution costs 1/311,432291,94917924181,018
ENCO’s wholesale margin 1/6277851342214221
Retail margin18831128211055300
Residual−27−1,254−49−3,375−27−1,5085289
Average retail price27112,50016111,0001086,0001347,399
Source: São Tomé and Príncipe authorities.

ENCO: the National Petroleum Distribution Company.

Source: São Tomé and Príncipe authorities.

ENCO: the National Petroleum Distribution Company.

Table 9.São Tomé and Príncipe: Components of Official Consumer Price Index, 2001–05(Index, 1996=100; end of period)
Weights20012002200320042005
(In percent)
Food, beverages, and tobacco71.9307.7342.6375.1423.3507.3
Clothing5.3450.3496.5523.3603.0669.7
Housing and energy10.2647.6677.7731.2830.0989.2
Furniture, electrical equipment, and
other housing equipment2.8440.5469.9497.5548.8572.4
Health services1.3459.1501.1580.1618.3621.4
Transport and communications6.4456457.9565.4802.1894.5
Entertainment and cultural activities0.7321.8377.8408.1427.2423.6
Education0.4343.1370.2413.1422.7421.0
Hotels and restaurants0.7260.6275.6313.5365.1336.8
Other0.5301.5320.5357.4377.0389.4
General index100.0364.6397.5437.2503.8590.5
Source: São Tomé and Príncipe authorities.
Source: São Tomé and Príncipe authorities.
Table 10.São Tomé and Príncipe: Monthly Movements in Official Consumer Price Index, 2001–05(Index, 1996 = 100, unless otherwise indicated)
20012002200320042005
January336.2368.1402.8444.3518.6
February340.1376.0409.5459.7534.5
March343.3377.8416.8470.6551.4
April344.7382.6418.3474.1557.4
May346.9383.3419.4476.3560.0
June348.7385.1422.2478.5560.9
July349.5385.8424.6479.7562.4
August351.0386.8427.5481.9565.0
September353.3389.5429.5486.3569.6
October356.1392.8431.0492.9577.9
November360.6394.6433.5498.1583.6
December364.6397.5437.2503.8590.5
Annual average349.6385.0422.7478.9561.0
Rate of inflation (in percent)
End of period9.49.010.015.217.2
Annual average9.210.19.813.317.2
Source: São Tomé and Príncipe authorities.
Source: São Tomé and Príncipe authorities.
Table 11.São Tomé and Príncipe: Monthly Movements in Components of Official Consumer Price Index, 2001–05
Weight2001
(In percent)Jan.Feb.MarchApr.MayJuneJulyAug.Sep.Oct.Nov.Dec.
(Annual average for 1996=100)
Food, beverages, and tobacco71.9295.6301.0303.4303.4302.7303.7303.8291.3293.7297.6301.6307.7
Clothing5.3335.4339.1351.0380.4382.2385.4390.0396.9405.3405.6432.1450.3
Housing and energy10.2523.6523.5523.6521.1547.7560.7562.9654.5656.5657.4656.9647.6
Furniture, electrical equipment, and
other housing equipment2.8431.7418.5444.7432.1430.2435.1439.4451.0449.7444.4435.1440.5
Health services1.3417.7431.5442.7456.3470.4425.0433.3451.9452.1453.7456.3459.1
Transport and communications6.4459.2460.1459.1457.9458.0457.9458.0459.3459.2458.7458.0456.0
Entertainment and cultural activities0.7270.0267.9277.8310.0316.0305.3311.8314.3309.3312.8315.7321.8
Education0.4296.7293.0285.4315.2322.5322.5312.5327.1328.9330.7338.6343.1
Hotels and restaurants0.7249.9250.0259.8254.7238.6234.4245.7249.3253.6256.1254.9260.6
Other0.5288.2293.3278.3287.7258.4267.0276.8282.8276.2278.7290.1301.5
General index100.0336.2340.1343.3344.7346.9348.7349.5351.0353.3356.1360.6364.6
(Monthly percentage changes)
Cumulative rate of inflation0.92.13.03.54.14.64.95.36.06.88.29.4
Average annual inflation11.911.411.010.710.510.310.09.89.69.49.29.2
Source: São Tomé and Príncipe authorities.
Weight2002
(In percent)Jan.Feb.MarchApr.MayJuneJulyAug.Sep.Oct.Nov.Dec.
(Annual average for 1996=100)
Food, beverages, and tobacco71.9314.0322.1323.6328.6329.8331.2330.4331.4335.3337.8340.0342.6
Clothing5.3452.8443.7449.2449.1453.5464.5482.2485.2485.7483.3484.4496.5
Housing and energy10.2636.1666.2669.0672.8668.1665.7666.8664.4666.5674.1673.6677.7
Furniture, electrical equipment, and
other housing equipment2.8439.2416.1423.6446.0447.6453.9460.4461.8452.2469.9473.0469.9
Health services1.3459.1459.1459.5473.3473.4507.5500.4521.7496.6506.4502.7501.1
Transport and communications6.4453.8453.2453.3452.7452.7452.2451.8453.1455.4457.7457.9457.9
Entertainment and cultural activities0.7326.4333.5334.3337.3326.3330.8327.7328.3343.9350.8374.1377.8
Education0.4352.8358.5354.6355.3361.5365.2362.0362.5361.7361.6367.8370.2
Hotels and restaurants0.7258.9258.2258.2257.6259.1258.1277.3281.6275.6275.6275.6275.6
Other0.5294.2296.3301.6308.4314.1311.1308.1311.2313.3319.2319.9320.5
General index100.0368.1376.0377.8382.6383.3385.1385.8386.8389.5392.8394.6397.5
(Monthly percentage changes)
Cumulative rate of inflation1.03.13.64.95.15.65.86.16.87.78.29.0
Average annual inflation9.29.49.59.69.79.79.89.910.010.110.210.1
Source: São Tomé and Príncipe authorities.
Weight2003
(In percent)Jan.Feb.MarchApr.MayJuneJulyAug.Sep.Oct.Nov.Dec.
(Annual average for 1996=100)
Food, beverages, and tobacco71.9349.2353.7355.3355.8356.8359.8360.8364.3366.2367.5370.4375.1
Clothing5.3498.2499.8500.2500.4501.2504.3510.6512.7515.1518.5520.0523.3
Housing and energy10.2676.8708.4719.0718.6723.7723.7725.9726.5728.2729.9730.5731.2
Furniture, electrical equipment, and
other housing equipment2.8485.1489.2485.8485.7490.4493.6493.1495.6495.9497.7497.4497.5
Health services1.3509.6517.1517.1528.9528.9548.1548.0550.8559.2564.5580.1580.1
Transport and communications6.4458.2458.0537.4553.2547.9548.7563.5563.4565.3565.3564.4565.4
Entertainment and cultural activities0.7379.1375.8374.2373.4375.1382.6387.2393.0395.1405.8408.0408.1
Education0.4371.4371.4371.4371.4371.4374.7383.3396.2399.8407.7411.7413.1
Hotels and restaurants0.7275.6275.6284.0284.0284.0284.7295.3297.5300.0305.9309.5313.5
Other0.5319.7322.4325.1323.7327.4331.5335.9344.5350.6351.5354.4357.4
General index100.0402.8409.5416.8418.3419.4422.2424.6427.5429.5431.0433.5437.2
(Monthly percentage changes)
Cumulative rate of inflation1.33.04.85.25.56.26.87.58.08.49.09.9
Average annual inflation10.110.010.09.99.89.79.79.79.79.79.79.8
Source: São Tomé and Príncipe authorities.
Weight2004
(In percent)Jan.Feb.MarchApr.MayJuneJulyAug.Sep.Oct.Nov.Dec.
(Annual average for 1996=100)
Food, beverages, and tobacco71.9384.5405.5416.6417.5417.2419.1417.8422.8422.8415.4416.3423.3
Clothing5.3526.2529.3543.9545.9562.0563.2570.6572.9576.7582.7572.3603.0
Housing and energy10.2730.3732.1755.0762.7775.5776.0786.7762.9805.3839.1841.0830.0
Furniture, electrical equipment, and
other housing equipment2.8502.0504.5495.8504.3510.9510.8530.3536.4530.5539.0543.2548.8
Health services1.3580.1580.1580.1588.6582.9583.9606.4618.3618.3618.3618.3618.3
Transport and communications6.4567.9564.6565.0591.0591.4597.5593.9602.9603.0728.0802.3802.1
Entertainment and cultural activities0.7408.1408.0407.8408.0408.0407.9424.8429.4426.7427.0427.8427.2
Education0.4414.2414.8425.7425.7422.4424.6424.2431.2426.7421.5420.0422.7
Hotels and restaurants0.7316.4320.4321.6321.6330.0383.2375.2364.5368.4359.5365.6365.1
Other0.5356.3359.6364.0359.3368.3369.5379.0379.2378.5370.9377.2377.0
General index100.0444.3459.7470.6474.1476.3478.5479.7481.9486.3492.9498.1503.8
(Monthly percentage changes)
Cumulative rate of inflation1.65.17.68.48.99.49.710.211.212.713.915.2
Average annual inflation9.910.110.410.711.111.411.611.812.112.412.913.3
Source: São Tomé and Príncipe authorities.
Weight2005
(In percent)Jan.Feb.MarchApr.MayJuneJulyAug.Sep.Oct.Nov.Dec.
(Annual average for 1996=100)
Food, beverages, and tobacco71.9439.9460.8483.0488.4496.4495.9480.3478.4483.8494.5499.3507.3
Clothing5.3595.4600.1603.0616.0624.0639.4649.5646.3643.8646.9669.5669.7
Housing and energy10.2862.5872.9876.0887.0853.0859.0950.2970.2974.8978.6979.9989.2
Furniture, electrical equipment, and
other housing equipment2.8549.8532.3550.3557.7555.3557.8559.3558.9572.9579.1574.4572.4
Health services1.3618.3618.3618.3618.3618.3618.3618.3618.3618.3618.3621.4621.4
Transport and communications6.4802.1801.8802.0802.0802.1802.1846.6878.7878.5878.5894.7894.5
Entertainment and cultural activities0.7427.2427.3427.3427.3427.3427.3427.3427.3427.3427.3416.1423.6
Education0.4421.4422.0420.2421.2421.2420.9421.1421.1421.0421.0421.0421.0
Hotels and restaurants0.7366.6368.2365.9374.3375.9339.9334.5334.5340.1332.2338.5336.8
Other0.5374.6375.8385.8388.1384.6390.1389.1389.4389.5389.3389.4389.4
General index100.0518.6534.5551.4557.4560.0560.9562.4565.0569.6577.9583.6590.5
(Monthly percentage changes)
Cumulative rate of inflation2.96.19.410.611.211.311.612.113.114.715.817.2
Average annual inflation13.814.214.514.915.215.615.916.316.616.817.017.2
Source: São Tomé and Príncipe authorities.
Source: São Tomé and Príncipe authorities.
Table 12.São Tomé and Príncipe: Financial Transactions of Central Government, 2001–05(In billions of dobras)
20012002200320042005
Est.
Total revenue and grants248.8245.6321.0381.2972.1
Tax revenue77.295.0114.2147.3183.9
Consumption taxes30.130.339.453.669.5
Import taxes19.423.830.935.740.8
Other taxes27.740.943.858.173.6
Nontax revenue12.018.427.431.342.6
Of which: fishing licenses2.71.69.87.28.7
transfers from enterprises8.25.74.93.84.2
Grants159.5132.2179.4202.6184.1
Oil signature bonuses0.00.00.00.0561.5
Total expenditure and net lending335.3325.6415.1548.6545.5
Current expenditure121.9156.8183.3292.5320.4
Personnel costs40.543.655.075.7103.3
Goods and services 1/18.826.743.995.865.5
Interest on external debt due23.625.926.130.133.7
Interest on internal debt due1.10.00.00.01.9
Transfers13.140.735.965.989.8
Of which: Joint Development Agency0.031.322.626.032.9
Other current expenditures24.820.022.425.026.2
Capital expenditure194.3140.0197.9234.9193.4
Financed by the treasury29.412.338.050.515.1
Foreign financed164.9127.7160.0184.4178.3
HIPC Initiative-related social expenditure17.222.533.630.131.7
Public service restructuring1.96.30.00.00.0
Net lending0.00.00.3−9.00.0
Overall fiscal balance (commitment basis)−86.5−80.0−94.1−167.3426.6
Change in arrears (net; reduction -)3.848.828.341.0−145.9
External arrears (net; reduction -) 2/3.814.99.413.8−52.2
Domestic arrears (net; reduction -)0.034.018.827.2−93.6
Of which: Joint Development Agency0.031.322.626.032.9
Overall fiscal balance (cash basis)−82.7−31.1−65.8−126.3280.8
Financing82.731.165.8126.3−280.8
External (net)31.93.624.774.2−32.1
Disbursements (projects)42.917.717.938.441.8
Program financing (loans)25.80.030.850.318.0
Short-term loans0.045.046.758.70.0
Medium & long-term Amortization−36.7−59.1−70.8−73.2−91.9
Domestic (net)35.6−1.816.017.2−16.1
Banking credit17.3−0.329.716.6−16.1
Nonbank financing18.3−1.5−13.70.70.0
Oil reserve fund flows (net) 4/0.00.00.00.0−276.7
Change in arrears (principal) 5/15.229.325.134.9−100.0
Paris Club Rescheduling0.00.00.00.0144.1
Sources: São Tomé and Príncipe authorities; and staff estimates.

In 2004, includes Db20.8 billion (i.e. 3.3 percent of GDP) for hosting the 2004 conference of the Community of Portuguese Language countries (CPLP).

Interest arrears on Paris Club and non-Paris Club bilateral debt.

For 2002-04, includes three US$5 million loans from Nigeria borrowed during 2002-04 and a US$1 million loan from Angola borrowed in 2004. Repayment of the Nigeria loans has been rescheduled until receipt of oil signature bonuses other than on Block 1.

For 2005, net amount is negative on account of the transer of oil bonuses, net of drawings, to the National Oil Account.

For 2005, reflects impact of Paris Club rescheduling in the last quarter of 2005.

Sources: São Tomé and Príncipe authorities; and staff estimates.

In 2004, includes Db20.8 billion (i.e. 3.3 percent of GDP) for hosting the 2004 conference of the Community of Portuguese Language countries (CPLP).

Interest arrears on Paris Club and non-Paris Club bilateral debt.

For 2002-04, includes three US$5 million loans from Nigeria borrowed during 2002-04 and a US$1 million loan from Angola borrowed in 2004. Repayment of the Nigeria loans has been rescheduled until receipt of oil signature bonuses other than on Block 1.

For 2005, net amount is negative on account of the transer of oil bonuses, net of drawings, to the National Oil Account.

For 2005, reflects impact of Paris Club rescheduling in the last quarter of 2005.

Table 13.São Tomé and Príncipe: Central Government Revenue, 2001–05(In billions of dobras)
20012002200320042005
Est.
Total revenue and grants248.8245.6321.0381.2972.2
Tax revenue77.295.0114.2147.3184.0
Direct taxes23.834.133.044.554.3
Profit taxes10.218.214.918.023.5
Income taxes13.015.116.723.827.0
Other0.70.81.42.73.8
Indirect taxes53.460.881.2102.8129.7
Import taxes19.423.830.935.740.8
Consumption taxes30.130.339.453.669.5
On imported goods28.328.531.846.446.4
On domestic goods1.81.87.67.27.2
Other3.96.810.913.619.4
Nontax revenue12.018.427.431.342.6
Transfers from enterprises8.25.74.93.84.2
Fishing royalties2.71.69.87.28.7
Other 1/1.111.112.720.329.7
Grants159.5132.2179.4202.6184.1
Oil signature bonuses0.00.00.00.0561.5
Sources: São Tomé and Príncipe authorities; and staff estimates.

Includes revenues from Nigeria’s aid in kind.

Sources: São Tomé and Príncipe authorities; and staff estimates.

Includes revenues from Nigeria’s aid in kind.

Table 14.São Tomé and Príncipe: Central Government Expenditure, 2001–05(In billions of dobras)
20012002200320042005
Est.
Total expenditure and net lending335.3325.6415.1492.9545.5
Current expenditure121.9156.8183.3236.9320.4
Personnel costs40.543.655.020.1103.3
Wages and salaries32.635.750.510.590.4
Local28.731.243.69.080.9
Embassies3.94.56.91.59.5
Travel 1/6.16.3
Other personnel expenditures 2/0.90.63.07.310.1
Social security payments0.91.01.52.32.8
Goods and services18.826.743.995.865.5
Durable goods0.50.60.90.90.6
Nondurable goods2.84.611.012.611.4
Petroleum products1.11.52.02.63.1
Other1.73.19.010.08.3
Services15.521.432.082.253.5
Of which: electricity9.013.512.425.025.0
transport and communications4.44.811.117.710.8
Interest on external debt due23.625.926.130.133.7
Interest on internal debt due1.10.00.00.01.9
Transfers13.140.735.965.989.8
Public entities3.65.07.88.316.1
Public enterprises5.10.00.00.00.0
Private sector3.03.13.74.63.4
Private institutions0.10.10.40.60.2
Individuals2.93.03.34.03.3
External1.41.31.926.937.3
Joint Development Agency31.322.626.032.9
Other current expenditures24.820.022.425.026.2
Embassies2.23.13.04.95.0
Extraordinary expenditures0.80.60.70.7
Other21.816.318.719.421.1
Public service restructuring1.96.30.00.00.0
Capital expenditure 3/194.3140.0197.9234.9193.4
Financed by the treasury29.412.338.050.515.1
Financed by external sources164.9127.7160.0184.4178.3
HIPC Initiative-financed social expenditure17.222.533.630.131.7
Net lending0.00.00.3−9.00.0
Memorandum item:
Total expenditure and net lending, excluding
foreign-financed capital expenditure170.4197.9255.1308.5367.2
Sources: São Tomé and Príncipe authorities; and staff estimates.

Starting in 2003, travel expenditures are classified with goods and services.

Includes bonuses and allowances.

Includes outlays for technical assistance and other expenditures on social projects not associated with capital formation.

Sources: São Tomé and Príncipe authorities; and staff estimates.

Starting in 2003, travel expenditures are classified with goods and services.

Includes bonuses and allowances.

Includes outlays for technical assistance and other expenditures on social projects not associated with capital formation.

Table 15.São Tomé and Príncipe: Fiscal Indicators, 2001–05
20012002200320042005
Est.
(Annual percentage changes)
Total revenue and grants35.2−1.330.718.8155.0
Tax revenue30.023.020.229.024.9
Direct taxes18.943.3−3.334.922.1
Indirect taxes35.714.033.426.726.1
Of which: import taxes8.522.730.115.314.3
Nontax revenue−41.353.248.314.536.1
Of which: transfers from enterprises50.3−30.4−14.6−22.112.2
Grants53.2−17.135.712.9−9.1
Total expenditure36.0−2.927.518.810.7
Current expenditure35.628.616.929.335.2
Of which: personnel costs40.27.826.1−63.4413.9
goods and services23.041.964.5118.3−31.6
interest on external debt due0.29.41.115.311.8
Capital expenditure25.1−27.941.418.7−17.7
(In percent of total revenue and grants)
Total revenue and grants100.0100.0100.0100.0100.0
Tax revenue31.038.735.638.618.9
Direct taxes9.613.910.311.75.6
Indirect taxes21.524.825.327.013.3
Of which: import taxes7.89.79.69.44.2
export taxes0.00.00.00.00.0
Nontax revenue4.87.58.58.24.4
Of which: transfers from enterprises3.32.31.51.00.4
Grants64.153.855.953.118.9
Oil signature bonuses0.00.00.00.057.8
(In percent of total expenditure and net lending)
Total expenditure and net lending100.0100.0100.0100.0100.0
Current expenditure36.448.244.248.165.0
Of which: personnel costs12.113.413.24.121.0
goods and services5.68.210.619.413.3
interest on external debt due7.07.96.36.16.8
Public service restructuring0.61.90.00.00.0
Capital expenditure58.043.047.747.739.2
Financed by the treasury8.83.89.110.23.1
Financed by external sources49.239.238.537.436.2
HIPC Initiative-financed social expenditure5.16.98.16.15.8
Net Lending0.00.00.1−1.80.0
(In percent of GDP)
Total revenue and grants59.050.558.160.6129.7
Of which: tax revenue18.319.520.723.424.5
Total expenditure and net lending79.566.975.187.272.8
Of which: current expenditure28.932.233.246.542.8
capital expenditure46.028.835.837.325.8
Primary current balance
Primary overall balance 1/
Domestic primary balance (commitment basis)1/−12.9−4.3−11.7−20.6−14.0
Overall balance (commitment basis) 2/−20.5−16.4−17.0−26.6−18.0
Sources: São Tomé and Príncipe authorities; and staff estimates.

Including HIPC Initiative-financed social expendiure.

Excluding oil signature bonuses.

Sources: São Tomé and Príncipe authorities; and staff estimates.

Including HIPC Initiative-financed social expendiure.

Excluding oil signature bonuses.

Table 16.São Tomé and Príncipe: Public Investment Program, 2001–05
20012002200320042005
Est.
(In millions of U.S. dollars)
Total investment20.418.526.928.018.2
Public administration2.93.66.612.86.0
Agriculture2.33.81.80.91.4
Water and sewage1.71.93.71.90.9
Education4.01.53.81.80.9
Energy1.60.70.80.20.0
Housing0.30.01.20.20.3
Fisheries0.60.30.40.10.0
Health1.72.24.03.93.7
Transport and telecommunications4.74.13.93.43.9
Other0.50.30.62.81.3
Financing20.418.526.928.018.2
Foreign17.014.617.018.914.1
Grants15.212.315.214.912.8
Loans1.82.31.93.91.3
Domestic3.43.99.89.14.1
Counterpart funds0.20.10.00.00.0
Budget1.01.46.94.91.8
HIPC account2.22.53.04.22.3
(In percent of total investment)
Total investment100.0100.0100.0100.0100.0
Public administration14.419.324.645.632.7
Agriculture11.420.76.93.37.4
Water and sewage8.410.413.76.75.0
Education19.77.914.16.54.9
Energy7.73.83.00.80.0
Housing1.30.24.50.81.4
Fisheries3.01.71.40.40.0
Health8.512.014.913.820.3
Transport and telecommunications23.022.214.612.221.2
Other2.61.72.29.97.1
Financing100.0100.0100.0100.0100.0
Foreign83.378.863.467.477.5
Grants74.666.656.553.470.3
Loans8.612.26.914.07.1
Domestic16.721.236.632.622.5
Counterpart funds1.10.60.00.00.0
Other banking system deposits4.87.325.517.79.9
Sources: São Tomé and Príncipe authorities; and staff estimates.
Sources: São Tomé and Príncipe authorities; and staff estimates.
Table 17.São Tomé and Príncipe: Monetary Survey, 2001–05
20012002200320042005
Est.
(In billions of dobras; end of period)
Net foreign assets220.1264.7324.7297.7669.8
Central bank 1/167.9194.3235.1189.3529.1
Commercial banks52.270.589.6108.5140.7
Net domestic assets−66.7−69.9−48.6−1.2−295.8
Net domestic credit12.131.1101.0212.6−7.9
Net credit to government 1/−10.2−10.519.235.8−256.6
Of which: budgetary deposits−33.8−8.1−18.5−19.2−15.5
Net claims on other public institutions−0.70.00.00.00.0
Credit to the economy23.041.681.8176.8248.7
Other items (net)−78.8−101.0−149.6−213.8−287.9
Broad money153.5194.8276.2296.5373.9
Currency in circulation35.839.456.460.063.6
Demand deposits53.464.690.799.3130.1
Time deposits in local currency8.912.211.216.516.5
Foreign currency deposits55.478.5117.9120.7163.8
(Changes from the beginning of the year; in billions of dobras)
Net foreign assets 1/83.944.660.0−27.0372.1
Net domestic assets−42.7−3.221.447.4−294.6
Net domestic credit14.319.069.9111.5−220.5
Net credit to government 1/17.3−0.329.716.6−292.4
Credit to the economy−2.318.640.295.071.9
Broad money (M3)41.241.381.420.377.4
Currency in circulation10.73.717.03.63.6
Deposits in local currency21.814.625.014.030.8
Deposits in foreign currency8.723.139.32.843.1
(Changes in percent of beginning-of-period money stock)
Net foreign assets74.729.130.8−9.8125.5
Net domestic assets−38.0−2.111.017.1−99.4
Net domestic credit12.712.435.940.4−74.4
Net credit to government15.4−0.215.36.0−98.6
Credit to the economy−2.012.120.634.424.3
Broad money (M3)36.726.941.87.426.1
Currency in circulation9.52.48.71.31.2
Deposits in local currency19.49.512.95.110.4
Deposits in foreign currency7.715.020.21.014.5
(Annual percentage changes)
Credit to the economy−11.780.996.6116.140.7
Broad money36.626.941.87.426.1
Currency in circulation42.610.243.16.35.9
Deposits in local currency54.223.432.613.726.6
Deposits in foreign currency18.641.650.12.435.7
Source: São Tomé and Príncipe authorities; and staff estimates.

Includes the National Oil Account.

Source: São Tomé and Príncipe authorities; and staff estimates.

Includes the National Oil Account.

Table 18.São Tomé and Príncipe: Summary Accounts of Central Bank, 2001–05(In billions of dobras; end of period)
20012002200320042005
Est.
Net foreign assets167.9194.3235.1189.3529.1
Foreign assets 1/192.9217.7287.1246.5585.0
Of which: Gross Reserves139.7159.5240.6197.1526.4
National Oil Account0.00.00.00.0276.3
Foreign liabilities−24.9−23.5−52.0−57.3−55.9
Net domestic assets−74.5−82.4−76.4−70.0−375.8
Net domestic credit−9.7−5.429.454.7−236.5
Net credit to government−7.5−7.123.842.6−249.6
Claims58.259.263.183.687.5
Deposits 1/−65.7−66.3−39.2−41.0−337.0
Of which: National Oil Account0.00.00.00.0−276.3
counterpart funds−22.3−12.4−11.5−16.2−22.6
HIPC Initiative resources−4.3−3.6−10.3−4.2−8.5
Other items (net)−64.8−76.9−105.8−124.7−139.3
Base money87.7111.9158.7119.2153.3
Currency outside banks35.845.763.167.273.2
Reserve deposits (including cash holdings)52.066.195.652.180.1
Source: São Tomé and Príncipe authorities; and staff estimates.

Includes the National Oil Account.

Source: São Tomé and Príncipe authorities; and staff estimates.

Includes the National Oil Account.

Table 19.São Tomé and Príncipe: Summary Accounts of Banking Institutions, 2001–05(In billions of dobras; end of period)
20012002200320042005
Est.
Net foreign assets52.270.589.6108.5140.7
Foreign assets54.973.493.7112.9161.0
Foreign liabilities−2.7−2.9−4.1−4.4−20.4
Net domestic assets65.584.9130.1128.0169.7
Reserves59.872.4119.862.789.7
Cash holdings7.86.36.77.29.6
Local currency deposits at the central bank46.361.385.651.939.5
Foreign currency deposits at the central bank5.74.827.53.740.6
Short-term credit from the central bank0.00.00.0−4.00.0
Cash bonds0.00.0−9.4−17.9−7.5
Net domestic credit22.636.571.6161.9228.6
Net credit to government−2.7−3.4−4.6−6.9−7.0
Credit to the economy25.239.976.3168.7235.6
Other items (net)−16.9−24.1−52.0−74.6−141.1
Deposits117.7155.3219.7236.5310.4
Deposits in local currency62.376.8101.9115.8146.6
Deposits in foreign currency55.478.5117.9120.7163.8
Source: São Tomé and Príncipe authorities; and staff estimates.
Source: São Tomé and Príncipe authorities; and staff estimates.
Table 20.São Tomé and Príncipe: Structure of Interest Rates, 2001–05 1/(In percent a year; end of period)
20012002200320042005
Sept.
Interest rates for deposits
Sight deposits0.00.00.00.00.0
Term deposits
90-180 days14.014.010.610.612.5
181-365 days15.015.010.310.312.8
Over one year16.016.0
Interest rates for loans
Commercial and industrial credits
90-180 days34.034.030.030.035.0
181-365 days36.036.030.530.532.5
Over one year39.039.031.531.5
Short-term crop credit34.034.030.030.0
Central bank reference interest rate15.515.514.514.518.2
Memorandum items:
Interest rate for deposits of 181-365 days’ maturity
(in real terms)5.15.50.3−4.3−3.8
Interest rate or commercial and industrial credits
of 181-365 days’ maturity
(in real terms) 2/24.324.818.613.213.0
Sources: São Tomé and Príncipe authorities; and staff estimates.

The lending and deposit rates are maxima and minima, respectively.

Real interest rates calculated on the basis of the respective end-of-period inflation rates.

Sources: São Tomé and Príncipe authorities; and staff estimates.

The lending and deposit rates are maxima and minima, respectively.

Real interest rates calculated on the basis of the respective end-of-period inflation rates.

Table 21.São Tomé and Príncipe: Balance of Payments, 2001–05(In millions of U.S. dollars, unless otherwise specified)
20012002200320042005
Est.
Trade balance−22.9−23.3−27.0−32.5−38.3
Exports, f.o.b.3.35.16.63.53.8
Cocoa2.84.56.13.13.4
Other0.50.60.50.40.4
Imports, f.o.b.−26.2−28.4−33.6−36.0−42.1
Food−7.9−10.1−12.0−12.2−16.3
Investment goods−11.9−11.3−13.4−11.6−12.2
Petroleum products−3.8−4.3−4.7−7.8−9.9
Other−2.6−2.7−3.5−4.3−3.7
Services and income (net)−8.9−6.6−8.4−7.5−5.3
Exports of services12.813.414.116.617.7
Travel and tourism9.610.110.612.813.6
Other services3.23.33.53.84.1
Imports of services−19.0−17.2−19.7−21.0−20.0
Freight and insurance−6.6−7.1−8.4−9.0−10.5
Technical assistance−7.0−4.8−6.0−6.7−3.8
Other−5.5−5.2−5.3−5.4−5.7
Factor services (net)−2.7−2.8−2.8−3.1−3.0
Private transfers (net)0.60.71.82.12.0
Current account balance (excluding official transfers)−31.2−29.2−33.5−37.9−41.6
18.8
Official transfers (net)20.616.320.325.018.4
Public investment projects13.812.115.214.910.0
Nonproject grants2.71.41.63.43.8
HIPC Initiative-related grants2.42.83.23.23.2
Nigeria grant0.00.00.11.41.4
Current account balance (including official transfers)−10.7−12.9−13.2−13.0−23.2
Medium- and long-term capital (net)7.1−0.91.05.149.0
Project loans4.92.01.93.93.9
Program loans2.90.03.35.11.7
Oil signature bonuses0.00.00.00.049.2
Direct foreign investment3.33.63.43.53.5
Other investment0.00.00.00.0−0.5
Amortization−4.1−6.5−7.6−7.5−8.9
Short-term capital and errors and omissions 1/2.311.414.02.90.8
Overall balance−1.3−2.41.9−5.026.6
Financing1.42.4−1.95.0−26.5
Net change in reserves (increase -)−2.4−2.4−5.90.0−2.7
Use of Fund resources (net)0.00.00.00.00.5
Permanent oil fund (increase -)0.00.00.00.0−23.3
Medium- and long-term arrears (net; decrease -)2.14.94.05.0−14.6
Debt relief1.60.00.00.00.2
Rescheduling of arrears0.00.00.00.013.3
Memorandum items:
Debt-service ratio (before debt relief) 2/ 3/42.050.750.352.856.7
Debt service paid 2/ 4/4.09.215.411.8109.0
Current account, before grants (in percent of GDP)−65.4−54.5−56.7−58.9−59.2
Current account (in percent of GDP)−22.3−24.1−22.3−20.1−33.1
Sources: São Tomé and Príncipe authorities; and staff estimates.

Includes short-term loans from Nigeria.

In percent of exports of goods and services, calculated as a backward three-year moving average.

Includes amortization to the IMF; excludes arrears.

Includes obligations to the IMF and cash settlement of arrears.

Sources: São Tomé and Príncipe authorities; and staff estimates.

Includes short-term loans from Nigeria.

In percent of exports of goods and services, calculated as a backward three-year moving average.

Includes amortization to the IMF; excludes arrears.

Includes obligations to the IMF and cash settlement of arrears.

Table 22.São Tomé and Príncipe: Composition of Exports, 2001–05
20012002200320042005
Jan-Sept.
(In millions of U.S. dollars)
Total3.305.106.603.502.53
Cocoa2.844.556.143.142.22
Coffee0.020.010.000.000.00
Other0.440.540.460.360.32
(In metric tons)
Cocoa3,6513,4623,8202,5001,798
Coffee114
Other7165181,222927
(U.S. dollars per kilogram)
Cocoa0.781.311.611.261.23
Coffee2.103.15
Other0.611.040.290.34
Sources: São Tomé and Príncipe authorities; and staff estimates.
Sources: São Tomé and Príncipe authorities; and staff estimates.
Table 23.São Tomé and Príncipe: Composition of Imports, 2001–05
20012002200320042005
Jan-Sept
(In millions of U.S. dollars)
Total imports, f.o.b.26.228.433.636.037.7
Foodstuffs7.910.112.012.214.5
Petroleum products11.911.313.411.66.6
Investment goods3.84.34.77.810.9
Other2.62.73.54.35.7
(In percent of total, unless otherwise indicated)
Total imports, f.o.b.100.0100.0100.0100.0100.0
Foodstuffs30.035.635.734.038.5
Petroleum products45.539.740.032.217.5
Investment goods14.615.113.921.729.0
Other9.89.610.312.015.1
Memorandum item:
Total imports, c.i.f. (in millions of U.S. dollars)32.835.542.045.043.8
Sources: São Tomé and Príncipe authorities; and staff estimates.
Sources: São Tomé and Príncipe authorities; and staff estimates.
Table 24.São Tomé and Príncipe: Destination of Exports, 2001–05
20012002200320042005
Jan-Sept
(In millions of U.S. dollars)
Total exports, f.o.b.3.35.16.63.52.5
Angola0.00.10.20.10.1
Belgium0.40.71.60.60.4
Netherlands1.63.12.71.91.3
Portugal0.51.01.20.60.5
Other0.80.30.80.30.2
(In percent of total)
Total exports, f.o.b.100.0100.0100.0100.0100.0
Angola1.22.13.03.75.6
Belgium12.213.124.816.015.1
Netherlands47.260.141.655.050.9
Portugal16.019.618.516.921.2
Other23.45.112.18.47.2
Sources: São Tomé and Príncipe authorities; and staff estimates.
Sources: São Tomé and Príncipe authorities; and staff estimates.
Table 25.São Tomé and Príncipe: Origin of Imports, 2001–05
20012002200320042005
Jan-Sept
(In millions of U.S. dollars)
Total imports, c.i.f.32.835.542.045.043.8
Angola4.64.03.87.07.9
Belgium3.45.35.74.52.8
France3.90.31.60.20.1
Gabon1.31.11.50.90.3
Japan2.12.51.43.44.5
Netherlands0.30.10.20.50.04
Portugal15.121.325.525.525.3
Other2.01.02.32.92.8
(In percent of total)
Total imports, c.i.f.100.0100.0100.0100.0100.0
Angola14.111.29.115.618.1
Belgium10.514.913.510.16.4
France11.90.83.90.40.2
Gabon4.13.03.52.00.7
Japan6.47.03.47.510.2
Netherlands0.80.30.41.20.1
Portugal46.060.060.856.757.9
Other6.22.85.46.66.4
Sources: São Tomé and Príncipe authorities; and staff estimates.
Sources: São Tomé and Príncipe authorities; and staff estimates.
Table 26.São Tomé and Príncipe: Export, Import, and Terms of Trade Indices, 2001–05 1/
20012002200320042005
Est.
(Index, 2000=100)
Export unit value index117.6182.1180.4161.8169.3
Import unit value index 2/94.397.7107.7119.1131.4
Terms of trade124.7186.3167.5135.9128.9
(Annual percentage changes)
Terms of trade 3/24.749.5−10.1−18.8−5.2
Sources: São Tomé and Príncipe authorities; and staff estimates.

In U.S. dollar terms.

Calculated using export unit value indices of partner countries.

For 2005, based on preliminary data through October.

Sources: São Tomé and Príncipe authorities; and staff estimates.

In U.S. dollar terms.

Calculated using export unit value indices of partner countries.

For 2005, based on preliminary data through October.

Table 27.São Tomé and Príncipe: Indicators of External Public Debt, 2001–05 1/
20012002200320042005
Est.
(In millions of U.S. dollars; end of period)
Disbursed medium- and long-term debt outstanding299.1301.3313.6325.1316.3
Of which: arrears44.249.153.158.143.5
Short-term debt outstanding0.05.010.016.016.0
Nigeria0.05.010.015.015.0
Angola0.00.00.01.01.0
Arrears0.00.00.00.00.0
Total external debt outstanding299.1306.3323.6341.1368.7
Of which: arrears44.249.153.158.143.5
Debt service due on medium- and long-term debt6.79.310.410.612.0
Interest2.72.82.83.13.2
Amortization4.16.57.67.58.9
Debt relief 2/4.02.83.23.216.7
Cash settlements 3/0.00.00.00.014.6
(In percent of exports of goods and nonfactor services)
External debt service
Before debt relief42.050.750.352.856.7
After debt relief14.39.010.511.614.5
Net present value of external debt481.6467.3463.5500.7499.5
(In percent of GDP)
Total external debt outstanding (end of period,
including arrears)626.8571.9547.3530.2524.5
Sources: São Tomé and Príncipe authorities; and staff estimates.

Includes IMF.

Current maturities and arrears rescheduled, refinanced, or forgiven, including HIPC Initiative interim debt relief.

Includes reduction in arrears.

Sources: São Tomé and Príncipe authorities; and staff estimates.

Includes IMF.

Current maturities and arrears rescheduled, refinanced, or forgiven, including HIPC Initiative interim debt relief.

Includes reduction in arrears.

Table 28.São Tomé and Príncipe: Outstanding External Medium- and Long-Term Public Debt, 2001–05(In millions of U.S. dollars; end of period)
20012002200320042005
Prel.
Total 1/299.1301.3313.6325.1316.3
Of which: arrears44.249.153.158.143.5
Multilateral creditors 2/177.5180.6192.1204.5199.9
Of which: arrears0.00.00.00.00.0
World Bank66.766.970.876.374.9
African Development Bank Group 3/87.990.394.6100.598.8
Arab Bank for Economic
Development in Africa8.48.611.811.210.6
Other12.112.412.313.612.9
Official bilateral creditors121.6120.7121.4120.6116.4
Of which: arrears44.249.153.158.143.5
France5.45.46.06.15.7
Germany13.313.313.313.313.3
Portugal28.726.824.923.021.2
Russian Federation10.910.910.910.910.9
Angola21.421.421.421.421.4
Other 5/42.043.045.045.944.0
Sources: São Tomé and Príncipe authorities; and staff estimates.

Debt with maturity of more than one year.

Includes IMF.

Includes African Development Fund.

Bilateral rescheduling agreement signed in July 2003.

Includes debt with Italy under dispute, and People’s Republic of China.

Sources: São Tomé and Príncipe authorities; and staff estimates.

Debt with maturity of more than one year.

Includes IMF.

Includes African Development Fund.

Bilateral rescheduling agreement signed in July 2003.

Includes debt with Italy under dispute, and People’s Republic of China.

Table 29.São Tomé and Príncipe: Exchange Rates, 2001–05(In dobras per U.S. dollar, unless otherwise indicated; period average)
Real EffectiveNominal EffectiveOfficial RateBureau deCommercial BanksParallel MarketDifferential
Exchange RateExchange Rate2/Change RateRate 3/RateBetween the
(2000 = 100)Index 1/Official and
(2000 = 100)Parallel
Rates 4/
Annual
200199.493.68,842.18,822.68,919.28,852.10.1
200296.484.39,089.39,035.29,159.19,069.2−0.2
200387.571.49,347.69,327.19,360.09,355.70.1
200484.862.49,779.99,857.09,978.69,866.70.9
200590.058.410,522.810,489.010,626.610,562.50.4
Quarterly
2001 Q199.896.48,593.38,650.08,731.08,652.70.7
Q2105.4100.28,893.48,840.98,972.38,883.3−0.1
Q395.789.58,895.78,850.88,963.58,872.7−0.3
Q496.888.48,986.08,948.79,010.08,999.60.2
2002 Q1100.189.79,014.58,936.69,113.48,993.4−0.2
Q297.986.19,042.29,027.09,049.59,033.3−0.1
Q393.881.39,105.09,051.39,204.89,058.8−0.5
Q493.880.09,195.39,125.89,268.79,191.30.0
2003 Q189.575.39,225.89,191.89,239.89,245.60.2
Q286.571.59,307.59,300.09,311.59,311.10.0
Q388.971.59,390.89,368.79,412.49,391.30.0
Q485.067.39,466.39,477.99,476.39,474.60.1
2004 Q183.764.09,542.99,499.49,630.09,499.4−0.5
Q286.764.69,858.59,786.79,978.99,776.3−0.8
Q384.861.710,092.910,050.910,162.310,080.3−0.1
Q483.959.110,115.010,091.010,143.310,110.70.0
2005 Q186.357.910,125.910,100.510,175.610,101.5−0.2
Q291.859.510,182.310,148.110,250.110,148.8−0.3
Q393.559.410,188.210,152.810,469.910,260.90.7
Q411,594.911,554.711,610.911,738.91.2
Sources: São Tomé and Príncipe authorities; and staff calculations.

Trade weighted.

Average between buying and selling rates.

Up to end-2003, Banco Internacional de São Tomé and Príncipe only.

In percent of the official rate.

Sources: São Tomé and Príncipe authorities; and staff calculations.

Trade weighted.

Average between buying and selling rates.

Up to end-2003, Banco Internacional de São Tomé and Príncipe only.

In percent of the official rate.

São Tomé and Príncipe: Summary of Tax System(as of December 31, 2005)
TaxNature of TaxExemptions or DeductionsRates
1.Taxes on income, profit, and capital gains
1.1Individual.Levied on all domestically earned income, in cash and in kind. The tax is withheld at source and payable within the first eight days of the month after the income was earned. It is levied on all individuals, including nonresidents who earn income in the country.
1.1.1Income tax (Imposto sobre salários) (Decree-Law 11/93 of February 25, 1993; Decree-Law 64/97 of November 3, 1997).Earned annual income up to Db 480,000, after Db 5,000 monthly deductible.Flat rate of 13 percent.
Salary supplements up to 10 percent of the fixed monthly salary.
Expense allowances and per diem and representation allowances up to the limits set for government employees.
Income of clergy from the exercise of their spiritual functions.
Foreign personnel of diplomatic and consular missions or in the service of international or foreign organizations.
Certain moving expenses.
1.2Corporate
1.2.1Profit tax (Imposto sobre o rendimento) (Decree-Law 9/93 of March 5, 1993; Decree-Law 84/93 of December 31, 1993; Decree-Law 46/93 of August 10, 1993; Decree-Law 58/95 of December 31, 1995; Decree-Law 40/96 of October 29, 1996).Levied on all domestic income from any commercial, industrial, service, or agricultural business or independent profession, even if occasional or temporary.Profits from investment or dividends from mutual aid societies and nonprofit cooperatives.For commercial, industrial, service, and agricultural businesses, flat 30 percent rate on taxable profits; additional 15 percent rate on taxable profits in excess of Db 12 million.
Fifty percent of profits from agricultural activities.
Special exemptions granted in the context of the investment code.For independent professionals, a five-bracket schedule applies to taxable profits, with:
  • progressive rates from 5 percent to 30 percent on taxable profits of Db 60,000 to Db 3,000,000; and
  • a flat rate of 30 percent on taxable profits above Db 3,000,000, plus a 15 percent surcharge on the portion of taxable profits in excess of Db 3,000,000.
1.2.2Minimum tax (Valor minimo) (Decree-Law 58/95 of December 31, 1995).Payable during the first half of the year by all commercial, industrial, and artisanal businesses, as well as by self- employed professionals. The minimum tax is deductible from the tax on profits.None.Six progressive tax brackets:
  • up to Db 80,000: Db 18,000;
  • up to Db 400,000: Db 42,000;
  • up to Db 1,200,000: Db 105,000;
  • up to Db 2,000,000: Db 212,000;
  • up to Db 4,000,000: Db 424,000; and
  • above 4,000,000: Db 636,000.
1.2.3Tax on income by taxis (Imposto sobre o rendimento dos taxistas) (Decree-Law 36/00 of May 16, 2000).Levied on income from taxi services.None.Fixed rates depending on location and vehicle tonnage.
2.Taxes on property
2.1Urban property tax (Contribuição predial urbana) (Legislative Act 450 of September 8, 1954; Decree- Law 57/81 of November 28, 1981; Decree-Law 16/93 of March 5, 1993; Decree-Law 45/93 of August 10, 1993; Decree-Law 84/93 of December 31, 1993; Decree- Law 40/96 of October 29, 1996).Levied on all urban property, including:
  • ermanent buildings intended for housing, commercial, or industrial purposes other than exploitation of land, and the land on which the buildings are located; and
  • and for construction when declared as such by the owner or if covered under the law.
Government properties.Fifteen percent on registered value corrected according to the following factors:
  • factor of 8 for property registered before December 31, 1970;
  • factor of 4 for property registered between January 1, 1971 and December 31, 1980;
For two years, permanent buildings for use as dwellings by owners or their families, including buildings replacing demolished buildings, provided the construction period does not exceed 24 months.
Owners of property whose total income does not exceed Db 2,000 per day.
All property owned by religious entities pursuant to their purposes.
  • factor of 2 for property registered between January 1, 1981 and December 31, 1990;
  • factor of 1.5 for property registered between January 1, 1991 and April 30, 1993; and
  • factor of 1 for property registered after May 1, 1993.
2.2Motor vehicle tax (Imposto sobre veículos) (Decree-Law 13/93 of March 5, 1993; Decree-Law of December 31, 1993).Levied on motor vehicles equipped with engines larger than 50cc, either registered in the country or starting 180 days from entry into the country, that circulate or are parked in public thoroughfares or places.The government and any of its agencies, organizations, or services, except state-owned and mixed enterprises.The taxes are renewed annually, and vary according to the size and the age of the vehicle:
  • vehicles 50–500 cc are taxed Db 500 if less than 6 years old, and Db 1,000 if more than 6 years old;
  • vehicles 501–1,300 cc are taxed Db 2,500 if less than 6 years old and Db 4,000 if more than 6 years old;
  • vehicles 1,301–1,900 cc are taxed Db 4,000 if less than 6 years old and Db 6,000 if more than 6 years old; and
  • vehicles over 1,900 cc are taxed Db 6,000 if less than 6 years old and Db 10,000 if more than 6 years old.
Citizens of countries giving reciprocal treatment.
Personnel of diplomatic and consular missions, pursuant to agreements.
International or foreign organizations, pursuant to agreements
Driver-training vehicles.
Duly registered rental vehicles.
Duly registered boats used in artisanal fishing.
New vehicles purchased after October 31, 1997.
Farm tractors.For recreational boats, tariffs are:
Motorcycles used for transporting freight.
  • for recreational boats up to 25 hp, Db 500 if up to 6 years old, and Db 1,000 if more than 6 years old; and
  • for each 10 hp or fraction over 25 hp, there are additional tariffs of Db 500 for boats up to 6 years old and Db 1,000 for boats more than 6 years old.
3.Domestic taxes on goods and services
3.1Excise tax (Imposto sobre o consumo) (Decree-Law 20/76 of April 26, 1976; Decree-Law 14/93 of March 5, 1993, Decree-Law 1/2000 of February 1, 2000; Decree-Law 35/2000 of May 15, 2000; and Decree- Law 8/2005 and Decree-Law 9/2005 of July 28, 2005).Levied on the value of a limited number of manufactured goods listed in the schedules annexed to Decree-Law 1/00 of February 1, 2000 with the following valuation methods:
  • the factory gate selling price is used for locally produced goods not distributed by an associated or subsidiary enterprise;
  • the distributor’s selling price less 20 percent is used if the producer is associated with the distributor or the subsidiary enterprise; and
  • if the producer sells his goods directly to consumers, the factory gate price cannot, for purposes of the excise tax, be less than the price charged to the consumer less 20 percent.
Locally produced goods exported directly by the industrial establishment.As listed in the schedules annexed to Decree-Law 1/2000 and modified by Decree-Laws 8/2005 and 9/2005, the rates are as follows:
Alcohol needed in industrial processes.ProductsRates
Gasoline for vehicles of diplomats, subject to reciprocity, and of officials of international organizations.(In percent)
Gasoline for aviation equipment in public use.Petroleum products42–149
Medical or medical-related services.Motor vehicles10–35
Alcoholic drinks25–55
Of which: spirits55
beer25
Tobacco55
Services5
The tax is payable by the producer.
The excise tax also applies to the provision of services.
4.Taxes on international trade and transactions
4.1Import duty (Direitos de importação) (Decree-Law 1/00 of February 1, 2000; and Decree-Law 31/2005 of December 21, 2005).Levied on customs value of imports determined on the assumption that:
  • the goods are delivered to the buyer at the port of entry;
  • the seller’s price is the c.i.f. price, which includes all costs related to the sale of the good and its delivery at the port of entry;
  • the buyer pays the applicable duty and any other taxes that are excluded from the base price;
  • if the goods being valued are manufactured under a patented process of registered design or mark, or bear a foreign trademark or brand name, or are imported to be sold under the same trademark even after additional finishing, the base price includes the royalty for use of the patent, registered design, trademark, or brand name; and
Goods imported by official agencies as specified in Decree 41024 of March 23, 1957 are exempt. Examples are:
  • aircraft and aircraft engines for use in civil aviation;
  • equipment, machinery, and accessories for use in any public service;
  • fixed plant and rolling stock for railroads, hoists, and floating docks and cranes imported by the port and railroad agencies;
  • electrical equipment for postal, telegraph, and telephone stations;
  • construction materials, electrical equipment, and machinery and apparatus imported by the government for use in the water, electricity distribution, or sewer systems, or by public works agencies for carrying out work on such systems;
  • goods required for the country’s development and the equipping of ports; and
There are three rate bands:
  • 5 percent on basic goods;
  • 20 percent on luxury goods; and
  • 10 percent on all other goods.
The majority of investment goods are taxed at 10 percent, although some are taxed at 20 percent.
Surtaxes apply to a variety of goods.
All raw material or inputs for industry or agriculture are subject to 5 percent rate.
Petroleum products:
  • gasoline: 149 percent (5 percent + 144 percent surtax)
  • kerosene: 9.4 percent (5 percent + 4.4 percent surtax);
  • jet fuel: 322 percent (5 percent + 317 percent surtax); and
  • diesel: 62.9 percent (5 percent + 57.9 percent surtax).
Alcoholic beverages:
  • beer: 61 percent (20 percent + 41 percent surtax);
  • wine: 45 percent (20 percent + 25 percent surtax); and
  • spirits 75 percent (20 percent + 55 percent surtax).
  • specific duties levied on the weight of goods are calculated on the basis of their gross, net, or actual weight, as stated in the tariff and its regulations.
  • fertilizers and seeds imported by agricultural agencies.
Cigarettes:
  • 65 percent (20 percent plus
  • 55 percent surtax).
Decree-Law 31/2005 establishes that private enterprises cannot be exempted from import duties. In all cases private enterprises may have a fiscal benefit, they will be subject to 5 percent rate.Vehicles:
10 to 20 percent (plus 0 to 20 percent surtax, depending on the age of the vehicle).
4.2Lighthouse user fee (Imposto de farolagem) (Legislative Act 25 of December 24, 1933).Levied on all ships entering domestic harbors and used to defray the costs of lighthouses, lighted beacons, and light buoys.None.Rates range from Db 150 to Db 650 per ship, depending on the nationality of ship and the time of day.
The user fee is administered by the National Port Enterprise (ENAPORT) and is earmarked for harbor operations.
4.3Harbor tax (Taxas de porto) (Decree-Law 22/89 of December 19, 1989).Levied for the use of port facilities, and on materiel procured from the port authorities.Scientific missions, domestic ships, and fishing boats pay 50 percent of the tax. The following equipment is exempt:
  • government and military boats;
  • merchandise in transit;
  • merchandise shipped between domestic harbors;
  • passengers’ luggage; and
  • mail.
Most rates are in the form of specific tariffs that vary with the weight, volume, and quantity of merchandise, the type of service, and time of utilization of service.
For materiel procured from the port authorities, a tax of 1 percent of the c.i.f. value applies, plus an additional tax of 30 percent.
Exemptions are also granted by ENAPORT on a case-by-case basis.
5.Other taxes
5.1Inheritance and gift tax (Imposto sobre as successões e doações) (Decree 22 of June 22, 1988; Decree-Law 42/93 of August 10, 1993).Levied on all conveyance of tangible property, real estate, value, or title. Payable by the recipient.Transfers of less than Db 5,000. The gratuitous conveyance of tangible or real estate to descendants or to nonprofit organizations is also exempt.Progressive rates between 7 percent and 25 percent, based on the value of the goods or property conveyed and the degree of kinship between the deceased and the heirs.
The tax base is determined by the value of the conveyed goods or property, after deduction of the transferor’s debts and other costs set forth in the regulations.
5.2Real estate transfer tax sobre a transmissão de imobiliários por título oneroso) (Decree 22 of June 22, 1988; Decree-Law 42/93 of August 10, 1993).Levied on all onerous conveyances of real estate and payable by the purchaser.The state, nonprofit organizations, and recipients of real estate who are descendants, ascendants, husbands, wives, brothers or sisters, for property valued at less than Db 30,000.PropertyRate
Rural property10 percent
Urban property10 percent
Barter deeds5 percent
Taxable transactions include specifically:
  • sale or bartering of real estate, subject to the prior authorization of the Planning Minister under Article 1 of Decree-Law 48/75 of June 19, 1975;
  • acquisitions of shares in companies other than business corporations that own real estate, if through such acquisitions one partner becomes the holder of at least 75 percent of the company’s capital or the number of partners is reduced to two and the two are husband and wife married with community property; and
  • purchases of land from freeholders and redemptions of property seized in tax enforcement proceedings. The tax base is the value of the conveyance or the assessed income from the property as shown in the real estate register, whichever is higher. The tax base may also be determined through direct assessment.
Not applicable to new buildings.
5.3Stamp tax (Imposto do selo (Decree-Law 12/76 of April 19, 1976 and annexed schedule; Decree-Law 40/88 of December 20, 1988; Decree- Law 15/93 of March 5, 1993; Decree-Law 81/93 of December 31, 1993; Decree- Law 12/96 of April 19, 1996; and Decree-Law 7/2005).Levied in the form of:
  • revenue stamps (selos fiscais);
  • stamped forms (papel selado);
  • stamped bills (letras seladas);
  • revenue stamps (selos de verba);
  • collection advice stamps;
  • customs stamps;
  • pharmaceutical stamps; and
  • miscellaneous stamps.
The state, religious institutions, and some items in the schedule annexed to the regulations.Examples:
  • stamped forms, Db 500;
  • revenue stamps, Db 1,500;
  • stamped bills, Db 1 to Db 500; and
  • check stamps, Db 3 for local payment and Db 15 for payment abroad.
Transfers of foreign currency from abroad.
The stamp tax is levied upon assessment and payment, when it is due on acts and contracts subject to it, and when products subject to it are exhibited or sold.
5.4Special tax (Imposto especial) (Decree-Law 22793 of June 30, 1933).Surtax on the total amount of the following taxes, fees, and other government revenues:
  • import tax;
  • rural property tax;
  • justice, port, and customs duties;
  • enforced collection proceeds; and
  • check
  • tax violation proceeds.
None.Single rate of 20 percent.
5.5Service stamp tax (Imposto de selo de assistência) (Decree-Law 44/T/75 of June 6, 1975; Decree-Law 11/86 of March 31, 1986).Tax on customs clearance and receipts, licenses, and certificates.Same as stamp tax.For customs clearance and receipts, specific tax for values below Db10,000, ranging from Db 2 to Db 10; and an ad valorem rate of 0.15 percent for values above Db 10,000. Specific rates of Db 100,000 for certificates; for licenses for 25 identified activities, the rates range from Db 100,000 to Db 500,000.
5.6Military tax (Decree 17695 of December 1929; Decree 29 115 of November 12, 1938; Decree 32745 of April 10, 1943; Decree-Law 86/93 of December 31, 1993).Payable by all nationals exempt from military service.Disabled nationals; students, until the end of their studies; and anyone who is currently part of military or paramilitary services, or who served in the army for at least five years.Db 750 or Db 1,000, depending on income level.
5.7Justice tax (Decree-Law 18/87 of August 31, 1987).Due on the settlement value in legal cases.Flat rate of 10 percent.
Source: São Tomé and Príncipe authorities.
Source: São Tomé and Príncipe authorities.
ANNEX II Exchange and Payments System

(As of December 31, 2005)

Exchange arrangement

1. The currency of São Tomé and Príncipe is the dobra (Db). Since September 2005, the official selling of the dobra vis-à-vis the U.S. dollar is determined on a daily basis as a weighted average of the commercial banks’ selling rates and the outcomes of the central bank’s foreign exchange auctions, with weights of 0.4 and 0.6 respectively.33 On December 31, 2005, the exchange rate (middle rate) for the U.S. dollar was Db 11,929.7. Rates for other currencies are determined on the basis of the exchange rates of the U.S. dollar for the currencies concerned.

2. Foreign exchange transactions are divided into three categories for the purpose of assessing charges on purchases and sales of foreign exchange: import payments, transactions in foreign checks, and collection of export proceeds.

3. On import-related transactions, when a letter of credit is opened, a stamp duty of 0.25 percent of the import value and a postage levy of US$2 are payable.

4. On foreign checks for collection, the commercial banks charge a commission of US$2 for each transaction. For collection of export proceeds, a commission of 0.125 percent is charged by banks—with a minimum of US$25 and a maximum of US$300—when a letter of credit is opened, and a additional fee of 0.125 percent is charged by banks when funds are received. A postage levy of Db 39,000 is also charged.

5. There are no arrangements for forward cover against exchange rate risk.

Administration of control

6. As of the 2003 Article IV consultation (March 2, 2004), available information indicated that current account transactions were free of restrictions. A review of regulations and practices was conducted by the authorities, together with Fund staff in November 2005.

7. Importers and exporters are required to register with the Directorate of External Commerce for statistical purposes only.

Bilateral agreements

8. The bilateral payment agreement with Cape Verde is not operative, and its resulting debt was fully paid by the Central Bank of São Tomé and Príncipe in March 2000. The bilateral payment arrangement with the Central Bank of Angola is not operative; its resulting debt has been converted into government debt, and has not yet been paid but is the subject of rescheduling discussions.

Imports and import payments

9. All registered importers are permitted to make the related import payments. Import licenses are automatically granted by the Directorate of External Commerce. When importers open letters of credit, the commercial banks can require them to lodge a deposit34 in domestic currency equivalent to between 0 percent and 100 percent of the value of the letters of credit, depending on the creditworthiness of the importer.

Wire payments

10. Commercial banks charge a commission of US$2 for clients (and US$4 for nonclients).

Exports and export proceeds

11. For the purpose of collecting information, all exports require the completion of registration forms, which specify the quantity and c.i.f. or f.o.b. value of the export shipment.

12. All export proceeds must be repatriated and collected through the commercial banks.

Proceeds from invisibles

13. Travelers may bring in any amount of domestic or foreign currency.

Capital account transactions

14. Inward foreign investments are governed by the investment code of October 15, 1992. Foreign capital investment, excluding investment in the petroleum and mining sectors, is permitted on the same basis as domestic investment. Repatriation of profits is permitted.

20Prepared by Atsushi Iimi. An earlier version of this note was presented at a seminar held at the Central Bank of São Tomé and Príncipe during the Article IV consultation mission in November 2005.
21In the table, INTR denotes the central bank reference interest rate.
22For the derivation of the empirical model, see Nassar (2005). Also, see Gasha (2003) and Muñoz (2005).
23No cointegrating vector exists with a smaller number of lags.
24Including the reference interest rate in the econometric model did not result in a stable relationship for the price dynamics.
25An alternative definition for the exchange rate variable is the nominal effective exchange rate (NEER). In the case of São Tomé and Príncipe, however, the statistical evidence shows that the NEER has little explanatory power for inflation.
26For the trace test, see Johansen (1988).
27The model explains about 85 percent of actual inflation according to the conventional R-square. Also, according to the conventional χ2 test, the hypothesis of all the coefficients being zero can be rejected; the test statistics is 215.34.
28In spite of a remaining concern about normality in this restricted model, the results are statistically stable in the sense that all the eigenvalues lie inside the unit circle and any exogenous shocks will taper-off after some fluctuating transition. The hypothesis that there is no autocorrelation in the residuals for any of the orders cannot be rejected.
29As usual, causality test primarily suggests statistical precedence.
30For the weak exogeneity test, for instance, see Johansen and Juselius (1992).
31The Lagrange-multiplier test statistics, which follow the chi-square distribution, are 9.19 at the first lag order; 23.79 at the second lag order; 23.10 at the third lag order. The degree of freedom is 16.
32As far as the inflation equation is concerned, the skewness test statistic estimated at 6.248 is smaller than the 1 percent critical value drawn from the chi-square distribution with the degree of freedom of 1. The kurtosis test statistic is 5.461, and thus the null hypothesis of normality cannot be rejected at the 1 percent significance level.
33In the past, the methodology used for calculating the official dobra/USD exchange rate consisted in calculating the simple average of the central bank, commercial banks, exchange bureaus, and the parallel market rates. The methodology was changed in September 2005 as the previous methodology did not represent effective rates applied in the market.
34Currently, these deposits are not remunerated.

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