The African Development Bank Group's Board has approved a $7.9 million grant to bolster Sao Tome and Principe's economic recovery. The budgetary support operation aims to strengthen the country's economic resilience through improved revenue and public expenditure reforms and lay the groundwork for sustainable energy sector reforms vital to a strong and vibrant private sector.
The support is from the African Development Bank Group's Transitional Support Facility and is part of the country's second phase of its Fiscal Sustainability and Economic Resilience Support Program.
The first phase of the support amounting to $5.3 million was approved on 1 December 2023. The approval of the second phase brings the total financing to $13.2 million.
The programme aligns with the Country's Strategy Paper 2024-2029, the African Development Bank's Ten-Year Strategy, 2024-2033, and the High 5s development priorities, particularly the "Improve the Quality of Life of the People of Africa" and "Light up Africa" goals. It will greatly contribute to improving the business climate.
The key impediment to São Tomé and Príncipe's economic recovery is an insufficient energy supply that is aggravated by worn-out fossil fuel-based electricity generation equipment and a loss-making state-owned utility, I, which hinder the efficient functioning of the economy. The African Development Bank's support towards energy sector reform will result into improved energy sector governance and support the transition to renewable energy.
Highlighting the programme's importance, the African Development Bank's Director General for Southern Africa, Leila Mokaddem, said: "This budgetary support operation has come at a critical juncture to support economic recovery through revenue and public expenditure reforms while, at the same time, setting the foundations for sustainable energy sector reforms critical for a strong and vibrant private sector."
She added that the operation strengthens the Bank's position to provide policy and advisory support services, which are prerequisites for sustained economic recovery and inclusive growth
The African Development Bank Country Manager for Angola and São Tomé and Príncipe, Pietro Toigo, said: "The budgetary support will greatly help close the financing gap faced by the country, boost foreign exchange reserves, which are at their lowest. It will further strengthen the government's efforts to undertake further reforms required for economic recovery."
