At the conclusion of the visit, Tsidi Tsikata, Mission Chief for São Tomé and Príncipe, issued the following statement in São Tomé:

“Growth slowed to about 4 percent in 2009 after averaging more than 6 percent during the preceding five years. The slowdown was due to a significant decline in foreign direct investment (FDI) and official grants which adversely affected the pace of construction and trade activities. The global financial and economic crisis has dampened São Tomé and Príncipe's prospects for a quick return to a high growth path. In particular, FDI is unlikely to see a strong rebound in the near-term. Inflation has continued to decline steadily, with the year-on-year rate falling from the peak of 37 percent in July 2008 to 13 percent in April 2010. Non-food inflation has been much lower, reaching 4.5 percent in April 2010. The recent successful introduction of the exchange rate peg to the Euro—the currency of STP's most important trading partners—bodes well for further progress in lowering inflation and interest rates in the country and thus boosting economic activity.

“The government and the IMF team discussed policies for strengthening fiscal performance in order to maintain macroeconomic stability and support the exchange rate peg. Over the last few years, the government has drawn on National Oil Account balances and privatization proceeds to boost expenditures, including on public investment projects. Last year, the government drew on these resources to compensate for weaker-than-expected tax revenues and shortfalls in external grants. However, the government acknowledged the need for policies to achieve a more sustainable fiscal position and highlighted measures underway to improve revenue administration and public expenditure management. The IMF team suggested that the authorities implement measures to address a recurring problem of arrears accumulation between the Treasury, the water and electricity corporation (EMAE), and the petroleum importing company (ENCO), including mechanisms to automatically adjustment fuel prices and utility tariffs. This would allow the government to better target its budgetary resources for social protection programs.

“Notwithstanding the substantial debt relief it has received from its bilateral and multilateral partners, STP remains at high risk of falling back into debt distress because of its limited export and production base. The IMF mission welcomed the government's commitment to avoid commercial borrowing and instead rely on external grants and highly concessional loans to finance its development programs. The government highlighted several reforms underway to improve the investment climate which should help attract foreign direct investment and facilitate private sector-led growth.

“Most of the targets for 2009 under the IMF-supported program were met. However, the budget deficit target was exceeded due to revenue shortfalls and spending to clear the government's arrears to EMAE. Weak revenue performance continued in the first quarter of 2010 and was the main factor behind the deficit for that period also exceeding the program target. The government and the IMF team agreed to continue discussions on the ECF second review while monitoring fiscal performance in the second quarter of 2010.