Economy of Sao Tome and Principe

Economy - overview: The economy of Sao Tome and Principe has become increasingly dependent on cocoa since independence 25 years ago. However, cocoa production has substantially declined because of drought and mismanagement. The resulting shortage of cocoa for export has created a persistent balance-of-payments problem. Sao Tome has to import all fuels, most manufactured goods, consumer goods, and a significant amount of food. Over the years, it has been unable to service its external debt and has had to depend on concessional aid and debt rescheduling. Considerable potential exists for development of a tourist industry, and the government has taken steps to expand facilities in recent years. The government also has attempted to reduce price controls and subsidies, but economic growth has remained sluggish. Sao Tome is also optimistic that significant petroleum discoveries are forthcoming in its territorial waters in the oil-rich waters of the Gulf of Guinea. Corruption scandals continue to weaken the economy.

Since the 1800s, the economy of Sao Tome and Principe has been based on plantation agriculture. At the time of independence, Portuguese-owned plantations occupied 90% of the cultivated area. After independence, control of these plantations passed to various state-owned agricultural enterprises. The dominant crop on Sao Tome is cocoa, representing about 95% of exports. Other export crops include copra, palm kernels, and coffee.

Domestic food-crop production is inadequate to meet local consumption, so the country imports some of its food. Efforts have been made by the government in recent years to expand food production, and several projects have been undertaken, largely financed by foreign donors.

Other than agriculture, the main economic activities are fishing and a small industrial sector engaged in processing local agricultural products and producing a few basic consumer goods. The scenic islands have potential for tourism, and the government is attempting to improve its rudimentary tourist industry infrastructure. The government sector accounts for about 11% of employment.

Following independence, the country had a centrally directed economy with most means of production owned and controlled by the state. The original constitution guaranteed a "mixed economy," with privately owned cooperatives combined with publicly owned property and means of production. In the 1980s and 1990s, the economy of Sao Tome encountered major difficulties. Economic growth stagnated, and cocoa exports dropped in both value and volume, creating large balance-of-payments deficits. Efforts to redistribute plantation land resulted in decreased cocoa production. At the same time, the international price of cocoa slumped.

In response to its economic downturn, the government undertook a series of far-reaching economic reforms. In 1987, the government implemented an International Monetary Fund structural adjustment program[?], and invited greater private participation in management of the parastatals, as well as in the agricultural, commercial, banking, and tourism sectors. The focus of economic reform since the early 1990s has been widespread privatization, especially of the state-run agricultural and industrial sectors.

In April 2000, the IMF approved a poverty reduction and growth facility for Sao Tome aimed at reducing inflation to 3% for 2001, raising deal growth to 4%, and reducing the fiscal deficit. In December 2000, Sao Tome received significant debt reduction under the IMF-World Bank's heavily indebted poor countries[?] (HIPC) initiative. The reduction should free additional resources for poverty reduction and public investment.

Sao Tome’s success in implementing structural reforms has been rewarded by international donors, who have pledged increased assistance in 2001. The Sao Tomean Government has traditionally obtained foreign assistance from various donors, including the UN Development Program[?], the World Bank, the European Union, Portugal, Taiwan and the African Development Bank

Portugal remains one of Sao Tome's major trading partners, particularly as a source of imports. Food, manufactured articles, machinery, and transportation equipment are imported primarily from the EU.

gross domestic product: purchasing power parity - $169 million (1999 est.)

GDP - real growth rate: 1.5% (1999 est.)

GDP - per capita: purchasing power parity - $1,100 (1999 est.)

GDP - composition by sector:
agriculture: 23%
industry: 19%
services: 58% (1997 est.)

Population below poverty line: NA%

Household income or consumption by percentage share:
lowest 10%: NA%
highest 10%: NA%

Inflation rate (consumer prices): 10.5% (yearend 1999 est.)

Labor force: NA

Labor force - by occupation: population mainly engaged in subsistence agriculture and fishing
note: shortages of skilled workers

Unemployment rate: 50% in the formal business sector (1998 est.)

Budget:
revenues: $58 million
expenditures: $114 million, including capital expenditures of $54 million (1993 est.)

Industries: light construction, textiles, soap, beer; fish processing; timber

Industrial production growth rate: NA%

Electricity - production: 15 million kWh (1998)

Electricity - production by source:
fossil fuel: 46.67%
hydro: 53.33%
nuclear: 0%
other: 0% (1998)

Electricity - consumption: 14 million kWh (1998)

Electricity - exports: 0 kWh (1998)

Electricity - imports: 0 kWh (1998)

Agriculture - products: cocoa, coconuts, palm kernels, copra, cinnamon, pepper, coffee, bananas, papayas, beans; poultry; fish

Exports: $4.9 million (f.o.b., 1999 est.)

Exports - commodities: cocoa 90%, copra, coffee, palm oil (1997)

Exports - partners: Netherlands 51%, Germany 6%, Portugal 6% (1997)

Imports: $19.5 million (f.o.b., 1999 est.)

Imports - commodities: machinery and electrical equipment, food products, petroleum products

Imports - partners: Portugal 26%, France 18%, Angola, Belgium, Japan (1997)

Debt - external: $274 million (1998)

Economic aid - recipient: $57.3 million (1995)

Currency: 1 dobra (Db) = 100 centimos

Exchange rates: dobras (Db) per US$1 - 7,200.0 (October 1999), 7,104.05 (1998), 4,552.5 (1997), 2,203.2 (1996), 1,420.3 (1995)

Fiscal year: calendar year

See also : Sao Tome and Principe