african economic outlook southern africa central africa region 2013 united nations economic...

Cameroon

Central African Rep.

Chad

Congo, Dem. Rep.

Congo, Rep.

Equatorial Guinea

Gabon

Madagascar

São Tomé and Príncipe

Regional Edition: Central Africa Cameroon


Chad

Congo, Dem. Rep.

Congo, Rep.

Equatorial Guinea

Gabon

Madagascar


The full report is available at:

Regional edition

Central Africa

AfricanEconomicOutlook2013

2013 A

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African Economic Outlook 2013

www.africaneconomicoutlook.org

AFRICAN DEVELOPMENT BANK GROUP

Regional edition

African Economic Outlook

2013Regional Edition

Central Africa

AFRICAN DEVELOPMENT BANK

DEVELOPMENT CENTRE OF THE ORGANISATIONFOR ECONOMIC CO-OPERATION AND DEVELOPMENT

UNITED NATIONS DEVELOPMENT PROGRAMME

ECONOMIC COMMISSION FOR AFRICA


DEVELOPMENT CENTRE

The opinions expressed and arguments employed in this publication are the sole responsibility of the authors and do not necessarily reflect those of the African Development Bank Group, its Board of Directors, or the countries they represent; the OECD, its Development Centre or the governments of their member countries; the United Nations Development Programme; the Economic Commission for Africa; the European Union; or those of the Secretariat of the African Caribbean and Pacific Group of States or its member states.This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.

Corrigenda to the African Economic Outlook may be found on line at: www.africaneconomicoutlook.org/en

© African Development Bank, Organisation for Economic Co-operation and Development, United Nations Development Programme, Economic Commission for Africa (2013).

You can copy, download or print the content of this publication for your own use, and you can include excerpts from it in your own documents, presentations, blogs, websites and teaching materials, provided that suitable acknowledgment of AfDB, OECD, UNDP, and UNECA as source and copyright owners is given. All requests for public or commercial use and translation rights should be submitted to [email protected]. Requests for permission to photocopy portions of this material for public or commercial use shall be addressed directly to the Copyright Clearance Center (CCC) at [email protected] or the Centre français d’exploitation du droit de copie (CFC) [email protected].

2 African Economic Outlook - Regional Edition / Central Africa © AfDB, OECD, UNDP, ECA 2013

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This is a complementary edition to the African Economic Outlook 2013

Other regional editions are available for :African members of the CPLP - Community of Portuguese-speaking countries Eastern Africa Northern Africa Southern AfricaWestern Africa

Table of Contents

Overview .......................................................................................................

Cameroon ......................................................................................................

Central African Republic.................................................................

Chad.....................................................................................................................

Congo, Dem. Rep. ..............................................................................

Congo, Rep. .................................................................................................

Equatorial Guinea .................................................................................

Gabon .................................................................................................................

Madagascar ..................................................................................................

São Tomé and Príncipe ....................................................................

4

7

23

37

49

61

77

91

105

121

3African Economic Outlook - Regional Edition / Central Africa © AfDB, OECD, UNDP, ECA 20132

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In Central Africa, GDP is likely to continue to grow by 5.7% in 2013 and 5.4% in 2014 with above-average growth in Chad and in DRC. In Chad, oil production and agriculture are the main drivers of growth. In DRC, mining, agriculture and construction are boosting growth. But sustainable growth also requires further prog-ress in political stability and the security problem in the eastern part of the country has significantly affected economic activity in that region.

In 2012, Africa’s monetary authorities had to cope with emerging inflationary pressures stemming from high-er food prices and exchange rate depreciation. The depreciation of exchange rates helped to boost exports but added to inflation through higher import prices. At the same time, the deepening of the crisis in Europe increased risks of a new economic downturn in Africa. Monetary policies responded quite differently depend-ing on the balances of these risks. Monetary policies of the WAEMU and of the CEMAC continued their prudent stance with priority given to controlling inflation with fixed exchange rates tied to the euro.

Given the risk of another economic downturn due to lower global demand several countries continue to pur-sue expansionary fiscal policies. But many other countries follow fiscal consolidation strategies to ensure debt sustainability. This is particularly important in countries, which are already at risk of debt distress. The Republic of Congo continued to implement an ambitious public investment program aimed at reducing large infrastructure deficits. In Cameroon, fiscal policy was also expansionary due to public investment and food and fuel subsidies. By contrast, other countries saw little fiscal space or need for an expansionary policy and tightened the fiscal stance.

FDI flows to Central Africa stagnated around USD 8 billion in 2012 and are projected to hover around that fig-ure in 2013. FDI remained concentrated in Democratic Republic of Congo (DRC), Congo Republic and Equato-rial Guinea, attracted by natural resources. These three countries are likely to continue receiving 80% of the region’s FDI in the near future. FDI to Central Africa as a share of GDP averaged 6.4 % over the past decade. This is about twice the average of other regions and highlights the role of natural resources –especially oil - in the region’s economic growth.

Africa’s economic prospects depend on global and domestic factors, which are highly uncertain. One of the downside risks is continued weakness of the global economy. The main channels of transmission of weaker global growth would be lower commodity export earnings, shrinkages in export volumes of other goods, tourism receipts, official development assistance (ODA), foreign direct investment inflows (FDI) and worker’s remittances.


Real GDP Growth (%) 2004-08 2009 2010 2011 2012(e) 2013(p) 2014(p)Central Africa 6,6 2,7 5,7 5,2 5,7 5,7 5,4Cameroon 3,1 1,9 3,3 4,1 4,9 5,0 5,2Central African Rep. 2,9 1,7 3,3 3,1 3,1 3,2 4,6Chad 11,4 4,1 14,0 1,6 7,2 7,4 11,5Congo, Rep. 4,3 7,5 8,8 3,4 4,9 5,1 5,3Congo, Dem. Rep. 6,5 2,8 7,2 6,9 7,2 8,2 9,4Equatorial Guinea 16,2 4,6 -0,5 7,7 5,5 4,9 -2,0Gabon 3,1 -2,7 6,9 7,0 5,6 4,6 4,8São Tome and Príncipe 6,0 4,0 4,5 4,9 4,0 5,2 5,8AFRICA 6,1 3,1 5,0 3,5 6,6 4,8 5,3

Consumer Prices(Inflation)(%) 2004-08 2009 2010 2011 2012(e) 2013(p) 2014(p)Central Africa 4,6 9,9 5,1 4,5 4,4 3,5 3,4Cameroon 2,7 3,0 1,3 2,9 3,0 3,0 3,0Central African Rep. 3,6 3,5 1,5 0,7 3,5 2,4 2,9Chad 2,0 10,1 -2,2 2,0 7,0 3,1 3,1Congo, Rep. 3,9 4,3 5,0 1,8 5,1 4,2 2,9Congo, Dem. Rep. 14,7 46,2 23,5 15,4 6,4 5,9 5,5Equatorial Guinea 5,1 6,0 5,6 4,8 4,5 3,1 3,5Gabon 1,8 1,9 1,5 1,3 2,7 2,5 2,5São Tome and Príncipe 20,8 17,0 13,3 14,3 9,5 7,9 7,7AFRICA 7,4 10,0 7,2 8,5 9,1 7,4 7,2

Overall Fiscal Balance, Including Grants (Percent of GDP) 2004-08 2009 2010 2011 2012(e) 2013(p) 2014(p)Central Africa 8,3 -0,5 1,0 1,9 -0,1 -0,3 -0,4Cameroon 9,1 -0,1 -1,1 -2,7 -3,5 -3,9 -4,2Central African Rep. 0,5 -0,1 -1,4 -2,9 -3,5 -3,4 -3,4Chad 1,1 -7,6 -4,1 2,4 0,8 0,0 3,8Congo, Rep. 14,6 5,3 16,3 16,4 2,4 3,2 2,4Congo Dem. Rep. -2,5 -4,2 2,4 -0,4 -6,2 -5,2 -3,0Equatorial Guinea 17,0 -3,8 -5,1 0,9 6,0 6,3 3,5Gabon 9,3 6,9 0,7 0,7 0,9 -1,2 -2,1São Tome and Príncipe 18,2 -18,4 -10,2 -11,9 -9,4 -13,4 -13,2AFRICA 2,0 -5,2 -3,0 -3,1 -2,5 -2,4 -1,9

External Current Account,including grants (Percent of GDP) 2004-08 2009 2010 2011 2012(e) 2013(p) 2014(p)Central Africa 0,7 -7,0 -5,2 -2,7 -1,8 -2,8 -3,6Cameroon -2,7 -7,7 -5,2 -4,5 -5,3 -5,3 -6,2Central African Rep. -5,6 -8,1 -9,9 -7,2 -7,0 -5,4 -5,3Chad 1,1 -8,7 -10,6 -2,3 -6,1 -8,9 -2,1Congo, Rep. 2,6 -8,1 5,2 0,8 0,3 0,6 -3,0Congo, Dem. Rep. -7,5 -10,5 -8,1 -11,5 -11,1 -11,0 -9,1Equatorial Guinea -3,7 -17,7 -20,5 -6,0 3,5 2,0 -1,0Gabon 16,6 11,9 9,1 8,9 7,5 5,4 2,2São Tome and Príncipe -21,0 -25,5 -30,9 -30,1 -22,5 -27,5 -27,7AFRICA 6,4 0,3 -0,6 -1,1 -0,4 0,0 0,7

Trade Balance(Percent of GDP) 2004-08 2009 2010 2011 2012(e) 2013(p) 2014(p)Central Africa 25,8 11,7 18,0 20,2 19,9 18,1 16,2Cameroon 1,6 -4,6 -2,7 -3,9 -4,4 -4,7 -5,3Central African Rep. -4,0 -7,2 -8,1 -4,1 -5,1 -4,6 -4,7Chad 25,8 0,8 3,6 10,6 8,1 4,2 9,9Congo, Rep. 50,6 45,2 52,9 48,9 41,1 37,8 35,4Congo, Dem. Rep. 0,4 -5,2 5,0 3,2 7,0 4,6 4,5Equatorial Guinea 60,0 23,9 31,2 37,8 40,5 40,3 36,5Gabon 46,6 35,8 36,5 37,9 35,1 33,7 28,8São Tome and Príncipe -36,0 -37,9 -46,0 -41,8 -40,7 -38,5 -37,6AFRICA 6,6 -0,1 2,9 2,7 4,1 4,3 4,5

Source: Authors’ calculationse: estimates; p: projections


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Cameroon 2013


Aissatou Gueye / [email protected] Facinet Sylla / [email protected]

http://dx.doi.org/10.1787/888932808025

Table 1: Macroeconomic indicators 2013

2011 2012 2013 2014

Real GDP growth 4.1 4.9 5 5.2

Real GDP per capita growth 1.9 2.8 2.9 3

CPI inflation 2.9 3 3 3

Budget balance % GDP -2.7 -3.5 -3.9 -4.2

Current account % GDP -4.5 -5.3 -5.3 -6.2

Figures for 2012 are estimates; for 2013 and later are projections.

http://dx.doi.org/10.1787/888932805042

Cameroon

Sections

The economy bounced back in 2012, stimulated by the recovery in the oil sector and strong domesticdemand, which was in turn driven by investments in infrastructure. This trend should continue in 2013 and2014.

Relative macroeconomic stability could be undermined by the maintenance of subsidies on oil products.

Despite ongoing social policies, Millennium Development Goal (MDG) indicators highlight the scale ofchallenges to be met against a background of strong population pressure.

Overview

The rebound in the economy initiated following the 2008/09 financial crisis continued in 2012, with growthestimated at 4.9%, versus 4.1% in 2011. Supported by higher oil production and strong domestic demand tiedto the launch of large infrastructure projects, this positive performance should continue in the 2013-14 period.

In 2012, budgetary policy remained expansive with increased investment spending and spending on subsidies.According to estimates, the budget balance should remain in deficit, at 3.5% of gross domestic product (GDP),compared to a deficit of 2.7% in 2011. The monetary situation was characterised by a fall in net external assets(NEA) and an increase in domestic credit. Inflation, which should reach 3% (compared with 2.9% in 2011), canbe explained by electricity price increases as well as the impact of flooding on harvest stocks. With a 32.6%share of exports, oil remains the main export. Estimates based on 2012 first-quarter performances indicate thatseveral external balances will remain in deficit. The debt level remains manageable, with a ratio of public debtstock/GDP of around 16.7%.

Cameroon has abundant natural resources. However, revenues obtained from the exploitation of theseresources, and from oil in particular, have not been sufficiently channeled into structural investments ininfrastructure and the productive sectors. The decline of the agricultural and forestry sectors in the country’seconomic structure over the past decade attests to this. Recently, the State has undertaken steps aimed atreviving the productive sectors, particularly by strengthening infrastructure. While efforts to maintainmacroeconomic stability are continued, poor governance persists and impedes the optimal use of publicresources for the country’s socio-economic development.

Figure 1: Real GDP growth 2013 (Central)


Real GDP growth (%) Central Africa - Real GDP growth (%) Africa - Real GDP growth (%)

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20140%

2.5%

5%

7.5%

10%

12.5%

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%)

http://dx.doi.org/10.1787/888932805042

Cameroon

Sections

The economy bounced back in 2012, stimulated by the recovery in the oil sector and strong domesticdemand, which was in turn driven by investments in infrastructure. This trend should continue in 2013 and2014.

Relative macroeconomic stability could be undermined by the maintenance of subsidies on oil products.

Despite ongoing social policies, Millennium Development Goal (MDG) indicators highlight the scale ofchallenges to be met against a background of strong population pressure.

Overview

The rebound in the economy initiated following the 2008/09 financial crisis continued in 2012, with growthestimated at 4.9%, versus 4.1% in 2011. Supported by higher oil production and strong domestic demand tiedto the launch of large infrastructure projects, this positive performance should continue in the 2013-14 period.

In 2012, budgetary policy remained expansive with increased investment spending and spending on subsidies.According to estimates, the budget balance should remain in deficit, at 3.5% of gross domestic product (GDP),compared to a deficit of 2.7% in 2011. The monetary situation was characterised by a fall in net external assets(NEA) and an increase in domestic credit. Inflation, which should reach 3% (compared with 2.9% in 2011), canbe explained by electricity price increases as well as the impact of flooding on harvest stocks. With a 32.6%share of exports, oil remains the main export. Estimates based on 2012 first-quarter performances indicate thatseveral external balances will remain in deficit. The debt level remains manageable, with a ratio of public debtstock/GDP of around 16.7%.

Cameroon has abundant natural resources. However, revenues obtained from the exploitation of theseresources, and from oil in particular, have not been sufficiently channeled into structural investments ininfrastructure and the productive sectors. The decline of the agricultural and forestry sectors in the country’seconomic structure over the past decade attests to this. Recently, the State has undertaken steps aimed atreviving the productive sectors, particularly by strengthening infrastructure. While efforts to maintainmacroeconomic stability are continued, poor governance persists and impedes the optimal use of publicresources for the country’s socio-economic development.




2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20140%

2.5%

5%

7.5%

10%

12.5%

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2011 2012 2013 2014

Real GDP growth 4.1 4.9 5 5.2

Real GDP per capita growth 1.9 2.8 2.9 3

CPI inflation 2.9 3 3 3





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techniques), the optimisation of production facilities and the development of the Kribi gas power plant.However, 2012 was marked by events that negatively impacted on growth. The agricultural sector stagnatedwith floods in the North of the country resulting in crop losses. Rice paddy and sorghum stocks were partlydamaged and seedlings and cultivated areas were literally swallowed up (cotton, onion, rice, and sorghum). Theeffect of this bad weather was compounded by external developments including the contraction in globaldemand for raw materials linked to the ongoing sovereign debt crisis in the euro area and falling prices forCameroon’s key raw materials exports (wood, rubber, coffee, cocoa and cotton) due to geopolitical tensions. Inaddition, net external demand continued to exert a negative effect on growth in 2012 due to a deterioration inthe exchange rate (-7.5%) and a rise in imports, particularly in equipment necessary for large public works.To consolidate gains since 2010, when the Growth and Employment Strategy was launched (and continued inthe 2010-20 Growth and Employment Strategy Paper, GESP), Cameroon maintained its investment programmein the energy, transportation, telecommunications and manufacturing sectors. Initiatives included: i) the pavingof roads, notably on the Djoum-Mintom-Congolese border (233 km), Fumban-Magba trunk (66 km), Ekok-Mamfe(73 km), and Garoua Boulaï-Ngaoundéré trunks; ii) the construction of the gas fired plant at Kribi and hydroelectrical dams at Mekin, Lom Pangar and Memve’ele; iii) the extension of the fibre optic network; iv) theconstruction of 10 000 low cost housing units; and v) the construction of a new cement works in Douala.Thus, with the help of these projects and their effect on domestic demand, the economic recovery begun in2010 should be sustained over the 2013-14 period. The extractive industries should grow, with: the Kribi gasplant scheduled to be operational in the first quarter of 2013 contributing an additional 216 MW to the country’selectricity supply; private investment to exploit the Mbalam gas well and the gas fields from Logbaba to Douala(212 billion cubic metres of gas and almost 4.2 million barrels of condensates); and the start of production ofnew oil wells, which will boost extraction volumes. These investments should represent 21.9% of GDP in 2013and 22.9% in 2014 and these combined factors should enable Cameroon to reach 5% growth in 2013 and 5.2%in 2014. Following mixed results during the first two years of the 2010-2020 development strategy, the countryis edging towards the 5.5% targeted growth rate.In the short to medium term, certain factors risk impacting growth projections for 2013 and 2014. These includethe ongoing crisis in Europe and possible delays to public construction projects due to poor absorption capacitiesattributable to administrative deficiencies. The country’s growth also remains vulnerable to climatic shocks, asdemonstrated by the 2012 floods, and to volatility in world prices for primary raw materials.Over the 2013-14 period however, the rise in oil production combined with the gradual decline in imports ofequipment and the completion of a number of large construction projects in the transportation and electricitysectors, should offset these risks.According to estimates, inflation should level at 3% in 2012, up slightly from the 2.9% recorded in 2011. This isdue to higher prices for food and non-alcoholic drinks, higher electricity prices and the effects of the floods thatdamaged harvests.

http://dx.doi.org/10.1787/888932809013

Recent Developments & Prospects

Table 2: GDP by Sector (percentage of GDP)

2007 2011

Agriculture, forestry & fishing - -

Agriculture, hunting, forestry, fishing 22.9 23.6

Construction 3.3 5.7

Electricity, gas and water 1.1 1

Electricity, water and sanitation - -

Extractions - -

Finance, insurance and social solidarity - -

Finance, real estate and business services 10.4 10.9

General government services - -

Gross domestic product at basic prices / factor cost 100 100

Manufacturing 14.9 14.5

Mining 10.6 8.3

Other services 1.1 1.2

Public Administration & Personal Services - -

Public Administration, Education, Health & Social Work, Community, Social & Personal Services 7.3 8.2

Public administration, education, health & social work, community, social & personal services - -

Social services - -

Transport, storage and communication 21.9 19.5

Transportation, communication & information - -

Wholesale and retail trade, hotels and restaurants 6.6 7.1

Wholesale, retail trade and real estate ownership - -

The economic recovery begun after the 2008/09 financial crisis continued in 2012, with an estimated growthrate of 4.9%, up from 4.1% in 2011. This performance is attributable to both a rise in oil production (+9.7%,compared to -7.3% in 2011) and strong domestic demand linked to the start of large infrastructure projects. In2012, private sector activity boosted internal demand by 6.5%, up from just 5.3% in 2011.Through the supply of goods and services for various projects, the effect of this increased demand was feltthroughout the economy. The recovery has boosted the growth of the non-oil sector, estimated at 5% in 2012,and of agriculture (+4.1%), agro food (+3.6%), construction (+11.2%), as well as transportation andtelecommunications (+8.8%).This momentum should be sustained in 2013. The national hydrocarbons society (Société nationale deshydrocarbures, SNH) should benefit from new oil fields coming into activity, particularly at Dissoni, which couldboost production by 17 000 to 20 000 barrels per day (bpd). This will bring production from its current level of63 000 bpd to 90 000 or 100 000 bpd. Growth should also be boosted by the drilling of new mines in theDouala/Kribi-Campo basin, the reopening of certain mines in the Rio del Rey basin (thanks to new extraction


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techniques), the optimisation of production facilities and the development of the Kribi gas power plant.However, 2012 was marked by events that negatively impacted on growth. The agricultural sector stagnatedwith floods in the North of the country resulting in crop losses. Rice paddy and sorghum stocks were partlydamaged and seedlings and cultivated areas were literally swallowed up (cotton, onion, rice, and sorghum). Theeffect of this bad weather was compounded by external developments including the contraction in globaldemand for raw materials linked to the ongoing sovereign debt crisis in the euro area and falling prices forCameroon’s key raw materials exports (wood, rubber, coffee, cocoa and cotton) due to geopolitical tensions. Inaddition, net external demand continued to exert a negative effect on growth in 2012 due to a deterioration inthe exchange rate (-7.5%) and a rise in imports, particularly in equipment necessary for large public works.To consolidate gains since 2010, when the Growth and Employment Strategy was launched (and continued inthe 2010-20 Growth and Employment Strategy Paper, GESP), Cameroon maintained its investment programmein the energy, transportation, telecommunications and manufacturing sectors. Initiatives included: i) the pavingof roads, notably on the Djoum-Mintom-Congolese border (233 km), Fumban-Magba trunk (66 km), Ekok-Mamfe(73 km), and Garoua Boulaï-Ngaoundéré trunks; ii) the construction of the gas fired plant at Kribi and hydroelectrical dams at Mekin, Lom Pangar and Memve’ele; iii) the extension of the fibre optic network; iv) theconstruction of 10 000 low cost housing units; and v) the construction of a new cement works in Douala.Thus, with the help of these projects and their effect on domestic demand, the economic recovery begun in2010 should be sustained over the 2013-14 period. The extractive industries should grow, with: the Kribi gasplant scheduled to be operational in the first quarter of 2013 contributing an additional 216 MW to the country’selectricity supply; private investment to exploit the Mbalam gas well and the gas fields from Logbaba to Douala(212 billion cubic metres of gas and almost 4.2 million barrels of condensates); and the start of production ofnew oil wells, which will boost extraction volumes. These investments should represent 21.9% of GDP in 2013and 22.9% in 2014 and these combined factors should enable Cameroon to reach 5% growth in 2013 and 5.2%in 2014. Following mixed results during the first two years of the 2010-2020 development strategy, the countryis edging towards the 5.5% targeted growth rate.In the short to medium term, certain factors risk impacting growth projections for 2013 and 2014. These includethe ongoing crisis in Europe and possible delays to public construction projects due to poor absorption capacitiesattributable to administrative deficiencies. The country’s growth also remains vulnerable to climatic shocks, asdemonstrated by the 2012 floods, and to volatility in world prices for primary raw materials.Over the 2013-14 period however, the rise in oil production combined with the gradual decline in imports ofequipment and the completion of a number of large construction projects in the transportation and electricitysectors, should offset these risks.According to estimates, inflation should level at 3% in 2012, up slightly from the 2.9% recorded in 2011. This isdue to higher prices for food and non-alcoholic drinks, higher electricity prices and the effects of the floods thatdamaged harvests.


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Table 3: Public Finances 2013 (percentage of GDP)

2009 2010 2011 2012 2013 2014

Total revenue and grants 17.4 16.6 17.9 18 17.6 17.5

Tax revenue 10.6 10.3 11 11.1 11 11

Oil revenue - - - - - -

Grants 0.8 0.6 0.5 0.5 0.4 0.4

Total expenditure and net lending (a) 17.5 17.7 20.7 21.5 21.5 21.7

Current expenditure 13.5 13.8 14.6 15.2 15.1 15.1

Excluding interest 13.2 13.5 14.2 14.8 14.7 14.6

Wages and salaries 5.7 5.4 5.5 5.7 5.8 5.8

Interest 0.3 0.3 0.4 0.4 0.5 0.5

Primary balance 0.2 -0.8 -2.4 -3.1 -3.4 -3.7

Overall balance -0.1 -1.1 -2.7 -3.5 -3.9 -4.2


Monetary Policy

Cameroon is part of the Central African Economic and Monetary Community (CEMAC). As such, its monetarypolicy is determined by the Bank of Central African States (BEAC), which prioritises controlling inflation andmaintaining parity between the CFA franc and euro.

Over the 2011-12 period, the country experienced a fall in net external assets and a rise in domestic credit. Netexternal assets declined by 12.6% in 2012 over the previous year, affected by the coverage of primary goodsimports and fuel. Credits to the economy recorded an 11.3% increase in 2012, due to higher commitments fromthe private sector (up XAF 232.5 billion) and non-financial sector public companies (up XAF 14.6 billion) to thebanking system. Also affecting domestic credit were the participation of banks in financing the construction ofthe Kribi gas power plant, the modernisation and increase in production capacities at SONARA, as well as thenumerous loans obtained by companies sub-contracted on structural projects.

Money mass declined slightly by 0.1%, going from XAF 2 703.3 billion in 2011 to XAF 2 701.5 billion in 2012.Deposits fell by 2.1%, while currency in circulation rose by 10.2%. The relative share of deposits in money masswent from 83.7% to 82.1% over the same period, reflecting increased national savings. This development inmoney supply is accompanied by a 3% increase in consumer prices, which still conforms to the convergencecriteria and multilateral surveillance programme of the CEMAC zone. Lastly, it should be noted that in 2012,Cameroon drew on reserves rather than resorting to monetary financing of its deficit.

Economic Cooperation, Regional Integration & Trade

By virtue of its geographic position and diversified economy, Cameroon is the motor of regional trade in centralAfrica, particularly in the CEMAC zone. This is belied by statistics for the decade to 2010 as the Cameroonianeconomy accounted for almost 40% of GDP in the zone, 16.8% of exports and 38.8% of imports and more than44% of money supply. According to the central bank, the leading trade partner for Cameroon in the CEMACzone is Equatorial Guinea, with 30% of trade, followed by Chad (27%), Congo (25%), Gabon (11%) and CentralAfrican Republic (7%). Cameroon exports primarily food products, meat, mineral water, fruit juices, palm oil,iron and steel to the region. It imports crude oil, cigarettes, and liquefied gas (originating primarily in EquatorialGuinea). Aside from crude oil, Congo is the leading partner for Cameroon in the CEMAC zone, with 41% oftrade. It is followed by Gabon (20%), Equatorial Guinea (16%), Chad (15%) and Central African Republic (8%).Despite the volume of these exchanges, numerous barriers persist that compromise full use of this tradepotential.

Macroeconomic Policy

Fiscal Policy

In 2012, budgetary policy remained expansive with large expenditures linked to subsidies and infrastructureprojects. Budget execution was marked by a strong rise in income (+9.6%) over the previous year. This resultwas due to increased oil revenues (+10.5%) and tax collection efforts (+8.4%). In total, income accounted for18% of GDP in 2012, up from 17.9% in 2011. Transfers and subsidies continued to rise, specifically driven by oilproducts and capital expenditure (linked to the public investment plan). In parallel to controlling currentspending in 2012, budget execution progressed in reversing previous tendencies of poor investment absorption.Thus in 2012, the budgetary execution rate for spending reached around 89.2% of forecasts, compared with86.2% in 2011. The adoption of the budget programme should strengthen strategic tools (the medium termbudget framework and the medium term spending framework) already present in a large number of ministerialdepartments.

The State significantly increased resources allocated to current expenditure and to petrol subsidies. Thesereached XAF 662 billion (CFA franc BEAC), or more than 1 billion euros in 2012, compared with XAF 550 billionin 2011. They should rise to XAF 689 billion in 2013. Alone, subsidies and transfers consumed more than 27% oftotal income and 26% of total spending during the 2012 budget exercise. Throughout the previous budgetperiod, these ratios were 24% and 22%, respectively. Capital expenditure accounted for 32% of income and31% of spending in 2012, unchanged from 2011.

In light of the country’s weak infrastructure as well as delays built up over the years, investment ratios morethan comply with GESP goals. This rhythm should be sustained over the 2013-4 period, with an average of 35%for income and 31% for spending. However, this rise in investment spending should have been accompanied bya gradual increase in spending on maintaining existing infrastructure – which is not currently the case.

The trend in terms of subsidies and transfers is worrying. Indeed, petrol subsidies and the continued taxexemption status of food imports weigh heavily on public finances. In addition, the subsidies on petrol productshave led to large arrears being accumulated with SONARA, the national oil refining company, and in turn, to thecompany’s high debt with national banks. Beyond the high opportunity cost in terms of investment, thesemeasures provoke questions about their sustainability in regards to public finances and their efficiency incombatting poverty. The government should urgently consider introducing more targeted social protection nets(such as public transportation subsidies) and other direct assistance to low-income individuals.

The 2013 budget law maintained this focus on supporting consumption and purchasing power, particularly forcash crop farmers. It also continued incentives for importers of goods of mass consumption (rice, wheat, fish,cement, etc.).

The sole measures currently undertaken by the government to overturn this trend focus on promoting localproduction. This is the case, for example, of programmes to revive rice production, which will benefit fromJapanese, Chinese and Indian aid, projects to develop intensive aquaculture, as well as aid to improve fishingand fish conserving facilities.

While better fiscal mobilisation in 2012 enabled the public investment programme to be reinforced, the impactof food imports tax exemptions and petrol pump price subsidies continued to make budgetary management lessefficient. The budget balance should deteriorate during the 2012 period, with a deficit of 3.5% of GDP,compared to 2.7% in 2011. In light of this situation, the State raised external financing (of XAF 49 billion), issuedTreasury bonds (XAF 50 billion) and drained XAF 41 billion from central bank reserves.

If this trend in spending continues (subsidies and transfers), the budget deficit could exceed 3% over the 2013-14 period, save for a significant increase in oil revenues.


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2009 2010 2011 2012 2013 2014

Total revenue and grants 17.4 16.6 17.9 18 17.6 17.5

Tax revenue 10.6 10.3 11 11.1 11 11


Grants 0.8 0.6 0.5 0.5 0.4 0.4





Interest 0.3 0.3 0.4 0.4 0.5 0.5

Primary balance 0.2 -0.8 -2.4 -3.1 -3.4 -3.7

Overall balance -0.1 -1.1 -2.7 -3.5 -3.9 -4.2


Monetary Policy

Cameroon is part of the Central African Economic and Monetary Community (CEMAC). As such, its monetarypolicy is determined by the Bank of Central African States (BEAC), which prioritises controlling inflation andmaintaining parity between the CFA franc and euro.

Over the 2011-12 period, the country experienced a fall in net external assets and a rise in domestic credit. Netexternal assets declined by 12.6% in 2012 over the previous year, affected by the coverage of primary goodsimports and fuel. Credits to the economy recorded an 11.3% increase in 2012, due to higher commitments fromthe private sector (up XAF 232.5 billion) and non-financial sector public companies (up XAF 14.6 billion) to thebanking system. Also affecting domestic credit were the participation of banks in financing the construction ofthe Kribi gas power plant, the modernisation and increase in production capacities at SONARA, as well as thenumerous loans obtained by companies sub-contracted on structural projects.

Money mass declined slightly by 0.1%, going from XAF 2 703.3 billion in 2011 to XAF 2 701.5 billion in 2012.Deposits fell by 2.1%, while currency in circulation rose by 10.2%. The relative share of deposits in money masswent from 83.7% to 82.1% over the same period, reflecting increased national savings. This development inmoney supply is accompanied by a 3% increase in consumer prices, which still conforms to the convergencecriteria and multilateral surveillance programme of the CEMAC zone. Lastly, it should be noted that in 2012,Cameroon drew on reserves rather than resorting to monetary financing of its deficit.


By virtue of its geographic position and diversified economy, Cameroon is the motor of regional trade in centralAfrica, particularly in the CEMAC zone. This is belied by statistics for the decade to 2010 as the Cameroonianeconomy accounted for almost 40% of GDP in the zone, 16.8% of exports and 38.8% of imports and more than44% of money supply. According to the central bank, the leading trade partner for Cameroon in the CEMACzone is Equatorial Guinea, with 30% of trade, followed by Chad (27%), Congo (25%), Gabon (11%) and CentralAfrican Republic (7%). Cameroon exports primarily food products, meat, mineral water, fruit juices, palm oil,iron and steel to the region. It imports crude oil, cigarettes, and liquefied gas (originating primarily in EquatorialGuinea). Aside from crude oil, Congo is the leading partner for Cameroon in the CEMAC zone, with 41% oftrade. It is followed by Gabon (20%), Equatorial Guinea (16%), Chad (15%) and Central African Republic (8%).Despite the volume of these exchanges, numerous barriers persist that compromise full use of this tradepotential.


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on public debt) estimated at XAF 2 970.9 billion, in 2013 the primary balance should represent -3.1% of GDP.The XAF 265.1 billion amortisation of public debt will require XAF 574 billion in financing. This should becovered by foreign grants of XAF 66 billion (of which XAF 43 billion falls under the Debt Reduction-Development Contract), foreign indebtedness (of XAF 258 billion) and domestic credit, through the emission ofXAF 250 billion in public securities.

In terms of sustainability, debt levels will remain manageable between 2013 and 2017. Over this period, theratio of public debt stock/GDP will remain around 16.7% and, even with extremely challenging external shocks,it will not surpass 17.6% - a figure well below the critical threshold of 70% fixed by the CEMAC zoneconvergence criteria. By 2014, the ratio of present value of debt to GDP could reach almost 25%. Althoughthere is no current risk of over indebtedness, the country’s obligations towards developing economies for itsinfrastructure projects are beginning to be significant1 and could, in time, pose a problem for the viability ofits foreign debt.

Figure 2: Stock of total external debt and debt service 2013


Debt/GDP Debt service/Exports

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The Douala free port – which is a hub for foreign trade (95% of customs income and most traffic to Cameroon ishandled by the port) and an access point for neighbouring landlocked countries (Chad and CAR) – suffers from anumber of issues. In the absence of adequate support structures, it has become a holding area and warehousefor a number of organisations, as importers are allowed eleven free days before having to pay storage fees.According to several sources, the one-stop shop for foreign trade (GUCE), which oversees customs clearance,takes up to eight weeks to process shipments. As a result, the port is near-permanently overcrowded. Awaitingthe completion of modernisation works on the Kribi and Limbe ports, the government adopted a number ofmeasures in 2012 including: implementing regulations, publishing performance standards for customs officialsand optimising the management of dock workers. The digitalisation of the GUCE which is under way, shouldfacilitate the execution of port formalities and reduce both delays and costs. In addition and for the purpose ofregional integration, the government is highly involved in installing communications infrastructure. It alsocontributes to the convergence programme for the sub-region and it respects the four criteria imposed onregional states under the multilateral monitoring framework. Lastly, the government fulfils its financialobligations to sub-regional institutions and takes an active role in sub-regional meetings.

During the 2012 budget year, exports were dominated by crude oil (32.6%). Excluding petrol products, theother five leading other exports accounted for 27.3% of the total: unprocessed cocoa beans, cut wood,unprocessed logs, natural rubber and raw cotton. Food products and equipment comprised the majority ofimports. The exemption measures on foodstuffs provoked a phenomenon of re-exports to neighbouringcountries, constituting a risk for the current account balance.

Despite the good performance of world prices of its exports in 2012, Cameroon should continue to post severalexternal deficits (estimates based on first quarter results). The current-account deficit should reach 5.3% of GDPat the end of 2012, versus 4.5% in 2011. The trade-account deficit should similarly become more pronounced,at around 4.4% of GDP, compared to 3.9% in 2011. The current-account balance should remain in deficit in2013, at 5.3% of GDP, due primarily to the trade-account deficit, which should reach 4.7% of GDP.

In terms of economic partnerships, France remains the largest foreign investor in Cameroon, although Chinaappears to be increasingly involved. It is already participating in several projects in the country, particularly intransportation and energy infrastructure. Cameroon has signed an economic partnership agreement (EPA) withthe European Union, which has yet to be ratified. It should be recalled that in September 2011, the EuropeanCommission announced that unless the EPA is ratified before January 2014, the country will be excluded frommarket access regulations. Cameroon must urgently pre-empt the impact of this action on its economy.

Table 4: Current Account 2013 (percentage of GDP)

2004 2009 2010 2011 2012 2013 2014

Trade balance 1 -4.6 -2.7 -3.9 -4.4 -4.7 -5.3

Exports of goods (f.o.b.) 17.6 14.9 16.2 18.3 17.8 16.7 16.2

Imports of goods (f.o.b.) 16.6 19.5 18.9 22.2 22.2 21.4 21.5

Services -5.2 -2.3 -2.3 -0.5 -0.8 -0.5 -0.8

Factor income -3.3 -2 -1.1 -1.1 -0.9 -0.9 -0.8

Current transfers 1 1.2 0.9 1 0.8 0.7 0.7

Current account balance -6.5 -7.7 -5.2 -4.5 -5.3 -5.3 -6.2


Debt Policy

Public debt levels should reach XAF 2 020 billion by 31 December 2012, or 15.6% of GDP, down by 9 billionover 2011. Foreign debt represents 65.4% (XAF 1 321 billion) of the total debt, and domestic debt 34.6%(XAF 700 billion).

With domestic budget revenues estimated at XAF 2 662.2 billion and expenditure (including interest payments

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2004 2009 2010 2011 2012 2013 2014

Trade balance 1 -4.6 -2.7 -3.9 -4.4 -4.7 -5.3



Services -5.2 -2.3 -2.3 -0.5 -0.8 -0.5 -0.8

Factor income -3.3 -2 -1.1 -1.1 -0.9 -0.9 -0.8




Debt Policy




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on public debt) estimated at XAF 2 970.9 billion, in 2013 the primary balance should represent -3.1% of GDP.The XAF 265.1 billion amortisation of public debt will require XAF 574 billion in financing. This should becovered by foreign grants of XAF 66 billion (of which XAF 43 billion falls under the Debt Reduction-Development Contract), foreign indebtedness (of XAF 258 billion) and domestic credit, through the emission ofXAF 250 billion in public securities.

In terms of sustainability, debt levels will remain manageable between 2013 and 2017. Over this period, theratio of public debt stock/GDP will remain around 16.7% and, even with extremely challenging external shocks,it will not surpass 17.6% - a figure well below the critical threshold of 70% fixed by the CEMAC zoneconvergence criteria. By 2014, the ratio of present value of debt to GDP could reach almost 25%. Althoughthere is no current risk of over indebtedness, the country’s obligations towards developing economies for itsinfrastructure projects are beginning to be significant1 and could, in time, pose a problem for the viability ofits foreign debt.




2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20140%

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2004 2009 2010 2011 2012 2013 2014

Trade balance 1 -4.6 -2.7 -3.9 -4.4 -4.7 -5.3



Services -5.2 -2.3 -2.3 -0.5 -0.8 -0.5 -0.8

Factor income -3.3 -2 -1.1 -1.1 -0.9 -0.9 -0.8




Debt Policy




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this summarising activity.

While Cameroon signed up to the Extractive Industries Transparency Initiative (EITI) in 2005, the country isstruggling to raise itself to the level of compliant countries. It runs a risk of being expelled if correctivemeasures are not undertaken before August 2013 – a scenario which could lead to a loss of confidence ininternational donors who support EITI. In May 2012, Cameroon thus adopted a three-year plan that shouldenable it to become compliant by the deadline.

Natural Resource Management & Environment

Located adjacent to Lake Chad and part of the Congo basin, Cameroon is very sensitive to environmental issuesand it has signed numerous international agreements on the subject. The country has several action plans andnational programmes in place aimed at improving management of the environment, forests and fauna and of theforestry sector. Recent floods and their socio-economic impact have also increased awareness of environmentalissues amongst the authorities. The framework law for the environment moreover is in need of revision.

Forestry sector reform has advanced greatly recently. A new code has been drawn up and will be discussed inParliament shortly. The draft provisions reinforce transparency in access to forestry concessions, which will begranted interdepartmentally, with civil society and the private sector participating when concessions are openedup.

In the mining sector, the code has been revised to comply with international standards, particularly in terms oftransparency in granting permits and, more importantly, in obliging mining operators to compensate andmitigate the impact of mining activities.

Lastly, measures have been taken to reinforce synergies between the natural resources sector and othersectors. The management of these resources is thus no longer the prerogative of the ministries in charge offorests and the environment, as interdepartmental management has become more widespread, with civilsociety increasingly involved.

Political Context

The year 2012 was marked by socio-political stability. The President Paul Biya, in power since 1982, was re-elected in October 2011. Under the guidance of the current Prime Minister, Philémon Yang, re-elected to hispost, a new government was appointed in December 2011 with none of the opposition parties included. Theonly noteworthy change concerned the creation of a Public Procurement Ministry.

In April 2012, having been proposed by the government, a law extending the mandate of parliamentarymembers was adopted. The text provides for a renewable six-month extension of the current legislature. Thischange has resulted in the postponing by one year of legislative elections, initially scheduled for 2012.

The ‘Épervier’ plan to improve governance and bring high-ranking officials accused of various forms ofembezzlement to justice has been in operation for several years. It has brought about the arrest and convictionof several political figures. For several observers however, these trials are only the shadow of a battle that willoffer up the possible successors of the current head of state.

Economic & Political Governance

Private Sector

Cameroon’s ranking in the World Bank report Doing Business 2013 – at 161st place out of 185 countries –indicates a long road ahead to improve the business environment. In 2012, the government implemented anumber of reforms, including: i) revising business start up regulations, with a provision for a new 48-hourmaximum delay for procedures with notaries prior to approaching business creation regulation centres (CFCEs);ii) introducing a new procedure for registering with the Registre du commerce et du crédit mobilier, withgreater autonomy given to CFCE agents; iii) reducing by 22% the costs of forming a company in CFCEs; iv) athree-month delay to produce land titles; v) launching a tax centre (CDI) for small companies and reinvigoratingthe fight against contraband, evasion and counterfeits; vi) creating commercial chambers in courts to facilitatethe settling of trade disputes (Law 2011/027 of 14th December 2011), with appointed presidents; vii) continuingto digitalise the judicial system; viii) passing the application texts on the e-commerce law; ix) introducingelectronic payments for customs duties, via an agreement between the banks and the Finance Ministry; x)signing the decree regulating certification; xi) creating a virtual platform between the automated customssystem and the Oscar management system of the container terminal to speed up customs procedures; xii)connecting customs offices nationally to introduce a new trade system; xiii) establishing a review board forapplications for construction permits in the Douala metropolitan area (CUD), which will meet twice monthly;and, xiv) digitalising the system for managing construction permits, which will introduce transparency into thesystem.

Financial Sector

Cameroon’s financial sector continues to be dominated by multi-service banks. Specialist banks (business andinvestment banks) and leasing companies remain absent, which considerably limits long-term borrowingcapacities. In addition, the cost of mobilising resources remains high, even with surplus liquidity in the bankingsystem.

Overall, the sector is healthy, with the exception of two banks (out of a dozen), which have been strugglingsince 2009. They are being restructured, under the supervision of the Central African Banking Commission(COBAC), the CEMAC banking supervision body.

An assessment of the prudential ratios in mid 2012 confirmed this relative solidity: ten banks adhered to liquidityratios, while three had excess liquidity. The CEMAC banking system consolidation programme aims for all banksin the sub-region to bring their minimum capital to XAF 7.5 billion by June 2012 and to XAF 10 billion by30 June 2014. By 30 June 2012, the two weaker banks were struggling to meet to these standards.

The sizeable arrears the State owes to SONARA pose a risk for the Cameroonian financial system, given its highexposure.

Since 2010, the State has had recourse to the bond market and since 2011 the Treasury has issued bonds tocover short-term needs. Over 2011, the State raised XAF 50 billion in bond-equivalent securities with anaverage interest rate of 2.3%. By end June 2012, XAF 55 billion had been raised with an average interest rateof 2.2% - which remains competitive in comparison to the 4% charged on BEAC statutory advances to nationaltreasuries.

Public Sector Management, Institutions & Reform

In 2012, the government undertook two broad measures aimed at increasing the effectiveness of the State’sfinancial management: i) lightening public procurement procedures, notably via the creation of an ad hoc

ministry; and ii) adopting a results-based budget programme which should have been brought into effect on 1st

January 2013. Other advances are of note, such as multiannual commitments for investment spending and thedevelopment of the market for Treasury bonds, which has improved management of the State treasury.

Public administration is highly fragmented, as seen by the large number of ministers. Reforms aimed atdecentralisation are under way with more power being granted to local authorities in order to strengtheninternal co-ordination. The GESP contributes by focusing ministerial departments on a number of strategicpriorities, obliging them to act in line with the strategy.

Efforts to increase transparency have continued, with monthly publications of public finance indicators (calledTABORD). Local public project monitoring committees produce quarterly reports in a number of localities. Areport on the physical and financial execution of the public spending budget summarises both these local reportsand ones on centrally managed projects. All the same, in 2012, a few irregularities came to light in the course ofthis summarising activity.







Political Context





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Political Context





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women received no education, compared with 8% of men.

Disparities between men and women in the working population also exist, as well as high inequality in terms ofproperty ownership. While Ruling 74-1 of 6 July 1974 guarantees that every individual or entity possessing landtitles has the right to benefit from and dispose of them freely, in reality the situation seems less favourable forwomen; they are almost entirely absent from land registers.

Early marriage remains relatively common. At age 15, around 8% of women have already given birth at leastonce, and this proportion accelerates with age so that 55% have given birth before 20 and 83% before 25 (EDS-MICS 2011).

Social Context & Human Development

Building Human Resources

Cameroon appears to be on course to achieve Millennium Development Goal (MDG) 2 on universal primaryeducation by 2015. The gross enrolment rate (GER) has already exceeded the 100% target and the netenrolment rate (NER) is rising, having increased by 8.5% between 2001 and 2010. Other indicators remainbelow target, although they are improving steadily, as is the case for the primary school completion rate (whichreached 73%, versus an 88% target).

Cameroon will clearly find it more difficult to attain MDG 4 pertaining to under-five and infant mortality by thedeadline. Despite all of the components of this indicator exhibiting a falling trend since 2000 (infant mortalityand child-juvenile mortality), progress has not been sufficient. According to data from the 2011 specialdemographic and health survey (EDS-MICS), infant mortality went from 151 per thousand before 1998 to 144per thousand in 2004 then to 122 per thousand in 2011.

Maternal mortality (targeted in MDG 5) has followed a worrying trend over the past decades, with the rategoing from 511 deaths per one hundred thousand live births in 1991 to 782 in 2010. These statistics reflect analarming situation, which should undermine the achievement of this goal by 2015.

On the other hand, efforts to increase access to reproductive healthcare (Target B of MDG 5) form part of a realdrive. Increasingly, a large proportion of women have access to prenatal care, although the situation differsfrom region to region. Broadly, 64% of pregnant women give birth in the presence of a healthcare worker and61% give birth in health clinics (of which 21% are in private establishments). But in 37% of cases, women stillgive birth at home, particularly in rural areas (54%).

The country is trying to reverse the HIV/AIDS prevalence curve. For 15-59 year olds, this went from 0.5% in1987 to 10.8% in 2000 then to 5.5% in 2004, before falling to 4.3% in 2011. Access to healthcare remains aserious challenge. As a result, the MDG 6 target of achieving universal healthcare in 2010 could not be met.

The situation regarding malaria is also worrying and Cameroon will most probably not achieve the related MDG6C target. This disease continues to be the leading cause of morbidity and mortality amongst the mostvulnerable groups, particularly children under five and pregnant women. It is responsible for 24% of all deathsrecorded in healthcare institutions, 40-45% of medical consultations and 30% of hospitalisations (EDS-MICS2011). Tuberculosis remains a scourge with 22 500 new cases recorded on average each year by the Ministry ofPublic Health. It is responsible for a 1% fall in GDP. The resurgence of this disease is linked to both persistentpoverty and the HIV/AIDS pandemic.

Poverty Reduction, Social Protection & Labour

In April 2003, the government adopted a Poverty Reduction Strategy Paper (PRSP) the aim of which is to bringthe incidence of poverty to 25.2% by 2015 (which entails halving the 1996 rate of 53.3%, and with an interimrate of 37.1% in 2007). In order to reach this target, the paper hypothesises on a 7% growth rate per annum forthe period. However, growth has not exceeded 3% to 3.4%. The PRSP, which focuses primarily on prioritysocial sectors, projects bringing the poverty rate down to 28.7% in 2020.

The periodically conducted Cameroon household survey (ECAM) enables the country to monitor povertyindicators regularly. Despite a 13-point fall in the incidence of poverty between 1996 and 2001, between 2001-07 poverty only dropped from 40.2% to 39.9%. As such, progress was slower than expected, with a decline inpoverty of just 0.28%.

The Southwest, West, South and border provinces posted a 30% incidence of poverty, while in the Centre itreached 41% and approached 50% in the Northwest, East and Adamawa. These data also attest that poverty fellin urban areas (-5.7 points) but rose in rural ones (+3 points). As such, the rural poor increased from 85% to89% between 2001 and 2007. The principal determinants of poverty are household size, high fertility, educationlevel and sector of economic activity.

Gender Equality

The attainment of MDG 3 which aims to eliminate gender disparity in education at all levels by 2015 remainsproblematic when analysing the evolution of social indicators. Parity in the gross enrolment rate was 0.86 in2010. The male/female gap in primary and secondary schooling has been reduced significantly, from 4.3% in2001 to 0.6% in 2010. Parity increased significantly at secondary level, with a more pronounced reduction inthe gap between the sexes, of 0.01 and 0.08 for the primary and secondary levels. However, the EDS-MICS2011 survey revealed that less than 69% of women are literate, compared with 82% of men, and that 20% ofwomen received no education, compared with 8% of men.




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will compete strongly with Western multinationals, which traditionally monopolised distribution.

The PACD/PME programme also aims to support the creation and development of small- and medium-sizedenterprises (SMEs) through more efficient processing and conserving of local mass market goods. The Ministryfor Small and Medium Enterprises, the Social Economy and Crafts has been active in this task. Through amultipronged approach of direct and indirect support, the PACD/PME facilitates SME access to technology,finance and essential services (including feasibility studies, incorporation, training, drawing up technicalconstruction plans, and technical and administrative support, etc.).

Regionally, the authorities are also focused on promoting local processing through the creation of the ‘CEMACproduct’ label under the Community Investment Charter. Products originating in the CEMAC are givensubstantial tax advantages over other foreign goods.

Notes

1. According to the Independent Amortisation Fund (Caisse autonome d’amortissement), the body charged withdebt management, this undertaking resulted in new financing agreements being signed in 2011 amounting toXAF 618 billion. Negotiations are underway for nine other projects (airports, roads, water, sanitation, energyand telecommunications), valued at XAF 1 658 billion.

Thematic analysis: Structural transformation and natural resources

The structure of the Cameroonian economy has changed over the past decade, with a relatively large fall in thecontribution of the primary sector to GDP, to the benefit of the tertiary sector. Every sector has experiencedstructural changes: thus, the contribution of agriculture (food or industrial agriculture, livestock, fisheries andforestry) has gradually but drastically diminished, falling from 33% to 17% between 1998/99 and 2012.Inversely, the oil sub-sector rose although to a lesser extent, with a 9% contribution to GDP in 2012, versus 5%at the end of the 1990s. In the service sector, trade, hotels and restaurants experienced major developmentwhile, over the same period, transportation and communication fell significantly.

Cameroon has plentiful natural resources – oil, wood, coffee, cotton, cocoa, rubber and aluminium – which driveexports. It also has enormous untapped potential in natural gas, iron, bauxite and cobalt.

Oil has an important place in the economy: over the past decade, it has represented on average 40% of exportsin terms of value and contributed 25% of budget income. Since the 1994 devaluation and until the recentrecovery of the sector, Cameroon has experienced weak growth, specifically reflecting the gradual depletion ofoil resources. But the sector continues to play an important role in public finances and in the balance of externalaccounts.

Despite the underlying fall in oil production over the past ten years, the price of Cameroonian crude hascontinuously increased (except in 2009), explaining the good performance of oil revenues. Investment spendinghowever was stuck at very low levels, at around 2.8% of GDP until 2006, the date at which the HeavilyIndebted Poor Countries (HIPC) Initiative completion point was reached. Economic growth has increasinglysuffered from the negative performance of transportation, a decline in forestry activities and breakdowns in theenergy sector. Since the 1990s, the falling off of efforts at upkeep, maintenance and expansion of roads, ports,airports and railways became a major factor in the decline in the stock and quality of infrastructure. In energy,this disinvestment led to recurring power cuts and electricity rationing for companies. Lastly, in the forestrysector, formerly the largest source of jobs, a decline in activity has led to the closure of numerous companies.

Given these challenges and thanks to lesser budgetary pressure resulting from debt relief, since 2006 theCameroonian state has committed to a new initiative aimed at upgrading and extending energy, port andtransport infrastructure. It also sought to revive oil production by opening new fields and reopening a numberof wells. Thus 2012 marked the revival of oil production, with an estimated rise of 9.7%. This trend shouldcontinue in 2013, with production expected to grow by 15.6%. Lastly, scheduled liquefied gas production in2015 opens new and important prospects in the hydrocarbon sector.

In an attempt to maximise oil profits, the authorities have concentrated on producing broad regulatory texts,including: i) the mining code; ii) a national investment code; iii) the community investment charter; iv) EITIstandards; and, v) the GESP. The mining code regulates all extractive activity and invested the SNH with thetask of promoting the oil sector. In addition to granting prospecting licences and permits, the SNH must bothattract investors and enjoin them to respect current regulations.

The State does not have a stabilisation fund as such to invest oil and gas revenues in long-term assets. Oilreceipts are generally injected into the overall budget. When a surplus exists, a specific budget line is adoptedor the money is allocated to building up central bank reserves.

Natural resource revenues have not been channelled sufficiently towards structural investments in infrastructureor productive sectors. However, for some time now the State has been involved in a programme to revive theproductive sectors, specifically via strengthening key infrastructure. At the same time, it is attempting toincrease the mobilisation of non-oil resources and thus to improve the budget structure. Overall, while theauthorities have succeeded in maintaining a degree of macroeconomic stability, administrative dysfunctionspersist reflecting governance failings – which hamper the optimal use of public resources towards the country’ssocio-economic development.

Drawn up in 2009, the GESP reflects the government’s ambition to make Cameroon an emerging economy by2035. With this strategy, which amplifies the political will to diversify the economy, the public authorities intendto work towards a deep transformation of the structure of the productive industries. The share of manufacturingin GDP should thus reach at least 23%. This policy also aims at boosting the role of manufacturing products inforeign trade, to the detriment of primary materials. This underlies the importance placed on activities relatingto industrial transformation in general and the extractive industry in particular in the GESP.

Logically, the local transformation of hydrocarbons is key in the country’s investment code. This code clearlystates the multiple advantages – administrative, economic, customs and tax – from which local and foreigncompanies transforming the sector’s products in situ will benefit. The main changes introduced these past yearsfocus primarily on giving local companies access to distribution activities of petrol products. These henceforthwill compete strongly with Western multinationals, which traditionally monopolised distribution.



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will compete strongly with Western multinationals, which traditionally monopolised distribution.



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Central African Republic 2013

Central African Republic 2013


Kalidou Diallo / [email protected]

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2011 2012 2013 2014

Real GDP growth 3.1 3.1 3.2 4.6

Real GDP per capita growth 1.2 1.1 1.3 2.6

CPI inflation 0.7 3.5 2.4 2.9


Current account % GDP -7.2 -7 -5.4 -5.3



2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20140%

2.5%

5%

7.5%

10%

12.5%

Re

al

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P G

row

th (

%)

Central African Republic

Sections

Growth in 2012 (3.1%) was lower than forecast, and the outlook for 2013 and 2014 has deteriorated andbecome highly uncertain since the rebel attacks in December 2012, which led to the fall of François Bozizé’sregime.

Efforts made in the area of public finance enabled the government to conclude an agreement with the IMFin June 2012 and to re-establish relations with the African Development Bank (AfDB) and the World Bank,which had suspended their budget support in late 2010.

Despite having substantial natural resources, the Central African Republic has not yet achieved thestructural transformation needed to create strong, sustainable growth and reduce poverty.

Overview

The increasingly fragile political and security situation has not only worsened the economic outlook for 2013, ithas also made it highly uncertain. Despite the peace deal signed in Libreville on 11 January 2013, resulting in anational unity government, the Seleka rebels launched an offensive on the capital, Bangui, on 22 March 2013,setting up a new regime. Chief rebel Michel Djotodia proclaimed himself president, while former presidentFrançois Bozizé was forced into exile. The events also sparked extensive looting and the destruction of publicand private property in Bangui.

Real gross domestic product (GDP) growth in 2012 was 3.1%, below initial forecasts of 4.2%. The performancewas lower than expected because of bad weather causing a slowdown in agriculture and because of theworsening security situation. A decline in agricultural production and higher prices for petroleum productspushed inflation above the levels that were forecast.

Concerning public finances, efforts to maintain budgetary discipline continued in 2012. These efforts enabled thecountry to re-establish relations with its main development partners. In June 2012, the government signed aneconomic and financial programme with the International Monetary Fund (IMF) through an Extended CreditFacility (ECF). The African Development Bank (AfDB) and the World Bank provided budget support for thereforms, which had been suspended since 2010. However, it is difficult to predict to what extent the economicand financial reforms supported by the country's technical and financial partners will be enforced over the nexttwo years given the current political turmoil.

Social developments such as eradicating extreme poverty, reducing infant mortality and providing access tobasic sanitation remain slow. Some factors did show a marked improvement: the primary-school enrolment rate,promotion of gender equality, the ratio of girls to boys in primary schools and the supply of drinking water.

The Central African Republic has substantial natural resources, but their exploitation has not yet led to thestructural transformation needed for stronger, sustainable growth. Recent encouraging progress in themanagement of natural resources has enabled the Central African Republic to comply with the ExtractiveIndustries Transparency Initiative (EITI). The country’s political fragility, deficient basic infrastructure andprevailing business climate make a structural transformation of the economy very difficult.

Central African Republic

Sections

Growth in 2012 (3.1%) was lower than forecast, and the outlook for 2013 and 2014 has deteriorated andbecome highly uncertain since the rebel attacks in December 2012, which led to the fall of François Bozizé’sregime.

Efforts made in the area of public finance enabled the government to conclude an agreement with the IMFin June 2012 and to re-establish relations with the African Development Bank (AfDB) and the World Bank,which had suspended their budget support in late 2010.

Despite having substantial natural resources, the Central African Republic has not yet achieved thestructural transformation needed to create strong, sustainable growth and reduce poverty.

Overview

The increasingly fragile political and security situation has not only worsened the economic outlook for 2013, ithas also made it highly uncertain. Despite the peace deal signed in Libreville on 11 January 2013, resulting in anational unity government, the Seleka rebels launched an offensive on the capital, Bangui, on 22 March 2013,setting up a new regime. Chief rebel Michel Djotodia proclaimed himself president, while former presidentFrançois Bozizé was forced into exile. The events also sparked extensive looting and the destruction of publicand private property in Bangui.

Real gross domestic product (GDP) growth in 2012 was 3.1%, below initial forecasts of 4.2%. The performancewas lower than expected because of bad weather causing a slowdown in agriculture and because of theworsening security situation. A decline in agricultural production and higher prices for petroleum productspushed inflation above the levels that were forecast.

Concerning public finances, efforts to maintain budgetary discipline continued in 2012. These efforts enabled thecountry to re-establish relations with its main development partners. In June 2012, the government signed aneconomic and financial programme with the International Monetary Fund (IMF) through an Extended CreditFacility (ECF). The African Development Bank (AfDB) and the World Bank provided budget support for thereforms, which had been suspended since 2010. However, it is difficult to predict to what extent the economicand financial reforms supported by the country's technical and financial partners will be enforced over the nexttwo years given the current political turmoil.

Social developments such as eradicating extreme poverty, reducing infant mortality and providing access tobasic sanitation remain slow. Some factors did show a marked improvement: the primary-school enrolment rate,promotion of gender equality, the ratio of girls to boys in primary schools and the supply of drinking water.

The Central African Republic has substantial natural resources, but their exploitation has not yet led to thestructural transformation needed for stronger, sustainable growth. Recent encouraging progress in themanagement of natural resources has enabled the Central African Republic to comply with the ExtractiveIndustries Transparency Initiative (EITI). The country’s political fragility, deficient basic infrastructure andprevailing business climate make a structural transformation of the economy very difficult.


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Current account % GDP -7.2 -7 -5.4 -5.3



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strong growth of 26.3% in non-market services as government activity increased and international co‑operationresumed.The country’s GDP sector composition, dominated by the primary sector, has not changed over the past fewyears. The primary sector contributed more than 50% of GDP in 2012 (food crops alone contributed 28%), thetertiary sector about 30% and the secondary sector nearly 20%.In terms of aggregate demand, growth in 2012 was provided by both public and private consumption and bypublic investment. This situation was mainly thanks to the recovery of external financing through developmentprogrammes and to growing interest from non-traditional investors in the construction and agriculture sectors.External demand improved its contribution to economic growth, but remains marginal.The government achieved its 2012 budget objective of reducing current primary expenditure to 10.9% of GDP.Total expenditure including net lending was 19.2% of GDP. Domestic resource mobilisation, however, was stillvery low. Tax revenue falls far short of being able to cover recurrent spending (9.5% of GDP in 2012). Itremains well below the ratio of most sub-Saharan African countries. Despite measures to improve revenueadministration and efforts to control public expenditure, the budget balance deteriorated. In 2011 there was adeficit of 2.9% of GDP, but in 2012 this expanded to 3.5%.Inflation remained moderate, at 3.5%, albeit higher than the 2011 rate of 0.7%. Inflation was driven up byagriculture’s poor performance and the rise in the prices of imported food. The Central African Republic’scontinued improvement of its macroeconomic management enabled the government to reach an agreement inJune 2012 with the IMF on a three-year economic programme through the ECF. Current transfers increased tohelp improve the current-account balance, reducing the deficit from 7.2% of GDP in 2011 to 7.0% in 2012.The current political climate is likely to hinder the agricultural calendar in 2013, resulting in lower yields. Part ofthe foreign direct investment (FDI) programmed for the mining sector and certain externally funded agriculturaland infrastructure projects could also be affected by political uncertainties. Growth is forecast at less than 3.2%in 2013, and will depend largely on how the political landscape and international climate shape up. Inflation,meanwhile, should dip below the 3.0% regional convergence criterion to 2.5% in 2014. It should be noted thatforecasts for 2013 and 2014 were made before the recent political turmoil and the fall of President FrançoisBozizé.

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Electricity, gas and water 0.9 0.7


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Mining 2.8 2





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Real GDP growth stabilised at 3.1% in 2012, below the initial forecast of 4.2% but equivalent to the rate in2011. Growth did not reach the predicted level because there was a slowdown in the primary and secondarysectors. Primary-sector growth slowed from 6.7% in 2011 to 2.9%, while secondary-sector growth slowed from5.2% in 2011 to 4.1%. Tertiary-sector growth, meanwhile, accelerated from 3.1% in 2011 to 4.8%.The primary sector’s poor performance was due to a decline in food-crop production following the late arrival ofthe rainy season and the worsening security situation during part of the harvest period. Cash-crop exports hadmixed results. Cotton production grew by 10.3%, helped by a project involving Chinese co‑operation, but coffeeproduction fell. Timber – the main export product – performed well in 2012 thanks to lumber production, butnot as well as in 2011.Secondary-sector growth was boosted by the recovery of mining, which grew by 10.7% in 2012. This stronggrowth probably occurred thanks to new mining policies, the revitalisation of support structures andcooperatives and efforts to build the capacities of artisanal miners. The other secondary-sector industries(construction, industry and electricity) grew at least as strongly as in 2011. The tertiary sector benefited from



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maintaining fixed parity between the CFA franc and the euro. It does so by using indirect instruments such asrefinancing and obligatory reserve requirements to control the money supply.

The BEAC’s prudent monetary policy has helped contain inflationary pressures since late 2011. In 2012, the rateof inflation of the consumer price index was slightly above the 3% convergence criterion for member states ofthe Economic and Monetary Community of Central Africa (CEMAC). The inflationary pressures seen in theCentral African Republic were caused by a slight rebound in prices during the final six months of 2011 asimported food became more expensive. Another factor could be a delayed effect of the BEAC’s interest-rate cutto 4% in 2010. The cut caused the volume of credit to the economy to increase, especially short-term loans.

The Central African Republic’s foreign assets continued the downward trend that began in early 2011, thuslimiting the expansion of the money supply.


The country’s trade deficit widened in 2012 from 4.1% to 5.1% as cotton prices collapsed and oil and food pricescontinued to rise. By contrast, the current-account deficit narrowed slightly from 7.2% to 7.0% thanks to a risein the volume of current transfers.

The government continued with its regional integration policy in 2012, implementing the CEMAC Customs Code(Code douanier). CEMAC’s common external tariff is the simple average of the Most Favoured Nation’s (MFN)tariff of the past few years (18.2%), with much higher tariff protection for agricultural goods (22.7%). However,due to the government’s financial difficulties the country obtained an exemption from CEMAC’s GeneralPreferential Tariff (GPT). The Central African Republic therefore grants no preferential tariffs to any country.

By adopting programmes in late 2012 that are better adapted to the regional integration strategy, the CentralAfrican Republic committed to promote regional trade facilitation. The consultation process with Cameroon andChad was revived in 2012 for the institutions affected by traffic in the Bangui-Douala and Ndjamena-Doualacorridors. The asphalting of the Bouar-Ngaroua-Mboulaï road, partly funded by the AfDB, was completed in2012, improving traffic in the Bangui-Douala corridor.

Despite its political commitment and its geographically strategic location in Central Africa, the country does notcapitalise enough on regional integration. Exports to the region grew by only 5.2% between 2003 and 2010; onaverage, exports by other CEMAC countries grew by 13.5% during the same period. This poor performance islargely caused by problems with the transport infrastructure and a poor business climate. Nevertheless, thecountry’s membership in CEMAC has contributed to macroeconomic stability by limiting the negative effects ofexternal shocks.


2004 2009 2010 2011 2012 2013 2014

Trade balance -1.4 -7.2 -8.1 -4.1 -5.1 -4.6 -4.7



Services -5.1 -4.6 -5.7 -5.6 -5.3 -4.8 -4.4

Factor income -1.1 -0.3 -0.2 -0.1 -0.1 -0.1 0

Current transfers 5.8 3.9 4 2.6 3.5 4.2 3.9

Current account balance -1.8 -8.1 -9.9 -7.2 -7 -5.4 -5.3


Debt Policy

The Central African Republic completed the Heavily Indebted Poor Countries (HIPC) Initiative in 2009. As aresult, its public debt was drastically reduced from 80.3% to 35.0% between 2008 in 2009. Fiscal slippages in

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Fiscal Policy

Measures initiated in 2011 to redress public finances continued in 2012. These measures restored normalprocedures for public spending, introduced reforms to simplify the tax system and reorganised financialauthorities to improve tax revenue mobilisation.

Following fiscal slippages in 2011, the government made budget enforcement the cornerstone of its fiscal policyin 2012. It created a budget-management monitoring committee (Comité de suivi de la gestion budgétaire,CSGB) and strengthened the two liquidity monitoring units: the finance ministry’s Commission de suivi de laliquidité (CSL) and the treasury’s Cellule technique de suivi de la liquidité (CTSL). The CSL met regularly toestablish the monthly and annual treasury plans put forward by the CTSL. The CSBG, meanwhile, would meetevery two weeks to monitor revenue collection, disbursements and the use of foreign financial assistance.

The government also continued reforms to improve its domestic revenue mobilisation by simplifying taxlegislation for small- and medium-sized enterprises (SMEs), abolishing the reduced VAT rate and completing thecreation of tax bands. It cut registration fees by half. Finally, in 2012 it completed plans to simplify personalincome tax and adopted them in the 2013 budget. Total government revenue (including grants) represented16.2% of GDP in 2012, up from 14.7% in 2011. This increase was helped by the return of external budgetsupport, which in 2010 and 2011 was suspended. The tax-to-GDP ratio remains below the 12.0% target. In 2012it was 9.9%, up slightly from 9.5% in 2011.

Public expenditure increased in 2012 to 16.2% of GDP, from 15.7% in 2011. This increase was linked to the risein investment expenditure financed by external resources, which in turn was thanks to the resumption ofbudget support from technical and financial partners. Thanks to additional tax revenue and control of currentexpenditure, the overall fiscal balance stabilised at 4.8% of GDP in 2012.


2009 2010 2011 2012 2013 2014

Total revenue and grants 16.1 17.9 14.5 15.7 16.4 16.4

Tax revenue 8.7 9.4 9.4 9.5 9.5 9.4


Grants 5.3 6.3 3.5 4.5 5.3 5.3



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Interest 1.1 1 0.8 0.7 0.5 0.4

Primary balance 1 -0.4 -2.1 -2.8 -2.9 -3

Overall balance -0.1 -1.4 -2.9 -3.5 -3.4 -3.4


Monetary Policy

Monetary policy is determined by the Bank of Central African States (BEAC). The bank’s mission is to issue thecurrency and ensure its stability, set and implement monetary policy for member states, conduct foreign-exchange transactions, hold and manage member states’ foreign-exchange reserves and help the union’spayments system to run smoothly. The BEAC’s monetary policy gives priority to controlling inflation and


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Private Sector

The conditions for the development of the private sector are still difficult. The unattractive business climate, as

evidenced by its position of 185th in the World Bank report Doing Business 2013, hinders private-sectordevelopment. Complex procedures are necessary to start up or shut down a business. Starting a businessrequires an average of eight procedures and takes 22 days. The relative costs, however, have fallen. In 2010 itcost an average of 244.9% of income per capita, but in 2011 it cost an average of 228.4%; this compared with asub-Saharan African average of 95.4%.

The government is seeking to overcome these constraints, but is struggling to produce the desired effects withthe measures it has taken. A one-stop shop was created in 2008 to reduce business start-up costs and simplifyprocedures. A joint committee responsible for improving the business environment was also formed. FDIremains low, however. Economic operators have various hurdles to overcome. The country is isolated,infrastructure is lacking and of poor quality, the judiciary is unstable and there is insufficient dialogue betweengovernment and the private sector.

Financial Sector

Financial intermediation and private-sector development remains superficial. There are few financial institutions,and they are heavily concentrated in the capital, Bangui. Financial-sector assets as a proportion of GDP remainbelow the regional average. More than 90% of the financial system’s consolidated assets are concentrated infour commercial banks. There are two insurance companies (4% of assets) and eleven microfinance institutions(3% of assets).

Measures taken in 2012 to increase the use of banks for paying salaries and business taxes have improvedpeople’s access to banking and financial services, despite expensive fees. Cash machines are rare and the vastmajority are in Bangui.

Despite a rise in the overall volume of credit to the economy in 2012, thanks to private-sector tenders, SMEsstill have little access to finance.

The banking sector’s financial soundness indicators had mixed results in 2012. Two banks had enough net capitalresources to comply with all prudential standards.

Microfinance improved thanks to the Programme d’appui à l’émergence d’un secteur financier inclusif (asupport programme for the emergence of an inclusive financial sector, PAE/SFI), organised by the UnitedNations Development Programme (UNDP) for the period 2008‑12. Five of the eight microfinance institutionsbenefited from the programme, which helped raise the number of branches to 23 in 2012, including 9 in ruralareas. According to UNDP statistics for 2012, the programme benefited 62 000 people, including 23 000 women.The total savings of microfinance institutions in 2012 was USD 13 million, while total lending wasUSD 4.5 million. The portfolio at risk of the microcredit institutions was estimated at 18‑20% in 2012.


A weak institutional capacity and structural deficiencies hinder the country’s economic and social development.Public-sector management improved in 2012, enabling the country to reconnect with its technical and financialpartners to receive budget support and to create an economic programme with the IMF in June 2012. However,despite this progress the Central African Republic is still faced with major challenges, as underlined by theresults of the first review of the IMF programme in November 2012.

The IMF mission found that the government had made significant efforts to strengthen public financemanagement, particularly the monitoring of treasury transactions. It also noted that several governmentrevenue mobilisation goals had been achieved. However, there were still problems with controlling theexpenditure chain caused by the use of exceptional payment procedures. Budget priorities are ignored,including spending on poverty reduction and the ceiling for the reduction of domestic payment arrears.


In March 2011, the country became compliant with the EITI just two years after being admitted as a candidatecountry. About 70% of the population use wells or waterholes. This figure is higher than average for similarfragile states. The wells and waterholes are in such a poor state that they rarely provide drinking water. Abouta quarter of the waterholes are not working, and the rest serve an average of 1 500 to 2 000 people each. Thisfigure is far higher than the government’s target of 300 people per waterhole.

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2010 and 2011 forced the government to borrow again to finance infrastructure projects. Public debt thus roseto 42% of GDP in 2011, well above the projected target of 27% for 2010 set in the IMF and World Bank’s DebtSustainability Analysis (DSA). Despite its growing debt, the Central African Republic is classed as having “lowerdebt vulnerability and a lower capacity” with regard to the IMF’s debt limits.




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Private Sector

The conditions for the development of the private sector are still difficult. The unattractive business climate, as

evidenced by its position of 185th in the World Bank report Doing Business 2013, hinders private-sectordevelopment. Complex procedures are necessary to start up or shut down a business. Starting a businessrequires an average of eight procedures and takes 22 days. The relative costs, however, have fallen. In 2010 itcost an average of 244.9% of income per capita, but in 2011 it cost an average of 228.4%; this compared with asub-Saharan African average of 95.4%.

The government is seeking to overcome these constraints, but is struggling to produce the desired effects withthe measures it has taken. A one-stop shop was created in 2008 to reduce business start-up costs and simplifyprocedures. A joint committee responsible for improving the business environment was also formed. FDIremains low, however. Economic operators have various hurdles to overcome. The country is isolated,infrastructure is lacking and of poor quality, the judiciary is unstable and there is insufficient dialogue betweengovernment and the private sector.

Financial Sector

Financial intermediation and private-sector development remains superficial. There are few financial institutions,and they are heavily concentrated in the capital, Bangui. Financial-sector assets as a proportion of GDP remainbelow the regional average. More than 90% of the financial system’s consolidated assets are concentrated infour commercial banks. There are two insurance companies (4% of assets) and eleven microfinance institutions(3% of assets).

Measures taken in 2012 to increase the use of banks for paying salaries and business taxes have improvedpeople’s access to banking and financial services, despite expensive fees. Cash machines are rare and the vastmajority are in Bangui.

Despite a rise in the overall volume of credit to the economy in 2012, thanks to private-sector tenders, SMEsstill have little access to finance.

The banking sector’s financial soundness indicators had mixed results in 2012. Two banks had enough net capitalresources to comply with all prudential standards.

Microfinance improved thanks to the Programme d’appui à l’émergence d’un secteur financier inclusif (asupport programme for the emergence of an inclusive financial sector, PAE/SFI), organised by the UnitedNations Development Programme (UNDP) for the period 2008‑12. Five of the eight microfinance institutionsbenefited from the programme, which helped raise the number of branches to 23 in 2012, including 9 in ruralareas. According to UNDP statistics for 2012, the programme benefited 62 000 people, including 23 000 women.The total savings of microfinance institutions in 2012 was USD 13 million, while total lending wasUSD 4.5 million. The portfolio at risk of the microcredit institutions was estimated at 18‑20% in 2012.


A weak institutional capacity and structural deficiencies hinder the country’s economic and social development.Public-sector management improved in 2012, enabling the country to reconnect with its technical and financialpartners to receive budget support and to create an economic programme with the IMF in June 2012. However,despite this progress the Central African Republic is still faced with major challenges, as underlined by theresults of the first review of the IMF programme in November 2012.

The IMF mission found that the government had made significant efforts to strengthen public financemanagement, particularly the monitoring of treasury transactions. It also noted that several governmentrevenue mobilisation goals had been achieved. However, there were still problems with controlling theexpenditure chain caused by the use of exceptional payment procedures. Budget priorities are ignored,including spending on poverty reduction and the ceiling for the reduction of domestic payment arrears.


In March 2011, the country became compliant with the EITI just two years after being admitted as a candidatecountry. About 70% of the population use wells or waterholes. This figure is higher than average for similarfragile states. The wells and waterholes are in such a poor state that they rarely provide drinking water. Abouta quarter of the waterholes are not working, and the rest serve an average of 1 500 to 2 000 people each. Thisfigure is far higher than the government’s target of 300 people per waterhole.


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The Central African Republic remains confronted by the consequences of the multiple political crises that rockedthe country over more than a decade. The country’s Human Development Index improved slightly in recentyears. By 2013 it was 0.345, compared to an average of 0.475 for sub-Saharan Africa, giving it a ranking of

180th out of 187 countries.

The overall analysis of vulnerability and food security carried out by the World Food Programme, the UNDP andthe Food and Agriculture Organization of the United Nations (FAO) shows that in 2011 around 30.0% ofhouseholds in the Central African Republic suffered from food insecurity. Malnutrition is still endemic throughoutthe country and is particularly rife in the mining towns of the south-west (Carnot, Nola and Berberati), whereunder-five malnutrition stands at 16.0%. The proportion of children under five who are underweight isincreasing and now stands at 28.3%. A huge 68.2% of infants under 36 months have vitamin A deficiency and84.0% are anaemic. Furthermore, armed conflict and insecurity, with 250 000 displaced persons in the north-west regions, have increased food insecurity. Malnutrition remains the cause of more than half of deaths ofchildren aged under five. Malaria affects 22.0% of the population and 32.0% of children under five.

Because it is unlikely to achieve the Millennium Development Goals (MDGs) by 2015, the Central AfricanRepublic made a commitment to implement the MDG Acceleration Framework, as certain other sub-SaharanAfrican countries have. With this new strategy, each country chooses a particular target and focuses itsresources on that target. The Central African Republic chose the target of halving the proportion of peoplesuffering from hunger by 2015.

One of the priorities of the Poverty Reduction Strategy Paper (PRSP 2) for 2011‑15 is education. Publicexpenditure on education increased from less than 10% in 2007 to almost 40% by 2011. The mid-term reviewof the MDGs at the end of 2010 showed that the primary-school enrolment rate had improved drastically. Thepreschool enrolment rate improved from 5% in 2005 to more than 8% in 2011, with nine girls for every tenboys. The gross enrolment rate also improved from 74% in 2007 to 91% between 2010 and 2011.

The SNSE education strategy (Stratégie nationale du secteur de l’éducation) was developed and implementedin 2009 with the aim of building and developing the country’s human resources. The government committed toprogressively allocating significant shares of the operating budget, with the figure reaching 23% by 2020.


The country has adopted most of the necessary laws to comply with the fundamental conventions of theInternational Labour Organization, but most of the laws are not enforced. Trade unions defend the interests ofworkers but have few members. The Central African Republic has also legislated against child labour and infavour of the employment of people with disabilities, but the laws are rarely enforced.

The labour market is dominated by private-sector jobs, with relatively few public-sector and parastatal-sectorjobs. Government policy on employment is conducted by the Agence centrafricaine pour la formationprofessionnelle et l’emploi (ACFPE). After passing new legislation aimed at improving the institutionalframework of the civil service (including the November 2008 law on the institutional and legal framework ofpublic enterprises and public office), the government passed a law on its status in August 2009.

In the private sector, companies do not fully implement labour legislation because the informal sector is so largeand because they have little capacity to hire staff following the destruction of capital and material goods duringthe conflicts. The Labour Code (Code du travail), which was published in 2012, is currently being disseminated.Labour market regulations still discourage the creation of jobs in the formal sector and fail to protect much ofthe workforce. Very little money is spent on programmes for the labour market and very few workers benefitfrom them.

Only a small fraction of the population have social-security coverage: public-sector employees and a fewprivate-sector employees. The risks covered by the programme are limited. Pensions, social benefits andpayments related to workplace accidents and illnesses are not always paid because the social-securityadministration (Office centrafricain de sécurité sociale) has financial difficulties. Private and complementaryinsurance schemes, meanwhile, are almost non-existent. Initiatives aimed at providing microinsurance to peoplewith low incomes and workers in the informal sector began in 2012.

Gender Equality

Gender disparities remain high. The country was ranked 142nd out of 148 countries in the 2013 UNDP Gender

Access to drinking water is far higher in urban areas than in rural areas. Drinking fountains are accessible to 52%of people living in urban areas, but only around 5% of people living in rural areas, where waterholes and handpumps provide 95% of water. Since only 10% of water from wells and waterholes is safe, only 14% of the ruralpopulation have access to safe drinking water, compared with 61% of the urban population. In addition, 43% ofrural households must walk between 30 minutes to an hour to fetch water, compared with 25% of urbanhouseholds.

Political Context

Rebel attacks launched by Seleka (the Sango word for “coalition”, since it is a coalition of armed groups) inDecember 2012 have made the political and security situation very fragile. The attacks led to the fall of FrançoisBozizé’s regime on 22 March 2013. The former president fled to Cameroon. These events occurred despite thepeace deal signed between Bozizé and Seleka on 11 January 2013 in Libreville (Gabon) and the national unitygovernment that was set up. As the rebels began to gain ground, the Economic Community of Central AfricanStates organised a conference in Libreville from 9 to 11 January, inviting all parties involved. The peace dealwas supposed to put an end to hostilities and create a national unity government led by a prime minister fromthe opposition.

The leader of the Seleka coalition, Michel Djotodia, proclaimed himself President of the Republic on 22 Marchand announced the suspension of the 27 November 2004 constitution and the dissolution of the NationalAssembly and the national unity government. He also announced his intent to hold “free and fair elections witheverybody’s help” by 2016. Michel Djotodia has left Prime Minister Nicolas Tiangaye (from the rival party of theformer president) in office. Security has worsened since the rebel offensive. There has been extensive looting,and public and private property has been destroyed, especially in the capital. The cost of the damage is stilldifficult to calculate.

After a decade of armed conflicts, the political changes in 2003 following the military coup that brought GeneralFrançois Bozizé to power led to the signing of various agreements to promote peace, security and theemergence of the rule of law. The new constitution was approved by referendum in 2004 and presidential andparliamentary elections took place in 2005. Several peace agreements were signed between the newgovernment and the former armed groups. These agreements planned for disarming, demobilising andreintegrating former combatants. Political stability gradually returned, and the government restored its relationswith its main development partners.

The political climate became tense after the presidential and parliamentary elections of 2011, the results ofwhich were contested. The opposition refused to be part of the national unity government that was expectedafter the elections. Dialogue and the peace- and security-building process that had been under way for severalyears deteriorated.


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The country has vast natural resources that have not yet been exploited. Only 700 000 of the 15 millionhectares of useful farmland are cultivated. Dense tropical forest covers 34 million hectares, offering greatpotential for forestry. Mineral resources including diamonds, gold, uranium, iron, calcium and copper are just assignificant. These natural resources, however, have not enabled the country to experience economicdevelopment involving structural transformation. Instead, agricultural has continued to focus essentially onsubsistence food crops and unprocessed cash crops for export. The only mineral resources exploited arediamonds and gold, and they have always been mined by artisanal miners. Only the timber industry has begunto process goods, albeit on a small scale.

Political and strategic errors and poor governance have been compounded by the country’s isolation and vastsize. Similarly, mediocre infrastructure, the small domestic market and the weak private business sector allcontribute to the poorly diversified economy. Manufacturing value added per capita (VAM) fell from USD 21 to16 between 1990 and 2010, affected by political unrest. This contributed to the Central African Republic’sclassification as a country in the first phase of industrialisation.

Progress has been made in improving the institutional framework. The mining and forestry codes have beenrevised to adapt them to international standards and foster the processing of natural resources. Measures takenover the past few years enabled the country to become EITI compliant in March 2011 just two years after beingadmitted as a candidate country. The government signed a Voluntary Partnership Agreement on Forest LawEnforcement, Governance and Trade (FLEGT) with the European Union in 2010. It also joined the UnitedNations Collaborative Programme on Reducing Emissions from Deforestation and Forest Degradation inDeveloping Countries (UN-REDD) for the management of the Congo Basin Forest in 2010. In May 2012, thecountry’s parliament passed a law to create an agency to manage forestry resources, the Agence autonome degestion des ressources forestières.

Inequality Index. As is shown in the AfDB’s 2010 report on the Central African Republic’s gender profile, thereare still few women involved in managing and controlling economic resources. Only one in nine MPs and one ineight members of the executive are female.

Access to prenatal and childbirth care and family planning is very limited. Only 44% of births are assisted byqualified health personnel and maternal mortality is estimated at 1 100 per one hundred thousand births. TheCentral African Republic did however ratify the 1979 Convention on the Elimination of All Forms ofDiscrimination against Women (CEDAW) in March 1992 and has incorporated clauses on gender equality in thenational constitution.

Despite this, as the MDG mid-term review conducted in 2010 shows, encouraging progress has been made topromote gender equality. In primary schools, the ratio of girls to boys increased from 0.60 in 2003 to 0.72 in2008. The PRSP 2 stressed the importance of gender in national development programmes based on the 2005PNPEE gender policy (Politique nationale de promotion de l’égalité, de l’équité, et de l’autonomie des femmes).However, despite these measures and the creation of a ministry responsible for gender issues, there areinsufficient resources available.














Gender Equality



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The country has vast natural resources that have not yet been exploited. Only 700 000 of the 15 millionhectares of useful farmland are cultivated. Dense tropical forest covers 34 million hectares, offering greatpotential for forestry. Mineral resources including diamonds, gold, uranium, iron, calcium and copper are just assignificant. These natural resources, however, have not enabled the country to experience economicdevelopment involving structural transformation. Instead, agricultural has continued to focus essentially onsubsistence food crops and unprocessed cash crops for export. The only mineral resources exploited arediamonds and gold, and they have always been mined by artisanal miners. Only the timber industry has begunto process goods, albeit on a small scale.

Political and strategic errors and poor governance have been compounded by the country’s isolation and vastsize. Similarly, mediocre infrastructure, the small domestic market and the weak private business sector allcontribute to the poorly diversified economy. Manufacturing value added per capita (VAM) fell from USD 21 to16 between 1990 and 2010, affected by political unrest. This contributed to the Central African Republic’sclassification as a country in the first phase of industrialisation.

Progress has been made in improving the institutional framework. The mining and forestry codes have beenrevised to adapt them to international standards and foster the processing of natural resources. Measures takenover the past few years enabled the country to become EITI compliant in March 2011 just two years after beingadmitted as a candidate country. The government signed a Voluntary Partnership Agreement on Forest LawEnforcement, Governance and Trade (FLEGT) with the European Union in 2010. It also joined the UnitedNations Collaborative Programme on Reducing Emissions from Deforestation and Forest Degradation inDeveloping Countries (UN-REDD) for the management of the Congo Basin Forest in 2010. In May 2012, thecountry’s parliament passed a law to create an agency to manage forestry resources, the Agence autonome degestion des ressources forestières.


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Chad 2013


Claude N’Kodia / [email protected]


2011 2012 2013 2014


Real GDP per capita growth -1 4.6 4.9 8.9

CPI inflation 2 7 3.1 3.1

Budget balance % GDP 2.4 0.8 0 3.8



Chad

Sections

Economic growth picked up to 7.2% in 2012 (from 1.6% in 2011) and is projected to reach 7.4% in 2013and 11.5% in 2014.

Improvement in the budgetary situation will depend not just on better world oil prices but on thegovernment’s ability to curb its spending, increase the country’s non-oil resources and maintain externalbalances.

Chad needs to take full advantage of its demographic asset – a population of 12 million, growing by morethan 400 000 a year – which will help turn it into an economically emerging country by 2025, in accordancewith the government’s objective.

Overview

Gross domestic product (GDP) grew 7.2% in 2012 and is projected to increase 7.4% in 2013. This growth will bedriven by the buoyancy of the agriculture and oil sectors, largely due to implementation of governmentindustrial, energy and agro-livestock projects. Poor weather affected harvests in 2011 and 2012, pushinginflation up to 7% in 2012. It should drop to 3.1% in 2013.

The projected increase in cotton and especially oil production should boost export revenue over the next fiveyears and could help finance the government’s public investment plan, as part of its strategy to make Chad anemerging economy. However, the funding needed for this investment programme could destabilise governmentspending and impair the medium- and long-term budgetary position.

The budget framework also needs to be greatly improved through a credible strategy of financial reform. Thiseffort would be much helped by Chad reaching the completion point under the Heavily Indebted Poor Countries(HIPC) Initiative (it reached the decision point in 2001), signing a standard programme with the InternationalMonetary Fund (IMF) and diversifying its sources of economic growth by creating value chains in three verypromising sectors: livestock, cotton and gum arabic. Such diversification would generate additional revenue bybroadening the tax base through increased added value and would create jobs in these sectors. It would alsoboost manufacturing, speed up the structural change of the economy and make growth more inclusive.




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Chad

Sections

Economic growth picked up to 7.2% in 2012 (from 1.6% in 2011) and is projected to reach 7.4% in 2013and 11.5% in 2014.

Improvement in the budgetary situation will depend not just on better world oil prices but on thegovernment’s ability to curb its spending, increase the country’s non-oil resources and maintain externalbalances.

Chad needs to take full advantage of its demographic asset – a population of 12 million, growing by morethan 400 000 a year – which will help turn it into an economically emerging country by 2025, in accordancewith the government’s objective.

Overview

Gross domestic product (GDP) grew 7.2% in 2012 and is projected to increase 7.4% in 2013. This growth will bedriven by the buoyancy of the agriculture and oil sectors, largely due to implementation of governmentindustrial, energy and agro-livestock projects. Poor weather affected harvests in 2011 and 2012, pushinginflation up to 7% in 2012. It should drop to 3.1% in 2013.

The projected increase in cotton and especially oil production should boost export revenue over the next fiveyears and could help finance the government’s public investment plan, as part of its strategy to make Chad anemerging economy. However, the funding needed for this investment programme could destabilise governmentspending and impair the medium- and long-term budgetary position.

The budget framework also needs to be greatly improved through a credible strategy of financial reform. Thiseffort would be much helped by Chad reaching the completion point under the Heavily Indebted Poor Countries(HIPC) Initiative (it reached the decision point in 2001), signing a standard programme with the InternationalMonetary Fund (IMF) and diversifying its sources of economic growth by creating value chains in three verypromising sectors: livestock, cotton and gum arabic. Such diversification would generate additional revenue bybroadening the tax base through increased added value and would create jobs in these sectors. It would alsoboost manufacturing, speed up the structural change of the economy and make growth more inclusive.




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2011 2012 2013 2014


Real GDP per capita growth -1 4.6 4.9 8.9

CPI inflation 2 7 3.1 3.1

Budget balance % GDP 2.4 0.8 0 3.8




Cha

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http://dx.doi.org/10.1787/888932809070



2007 2012


Agriculture, hunting, forestry, fishing 21 16.4




Extractions - -






Mining 29.8 28

Other services 0 0




Social services - -





The economy recovered in 2012 from a sharp setback in 2011, growing 7.2% (up from 1.6% in 2011), andshould improve further in 2013 (7.4% growth) and 2014 (11.5%).The primary sector contributed 0.96 percentage points to GDP growth in 2012, mainly livestock, industrialfarming and food-crop farming. Despite heavy flooding, cereals output more than doubled, from 1.66 milliontonnes in 2011/12 to 3.7 million in 2012/13. Government measures to upgrade major farming areas, distributebetter seeds and provide 1 000 tractors around the country helped to increase added value in agriculture.The secondary sector accounted for 3.22 percentage points of GDP growth, thanks to robust manufacturing andconstruction, to expansion of new energy-sector industries such as construction and refining, and to cotton, withthe revival of the state-owned firm Cotontchad. The oil sector contributed less to growth because of a drop inproduction due to geological problems in the Doba Basin field.The services sector contributed 3.02 percentage points of GDP growth and remained a key source of jobs. Thehealthy performance of transport, telecommunications and commerce, as well as civil service hiring, boostedemployment in Chad.


Cha

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Gross fixed capital formation was the main factor underlying the increase in overall demand in 2012, accountingfor 4.9 percentage points of GDP growth. It was driven by overall investment, which rose 7.9% on 2011 (up19% in the oil sector). Final consumption contributed 4.6 percentage points to GDP growth, mainly as a result ofincreased private spending. Where foreign trade is concerned, net external demand detracted from GDPgrowth (-2.3 percentage points).The growth recovery in 2012, after the very poor result of 2011, was expected to continue in 2013. Thechanges and improvements expected in the very short term in the power generation sector and theinauguration of industrial zones will underpin the forecasts for 2013 and 2014, but growth will also depend onthe performance of the oil sector. The government body monitoring this sector (Collège de contrôle et desurveillance des ressources pétrolières) reported in 2012 that output was 41 880 000 barrels, with estimatedreserves of approximately 900 million barrels. The main oilfields are in the southern region of Doba, and the oilis piped 1 070 km out of landlocked Chad to Cameroon.The oil companies operating in Chad are all foreign owned. They include Esso, Chevron, Petronas, Griffiths, theChina National Petroleum Company (CNPC) and Taiwan’s Overseas Petroleum and Investment Corporation.Chad joined the Extractive Industries Transparency Initiative (EITI) in 2007 and became a candidate country inApril 2010. Publication in 2012 of EITI reports for 2007, 2008 and 2009 confirmed that oil revenue was thegovernment’s main source of income: 74% of fiscal revenue in 2007, 81% in 2008 and 49% in 2009. The figurewas about 80% in 2012.Spin-off from the oil sector is potentially a major factor in the country’s economic and industrial growth, but itwill depend on the oil companies’ ability to maintain production levels in coming years. New extraction in thenext two years by the Canadian firm Griffiths should boost output. Substantially increased production by theCNPC in the Bongor region should offset declining output from the country’s first oilfields and make it possibleto export the surplus. Production at the Bongor site, originally set at 20 000 barrels a day, currently rangesfrom 10 000 to 15 000 barrels, all of it handled by the Djermaya refinery that opened in July 2011.


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Keeping the leading rates unchanged in 2012, especially the refinancing rate at 4%, reduced the possibilities forinternal refinancing of the economy by the banks. Prices continued to rise overall due to the poor 2011/12harvests. Inflation averaged 7% over the year, despite control of budget deficits through institutionalmechanisms, overseen by the regional issuing bodies, and Chad’s compliance with a convergence agreementundertaken as part of multilateral monitoring in the Central African Economic and Monetary Community(CEMAC). Two of the franc zone’s four prudential criteria were not met in 2012: inflation below 3% and notaccumulating external and internal arrears. In 2011, only the arrears criterion was not met.


In 2012, the country recorded a trade surplus equivalent to 8.1% of GDP, mainly due to buoyant exports (up4%) and imports that rose only 1.1%. Deficits in the services and factor income balances prevented a significantimprovement in the current account, which showed a deficit of 6.1% of GDP. Export composition was the sameas in 2011, mainly oil (83%), along with livestock, cotton and gum arabic. Imports were largely manufacturedgoods (due to the industrial activity of oil companies) and items related to the public investment programme inthe productive traded sector.

Healthier external accounts in the future will depend on world oil prices and local oil output levels, as well asthe cotton industry’s recovery and the ability of new industries to produce goods to replace imports. Informaltrade, whose shape and extent are not easy to determine, is hampering the growth of formal trade withneighbouring Cameroon, Nigeria, Sudan, Central African Republic and, to a lesser extent, Libya. In order toboost goods traffic between Chad and Cameroon’s port of Douala, which handles 90% of Chad’s imports, themixed permanent transport commission cut the number of customs points to three on the route to Douala inNovember 2012. The government is also trying to boost trade by improving foreign trade data put out bynational, sub-regional and cross-border bodies, and Chad is part of a sub-regional project to link customsadministrations.

The committee of the country’s technical and financial partners conducted a review of foreign development aidand foreign-funded projects and programmes. Its report, which the government used as the basis for its ownassessment of aid, shows that Chad received XAF 2 003 billion from donors between 2008 and 2011.


2004 2009 2010 2011 2012 2013 2014

Trade balance 27.9 0.8 3.6 10.6 8.1 4.2 9.9


Imports of goods (f.o.b.) 21.4 30.3 30.8 26 25.8 26.2 24.7

Services -36.5 -10 -13.8 -12.4 -11.9 -11 -9.7

Factor income -13.3 -7.4 -3.3 -3.3 -4.9 -4.2 -4.2

Current transfers 4.9 7.9 2.9 2.8 2.7 2.1 1.8

Current account balance -17 -8.7 -10.6 -2.3 -6.1 -8.9 -2.1


Debt Policy

Chad’s debt is managed by the national treasury, with support from the research and forecasting department,the national statistics institute (INSEED) and the BEAC. These bodies have served over the past three years asthe technical team for debt viability assessment, with responsibility for monitoring and updating all informationon debt. Each year, along with other government departments involved in public finance management, it draftsa national public debt strategy that is attached to all budget bills presented to parliament.

Chad’s public debt at the end of 2012 was estimated at XAF 1 655 billion, XAF 1 197 billion (72%) of it externaland XAF 458 billion (28%) domestic. Servicing this debt cost 11% of total budget revenue. While no arrears


Fiscal Policy

The primary non-oil budget deficit rose to 19.5% of GDP in 2012 (from 18.8% in 2011), and the overall balance,though positive, fell from 2.4% of GDP to an estimated 0.8%. Budget spending increased from XAF 1 341 billion(CFA francs BEAC) in 2011 to XAF 1 614 billion (XAF 801 billion for investment and XAF 813 billion in currentspending) due a sharp 20.3% rise in overall government spending (22.3% of GDP, compared with 21.9% in2011). New spending on public projects was funded by loans or domestic revenue. The increase in outlay wasalso caused by higher debt service and a 13% increase in civil service pay. Overall budget revenue rose slightlyto about XAF 1 341 billion (from 1 338 billion in 2011), nearly 80% of which (16.1% of GDP) came from oil.

Little non-oil tax revenue was raised in 2012. The non-oil tax burden has been below 10% of GDP for years: in2012 it was only 7.3%; in 2011, 7.4%. The government was obliged to issue a supplementary budget inSeptember 2012, taking into account the low level of non-oil revenue and increased oil revenue during theyear, the increasing cost of state subsidies and transfers (5.3% of GDP), and pre-budget spending, whichamounted roughly to a quarter of government resources in 2012.


2009 2010 2011 2012 2013 2014

Total revenue and grants 14.9 20 24.3 23.1 21.3 23.1

Tax revenue 5.5 5.9 5.1 5.1 5.1 4.8

Oil revenue 6.5 12.7 17.4 16.1 14.5 16.6

Grants - - - - - -

Total expenditure and net lending (a) 22.5 24.2 22 22.3 21.4 19.3


Excluding interest 14 13.8 12 11.8 10.8 9.6

Wages and salaries 4.6 4 4.3 4.2 4.2 3.9

Interest 0.5 0.5 0.6 0.7 0.7 0.6

Primary balance -7.1 -3.6 3 1.5 0.6 4.4

Overall balance -7.6 -4.1 2.4 0.8 0 3.8


Monetary Policy

Adjustment of leading interest rates, required minimum reserves and caps on bank refinancing are the chiefmonetary tools used to control inflation and maintain parity between the euro and the CFA franc in the franczone to which Chad belongs. The franc zone has convertibility between member countries and an unlimitedguarantee by the French treasury to currencies issued by the various regional bodies. Free capital transfers, afixed-rate but adjustable exchange system, centralisation and the pooling of foreign exchange reserves in aspecial “operations account” give the CFA franc international status.

By the end of September 2012, Chad’s net external assets in the operations account of the Bank of CentralAfrican States (BEAC) had increased by 15.5% year-on-year, from XAF 455 billion to more than XAF 499 billion,largely due to better prices for oil exports. Coverage of sight liabilities by net external assets increased from66% to 68.8%. Improvements in these two important indicators in a very tough international economic andfinancial situation help to strengthen the link between the euro and the CFA franc and contribute to themonetary stability of the franc zone. Chad thus boosts respect for the monetary co-operation zone’s operatingprocedures and strengthens its economic and financial resilience.


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2004 2009 2010 2011 2012 2013 2014

Trade balance 27.9 0.8 3.6 10.6 8.1 4.2 9.9



Services -36.5 -10 -13.8 -12.4 -11.9 -11 -9.7

Factor income -13.3 -7.4 -3.3 -3.3 -4.9 -4.2 -4.2




Debt Policy




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Private Sector

The business climate is still an obstacle to private sector growth. Chad ranks 184th out of 185 countries in theWorld Bank report Doing Business 2012/13 for ease of doing business. Four weaknesses highlighted in thereport are starting a business, paying taxes, trading across borders and resolving insolvency (closing a business).The government is trying to improve conditions by setting up one-stop shops in N’Djamena and other cities,reducing the time needed to start a business from 75 days to 3, with a target of 2. Some 3 800 businesses wereset up in 2011, 95% of them very small or sole proprietorships. A total of 1 949 were created between Januaryand September 2012. Few local private firms pay taxes, and hence the burden falls on 7 000 companies liablefor the flat-rate tax (impôt général libératoire – IGL), 810 for the simplified version and only 472 for the fullrate. A mere 250 of these contribute 75% of all revenue from this tax.

The government definitely favours reform, but its strategy is unclear and needs to be reviewed in a number ofareas: several ministries are involved in boosting the private sector, so structural duplication is a problem;employer organisations compete rather than work together; and dialogue between economic players is very

limited. The World Economic Forum’s 2012/13 report Global Competitiveness ranks Chad 95th out of 144countries for labour market flexibility because of serious administrative and legal rigidities.

Financial Sector

Only 12% of the population used banks in 2012 due to poor national coverage by the country’s nine banks. TheGlobal Competitiveness report identified access to credit as the main concern for the business community. Thebanking system remains highly dependent on the public sector, with about 90% of its net banking incomecoming from government contracts.

The sector is not very effective in transforming resources into long-term uses, as 80% of deposits are very shortterm. Any government liquidity crisis is a serious liquidity risk for local banks, exposing them to grave economicconsequences. Government efforts in 2012 to reduce its debts have freed the banks to channel part of theirresources to the private sector. Bank loans increased in 2012 due to the boom in household demand for housingconstruction and work on many public construction projects.


The calmer political scene, gradual expansion of the government’s writ across the country, decentralisationpreparations and a better security situation have all helped the government to protect citizens and privateproperty against crime and violence.

The 2012 Mo Ibrahim Index of African Governance gives Chad a score of 64.7 (out of 100) for national securityin 2011, up from 61.1 in 2010 and 51 in 2009. Major government reforms to improve the business climateinclude setting up a one-stop shop to handle all formalities for starting a business (involving the tax authority,customs, justice and trade ministries, and the social security fund).


Chad faces many ecological threats that could endanger its agricultural potential, increase emigration from thecountryside, aggravate conflicts between crop and livestock farmers, and heighten the risk of food shortagesand poverty. The government has set up a national committee for the environment (HCNE), adopted a nationalenvironmental action plan (PNAE) and implemented a national programme to fight desertification (PAN-LCD)and a national strategy and action plan on biodiversity (SNPA/DB). All land development activities in oilfieldareas have been made subject to environmental impact surveys. The country has ratified the UN FrameworkConvention on Climate Change and the Vienna Convention for the Protection of the Ozone Layer and itsprotocol, as well as conventions on hazardous waste.

There are many grassroots-level initiatives, including very strict rules about felling trees, a national ban onplastic bags and an environmental tax on vehicles according to engine size. Substantial actions have been takento preserve Lake Chad, a major national priority, and others are planned with the support of the AfricanDevelopment Bank. The Bank will be the lead institution at a donor round-table in 2013 on how to preserve thelake. Money raised at the meeting will fund a five-year investment plan for the area.

Political Context

The year 2012 saw local elections, a civil service strike, government efforts to improve governance and settlingof armed conflicts in the sub-region.

have been incurred on the external debt, the government has not used the increased oil revenue over the pastthree years to increase the pace of domestic debt repayment. The current rate of spending and the sensitivityof the debt to variation in oil prices are matters of concern for the donor community and affect the debt in themedium and long terms.




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Trade balance 27.9 0.8 3.6 10.6 8.1 4.2 9.9



Services -36.5 -10 -13.8 -12.4 -11.9 -11 -9.7

Factor income -13.3 -7.4 -3.3 -3.3 -4.9 -4.2 -4.2




Debt Policy




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Private Sector




Financial Sector









Political Context



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The 2013-15 national development plan (PND) is to take over from the national poverty reduction strategies(SNRP 1 and 2), which have managed to improve education. The PND aims to build on their achievements witha human resources development programme. The president has called for 15% of the national budget to go tohealth and 18% to education. However, despite these significant advances and the money raised, these twosectors still face many problems.

Strong regional disparity in access to education is still a major snag. The gross enrolment ratio in 2011 was 95%in southern Chad but only 20% in the north. Completion rates in primary education – 37% at national level (28%for girls) – also differed very widely across the country. Gender-related illiteracy was highly skewed as well,standing at 86% among women and 69% among men in 2011. Illiteracy also varied strongly according to region:45% in N’Djamena, 57% in Mayo-Kebbi Ouest, 97% in Barh El Gazel and 96% around Lake Chad.

These human resource imbalances help explain the country’s middling progress towards meeting the UNMillennium Development Goals (MDGs). Significant advances have been made towards three targets that maybe reached by the 2015 deadline: halving the number of people living on less than a dollar a day, fighting majordiseases and halving the number of people without access to safe water. The other goals and targets will not bereached in time and will need more funding and appropriate sector planning if they are eventually to beachieved.


The latest survey on consumption and the country’s informal sector (ECOSIT 3) showed a poverty rate of 46.7%(down from 55% in 2003), with small farmers and women the main victims. Higher budget revenue andimproved security enabled substantial anti-poverty spending under the SNRP 2 plan. Spending on prioritysectors in 2011 was 62.4% of the overall budget (excluding expenditure for security and debt servicing), whichwas slightly above the plan’s 62.2% target.

The government hired 1 960 people in 2011 to boost its efforts to support priority sectors. Products such ascement, electricity and water were subsidised to help the neediest social categories. The cost of these subsidiesand other transfers granted by the government was estimated at 5.3% of GDP in 2012. However, manydistortions in the distribution and marketing chains for such items may have blunted the real economic andsocial impact of the measures for the poorest.

Gender Equality

Real progress has been made towards expanding opportunities for women, and these efforts should becontinued. Women held 18% of seats in parliament in 2011 (up from 7% in the previous assembly). Chad hassigned conventions such as the African Charter on the Rights and Welfare of the Child, the ConventionEliminating All Forms of Discrimination Against Women and the International Labour Organisation’s Convention182 on the Worst Forms of Child Labour.

The rate of female illiteracy nonetheless remains high (86% in 2011, compared with 69% among men). Womenare under-represented in the civil service, and their advancement is even harder in the formal private sector.They mostly work in agriculture, livestock and fishing (half of all female jobs). This contributes to thepersistence of gender disparity with regard to pay, property and land ownership, setting up businesses andinheritance. The law decrees gender equality in property rights and inheritance but traditional practices favourmen.

Following the 2011 presidential and parliamentary elections, the ruling Mouvement patriotique du salut (MPS)won the local elections held on 21 and 22 January 2012.

The national trade union federation (Union des syndicats du Tchad – UST) called a strike on 17 July 2012 todemand strict application of the November 2011 draft agreement with the government for a general payincrease. All attempts at mediation failed, and the government ended negotiations in November 2012 andcancelled the draft agreement.

The government launched Operation Cobra to fight against poor governance and embezzlement of public funds.The operation has so far yielded some XAF 10 billion for the state.

Chad has been very actively helping to resolve regional conflicts and contributed troops to internationalpeacekeeping forces in the Central African Republic in 2012.


Private Sector




Financial Sector









Political Context



Cha

d



The 2013-15 national development plan (PND) is to take over from the national poverty reduction strategies(SNRP 1 and 2), which have managed to improve education. The PND aims to build on their achievements witha human resources development programme. The president has called for 15% of the national budget to go tohealth and 18% to education. However, despite these significant advances and the money raised, these twosectors still face many problems.

Strong regional disparity in access to education is still a major snag. The gross enrolment ratio in 2011 was 95%in southern Chad but only 20% in the north. Completion rates in primary education – 37% at national level (28%for girls) – also differed very widely across the country. Gender-related illiteracy was highly skewed as well,standing at 86% among women and 69% among men in 2011. Illiteracy also varied strongly according to region:45% in N’Djamena, 57% in Mayo-Kebbi Ouest, 97% in Barh El Gazel and 96% around Lake Chad.

These human resource imbalances help explain the country’s middling progress towards meeting the UNMillennium Development Goals (MDGs). Significant advances have been made towards three targets that maybe reached by the 2015 deadline: halving the number of people living on less than a dollar a day, fighting majordiseases and halving the number of people without access to safe water. The other goals and targets will not bereached in time and will need more funding and appropriate sector planning if they are eventually to beachieved.


The latest survey on consumption and the country’s informal sector (ECOSIT 3) showed a poverty rate of 46.7%(down from 55% in 2003), with small farmers and women the main victims. Higher budget revenue andimproved security enabled substantial anti-poverty spending under the SNRP 2 plan. Spending on prioritysectors in 2011 was 62.4% of the overall budget (excluding expenditure for security and debt servicing), whichwas slightly above the plan’s 62.2% target.

The government hired 1 960 people in 2011 to boost its efforts to support priority sectors. Products such ascement, electricity and water were subsidised to help the neediest social categories. The cost of these subsidiesand other transfers granted by the government was estimated at 5.3% of GDP in 2012. However, manydistortions in the distribution and marketing chains for such items may have blunted the real economic andsocial impact of the measures for the poorest.

Gender Equality

Real progress has been made towards expanding opportunities for women, and these efforts should becontinued. Women held 18% of seats in parliament in 2011 (up from 7% in the previous assembly). Chad hassigned conventions such as the African Charter on the Rights and Welfare of the Child, the ConventionEliminating All Forms of Discrimination Against Women and the International Labour Organisation’s Convention182 on the Worst Forms of Child Labour.

The rate of female illiteracy nonetheless remains high (86% in 2011, compared with 69% among men). Womenare under-represented in the civil service, and their advancement is even harder in the formal private sector.They mostly work in agriculture, livestock and fishing (half of all female jobs). This contributes to thepersistence of gender disparity with regard to pay, property and land ownership, setting up businesses andinheritance. The law decrees gender equality in property rights and inheritance but traditional practices favourmen.


Cha

d


The discovery of oil and its extraction beginning in 2003 have changed the economic direction of Chad, andextractive activity is increasing. The considerable taxes paid by the oil sector have speeded up the country’sgrowth. GDP at current prices doubled between 2003 and 2005, and the country’s annual growth rate averagednearly 8% between 2000 and 2011.

The money collected from the oil industry, along with foreign loans, has been used for priority funding of large-scale investment in the key sectors of infrastructure, hydrocarbons and transport, to build a solid nationaleconomic base, in order make up for 40 years of political instability and wars and to make the economy moreattractive. Another aim of the investment programme is to develop the country’s natural resources throughmajor industrial investment in the traded productive sector. The decision to produce goods in heavy local andregional demand testifies to the government’s keenness to replace imports with factories processing local rawmaterials.

In the oil sector, the main project along these lines was the construction of an oil refinery at Djermaya, inpartnership with China. The refinery, which began operating in July 2011, has a capacity of 1 million tonnes,about twice what is needed to meet local demand. The government owns 40% of the plant and the CNPC 60%.

The development of the cotton sector, which predates that of oil, was accomplished through a sectoral structuredominated by the firm Cotontchad, which played a leading role in ginning, technical help and marketing. Thecotton sector was the mainstay of the economy before oil, earning some 65% of export revenue and employingdirectly or indirectly about a quarter of the population. Its collapse, due to longstanding low world cotton pricesand to the technical, financial and production problems of Cotontchad, prevented consolidation of efforts todevelop it and preserve the economic gains. The government decided in 2012 to invest XAF 5 billion to reviveCotontchad.

Structural transformation through the primary sector, through industrialisation or progress towards a serviceseconomy has been hampered partly by the predominance of agriculture (52% of GDP), which continues toemploy more than half the working-age population. It has low productivity, in contrast to the farm sectors ofother sub-Saharan economies that have changed more substantially. An IMF survey shows that between 1995and 2010 Chad’s overall agricultural productivity grew only 0.8% , compared with 4.5% in Angola, 2.7% inGabon, 5.3% in Niger and 2.3% in Nigeria.

The development of the oil sector, and to a lesser extent the cotton sector, is obstructed as in many developingcountries by small domestic markets and by regional competition, chiefly in refining. Most CEMAC countries nowhave their own refineries, but Chad’s economy has not seen all the spillover effects usually expected from oilprospecting and production. This is particularly true of local outsourcing, because Chad lacks the highly skilledlabour needed in a sector dependent on sophisticated technology. The slow development of the oil and cottonsectors is also due to the way they operate, with the strong government presence in productive traded goodsindustries inevitably causing conflict between market forces and profit-seeking on one hand and social goals onthe other. This situation can make it difficult to make certain hard choices in management and strategic decision-making and can ultimately hamper the running of a company.

One example is the Djarmaya refinery, which opened on 29 June 2011 but temporarily closed on19 January 2012 after a disagreement between the government and its Chinese partner over what price the oilshould be sold for. The dispute was soon solved, and the refinery reopened on 6 February. Such industrialfacilities in which the state has a majority stake will require substantial short-term (and even medium- and long-term) resources if social rather than market considerations prevail in their long-term operation andmaintenance.

Chad’s economy has undergone little structural change, to judge by the development of its two main naturalresources (oil and cotton). Yet this process of value creation is a key instrument for promoting strong anddiversified economic growth in Chad. It could be speeded up through greater attention to market forces, whichwould require a shift in public policies. Private sector support and a good business climate are also vital in orderto take greater advantage of oil and cotton resources.


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Steve Gui-Diby / [email protected] Seraphine Wakana / [email protected]

Léonce Yapo / [email protected]

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2011 2012 2013 2014




Budget balance % GDP -0.4 -6.2 -5.2 -3

Current account % GDP -11.5 -11.1 -11 -9.1



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Sections

GDP growth speeded up in 2012 to 7.2%, from 6.9% in 2011, driven by vigorous performances in mining,trade, agriculture and construction, despite the political situation and lawlessness in the eastern provinces.The economy should continue to expand in 2013 (8.2%) but prospects depend on political stability, bettersecurity in the east and continuing structural reforms.

Efforts to stabilise the macroeconomic framework continue apace thanks to a tight budget policy, thegradual easing of monetary policy and a recovery in export earnings.

The fundamental structure of the economy has changed little in the past 20 years and is still based onmining and agriculture. Government revenue from mining is paltry in the light of the potential. Seriousfood problems for the population reflect low agricultural productivity.

Overview

The economy grew 7.2% in 2012 despite difficult world economic and financial conditions and a worryingdomestic political and security situation. The performance was largely due to extractive industries, trade,agriculture and construction, macroeconomic stability and robust domestic demand. Growth should continue, to8.2% in 2013 and 9.4% in 2014, in the light of world demand for minerals and the major investment in thesector in recent years.

Macroeconomic policy in 2012 aimed to cut inflation, stabilise the exchange rate and boost foreign currencyreserves to ensure greater predictability and help the economy grow. Tight public finance management andeasing of monetary policy are helping to curb inflation better and it fell to 6.4% from 15.4% in 2011. Thecentral bank (BCC) substantially cut its key interest rate from 21% to 6% by the end of 2012 year-on-year toboost credit to the economy. Higher exchange reserves from a resurgence of exports increased coverage ofimports to 8.6 weeks at the end of the year from 7.2 weeks a year earlier.

The turnover tax was replaced by value added tax (VAT) in 2012 to encourage growth. The World Bank report

Doing Business 2013 demoted the DRC one place, from 180th to 181st overall, because of problems in gettingelectricity, protecting investors, paying taxes, trading across borders and enforcing contracts, though someprogress was made in dealing with construction permits, registering property and resolving insolvency. Butprospects are good with the government joining OHADA (the Organisation for the Harmonization of BusinessLaw in Africa).

The country’s poverty contrasts with the huge potential of its natural resources. The social situation remainedfragile in 2012 despite continuing economic growth. Low pay, difficulties in finding work and seriousmalnutrition undermine the health of the population.

The situation was very difficult in North Kivu province at the end of 2012 because of a new rebellion by theMarch 23 Movement (M23) demanding that the government respect agreements it made with the former rebelmovement it succeeded, the Congrès national pour la défense du peuple (CNDP), and contesting violently the2011 general elections. This lawlessness enables minerals to be illegally mined, harms agriculture, movement offood supplies and tax collection in the rebel area, and has delayed the new school year in some places.

The fundamental shape of the economy has not changed much since 1990. Agriculture and extractive industriesare its main pillars accounting for 50% of GDP. Mining tax revenue is paltry. Despite the size of agriculture inGDP, 75% of Congolese do not have enough to eat.


Sections

GDP growth speeded up in 2012 to 7.2%, from 6.9% in 2011, driven by vigorous performances in mining,trade, agriculture and construction, despite the political situation and lawlessness in the eastern provinces.The economy should continue to expand in 2013 (8.2%) but prospects depend on political stability, bettersecurity in the east and continuing structural reforms.

Efforts to stabilise the macroeconomic framework continue apace thanks to a tight budget policy, thegradual easing of monetary policy and a recovery in export earnings.

The fundamental structure of the economy has changed little in the past 20 years and is still based onmining and agriculture. Government revenue from mining is paltry in the light of the potential. Seriousfood problems for the population reflect low agricultural productivity.

Overview

The economy grew 7.2% in 2012 despite difficult world economic and financial conditions and a worryingdomestic political and security situation. The performance was largely due to extractive industries, trade,agriculture and construction, macroeconomic stability and robust domestic demand. Growth should continue, to8.2% in 2013 and 9.4% in 2014, in the light of world demand for minerals and the major investment in thesector in recent years.

Macroeconomic policy in 2012 aimed to cut inflation, stabilise the exchange rate and boost foreign currencyreserves to ensure greater predictability and help the economy grow. Tight public finance management andeasing of monetary policy are helping to curb inflation better and it fell to 6.4% from 15.4% in 2011. Thecentral bank (BCC) substantially cut its key interest rate from 21% to 6% by the end of 2012 year-on-year toboost credit to the economy. Higher exchange reserves from a resurgence of exports increased coverage ofimports to 8.6 weeks at the end of the year from 7.2 weeks a year earlier.

The turnover tax was replaced by value added tax (VAT) in 2012 to encourage growth. The World Bank report

Doing Business 2013 demoted the DRC one place, from 180th to 181st overall, because of problems in gettingelectricity, protecting investors, paying taxes, trading across borders and enforcing contracts, though someprogress was made in dealing with construction permits, registering property and resolving insolvency. Butprospects are good with the government joining OHADA (the Organisation for the Harmonization of BusinessLaw in Africa).

The country’s poverty contrasts with the huge potential of its natural resources. The social situation remainedfragile in 2012 despite continuing economic growth. Low pay, difficulties in finding work and seriousmalnutrition undermine the health of the population.

The situation was very difficult in North Kivu province at the end of 2012 because of a new rebellion by theMarch 23 Movement (M23) demanding that the government respect agreements it made with the former rebelmovement it succeeded, the Congrès national pour la défense du peuple (CNDP), and contesting violently the2011 general elections. This lawlessness enables minerals to be illegally mined, harms agriculture, movement offood supplies and tax collection in the rebel area, and has delayed the new school year in some places.

The fundamental shape of the economy has not changed much since 1990. Agriculture and extractive industriesare its main pillars accounting for 50% of GDP. Mining tax revenue is paltry. Despite the size of agriculture inGDP, 75% of Congolese do not have enough to eat.


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2011 2012 2013 2014




Budget balance % GDP -0.4 -6.2 -5.2 -3

Current account % GDP -11.5 -11.1 -11 -9.1



2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20140%

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2007 2011






Extractions - -






Mining 5.5 8.4

Other services 0 0




Social services - -





The economy remained quite robust in 2012 and grew 7.2%. Better world mineral prices helped extractiveindustries, while exchange rate stability and upgrading roads helped trade to expand. The government’sprogramme of major public works produced another solid performance by the construction sector.Manufacturing and transport were not very significant and the energy sector dampened overall growth.Agriculture is about 40% of GDP, employs 70% of the population and production was up in 2012 due to coffee(+9.2%), logs and sawn wood (+0.1%) and the repair of several agricultural roads. Food crops did slightlybetter thanks to government support for small farmers in recent years (distribution of tractors, fertiliser andimproved seeds). The agricultural drive launched by the government in 2012 should boost the sector over thenext few years. The government is allotting USD 23 million for crops, fisheries and animal production, upkeepof agricultural roads, improving the lives of farmers, especially better access to drinking water.Extractive industries did well because of good world prices and the substantial investment they have attractedin recent years (about USD 2 billion for Tenke Fungurume Mining, USD 1.5 billion for Kamoto Copper Companyand USD 750 million for Metalkol). Output was mixed, with (up to September 2012 year-on-year) increased


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volume of copper (+24.6%), cobalt (+22.27%) and zinc (+5.65%) and a fall in production of diamonds (-6.9%)and oil (-1.1%); Copper output was 500 000 tonnes in 2012 and gold less than a tonne.The drop in industrial diamond production was partly due to exhaustion of detrital deposits by the Bakwangamining company (Miba). The artisanal diamond sector lacks investment and was hit by a new governmentrequirement for deoxidisation before export. The continuing decline in oil output was due to the upgrading ofseveral wells belonging to Perenco but production should increase in coming years when extraction begins inthe potentially oil-bearing zones of Virunga National Park and Lake Albert, which are currently being prospectedby Soco International and Total.Manufacturing only accounted for 2.08 percentage points of growth in 2012 because of outdated equipment,limited capacity to use new technology, the effect of foreign competition and shortage of electricity. The energysector hampered growth slightly (0.01 percentage points) because of the longstanding technical and financialproblems of the national electricity company (SNEL) and water company (Regideso), along with non-payment ofarrears by the government accounting for annual losses of USD 30 million (electricity) and USD 50 million(water).The tertiary sector once again contributed quite substantially to growth in 2012. The expansion of commercewas due to exchange rate stability, better roads and decongestion at the ports of Matadi and Boma. Transportand communications accounted for 3.7 percentage points of GDP growth and telecommunications grew 8.2%due to increased demand after two new operators (Africell and Orange) entered the local market. Some sectorsof transport did less well than in 2011, including railways because of poor-condition rolling stock. The services

sector progressed slightly and the holding of the 14th Francophone Summit boosted hotels. The weakperformance was due to less hotel business in eastern Congo because of fighting, tourism being an importantactivity in North Kivu.Faster growth in 2012 was driven by a good level of investment (51.3% of GDP) and private (31.6%) and publicconsumption (16.3%). Robust private consumption boosted wholesale and retail commerce. The investment rateincreased to 28.2% of GDP (from 20.5% in 2011), with foreign direct investment (FDI) rising to USD 1.62 billion(from USD 1.596 billion), drawn by the extractive industries, basic infrastructure work and growth of privatehousing.The combined effects of investment in the extractive industries in recent years, the new agricultural drive, andof the upgrading of infrastructure (especially introduction of fibre-optic cables) could push overall growth to8.2% in 2013 and 9.4% in 2014. A start to production by new mining firms (Banro, Kibali Gold and Rand Gold)could also stimulate the economy. Copper output should exceed 600 000 tonnes in 2013 and reach about1 million in 2014, while gold production is estimated at 2 tonnes in 2013 and 14 tonnes in 2014. The healthymining sector should boost other parts of the economy.These forecasts depend on world mineral prices and the security situation in the east of the country. Continuedfighting may undermine business confidence and slow down activity because of the pressure of militaryspending on public finances. Poor energy supplies and a resulting timid business climate could underminemacroeconomic stability.


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Monetary Policy

The BCC eased its monetary policy to stimulate the economy in 2012, adjusting liquidity by lowering itsintervention rate from 21% to 6% by the end of 2012 year-on-year to boost credit to the economy but keepingthe bank reserve requirement the same, as well as using treasury notes and buying foreign exchange.

The money supply rose 15%, partly due to net external assets increasing 65.8% over 2011. Net internal assetsfell 11.7% because banks gave less credit to the government. The money supply also grew because of a rise incurrency deposits to CDF 202.6 billion, which resulted in a 68.7% dollarisation rate.

To facilitate dealings in local currency and reduce costs, the BCC issued new banknotes (CDF 1 000, 5 000 and10 000) in July 2012. This was done gradually, to prevent inflation and protect the exchange rate. Annualaverage inflation fell to 6.4% (from 15.4%), mainly due to higher food and energy prices. The exchange ratewas steady, at about CDF 920 to the US dollar.

Inflation should fall further in 2013, to 5.9%. The BCC plans to start forecasting liquidity to improve regulationand begin making adjustments taking into account possible gaps between forecasts and buying of treasury notes.A lower intervention rate is also expected, along with a smaller reserve requirement, to help credit houses andallow them to use the freed-up resources to lend to the economy in local currency. The BCC will also impose adiscrimination coefficient for deposits in Congolese francs and those in foreign currency to encourage domesticsavings in local currency.

To reduce the risk of a systemic crisis in the banking sector caused by a shortage of foreign currency, the BCCwill start to dedollarise the economy in 2013. It will also keep an administered floating exchange rate to reducerate volatility. This will support the level of foreign exchange reserves, currently equivalent to two months ofimports, which is expected to rise to six months by 2016.


The DRC belongs to several sub-regional organisations, including the Southern African Development Community(SADC), the Common Market for Eastern and Southern Africa (COMESA), the Economic Community of CentralAfrican States (ECCAS) and the Economic Community of the Great Lakes Countries (ECGLC), but is not a veryactive member because of its economic, political and institutional instability.

In 2012, it played an active part in the renovation of COMESA’s customs union, which essentially concerned howfar the member states had implemented the union’s main instruments, especially the common tariffnomenclature (CTN), the lists of tariff alignments, and the common external tariff (CET) and customsregulations. The DRC also took part in a SADC council of ministers meeting that discussed the tripartite freetrade zone between COMESA, SADC and the East African Community (EAC) and implementation of the COMESAcustoms union.

The current account still has a structural deficit because of the continuing deficit in the services and factorincome balance. But the current account shortfall improved to 9.2% of GDP in 2012 (from 11.5% in 2011) dueto higher exports. The trade surplus rose to 7.0% of GDP (from 3.2%). Exports in the first half of 2012 weredominated by copper and cobalt (together 88% of the total). Imports were mostly capital goods (63.8%) andconsumer items (20.9%). The export revival was mostly due to increased demand for minerals by emergingcountries and boosted exchange reserves, which were USD 1.5 billion at the end of 2012, the equivalent of 8.6weeks of imports.

Net capital outflow was USD 381.6 million in 2012 (compared with a net inflow of USD 393.1 million in 2011)because of higher portfolio investments abroad. FDI rose to USD 1.62 billion (from 1.59 billion) mainly in theextractive industries. The capital and financial operations account had a surplus of USD 622.6 million because ofmajor transfers to the government (USD 913 million).


Fiscal Policy

Macroeconomic policy in 2012 was in line with the government programme backed by the InternationalMonetary Fund (IMF) which seeks to curb inflation, stabilise the exchange rate and increase foreign currencyreserves. The government made efforts to increase tax revenue and limit spending without harming growth.The central bank (BCC) eased its monetary policy while balancing real flows and money flows to encourageeconomic activity.

The government conducted a very tight budget policy to preserve macroeconomic stability, though did spend tosupport growth. Because some revenue was erratic, it kept strictly to its commitments so as to ensure budgetviability.

Government revenue was 32.4% of GDP, 3.4 percentage points down from 2011 because of non-execution ofbudget support (grants), which was 12.2% of GDP in 2011. This was due to late parliamentary approval of the2012 budget (in June 2012) and post-election political uncertainties. But concerted efforts (introduction of VATand customs reforms) boosted tax revenue by 8.8 percentage points.

The government increased its potential income by limiting tax exemptions, ending tax-breaks for oil, imposing alevy on phone calls, strengthening customs staff and imposing VAT on some common goods hitherto exempted.Dropping tax concessions for oil brought in CDF 70 billion (Congolese francs) and extending the professionalincome tax to all political bodies and all Congolese working in embassies and international organisations raisedCDF 100 billion.

The government did not, however, manage to curb its spending, which was 38.6% of GDP (up from 36.2% in2011) and dominated by wages, recurrent costs and emergency outlays. The emergency spending, linked tofighting in the east, was 15.7% of the total (up from 9.3%). Capital spending was 21.7% of the total (19.5% in2011). The government budgeted USD 23 million for the 2012 crop year to boost the economy. The overallresult was a deficit of 6.1% of GDP (up from a deficit of 0.4% of GDP in 2011).

In 2013, the government aims to increase its capacity to maintain macroeconomic stability and fund itsprogramme of major public works. The budget, based on a medium-term expenditure framework (MTEF),distinguishes central and provincial spending and has been set at CDF 6 973.9 billion, up 4.1% on 2012. As partof dedollarising the economy, the government will make most of its payments in Congolese francs from 2013,including domestic debt reimbursements after certification and negotiation of discounts through securitisation.


2009 2010 2011 2012 2013 2014


Tax revenue 16.8 18.9 23.6 32.4 33.4 33.1


Grants 7.5 14.1 12.2 0 3 5.7




Wages and salaries 6 5.9 6 6.7 9.9 11.8

Interest 5.5 2.2 2.2 2.1 2 1.9

Primary balance 1.3 4.6 1.8 -4.1 -3.2 -1.1

Overall balance -4.2 2.4 -0.4 -6.2 -5.2 -3


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Private Sector

Most firms in the undeveloped private sector are foreign owned, with some low-productivity informalenterprises that are not very profitable. Lack of infrastructure, unreliable energy supply, problems getting creditand a poor business climate slow the country’s growth and reduce the chances of increasing its competitivenessthrough economies of scale.

The government has been thinking about joining OHADA since 2003 to create a better investment climate andseveral studies and training sessions were done. A law authorising membership was not promulgated until 2010and ratification was only in July 2012. Despite efforts to improve the business climate in 2011, the DRC fell one

place in the World Bank report Doing Business 2013, from 180th to 181st overall, because of low scores forgetting electricity, protecting investors, paying taxes, trading across borders and enforcing contracts. But someprogress was made in dealing with construction permits, registering property and resolving insolvency.

The one-stop shop for trade, begun in 2010, is almost operational. The government appealed in 2012 for aprivate firm to run it. The new system may improve the country’s trade ranking in Doing Business as it will leadto cheaper passage through customs and speed up imports and exports by reducing border officialdom.

The government decided in 2012 to abolish some fees payable to the Office congolais de contrôle to facilitateinternational trade. Because of high world food and oil prices, the government abolished several quality controltaxes on imports of cereals and oil products to reduce costs for importers, while at the same time stepping upquality control. It also banned the import of vehicles made before 2002 in an effort to reduce urban pollutionand improve urban transport.

Investors are still discouraged by spasmodic and insufficient electricity supply, political instability andlawlessness. Better access to long-term funding as part of a more integrated and harmonised sub-regionalmarket, along with continuance of the government’s programme of major public works, could much improvethe business climate.

Financial Sector

The sector has 26 credit institutions, one insurance company, about 100 microfinance bodies and a few financialmessaging firms and foreign currency offices. The BCC has cancelled recognition of 10 microfinance institutionsfor not complying with prudential management laws and regulations, so as to keep the sector in a healthy stateand protect savings. The sector will be helped from 2013 by modernisation of two national offices handling risksand payments.

The national microfinance fund (FNM) was set up in 2011 and began operating in 2012 with USD 2.5 millioncapital from the government which (along with some aid donors) gave it more in 2013 so it could effectivelyparticipate in the fight against poverty. The government also backed economic recovery efforts by givingUSD 5 million to the financial development company (SOFIDE), half of what it needed to get back on its feet.

The banking system changed significantly in 2012, with more ATMs, encouraging greater use of cash, and theintroduction of mobile banking, which was a revolution. A nationwide online interbank clearing system speededup local currency transactions. The BCC also began automatic handling of foreign currency payments andincoming and outgoing capital movements to simplify keeping track of the balance of payments.

The banks’ balance sheet total is USD 3.473 billion, with deposits of USD 2.43 billion and credits to the economyof USD 1.418 billion. Despite this progress, the financial sector is still limited in scope because only 2% of thepopulation use banks and people have limited access to their services. Small- and medium-sized enterprises(SMEs) have trouble getting loans, which usually go to a few big companies. More than 60% of bank loans in2012 were short term (less than a year), of which 48.5% were made as overdrafts. Long-term credit, whichsupports growth better, was only 4.6% of the total. Most (95%) were in foreign currency, in which commercialbanks get most of their deposits and which most businesspeople prefer.


The public sector has suffered greatly from the political and institutional instability, which has resulted in badeconomic and financial governance, higher budget deficits and weaker state authority. Along with short-termefforts to stabilise the economy, major structural reforms have begun, including in public services and towardsgood governance to strengthen the rule of law and promote transparency.

Although required by the national constitution, political and administrative decentralisation is going slowly,

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2004 2009 2010 2011 2012 2013 2014

Trade balance 1.2 -5.2 5 3.2 7 4.1 2.2



Services -4.9 -10.5 -14.6 -13 -10.4 -10.4 -9.4

Factor income -4.7 -7 -6.9 -8.1 -11.5 -13.9 -13.2




Debt Policy

The government’s debt is still unsustainable and the risk of excessive debt is high even though the DRC wasgranted substantial external debt relief in 2010 and 2011 under the Heavily Indebted Poor Countries (HIPC)Initiative and the Multilateral Debt Relief Initiative (MDRI). But the size of its domestic arrears and continuedtendencies towards excessive external debt weigh on public finances. External debt increased toUSD 5.59 billion in 2012 (after falling to USD 4.73 billion in 2011).

The budgeted cost of servicing the external debt in 2012 was 1.6% of exports and 4% of government revenuebut was only partly executed. The country had payment arrears by February of more than USD 18 million butthese have now been cleared and steps taken to strengthen debt management. Domestic debt payment arrearsincreased by CDF 163 billion (USD 180 million) between 2011 and 2012.

Co-ordination of debt management and other macroeconomic policies will be crucial to ensure public debt doesnot harm development efforts. It is also essential that the government maintain a cautious borrowing policy toreduce the country’s vulnerability.




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Despite quickening growth, lower inflation and relative monetary stability, the social situation was still worryingin 2012. The country will not achieve any of the Millennium Development Goals (MDG) by the 2015 target date

and the 2012 UN Human Development Index puts it in last place (186th).

Many parents cannot pay their children’s school fees and in North Kivu, some schools did not reopen on timebecause of the lawlessness and fighting. In 2012 the government distributed several textbooks free to pupilsnationwide in the first four years of primary school. But the school dropout rate remains high (4 millionchildren).

The government pledged to renovate schools all around the country under its 2012-16 action programme andextend abolition of all primary school fees to the whole country. It also wants to strengthen technical andvocational education by upgrading, building and equipping classrooms, to update curricula, recycle teachers andturn some secondary schools, especially in rural areas, into technical and vocational training centres. Theinterim education plan (PIE) aims to improve accessibility, equality, the retention rate and the quality andrelevance of teaching. The government wants to increase gross primary enrolment to 110% by 2016, increasethe rate of girls in primary schools to 50%, expand the primary graduation rate to 75% and reduce illiteracy toless than 10%.

The healthcare situation remains worrying because of environmental pollution, substantial malnutrition anddifficult access to safe water, which has allowed typhoid to spread widely. A cholera outbreak in some provincesworsened because of lack of public toilets and 19 276 cases were identified in July 2012 (up from 5 724 in2011). First aid access was a serious problem in some hospitals. Malaria is still the country’s leading killer andincidence of HIV/AIDS remains very high because of prostitution and rape, with sexual relations the leadingcause of transmission (more than 83% of cases).

The government is preparing a road-map for safe water and sanitation for 2012-20 that should give 70% of thepopulation access to it.


Poverty is still widespread (about two-thirds of the population) because of low wages and difficult access to thelabour market. Unemployment tops 50% for both men and women, whatever their qualifications, and the rateof about 30% among young people (under 25) is very worrying.

But the wage bill for civil servants rose 9.48% in 2012 (from CDF 1 096 to 1 200 billion) to meet pay demandsby teachers, magistrates, doctors and other public employees. The 2012 budget increased allocations toeducation by 2% and healthcare by 1.5%.

To improve social protection for workers, the government now requires all employers to subscribe to thenational social security institute (INSS) and the national professional training institute (INPP) and pay them 8.5%of their workers’ monthly salary. It has also given a USD 300 000 monthly subsidy to the healthcare mutual fundfor primary, secondary and vocational teachers (set up in November 2011) that will provide better access tohealthcare for them and their families.

Gender Equality

Women, who are more than half the labour force and produce most of the country’s food, are victims of severalforms of violence. They are still a minority in state institutions (government, parliament and publicadministration), the private sector, trade unions, co-operatives, professional organisations and grassrootsorganisations. They are estimated to occupy fewer than 10% of positions of authority nationwide, including 5%in Kinshasa. A law to promote gender equality was adopted by parliament in April 2011 but has not yet beenpromulgated.

The government organised a workshop in September 2012 on gender equality in higher education, universitiesand scientific research. It aimed to confirm basic understanding of structural gender inequality; publicise latestdata about gender inequality in higher education and research; discuss gender equality relating to recent laws;show how to define gender inequality in universities and how to work effectively towards equality; andintroduce monitoring and assessment tools adapted to various fields.

especially in financial matters because of delays in transferring skills, setting up public finance management toolsin the provinces and training staff. Nomenclature of revenue-generating activity for the central and localgovernment has been completed, but machinery for awarding government contracts in the provinces is not yetfully in place.


Despite its abundant natural resources, the DRC is one of the world’s poorest countries. Tax revenue from themining sector is quite small because of the predominance of small-scale and informal production, along withinstitutional and administrative failings, export fraud and persistence of corruption.

The British non-governmental organisation (NGO) Free Fair DRC reported in 2011 that mining rights had beensold at knockdown prices to fictitious companies mostly based in tax havens such as the British Virgin Islands. Itnamed 59 such firms and put the loss of earnings for the DRC at USD 5.5 billion. This situation led the IMF tosuspend its support for the government’s economic programme.

To combat such misconduct, the World Bank has since 2010 funded with USD 92 million the Promines project toboost the capacity of mining sector management institutions, as well as improve conditions to attract moreinvestment, and increase revenue from mining and the quantity and quality of production.

The government is to revise the mining and oil laws and regulations to include strong rules about transparency,bidding for contracts and the rights of local communities. This should help fight corruption and enable thecountry to get the best possible prices for its natural resources.

Less than 1% of the 2012 budget went to the environment and covered only a very small part of recurrentspending. Investment in the sector has been by foreign aid donors. The national constitution stipulatesdecentralised management of natural resources, but local people are reluctant to take part.

Political Context

The political scene is still marked by arguments about the November 2011 elections which re-elected PresidentJoseph Kabila, as well as by fighting in the east. Some independent observers say the elections were flawed andseveral opposition parties and civil society organisations have called for the results to be cancelled, while othershave suggested dialogue among politicians to calm the situation. These disputes and opposition party splits haveprevented parliament from starting work.

A rebel group, the March 23 Movement (M23), emerged in eastern DRC in 2012 demanding that thegovernment respect agreements it made with the former rebel movement it succeeded, the Congrès nationalpour la défense du peuple (CNDP). The new rebellion set back the progress made in restoring peace to theeastern provinces. Sub-regional and international conciliation efforts have been planned but despiteinternational condemnation of foreign backing for the rebels, fighting goes on and continues to damage the cityof Goma. The political situation in 2013 will depend on the result of ongoing talks between government andrebels.


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Despite quickening growth, lower inflation and relative monetary stability, the social situation was still worryingin 2012. The country will not achieve any of the Millennium Development Goals (MDG) by the 2015 target date

and the 2012 UN Human Development Index puts it in last place (186th).

Many parents cannot pay their children’s school fees and in North Kivu, some schools did not reopen on timebecause of the lawlessness and fighting. In 2012 the government distributed several textbooks free to pupilsnationwide in the first four years of primary school. But the school dropout rate remains high (4 millionchildren).

The government pledged to renovate schools all around the country under its 2012-16 action programme andextend abolition of all primary school fees to the whole country. It also wants to strengthen technical andvocational education by upgrading, building and equipping classrooms, to update curricula, recycle teachers andturn some secondary schools, especially in rural areas, into technical and vocational training centres. Theinterim education plan (PIE) aims to improve accessibility, equality, the retention rate and the quality andrelevance of teaching. The government wants to increase gross primary enrolment to 110% by 2016, increasethe rate of girls in primary schools to 50%, expand the primary graduation rate to 75% and reduce illiteracy toless than 10%.

The healthcare situation remains worrying because of environmental pollution, substantial malnutrition anddifficult access to safe water, which has allowed typhoid to spread widely. A cholera outbreak in some provincesworsened because of lack of public toilets and 19 276 cases were identified in July 2012 (up from 5 724 in2011). First aid access was a serious problem in some hospitals. Malaria is still the country’s leading killer andincidence of HIV/AIDS remains very high because of prostitution and rape, with sexual relations the leadingcause of transmission (more than 83% of cases).

The government is preparing a road-map for safe water and sanitation for 2012-20 that should give 70% of thepopulation access to it.


Poverty is still widespread (about two-thirds of the population) because of low wages and difficult access to thelabour market. Unemployment tops 50% for both men and women, whatever their qualifications, and the rateof about 30% among young people (under 25) is very worrying.

But the wage bill for civil servants rose 9.48% in 2012 (from CDF 1 096 to 1 200 billion) to meet pay demandsby teachers, magistrates, doctors and other public employees. The 2012 budget increased allocations toeducation by 2% and healthcare by 1.5%.

To improve social protection for workers, the government now requires all employers to subscribe to thenational social security institute (INSS) and the national professional training institute (INPP) and pay them 8.5%of their workers’ monthly salary. It has also given a USD 300 000 monthly subsidy to the healthcare mutual fundfor primary, secondary and vocational teachers (set up in November 2011) that will provide better access tohealthcare for them and their families.

Gender Equality

Women, who are more than half the labour force and produce most of the country’s food, are victims of severalforms of violence. They are still a minority in state institutions (government, parliament and publicadministration), the private sector, trade unions, co-operatives, professional organisations and grassrootsorganisations. They are estimated to occupy fewer than 10% of positions of authority nationwide, including 5%in Kinshasa. A law to promote gender equality was adopted by parliament in April 2011 but has not yet beenpromulgated.

The government organised a workshop in September 2012 on gender equality in higher education, universitiesand scientific research. It aimed to confirm basic understanding of structural gender inequality; publicise latestdata about gender inequality in higher education and research; discuss gender equality relating to recent laws;show how to define gender inequality in universities and how to work effectively towards equality; andintroduce monitoring and assessment tools adapted to various fields.


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Agriculture and mining have been the economy’s main pillars since 1960 and still account for about half of GDP(in 2012, agriculture 40% and extractive industries 12%). About 70% of the population live in rural areas anddepend on the two sectors. Export earnings also come chiefly from mining (88% in 2012).

The country has substantial agricultural, oil and mining potential. Its water resources can provide great amountsof electricity and safe water and 60 million of its 100 million hectares of dense tropical forest can be sustainablyused. Its sedimentary basins contain more than 1 100 minerals, including 30% of the world’s diamond reserves,60% of its cobalt and 10% of its copper. These riches have not led to the country’s development but have onthe contrary fed wars between 1990 and 2000, which themselves encouraged fraud and so limited thecontribution of these resources to the economy. About 60% of the minerals mined in eastern DRC are smuggledout and appear in the export statistics of neighbouring countries.

Economic progress between 1967 and 1974 was driven by mining which contributed 12% to GDP and provided40% of government revenue. The sharp fall in copper and cobalt prices after the first oil crisis in 1974 causedthe collapse of the biggest mining firm, Gécamines. In the 1980s, the sector was 25% of GDP, provided 25% oftax revenue and 75% of exports (60% from Gécamines). Two percentage points of the 5.5% drop in GDPbetween 1990 and 2000 were caused by the extractive industries and state mining firms suffered heavy lossesbecause of their bad governance and heavy tax burden. The drop was also due to a hostile environment forprivate firms.

Promulgation in 2002 of new agriculture, forestry and mining laws and regulations amid high world priceshelped persuade several big multinational firms (BHP Billiton, De Beers and Phelps) to set up in the DRC andrevived forestry and mining activity. The 2008-09 world recession caused a big drop in prices of the country’smain exports and thus a big fall in tax revenue. More than 40 mining firms shut down in Katanga province withthe loss of about 300 000 jobs. Mineral prices rose again with the world economic recovery in 2010 and thecountry’s extractive industries revived once more.

Oil exploration and output is still very small because of structural problems that have slowed down reformsneeded for the sector to grow. Results are also poor because of low investment and outdated equipment whichhas led to closing some wells. Production fell between 2010 and 2012 because the firm Perenco was upgradingits equipment, but output should rise in the next few years as potential new oilfields are brought on stream bySoco International (in Virunga National Park) and Total (Lake Albert). Congolese oil is heavy-grade and notrefined much before export and so does not yield much revenue for the government.

The energy sector has performed poorly since 1960 because of the outdated network and equipment of thenational water firm Regideso and electricity company SNEL and their technical and financial problems. Theirequipment is badly maintained and new investment is virtually non-existent. The sector is a drag on growth andvery costly to industry and households. SNEL serves only 10% of the population, service is poor and it cannotmeet demand, with lines in Kinshasa and from Inga to Katanga overloaded. Drinking water supply is steadilygetting worse, with only 46% of the population having access.

The government has sold shares in mining and forestry operations to firms where the structure of themanagement is not clear. It signed contracts in 2008 worth USD 9 billion with a group of Chinese firms grantingmining concessions in exchange for providing basic infrastructure. Gécamines and Sodimico sold their shares infour large mines without making public the details of the deals. These deals are very controversial and someinvolved knockdown prices to owners of firms based in tax-havens whose real identities are hidden. The risk ofembezzlement and loss of revenue is very great and the authorities should ban secret talks with such firms

To promote good management of natural resources, the DRC set up a national committee on the ExtractiveIndustries Transparency Initiative (EITI)) in 2009. Under a UN security and stabilisation support strategy, fiveoffices each offering full national mining services have been set up in North and South Kivu to improvetraceability of products and maintain close links with the mining areas. The government decided in 2012 toreview the mining and oil laws and regulations to make them much more transparent and stricter about biddingfor contracts and protecting local communities. Such measures should combat corruption and help get the bestpossible prices for the country’s natural resources.


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Congo Republic 2013

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Congo Republic 2013


Nouridine Kane Dia / [email protected]

http://dx.doi.org/10.1787/888932805137

http://dx.doi.org/10.1787/888932808120




2011 2012 2013 2014




Budget balance % GDP 16.4 2.4 3.2 2.4

Current account % GDP 0.8 0.3 0.6 -3



2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014-2.5%

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Congo Republic

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The economy should grow a fairly satisfactory 5.1% in 2013 and 5.3% in 2014 (up from 4.9% in 2012) butthis should be seen against the worldwide economic outlook.

Apart from oil, the country has large mineral, forest and natural gas resources and good agriculturalpotential, yet the structure of the economy has not changed much.

More than ever, the government’s public investment programme is needed to diversify the economy andtackle a 44% poverty rate that especially affects young people and women, who both suffer from highunemployment.

Overview

Congo’s economic outlook is still quite good but external factors are a major threat. Gross domestic product(GDP) should grow 5.1% in 2013 and 5.3% in 2014. Apart from oil, the main pillars of growth are forestry,transport and telecommunications, and continued government investment in the public sector. These growthrates will depend on faster reforms and proper management of risks from a deteriorating world economicoutlook, especially lower demand for oil and thus lower prices. This shows how vulnerable the economy is andthe need to diversify it by developing the non-oil private sector.

The reform programme backed by the Extended Credit Facility (ECF) of the International Monetary Fund (IMF)has produced satisfactory results but it must be speeded up. The government’s public finance managementprogramme (Programme d’action gouvernementale de gestion des finances publiques) has had good effectstoo. A law to make management of forestry resources more transparent was passed in 2011. The governmenthas begun implementing an action plan to improve the business climate. Adopted in February 2011, the plancreated a high council for public-private sector dialogue (Haut Conseil du dialogue public-privé) underpresidential supervision and a one-stop shop for registering businesses. These measures, for the first time,enabled satisfactory reviews of all stages of the IMF-backed programme.

Despite this progress, bold reforms are still needed so the country can use its natural resources better todiversify the economy and promote broad long-term growth. Despite fairly satisfactory economic expansion,good prospects for oil, forestry, mining and agriculture and a per capita income of USD 2 300, which makes theRepublic of Congo a lower middle income country, poverty is still high and achieving the MillenniumDevelopment Goals (MDGs) is a big challenge. Unemployment is also high, especially among young people aged15-29. The structure of the economy has changed little and the country is still very dependent on oil (about70% of nominal GDP and 90% of exports). Speeding up reform is thus vital, especially by urgently improvingthe business climate, upgrading infrastructure, developing human resources and boosting good management,especially of natural resources.

Congo Republic

Sections

The economy should grow a fairly satisfactory 5.1% in 2013 and 5.3% in 2014 (up from 4.9% in 2012) butthis should be seen against the worldwide economic outlook.

Apart from oil, the country has large mineral, forest and natural gas resources and good agriculturalpotential, yet the structure of the economy has not changed much.

More than ever, the government’s public investment programme is needed to diversify the economy andtackle a 44% poverty rate that especially affects young people and women, who both suffer from highunemployment.

Overview

Congo’s economic outlook is still quite good but external factors are a major threat. Gross domestic product(GDP) should grow 5.1% in 2013 and 5.3% in 2014. Apart from oil, the main pillars of growth are forestry,transport and telecommunications, and continued government investment in the public sector. These growthrates will depend on faster reforms and proper management of risks from a deteriorating world economicoutlook, especially lower demand for oil and thus lower prices. This shows how vulnerable the economy is andthe need to diversify it by developing the non-oil private sector.

The reform programme backed by the Extended Credit Facility (ECF) of the International Monetary Fund (IMF)has produced satisfactory results but it must be speeded up. The government’s public finance managementprogramme (Programme d’action gouvernementale de gestion des finances publiques) has had good effectstoo. A law to make management of forestry resources more transparent was passed in 2011. The governmenthas begun implementing an action plan to improve the business climate. Adopted in February 2011, the plancreated a high council for public-private sector dialogue (Haut Conseil du dialogue public-privé) underpresidential supervision and a one-stop shop for registering businesses. These measures, for the first time,enabled satisfactory reviews of all stages of the IMF-backed programme.

Despite this progress, bold reforms are still needed so the country can use its natural resources better todiversify the economy and promote broad long-term growth. Despite fairly satisfactory economic expansion,good prospects for oil, forestry, mining and agriculture and a per capita income of USD 2 300, which makes theRepublic of Congo a lower middle income country, poverty is still high and achieving the MillenniumDevelopment Goals (MDGs) is a big challenge. Unemployment is also high, especially among young people aged15-29. The structure of the economy has changed little and the country is still very dependent on oil (about70% of nominal GDP and 90% of exports). Speeding up reform is thus vital, especially by urgently improvingthe business climate, upgrading infrastructure, developing human resources and boosting good management,especially of natural resources.


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http://dx.doi.org/10.1787/888932805137

http://dx.doi.org/10.1787/888932808120




2011 2012 2013 2014




Budget balance % GDP 16.4 2.4 3.2 2.4

Current account % GDP 0.8 0.3 0.6 -3



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2007 2012






Extractions - -






Mining 63.1 65.4

Other services 0 0


Public Administration, Education, Health & Social Work, Community, Social & Personal Services 5 4.4


Social services - -

Transport, storage and communication 5.2 5




The economic recovery begun in 2008 has taken root in recent years. Buoyant forestry, construction andtelecommunications sectors helped the economy grow 3.4% in 2011 and 4.9% in 2012. The economy was alsoboosted by ambitious public investment in energy and transport, which took public investment from 18.3% ofGDP in 2008 to 26.0% in 2012 as inflation was curbed.The cautious regional monetary policy of the Bank of Central African States (BEAC) kept inflation at 5.1%, butthe overall budget surplus (excluding grants) fell from 16.4% of GDP in 2011 to 2.4% in 2012 due to the surgein government spending. The current account surplus was slightly down, from 0.8% of GDP in 2011 to 0.3% in2012, because of a 10% drop in oil production. Debt relief under the Heavily Indebted Poor Countries (HIPC)Initiative and the Multilateral Debt Relief Initiative (MDRI), along with a prudent debt policy, significantlyreduced the external debt and cut the country’s risk of excessive debt from moderate to low.These good economic performances were underpinned by continuing structural reforms as part of the economicand financial programme backed by the IMF’s ECF, which restored macroeconomic stability and maintained theeconomic recovery. Governance improved in the extractive industries, with foreign audits of the national oil


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company (SNPC) and refinery company (CORAF), certification of oil resources, application of a new law onpublic contracts and implementation of the government’s PAAGIP public investment action programme.The country’s economic prospects remain good but risks are high. GDP growth should be 5.1% in 2013 and5.3% in 2014 and mining, forestry, construction and telecommunications are all doing well. Governmentinvestment is also upgrading economic infrastructure. But the flagging world economy, especially with lowerdemand and prices for oil, is a big threat. Other dangers are a slowdown in reforms at the end of the IMFprogramme and political developments in the sub-region.Congo’s main challenge is to use its natural resources better to make the economy strong and diversified. Evenif recent growth seems more balanced, it has not yet been accompanied by significant changes in the structureof an economy that remains dependent on oil, which still provides 70% of GDP, 90% of exports and provides80% of government revenue. This huge dependence makes the country especially vulnerable to external shocksand is a serious obstacle to long-term growth and job creation.Besides oil, Congo has big mining, forestry and natural gas resources that could, if properly developed,transform the economy and bring social and economic development. But this major potential is not much used,as shown by the small primary and secondary sectors. Obstacles to structural change and proper management ofnatural resources include poor-quality infrastructure in energy and transport, an ill-qualified labour force withskills not matched to the country’s needs, especially in key sectors, and vaguely defined property rights.The government aims to step up efforts to build competitive infrastructure so as to boost growth and structuraltransformation based on natural resources. This includes setting up special economic zones (SEZ) backed byseveral emergent countries and creating an investment promotion agency targeting key sectors, establishing adevelopment bank for small- and medium-sized enterprises (SMEs), opening schools and colleges to teach skillsneeded by sectors with strong growth potential, encouraging local processing with subsidies and tax breaks, andspeeding up implementation of the global action plan to improve the business climate.


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Monetary Policy

Monetary and exchange policy still aims to keep prices stable and demand policies in 2012 were generally inline with maintaining internal and external balances. Monetary policy, regionally controlled by the BEAC,continued to be cautious, with the CFA franc BEAC (XAF) pegged to the euro, allowing inflation to be kept to5.1% despite the big public spending increases.

Without a major risk of renewed inflation, the BEAC kept its main intervention rate unchanged (with therefinancing rate at 4%). Overall demand policies did not seem to have “crowded out” the private sector. Loansto the rest of the economy rose 22% and private investment 6% in 2012. Government deposits with thebanking system increased in a context of an expansionist budget policy with an overall surplus.

In the medium term, the BEAC’s monetary policy will continue to aim for price stability. The cautious monetarypolicy of the central bank, like the government’s prudent budget policy, will help keep inflation at 4.2% in 2013and 2.9% in 2014.


Congo’s trade policy is largely determined by its membership of the Central African Economic and MonetaryCommunity (CEMAC), whose customs laws, common external tariff and general preferential tariff regulations itapplies. CEMAC’s tariff nomenclature has four brackets: 5%, 10%, 20% and 30%. The simple mean of the most-favoured-nation tariff is 18.7%, while tariff protection for agricultural products (World Trade Organizationdefinition) is 23%. Congo accepts its obligations under the IMF’s Article VIII about current internationaltransactions. So the tariff regime is fairly transparent and predictable, without formal non-tariff barriers, even iftrading or importing some items, such as mineral water, sugar, flour and rice, is under licence.

Reforms to streamline and modernise procedures to make it easier to implement the CEMAC customs union andconduct regional trade continued in 2012. Customs formalities for most imports are now computerised throughthe Automated System for Customs Data (ASYCUDA), which handles declarations and calculates payments due.A one-stop shop was introduced in 2013 for all payments on imported goods. Despite this progress andsignificant government efforts in the past three years to upgrade the country’s infrastructure, Congo’s record in

ease of trading is mediocre. The World Bank’s 2012 Logistics Performance Index ranked Congo 149 th out of 155

countries overall, 155th for infrastructure and 149th for customs, reflecting the complexity, bureaucracy and costof passing through customs, which is still about a third of the total cost of cross-border trade.

These deficiencies, along with delays in harmonising country policies, especially about transport taxes andcustom procedures, explain the little progress towards trade integration. Less than 7% of Congo’s non-oilexports go to the five other CEMAC member states, who provide only about 3.5% of its total imports. Thecountry’s main trade partners are China, France and the United States. They also supply most of Congo’sforeign direct investment (FDI), which continues to focus on the oil sector (about 90%). Congo is involved intrade talks between CEMAC and the European Union (EU) to reach economic partnership agreements (EPA).


Fiscal Policy

Budget policy is still based on preserving macroeconomic stability and achieving the goals of the poverty-reduction strategy (PRS) but was significantly harmed by the 2012 supplementary budget. The governmentcontinued its bold public investment programme to improve infrastructure and public services (70% of it fundedby domestic sources), raising such spending by about 70% in 2012 to 26% of GDP. This sharp rise was due toextra spending related to the 4 March 2012 explosion at a military ammunition dump at Mpila, near Brazzaville,that officially killed at least 280 people, injured more than 2 500 and caused heavy material damage.

Most investment spending went to housing construction (77%), with 4% for education and healthcare. Good oilprices kept the budget position healthy but the surplus (on a commitment basis, excluding grants) shrank to2.4% of GDP (from 16.4% in 2011). Higher government spending was also not matched by increased capacity,which limited public services and quality of spending. Boosting the capacity of key ministries to choose, draftand carry out projects will be crucial in making public investment significantly more effective.

The government continued its reform of the tax system through simplification and better collection, especiallyof non-oil revenue. All exemptions unsupported by law were abolished and a minimum 5% duty was imposedon oil transactions. A system of assigning taxpayers a single identification number is now being used, taxbrackets have been harmonised and the system streamlined. All this increased the non-oil sector’s share of GDPfrom 8.0% in 2010 to 8.9% in 2012. But tax collection is still below par and major improvement in the taxadministration will be needed to reduce fraud and evasion which, with exemptions, are the main cause of lownon-oil revenue.

Budget policy in 2013 is focused on meeting the targets of the growth, employment and poverty-reductionstrategy paper (DSCERP), rebuilding areas devastated by the March 2012 explosion and looking after thoseaffected. The budget includes significantly higher spending on investment and to help the poor. Greater publicspending will benefit basic education, skills training, healthcare, energy, transport, public works and housing. Toincrease the impact of public spending on growth and poverty reduction, the government will continue toimplement the PAAGIP, with a focus on boosting capacity for assessing, choosing and carrying out projects.

The world economic slowdown, which may reduce forecast oil revenue, could undermine budget execution in2013. But the country’s sizeable foreign exchange reserves and the adjustment machinery in the budget givethe government plenty of room to absorb external shocks from erratic oil prices. Some of the oil revenuedeposited in a BEAC stabilisation account can also be used when the oil price falls below the projected budgetprice.


2009 2010 2011 2012 2013 2014


Tax revenue 9.1 7.9 8.4 8.8 9.2 9.4

Oil revenue 22.7 30 33.5 33.4 34.6 36.2

Grants - - - - - -


Current expenditure 15.2 11.6 10.2 12 13.6 14.6

Excluding interest 13.5 10.6 10 11.8 13.4 14.4

Wages and salaries 4.3 3.1 3 3.1 3.4 3.4

Interest 1.8 1 0.2 0.2 0.2 0.1

Primary balance 7 17.3 16.6 2.5 3.3 2.5

Overall balance 5.3 16.3 16.4 2.4 3.2 2.4


http://dx.doi.org/10.1787/888932810096

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Trade balance 53 45.2 52.9 48.9 41.1 37.8 35.4



Services -17.6 -22.9 -22 -19.5 -17.8 -16 -17

Factor income -20.4 -29.9 -25.2 -28.6 -23.2 -21.4 -21.6

Current transfers -0.5 -0.5 -0.6 -0.1 0.2 0.2 0.2

Current account balance 14.5 -8.1 5.2 0.8 0.3 0.6 -3


Debt Policy

Debt relief under the HIPC Initiative and MDRI, along with a cautious debt policy, has enabled the governmentto significantly reduce the country’s external public debt to 21.9% of GDP in 2012 (from 59.3% in 2008) andpreserve its long-term sustainability. The risk of excessive debt has also been reduced from moderate to low.An IMF and World Bank debt viability study in 2011 showed that the reasons for and nature of the debt wererobust enough to withstand most shocks because of sizeable liquid assets that would avoid the need to seekexternal loans. More than 70% of public investment is funded domestically and soft loans are the rule. Theinternal public debt was 2.6% of GDP in 2012 (and 11.5% of total public debt), comprising commercial debt tothe private sector as well as salary and pension arrears in restructured state firms being cleared by thegovernment.

The legal framework for public debt management stipulates that the ministry of the economy, finance, planning,state firms and integration (MEFPI) is the only body authorised to contract debts for the government and issuedebt guarantees. MEFPI’s sinking fund (Caisse congolaise d’amortissement) is in charge of managing the publicdebt. Great progress has been made expanding data on the debt and its management. The CCA collectscomplete statistics about the government’s foreign debt, including arrears and their composition, makes detailedprojections of interest payments, and gathers data on the internal debt, with the help of a computerised debt-management system (DMFAS). The finance ministry posts a quarterly statement of the external debt and debtservice projections on its website. But the CCA’s analytical capacity needs to be strengthened and its staff bettertrained.


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partly explains Congo’s position in the 9th percentile for “government effectiveness” in the World Bank’s WorldGovernance Indicators.

The authorities continue to implement key reforms in public finance management to build on progress alreadymade. Transparency in oil resources management improved with quarterly foreign audits and posting ofverification reports on the finance ministry’s website. Efforts have also been made to strengthen obligatoryreporting of public finance management, but much more needs to be done here. Boosting the court of auditorsand the inspectorate-general of finance enabled the clearing of the backlog in drafting and adopting paymentlaws. As in other countries, the 2011 payments law was sent to parliament in October 2012 at the same time asthe 2013 budget. After a difficult start, a law on public procurement passed in 2009 is now fully operational andlimits unauthorised actions. More than 80% of public contracts worth more than XAF 250 million are subject tobidding. The government’s reform programme now concentrates on choosing, prioritising and carrying outinvestment projects. The authorities have also started reforming the civil service, including introduction of anew merit-based pay scale.

Big challenges remain however. Management of the national oil company (SNPC) needs to be upgraded and itsfinancial arrangements with producers and the national treasury clarified and made more transparent. Quality ofdata about extractive resources must be improved to conform with standards of the Extractive IndustriesTransparency Initiative (EITI). Internal and external monitoring is hampered by weak institutional and technicalcapacity of inspection bodies and their inadequate funding. Monitoring government action, the obligation toreport on public finance management, and monitoring the use of public resources by parliament and civil society

are also obstructed by poor-quality financial data. Congo ranks 144th out of 176 countries in TransparencyInternational’s 2012 Corruption Perceptions Index, with a score of just 0.26.


National legislation on the environment and forestry sector is fairly extensive and includes regulations aboutforestry, land ownership, fauna and protected areas. The environmental protection law is being revised toinclude guarantees for the economic, ecological and social sustainability of natural resources and take account ofnew environmental problems. The government has drafted new regulations to assess environmental impact andalso signed with the EU a voluntary partnership agreement to implement the EU’s Forest Law Enforcement,Governance and Trade (FLEGT) action plan, which guarantees the legality of all Congo’s wood exports.

The government also launched in 2011 a national reforestation programme (PRONAR) to plant a millionhectares of forest by 2020 to curb deforestation and soil degradation. Congo joined the Global Gas FlaringReduction (GGFR) partnership in June 2012 as part of efforts to improve energy efficiency and reduce emissionsrelated to oil production. Congo is backed by the UN Programme on Reducing Emissions from Deforestation andForest Degradation (UN-REDD) to develop its potential and get funding for this environmental initiative.Ministries involved in managing natural areas and resources have sectoral policies to help sustainably manageforest ecosystems but implementation suffers from lack of money and staff. So efforts are still needed to applylaws and regulations.

Political Context

Parliamentary elections in July and August 2012 were won by the ruling party but few people voted and noofficial turnout figures were released. The vote was marred by late opening of polling stations, late andinadequate supply of equipment to some of them and poorly trained vote-counting personnel. But internationalobservers said the voting was free, transparent and credible. The ruling party retained its majority, with morethan 80% of the 139 seats, but the opposition, which only won 19 seats, said the results were rigged. A coalitionof 18 opposition parties appealed to the president on 29 October to convene a national conference as the onlyway to solve the country’s problems, but he did not officially respond.

Police used tear gas in March 2012 to disperse hundreds of victims of an ammunition dump explosion nearBrazzaville who protested against slowness and corruption in the government’s payment of compensation.Lawyers went on strike a month later to protest against the arrest of two colleagues accused of underminingstate security in connection with the blast. In September, the press council (Conseil supérieur de la liberté decommunication, CSLC) suspended two weekly newspapers, La Voix du peuple (for nine months) and Le Glaive(six months). La Voix du peuple had defied a six-month suspension imposed by a court in May and Le Glaive wasaccused of printing “false news, seriously invading people’s privacy and manipulating public opinion”.


Private Sector

Efforts have been made to improve the business climate but rules about starting a business and closing it downare still complicated and costly. Procedures for starting one were simplified as part of the 2012 budget andbusiness people will now only pay one fee to get all the documents needed for this. The trader’s licence andauthorisations to operate, transfer and expand business activity are all now free of charge.

Important steps have also been taken under the government’s global action plan to improve the businessclimate (adopted in February 2011), including a one-stop shop to register new firms, handbooks on commercialarbitration and strengthening the capacity of judges and legal officials to handle commercial law. Despite this

progress, the country’s ranking in the World Bank report Doing Business 2013 (183rd out of 185 countries)

reflects serious obstacles, especially to starting up and closing down a business. The country ranks 180th for easeof starting a business, with 161 days needed to do so (compared with an average of 34 in sub-Saharan Africa).

Progress has been made with incorporating the laws of OHADA (African Business Law HarmonisationOrganisation), but judicial unreliability is a major obstacle. The Doing Business report says it takes 3.3 years tolegally close down a business in Congo and enforcing contracts involves 44 procedures over 560 days and costs53.2% of the claim. Abolishing all fees and charges not stipulated by law, such as the many dues required to get

goods through customs, pushed Congo up two places (from 184th to 182nd) in the ranking for ease of payingtaxes, but the low score shows how far the country still has to go.

The cost of labour is not a big problem for the private sector but hiring and firing costs, as well as non-salarycharges, are quite high considering the quality of skills available.

Land ownership is quite unrestricted but formalisation and transfer of property deeds is long and costly and one

of the major constraints in getting financial backing. The country is 156th in the Doing Business ranking for easeof registering property, with 55 days needed and costing the equivalent of 21.3% of the value of the property.

Financial Sector

The financial system is fairly solid and quite resistant to external shocks in the medium term, but stillundeveloped. Congolese banks largely comply with the CEMAC prudential ratios. Despite a substantial increasein credit activity, non-performing loans are only 1.1% of the total, compared with an average 9% amongCEMAC member states. The minimum capital required for banks to guard against risks is less than 10% of assets.The sector’s robustness is partly due to better prudential monitoring by the Central African Banking Commission(COBAC).

Despite the increase in the number of banks from four in 2007 to nine in 2012 and the potential for large-scalefunding of the economy, financial intermediation is low. The M2/GDP ratio was 37% in 2012 and total bankassets were 21% of GDP. The financial markets in Douala (Cameroon) and Libreville (Gabon) are also verysmall. Microfinance has not yet really taken off and is dominated by MUCODEC, which has more than 40branches and 250 000 customers and deposits of around XAF 95 billion (about 90% of all microfinance assets).

The insurance sector, which is still quite small compared to that of most countries adhering to the Inter-AfricanConference on Insurance Markets (CIMA), comprises five companies, led by the state-owned ARC (Assuranceset réassurances du Congo). This weak presence explains the difficult access to financial services, an especiallybig problem for SMEs, only 17% of which have loans or credit lines. Less than 5% of the population have a bank

account. Congo fell seven places (from 97th to 104th) in the Doing Business 2013 report for access to credit.Data about loans made, costs and defaults has improved as the role of the central accounting and creditauthorities has been strengthened. The legal and regulatory framework for financial services, largely set byregional financial institutions, is adequate but implementation still needs to be improved, especially bymonitoring microfinance institutions better.


Creation of the national anti-poverty committee to fight poverty (CNLP), backed by key ministries, and settingup a permanent technical secretariat for the PRS, helped with drafting and implementing policies. In the lastcabinet reshuffle in September 2012, the economy, finance and planning ministries were merged into a singleone (MEFPI) to boost policy co‑ordination and supervision. This should also improve drafting of policy and thebudget. But overlapping responsibilities, ill-defined administrative roles, failure to respect clearly set division ofauthority and poor co‑ordination all seriously hampered implementation of strategies and sectoral policies andthe ability of public services to react. This was exacerbated by low capacities and failure to share information. It


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partly explains Congo’s position in the 9th percentile for “government effectiveness” in the World Bank’s WorldGovernance Indicators.

The authorities continue to implement key reforms in public finance management to build on progress alreadymade. Transparency in oil resources management improved with quarterly foreign audits and posting ofverification reports on the finance ministry’s website. Efforts have also been made to strengthen obligatoryreporting of public finance management, but much more needs to be done here. Boosting the court of auditorsand the inspectorate-general of finance enabled the clearing of the backlog in drafting and adopting paymentlaws. As in other countries, the 2011 payments law was sent to parliament in October 2012 at the same time asthe 2013 budget. After a difficult start, a law on public procurement passed in 2009 is now fully operational andlimits unauthorised actions. More than 80% of public contracts worth more than XAF 250 million are subject tobidding. The government’s reform programme now concentrates on choosing, prioritising and carrying outinvestment projects. The authorities have also started reforming the civil service, including introduction of anew merit-based pay scale.

Big challenges remain however. Management of the national oil company (SNPC) needs to be upgraded and itsfinancial arrangements with producers and the national treasury clarified and made more transparent. Quality ofdata about extractive resources must be improved to conform with standards of the Extractive IndustriesTransparency Initiative (EITI). Internal and external monitoring is hampered by weak institutional and technicalcapacity of inspection bodies and their inadequate funding. Monitoring government action, the obligation toreport on public finance management, and monitoring the use of public resources by parliament and civil society

are also obstructed by poor-quality financial data. Congo ranks 144th out of 176 countries in TransparencyInternational’s 2012 Corruption Perceptions Index, with a score of just 0.26.


National legislation on the environment and forestry sector is fairly extensive and includes regulations aboutforestry, land ownership, fauna and protected areas. The environmental protection law is being revised toinclude guarantees for the economic, ecological and social sustainability of natural resources and take account ofnew environmental problems. The government has drafted new regulations to assess environmental impact andalso signed with the EU a voluntary partnership agreement to implement the EU’s Forest Law Enforcement,Governance and Trade (FLEGT) action plan, which guarantees the legality of all Congo’s wood exports.

The government also launched in 2011 a national reforestation programme (PRONAR) to plant a millionhectares of forest by 2020 to curb deforestation and soil degradation. Congo joined the Global Gas FlaringReduction (GGFR) partnership in June 2012 as part of efforts to improve energy efficiency and reduce emissionsrelated to oil production. Congo is backed by the UN Programme on Reducing Emissions from Deforestation andForest Degradation (UN-REDD) to develop its potential and get funding for this environmental initiative.Ministries involved in managing natural areas and resources have sectoral policies to help sustainably manageforest ecosystems but implementation suffers from lack of money and staff. So efforts are still needed to applylaws and regulations.

Political Context

Parliamentary elections in July and August 2012 were won by the ruling party but few people voted and noofficial turnout figures were released. The vote was marred by late opening of polling stations, late andinadequate supply of equipment to some of them and poorly trained vote-counting personnel. But internationalobservers said the voting was free, transparent and credible. The ruling party retained its majority, with morethan 80% of the 139 seats, but the opposition, which only won 19 seats, said the results were rigged. A coalitionof 18 opposition parties appealed to the president on 29 October to convene a national conference as the onlyway to solve the country’s problems, but he did not officially respond.

Police used tear gas in March 2012 to disperse hundreds of victims of an ammunition dump explosion nearBrazzaville who protested against slowness and corruption in the government’s payment of compensation.Lawyers went on strike a month later to protest against the arrest of two colleagues accused of underminingstate security in connection with the blast. In September, the press council (Conseil supérieur de la liberté decommunication, CSLC) suspended two weekly newspapers, La Voix du peuple (for nine months) and Le Glaive(six months). La Voix du peuple had defied a six-month suspension imposed by a court in May and Le Glaive wasaccused of printing “false news, seriously invading people’s privacy and manipulating public opinion”.


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142nd out of 186 countries in the 2013 UN Development Programme (UNDP) Human Development Report witha gender inequality score of 0.610. Thanks to the government’s policy of free primary education, female/maleparity in primary schools rose to 0.97 in 2011 (from 0.89 in 2008) and to 0.78 (from 0.69) in secondaryeducation, but a big gender gap remained in higher education. It will be hard to achieve the MDG for primaryand secondary school gender equality by 2015. Free malaria treatment for pregnant women and children under16 and free HIV/AIDS treatment has also reduced gender inequality in access to healthcare. But maternalmortality is still high and there are still great gender disparities in both urban and rural areas.

Major gender disparities also exist in access to socio-economic opportunities and representation in decision-making. An estimated 62.8% of women have jobs (compared with 83.5% of men), according to the WorldBank’s GenderStats. A 2010 survey of the informal sector and unemployment (ESSIC) found that femaleunemployment was 18.8% (13.9% among men). Women have less human capital and are often discriminatedagainst in getting jobs and loans, so poverty is greater in families headed by women (58.2%) than in thoseheaded by men (48.8%). Women are under-represented in decision-making bodies and the number inparliament fell from 12% in 2005 to 6% in 2012. The government has only four women among 38 ministers.

To promote equality in law and in practice, the government is stepping up application of its 2009 gender-equality action plan. Features include implementing a law to guarantee fair representation of women in political,elective and administrative positions; revising laws on inheritance, marriage and political parties; publicisingconventions and treaties on women’s rights; and giving women more access to property ownership, loans(including microfinance), fast-track literacy and management training. But strong government determination willbe needed to ensure gender equality advances.



Despite recent economic progress, results in the social sector are still mixed. Steps have been taken to improveeducation in recent years but so much remains to be done. Human capacities have been boosted thanks tosubstantial government funding under the PRS and sectoral strategy, with hiring of teachers and theircontinuing education, supplying them with manuals, providing books for pupils and upgrading infrastructure andequipment. Budget allocations for education rose about 80% between 2008 and 2012 to 11.1% of total publicspending (8.4% of non-oil GDP). Current trends suggest Congo could achieve the Millennium Development Goal(MDG) of universal primary education by 2015.

The primary school graduation rate rose to 83% in 2011 (from 77% in 2008) and secondary-level enrolment to84.5% (65% in 2005), with notably more girls. Access to education has generally improved in recent years, butaccess to higher education is still poor. Progress has been slower in vocational training, which draws less than10% of students, holding back private-sector growth.

The overall picture for healthcare is not very good, with lack of trained staff, poor infrastructure and mediocrecare quality. The proportion of malnourished children under five fell to 10.6% in 2011 (from 14.4% in 2005) butCongo has some of the lowest health indicator scores in Africa, with maternal mortality of 740 deaths per onehundred thousand live births and infant/child mortality of 127 per thousand live births. It is therefore veryunlikely to achieve the MDG health goals and targets.

Nonetheless, substantial progress has been made in preventing and treating AIDS, tuberculosis and malaria.Those being treated with antiretroviral drugs for HIV/AIDS rose 55% between 2008 and 2011 and 118 healthcentres offer voluntary tests for the disease (up from 98 in 2008). The number of pregnant women joining theprevention of mother-to-child HIV transmission (PMTCT) programme has also risen and helped contain theincidence of HIV/AIDS (2.1%). Treatment of malaria is free for children under 16 and pregnant women, andtreated mosquito nets are also free. Congo could reach the MDG target of stopping the spread of HIV by 2015and reversing the present trend. But improvements are still needed in monitoring the coverage of programmesand the effectiveness of public resources.


In line with its PRS priorities, the government continued to earmark substantial funding in the 2012 budget toanti-poverty spending – 8.1% of GDP (up from 6.4% in 2008) – and about three-quarters of budget projectswere to support the poor. The year was declared “the year of healthcare” with significantly more moneyallotted. Treatment for malaria, HIV/AIDS, and caesarean births were all declared free of charge, along witheducation. But government spending, especially to fight poverty, is not very efficient and income-measuredpoverty was still high nationwide (44%) with big disparities between urban and rural areas.

To combat poverty and the increasing number of people without social security, the government has introducedsafety nets in recent years for the most vulnerable groups. These nets include labour-intensive public works,one-off financial and material subsidies and lower (or exemption from) school fees and public hospital charges.But the range and level of support is still not enough to adequately protect the worst-off, especially youngpeople and excluded groups. The ministry of social affairs, humanitarian action and solidarity gets less than 1%of all government spending. Programmes must also be better targeted and monitored properly. At present,they are hardly assessed at all for efficiency and impact.

National social protection is limited to the civil servants’ retirement fund (CRF) and the social security fund(CNSS) and mostly only covers formal-sector workers, especially civil servants and private-sector employees,leaving out people in rural areas and the informal sector. The small number of contributors to the funds (lessthan a quarter of the working population) and the amount of contributions means the level and quality ofbenefits is low and the pensions system is not economically or financially viable. The CNSS has had managementproblems and chronic deficits for several years, making benefit payments very erratic. The government istherefore drafting a national social-protection plan with the help of UN agencies.

Labour market rules create a rather unsatisfactory balance between social protection and job creation andimplementation is still limited. The labour law offers quite good protection and coverage to workers but is notvery flexible for employers in hiring, firing and organisation of work. But, as noted, this only affects a quarter ofthe population and only formal-sector workers. A few small continuing-education programmes are available.

Gender Equality

The principle of gender equality is established by law and policies but enforcement is limited. The country ranks












Gender Equality



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142nd out of 186 countries in the 2013 UN Development Programme (UNDP) Human Development Report witha gender inequality score of 0.610. Thanks to the government’s policy of free primary education, female/maleparity in primary schools rose to 0.97 in 2011 (from 0.89 in 2008) and to 0.78 (from 0.69) in secondaryeducation, but a big gender gap remained in higher education. It will be hard to achieve the MDG for primaryand secondary school gender equality by 2015. Free malaria treatment for pregnant women and children under16 and free HIV/AIDS treatment has also reduced gender inequality in access to healthcare. But maternalmortality is still high and there are still great gender disparities in both urban and rural areas.

Major gender disparities also exist in access to socio-economic opportunities and representation in decision-making. An estimated 62.8% of women have jobs (compared with 83.5% of men), according to the WorldBank’s GenderStats. A 2010 survey of the informal sector and unemployment (ESSIC) found that femaleunemployment was 18.8% (13.9% among men). Women have less human capital and are often discriminatedagainst in getting jobs and loans, so poverty is greater in families headed by women (58.2%) than in thoseheaded by men (48.8%). Women are under-represented in decision-making bodies and the number inparliament fell from 12% in 2005 to 6% in 2012. The government has only four women among 38 ministers.

To promote equality in law and in practice, the government is stepping up application of its 2009 gender-equality action plan. Features include implementing a law to guarantee fair representation of women in political,elective and administrative positions; revising laws on inheritance, marriage and political parties; publicisingconventions and treaties on women’s rights; and giving women more access to property ownership, loans(including microfinance), fast-track literacy and management training. But strong government determination willbe needed to ensure gender equality advances.












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economy and intends to step up its efforts to create the best conditions for this to happen. It plans to speed upbuilding competitive infrastructure, especially the current upgrading of the road and rail corridor between theexpanding port of Pointe-Noire and Brazzaville. It intends to create (with the help of several emergingcountries) special economic zones (SEZ) and an investment promotion office to boost key economic sectors, adevelopment bank for SMEs and vocational training colleges for skills needed in high-growth economic sectors(like two such centres in Pointe-Noire and Brazzaville specialising in construction and industrial maintenance). Itwill also encourage local processing of resources with subsidies and tax breaks and speed up the global actionplan to improve the business climate. Finally, the government has launched a forestry and environmentalprogramme to assess resources and improve the management of concessions.


Congo’s substantial natural resources, mainly oil, are a solid base for structural reform of the economy. Theimportance of oil has steadily increased since deposits were discovered and production began in 1957 and worldprices began to rise. Output rose to 269 300 barrels a day in 2012 (from 65 000 in 1980) through newinvestment and full production of initial deposits. Congo is now the fifth largest producer in sub-Saharan Africaand oil is 70% of its nominal GDP and 90% of total exports. The oil ministry predicts output will peak at 140million barrels in 2012 before declining to 40 million by 2029 unless new deposits are found. Recent estimatessay the country has reserves that would last for another 40 years at the present rate of production.

Oil revenue (about 80% of government income) funds a great deal of public investment, which wasUSD 1.2 million between 2009 and 2012. (More than 70% of infrastructure spending is from domesticresources.) Oil income allowed the government to launch a bold programme to upgrade energy and transportinfrastructure that should help economic diversification. A special “oil reserves fund” has been opened at theBEAC to receive unbudgeted surplus revenue from higher oil prices.

The country has other substantial mineral reserves, along with forestry resources, natural gas and goodagricultural potential. Gas reserves are estimated at between 1.7 trillion and 2.6 trillion cubic metres (20 yearsof production at the current rate). Iron reserves are put at more than 2 billion tonnes and Congo has the world’ssecond biggest forestry reserves after the Amazon. The forestry sector is 10% of non-oil GDP and generatesXAF 100 billion in exports of wood (the country’s second biggest export) and more than XAF 20 billion annuallyin tax revenue. Sustainable production of wood is estimated at 5 million cubic metres (1 million in 2011). Congoalso has 10 million hectares of arable land. The huge mining potential is beginning to be exploited, with fourprojects under way, including one expected to start production in late 2013 and another in 2016, as part of theCongo Iron and Mining Project Development. But development of all these resources is hampered by seriousstructural constraints.

Congo has not yet managed to take best advantage of its natural resources. Management transparency hashowever improved with quarterly certification of oil resources by foreign auditors and posting of verificationreports on the finance ministry website, new laws to improve management transparency in forestry and inmining (especially granting concessions) and signing up to the FLEGT action plan, which guarantees the originand sustainability of wood products.

But natural resources management needs to be greatly improved with more and better information onextractable resources to conform with EITI standards, better management of the extractive-industry value chain(including maximising oil revenue through good contracts with oil companies) and better use of governmentresources through improved public finance management.

Profits from natural resources development have enabled the government to speed up its national transportprogramme and quadruple energy supplies over the past three years. Revenue from natural resources,especially oil, has also funded anti-poverty efforts and economic growth. Oil prospection and production hasgenerated spillover activity, especially in metal industries, maintenance, technical assistance for drilling, seismicexploration and other services for oil companies. Other sectors, however, have benefited little from naturalresources, so structural change to the economy over the last two decades has been limited.

Economic growth in recent years seems to have been more balanced but has not really changed structures. Oilhas been the pillar of the economy since the 1980s. It provides 70% of nominal GDP, making the economyvulnerable to external shocks. Also, because the oil industry is capital-intensive, it provides few jobs. The non-oilsector has shrunk, with the tertiary sector contributing 18% of GDP, the secondary sector only 7% and the non-oil primary sector less than 5%. The weakness of the primary and secondary sectors contrasts with theimportance of the country’s natural resources, showing a potential for economic transformation undevelopedbecause of major structural impediments.

The main obstacles to this are poor infrastructure, a largely unskilled labour force and an unfavourable businessclimate. The lack of good infrastructure is marked in the energy and transport sectors, with only 10% of roadssurfaced and only 38% of these in good or fair condition. Despite increased energy production capacity,inadequate electricity supply comes at the top of a list of ten complaints by businesses. Infrastructure servicesare still very costly, undermining competitiveness and productivity. Ill-trained labour and unsuitable skills (asshown by 17% unemployment among higher-education graduates) prevent the huge needs of the economy’spromising sectors from being met. Serious problems with the business climate, as shown by the country’s lowrankings in the Doing Business 2013 report, are other big obstacles to economic diversification. Legalunreliability is a major barrier to the private investment that is so vital for transforming the economy. Theseweaknesses are exacerbated by poor management of natural resources.

The government knows how important the country’s natural resources can be for structurally transforming the












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economy and intends to step up its efforts to create the best conditions for this to happen. It plans to speed upbuilding competitive infrastructure, especially the current upgrading of the road and rail corridor between theexpanding port of Pointe-Noire and Brazzaville. It intends to create (with the help of several emergingcountries) special economic zones (SEZ) and an investment promotion office to boost key economic sectors, adevelopment bank for SMEs and vocational training colleges for skills needed in high-growth economic sectors(like two such centres in Pointe-Noire and Brazzaville specialising in construction and industrial maintenance). Itwill also encourage local processing of resources with subsidies and tax breaks and speed up the global actionplan to improve the business climate. Finally, the government has launched a forestry and environmentalprogramme to assess resources and improve the management of concessions.












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Equatorial Guinea 2013


Glenda Gallardo / [email protected] Ahmed Moummi / [email protected]

http://dx.doi.org/10.1787/888932805232

http://dx.doi.org/10.1787/888932808215




2011 2012 2013 2014

Real GDP growth 7.7 5.5 4.9 -2

Real GDP per capita growth 5.2 3.3 2.7 -4.2


Budget balance % GDP 0.9 6 6.3 3.5

Current account % GDP -6 3.5 2 -1



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With a rate of 5.5% in 2012 and a forecast of 4.9% for 2013, GDP growth is slowing down, a disappointingperformance mainly due to a sluggish oil sector and a lower contribution from construction and services.

The balanced budget achieved in 2012 shows considerable improvement in the management of publicresources, but it is at risk from the high level of public investments currently underway.

High cash inflows from oil have brought about deep structural changes in Equatorial Guinea in the pasttwenty years, especially in construction and basic-infrastructure development, but human development andjob creation have fallen short of the country’s financial and economic potential.

Overview

Growth in Equatorial Guinea’s gross domestic product (GDP) is estimated to have fallen back to 5.5% in 2012from 7.7% in 2011 because of a fall in production at the Ceiba-Okouméhed oil complex, which had reached itspeak. The fall was partially offset by the exploitation of new fields in Aseng. The main drivers for growth wereoil and gas, with manufactured products, services and construction providing a smaller contribution.

The growth outlook for 2013 and 2014 should confirm this downward trend. Growth of 4.9% in 2013 isexpected to turn negative in 2014. The downturn in crude oil output is the reason for this fall. Natural gas,however, is a serious alternative that might allow the country to compensate for falling oil production, providedthe productivity of its exploitation can be improved.

In 2012, monetary policy endeavoured to counter the effects of rising liquidity in the economy in order toachieve price stability. This was largely successful as shown by the average price level of foodstuffs and fuel.Inflation was thus contained. According to the latest estimates of the national statistics and audit bureau, theconsumer-goods price index (CPI) was 4.5% in 2012, thanks to falls in the cost of several services such astransport, education and telecommunications. Inflation should remain moderate over the next two years, withforecasts of 3.1% in 2013 and 3.5% in 2014, but only if the prices of goods are held in check and if the policy ofprice support for essential goods and for fuel at the petrol pump is maintained. Budgetary policy in 2012 aims tobring public finances into balance. The budget balance in 2012 and 2013 also shows government commitment toimproving budgetary discipline. A surplus estimated at 6% of GDP was secured for 2012, but the balance isfragile because of the high level of current public investments, estimated at XAF 9 000 billion (Franc CFA BEAC).Provided investment expenditure is brought under control, budget projections are based on an improvement inthe surplus for 2013 (6.3%), which would fall back to 3.5% in 2014.

Equatorial Guinea has undergone deep economic and social changes since the discovery of oil in the mid-90s.From being a poor, mainly agricultural country, it became the foremost oil producer of the franc zone. Oilincome has helped to improve basic infrastructure: roads, schools, hospitals and social housing. In terms ofhuman development, however, the country falls short of its economic and financial potential with high levels ofpoverty (more than 60%), limited access to drinking water and sewerage, and the prevalence of contagiousdiseases. Unemployment is also high, especially among the young, who have not fully benefited from theemployment opportunities offered locally, especially by the oil industry.

Equatorial Guinea’s political and economic stability is attracting growing interest from foreign businesses,especially to extract oil deposits. This provides a favourable medium-term outlook, particularly in natural-gasextraction projects. The main challenge the country will have to take up will be to use these substantial revenueinflows efficiently to diversify the economy.

Equatorial Guinea

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Overview







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http://dx.doi.org/10.1787/888932805232

http://dx.doi.org/10.1787/888932808215




2011 2012 2013 2014

Real GDP growth 7.7 5.5 4.9 -2

Real GDP per capita growth 5.2 3.3 2.7 -4.2


Budget balance % GDP 0.9 6 6.3 3.5

Current account % GDP -6 3.5 2 -1



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http://dx.doi.org/10.1787/888932809203



2007 2011






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Mining 91.7 89.4





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The disappointing results of 2012 may be due to weak progress in hydrocarbon output (especially gas), fallingworld timber prices, the less favourable environment in the building industry and a slowdown in trade,restaurants, hotels and other services.Oil production was slightly higher in 2012 than in 2011, according to the latest figures: 110.2 million barrels by31 December 2012, compared to 102.2 million barrels the previous year, representing a 7.9% rise, less thanprojections, which were expecting a 10.5% increase. Noble Energy brought the new Aseng field into productionin November 2011 and this made up for falling production from the fields at Ceiba-Okoumé operated byAmerada Hess, Alba (Marathon), Zafiro, Jade and Serpentina (ExxonMobil), where some wells had peaked.According to Bank of Central African States figures, oil output from the main companies active in extraction fell.ExxonMobil’s production (which is 38.36% of overall production) fell by 12.65% to the end of September 2012;Marathon’s production (14.7% of total) fell by 10.9%; and Amerada Hess’s (28.38 % of total production) by18.4 %. Conversely, Noble Energy’s production (20.5% of overall output) rose by 21% in 2012.Oil and gas, together with manufactured goods, contributed about 90% of growth. The dynamism of the


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construction sector can be seen from its 5.2% contribution to growth despite reduced public investment.Several projects are being finished, and the capital, Malabo, looks like a huge building site, especially for socialhousing.Like construction, services made an increased contribution to GDP in 2012. This is an improvement on 2011, thissector being important in terms of employment and technology transfer. Energy contributed about 1% to GDPwith the commissioning of the Djibloho hydroelectric power plant on the mainland and the new gas-poweredstation in Malabo. To take full advantage of this new energy supply, modernisation of the grid that supplies mostlarge towns is under way.The contribution to growth of both food and cash crops, including those for export like cacao and coffee, as wellas fisheries, remained small at about 1.2% of GDP. Although mainland Equatorial Guinea is densely wooded,forestry made a negligible contribution to GDP in 2012 (under 0.5%), partly due to falling overseas orders,partly because of the 2008 forestry law forbidding the export of round timber, which means wood-processingunits are needed.The structure of aggregate demand reflects the dependence of Equatorial Guinea’s economy on hydrocarbons.Investments thus contributed no more than 2% to growth in 2012, with 1.4% from private investments and just0.6% from public-sector investments. The lower contribution of public investments is explained by thecompletion of major construction projects such as buildings to host the African Union (AU) Summit and the AfricaCup of Nations, as well as of basic infrastructure such as the Djibloho dam and high-voltage transmission lines inthe mainland region.Overall consumption contributed 23.1% to growth in 2012. Private consumption was 22.9% of GDP followingincreased household demand for appliances and supplies connected with rising living standards.Foreign demand fell in 2012, making a negative contribution to GDP of 19.6%, including 16.3% imports. The fallin the volume of imports was mainly due to lesser imports by the public sector.

http://dx.doi.org/10.1787/888932809203



2007 2011






Extractions - -






Mining 91.7 89.4





Social services - -





The disappointing results of 2012 may be due to weak progress in hydrocarbon output (especially gas), fallingworld timber prices, the less favourable environment in the building industry and a slowdown in trade,restaurants, hotels and other services.Oil production was slightly higher in 2012 than in 2011, according to the latest figures: 110.2 million barrels by31 December 2012, compared to 102.2 million barrels the previous year, representing a 7.9% rise, less thanprojections, which were expecting a 10.5% increase. Noble Energy brought the new Aseng field into productionin November 2011 and this made up for falling production from the fields at Ceiba-Okoumé operated byAmerada Hess, Alba (Marathon), Zafiro, Jade and Serpentina (ExxonMobil), where some wells had peaked.According to Bank of Central African States figures, oil output from the main companies active in extraction fell.ExxonMobil’s production (which is 38.36% of overall production) fell by 12.65% to the end of September 2012;Marathon’s production (14.7% of total) fell by 10.9%; and Amerada Hess’s (28.38 % of total production) by18.4 %. Conversely, Noble Energy’s production (20.5% of overall output) rose by 21% in 2012.Oil and gas, together with manufactured goods, contributed about 90% of growth. The dynamism of the


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(nominal) GDP in surplus or balanced, internal and external debt below 70% of GDP and avoidance of latepayment of internal and external debt.

The monetary situation in 2012 showed an overall improvement in Equatorial Guinea’s external position and arise in most monetary aggregates in the broad sense. This situation should be maintained over 2013 and 2014according to the Bank of Central African States’s latest projections. Money supply (M2) rose by 45.1%,strengthening the country’s liquidity. According to the most recent Bank of Central African States's estimations,this flow was allocated as 88% of narrow money and 12% of quasi-money.

Following a 2011 marked by strong demand for foodstuffs resulting from the organisation of many events,including an AU Summit in Malabo and the holding, together with Gabon, of the Africa Cup of Nations footballchampionship, the situation seems to have steadied in 2012. According to the most recent estimations of thenational statistics and audit office, the overall consumer price index (CPI) fell a little, reaching 4.5% compared to4.8% in 2011, despite a rise in military pay in June 2012 of up to 100% depending on rank, which could havefuelled inflation.

Downward pressure on inflation ought to continue over 2013 and 2014. It will be close to 3% thanks to a returnto consumer-price stability and a rise in subsistence-farming output made possible by falling costs of transport,telecommunications and services.


Equatorial Guinea’s monetary situation in 2012 also showed an improvement in its overall external position andan upturn in most monetary aggregates. In comparison to the same period in 2011, foreign assets rose sharply(34%) as a result of rising exports, particularly of those related to oil and gas, and of the good price for crude oilon international markets and the rapid pace of oil-revenue collection.

The country’s external position rests on a narrow base of exports concentrated on natural resources, especiallyoil and natural gas. These products are very vulnerable to shocks in the terms of trade. Balance of trade yieldeda surplus, which rose from 37.8% of GDP in 2011 to 40.5% in 2012. The share contributed by exports to GDPfell by 2% in 2012. A sizeable fall of 4.6% was recorded in imports.

The deficit in the services balance improved to 11.4% of GDP in 2012 compared to a deficit of 13.5% of GDP ayear earlier, in line with investments by gas-production enterprises as well as by subcontractors in the oilsector. Conversely, the negative income balance worsened, due to an increase in returns on equity in thehydrocarbon sector. The current-account-transfer deficit stood at 0.6% in 2012 compared to nearly 0.7% in2011, mainly because of subcontractors in the oil sector.

The balance of payments shows a surplus of 3.5% of GDP in 2012 compared to a deficit of 6% of GDP in 2011.The current-account balance should continue to be in surplus in 2013, but with the danger of a return to thedeficit cycle by 2014 if oil and gas production do not return to their usual levels.

Equatorial Guinea is trying to become a regional transport and trade hub for the central African region. To thisend, it has substantially upgraded its ports and airports. For example, the Malabo port has been enlarged toreceive large vessels and container ships, the current capacity allowing for 10 000 containers. Ultimately, thecapital's port could be a port of call for shipping to west and central Africa from Asia, America and Europe.

As a CAEMC member state, Equatorial Guinea has started a series of customs-duty reforms. In particular, it nowapplies a common external tariff (CET) charged at four rates for four categories of goods: a 5% rate for basiccommodities, a 10% rate for equipment and inputs, a 20% rate for intermediate goods and a 30% rate onconsumer goods. Further effort is needed to ensure the free circulation of persons and goods. The authoritiesare trying to speed up and modernise customs clearance, but their efforts run up against an arbitrary applicationof the law and tax evasion.

http://dx.doi.org/10.1787/888932810191


Fiscal Policy

The 2012 budget law and the budgetary policy following from it draw their inspiration from the MillenniumDevelopment Goals (MDGs) and the priorities set out in the policy framework paper of the second nationaleconomic conference: endowing the country with basic infrastructure necessary for development and turningEquatorial Guinea into an emerging country by 2020.

Total tax receipts at the end of 2012 were slightly up on 2011 thanks to oil and gas earnings. This was due tovery high oil prices. Non-oil receipts stagnated despite the government’s attempts at bringing order to theadministration of taxes. The implementation of the new customs-duty act and the gradual introduction of valueadded tax (VAT) do not seem to have had the desired effect on overall revenues. A slow fall in oil revenues isprojected for 2013 and 2014, unless the discovery of new deposits strengthens the country’s productioncapacity.

Public expenditure, especially capital expenditure, fell substantially. This was due to a slowdown in investmentin road infrastructure and in the construction of large public buildings. This is part of a deliberate policy of easingoff on public investments after years of massive construction of basic infrastructure.

Expenditure on goods and services went down slightly in 2012 thanks to improved management of public-administration expenditures in equipment and maintenance. It ought to hold steady at 2% of GDP over 2013and 2014 thanks, in particular, to containment of expenditure on purchase of fuel and on the upkeep of publicbuildings.

The management of pubic finances in 2012 left an overall budgetary surplus of 6% of GDP, in comparison to0.9% of GDP in 2011. This surplus ought to last into 2013 and 2014 provided a tight rein is kept on publicexpenditure.


2009 2010 2011 2012 2013 2014


Tax revenue 1.9 1.7 1.5 1.5 1.5 1.6

Oil revenue 38.2 27.2 28.6 29.4 29.4 28

Grants - - - - - -


Current expenditure 6 6.4 5.4 5 4.8 4.9

Excluding interest 6 6.1 5.1 4.4 4.4 4.4


Interest 0.1 0.3 0.3 0.5 0.5 0.5

Primary balance -3.8 -4.9 1.2 6.5 6.7 4

Overall balance -3.8 -5.1 0.9 6 6.3 3.5


Monetary Policy

Equatorial Guinea is a member of the Central African Economic and Monetary Community (CAEMC). The Bank ofCentral African States defines and applies monetary policy for the six CAEMC member states, the mainconvergence criteria of which are stability in the rate of inflation (below 3%), a budget balance based on(nominal) GDP in surplus or balanced, internal and external debt below 70% of GDP and avoidance of latepayment of internal and external debt.












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(nominal) GDP in surplus or balanced, internal and external debt below 70% of GDP and avoidance of latepayment of internal and external debt.












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2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20140%

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5%

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2004 2009 2010 2011 2012 2013 2014

Trade balance 59 23.9 31.2 37.8 40.5 40.3 36.5

Exports of goods (f.o.b.) 89.2 69.8 70 71.7 69.9 68.9 66.1

Imports of goods (f.o.b.) 30.1 46 38.8 33.9 29.3 28.5 29.6

Services -23.9 -14.7 -14.2 -13.5 -11.4 -11.1 -11.1

Factor income -55.9 -26 -36.6 -29.5 -25 -26.6 -25.8

Current transfers -0.9 -0.9 -0.9 -0.7 -0.6 -0.6 -0.6

Current account balance -21.6 -17.7 -20.5 -6 3.5 2 -1


Debt Policy

As of the end of 2011, public debt was 4.7% of GDP and is estimated to have remained under 10% of GDP in2012. External debt has mainly been agreed with bilateral creditors for 83% of all debt. Servicing the debtremains minimal. It is estimated to have held steady at 0.8% of GDP in 2012, the same as in 2011. No latepayments are recorded, which shows efforts on the part of government to use its good fortune in having oil topurge external and internal debt of all late payments.

A low level of debt, substantial foreign-exchange reserves and considerable oil income all contribute to thesustainability of Equatorial Guinea’s debt, which is not under threat in the medium term.

The latest debt-sustainability analysis dating from March 2010 — using the middle-income-countries model —also shows that the country’s external debt should stay well within the CAEMC convergence criteria of 70% ofGDP whatever happens. Moreover, the government intends to increase its ability to manage debt by givingitself the tools it needs in terms of management methods as well as by expanding training for the personnelentrusted with overseeing and managing debt.

Equatorial Guinea has not yet finalised its system for giving a true picture of its debt. Figures on public debt areavailable but not consistently so. The recently set up debt-management unit’s efficiency and analysis capacitiesremain weak. Public-debt-accounts documents are not always available in digital form and debt repaymentcould be better co-ordinated with other finance-ministry procedures, which would reduce late payments.

Debt management comes under the responsibility of the public-debt sinking fund, in charge of accounting for allthe government's financial obligations as well as debt-repayment operations. The authorities are resolved to putin place an appropriate debt strategy and enhance debt-management capacities. Technical assistance has beensought from the World Bank for this.


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personnel to implement policy and reform programmes. Although reforms are envisaged in the budgetaryprocess (rationalisation of budgetary procedures, improved categorisation and record-keeping of publicexpenditure, and provision of handbooks), upgrading of computer-based data collection has not beenundertaken.

Reducing corruption is still a major challenge for the country. According to the 2012 Transparency International

(TI) report, Equatorial Guinea comes 163rd out of 176 countries on the corruption perception index with a scoreof 2 out of 10 (10 being the most transparent). According to TI, corruption is endemic in the public sector andthere is lack of transparency in the oil sector. The country score in the International Budget Partnership's OpenBudget Index was 0/100 in 2012, the same as in 2010. In November 2011, a constitutional reform wasapproved by a substantial majority through a national referendum, providing the legal framework for a StateAudit Office.


The management of natural resources is another challenge the country is facing. Delays in obtaining andvalidating its candidature as a member of the Extractive Industries Transparency Initiative (EITI) was due toslowness in the application of transparency rules in the production, marketing and use of oil revenues.

The country is rich in forests. These cover some 2.2 million hectares, which is virtually the entire surface area ofthe country. The rapid development of infrastructure brought about rapid deforestation, coming on top of soildegradation and the consequences of hunting wild animals for food.

Legislation related to the management of forest resources has greatly changed since the country achievedindependence. The forestry law of July 1997 divided forests into two categories: productive forests andconservation forests. The law aims at preserving nature but in practice, there is considerable fuzziness in thegranting of concessions to companies operating in the country. For lack of adequate personnel on the ground,the state is unable to control logging or take a proper inventory of its forest resources. Though the countryratified the Kyoto Protocol, the state pays insufficient attention to ensuring that all economic stakeholders,especially off-shore oil companies, respect its commitments. Greenhouse-gas emissions were estimated at4.815 kilos/tonne in 2008, but even this estimation leaves out of the calculation emissions caused bydeforestation and soil degradation.

Political Context

A new government came into office in 2012. The opposition condemned the fact that close relatives of thePresident of the Republic were made ministers. The reshuffling came after the adoption in November, by 97.7%of votes cast (according to official figure, contested by the opposition), of a constitutional reform limiting to twothe number of terms a president can serve, creating a post of vice-president and setting up five bodies: asenate, a state audit office, a state council and a council for social and economic development and the defence ofthe people. The constitution does not specify whether the current president should vacate his post in 2016, onthe expiry of his current mandate, or whether the limitation of the number of mandates will only take effectfollowing the reform.

The capital, Malabo, hosted the ACP (African, Caribbean, and Pacific Group of States) Summit inDecember 2012, with delegates from most member states, all the Heads of State of the CAEMC zone and those

of other African countries. The theme of the 7th ACP Summit was “The Future of the ACP Group in a ChangingWorld: Challenges and Opportunities”. Participants dealt with environmental topics: climate change, foodsecurity, rural development and sustainable development.


Private Sector

Equatorial Guinea’s business climate falls short of expectations considering the country’s wealth and private-sector development opportunities. The international conference held at the end of 2011 on the creation of anindustrialisation plan for the country by 2020 was a major turning point. This body underlined the role of non-oil-related private investment as an alternative source of finance just as important as state funding. Theindustrialisation plan provides for giving pride of place to the private sector, both national and international, tosupport economic diversification. It targets various sectors, especially oil and gas, petrochemicals, farming andfood, and the building industry (cement and bricks). The government seems determined to follow theconference recommendations; the conference should reconvene in 2013 to debate ways of funding theindustrialisation plan from private-sector resources at home and abroad.

As far as the business environment is concerned, things seem to be getting worse. The World Bank report Doing

Business 2013 put Equatorial Guinea in 162nd place (out of 185 countries), down three places from its 2012ranking. The situation has worsened in particular for starting a business, getting credit and dealing withconstruction permits. The only good point is an improvement in getting electricity.

Starting a business takes an average of 135 days, involves 18 procedures, for a cost of 12% of income percapita. Labour costs are relatively high compared to neighbouring countries, the tax system is not transparentand not applied in a consistent manner, and customs duties are high. The country also occupies the last place inthe rankings for resolving insolvency. The assets of bankrupt companies are not swiftly and efficiently put toother uses.

Though government seeks to welcome foreign investment, bureaucracy, opaque rules, an underdevelopedlabour market and an underqualified local workforce are all obstacles to the development of a competitiveprivate sector in Equatorial Guinea.

Financial Sector

Though limited and relatively underdeveloped, Equatorial Guinea’s financial system is, generally speaking,robust. It is very much dominated by banking, which has expanded over recent years because of strongeconomic growth and swiftly rising liquidity. The gap between loans and deposits remains wide, though realbank interest rates have fallen through increased competition. Credit is made up of short-term loans provided tobusinesses contracted to the state and to public-infrastructure projects, which is a potential source of weakness.In 2012, the banking system remained liquid and the banking sector, as assessed by the Central African BankingCommission, is healthy. It comprised four banks, three of which are branches of international banks. Two newbanks, not yet open for business, should enter the market in 2013.

Indicators of financial robustness included a fall in doubtful debts (less than 5%) as well as increased returns onassets and equity. Despite the liberalisation of the banking sector, the cost of financing remained high, showinglack of competition. In addition to the high fees charged on loans, interest rates applied to private businesseswere about 15%, while the cost of bank refinancing was around 4%. With a business model like this, with highreturns and low risk, banks were loath to finance local businesses unless it was for government procurement.Most oil and gas multinationals source their financing from abroad.

The country’s position for getting credit has worsened. According to the Doing Business 2013 report, it went

from 97th to 104th place from 2012 to 2013. Private-sector access to financial services, including microfinance, isstill restricted and loans are mainly available for public-infrastructure projects. The banking system does not yetadequately facilitate the private sector and relies on short-term loans. The high cost of financing and restrictedaccess to instruments of credit are a barrier to entrepreneurialism.

Access to banking services for the population was limited and few households had a bank account. Paymentfacilities were underdeveloped and concentrated in the country’s two large towns, Malabo and Bata. Moreover,payment services through cash dispensers were not widely available and cheque use was restricted. Since thereare a few international banks dealing with large numbers of international money transfers on behalf of the stateand oil companies, however, the automatic payment system could develop quickly, provided the domesticmarket is opened up to competition and the opening of branches throughout the country is encouraged.


The general environment of public-sector management is marked by restricted access to information and poorgovernance, as well as by weakness and lack of transparency in procedures for the management of publicfinance. Added to this is the weakness of the resources available to institutions, especially the lack of qualified


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personnel to implement policy and reform programmes. Although reforms are envisaged in the budgetaryprocess (rationalisation of budgetary procedures, improved categorisation and record-keeping of publicexpenditure, and provision of handbooks), upgrading of computer-based data collection has not beenundertaken.

Reducing corruption is still a major challenge for the country. According to the 2012 Transparency International

(TI) report, Equatorial Guinea comes 163rd out of 176 countries on the corruption perception index with a scoreof 2 out of 10 (10 being the most transparent). According to TI, corruption is endemic in the public sector andthere is lack of transparency in the oil sector. The country score in the International Budget Partnership's OpenBudget Index was 0/100 in 2012, the same as in 2010. In November 2011, a constitutional reform wasapproved by a substantial majority through a national referendum, providing the legal framework for a StateAudit Office.


The management of natural resources is another challenge the country is facing. Delays in obtaining andvalidating its candidature as a member of the Extractive Industries Transparency Initiative (EITI) was due toslowness in the application of transparency rules in the production, marketing and use of oil revenues.

The country is rich in forests. These cover some 2.2 million hectares, which is virtually the entire surface area ofthe country. The rapid development of infrastructure brought about rapid deforestation, coming on top of soildegradation and the consequences of hunting wild animals for food.

Legislation related to the management of forest resources has greatly changed since the country achievedindependence. The forestry law of July 1997 divided forests into two categories: productive forests andconservation forests. The law aims at preserving nature but in practice, there is considerable fuzziness in thegranting of concessions to companies operating in the country. For lack of adequate personnel on the ground,the state is unable to control logging or take a proper inventory of its forest resources. Though the countryratified the Kyoto Protocol, the state pays insufficient attention to ensuring that all economic stakeholders,especially off-shore oil companies, respect its commitments. Greenhouse-gas emissions were estimated at4.815 kilos/tonne in 2008, but even this estimation leaves out of the calculation emissions caused bydeforestation and soil degradation.

Political Context

A new government came into office in 2012. The opposition condemned the fact that close relatives of thePresident of the Republic were made ministers. The reshuffling came after the adoption in November, by 97.7%of votes cast (according to official figure, contested by the opposition), of a constitutional reform limiting to twothe number of terms a president can serve, creating a post of vice-president and setting up five bodies: asenate, a state audit office, a state council and a council for social and economic development and the defence ofthe people. The constitution does not specify whether the current president should vacate his post in 2016, onthe expiry of his current mandate, or whether the limitation of the number of mandates will only take effectfollowing the reform.

The capital, Malabo, hosted the ACP (African, Caribbean, and Pacific Group of States) Summit inDecember 2012, with delegates from most member states, all the Heads of State of the CAEMC zone and those

of other African countries. The theme of the 7th ACP Summit was “The Future of the ACP Group in a ChangingWorld: Challenges and Opportunities”. Participants dealt with environmental topics: climate change, foodsecurity, rural development and sustainable development.


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on USD 2 per day, and two-thirds of them are women. There is no legal discrimination against women inrespect to property rights or access to bank loans, but the de facto situation clearly shows a form of structuraldiscrimination. The country has ratified the Convention on the Elimination of All Forms of Discrimination againstWomen, but the low education levels and high illiteracy rates amongst women mean they cannot claim theirrights.



Progress in human development fails to reflect the country’s economic potential. Compared to other countriespoorer in natural resources, like Cape Verde, the gap is flagrant. In 2012, Equatorial Guinea’s human

development index was 0.554 and the country ranked 136th from a total of 187 countries, with a gross nationalincome per capita of USD 21 715 in 2012 in purchasing power parity (PPP) terms (constant 2005 internationalUSD).

Health-care access is limited (44% and 53% in rural and urban areas respectively), as is basic education (60%).HIV/AIDS is widespread, affecting some 3% of the population. The government has taken over HIV/AIDS andmalaria provisions with international support. Public hospitals have adequate stocks to provide free anti-retroviral and anti-malarial drugs. In this area, the country must continue to make provisions for health care,public awareness and education.

Current education policy and institutions are a brake on economic growth. The education system is particularlyineffective. Only one pupil out of two finishes primary school. The relatively low overall enrolment rate atprimary level (80%) together with a high number of pupils repeating their year (24%) make it doubtful that thecountry can reach the MDG for universal primary education by 2015. Improvement in the quality of teaching,particularly at primary level, should be accompanied by measures such as scholarships, school canteens, buildingschools in the remoter rural areas, if only to increase participation rates of children from poorer backgrounds. Afar-reaching reform of professional training is under way and includes building four new training centres and anoverhaul of the syllabus to make it match the needs of the labour market.


Poverty reduction is a further challenge for Equatorial Guinea, especially as it has considerable financialresources. According to data from the second national economic conference, the share of the total populationliving below the poverty threshold (USD 2 per day) was 76.8% in 2007. Poverty affected 79% of the ruralpopulation; in the main urban areas, Malabo and Bata, this share was 70% and 62%, respectively.

The trend seems to be downwards. Subsidies to social sectors, these past years in particular to health care, haverisen substantially and there is a clear public will to take care of the underprivileged populations.

Job creation is another difficulty. The government has launched an ambitious public-investment programme ininfrastructure. In November 2011, the national industrialisation conference called for diversification ofproduction in order to create jobs and raise citizens’ income. For this to happen, improved university educationand professional training is vital as is access to information and communication technologies.

There are very few safety nets to protect the vulnerable groups. The social-protection system only coverspublic-sector employees and thus excludes most workers, who operate in the informal sector. A few social-protection programmes have begun to be set up, but their funding and scope remain restricted.

Since 2009, Equatorial Guinea has been taking part on a voluntary basis in periodic reviews of its human-rightssituation. It has implemented the recommendations that have come out of these, with the support of the UnitedNations (UN) Subregional Centre for Human Rights and Democracy in Central Africa and the office of the UNDevelopment Programme. Progress is being made in freedom of expression as shown by the number of permitsgiven to the foreign press to cover events in the country and the progressive opening up of the audiovisualmedia. According to the 2012 Amnesty International report, however, freedom of expression remains limited,the press being under state control.

Gender Equality

Despite their equal rights and opportunities written into the law, women are still at a disadvantage incomparison to men in access to positions of responsibility, in work and in education. The constitution clearlyestablishes gender equality, but much remains to be done to achieve this, especially in rural areas.

Only 11% of the new government (including the positions of deputy ministers and chief executive officers ofministries) were women in 2012. Equatorial Guinea ensures gender equality in access to primary education, buttwice as many boys as girls carry on to secondary school. There are still disparities amongst the provinces withregard to women never having gone to school. More than 20% of women in central province Centro Sur haveno schooling, but just 3% of women in Bioko Norte.

Economic activity is male dominated; women are more affected by job insecurity. One person out of three lives













Gender Equality





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on USD 2 per day, and two-thirds of them are women. There is no legal discrimination against women inrespect to property rights or access to bank loans, but the de facto situation clearly shows a form of structuraldiscrimination. The country has ratified the Convention on the Elimination of All Forms of Discrimination againstWomen, but the low education levels and high illiteracy rates amongst women mean they cannot claim theirrights.













Gender Equality





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Equatorial Guinea is very rich in natural resources: oil, gas, mines and forest. The main one is crude oil withproven reserves estimated in 2011 at 1.8 billion barrels, followed by natural gas and especially methanol with

reserves of 396 million m3.

The country’s new economic status dates back to 1991, when the Alba oil condensate field was discovered,offshore from Bioko. The economic value of the discoveries became clear in 1994, with a substantial rise inproduction, which brought the country unprecedented revenues. Equatorial Guinea became the third largest oilproducer in sub-Saharan Africa after Nigeria and Angola. It holds the record on the African continent for thenumber of barrels per capita. Oil and gas production driven by three big offshore fields (Zafiro, Alba and Ceiba)has enabled it to achieve double-digit economic growth for about ten years (in 2001 its growth was 70%) and tobecome one of the biggest beneficiaries in Africa of foreign investment.

Driven by oil, the country’s GDP thus recorded on average an annual growth of 60% between 1993 and 2012.Arising out of an increase in oil production and more recently in gas production, and out of the surge in theprice per barrel, growth has led to a rapid rise in gross national income per capita, estimated at USD 21 715 inPPP terms according to the most recent figures from 2011. Many offshore oil companies are active in EquatorialGuinea, foremost amongst them American companies like ExxonMobil, Marathon, Amerada Hess, Chevron-Texaco. The state has issued exploration permits to non-American companies like: China Petroleum and &Chemical Corporation (China), Petrobras (Brazil), Repsol (Spain), Atlas Petroleum (Nigeria) and Petronas(Malaysia). This diversification has given the country an opportunity to have different technologies to facilitatebetter exploitation of its energy sources.

Equatorial Guinea has substantial forestry resources, which were its main natural resource for export prior tothe discovery of oil and gas. Since the beginning of the 2000s, production has fallen considerably due to a crisisin the world timber market and a certain anarchy in the granting and management of concessions. At end-2010,a mere 20% of felled timber was exploited in the country, with the remainder exported as logs. To preservethe national forestry heritage, the authorities restricted the area available to logging from 1.2 million hectaresin 1994 to 400 000 hectares in 2011, and reduced the number of licenced enterprises from 52 in 1994 to 15 orso in 2011.

The substantial revenues from oil and gas explain the significant structural changes seen since the 1990s. Thecountry has entered an unprecedented phase of modernisation of its basic infrastructure such as roads, airports,social and economic establishments, which has made it possible to attract substantial foreign direct investment.

Co-operation with new partners, mainly China, made possible by oil revenues, enabled huge infrastructureprojects like the new city Malabo II, the building of several thousand units of social housing in Malabo and Bata,construction of the CAEMC parliament and the completion of roads linking all parts of the country, especially onthe mainland.

Conversely, in terms of human development, the country seems unable to reach any of the eight MDGs. Thisinability shows the inefficiency of the economic and social model adopted since the discovery of oil. EquatorialGuinea is a textbook example of the Dutch disease, despite efforts to diversify the economy through theintroduction of long- and medium-term development plans (country vision for 2020) or the organisation ofconferences, like the one in 2011, devoted to an industrialisation programme. These projects never get off thedrawing board through the failure to mobilise adequate resources, financial and human, to ensure their success.


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Gabon 2013


Pascal Yembiline / [email protected]




2011 2012 2013 2014


Real GDP per capita growth - - - -


Budget balance % GDP 0.7 0.9 -1.3 -1.8

Current account % GDP 8.9 7.5 5.4 3.4



2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014-5%

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Gabon

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Economic growth in 2012 was robust, supported externally by improving world prices for oil, manganeseand timber, and internally by massive investments undertaken for football's Africa Cup of Nations 2012. Theeconomy should continue expanding over 2013 and 2014, despite a structural fall in oil production.

The country must meet three major challenges: poverty, which affects one citizen in three, the highunemployment rate, standing at 27% of the working population, and the continuing very unequaldistribution of income.

Local processing of raw materials will increase sharply in the special economic zones currently being set up.

Overview

Gabon’s per capita gross domestic product (GDP) is among the highest in sub-Saharan Africa, at almost USD15 000 at current value, a performance due in large part to the availability of natural resources, especially theexploitation of hydrocarbons. Through the Strategic Plan for Emerging Gabon (PSGE), the authorities havepromoted the idea of turning the country into an emerging economy by 2025. This rests on three pillars:“Green Gabon”, “Industrial Gabon” and “Service-Industry Gabon”. The PSGE hopes to bring about an ambitiousprogramme of structural change in the national economy, based on improved governance of the state, therecovery in public and private investment, the development of infrastructure and human resources and a moreequitable distribution of national wealth.

Recent trends show the real economy has weathered the financial crisis and its implications rather well. Growthis still above average for the region. After a recession of about 1.5% in 2009, the economy was able to continuegrowing at about 6% for the last three years. Indeed in 2010 Gabon was the only country in the Economic andMonetary Community of Central Africa (CEMAC) to respect all the region’s macroeconomic convergencecriteria: primary budget in surplus, inflation under 3%, public debt below 70% of GDP and no backlog of latepayments.

For 2012, real GDP growth is put at 5.7%, down from 2011 (7.0%), but above forecasts, which were for 4.4%.Increasing public investment and an upturn in mining – stimulated by demand from big emerging markets –were in part responsible for the change in internal demand. In terms of structure, 2012’s GDP shows threethings: the low contribution of the primary sector (5%), the preponderance of the secondary sector (64%),whose contribution fluctuates widely according to world oil prices, and the importance of the tertiary sector,which represents 32% of internal activity. The primary budget balance was consolidated. The current accountsurplus is considerable in a climate of rising inflation, which, however, remains within CEMAC convergencecriteria.

Overall, economic activity was moderate in 2012. This was due to two things: the end of large-scale stadium-building works for the Africa Cup of Nations (ACN) 2012 and cut-backs in road improvement schemes. In 2013economic activity should grow by around 6.2%, supported in large part by the non-oil sector. This growth willundoubtedly not be sufficient to absorb a population of relatively young people unable to find jobs. Theauthorities are attempting to solve this problem in several ways: they are setting aside special funds to supportreforms undertaken by the National Employment Office and encouraging the foreign direct investment (FDI)currently under way in three special economic zones, among other initiatives.

Gabon

Sections

Economic growth in 2012 was robust, supported externally by improving world prices for oil, manganeseand timber, and internally by massive investments undertaken for football's Africa Cup of Nations 2012. Theeconomy should continue expanding over 2013 and 2014, despite a structural fall in oil production.

The country must meet three major challenges: poverty, which affects one citizen in three, the highunemployment rate, standing at 27% of the working population, and the continuing very unequaldistribution of income.

Local processing of raw materials will increase sharply in the special economic zones currently being set up.

Overview

Gabon’s per capita gross domestic product (GDP) is among the highest in sub-Saharan Africa, at almost USD15 000 at current value, a performance due in large part to the availability of natural resources, especially theexploitation of hydrocarbons. Through the Strategic Plan for Emerging Gabon (PSGE), the authorities havepromoted the idea of turning the country into an emerging economy by 2025. This rests on three pillars:“Green Gabon”, “Industrial Gabon” and “Service-Industry Gabon”. The PSGE hopes to bring about an ambitiousprogramme of structural change in the national economy, based on improved governance of the state, therecovery in public and private investment, the development of infrastructure and human resources and a moreequitable distribution of national wealth.

Recent trends show the real economy has weathered the financial crisis and its implications rather well. Growthis still above average for the region. After a recession of about 1.5% in 2009, the economy was able to continuegrowing at about 6% for the last three years. Indeed in 2010 Gabon was the only country in the Economic andMonetary Community of Central Africa (CEMAC) to respect all the region’s macroeconomic convergencecriteria: primary budget in surplus, inflation under 3%, public debt below 70% of GDP and no backlog of latepayments.

For 2012, real GDP growth is put at 5.7%, down from 2011 (7.0%), but above forecasts, which were for 4.4%.Increasing public investment and an upturn in mining – stimulated by demand from big emerging markets –were in part responsible for the change in internal demand. In terms of structure, 2012’s GDP shows threethings: the low contribution of the primary sector (5%), the preponderance of the secondary sector (64%),whose contribution fluctuates widely according to world oil prices, and the importance of the tertiary sector,which represents 32% of internal activity. The primary budget balance was consolidated. The current accountsurplus is considerable in a climate of rising inflation, which, however, remains within CEMAC convergencecriteria.

Overall, economic activity was moderate in 2012. This was due to two things: the end of large-scale stadium-building works for the Africa Cup of Nations (ACN) 2012 and cut-backs in road improvement schemes. In 2013economic activity should grow by around 6.2%, supported in large part by the non-oil sector. This growth willundoubtedly not be sufficient to absorb a population of relatively young people unable to find jobs. Theauthorities are attempting to solve this problem in several ways: they are setting aside special funds to supportreforms undertaken by the National Employment Office and encouraging the foreign direct investment (FDI)currently under way in three special economic zones, among other initiatives.


Gab

on




2011 2012 2013 2014


Real GDP per capita growth - - - -


Budget balance % GDP 0.7 0.9 -1.3 -1.8

Current account % GDP 8.9 7.5 5.4 3.4



2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014-5%

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Farming is still limited, with cash crops, food crops and market gardens around towns developed with theassistance of the Gabonese Development Support Institute. Its contribution in 2012 was at the same level as2011 (3.8%), with cocoa and coffee production still hardly above their 2002 level (500 tonnes and 200 tonneseach). Similarly, prices received by planters have not changed since 2007, at XAF 650 (CFA francs BEAC) perkilogram of cocoa and XAF 450 per kilogram of coffee, despite rising world prices. The share of the secondarysector in the GDP rose to 8.5% in 2012, compared to 8.3% in 2011. This trend should carry over into 2013,reaching 9.1%, and 9.3% in 2014. Industry, building and public works, electricity and water generate thegreatest part of this sector’s contribution (respectively 4.6%, 2.7% and 1.7%). Finally, the tertiary sector,representing 32% of internal activity, is still the second contributor to GDP growth, 27.7% in 2012, up from2011 (27.0%). This sector was driven by the upgrading of hotels ready to welcome fans to the 2012 ACN and bythe spread of mobile phones. There should be an upward trend in 2013, 2014 and 2015, at 29.7%, 30.8% and31.7% respectively.In terms of demand, growth, estimated at 5.7% in 2012 and 6.2% in 2013, should be supported by two factors:rising public investment and FDI investment in special economic zones (SEZs) and the bounce back of miningunder the impetus of increased demand from big emerging markets. The public-sector contribution to GDPgrowth could well show a fall, from 3.1% in 2011 to 0.9% in 2012 as a result of the ending of the stadiumbuilding programme and cutbacks in the road-improvement programme. The public-sector contribution to GDPgrowth in 2012 rose (0.7%) compared to 2011 (-0.1%). It should grow in 2013 to 1.2% and in 2014 to 1.7%, asa result of the three-year recruitment of defence and security personnel, which has been taking place since2009. Contrary to forecasts, private consumption grew in 2012 (5.3%) compared to 2011 (2.9%), under theredistributive effect of income from works undertaken for the ACN. But it will fall in 2013 (3.4%) as the firstphase of these works is completed.Exports fell slightly in 2012 for several reasons. Marginal oil fields became depleted, production at the newNdjolé mine belonging to the Compagnie industrielle et commerciale des mines de Huazhou (CICMHZ) fell, thebringing into production of ore from Franceville by BHP Billiton was delayed (initially forecast at 250 000 tonnesin 2012), while COMILOG kept to its initial forecast (3.75 million tonnes for 2012). In general terms, the tradebalance has a structural surplus, with an import-cover ratio above 150%. The current value of exports easilymade up for the purchase of equipment following the dynamic public and private investments in recent years.Thanks to the high price of oil on the world market, Gabon enjoyed exceptional oil income. In 2012 itrepresented over 80% of export income, 48% of GDP and 50% of fiscal income.

http://dx.doi.org/10.1787/888932809260



2007 2012



Construction 2 2.3



Extractions - -






Mining 55.5 56.5

Other services 0 0

Public Administration & Personal Services 7.8 9.2

Public Administration, Education, Health & Social Work, Community, Social & Personal Services - -


Social services - -

Transport, storage and communication 5.9 6




Gabon’s economy benefited from the high price of oil: between USD 90 and USD 110 per barrel for Brent in2012, compared to USD 79 in 2010. In this way it was able to keep its GDP growth at 5.7% in 2012, even if thiswas lower than in 2011 (7.0%). One of the targets of the Strategic Plan (PSGE) is to gradually reducedependence on oil and, more generally, primary resources. Oil accounts for nearly all exports (over 90%) andhas a significant share in GDP (48%). Oil resources are slowly dwindling, however, because marginal fields arerunning dry, while no new commercially exploitable fields are being discovered.Forestry is the second main economic resource after oil, as well as the country’s main employer. It will only be0.4% of GDP over 2012 and 2013, slightly up from 2011 (0.3%) thanks to increased production andtransformation capacity at Rougier Gabon, Olam and the Société nationale des bois du Gabon (SNBG). Theexploitation of minerals, especially manganese, is the third area of production with a big impact on foreigntrade. Generally speaking, mining’s share in GDP remained at 6.3% in 2011 and 2012. It should show a slightimprovement for 2013 (6.5%) when mining of the manganese deposit at Ndjolé begins and production at theCompagnie minière de l’Ogooué (COMILOG) is stepped up.


Gab

on

Farming is still limited, with cash crops, food crops and market gardens around towns developed with theassistance of the Gabonese Development Support Institute. Its contribution in 2012 was at the same level as2011 (3.8%), with cocoa and coffee production still hardly above their 2002 level (500 tonnes and 200 tonneseach). Similarly, prices received by planters have not changed since 2007, at XAF 650 (CFA francs BEAC) perkilogram of cocoa and XAF 450 per kilogram of coffee, despite rising world prices. The share of the secondarysector in the GDP rose to 8.5% in 2012, compared to 8.3% in 2011. This trend should carry over into 2013,reaching 9.1%, and 9.3% in 2014. Industry, building and public works, electricity and water generate thegreatest part of this sector’s contribution (respectively 4.6%, 2.7% and 1.7%). Finally, the tertiary sector,representing 32% of internal activity, is still the second contributor to GDP growth, 27.7% in 2012, up from2011 (27.0%). This sector was driven by the upgrading of hotels ready to welcome fans to the 2012 ACN and bythe spread of mobile phones. There should be an upward trend in 2013, 2014 and 2015, at 29.7%, 30.8% and31.7% respectively.In terms of demand, growth, estimated at 5.7% in 2012 and 6.2% in 2013, should be supported by two factors:rising public investment and FDI investment in special economic zones (SEZs) and the bounce back of miningunder the impetus of increased demand from big emerging markets. The public-sector contribution to GDPgrowth could well show a fall, from 3.1% in 2011 to 0.9% in 2012 as a result of the ending of the stadiumbuilding programme and cutbacks in the road-improvement programme. The public-sector contribution to GDPgrowth in 2012 rose (0.7%) compared to 2011 (-0.1%). It should grow in 2013 to 1.2% and in 2014 to 1.7%, asa result of the three-year recruitment of defence and security personnel, which has been taking place since2009. Contrary to forecasts, private consumption grew in 2012 (5.3%) compared to 2011 (2.9%), under theredistributive effect of income from works undertaken for the ACN. But it will fall in 2013 (3.4%) as the firstphase of these works is completed.Exports fell slightly in 2012 for several reasons. Marginal oil fields became depleted, production at the newNdjolé mine belonging to the Compagnie industrielle et commerciale des mines de Huazhou (CICMHZ) fell, thebringing into production of ore from Franceville by BHP Billiton was delayed (initially forecast at 250 000 tonnesin 2012), while COMILOG kept to its initial forecast (3.75 million tonnes for 2012). In general terms, the tradebalance has a structural surplus, with an import-cover ratio above 150%. The current value of exports easilymade up for the purchase of equipment following the dynamic public and private investments in recent years.Thanks to the high price of oil on the world market, Gabon enjoyed exceptional oil income. In 2012 itrepresented over 80% of export income, 48% of GDP and 50% of fiscal income.


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maintaining the policy of holding obligatory reserves. Inter-bank activity was characterised by a near-totalabsence of exchanges between banks. In general terms, the development of the major monetary aggregates isfavourable. In particular, foreign reserves have been built up, credit to the economy has grown, andgovernment debt to the banking sector has fallen.


Gabon is a member of the main regional organisations for economic co-operation: the Economic Community ofCentral African States (CEEAC), the Economic and Monetary Community of Central Africa (CEMAC), Organisationfor the Harmonisation of Business Law in Africa (OHADA) and the New Partnership for Africa's Development(NEPAD). Within CEMAC, non-tariff barriers are gradually being lifted. Customs duties on imported goods fromoutside CEMAC range from 5% to 30%. But regional integration is still held back by inadequate diversificationand communications within the sub-region. Gabon suffers from the low density of its industrial base andrelatively high labour costs. These affect its position within the region.

Since September 2010, Gabon has been in negotiations to conclude a voluntary partnership agreement (VPA)with the European Union. Discussions required the creation of three colleges: administration, business and civilsociety. Their members, designated by each college, work with representatives of the European Commissionbased in Libreville and Brussels. Negotiations deal with the legality of timber exported to the European Union(EU). The EU formulated new rules in October 2010 – due to come into force in March 2013 – forcing Europeanimporters to show that the timber they want to sell is legally sourced. The rules clearly state that timber from aVPA signatory meets the requirement and has automatic entry into the EU.

In 2012, Gabon’s balance worsened because of a fall in the surplus in current transactions, despite theimprovement in the capital and services account.

The downward trend in the current transactions balance, from 8.9% of GDP in 2011 to 7.5% of GDP in 2012, islinked to the falling trade balance. The trade balance is forecast to weaken, reaching 35.1% of GDP in 2012,because of the downturn in export income in 2012 to 50.9% as compared to 2011 when it was 53.7%.According to forecasts, this trend will continue in 2013 with falling export income, expected to be 48.8%, andthe services account will weaken.

Imports as a percentage of GDP are rising slightly, to 15.9% in 2012 compared to 15.8% in 2011, because of theimport of goods and services for the ACN. The deficit in the services balance is tending to reduce: from -10.2%in 2011 to -9.9% in 2012. This positive trend is mainly due to an improvement in the “other services tobusiness, freight and insurance”. The income balance had a deficit, which improved in 2012 over 2011(respectively -16.5% and -17.5%), resulting from a fall in dividend payments to private foreign investors. Thetrend is expected to continue in 2013 (-16.4%) and 2014 (-15.1%).


2004 2009 2010 2011 2012 2013 2014

Trade balance 39.8 35.8 36.5 37.9 35.1 33.2 29.0



Services -10.9 -9.5 -12.0 -10.2 -9.9 -10.2 -9.5

Factor income -13.0 -12.7 -14.0 -17.5 -16.5 -16.4 -15.1


Current account balance 12.9 11.9 9.1 8.9 7.5 5.4 3.4


Debt Policy

Since 2005, Gabon has not carried much debt. Over a fairly long period, public debt has been standing at a little


Fiscal Policy

The 2013 budget seeks to further the transformation of the economy by creating basic infrastructures and hubsof economic development. The aim is to consolidate growth and diversify its sources. Public financemanagement shows a budget surplus, which has regularly contracted since 2007, coming close to balance in2011 and 2012. Specifically, budgetary policy aims to diversify the economy and get the state’s overallexpenditure under control. The primary budget surplus was 2.1% of GDP in 2012, as opposed to 1.8% in 2011.It is expected to worsen in 2013 reaching 0.1%, as a result of dependence on variations in the price of oil.Hydrocarbons accounted for over 50% of total state income in 2012.

Budgetary policy shows a squeezing of overall state expenditure as a percentage of GDP. It went from 25.0% ofGDP in 2011 to 24.4% in 2012. However it should rise to 26.2% in 2013 with an increase in current expenditureon salaries and wages and higher capital expenditure.

State revenue dropped from 25.7% of nominal GDP in 2011 to 25.3% in 2012. This was due to a fall in oilincome, which decreased from 14.8% in 2011 to 14.0% in 2012. This downward trend should be maintained in2013 (13.5%) and 2014 (12.4%). A drop in public expenditure is the probable cause for 2012’s increased overallbalance, estimated at 0.9% of GDP, compared to 0.7% in 2011. This balance will worsen in 2013 to -1.3%, andin 2014 to -1.8%, due mainly to falling oil income.


2009 2010 2011 2012 2013 2014


Tax revenue 14.6 10.6 10.1 10.4 10.6 11.0

Oil revenue 16.6 16.3 14.8 14.0 13.5 12.4

Grants - - - - - -



Excluding interest 17 13 12.3 11.9 12.0 11.9


Interest 1.5 1.3 1.1 1.2 1.4 1.3

Primary balance 8.5 2 1.8 2.1 0.1 -0.5

Overall balance 6.9 0.7 0.7 0.9 -1.3 -1.8


Monetary Policy

In terms of monetary policy, inflation is structurally low thanks to the control mechanisms of the Bank of CentralAfrican States (BEAC). Over recent years, it has remained on average within the limits set by the stability andgrowth pact of the Economic and Monetary Community of Central Africa (CEMAC), similar to world inflationrates. However, in 2012 consumer prices rose by 3%, in line with the community’s norm (3%). This rise is dueto several causes: pressure on food prices, internal demand buoyed by public investment, and increasedconsumption due to the ACN. In agreement with the agri-food industry and consumer associations, thegovernment took steps to bring down prices of several food staples. These included the suspension, fromSeptember to December 2012, of customs duties and value added tax (VAT) on certain consumer products.Monetary policy, under the overall lead of the BEAC, has several aims: keeping the refinancing of banks at XAF2 billion; reducing main base rates, especially the interest rate on tenders, which now stands at 4%; and


Gab

on









2004 2009 2010 2011 2012 2013 2014

Trade balance 39.8 35.8 36.5 37.9 35.1 33.2 29.0



Services -10.9 -9.5 -12.0 -10.2 -9.9 -10.2 -9.5

Factor income -13.0 -12.7 -14.0 -17.5 -16.5 -16.4 -15.1




Debt Policy



Gab

on


Private Sector

The World Bank report Doing Business 2013 puts Gabon in 170th place in the world out of 185 economies forease of doing business. Having ranked 165th in the 2012 edition, Gabon fell by five places. The report picks uptwo good points: connection to the electricity supply and the resolution of insolvency, which improved by threeand two points respectively. The situation is unchanged with regard to setting up a business and the executionof contracts. Further effort is required in the transfer of property, granting of building permits, getting loans,payment of taxes, protection of investments and cross-border trade in a region recognised as poorly integrated.

Gabon’s private sector is still dominated by big multinationals and does not offer many openings to small- andmedium-sized enterprises (SMEs). This situation does not favour the emergence of small businesses drawing onlocal resources. Dialogue between the state and the private sector can be difficult. The same holds true fordialogue between the state and civil society organisations.

Some progress has been made in the area of good governance but practices remain unsatisfactory. According toTransparency International’s 2012 report on corruption in the world, Gabon comes 102 nd out of 176 countriesconsidered. This is disappointing, especially as there has been a national anti-profiteering commission since2010. The authorities, who wish to attract substantial foreign investment to develop the country, ought to beconcerned by this situation.

A new oil code is about to be adopted. Its aim is to raise the state’s share of income from the oil industry, whichis currently about 20% of profits. This share should rise to 30% over the next five years according to the newcode. Gabon wishes to promote prospecting in the so-called “marginal” zones and thus reduce the fall inproduction of crude oil. To bring its deep reserves on stream, it intends to create a more attractive, morecompetitive and safer institutional, legal, and tax environment. The new code, replacing that of 1962, willreduce the period for prospecting which should henceforth not exceed 12 years, while extraction can last for amaximum of 20 years.

The authorities wish to monitor state participation in oil companies and to become active partners in drilling,extraction and distribution. The new code provides for a new national oil company, the Gabon Oil Company(GOC), whose role in production should enhance income and investment in the sector.

In July 2012, the government finalised an agreement with the South Korean giant Samsung to build a newrefinery. This is intended to replace the old Société gabonaise de raffinerie (SOGARA) refinery, now out of date,whose refinement capacity no longer corresponds to the policy of adding value to primary resources as desiredby the authorities. The new refinery should double the treatment capacity for Gabonese crude, rising from thepresent 21 000 barrels a day to 50 000 barrels. Half this output will be exported. By 2015-16, the new plantshould be producing liquefied petroleum gas (LPG), diesel, aviation fuel, heating oil and refined petrol.

Financial Sector

Currently the financial sector comprises nine banks, three of which hold 65% of deposits and customer loans:the Banque gabonaise et française internationale (BGFI), the Banque internationale pour le commerce etl’industrie au Gabon (BICIG) and the Union gabonaise de banque (UGB). Outstanding receivables, as aproportion of total loans, have risen slightly in 2012, from 9.9% in 2011 to 10.1%. Loans to the private sectorare under the average for sub-Saharan oil exporting countries: 17.6% of GDP excluding oil in 2012, comparedto 18.3% in 2011. It is hard for SMEs to raise loans, given the restricted role of microfinance. The microfinancenetwork in Gabon is among the weakest in Central Africa, with just five bodies, of which three are operational:Finam, Loxia and Gamifi. These microfinance institutions are unable to meet the substantial credit needs of theprivate sector.

However, microfinance institutions could play a big role in poverty reduction and financing very smallenterprises1. Their presence in manufacturing, and not merely in services, could be facilitated by the setting upof a microfinance institutions refinancing fund. This would enable them to make commitments that correspondto the financing of the exploitation and investment cycles of very small enterprises.

The weakness of the financial sector constrains credit for small and very small enterprises, despite the highpotential demand. These enterprises are not always able to find solutions to their funding problems. Long-termfunding of investments continues to fall outside the scope of commercial banks, which prefer to invest theirsurplus liquidity. Several obstacles explain why the banks are unable to support the development of the privatesector, including inadequate security, the high cost of credit and substantial risks.

over 21% of GDP – including 18% foreign debt – which is a relatively low level of indebtedness. The cost ofservicing the public debt is forecast, however, to rise. Servicing the debt cost slightly more in 2012 (1.2%) ascompared to 2011 (1.1%). This trend is expected to carry over into 2013 (1.4%), because of the slowness ofimplementing budgets – and of financial management in general – which causes internal late payments. Thegovernment has set up a directorate of foreign debt tasked with shaping debt policy and taking active control ofa debt whose rate has been brought down to readily sustainable levels. It has also fixed a ceiling for debt whichcan be sustained while maintaining balanced public accounts. In 2012, the Directorate of Foreign Debtundertook to reconcile debt data with the state’s different creditors, including the World Bank Group.




2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20140%

10%

20%

30%

40%

50%

60%

70%

Perc

enta

ge









2004 2009 2010 2011 2012 2013 2014

Trade balance 39.8 35.8 36.5 37.9 35.1 33.2 29.0



Services -10.9 -9.5 -12.0 -10.2 -9.9 -10.2 -9.5

Factor income -13.0 -12.7 -14.0 -17.5 -16.5 -16.4 -15.1




Debt Policy



Gab

on


Private Sector

The World Bank report Doing Business 2013 puts Gabon in 170th place in the world out of 185 economies forease of doing business. Having ranked 165th in the 2012 edition, Gabon fell by five places. The report picks uptwo good points: connection to the electricity supply and the resolution of insolvency, which improved by threeand two points respectively. The situation is unchanged with regard to setting up a business and the executionof contracts. Further effort is required in the transfer of property, granting of building permits, getting loans,payment of taxes, protection of investments and cross-border trade in a region recognised as poorly integrated.

Gabon’s private sector is still dominated by big multinationals and does not offer many openings to small- andmedium-sized enterprises (SMEs). This situation does not favour the emergence of small businesses drawing onlocal resources. Dialogue between the state and the private sector can be difficult. The same holds true fordialogue between the state and civil society organisations.

Some progress has been made in the area of good governance but practices remain unsatisfactory. According toTransparency International’s 2012 report on corruption in the world, Gabon comes 102 nd out of 176 countriesconsidered. This is disappointing, especially as there has been a national anti-profiteering commission since2010. The authorities, who wish to attract substantial foreign investment to develop the country, ought to beconcerned by this situation.

A new oil code is about to be adopted. Its aim is to raise the state’s share of income from the oil industry, whichis currently about 20% of profits. This share should rise to 30% over the next five years according to the newcode. Gabon wishes to promote prospecting in the so-called “marginal” zones and thus reduce the fall inproduction of crude oil. To bring its deep reserves on stream, it intends to create a more attractive, morecompetitive and safer institutional, legal, and tax environment. The new code, replacing that of 1962, willreduce the period for prospecting which should henceforth not exceed 12 years, while extraction can last for amaximum of 20 years.

The authorities wish to monitor state participation in oil companies and to become active partners in drilling,extraction and distribution. The new code provides for a new national oil company, the Gabon Oil Company(GOC), whose role in production should enhance income and investment in the sector.

In July 2012, the government finalised an agreement with the South Korean giant Samsung to build a newrefinery. This is intended to replace the old Société gabonaise de raffinerie (SOGARA) refinery, now out of date,whose refinement capacity no longer corresponds to the policy of adding value to primary resources as desiredby the authorities. The new refinery should double the treatment capacity for Gabonese crude, rising from thepresent 21 000 barrels a day to 50 000 barrels. Half this output will be exported. By 2015-16, the new plantshould be producing liquefied petroleum gas (LPG), diesel, aviation fuel, heating oil and refined petrol.

Financial Sector

Currently the financial sector comprises nine banks, three of which hold 65% of deposits and customer loans:the Banque gabonaise et française internationale (BGFI), the Banque internationale pour le commerce etl’industrie au Gabon (BICIG) and the Union gabonaise de banque (UGB). Outstanding receivables, as aproportion of total loans, have risen slightly in 2012, from 9.9% in 2011 to 10.1%. Loans to the private sectorare under the average for sub-Saharan oil exporting countries: 17.6% of GDP excluding oil in 2012, comparedto 18.3% in 2011. It is hard for SMEs to raise loans, given the restricted role of microfinance. The microfinancenetwork in Gabon is among the weakest in Central Africa, with just five bodies, of which three are operational:Finam, Loxia and Gamifi. These microfinance institutions are unable to meet the substantial credit needs of theprivate sector.

However, microfinance institutions could play a big role in poverty reduction and financing very smallenterprises1. Their presence in manufacturing, and not merely in services, could be facilitated by the setting upof a microfinance institutions refinancing fund. This would enable them to make commitments that correspondto the financing of the exploitation and investment cycles of very small enterprises.

The weakness of the financial sector constrains credit for small and very small enterprises, despite the highpotential demand. These enterprises are not always able to find solutions to their funding problems. Long-termfunding of investments continues to fall outside the scope of commercial banks, which prefer to invest theirsurplus liquidity. Several obstacles explain why the banks are unable to support the development of the privatesector, including inadequate security, the high cost of credit and substantial risks.


Gab

on



The implementation of the national education policy is continuing with the aim of enhancing capacity at primary,secondary and higher levels. At primary and secondary level, the aim is to keep class numbers down to amaximum of 35 pupils, instead of 100 as at present. Scientific education has been reorganised withestablishments specialising in certain disciplines. Vocational and technical training must improve its capacity andperformance.

Schooling is obligatory from nursery school to the age of 16 in Gabon, where enrolment rose above 96% in2012. More than 20% of the population define themselves as having no qualifications. Nearly half have not gonebeyond primary level, 16% to lower secondary and only 6% have finished secondary education. In highereducation, the bachelor’s, master’s, doctorate system is becoming generalised, and new courses have beencreated. Moreover, the professionalisation of higher education and a quick transition to the workplace are beingachieved, thanks to public-private partnerships suggested by the education round table held in 2010. SinceJanuary 2012, the study bursaries of Gabonese students living in France have been increased. This is part of aproject to raise bursaries for all Gabonese students, by 10% for those abroad and 25% for those who stay inGabon.

The problem of overcrowding has not yet been solved, especially since 2011, when turning students away frompublic schools was banned. This measure created added difficulties because there was no complementaryschool-building programme or recruitment of teaching staff. Class sizes can exceed 200 pupils at sixth grade,which school heads find hard to deal with. A further challenge lies in the generalised recognition by the ministryof higher education of private institutions of higher education with no prior inspection of the quality of provisionor of teaching.

After education, healthcare is one of the sectors in greatest difficulty, even though it is considered a priority. In2012, it had enormous shortcomings, with poorly functioning health departments, inadequate primaryhealthcare, poor health information, frequent shortages of medicines in the basic health structures, and anunequal spread of human resources.

According to the programme to combat sexually transmitted disease and HIV/AIDS, the incidence of HIV/AIDShas fallen since 2007 when it was 5.7%. It is thought to have stabilised at around 5% since 2010. Despite that,AIDS remains a real threat to population growth and the socio-economic well-being of the country, and so it is apublic health problem.


Gabon exhibits enormous disparities in wealth distribution, with a third of the population living below thepoverty line. The inability to implement priority programmes, especially in the social field, can in large part beexplained by continuing failings in public finance management. This continues to affect the quality and efficiencyof public expenditure. The Millennium Development Goals (MDGs) evaluation document, prepared inconjunction with the United Nations Development Programme (UNDP), shows that many MDGs will not bereached by 2015, especially those relating to poverty and unemployment, the reduction of infant and maternalmortality, the number of children repeating years in primary education and the improvement of the habitat.

In terms of social protection, the Caisse nationale d’assurance maladie et de garantie sociale (CNAMGS:National Health Insurance and Social Guarantee fund), set up in 2011, is to undergo substantial reform in 2013.The functions of the Caisse nationale de sécurité sociale (CNSS: National Social Security Fund) with regard tohealth and maternity benefits will be transferred to the CNAMGS, so as to give universal health coverage. Thischange will lead to the creation of a private-sector health-insurance fund. The authorities also intend to reformretirement pensions and family allowances to state employees. To achieve this they will set up an independentsocial protection entity to manage retirement pensions and family services for public sector workers. Private-sector workers for their part will stay in the CNSS.

Access to drinking water and electricity is still a daily problem. Only 41% of the rural population have a supplyof treated water, that is to say tested and guaranteed safe to drink.

In terms of the habitat, the International Development Corporation (IDC) became the 40th foreign company toinvest in real estate in Gabon. In September 2011, it signed a contract worth XAF 600 billion to build5 000 homes opposite the Nkok special economic zone. The project, which should be completed in two years’time, according to the IDC’s chairman, has yet to start. Among large-scale habitat projects is that of RPP InfraProjects, an Indian construction and infrastructure enterprise, which has signed with the ministry of housing andhabitat a XAF 163 billion contract to build 10 000 units over three years. Another Indian company, M3M, intends

Nominal interest rates vary between 7.5% and 8.5% for the safest loans. The few businesses which obtained aloan from the Fonds d’aide et de garantie (Assistance and Guarantee Fund) are paying around 12%, withoverdraft facilities costing more than 20%.


Structural reform must be accelerated to strengthen good governance and support the diversification of theeconomy. The business environment needs to be improved, and infrastructure upgraded, while actions ofinternational relevance are pursued, such as taking advantage of, or instituting good practice in, the natural-resources sector. However, as the World Bank report Doing Business 2013 points out, the public service suffersfrom shortcomings in the management of administrative human resources. Moreover, businesses and citizensbear a substantial tax burden. This state of affairs encourages the informal economy, with many organisationsfailing to declare all of their turnover to the tax authorities.


Gabon’s economic development strategy rests on sustainable management of forest ecosystems andenhancement of biodiversity. At the end of 2012 the country signed a convention to create three protectedareas on the northern outskirts of Libreville: the Raponda Walker arboretum, formerly Mondah forest, theAkanda national park, important for bird life, and the Pongara national park, considered one of the mostimportant sea-turtle reserves on the Atlantic coast. The convention includes a plan to improve roads, tracks andbridges in the forest to facilitate eco-tourism and forest protection. It also provides for the establishment of anenvironmental education centre for young people.

The Agence d’exécution des activités de la filière forêt-bois (AEAFB: Agency for Activity in the Forestry/TimberSector) was set up in 2012. Its main aims are, on the one hand, the promotion of activity in the forestry/timbersector, and on the other, provision of technical support and advice to the ministry in charge of water andforests. Its tasks include inventory, forestry management, sorting, certification and product traceability, as wellas being alert to economic, political and strategic questions. The AEAFB is a major stakeholder inforestry/timber-related activities, from which the ministry of water and forests hopes to achieve a great deal: anincrease in the contribution to GDP, job creation, reduction of rural poverty and the development of thenation’s industrial fabric.

Apart from ensuring the sector is better known, the AEAFB also has to estimate the quantity and quality ofnational forestry holdings by 2014. This is an important undertaking: 85% of Gabon is covered by a denseevergreen rain forest of 22 million hectares, home to 400 different species, of which 60 have commercial value.Before the banning of raw log exports in May 2010, forestry made up 4.6% of GDP. This has since risen to 8%,according to water and forestry ministry figures.

Political Context

There was a change in the political landscape in 2012 following the death in October 2011 of PierreMamboundou, regarded as the main opposition leader. His death occurred after the dissolution in January 2011of the Union nationale, an opposition party whose leader, André Mba Obame, had declared himself president ofthe republic. His return to Libreville in August 2012, after 14 months in exile, gave rise to some violence duringunauthorised demonstrations. Thirty-three people were arrested and sentenced for public-order offences andvandalism.

Another important political event in 2012 was February’s cabinet reshuffle. A new prime minister was appointedat the head of a government with a “mission”. Its objective: to speed up the implementation of reforms andinvestments to elevate Gabon to the status of an emerging country. The new majority, after the legislativeelections of 17 December 2011, is still dominated by the Parti démocratique gabonais (PDG), which had 114 outof 120 deputies returned. By-elections were held in the five seats in which the results were invalidated by theConstitutional Court following irregularities. The forthcoming local elections, currently being organised, maytake place in a tense atmosphere, in particular through lack of trust in the electoral rolls. The biometric electoralregister was to be ready by 31 December 2012 at the latest, but the national personal data protectioncommission, set up in November 2012, handed its preliminary conclusions concerning the right way to set up aofficial biometric identity project to the government in February 2013.

to build 5 000 social housing units, for an estimated XAF 45.9 billion in the next two years.

The government has ratified international labour conventions and made progress on setting policies that willrespect them. However, applying the law sometimes runs up against difficulties on the ground. Employmentprotection is mainly safeguarded in the public sector, much less so in the formal private sector where lay-offs foreconomic reasons are tolerated. The law governing the labour market is fairly rigid, with a negative impact onthe competitiveness of businesses in the private sector.

Gender Equality

In school enrolment, the gap between boys and girls at primary level is not significant. However, for the periodfrom 1990 to 2010, the UNDP report notes a downward trend in the number of girls per 100 boys in primaryeducation, from 99.16% in 1990 to 95.15% by 2010. There is no disparity between the sexes in access tohealthcare. However, early and late or frequent pregnancies and inadequate prenatal or postnatal care lead to ahigh rate of maternal mortality, which might in part explain girls’ lower school enrolment and the drop-out rate,especially in the first half of the secondary cycle.

Moreover, widows and orphans encounter difficulties in obtaining their inheritance when the head of the familydies. On average, women are poorer and more likely to be unemployed than men. In terms of posts ofinfluence, recent figures show there are 18% of women in the Senate and 16% in the National Assembly.However, women fill 33% of jobs in the public service and 41% in commerce.

Gabon has ratified the United Nations Convention on the Elimination of all forms of Discrimination againstWomen. It has also joined the Beijing Action Programme (1995) and the Protocol on Women’s Rights in Africa,adopted by the African Union heads of state conference in Maputo (2003). Progress in this area led to theadoption of a national gender equality and fairness policy in 2010. According to the UNDP 2010 report, Gabonhas no customs or usages or daily practices that discriminate against women, whether deliberately, arbitrarily orsystematically established. Progress continued with the approval in 2010 of a law abrogating certaindiscriminatory provisions of the civil code and social security legislation.


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The implementation of the national education policy is continuing with the aim of enhancing capacity at primary,secondary and higher levels. At primary and secondary level, the aim is to keep class numbers down to amaximum of 35 pupils, instead of 100 as at present. Scientific education has been reorganised withestablishments specialising in certain disciplines. Vocational and technical training must improve its capacity andperformance.

Schooling is obligatory from nursery school to the age of 16 in Gabon, where enrolment rose above 96% in2012. More than 20% of the population define themselves as having no qualifications. Nearly half have not gonebeyond primary level, 16% to lower secondary and only 6% have finished secondary education. In highereducation, the bachelor’s, master’s, doctorate system is becoming generalised, and new courses have beencreated. Moreover, the professionalisation of higher education and a quick transition to the workplace are beingachieved, thanks to public-private partnerships suggested by the education round table held in 2010. SinceJanuary 2012, the study bursaries of Gabonese students living in France have been increased. This is part of aproject to raise bursaries for all Gabonese students, by 10% for those abroad and 25% for those who stay inGabon.

The problem of overcrowding has not yet been solved, especially since 2011, when turning students away frompublic schools was banned. This measure created added difficulties because there was no complementaryschool-building programme or recruitment of teaching staff. Class sizes can exceed 200 pupils at sixth grade,which school heads find hard to deal with. A further challenge lies in the generalised recognition by the ministryof higher education of private institutions of higher education with no prior inspection of the quality of provisionor of teaching.

After education, healthcare is one of the sectors in greatest difficulty, even though it is considered a priority. In2012, it had enormous shortcomings, with poorly functioning health departments, inadequate primaryhealthcare, poor health information, frequent shortages of medicines in the basic health structures, and anunequal spread of human resources.

According to the programme to combat sexually transmitted disease and HIV/AIDS, the incidence of HIV/AIDShas fallen since 2007 when it was 5.7%. It is thought to have stabilised at around 5% since 2010. Despite that,AIDS remains a real threat to population growth and the socio-economic well-being of the country, and so it is apublic health problem.


Gabon exhibits enormous disparities in wealth distribution, with a third of the population living below thepoverty line. The inability to implement priority programmes, especially in the social field, can in large part beexplained by continuing failings in public finance management. This continues to affect the quality and efficiencyof public expenditure. The Millennium Development Goals (MDGs) evaluation document, prepared inconjunction with the United Nations Development Programme (UNDP), shows that many MDGs will not bereached by 2015, especially those relating to poverty and unemployment, the reduction of infant and maternalmortality, the number of children repeating years in primary education and the improvement of the habitat.

In terms of social protection, the Caisse nationale d’assurance maladie et de garantie sociale (CNAMGS:National Health Insurance and Social Guarantee fund), set up in 2011, is to undergo substantial reform in 2013.The functions of the Caisse nationale de sécurité sociale (CNSS: National Social Security Fund) with regard tohealth and maternity benefits will be transferred to the CNAMGS, so as to give universal health coverage. Thischange will lead to the creation of a private-sector health-insurance fund. The authorities also intend to reformretirement pensions and family allowances to state employees. To achieve this they will set up an independentsocial protection entity to manage retirement pensions and family services for public sector workers. Private-sector workers for their part will stay in the CNSS.

Access to drinking water and electricity is still a daily problem. Only 41% of the rural population have a supplyof treated water, that is to say tested and guaranteed safe to drink.

In terms of the habitat, the International Development Corporation (IDC) became the 40th foreign company toinvest in real estate in Gabon. In September 2011, it signed a contract worth XAF 600 billion to build5 000 homes opposite the Nkok special economic zone. The project, which should be completed in two years’time, according to the IDC’s chairman, has yet to start. Among large-scale habitat projects is that of RPP InfraProjects, an Indian construction and infrastructure enterprise, which has signed with the ministry of housing andhabitat a XAF 163 billion contract to build 10 000 units over three years. Another Indian company, M3M, intendsto build 5 000 social housing units, for an estimated XAF 45.9 billion in the next two years.


Gender Equality





Gab

on


Sustainable management of forest ecosystems and the development of biodiversity are major components ofGabon’s economic development strategy. The authorities have promoted the idea of turning Gabon into anemerging economy based on three development pillars: “Green Gabon” , “Industrial Gabon” and “Service-Industry Gabon”. These sectors are seen as ways of diversifying and offering sustainable potential economicalternatives to oil.

Oil is the main resource of the economy. It has enabled Gabon, as the fifth largest producer in Africa, to becomea middle-income country, with a per capita income among the highest south of the Sahara. However, thisresource is beginning to run out. Yearly production, of the order of 12 million tonnes (235 000 barrels a day),has been slowing since 1998 and some experts even think the country’s fields will have run dry in 30 years orso. Doubts remain, however, over the size of identified reserves. Whatever the truth, efforts to escape from thestranglehold of oil are necessary, taking into account the desire to establish a balance in the future, whether interms of employment, of public finances or of international trade. Even taking the most optimistic view of thefuture for oil, the need to diversify is real, even if only to satisfy the expectations of the public at large, many ofwhom are in search of work. Oil does not provide many jobs.

According to figures from the Direction générale de l’économie (general directorate of the economy), 123 000people worked in the modern sector in 2010. This figure rose to 149 000 in 2012, as a result of rising numbersin the public sector. The oil industry employs a little over 2 400 Gabonese, which is less than 2% of the totalworkforce. Its contribution is mainly indirect, generating jobs in services, in retail and elsewhere. Oil alsoprovides a regular income for social purposes, especially by creating jobs in public administration. However,none of that is enough to meet the expectations of the country's people, roughly 50% of whom are under20 years of age. The national work and unemployment survey undertaken by the government in 2012, withfunding from the AfDB, puts the unemployment rate for those under 25 at 46% in the broad sense. That is tosay that it takes into account people who are out of work but who have not actively sought employment in themonth of the survey. The overall unemployment rate is 20% according to the International Labour Organization(ILO) definition, and 27% in the broader sense. Employment is a major challenge in Gabon. To meet it theauthorities want to create a diversified economic fabric based on the processing of natural resources to bring arelatively young population into the workforce.

This transformation requires the removal of obstacles that businesses find prohibitive. The state has alreadytaken steps along this road: it has created a genuine industrial policy that involves the setting up of specialeconomic zones (SEZs), and it has taken a share in local subsidiaries of big multinationals. Gabon has alsoengaged in a process to optimise oil resources, with explorations of deep offshore fields. It has done the samefor natural gas, by launching a project to build a petrochemical and metallurgical complex in partnership withthe Singaporean company Olam. In this context the AfDB is supporting the Gabon Fertilizer Company SA (GFC)project, which aims to finance the construction and operation of a modern and efficient industrial complex toproduce ammonia and urea. This complex is expected to produce 1.3 million tonnes of granular urea a year atthe SEZ of Île de Mandji, at Port-Gentil. The authorities also mean to continue the exploitation of other miningresources. Over 900 sites have been listed, the most high-profile being at Belinga, where more than 1 billiontonnes of iron ore have been identified.

After oil and gas, forestry is the second most important industry, as well as the country’s main employer. Theban on trade in unfinished timber since May 2010 ought to increase local added value by giving Gabon a role intimber processing. The “Green Gabon” of the PSGE relies on this target of adding value to forestry, whichpresupposes building plants for secondary and tertiary processing. It is still hard to assess the effectiveness ofthe ban on the export of lumber. Businesses complain this measure was not thought through and that they incurextra costs from delays in adding value to a significant proportion of exported timber. The export restrictions doindeed give rise to transitional costs, but do not prejudice the ability subsequently to become more competitive,subject to investment. The SEZs, which are very attractive, could provide a framework from within whichprocessing industries could take off. An example is the Nkok zone opened in September 2011, 40% of which isused for timber processing.

As of 2012, 90% of workers in most timber processing plants in Gabon were unskilled or partially skilled. Theplants are in urgent need of skilled workers to maintain production machinery, and this is confirmed by ministryof water and forests officials, who assessed the need for high-quality human resources. Some plants have noskilled workers at all and this lack makes itself felt in productivity and management of resources. In 2012 thegovernment therefore initiated a project to re-examine and harmonise the technical training of skilled workersand engineers specialised in the timber industry. It fits into the broader framework of training and naturalresource management programmes in the Congo basin, financed by the Congo Basin Forest Partnership andmanaged by the Network of Environmental and Forest Training Institutions of Central Africa. Canada’s Centred’enseignement et de recherche en foresterie (Centre for Forestry Teaching and Research) is responsible for

to build 5 000 social housing units, for an estimated XAF 45.9 billion in the next two years.


Gender Equality




the technical component.

Ore extraction, especially manganese, is the third industry where output has a strong impact on foreign trade.Manganese is the only mineral really exploited, and Gabon is one of the main world exporters. It is mined byCOMILOG, a company 66% owned by the French group Eramet. It intends to set up plants for the production ofsilicomanganese and manganese metal close to its Moanda site. But the city authorities, fearing the pollution thismight cause, have banned the consumption of water and fish from the river downstream from the manganesemine. The health risks in the short, medium and long term, the authorities claim, concern cardiovascular diseasefor the most at-risk groups – the young and the elderly. They intend to adopt a proper natural resourcesmanagement policy.

In conclusion, the PSGE must orchestrate structural processing in the long term to achieve a precise goal: tostop selling primary resources in their raw state, but rather to add value, so as to diversify economic activityand create jobs. Over time, the authorities expect the supply of jobs to meet demand. The success of thisdevelopment strategy depends in large part on the dynamics of investment, especially in the local and foreignprivate sector. The opportunities Gabon offers are considerable: they include mining, forestry, tourism, agri-food, and new information and communication technologies. To attract investors, reduce risks to entrepreneursand create conditions for profitability, the authorities must improve the economic and institutional environmentstill further.


Gab

on


Sustainable management of forest ecosystems and the development of biodiversity are major components ofGabon’s economic development strategy. The authorities have promoted the idea of turning Gabon into anemerging economy based on three development pillars: “Green Gabon” , “Industrial Gabon” and “Service-Industry Gabon”. These sectors are seen as ways of diversifying and offering sustainable potential economicalternatives to oil.

Oil is the main resource of the economy. It has enabled Gabon, as the fifth largest producer in Africa, to becomea middle-income country, with a per capita income among the highest south of the Sahara. However, thisresource is beginning to run out. Yearly production, of the order of 12 million tonnes (235 000 barrels a day),has been slowing since 1998 and some experts even think the country’s fields will have run dry in 30 years orso. Doubts remain, however, over the size of identified reserves. Whatever the truth, efforts to escape from thestranglehold of oil are necessary, taking into account the desire to establish a balance in the future, whether interms of employment, of public finances or of international trade. Even taking the most optimistic view of thefuture for oil, the need to diversify is real, even if only to satisfy the expectations of the public at large, many ofwhom are in search of work. Oil does not provide many jobs.

According to figures from the Direction générale de l’économie (general directorate of the economy), 123 000people worked in the modern sector in 2010. This figure rose to 149 000 in 2012, as a result of rising numbersin the public sector. The oil industry employs a little over 2 400 Gabonese, which is less than 2% of the totalworkforce. Its contribution is mainly indirect, generating jobs in services, in retail and elsewhere. Oil alsoprovides a regular income for social purposes, especially by creating jobs in public administration. However,none of that is enough to meet the expectations of the country's people, roughly 50% of whom are under20 years of age. The national work and unemployment survey undertaken by the government in 2012, withfunding from the AfDB, puts the unemployment rate for those under 25 at 46% in the broad sense. That is tosay that it takes into account people who are out of work but who have not actively sought employment in themonth of the survey. The overall unemployment rate is 20% according to the International Labour Organization(ILO) definition, and 27% in the broader sense. Employment is a major challenge in Gabon. To meet it theauthorities want to create a diversified economic fabric based on the processing of natural resources to bring arelatively young population into the workforce.

This transformation requires the removal of obstacles that businesses find prohibitive. The state has alreadytaken steps along this road: it has created a genuine industrial policy that involves the setting up of specialeconomic zones (SEZs), and it has taken a share in local subsidiaries of big multinationals. Gabon has alsoengaged in a process to optimise oil resources, with explorations of deep offshore fields. It has done the samefor natural gas, by launching a project to build a petrochemical and metallurgical complex in partnership withthe Singaporean company Olam. In this context the AfDB is supporting the Gabon Fertilizer Company SA (GFC)project, which aims to finance the construction and operation of a modern and efficient industrial complex toproduce ammonia and urea. This complex is expected to produce 1.3 million tonnes of granular urea a year atthe SEZ of Île de Mandji, at Port-Gentil. The authorities also mean to continue the exploitation of other miningresources. Over 900 sites have been listed, the most high-profile being at Belinga, where more than 1 billiontonnes of iron ore have been identified.

After oil and gas, forestry is the second most important industry, as well as the country’s main employer. Theban on trade in unfinished timber since May 2010 ought to increase local added value by giving Gabon a role intimber processing. The “Green Gabon” of the PSGE relies on this target of adding value to forestry, whichpresupposes building plants for secondary and tertiary processing. It is still hard to assess the effectiveness ofthe ban on the export of lumber. Businesses complain this measure was not thought through and that they incurextra costs from delays in adding value to a significant proportion of exported timber. The export restrictions doindeed give rise to transitional costs, but do not prejudice the ability subsequently to become more competitive,subject to investment. The SEZs, which are very attractive, could provide a framework from within whichprocessing industries could take off. An example is the Nkok zone opened in September 2011, 40% of which isused for timber processing.

As of 2012, 90% of workers in most timber processing plants in Gabon were unskilled or partially skilled. Theplants are in urgent need of skilled workers to maintain production machinery, and this is confirmed by ministryof water and forests officials, who assessed the need for high-quality human resources. Some plants have noskilled workers at all and this lack makes itself felt in productivity and management of resources. In 2012 thegovernment therefore initiated a project to re-examine and harmonise the technical training of skilled workersand engineers specialised in the timber industry. It fits into the broader framework of training and naturalresource management programmes in the Congo basin, financed by the Congo Basin Forest Partnership andmanaged by the Network of Environmental and Forest Training Institutions of Central Africa. Canada’s Centred’enseignement et de recherche en foresterie (Centre for Forestry Teaching and Research) is responsible forthe technical component.




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the technical component.




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104

Madagascar 2013


Jean Marie Vianney Dabire / [email protected]

Figure 1: Real GDP growth 2013 (South)



2011 2012 2013 2014

Real GDP growth 1.6 1.9 3 4



Budget balance % GDP -1.7 -3.1 -3 -2.2



Real GDP growth (%) Southern Africa - Real GDP growth (%) Africa - Real GDP growth (%)

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014-5%

-2.5%

0%

2.5%

5%

7.5%

10%

Re

al

GD

P G

row

th (

%)

Madagascar

Sections

Growth in Madagascar’s GDP was weak in 2012 (1.9% versus 1.6% in 2011), but projections point togrowth of 3% in 2013 and 4% in 2014, provided the elections scheduled in 2013 put an end to instability.

The four-year-old political crisis has led to a deterioration in the business climate and greater loss of controlin governance, and worsened the living conditions of the population despite some progress in educationand in the fight against HIV/AIDS.

Madagascar is rich in natural resources both significant and diverse, and although their contribution to thenational budget is still low, it could grow quickly, especially with the development of major projects for themining of ilmenite, nickel and cobalt.

Overview

Madagascar’s economic growth, which was negative (‑4.1%) in 2009 and weak (0.5%) in 2010, progressed to1.6% in 2011, still low compared to the average growth of sub-Saharan African countries, estimated at 5.3% bythe International Monetary Fund (IMF) in its October 2012 Regional Economic Outlook. The economy grew by1.9% in 2012, driven mainly by the mining industries, transport (helped by a revival of tourism) and exports

from customs-free zones.1 The authorities applied a restrictive fiscal policy to cope with the reduction ofexternal aid, a consequence of the political crisis that has shaken the country since 2009. They followed aprudent monetary policy and managed to contain the budget deficit at 3.1% of GDP (as against 1.7% in 2011).Similarly, they managed to limit the increase of prices to an annual average of 6.4%, down from 9.8% in 2011.The current-account deficit widened to 8.3% of GDP from 6.9% of GDP in 2011. This was the result of greaterdeterioration in the trade balance and in the services balance, which could not be offset by improvements in thebalance of current transfers and of the balance of financial transactions and in capital. Finally, if the electionsintended to put an end to the crisis are organised in 2013 as planned, growth could accelerate in 2013 and 2014to 3% and 4%, respectively. It would benefit from the expansion of the mining industries, the gradualresumption of external financing favourable to construction, and the buoyancy of trade and tourism.

The duration of the crisis has helped impoverish the population and to worsen the country’s social indicators. In2010, approximately 77% of Madagascans lived below the poverty line. This share is estimated to haveincreased in 2011 and 2012 even though recent data to confirm this are lacking. The protracted political tensionhas undermined the achievement of the Millennium Development Goals (MDGs) despite some progress in theareas of education and the fight against HIV/AIDS. GDP per capita amounted in 2012 to MGA 927 545(Madagascar ariarys) or USD 449, down 4.2% from 2011, while the population is growing at an annual rate of2.8%. The quality of governance and the business climate also deteriorated, and reform initiatives were limited.

Madagascar, which has very significant and diverse natural-resource deposits, has failed to take advantage ofthis wealth of assets to make major structural changes to the economy. The main reasons for this failure wererecurrent political crises since the 1970s, the weak competitiveness of local processing industries and suppliers,insufficient transport infrastructure and the low quality of public services. The contribution of natural resourcesto the national budget is still low but should grow rapidly with the implementation of large mining projects.

Madagascar

Sections

Growth in Madagascar’s GDP was weak in 2012 (1.9% versus 1.6% in 2011), but projections point togrowth of 3% in 2013 and 4% in 2014, provided the elections scheduled in 2013 put an end to instability.

The four-year-old political crisis has led to a deterioration in the business climate and greater loss of controlin governance, and worsened the living conditions of the population despite some progress in educationand in the fight against HIV/AIDS.

Madagascar is rich in natural resources both significant and diverse, and although their contribution to thenational budget is still low, it could grow quickly, especially with the development of major projects for themining of ilmenite, nickel and cobalt.

Overview

Madagascar’s economic growth, which was negative (‑4.1%) in 2009 and weak (0.5%) in 2010, progressed to1.6% in 2011, still low compared to the average growth of sub-Saharan African countries, estimated at 5.3% bythe International Monetary Fund (IMF) in its October 2012 Regional Economic Outlook. The economy grew by1.9% in 2012, driven mainly by the mining industries, transport (helped by a revival of tourism) and exports

from customs-free zones.1 The authorities applied a restrictive fiscal policy to cope with the reduction ofexternal aid, a consequence of the political crisis that has shaken the country since 2009. They followed aprudent monetary policy and managed to contain the budget deficit at 3.1% of GDP (as against 1.7% in 2011).Similarly, they managed to limit the increase of prices to an annual average of 6.4%, down from 9.8% in 2011.The current-account deficit widened to 8.3% of GDP from 6.9% of GDP in 2011. This was the result of greaterdeterioration in the trade balance and in the services balance, which could not be offset by improvements in thebalance of current transfers and of the balance of financial transactions and in capital. Finally, if the electionsintended to put an end to the crisis are organised in 2013 as planned, growth could accelerate in 2013 and 2014to 3% and 4%, respectively. It would benefit from the expansion of the mining industries, the gradualresumption of external financing favourable to construction, and the buoyancy of trade and tourism.

The duration of the crisis has helped impoverish the population and to worsen the country’s social indicators. In2010, approximately 77% of Madagascans lived below the poverty line. This share is estimated to haveincreased in 2011 and 2012 even though recent data to confirm this are lacking. The protracted political tensionhas undermined the achievement of the Millennium Development Goals (MDGs) despite some progress in theareas of education and the fight against HIV/AIDS. GDP per capita amounted in 2012 to MGA 927 545(Madagascar ariarys) or USD 449, down 4.2% from 2011, while the population is growing at an annual rate of2.8%. The quality of governance and the business climate also deteriorated, and reform initiatives were limited.

Madagascar, which has very significant and diverse natural-resource deposits, has failed to take advantage ofthis wealth of assets to make major structural changes to the economy. The main reasons for this failure wererecurrent political crises since the 1970s, the weak competitiveness of local processing industries and suppliers,insufficient transport infrastructure and the low quality of public services. The contribution of natural resourcesto the national budget is still low but should grow rapidly with the implementation of large mining projects.


Mad

agas

car

Figure 1: Real GDP growth 2013 (South)



2011 2012 2013 2014

Real GDP growth 1.6 1.9 3 4



Budget balance % GDP -1.7 -3.1 -3 -2.2



Real GDP growth (%) Southern Africa - Real GDP growth (%) Africa - Real GDP growth (%)

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014-5%

-2.5%

0%

2.5%

5%

7.5%

10%

Re

al

GD

P G

row

th (

%)


Mad

agas

car

http://dx.doi.org/10.1787/888932809431



2007 2012



Construction 4 4.5



Extractions - -


Finance, real estate and business services 16.7 15




Mining 0.1 0.3





Social services - -





Economic activity in 2012 was adversely affected by several factors. The first was the drawn-out political crisis,which had a negative impact on private-sector activities as well as on the volume of external financing. Therecurrence of natural disasters (hurricanes and floods) also affected the primary sector, while fluctuations in theinternational market, especially in energy prices, worsened the economy’s performance. The governmentincreased its subsidies to oil companies to contain fuel prices at the pump. According to National Treasury data,these amounted to MGA 211.83 billion, or 1% of GDP.Consequently, real GDP growth in 2012 has been estimated at 1.9%, barely higher than that in 2011 (1.6%).According to the 2013 budget data, the secondary sector has continued to drive growth and has grown by 3.8%,or 0.4 of a percentage point more than in 2011. This performance was mainly due to the mining industries andthe recovery in exports from the free-trade zones. These exports, which were hard hit by Madagascar’ssuspension from the African Growth and Opportunity Act (AGOA), should grow by 4.8% (after a 0.7% decline in2011) thanks to market diversification to Europe and Asia. Thanks to the revival of tourism and transport-relatedbranches, the tertiary sector grew by 2.7% after having declined by 0.7% in 2011. Primary-sector growth has


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car

remained low at 0.2%, suffering above all from the under-performance of the forestry sub-sector subsequent tothe suspension of issuance of licences to log precious woods, and also from recurrent cyclonic disturbanceshaving affected agricultural production. On the demand side, the overall investment rate is estimated to havefallen to 13.9% of GDP in 2012 from 14.4% in 2011, reflecting the completion of construction of major projectsin the private sector and the weakness of external funding to the government where public investment isconcerned. Total consumption is estimated to have amounted to 100.6% of GDP in 2012, up 1 percentage pointfrom 2011, a performance mostly due to the private component, notably the purchases of mining companies.The growth outlook should be better in 2013 and 2014, projected at 3% and 4%, respectively, taking intoaccount the organisation of presidential and legislative elections set for July and September 2013, and of thegradual return of foreign aid starting in 2014, once the institutional situation is stabilised. The secondary sectorwill remain the main engine of growth, fuelled mainly by the mining industries with an increase in ilmeniteproduction at QIT Madagascar Minerals (QMM) and in that of nickel and cobalt at Ambatovy. The tertiary sectorwill benefit from the revival of tourism and construction thanks to greater recovery in foreign aid. A revival inthe financing of agricultural projects by major donors should contribute to the recovery of agriculturalproduction.


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2009 2010 2011 2012 2013 2014


Tax revenue 10.7 10.9 11.1 10.9 10.7 10.2


Grants 1.7 1.9 1.9 1.2 2.1 3.6




Wages and salaries 4.8 5.2 5.3 5.6 5.8 6

Interest 0.8 0.8 0.7 1 1.3 1.7

Primary balance -1.8 -0.1 -1 -2.1 -1.7 -0.5

Overall balance -2.5 -0.9 -1.7 -3.1 -3 -2.2


Monetary Policy

Madagascar is not part of any monetary union. The Central Bank of Madagascar (CBM) conducts a prudentmonetary policy so as to maintain the internal and external stability of the currency. There was a nominaldepreciation of the national currency, the ariary, of 4.8% against the euro and 5.6% against the US dollar in2012. Interventions by the CBM in the money market (refinancing or liquidity-absorbing operations) did help,however, to protect the ariary against the fluctuations of the main currencies, which are ultimately expected tohave had little impact on foreign trade and are mostly determined by domestic production capacities and thenature and quality of external demand.

Price increases were contained at 6.4% on average for 2012, down from 9.8% in 2011. Increases in food priceswere moderate (+3.5%) thanks to good supply from the domestic market. The highest price rise was for energy(+8.9%) and was connected to price fluctuations in the international market. Expansion of the monetaryaggregates was accelerated in 2012. According to data from the 2013 budget, the money supply increased byMGA 48 billion in the first nine months of 2012 following a 43.1% increase in net claims on the government anda 9% increase in credits to the economy despite the deteriorated economic environment, which led banks togreater caution in their operations. On the other hand, net external assets decreased to MGA 295.5 billion overthe same period due to a greater rise in imports, which reduced foreign-exchange reserves to the equivalent of3.5 months of imports, compared with 3.9 months in 2011. The CBM maintained its lending rate at 9.5%,unchanged since August 2009, which has allowed money-market rates to remain stable since 2011.

For 2013 and 2014, the Madagascan authorities intend to conduct a prudent monetary policy in order tomaintain price stability. The CBM plans to increase withdrawal of excess liquidity through the indirectinstruments of monetary policy.


Madagascar belongs to several sub-regional organisations: the Common Market for Eastern and Southern Africa(COMESA), the Southern African Development Community (SADC) and the Indian Ocean Commission (IOC). Thecountry has been suspended from regional and continental organisations as a consequence of the country’sunconstitutional change of government in March 2009. Intra-regional trade remains poorly developed. In 2010and 2011, exports from Madagascar to the SADC and COMESA averaged 5% and 4%, respectively, whileimports from the same two regional blocs were 12% and 8% on average, respectively. Madagascar signed aninterim Economic Partnership Agreement with the European Union (EU) in August 2009, which came into effect


Fiscal Policy

In 2012, the country applied a restrictive fiscal policy to cope with the shock caused by reduced foreign aid. Theslowdown in economic activity was in particular reflected by a decline in the turnover of enterprises, resultingin lower revenues from income taxes and value added tax (VAT). Despite this, thanks to better mobilisation ofdomestic fiscal resources, total revenue (excluding grants) have been estimated for 2012 at MGA 2.357 trillion,a 4.5% increase from 2011. This effort helped to offset the lower revenues from international trade, whichforced the government to sacrifice MGA 64.5 billion in customs revenues after it froze the prices of fuel at thepump, which led to lower revenues from taxes and VAT on petroleum products.

Total revenues, however, accounted for only 11% of GDP, compared to 11.3% in 2011. The tax/GDP ratio thusended up at 10.9%, down 0.2 percentage points from 2011. External donations (consisting mainly of project-based donations) have remained low due to the political situation and have been estimated at MGA 246.6 billionin 2012 (1.2% of GDP), a 37% fall from 2011. Total expenditure has been estimated at MGA 3.317 trillion (about15.3% of GDP, against 14.9% in 2011), divided into current expenditure (11.2% of GDP) and investment (4% ofGDP). In terms of performance, the budget-implementation rate (interests not included) was only 52.41% at theend of 2012. The implementation rate was higher than 90% for current expenditures (debt, balance andoperations), but that for the investment programme was only 44.98%. Despite priority having been given tocurrent expenditure, the budget implementation did not allow the public service in general to be effectivebecause the resources were limited. The sectors identified as priorities in 2012 – such as health, education,support to agricultural production, increasing food security and the security of goods and persons, andconsolidating the energy sector – received approximately 40% of the resources from the general budget.Budget implementation for 2012 resulted in a budget deficit estimated at 3% of GDP, almost double the 1.6%target set by the budget. To finance the deficit, the authorities resorted to the banking system, notably byissuing Treasury-bill tenders and by drawing down on the on-going project-based loans. According to statisticssourced from the national debt department, they amounted to SDR 56.3 million (special drawing rights) fromJanuary to October 2012.

The 2013 budget has planned for a moderately restrictive fiscal policy to reduce the budget deficit to 1.6% ofGDP while also promoting economic recovery. The fiscal policy is focused on stabilising the tax rate, not settingnew taxes and strengthening measures against tax fraud. With the expected stabilisation of the politicalsituation, total revenues should amount to 12.9% of GDP. Grants are expected to increase by 45.3% from 2012to 2.1% of GDP as most of the projects based on external financing are put on track again. Total expenditure isprojected to grow moderately at 8.5% (10% for current expenditure and 3.6% under the public-investmentprogramme), to 15.9% of GDP.

in January 2013. The agreement covers market access, fisheries and official development aid. It is too early tojudge its impact on trade and customs revenues.

The country’s foreign trade in 2012 saw a higher deficit in the current-account balance, which came out at 8.3%of GDP, compared to 6.9% in 2011. This was a result of greater deterioration in the trade balance and in theservices balance, which could not be offset by the improved balances in current transfers and in financial andcapital transactions. The volume of exports of goods in 2012 increased by 3% and amounted to 12.4% of GDP.In addition to exports from the free-trade zone, which were resumed and amounted in terms of value to about40% of total exports, the main exported products were cloves (12.42%), petroleum products (6.84%) and sugar(2.26%). The increase in exports of cloves was connected to the rise in both its price and in global demand. Thevolume of imports of goods increased by 2.8% and amounted to 23.8% of GDP. The main imported productswere petroleum products (23%), raw materials (18%), imports from free-trade zones (15.7%), consumer goods(12.6%) and food products (9.8%). These percentages refer to the total value of imports (on a cost, insuranceand freight [cif] basis). The net flow of direct investment was SDR 507.7 million despite the ending of theconstruction phase in the mining sector. Foreign direct investment (FDI) came mainly from Canada, Japan, SouthKorea, the United Kingdom, Mauritius and France. The mining sector remained the major FDI recipient in 2012,followed by financial activities, oil distribution, construction and manufacturing activities.

According to provisional data from the CBM, the evolution of the competitiveness index, measured by the year-on-year real effective exchange rate (REER), indicated that the country lost in competitiveness in 2011 and inthe first eight months of 2012. The REER at end-August 2012 showed a 4.6% appreciation from the end ofDecember 2011 and a year-on-year 1.7% appreciation from August 2011. This loss of competitiveness was theresult of domestic inflation, which was higher than that of Madagascar's partner countries but had relatively littleimpact on international and financial trade.

The outlook for 2013 shows an improvement in the trade deficit resulting from a greater increase in exports(driven by mining products) than in imports. The same is projected for the balance of transfers, which willbenefit both from the increase in official transfers following the gradual resumption of aid and private transfers.The current account is projected to improve, with a deficit that could be reduced to 7.6% of GDP, compared to8.3% in 2012.


2004 2009 2010 2011 2012 2013 2014

Trade balance -10 -19.5 -12.3 -9.5 -11.4 -10.5 -8.8



Services -4.8 -4.2 -1.6 -1.6 -1 -0.7 -0.3

Factor income -1.8 -1.1 -1 -1.7 -0.7 -0.7 -0.5




Debt Policy

The latest joint World Bank/IMF sustainability analysis of the Madagascan debt dates back to June 2008 becausethe political crisis has prevented the possibility of conducting more recent ones. Nonetheless, total outstandingpublic debt has remained relatively low because of limited opportunities for loans from traditional donors.According to data from Madagascar’s national debt department, total outstanding public debt was estimated atthe end of 2012 at MGA 6.41 trillion (SDR 1.90 trillion), or 29.5% of GDP. Public debt was 77.5% of the totaldebt stock. It was made up of 77% of debt to international organisations, 18% of bilateral debt and 5% of debtto private creditors. The stock of domestic debt (23% of the total outstanding) was constituted of 77% ofTreasury-bill tenders and 23% of negotiable debt securities. The government has accumulated some external


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2009 2010 2011 2012 2013 2014


Tax revenue 10.7 10.9 11.1 10.9 10.7 10.2


Grants 1.7 1.9 1.9 1.2 2.1 3.6




Wages and salaries 4.8 5.2 5.3 5.6 5.8 6

Interest 0.8 0.8 0.7 1 1.3 1.7

Primary balance -1.8 -0.1 -1 -2.1 -1.7 -0.5

Overall balance -2.5 -0.9 -1.7 -3.1 -3 -2.2


Monetary Policy

Madagascar is not part of any monetary union. The Central Bank of Madagascar (CBM) conducts a prudentmonetary policy so as to maintain the internal and external stability of the currency. There was a nominaldepreciation of the national currency, the ariary, of 4.8% against the euro and 5.6% against the US dollar in2012. Interventions by the CBM in the money market (refinancing or liquidity-absorbing operations) did help,however, to protect the ariary against the fluctuations of the main currencies, which are ultimately expected tohave had little impact on foreign trade and are mostly determined by domestic production capacities and thenature and quality of external demand.

Price increases were contained at 6.4% on average for 2012, down from 9.8% in 2011. Increases in food priceswere moderate (+3.5%) thanks to good supply from the domestic market. The highest price rise was for energy(+8.9%) and was connected to price fluctuations in the international market. Expansion of the monetaryaggregates was accelerated in 2012. According to data from the 2013 budget, the money supply increased byMGA 48 billion in the first nine months of 2012 following a 43.1% increase in net claims on the government anda 9% increase in credits to the economy despite the deteriorated economic environment, which led banks togreater caution in their operations. On the other hand, net external assets decreased to MGA 295.5 billion overthe same period due to a greater rise in imports, which reduced foreign-exchange reserves to the equivalent of3.5 months of imports, compared with 3.9 months in 2011. The CBM maintained its lending rate at 9.5%,unchanged since August 2009, which has allowed money-market rates to remain stable since 2011.

For 2013 and 2014, the Madagascan authorities intend to conduct a prudent monetary policy in order tomaintain price stability. The CBM plans to increase withdrawal of excess liquidity through the indirectinstruments of monetary policy.


Madagascar belongs to several sub-regional organisations: the Common Market for Eastern and Southern Africa(COMESA), the Southern African Development Community (SADC) and the Indian Ocean Commission (IOC). Thecountry has been suspended from regional and continental organisations as a consequence of the country’sunconstitutional change of government in March 2009. Intra-regional trade remains poorly developed. In 2010and 2011, exports from Madagascar to the SADC and COMESA averaged 5% and 4%, respectively, whileimports from the same two regional blocs were 12% and 8% on average, respectively. Madagascar signed aninterim Economic Partnership Agreement with the European Union (EU) in August 2009, which came into effect






2004 2009 2010 2011 2012 2013 2014

Trade balance -10 -19.5 -12.3 -9.5 -11.4 -10.5 -8.8



Services -4.8 -4.2 -1.6 -1.6 -1 -0.7 -0.3

Factor income -1.8 -1.1 -1 -1.7 -0.7 -0.7 -0.5




Debt Policy

The latest joint World Bank/IMF sustainability analysis of the Madagascan debt dates back to June 2008 becausethe political crisis has prevented the possibility of conducting more recent ones. Nonetheless, total outstandingpublic debt has remained relatively low because of limited opportunities for loans from traditional donors.According to data from Madagascar’s national debt department, total outstanding public debt was estimated atthe end of 2012 at MGA 6.41 trillion (SDR 1.90 trillion), or 29.5% of GDP. Public debt was 77.5% of the totaldebt stock. It was made up of 77% of debt to international organisations, 18% of bilateral debt and 5% of debtto private creditors. The stock of domestic debt (23% of the total outstanding) was constituted of 77% ofTreasury-bill tenders and 23% of negotiable debt securities. The government has accumulated some external


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arrears, notably to Libya (MGA 49 billion) and Russia (MGA 60 billion), due to political instability for Libya and towaiting for the finalisation of agreements for Russia. With progressive recovery of funding from a number ofpartners (including the African Development Bank [AfDB] and the World Bank), in particular in the form of loans,outstanding debt is projected to increase but remain under control.




2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20140%

25%

50%

75%

100%

125%

150%

175%

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rce

nta

ge






2004 2009 2010 2011 2012 2013 2014

Trade balance -10 -19.5 -12.3 -9.5 -11.4 -10.5 -8.8



Services -4.8 -4.2 -1.6 -1.6 -1 -0.7 -0.3

Factor income -1.8 -1.1 -1 -1.7 -0.7 -0.7 -0.5




Debt Policy

The latest joint World Bank/IMF sustainability analysis of the Madagascan debt dates back to June 2008 becausethe political crisis has prevented the possibility of conducting more recent ones. Nonetheless, total outstandingpublic debt has remained relatively low because of limited opportunities for loans from traditional donors.According to data from Madagascar’s national debt department, total outstanding public debt was estimated atthe end of 2012 at MGA 6.41 trillion (SDR 1.90 trillion), or 29.5% of GDP. Public debt was 77.5% of the totaldebt stock. It was made up of 77% of debt to international organisations, 18% of bilateral debt and 5% of debtto private creditors. The stock of domestic debt (23% of the total outstanding) was constituted of 77% ofTreasury-bill tenders and 23% of negotiable debt securities. The government has accumulated some externalarrears, notably to Libya (MGA 49 billion) and Russia (MGA 60 billion), due to political instability for Libya and towaiting for the finalisation of agreements for Russia. With progressive recovery of funding from a number ofpartners (including the African Development Bank [AfDB] and the World Bank), in particular in the form of loans,outstanding debt is projected to increase but remain under control.




2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20140%

25%

50%

75%

100%

125%

150%

175%

Pe

rce

nta

ge


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arrears, notably to Libya (MGA 49 billion) and Russia (MGA 60 billion), due to political instability for Libya and towaiting for the finalisation of agreements for Russia. With progressive recovery of funding from a number ofpartners (including the African Development Bank [AfDB] and the World Bank), in particular in the form of loans,outstanding debt is projected to increase but remain under control.




2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20140%

25%

50%

75%

100%

125%

150%

175%

Pe

rce

nta

ge


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The country is well-endowed with legislation to prevent the exploitation and illicit export of rosewood. Thelegislation includes the 2011-001 Order on punishment of offences related to precious woods and the 2010-141Order prohibiting their logging, exploitation and export, but the government’s political will and actual capacityto enforce these texts are still problematic. There are countless cases of illegal exports of rosewood, particularlyto China, as regularly reported in the local press.

Given its potential in natural resources, including mining, Madagascar applied to join the Extractive IndustriesTransparency Initiative (EITI) and was admitted as candidate country in February 2008, but it was thensuspended in October 2011 pending the normalisation of its political situation. Budget receipts generated by theexploitation of natural resources are still low. According to the 2010 EITI reconciliation report made public in2012, earnings from the mining sector paid to the national budget were estimated at around MGA 291 billion, orabout 13% of total receipts that year and 1.5% of GDP. The contribution of the mining sector to the nationalbudget is, however, expected to grow in the coming years when Ambatovy project gets fully under way.

Political Context

In 2012, the country continued to suffer from the effects of the political crisis caused by Andry Rajoelina’soverthrow of Marc Ravalomanana, and the population’s living conditions deteriorated. There were severalstrikes in the country affecting virtually every sector of the public administration and even the financial sector.The strikers were demanding a wage increase or better safety and working conditions. Despite the difficulteconomic situation, the government tried to meet some of these demands partially, especially those of teachers.Political efforts were concentrated in 2012 on implementing the post-crisis roadmap signed on 17 September2011 with SADC mediation. This included setting up all the prescribed transition institutions in government andparliament and the independent electoral commission, CENI-T (Commission électorale nationale indépendantepour la transition).

Originally scheduled to take place before December 2012, the presidential and parliamentary elections werefirst postponed to May and then July 2013 due to technical and financial constraints. The CENI-T and the UnitedNations (UN) finally set the first round of the presidential election on 24 July 2013 and the second round of thepresidential election coupled with the parliamentary elections on 25 September 2013. Local elections will beheld on 23 October 2013. According the CENI-T, 82.38% of potential voters had been identified by February2012. The electoral budget, first estimated at USD 71 million, was reduced to USD 60 million as a result of thedepreciation of the local currency and of savings in the purchase of equipment. Funding continues but even if alldonor promises and the government’s commitment materialise, there will still be USD 3 million left to find.

The roadmap also emphasises that confidence and national-reconciliation measures need to be carried out,including an amnesty law and a law on the Madagascan reconciliation council. Several factors suggest that 2013could be the year when the political crisis ends. First of all, the two protagonists, former president MarcRavalomanana and the current transition president Andry Rajoelina, have announced that they will not run forpresident. This decision, which was one of the recommendations of the SADC summit of heads of state andgovernment of 7 and 8 December 2012 in Dar es Salaam (Tanzania), should generate a political climateconducive to the holding of the elections. In the second place, the population is exasperated by how long thecrisis has lasted. All the political and social actors want it to end as soon as possible. The internationalcommunity, especially the SADC, is putting much “pressure” on the country’s political actors to make thathappen. Moreover, the UN is involved alongside the CENI-T to ensure that elections are credible andtransparent.


Private Sector

The business climate has continued to deteriorate due to political uncertainties: the country lost four positions in

the annual ranking of the World Bank report Doing Business 2013, dropping from 138th out of 183 countries in

2012 to 142nd out of 185 in 2013. All the indicators have worsened except for the starting a business category,in which the country was ranked two places higher. Otherwise, there was no change in the categories of gettingcredit and resolving insolvency.

The sharpest decline was in the area of dealing with construction permits. The major obstacles to improving thebusiness climate include irregular access to electricity due to frequent load shedding, and difficulties inprotecting investors, enforcing contracts and registering property. Land-tenure bureaux have been set up acrossthe country to facilitate delivery of land deeds in particular, but some were closed in 2012 by the supervisingministry to resolve governance issues they were facing. To overcome most of these obstacles, an economicrecovery plan is being developed on the initiative of the Madagascan private sector.

Financial Sector

The Madagascan financial sector is poorly developed and is limited in its nationwide coverage. In 2012, itcomprised 11 banks, six financial institutions and 31 microfinance institutions (MFIs). The rate of access tobanking services remains low at about 5% of the population. In September 2012, 21% of households were usingMFIs, a 1.5 percentage point increase from the end of 2011. The financial markets include the money market(interbank and open-market trading) and Treasury-bill tendering. Financial regulations have not been reformedin any way in recent years. In addition, the political and economic crisis has affected the quality of bankportfolios. According to CBM statistics, 14.4% of total debts were doubtful receivables at the end of July 2012.All this reflects the difficulties banks are facing in honouring their commitments. There is some liquidity in thefinancial system, with 50.2% of banking assets held in cash in July 2012, up from 48.2% in July 2011. Long-termfinancing is difficult to obtain, in particular by small- and medium-sized enterprises (SMEs), and long-termborrowing costs remain quite high (a situation not particular to Madagascar, related to the fact that bankingresources are largely made up of short-term deposits, difficult to use for the long term), averaging between10% and 11% in 2011 and 2012. In the coming years, the CBM intends to increase its evaluation of MFIs. Thecountry has a comprehensive national finance strategy for 2013-17.


The process of privatising enterprises remained suspended in 2012 because the political crisis was not conduciveto implementing major structural reforms. If the 2013 elections are internationally recognised, the countrymight be able to finalise a new programme with the IMF, which would put the reform agenda at the centre ofeconomic policy. The state still owns shares in several enterprises operating in sectors such as energy,telecommunications, agro-industry and air transport. Preliminary talks between the public and private sectorwere also launched in June 2012 at the prime minister’s initiative. They focused on corruption, taxation anduntimely tax audits, insecurity and lack of visibility.

Despite their limited resources, the authorities continued to implement reforms in public finances that had beenstarted before the crisis. They deal with the programme budget, public procurement and top-down expendituremanagement, and include measures to strengthen the tax authorities. With the gradual resumption of funding tothe governance sector, the ministry of finance developed an internal action plan for 2013-15 to improve themanagement of finances. According to the ministry, the plan does not include deep reforms; its goal is toconsolidate the reforms achieved before the crisis, and the process is on-going.


Geologists have categorised Madagascar amongst the so-called “megadiversity countries” as it harbours about2% of global biodiversity. Its subsoil is rich and its favourable tax legislation is attracting more and more largemining companies. Their massive investments are, however, raising significant environmental challenges,especially given the public authorities’ weak capacities to ensure that they actually comply with environmentalstandards. In addition, the country’s natural resources are being threatened by the effects of climate change,deforestation and the degradation of natural areas. Madagascar is located in the southwest Indian Ocean basin,one of the major world areas where cyclones are formed, and is also prone to floods and drought. The countryhas had an environmental charter since 1990, a national adaptation programme of action on climate changeadopted in 2006 and a national policy for climate change. It was also equipped in 2010 with a national cleandevelopment mechanism strategy, one of the three Kyoto Protocol flexibility mechanisms.


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The country is well-endowed with legislation to prevent the exploitation and illicit export of rosewood. Thelegislation includes the 2011-001 Order on punishment of offences related to precious woods and the 2010-141Order prohibiting their logging, exploitation and export, but the government’s political will and actual capacityto enforce these texts are still problematic. There are countless cases of illegal exports of rosewood, particularlyto China, as regularly reported in the local press.

Given its potential in natural resources, including mining, Madagascar applied to join the Extractive IndustriesTransparency Initiative (EITI) and was admitted as candidate country in February 2008, but it was thensuspended in October 2011 pending the normalisation of its political situation. Budget receipts generated by theexploitation of natural resources are still low. According to the 2010 EITI reconciliation report made public in2012, earnings from the mining sector paid to the national budget were estimated at around MGA 291 billion, orabout 13% of total receipts that year and 1.5% of GDP. The contribution of the mining sector to the nationalbudget is, however, expected to grow in the coming years when Ambatovy project gets fully under way.

Political Context

In 2012, the country continued to suffer from the effects of the political crisis caused by Andry Rajoelina’soverthrow of Marc Ravalomanana, and the population’s living conditions deteriorated. There were severalstrikes in the country affecting virtually every sector of the public administration and even the financial sector.The strikers were demanding a wage increase or better safety and working conditions. Despite the difficulteconomic situation, the government tried to meet some of these demands partially, especially those of teachers.Political efforts were concentrated in 2012 on implementing the post-crisis roadmap signed on 17 September2011 with SADC mediation. This included setting up all the prescribed transition institutions in government andparliament and the independent electoral commission, CENI-T (Commission électorale nationale indépendantepour la transition).

Originally scheduled to take place before December 2012, the presidential and parliamentary elections werefirst postponed to May and then July 2013 due to technical and financial constraints. The CENI-T and the UnitedNations (UN) finally set the first round of the presidential election on 24 July 2013 and the second round of thepresidential election coupled with the parliamentary elections on 25 September 2013. Local elections will beheld on 23 October 2013. According the CENI-T, 82.38% of potential voters had been identified by February2012. The electoral budget, first estimated at USD 71 million, was reduced to USD 60 million as a result of thedepreciation of the local currency and of savings in the purchase of equipment. Funding continues but even if alldonor promises and the government’s commitment materialise, there will still be USD 3 million left to find.

The roadmap also emphasises that confidence and national-reconciliation measures need to be carried out,including an amnesty law and a law on the Madagascan reconciliation council. Several factors suggest that 2013could be the year when the political crisis ends. First of all, the two protagonists, former president MarcRavalomanana and the current transition president Andry Rajoelina, have announced that they will not run forpresident. This decision, which was one of the recommendations of the SADC summit of heads of state andgovernment of 7 and 8 December 2012 in Dar es Salaam (Tanzania), should generate a political climateconducive to the holding of the elections. In the second place, the population is exasperated by how long thecrisis has lasted. All the political and social actors want it to end as soon as possible. The internationalcommunity, especially the SADC, is putting much “pressure” on the country’s political actors to make thathappen. Moreover, the UN is involved alongside the CENI-T to ensure that elections are credible andtransparent.


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the non-agricultural sector was only 46.9%, and only 38.4% of managerial or technical positions in the publicand private sectors were occupied by women. According to the UNDP in its 2010 monitoring report, the reasonslie in the patriarchal nature of Madagascan society, in discriminatory and stereotypical gender practices, and inthe persistence of poverty, which affects women more than men.

Women are underrepresented in the transition institutions and in decentralised government administrations.They make up only 26% of the government, 18% of the supreme national transition council, and 12% of thetransition congress. Only 4.5% of mayors are women, and in the country’s 22 regions, not one of the regionalchiefs is a woman. To correct this, the government adopted on 6 November 2012 a bill (No. 03-2012/PL) ongender equality in elected offices and in senior public-service jobs. The upcoming elections will be anopportunity to test its implementation. The political crisis did not, however, bring about a significant decline inthe status of women despite the resurgence of violence against the vulnerable, women and children inparticular. A national platform was put in place to combat violence against women and to conduct severalawareness campaigns on the ground during 2012.



Madagascar’s Human Development Index (HDI) puts the country in the “low human development” category.

With an HDI score of 0.483, the country ranked 151st out of 187 countries in 2012. Despite some progress inthe areas of education and of the fight against HIV/AIDS, the authorities are facing significant challenges if theyare to achieve the Millennium Development Goals (MDGs), the deadline for which is 2015. A national survey onthe MDGs is under way and will make more recent data available to measure progress.

The country made significant efforts between 2002 and 2008 in extending primary education for all, but theywere stopped by the political crisis, making it difficult to achieve this MDG. According to the latest availabledata, the net enrolment rate was 73.4% in 2010 and the primary-school completion rate was 63% between2010 and 2011. The political crisis has severely affected access to primary education, with a decline in staff andincreased dropout rates, which amounted to 55.5% in 2010 for primary education. The number of children notenrolled in school increased by 500 000.

The political crisis has also had a particularly strong impact on the health sector. On average, 100 public basic-health centres out of the existing 2 000 remained closed. The reasons for this were budget restrictions in 2012– there was about 25% less public funding than in 2011 –, insufficient human resources and insecurity in someparts of the country. According to the latest available data from the AfDB, the infant mortality and under-fivemortality rates have remained high, although lower than the average in Africa. In 2011, they stood at 41.6 perthousand live births and 58.5 per thousand live births, respectively, compared to the average rates in Africa of76 per thousand live births and 119.5 per thousand live births, respectively. According to the 2009 populationand health survey, the maternal mortality rate was 498 deaths per one hundred thousand live births, whereas itwas 530.7 deaths per one hundred thousand live births in Africa. The MDG target is 127 deaths per one hundredthousand live births. HIV/AIDS prevalence was estimated at less than 1%, but the fight against the pandemic isslowed by a lack of sufficient resources.


The most recent diagnosis of poverty was conducted in 2010 through the periodic household survey, EPM(Enquête périodique auprès des ménages), which also helped to identify the most vulnerable groups. Thesurvey indicated that nearly 76% of Madagascans (82.2% in rural areas) were considered poor in 2010, whereasthe proportion was only 68% in 2005. The persistence of the crisis has worsened poverty since then, thoughthere are no recent statistics on this subject. According to the 2010 EPM, the situation of the labour market wascharacterised by a relatively low unemployment rate (3.8%), but also by a high underemployment rate (67.2%)due to job inadequacy and/or duration.

The authorities have established the priority areas to which resources are to go under the 2012 budget. Theseinclude, among others, the development of access to health and education services, support for agriculturalproduction, reinforcing food security, strengthening the security of goods and persons, and consolidating theenergy sector. These areas, which affect the poorest strata of the population, received approximately 40% ofthe resources from the general budget.

Moreover, various social-welfare programmes were put in place by the country’s public institutions and itstechnical and financial partners (the World Bank, the EU and the International Labour Organization [ILO]). Theidea is to offset the harmful effects of the crisis on the most disadvantaged populations by supplying someincome and by facilitating their access to basic social services. The World Bank, for example, approved inDecember 2012 a project for USD 65 million in emergency support to basic public services in the realm ofeducation, health and nutrition. The EU awarded a EUR 1.34 million grant to finance the programme to supportthe improvement of the living conditions and well being of communities at risk in the peripheral areas of thenational parks. These programmes remain very limited, however, affecting only the social security nets. Thegovernment’s budget constraints have made it less effective in implementing programmes. Allocations toprotection and welfare were reduced by 59% in 2012.

Gender Equality

Madagascar has made significant efforts to reduce gender disparities in education. According to the latest dataavailable from the UN Development Programme (UNDP) national report on the monitoring of MDGs (Rapportnational de suivi des OMD 2010, not officially launched in Madagascar until February 2012), the proportions ofgirls in total enrolment in primary and secondary schools in 2010 were 49.2% and 48.9%, respectively, against a50% target by 2015. In higher education, it was 47.2%. On the other hand, the proportion of women in thenon-agricultural sector and in politics is low. According to the 2010 EPM, the proportion of female employees in


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the non-agricultural sector was only 46.9%, and only 38.4% of managerial or technical positions in the publicand private sectors were occupied by women. According to the UNDP in its 2010 monitoring report, the reasonslie in the patriarchal nature of Madagascan society, in discriminatory and stereotypical gender practices, and inthe persistence of poverty, which affects women more than men.

Women are underrepresented in the transition institutions and in decentralised government administrations.They make up only 26% of the government, 18% of the supreme national transition council, and 12% of thetransition congress. Only 4.5% of mayors are women, and in the country’s 22 regions, not one of the regionalchiefs is a woman. To correct this, the government adopted on 6 November 2012 a bill (No. 03-2012/PL) ongender equality in elected offices and in senior public-service jobs. The upcoming elections will be anopportunity to test its implementation. The political crisis did not, however, bring about a significant decline inthe status of women despite the resurgence of violence against the vulnerable, women and children inparticular. A national platform was put in place to combat violence against women and to conduct severalawareness campaigns on the ground during 2012.


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Exports of food products such as vanilla, coffee, cloves and pepper constituted 11% of exports in 2011, inparticular thanks to the performance of cloves (+342%). Vanilla exports fell, however. Prawns and other fisheryproducts accounted for 11.2% of exports from the free-trade zones in 2011, and their share in total exports was4.5% in 2011.

The contribution of natural resources to the national budget is still low in terms of its potential, but should grow,thanks to the major mining projects. According to the 2010 EITI data reconciliation report, earnings from themining sector paid to the national budget were estimated at around MGA 291 billion. The vast majority wereroyalties paid by Wisco (USD 100 million). Mining resources accounted for approximately 13% of total revenueand 1.6% of GDP.

According to the transition authorities and a number of civil-society organisations (including Les amis de laTerre-France in their November 2012 report, Madagascar : nouvel eldorado des compagnies minières etpétrolières), the Madagascan mining code, in particular the law on large investments, favours mining companiesover the country. The authorities therefore suspended the issuance and the renewal of permits in many areas ofthe sector. Moreover, they went back on certain provisions of the law on large mining investments, requestingcommitments from the Ambatovy project that were not initially provided for in the legislation. Revision of themining code could be included amongst the priorities of the next post-election government. Modifying theallocation key for distributing mining revenues between the central government and local communities willcertainly be one of the elements to be considered in greater depth as part of such a review.

The country does not have a stabilisation fund in which resources can be invested in long-term assets.

A number of conditions are in place to allow Madagascar to grow enough to be able to promote structuralchange, namely to reallocate the labour force from the least productive sectors to the most productive ones,but this change has been thwarted by several factors: recurrent political crises that have generated an unstableenvironment for private-sector activities; the weak competitiveness of local processing industries and suppliers(high costs of production factors other than labour); insufficient transport infrastructure; and the low quality ofpublic services. In addition, good, sound management of natural resources remains a major challenge toMadagascar.

The first factor that might facilitate change was the establishment of free zones in 1989. These were intended togenerate jobs, to acquire and master new technologies, and to bring in capital. The zones were to be a steppingstone towards the country’s true industrialisation. Eighteen years later, in 2007, the number of employees wasestimated at 120 000, or one-third of the labour force in the secondary sector. In 2008, the zones had 175enterprises, of which 63% were in the textiles and apparel branch (further details are available in the ILO’sSeptember 2011 study, Les zones franches à Madagascar). The 2002 crisis and that of 2009, which resulted inthe suspension of AGOA agreements, led to the shut-down of several companies in the zone and the destructionof many jobs.

The second condition that can promote structural change lies in high-incentive oil and mining legislation. The2002 law on major mining investments provides for very competitive tax benefits for large investment projects(greater than MGA 50 billion, or about USD 22.5 million), in particular for those that process their products onsite. Corporate income taxes were thus reduced to 25% (compared to 35% for the general tax system) and to10% when products were processed inside the country. In this case, the mining licence was set at 1%. Thesebenefits help explain FDI inflow, in particular to extractive activities, which accounted for between 60% and80% of the entire FDI inflow over the past years.

The third element favourable to a change in the economy is the existence of a 2007-12 industrial policydocument through which the government of the time laid down its aim to “launch large-scale industrialisationwith intensive use of surplus labour”. It especially wished to encourage the introduction of new investmentprojects in sectors considered as high priorities for their ripple effect: tourism, agribusiness, light industry forexport, mining, infrastructure and ICT.

Political normalisation will be essential for the country to be able to implement a genuine industrial policy takingthese factors into account. It should make it possible to lift identified constraints and, in addition to the sectorsalready cited, give on-site processing of local products a place of choice, in particular in the agricultural sector.

Good management of natural resources remains one of Madagascar’s major challenges. According to aDecember 2010 World Bank study, Madagascar : revue de la gouvernance et de l’efficacité du développement,the country is mired in a “natural-resource curse” with regard to its mining potential. In the forestry sector,illegal logging and export of precious woods are almost daily realities despite the legal regulations. In themining sector, the tax revenues generated by mining will grow with the implementation of the two hugemining projects. They could “sharply change how revenues are distributed amongst the elites by rewardinghighly those who control political power”, according to the World Bank study. They could also “exacerbate


The past 20 years in Madagascar have witnessed recurrent political crises that made it impossible to implementmajor economic structural changes. A few sectors (or branches) can, however, be seen as having driven theeconomy: construction, mining, textiles, information and communication technology (ICT), and tourism. Theengines of future growth will be food products, mining, renewable energies, textiles, construction and tourism.

A report published by the IMF in October 2012, Regional Economic Outlook: Sub-Saharan Africa, indicates thatthe GDP shares of agriculture, mining and manufacturing have remained practically unchanged for 20 years.They were 28.6%, 0.5% and 10.6%, respectively, in 1990: and in 2010 28.4%, 0.6% and 11.1%. Theconstruction sector grew the most, from a 1.3% to a 4.7% share of GDP between 1990 and 2010, but it onlygenerated 1.2% of the jobs created in 2010. The GDP share of the tertiary sector, which remains the maindriver of growth, fell from 57.8% in 1990 to 53.9% in 2010, or a 3.9% fall.

Agriculture is distinguished by low productivity. It remains the largest provider of jobs having generated 80% ofboth male and female jobs, a share that has remained constant for several years according to the 2010 EPM.The mining sector has recently emerged as a growth engine. In the 1990s, its exploitation was mostly informaland small scale and was dominated by small mines with little added value. The mining landscape altered in thelate 2000s as a result of mining reforms and the arrival of big mining investors in two large projects, QMM andAmbatovy. Growth of the mining industries, which was 9% in 2008, rose to 25.6% in 2012 and is projected at42.4% in 2013 in the 2013 budget. The sector does not, however, generate many jobs. The largest miningproject, Ambatovy, provided only 18 000 jobs during its construction phase and will have 6 000 for operations.

The development of free-trade zones since 1989 was intended to strengthen the Madagascan industrial fabric,but the manufacturing sector has not evolved significantly since then. It only provided 3.4% of jobs in 2010, theyear Madagascar was suspended from AGOA, which it had entered in 2000, because of the political crisis.Several enterprises and companies had to shut down, causing a loss of nearly 20 000 jobs. The textile industryhas suffered from this situation. After a 24.6% fall in 2010, its growth is nonetheless gradually picking up: it rosefrom -0.8% in 2011 to 1.9% in 2012 and could reach 2.6% in 2013 thanks to a diversification of its marketoutlets. It is, therefore, still of major importance, even though it accounted for only 1.1% of jobs in 2010.

In the tertiary sector, trade is the largest provider of jobs. In 2010 it accounted for almost 7% of jobs, of which9% were for women and 5% for men. ICT and tourism have been dynamic sectors, with ICT showing sustainedgrowth at more than 3% per year these past ten years, including in the crisis years, thanks to the liberalisationof the sector and to significant investments in infrastructure including the installation of optical fibre in thedifferent regions. The turnover of mobile telephony grew 13-fold between 2005 and 2009, providing severaldirect and indirect jobs (call centres, computer programming, etc.) according to the ILO in its December 2011report, Madagascar : évaluation des impacts de la double crise sur l’emploi. The tourism sector has also grown,especially in the 2000s, but its expansion has been hampered by the political crisis. The number of tourists fellfrom 375 010 in 2008 to 162 687 in 2009, then rose a little to 196 052 in 2010. Similarly, the occupancy rate ofhotels dropped from 64% in 2008 to 39% in 2009 then rose back to 46% in 2010. Tourism, nevertheless,generated more than 31 000 direct jobs in 2011, compared to fewer than 20 000 in 2004, or a 57% increase.Tourism revenues have nearly tripled, rising from SDR 104 million in 2004 to SDR 303 million in 2008.

Madagascar has very significant and diversified natural resources. Their contribution to the national budget isstill low but should grow rapidly with the recent implementation of major mining projects.

Traditionally, exports of mineral resources were mainly of chromium and graphite, but their share in totalexports dropped from 4% in 1990 to 1.2% in 2011. The main reason for this is the coming on stream of giganticindustrial mines such as QMM and Ambatovy, which has transformed the Madagascan mining landscape. Theproduction and export of titanium and zirconium by QMM since 2010 has increased the share in exports of hardcommodities, which in 2011 was 8%. In terms of volume, ilmenite exports are expected rapidly to reach750 000 tonnes per year, or 10% of world production, and zirsill exports to reach 60 000 tonnes per year. Thisvolume was also expected to increase after Ambatovy began to export nickel and cobalt in November 2012.Ambatovy intends to move quickly to produce 5 600 tonnes per year of cobalt, or 10% of world production, and60 000 tonnes per year of nickel, or nearly 5% of world production. This project is one of the largest customersfor suppliers of goods and services in Madagascar. At the end of 2010, it had signed contracts with local suppliersfor more than USD 1.2 billion. After training to improve the quality of their products, more than 500 micro-,small-, and medium-sized enterprises received orders from Ambatovy. More than 2 000 local businesses areentered into a database used by Ambatovy and its sub-contractors.

In 2011 petroleum-product exports were estimated at 61.5 tonnes and accounted for about 6.6% of exports interms of value. According to the French treasury directorate general, a dozen companies of various nationalitiesare engaged in oil-exploration operations in Madagascar.


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Exports of food products such as vanilla, coffee, cloves and pepper constituted 11% of exports in 2011, inparticular thanks to the performance of cloves (+342%). Vanilla exports fell, however. Prawns and other fisheryproducts accounted for 11.2% of exports from the free-trade zones in 2011, and their share in total exports was4.5% in 2011.

The contribution of natural resources to the national budget is still low in terms of its potential, but should grow,thanks to the major mining projects. According to the 2010 EITI data reconciliation report, earnings from themining sector paid to the national budget were estimated at around MGA 291 billion. The vast majority wereroyalties paid by Wisco (USD 100 million). Mining resources accounted for approximately 13% of total revenueand 1.6% of GDP.

According to the transition authorities and a number of civil-society organisations (including Les amis de laTerre-France in their November 2012 report, Madagascar : nouvel eldorado des compagnies minières etpétrolières), the Madagascan mining code, in particular the law on large investments, favours mining companiesover the country. The authorities therefore suspended the issuance and the renewal of permits in many areas ofthe sector. Moreover, they went back on certain provisions of the law on large mining investments, requestingcommitments from the Ambatovy project that were not initially provided for in the legislation. Revision of themining code could be included amongst the priorities of the next post-election government. Modifying theallocation key for distributing mining revenues between the central government and local communities willcertainly be one of the elements to be considered in greater depth as part of such a review.

The country does not have a stabilisation fund in which resources can be invested in long-term assets.

A number of conditions are in place to allow Madagascar to grow enough to be able to promote structuralchange, namely to reallocate the labour force from the least productive sectors to the most productive ones,but this change has been thwarted by several factors: recurrent political crises that have generated an unstableenvironment for private-sector activities; the weak competitiveness of local processing industries and suppliers(high costs of production factors other than labour); insufficient transport infrastructure; and the low quality ofpublic services. In addition, good, sound management of natural resources remains a major challenge toMadagascar.

The first factor that might facilitate change was the establishment of free zones in 1989. These were intended togenerate jobs, to acquire and master new technologies, and to bring in capital. The zones were to be a steppingstone towards the country’s true industrialisation. Eighteen years later, in 2007, the number of employees wasestimated at 120 000, or one-third of the labour force in the secondary sector. In 2008, the zones had 175enterprises, of which 63% were in the textiles and apparel branch (further details are available in the ILO’sSeptember 2011 study, Les zones franches à Madagascar). The 2002 crisis and that of 2009, which resulted inthe suspension of AGOA agreements, led to the shut-down of several companies in the zone and the destructionof many jobs.

The second condition that can promote structural change lies in high-incentive oil and mining legislation. The2002 law on major mining investments provides for very competitive tax benefits for large investment projects(greater than MGA 50 billion, or about USD 22.5 million), in particular for those that process their products onsite. Corporate income taxes were thus reduced to 25% (compared to 35% for the general tax system) and to10% when products were processed inside the country. In this case, the mining licence was set at 1%. Thesebenefits help explain FDI inflow, in particular to extractive activities, which accounted for between 60% and80% of the entire FDI inflow over the past years.

The third element favourable to a change in the economy is the existence of a 2007-12 industrial policydocument through which the government of the time laid down its aim to “launch large-scale industrialisationwith intensive use of surplus labour”. It especially wished to encourage the introduction of new investmentprojects in sectors considered as high priorities for their ripple effect: tourism, agribusiness, light industry forexport, mining, infrastructure and ICT.

Political normalisation will be essential for the country to be able to implement a genuine industrial policy takingthese factors into account. It should make it possible to lift identified constraints and, in addition to the sectorsalready cited, give on-site processing of local products a place of choice, in particular in the agricultural sector.

Good management of natural resources remains one of Madagascar’s major challenges. According to aDecember 2010 World Bank study, Madagascar : revue de la gouvernance et de l’efficacité du développement,the country is mired in a “natural-resource curse” with regard to its mining potential. In the forestry sector,illegal logging and export of precious woods are almost daily realities despite the legal regulations. In themining sector, the tax revenues generated by mining will grow with the implementation of the two hugemining projects. They could “sharply change how revenues are distributed amongst the elites by rewardinghighly those who control political power”, according to the World Bank study. They could also “exacerbate


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social inequalities in the mining communities”. In addition, the management of mineral rights remains apotential source of pay-outs if the desired transparency is not there.

Given the risks, implementing the EITI is an opportunity, provided that the current blockages are removed, asthe country was suspended from the EITI in 2010 because of its political instability. The actions that are takenonce institutional stability is recovered must: support the EITI and, above all, civil-society oversight of the use ofpublic resources; strengthen the management skills of the mining communities for transparent use of therevenues generated by mining; and consolidate the oversight bodies for the illicit exploitation and export ofprecious woods, and apply penalties to all apprehended offenders.

Notes

1. The performance of the mining industry is mainly due to a number of large mining projects. QIT MadagascarMinerals (QMM)’s ilmenite-mining project in Fort-Dauphin is in its third year of operation. In 2013, the companyshould approach its annual export target, i.e. 750 000 tonnes per year of ilmenite (10% of world production)and 60 000 tonnes per year of zirsill. QMM’s investment amounts to USD 950 million. Rio Tinto owns 80% of theshares and the government of Madagascar 20%. The Ambatovy nickel and cobalt production project exported itsfirst products (99.9% pure nickel and 99.3-99.8% pure cobalt) in November 2012. Ambatovy is a consortiumcomprising Sherrit International Corporation (Canada), SNC-Lavalin (Canada), Suminoto Corporation (Japan) andKorea Resources Corporation (South Korea). Investment has been evaluated at USD 5.5 billion. An averageannual production of 60 000 tonnes of nickel, 5 600 tonnes of cobalt and 190 000 tonnes of ammonium sulphateis expected over a period of 20 years.


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São Tomé and Príncipe 2013


Flavio Soares Da Gama / [email protected]

120

São Tomé & Príncipe

Sections

As a small island state, São Tomé and Príncipe faces geographic constraints and economic challenges thatcondition its development prospects.

The economy grew 4.9 % in 2011 driven by the construction, transport and retail sectors but in 2012growth fell to an estimated 4%, mainly because of reductions in both private and public consumption.

São Tomé has great potential to become a middle-income country based on its size and GDP per capita, ifits resource wealth from oil is efficiently and transparently managed, thus avoiding the resource curse.

Overview

The economy in São Tomé and Príncipe grew by 4.9% in 2011 compared with 4.5% in 2010. The growth wasdriven by the service, transport, construction and retail sectors. In 2012 the government reported a slightdecrease in the growth rate to 4.0%, the result of a reduction in foreign direct investment (FDI) and private andpublic consumption. Real gross domestic product (GDP) growth is projected to be 5.2% and 5.8% in 2013 and2014, respectively, thanks to an increase in FDI, the oil signature bonus and the inception of the country’s majorinfrastructure projects, notably the deep-water seaport.

On the fiscal front, the emphasis was on consolidation. As a result, the budget deficit is projected to fall to asingle digit of 9.4% of GDP at the end of 2012, from 11.9% in 2011. The strong performance is linked tostructural reforms implemented in recent years aimed at improving revenue collection, including theestablishment of a credit bureau, and enactment of legislation on natural resource management. Furthermore,the authorities are considering the implementation of the Fiscal Responsibility Framework aimed at tackling in2013 the recurrent and chronic budget deficit and enhancing public accountability. To strengthen the financialsystem and improve its credibility, the Central Bank (CB) is planning to strengthen banking supervision byproviding training to staff on risk management. The measure also includes revision of CB activities andrestructuring of unprofitable banks. In 2013 a new chart of accounts will enter into force which is expected tocomply with international financial reporting standards. A sound legal framework for banks with problems is alsoenvisaged for 2014 with a view to assisting distressed banks with implementation, among other things, ofappropriate monitoring and supervision instruments.

Conscious of the need to move the country away from the high risk of debt distress, with the support of theWorld Bank (WB) and Debt Relief International (DRI), in April 2012 the National Assembly approved a newPublic Debt Management Law that defines the strategic framework and establishes the responsibilities andgovernance structure of the Bureau of Public Debt. In line with the sustainable growth objective of the countryand to demonstrate further its commitment to improving transparency in the management of funds from itsnatural resources, the government enacted several laws on natural resources management including aframework for oil resource management, and the creation of a national petroleum agency and a nationalpetroleum council (Law 8/2004, 5/2004 and 3/2004). This effort was reinforced with the re-application of thearchipelago to participate in the Extractive Industry Transparency Initiative (EITI) and the acceptance of theapplication. The efficient management of oil revenues will therefore be a key challenge with the production ofoil expected in 2016.


2011 2012 2013 2014

Real GDP growth 4.9 4 5.2 5.8






São Tomé & Príncipe

Sections

As a small island state, São Tomé and Príncipe faces geographic constraints and economic challenges thatcondition its development prospects.

The economy grew 4.9 % in 2011 driven by the construction, transport and retail sectors but in 2012growth fell to an estimated 4%, mainly because of reductions in both private and public consumption.

São Tomé has great potential to become a middle-income country based on its size and GDP per capita, ifits resource wealth from oil is efficiently and transparently managed, thus avoiding the resource curse.

Overview

The economy in São Tomé and Príncipe grew by 4.9% in 2011 compared with 4.5% in 2010. The growth wasdriven by the service, transport, construction and retail sectors. In 2012 the government reported a slightdecrease in the growth rate to 4.0%, the result of a reduction in foreign direct investment (FDI) and private andpublic consumption. Real gross domestic product (GDP) growth is projected to be 5.2% and 5.8% in 2013 and2014, respectively, thanks to an increase in FDI, the oil signature bonus and the inception of the country’s majorinfrastructure projects, notably the deep-water seaport.

On the fiscal front, the emphasis was on consolidation. As a result, the budget deficit is projected to fall to asingle digit of 9.4% of GDP at the end of 2012, from 11.9% in 2011. The strong performance is linked tostructural reforms implemented in recent years aimed at improving revenue collection, including theestablishment of a credit bureau, and enactment of legislation on natural resource management. Furthermore,the authorities are considering the implementation of the Fiscal Responsibility Framework aimed at tackling in2013 the recurrent and chronic budget deficit and enhancing public accountability. To strengthen the financialsystem and improve its credibility, the Central Bank (CB) is planning to strengthen banking supervision byproviding training to staff on risk management. The measure also includes revision of CB activities andrestructuring of unprofitable banks. In 2013 a new chart of accounts will enter into force which is expected tocomply with international financial reporting standards. A sound legal framework for banks with problems is alsoenvisaged for 2014 with a view to assisting distressed banks with implementation, among other things, ofappropriate monitoring and supervision instruments.

Conscious of the need to move the country away from the high risk of debt distress, with the support of theWorld Bank (WB) and Debt Relief International (DRI), in April 2012 the National Assembly approved a newPublic Debt Management Law that defines the strategic framework and establishes the responsibilities andgovernance structure of the Bureau of Public Debt. In line with the sustainable growth objective of the countryand to demonstrate further its commitment to improving transparency in the management of funds from itsnatural resources, the government enacted several laws on natural resources management including aframework for oil resource management, and the creation of a national petroleum agency and a nationalpetroleum council (Law 8/2004, 5/2004 and 3/2004). This effort was reinforced with the re-application of thearchipelago to participate in the Extractive Industry Transparency Initiative (EITI) and the acceptance of theapplication. The efficient management of oil revenues will therefore be a key challenge with the production ofoil expected in 2016.


2011 2012 2013 2014

Real GDP growth 4.9 4 5.2 5.8







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http://dx.doi.org/10.1787/888932809640



2007 2011


Agriculture, hunting, forestry, fishing 19.2 22

Construction 9.7 8



Extractions - -





Manufacturing 7 7.1

Mining 0.7 0.7





Social services - -





The country has registered a good economic performance in recent years, with real GDP growth of 4.9% in2011, driven by the construction, transport and retail sectors. In 2012, the economy suffered a setback as aresult of a reduction in both private and public consumption. In 2013 real GDP is expected to grow by 5.2% onthe back of a positive performance in FDI, any oil signature bonus, and the agriculture, tourism andinfrastructure sectors. In terms of sectoral contribution, the service sector is still dominant, accounting for about60% of GDP in 2011, followed by agriculture, which represented about 22% of GDP. Inflation has continued itsdownward trend and is expected to reach the single digit of 9.5% in 2012 against 14.3% in 2011, mainlybecause of the pegging of the dobra (STD) to the euro (EUR1=STD24 500). By the end of 2013 and 2014,inflation is expected to have fallen further to 7.9% and 7.7%, respectively.The country’s economy is undiversified with a narrow export base that depends on the export of a singlecommodity, cocoa. The European market continues to be the country’s main trade destination, with 55% ofimports coming from Portugal while 25% of the nation’s exports go to the Netherlands. In spite of a weakperformance in recent years, FDI is expected to recover, averaging about USD 25 million during 2012-14, based


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Fiscal Policy

The government continued its efforts with fiscal consolidation during the third quarter of 2012. Being highlydependent on external assistance, the government has been implementing policies to make the country moreresilient in the face of external shocks and to avoid unnecessary distortions in expenditures that will createfurther pressure on domestic revenue mobilisation. As a result, the budget deficit is projected to reach a singledigit of 9.4% of GDP at end of 2012 from 11.9% in 2011. The strong performance is linked to structural reformsimplemented by the government in recent years aimed at improving revenue collection, including theestablishment of the credit bureau, legislation on natural resource management, reduction of corporate tax,improved collection of tax arrears and enforcement of the government’s new financial administration system(SAFE-e). In recognising these efforts, in March 2012 the World Bank approved a USD 4.2 million budgetsupport for the country that focuses on improving economic governance and promoting sustainable economicgrowth. In the medium to long term, the government is envisaging further reforms, including improvement ofthe information technology (IT) system in the public administration, improving the taxpayer register, monitoringof tax compliance and enhancing tax administration capacity.

Although there has been progress in arrears collection, significant improvement is required from the authoritiesto overcome the existing cross-arrears between the government, the public electricity company – EMAE (Waterand Electricity Company) – and ENCO (the national fuel importer), which remain significant and couldcompromise the fiscal deficit programmed for the end of 2012. In view of these, total revenue including grantsis estimated to reach 38.6% of GDP in 2012 from 37.1% of GDP in 2011, while total expenditure and lendingdecreased to an estimated 48.1% in 2012 from 49% of GDP in 2011. Concomitantly, the fiscal balance deficitimproved to an estimated 9.4% in 2012 from 11.9% of GDP in 2011.

The continuing euro crisis and disturbances in North Africa have had a negative impact on the country’sdevelopment agenda. This is reflected in slow progress in the implementation of public investment projects (e.g.the deep-water port and construction of two luxury hotels) scheduled for the first half of the year, which has ledto delays in disbursement of grants and credits from abroad. By the end of 2012 the government planned toexecute 68% of its main investment projects provided that implementation took place according to scheduleduring the second semester. Given the current global economic environment, grants are expected to decreasein 2013 to account for 15.4% of GDP against 20.4% in 2012. On the external sector, the current account deficitincluding official transfers is forecast at 22.5% of GDP in 2012 against 30.1% in 2011 stemming from animprovement in the trade balance as a result of lower imports and increase in current transfers.


2009 2010 2011 2012 2013 2014


Tax revenue 14.8 17.4 16.8 16.3 15.8 15.4


Grants 14.7 19.3 18.3 20.4 15.4 15.2


Current expenditure 20.3 20.4 17.9 17.7 17 16.4

Excluding interest 19.8 20 17.4 17 16.4 15.8

Wages and salaries 7.9 9.1 7.7 7.5 7 6.6

Interest 0.5 0.4 0.5 0.7 0.6 0.6

Primary balance -17.9 -9.7 -11.4 -8.8 -12.8 -12.7

Overall balance -18.4 -10.2 -11.9 -9.4 -13.4 -13.2


on investment in the oil sector. The current account deficit, including official transfers, is forecast to be 22.5% ofGDP in 2012 against 30.1% in 2011, linked to an improvement in the trade balance resulting from lower importsand an increase in current transfers.At the macroeconomic level, the International Monetary Fund (IMF) review of the Extended Credit Facility (ECF)2009-12 recognised significant strides by the government in fiscal consolidation and thus rated the overalleconomic performance as satisfactory. The review also highlighted the need to strengthen budget supervisionand expenditure control. As a result of the successful economic performance, a new three-year ECF 2012-15arrangement valued at SDR 2.59 million (Special Drawing Rights) (USD 3.8 million) was agreed and signed withthe IMF. In April 2012, a new Public Debt Management Law was approved which defines the institutionalarrangements in respect of the structure of the debt department. It is expected that this new institutionalarrangement will help move the country from high-debt to medium-debt country status. According to the latestWorld Bank (WB) and IMF Debt Sustainability Analysis (DSA), the country’s debt situation is expected toimprove with the start of oil production foreseen in 2016. Conscious of the current financial crisis and the country’s high dependence on external aid, the government iscommitted to implementing the Fiscal Responsibility Framework, which aims to tackle the recurrent and chronicbudget deficit and enhance public accountability in 2013. The 2012 and 2013 government budgets show thecountry’s high dependence on external aid. In 2012 it is estimated that over 50% of the budget was funded bydonors and this level is expected to remain in 2013. Accordingly government reforms and measures to beimplemented also include adoption of a realistic budget with clear identification of the Millennium DevelopmentGoals (MDGs) expenses and avoidance of unnecessary distortions in expenditure that will bring additionalpressure on the weak capacity to mobilise domestic resources. In that respect the persisting global crisis and theArab spring, particularly in Libya, have had a negative impact on the country’s development programme, with,in particular, the suspension of major infrastructure projects by Libya (e.g. construction of five star hotels) andFDI. In spite of the government’s stated goal of reducing poverty, there is a reduction in the 2013 budgetaryallocation to the health and education sectors. These two sectors, critical for poverty reduction, were allocated10% each in 2013 compared with 15% in 2012. To reduce further the poverty level, create jobs and provideopportunity for the development of private initiative, in the first semester of 2012 the government offeredtraining and microcredit to selected young people to enable them start up private businesses.With good economic prospects in the light of the forthcoming start of oil production, continued implementationof sound macroeconomic policies and enhanced good governance are critical to achieving the desireddevelopment outcomes.


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Fiscal Policy

The government continued its efforts with fiscal consolidation during the third quarter of 2012. Being highlydependent on external assistance, the government has been implementing policies to make the country moreresilient in the face of external shocks and to avoid unnecessary distortions in expenditures that will createfurther pressure on domestic revenue mobilisation. As a result, the budget deficit is projected to reach a singledigit of 9.4% of GDP at end of 2012 from 11.9% in 2011. The strong performance is linked to structural reformsimplemented by the government in recent years aimed at improving revenue collection, including theestablishment of the credit bureau, legislation on natural resource management, reduction of corporate tax,improved collection of tax arrears and enforcement of the government’s new financial administration system(SAFE-e). In recognising these efforts, in March 2012 the World Bank approved a USD 4.2 million budgetsupport for the country that focuses on improving economic governance and promoting sustainable economicgrowth. In the medium to long term, the government is envisaging further reforms, including improvement ofthe information technology (IT) system in the public administration, improving the taxpayer register, monitoringof tax compliance and enhancing tax administration capacity.

Although there has been progress in arrears collection, significant improvement is required from the authoritiesto overcome the existing cross-arrears between the government, the public electricity company – EMAE (Waterand Electricity Company) – and ENCO (the national fuel importer), which remain significant and couldcompromise the fiscal deficit programmed for the end of 2012. In view of these, total revenue including grantsis estimated to reach 38.6% of GDP in 2012 from 37.1% of GDP in 2011, while total expenditure and lendingdecreased to an estimated 48.1% in 2012 from 49% of GDP in 2011. Concomitantly, the fiscal balance deficitimproved to an estimated 9.4% in 2012 from 11.9% of GDP in 2011.

The continuing euro crisis and disturbances in North Africa have had a negative impact on the country’sdevelopment agenda. This is reflected in slow progress in the implementation of public investment projects (e.g.the deep-water port and construction of two luxury hotels) scheduled for the first half of the year, which has ledto delays in disbursement of grants and credits from abroad. By the end of 2012 the government planned toexecute 68% of its main investment projects provided that implementation took place according to scheduleduring the second semester. Given the current global economic environment, grants are expected to decreasein 2013 to account for 15.4% of GDP against 20.4% in 2012. On the external sector, the current account deficitincluding official transfers is forecast at 22.5% of GDP in 2012 against 30.1% in 2011 stemming from animprovement in the trade balance as a result of lower imports and increase in current transfers.


2009 2010 2011 2012 2013 2014


Tax revenue 14.8 17.4 16.8 16.3 15.8 15.4


Grants 14.7 19.3 18.3 20.4 15.4 15.2


Current expenditure 20.3 20.4 17.9 17.7 17 16.4

Excluding interest 19.8 20 17.4 17 16.4 15.8

Wages and salaries 7.9 9.1 7.7 7.5 7 6.6

Interest 0.5 0.4 0.5 0.7 0.6 0.6

Primary balance -17.9 -9.7 -11.4 -8.8 -12.8 -12.7

Overall balance -18.4 -10.2 -11.9 -9.4 -13.4 -13.2



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2004 2009 2010 2011 2012 2013 2014

Trade balance -27.6 -37.9 -46 -41.8 -40.7 -38.5 -37.6



Services -9.2 -4.4 -9.5 -9.8 -8.7 -7.8 -7

Factor income -2 -0.1 0.3 0.1 0.3 0.3 0.3

Current transfers 22.7 17 24.3 21.4 26.5 18.5 16.6



Debt Policy

Maintaining macroeconomic stability is the government’s main priority, since the country is at high risk of debtdistress. The country’s deep dependence on imports and limited export base make it vulnerable to exogenousshocks.

In recent years the government has made significant efforts to reduce its debt stock. Before the countryqualified for debt relief under the Highly Indebted Poor Countries (HIPC) Initiative, its debt stock was estimatedat USD 360 million in 2006. After qualifying for debt relief, the debt stock at the end of August 2012 wasestimated at USD 191 million of which USD 45 million were owed to multilateral donors and USD 146 million tobilateral creditors.

Portugal remains the lead donor, followed by Angola. Also, a financial contribution from Nigeria was reported.The government is fully committed to debt reduction. As a result, Algeria has written off the debt owed to it.Furthermore, the government is also making progress in clearing its bilateral debt with recent success reportedthrough debt relief of over EUR 4 million from the Russian Federation. The country’s debt outstanding to theAfrican Development Bank (AfDB) was projected at around USD 2 million.

The debt sustainability assessment conducted by the World Bank and IMF indicates that the country’s risk ofnon-sustainable external debt remains high, despite benefiting from the HIPC Initiative. However, it is expectedthat with the coming on stream of oil production in 2016, the debt situation will improve. With a view toaddressing the country’s high risk of debt distress, and with the support of the World Bank and Debt ReliefInternational (DRI), in April 2012 a new Public Debt Management Law was approved. The law defines thestrategic framework and establishes the responsibilities and governance structure of the Bureau of Public Debt.In the future, more rigorous fiscal control and economic policies are required to ensure debt sustainability in thelong run.

Monetary Policy

Monetary policy has been supportive in complementing fiscal stimulus measures and responding to pricevolatility. The government has taken immediate measures to stave off inflation which averaged 17% from 2000-10. Two years after the implementation of the Memorandum of Understanding (MoU) with Portugal to index thedobra to the euro, inflation has continued its downward trend. As a result, the consumer price index stood at9.5% in 2012 against 14.3% in 2011. By the end of 2013 and 2014, inflation is expected to further decline to7.9% and 7.7%, respectively.

To create an enabling environment for private sector development, and based on the positive evolution ofmacroeconomic indicators in the first quarter of 2012, the CB lowered the benchmark interest rate, that hadremained unchanged since July 2010, from 15% to 14%. Such policy actions were aimed at putting downwardpressure on commercial banks' rates (currently at 24%-26%) to stimulate private sector credit.

Moreover, to protect the level of international reserves, which stood close to three months of imports at theend of third quarter of 2012, compared with six months observed in previous years, the Central Bank of SãoTomé and Príncipe has reformulated its NAP ( Norma de Aplicação Permanente: regulation created by the bankfor the financial system) on "Forex Market Access and Coverage" to increase restrictions on access to foreigncurrencies and thus create less pressure on foreign reserves. However, since these are short-term measures,the CB and the government approved a law that institutionalises the use of treasury bills that will be regulatedin both the primary and secondary markets. With technical assistance from the Bank of Portugal, the law isexpected to become operational in the first quarter of 2013. In the long term, the country is planning toredenominate its currency.

To preserve financial stability and improve the credibility of the financial system, the CB intends to strengthenbanking supervision by providing training to staff on risk-based supervision, and by reviewing commercial banks’strategies. The measures also include revision of the CB’s strategy and restructuring of commercial banks thatare unable to report profit. In 2013 a new chart of accounts will be introduced, and will comply withinternational financial reporting. A sound legal framework for banks with problems is envisaged for 2014.


The national economy is not diversified. Since independence in July 1975, cocoa has accounted for more than80% of total exports, followed by coffee and coconuts. In recent years, a positive and growing trend has beenobserved in the export of new products such as pepper and vanilla and also in the widespread belief in the needfor improvement in existing production, such as organic cocoa. In spite of these improvements, the country isstill heavily dependent on external aid. As of September 2012, Portugal was the main trade partner accountingfor 55% of imports while 25% of the country's exports were to the Netherlands.

The country’s geographic position as an island state presents severe economic challenges to its effectiveintegration within the region. Trade with the Economic and Monetary Community of Central Africa (CEMAC)accounted for about 2% of the country’s commercial trade. Notwithstanding its isolation, efforts have beenmade by the government to comply with the World Trade Organization (WTO) customs service rules andregulations and to comply more closely with international standards.

São Tomé and Príncipe is also a member of the Economic Community of Central African States (ECCAS) andsubscribes to the community’s common external tariff agreement and respects the five-band customs tariffstructure classification. The tariffs are organised into 5 486 items and cover five bands: 0%, 5%, 10%, 20%, and30%. The country has not benefited from the community’s regional integration projects such as the CentralAfrican Consensual Transport Master Plan (PDCT-AC). Non-trade barriers (such as unofficial checkpoints,overtaxing of goods, etc.) have been a major challenge to regional trade within the community, aggravated inthe case of São Tomé by its geographic position, and further hamper the development of a viable privatesector.

To increase competitiveness and expand regional integration, the government, with the assistance of the WorldBank, has invested in infrastructure, in particular telecommunications with the construction of submarine cablethat links the archipelago to the global fibre-optic network. Similarly, efforts are being made to develop

maritime transport including the deep-water port1 and airport infrastructure facilities.


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2004 2009 2010 2011 2012 2013 2014

Trade balance -27.6 -37.9 -46 -41.8 -40.7 -38.5 -37.6



Services -9.2 -4.4 -9.5 -9.8 -8.7 -7.8 -7

Factor income -2 -0.1 0.3 0.1 0.3 0.3 0.3

Current transfers 22.7 17 24.3 21.4 26.5 18.5 16.6



Debt Policy

Maintaining macroeconomic stability is the government’s main priority, since the country is at high risk of debtdistress. The country’s deep dependence on imports and limited export base make it vulnerable to exogenousshocks.

In recent years the government has made significant efforts to reduce its debt stock. Before the countryqualified for debt relief under the Highly Indebted Poor Countries (HIPC) Initiative, its debt stock was estimatedat USD 360 million in 2006. After qualifying for debt relief, the debt stock at the end of August 2012 wasestimated at USD 191 million of which USD 45 million were owed to multilateral donors and USD 146 million tobilateral creditors.

Portugal remains the lead donor, followed by Angola. Also, a financial contribution from Nigeria was reported.The government is fully committed to debt reduction. As a result, Algeria has written off the debt owed to it.Furthermore, the government is also making progress in clearing its bilateral debt with recent success reportedthrough debt relief of over EUR 4 million from the Russian Federation. The country’s debt outstanding to theAfrican Development Bank (AfDB) was projected at around USD 2 million.

The debt sustainability assessment conducted by the World Bank and IMF indicates that the country’s risk ofnon-sustainable external debt remains high, despite benefiting from the HIPC Initiative. However, it is expectedthat with the coming on stream of oil production in 2016, the debt situation will improve. With a view toaddressing the country’s high risk of debt distress, and with the support of the World Bank and Debt ReliefInternational (DRI), in April 2012 a new Public Debt Management Law was approved. The law defines thestrategic framework and establishes the responsibilities and governance structure of the Bureau of Public Debt.In the future, more rigorous fiscal control and economic policies are required to ensure debt sustainability in thelong run.


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Private Sector

The legal framework is favourable to private initiatives. Existing legislation allows access to governmentproperties and engagement in private activities except in those reserved for the Central Bank and the military.The insularity also affects the business environment. This challenge is exacerbated by the lack of physicalinfrastructure and a weak judicial system. To improve the business regulatory environment, the governmenthas implemented several reforms over the years, which enabled the country to be considered as one of Africa’stop reformers in 2012. These reforms include: i) adoption of a one-stop shop to fast-track the process of startinga business; ii) reduction of corporate tax; iii) reduction of permits for construction; and iv) adoption of a newinvestment code. The adoption of a one-stop shop and revision of the investment code further illustrate theauthorities’ intention to boost the sector. Nevertheless, some improvement is needed in the areas of, amongother things, extent of disclosure, access to credit and resolving insolvency, and the high cost of electricity.

In spite of the remarkable efforts acknowledged in the World Bank report Doing Business 2012, in the 2013

report the country has been ranked 160th out of 185 countries mainly because of a lack of continuing reformsand of the efforts shown in previous years. Substantial efforts are required in making the cost of imports more

affordable (for example a container costs about USD 577), and the enforcing of contracts (ranked 181th out of185) less cumbersome. As a means of overcoming some of these obstacles, the government has made a majorinvestment of about USD 6.4 million in information and communications technologies (ICT). The arrival of thesubmarine cable connecting STP to Europe will significantly improve the quality of service offered and reducethe cost of communications.

Financial Sector

Over the past years there has been a significant improvement in the financial sector when the country’s smallpopulation and the business environment are taken into account. Currently, there are eight financial institutions(of which one is authorised to engage in investment banking), two non-bank financial institutions (insurancecompanies) and five foreign exchange houses.

The mixed performance and irregular volume of credits to public/private entities in the total commercial banks’portfolio (21% in the first semester of 2012) is an element of concern. To mitigate the situation, commercialbanks have increased provision levels, which in turn have been negatively affecting the process of granting newcredits with the interest rate ranging between 24% and 26%.

In addressing these challenges, the Central Bank enforced the use of the NAP (Norma de Aplicação Permanente)22/2009 that regulates the Risk System Centre. This assesses the evaluation in the process of granting newcredit as well as the possibility of reducing the rate of business failure and has been fully in use since the end of2011. Similarly, through the reform initiated in 2007, banking supervision was made more prudent and theminimum capital requirement for commercial banks was increased by approximately 200%.

Under the country’s financial reforms to modernise and improve the financial sector the Rede Dobra 24payment system as well as the new electronic platform of the BCSTP (SIBANC) became operational in October2011. Automatic payment terminals have been installed by the main service providers since January 2013.


In spite of government efforts to decentralise power from central to local government, challenges remain,chiefly linked to inadequate governance mechanisms and weak institutional structures. The country still facesinstitutional gaps that often hinder efficient co-ordination among all the actors involved in the country’sdevelopment process and also penalise implementation of measures and policy reforms envisaged by thegovernment.

Nevertheless, as part of their long-term development reforms through inclusiveness, the authorities have takenaction to ensure the participation of civil society in policy implementation. As a result civil society organisationshave been actively engaged in the country’s policy dialogue, including participation and consultation in thedevelopment partners’ strategic framework for the country.

There has been a mixed performance in respect of measurement of the efficiency of public service delivery.The organisational structure is still outdated as decision making is often a complex and time-consuming processsince it involves different levels. Service delivery is also negatively impacted by the low salaries arising fromthe tight government budget, which encourages good employees to seek better opportunities outside the publicsector. Upcoming reforms in the public sector should pay special attention to these issues.




2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20140%

100%

200%

300%

400%

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nta

ge


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Private Sector

The legal framework is favourable to private initiatives. Existing legislation allows access to governmentproperties and engagement in private activities except in those reserved for the Central Bank and the military.The insularity also affects the business environment. This challenge is exacerbated by the lack of physicalinfrastructure and a weak judicial system. To improve the business regulatory environment, the governmenthas implemented several reforms over the years, which enabled the country to be considered as one of Africa’stop reformers in 2012. These reforms include: i) adoption of a one-stop shop to fast-track the process of startinga business; ii) reduction of corporate tax; iii) reduction of permits for construction; and iv) adoption of a newinvestment code. The adoption of a one-stop shop and revision of the investment code further illustrate theauthorities’ intention to boost the sector. Nevertheless, some improvement is needed in the areas of, amongother things, extent of disclosure, access to credit and resolving insolvency, and the high cost of electricity.

In spite of the remarkable efforts acknowledged in the World Bank report Doing Business 2012, in the 2013

report the country has been ranked 160th out of 185 countries mainly because of a lack of continuing reformsand of the efforts shown in previous years. Substantial efforts are required in making the cost of imports more

affordable (for example a container costs about USD 577), and the enforcing of contracts (ranked 181th out of185) less cumbersome. As a means of overcoming some of these obstacles, the government has made a majorinvestment of about USD 6.4 million in information and communications technologies (ICT). The arrival of thesubmarine cable connecting STP to Europe will significantly improve the quality of service offered and reducethe cost of communications.

Financial Sector

Over the past years there has been a significant improvement in the financial sector when the country’s smallpopulation and the business environment are taken into account. Currently, there are eight financial institutions(of which one is authorised to engage in investment banking), two non-bank financial institutions (insurancecompanies) and five foreign exchange houses.

The mixed performance and irregular volume of credits to public/private entities in the total commercial banks’portfolio (21% in the first semester of 2012) is an element of concern. To mitigate the situation, commercialbanks have increased provision levels, which in turn have been negatively affecting the process of granting newcredits with the interest rate ranging between 24% and 26%.

In addressing these challenges, the Central Bank enforced the use of the NAP (Norma de Aplicação Permanente)22/2009 that regulates the Risk System Centre. This assesses the evaluation in the process of granting newcredit as well as the possibility of reducing the rate of business failure and has been fully in use since the end of2011. Similarly, through the reform initiated in 2007, banking supervision was made more prudent and theminimum capital requirement for commercial banks was increased by approximately 200%.

Under the country’s financial reforms to modernise and improve the financial sector the Rede Dobra 24payment system as well as the new electronic platform of the BCSTP (SIBANC) became operational in October2011. Automatic payment terminals have been installed by the main service providers since January 2013.


In spite of government efforts to decentralise power from central to local government, challenges remain,chiefly linked to inadequate governance mechanisms and weak institutional structures. The country still facesinstitutional gaps that often hinder efficient co-ordination among all the actors involved in the country’sdevelopment process and also penalise implementation of measures and policy reforms envisaged by thegovernment.

Nevertheless, as part of their long-term development reforms through inclusiveness, the authorities have takenaction to ensure the participation of civil society in policy implementation. As a result civil society organisationshave been actively engaged in the country’s policy dialogue, including participation and consultation in thedevelopment partners’ strategic framework for the country.

There has been a mixed performance in respect of measurement of the efficiency of public service delivery.The organisational structure is still outdated as decision making is often a complex and time-consuming processsince it involves different levels. Service delivery is also negatively impacted by the low salaries arising fromthe tight government budget, which encourages good employees to seek better opportunities outside the publicsector. Upcoming reforms in the public sector should pay special attention to these issues.


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The country still faces human capacity gaps that hinder the effective implementation of its developmentprogramme. To address them the government has taken the necessary action by ensuring a capacity-buildingcomponent in almost all projects financed by development partners. However, the 2012 state budgetaryallocations to health and education were 10% each: lower than the 15% allocated to each sector in the previousyear’s budget.

To assist the government with its human capacity-building programme the AfDB will finance an institutionalsupport project (PAGEF: estimated at about USD 11 million) that focuses on capacity building with a view toimproving the country’s economic and financial governance. In the same vein, the government, with thesupport of the International Development Association of the World Bank, developed a social programme (PASS:estimated at about USD 8.6 million) to enhance the capacity of public institutions. In the 2012 Mo Ibrahim Indexthe country’s human development score was 66 out of 100, above the African average of 57.

In late 2011 the government made a diagnostic assessment of the country’s training and education system,which now serves as a basis for the development of a new strategy for the sector. The findings of theassessment indicate that country is well positioned to achieve the second MDG, in particular with regard touniversal primary education: primary education enrolment stood at 133.8% in 2011. The assessment alsoindicated a reduction in the rate of academic failure in primary education to 12.4% in 2011 against 15.5% in2010.


Based on the United Nations Development Programme (UNDP) 2010 poverty survey, 49.6% of the populationare living below the poverty line and 15.9% in extreme poverty, compared with 53.8% and 19.2%,respectively, in 2001. The finding also revealed that the incidence of poverty is higher for women (71.3%)compared with men (63.4%). The high incidence of poverty in rural areas has led to significant number of ruralworkers migrating to the city. Migration can also be linked to food insecurity. Furthermore, the survey indicatesas key determinants of poverty lack of job creation, weak purchasing power because of high inflation, and poormanagement of public resources.

The government in its new development framework (ENRP 2012-16) has recognised poverty reduction, socialprotection and job creation as crucial elements for the country to achieve inclusive growth. To ensure a minimalwelfare service for its population, in the 2012 budget 10% is allocated to the social sector. Furthermore, thegovernment has signed an agreement with the Gabonese Financial and Investment Bank (BGFI) to open a line ofcredit of EUR 200 000. The money will be administered in the form of microcredit to people engaged in fishingin the northern region of the country. Similarly, the authorities have received a USD 35 000 grant from theUnited States to support the special annual programme for civil society organisations in São Tomé and Príncipewith particular attention to agriculture, professional training and food processing. It is expected that the accessto microcredit as a result of different government agreements will boost the private sector and lead to thecreation of small- and medium-sized enterprises (SMEs). Moreover, the government has instituted several socialprotection programmes, including a school meals programme, promotion of child survival and health, andsubsidies to mothers with more than three children, with support from its development partners.

In respect of social indicators, in spite of the poor health infrastructure, the government’s commitment topreventing malnutrition and reducing child mortality and other diseases has been a success. As a result theinfant mortality rate (per thousand live births) stood at 69.3 compared to an average in Africa of 78.6 in 2011,while the percentage of births attended by skilled health staff reached 80.7 compared with an African averageof 50.2. However, significant efforts are required with regard to access to sanitation which was available to only26% in 2011.

Although benefits (e.g. a minimum wage, maternity leave, holiday, etc.) are granted under the current law, thelabour market is in need of improvement. The high literacy rate (88.8% in 2011) is not reflected in the numberof people employed. According to data from the statistics department, the rate of unemployment fell to 13.9%in 2008 compared with 16% in 2002. The data also indicated that unemployment affected women (17.4%) morethan men (13.9%). Although the country has ratified various international conventions in respect of the labourmarket, the implementation of these laws has been a challenge. Nevertheless, legislation on labour protectiondoes exist to protect employees’ interests, as outlined in the Law 6/92 establishing the legal regime of individualconditions of labour.

The country has yet to create and establish a labour market code. A further challenge is the absence of a labourtribunal to defend the interests of public sector workers.

The government continues to implement measures to strengthen public finance management (PFM) andincrease transparency in the public administration, for example through the introduction of SAFE (PFM electronicplatform) in early 2012. In addition to reforms and actions to improve governance of public funds implementedat the end of 2011, in particular: i) the new custom system ASYCUDA (Automated System for Customs Data); ii)oil resources management laws; and iii) publication of the 2011 state budget, the government is also envisagingreforms to combat corruption.

The government has outlined several reforms in its new development agenda, the Estratégia Nacional daRedução da Pobreza 2012-2016. This includes: i) improvement of tax collection by enhancing tax administrationcapacity; ii) improvement of tax payer registration and custom services and strengthening transparency andaccountability; and iii) frameworks for monetary policy and banking supervision.


After the endorsement by the National Assembly of various laws and regulations that make provision for theefficient management of oil resources, the government has continued its efforts to maximise effectively theresources generated from oil reserves in its Exclusive Economic Zone (EEZ) and the Joint Development Zone(JDZ) with Nigeria.

Oil production is expected to start by 2016, and the government is continuing negotiations with oil explorationcompanies. In April 2012 it signed an exploration agreement on Block 5 with Equator Exploration Limited underwhich the country will receive about USD 2 million as a signature bonus. Similarly, the French oil company Totalhas announced plans to invest about USD 200 million, and has recently acquired Chevron’s exploration rights inBlock 1 in the JDZ.

As part of the government’s commitment to enhance transparency in the management of its natural resources,and with assistance from the World Bank, the government made a renewed application to be a candidatecountry to the Extractive Industries Transparency Initiative (EITI), which was accepted. The country will nowhave to satisfy the criteria for becoming an EITI-compliant country. The AfDB is also envisaging a capacity-building training for the country’s EITI committee under its new public finance management support project.

The country has also ratified several environmental protection conventions: the United Nations FrameworkConvention on Climate Changes (UNFCCC), Convention on Biodiversity (CBD), and the Convention to CombatDesertification (CCD). Nevertheless, challenges persist and include rising sea levels and climate change. Toaddress these issues, the government passed legislation establishing an environmental framework andprotection of national parks.

Political Context

Recently, there was a rise in political tension between the ruling party, the Independent Democratic Party (ADI)led by Prime Minister Patrice Trovoada, and the main opposition political parties. As a result, in July 2012 acensure motion against the government was submitted by the main opposition parties – the Movement for theLiberation of São Tomé and Príncipe-Social Democratic Party (MLSTP-PSD) – in the National Assembly, but wasnot considered strong enough to warrant debate in the assembly plenary. The opposition parties presented asecond censure motion on 21 November 2012, which was accepted by the assembly. The motion focused onallegations against the government that it failed to comply with the recommendations and guidance providedduring the discussion of the 2012 state budget. The recommendations were for the government to increaseallocations: i) for the acquisition of seeds for agriculture; ii) to provide additional support to people withHIV/AIDS; and iii) for rehabilitation of school infrastructure in Porto Alegre and Santa Catarina. To pay for theseincreases, the members of parliament instructed the government to reduce the resources allocated to missionsand travel as well as expenses related to capital expenditure. As a result of the political uncertainty on 26November 2012 the president of the assembly Evaristo Carvalho resigned. A new assembly president AlcinoPinto was appointed at the 28 November 2012 meeting, and the parliamentarians voted for a censure motionthat resulted in the collapse of the government.

In this context, and to avoid the deepening of political instability countrywide, on 11 December 2012 a newcoalition government led by Prime Minister Gabriel Costa was formed without representatives of the ADI.








Political Context










Political Context




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The country still faces human capacity gaps that hinder the effective implementation of its developmentprogramme. To address them the government has taken the necessary action by ensuring a capacity-buildingcomponent in almost all projects financed by development partners. However, the 2012 state budgetaryallocations to health and education were 10% each: lower than the 15% allocated to each sector in the previousyear’s budget.

To assist the government with its human capacity-building programme the AfDB will finance an institutionalsupport project (PAGEF: estimated at about USD 11 million) that focuses on capacity building with a view toimproving the country’s economic and financial governance. In the same vein, the government, with thesupport of the International Development Association of the World Bank, developed a social programme (PASS:estimated at about USD 8.6 million) to enhance the capacity of public institutions. In the 2012 Mo Ibrahim Indexthe country’s human development score was 66 out of 100, above the African average of 57.

In late 2011 the government made a diagnostic assessment of the country’s training and education system,which now serves as a basis for the development of a new strategy for the sector. The findings of theassessment indicate that country is well positioned to achieve the second MDG, in particular with regard touniversal primary education: primary education enrolment stood at 133.8% in 2011. The assessment alsoindicated a reduction in the rate of academic failure in primary education to 12.4% in 2011 against 15.5% in2010.


Based on the United Nations Development Programme (UNDP) 2010 poverty survey, 49.6% of the populationare living below the poverty line and 15.9% in extreme poverty, compared with 53.8% and 19.2%,respectively, in 2001. The finding also revealed that the incidence of poverty is higher for women (71.3%)compared with men (63.4%). The high incidence of poverty in rural areas has led to significant number of ruralworkers migrating to the city. Migration can also be linked to food insecurity. Furthermore, the survey indicatesas key determinants of poverty lack of job creation, weak purchasing power because of high inflation, and poormanagement of public resources.

The government in its new development framework (ENRP 2012-16) has recognised poverty reduction, socialprotection and job creation as crucial elements for the country to achieve inclusive growth. To ensure a minimalwelfare service for its population, in the 2012 budget 10% is allocated to the social sector. Furthermore, thegovernment has signed an agreement with the Gabonese Financial and Investment Bank (BGFI) to open a line ofcredit of EUR 200 000. The money will be administered in the form of microcredit to people engaged in fishingin the northern region of the country. Similarly, the authorities have received a USD 35 000 grant from theUnited States to support the special annual programme for civil society organisations in São Tomé and Príncipewith particular attention to agriculture, professional training and food processing. It is expected that the accessto microcredit as a result of different government agreements will boost the private sector and lead to thecreation of small- and medium-sized enterprises (SMEs). Moreover, the government has instituted several socialprotection programmes, including a school meals programme, promotion of child survival and health, andsubsidies to mothers with more than three children, with support from its development partners.

In respect of social indicators, in spite of the poor health infrastructure, the government’s commitment topreventing malnutrition and reducing child mortality and other diseases has been a success. As a result theinfant mortality rate (per thousand live births) stood at 69.3 compared to an average in Africa of 78.6 in 2011,while the percentage of births attended by skilled health staff reached 80.7 compared with an African averageof 50.2. However, significant efforts are required with regard to access to sanitation which was available to only26% in 2011.

Although benefits (e.g. a minimum wage, maternity leave, holiday, etc.) are granted under the current law, thelabour market is in need of improvement. The high literacy rate (88.8% in 2011) is not reflected in the numberof people employed. According to data from the statistics department, the rate of unemployment fell to 13.9%in 2008 compared with 16% in 2002. The data also indicated that unemployment affected women (17.4%) morethan men (13.9%). Although the country has ratified various international conventions in respect of the labourmarket, the implementation of these laws has been a challenge. Nevertheless, legislation on labour protectiondoes exist to protect employees’ interests, as outlined in the Law 6/92 establishing the legal regime of individualconditions of labour.

The country has yet to create and establish a labour market code. A further challenge is the absence of a labourtribunal to defend the interests of public sector workers.


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São Tomé and Príncipe has a narrow and undiversified economy that is highly dependent on one product andvulnerable to exogenous factors. Since the country’s independence in 1975, the economy has been dominatedby the export of a single commodity, cocoa, which used to account for about 80% of GDP. Nevertheless, therehas been a significant change in the country’s economy in recent years which has seen the service sector(wholesale and retail trade; hotels and restaurants; and transport, storage and communications) and theconstruction sector become its drivers, accounting for about 60% of GDP in 2012, and employing nearly 60% ofthe country’s workforce, followed by the agriculture and industry sectors that each contributed 20% of GDP.

Economic transformation has continued with the announcement of the discovery of oil in the Joint DevelopmentZone (JDZ) with Nigeria and in the Exclusive Economic Zone (EEZ), with production expected by 2016. In thiscontext, in 2001 the government signed an oil exploration agreement with the government of Nigeria. Theagreement makes provision for 60% of oil resources to be allocated to Nigeria and 40% to the government ofSão Tomé and Príncipe. So far, the country has only received an oil signature bonus as a result of exploitationcontracts awarded from its different blocks. It was estimated that from 2005 to 2009 the country receivedUSD 79 million. Furthermore, based on projections from the IMF country report No.12/34 of February 2012, thearchipelago could receive about USD 106 million, which corresponds to 40% of the total revenue ofUSD 266 million from the JDZ shared with Nigeria. This translates into about 42% of the country’s 2011 GDP,estimated at USD 254 million, or 265% of tax revenue (estimated at USD 40 million) or 160% of donor-fundedcapital investment.

The discovery of oil in a small island economy has a huge potential for inclusive growth. In the short term,however, some of the constraints to structural transformation – such as the lack of infrastructure, shortage ofworkers with appropriate skills in the labour market, uncertainty over property rights and poor landmanagement, as well as undeveloped financial and private sectors – will need to be addressed.

Conscious of the need to manage efficiently its natural resources, the government has adopted legalframeworks to enhance transparency and accountability in the management of the revenues. These include theNational Oil Law (law nº16/2009) and the Petroleum Revenue Management Law (nº8/2004), which clearly spellout the importance of using the oil resources for future generations and thus created a national wealth fund (theNational Oil Account). The law on oil revenue also stipulates that only 20% of the oil resource will betransferred to the annual budget to finance the budget deficit. To further enhance transparency in themanagement of these resources, the government has reapplied to the Extractive Industry and TransparencyInitiative (EITI) and became a candidate country in late October 2012.

The announcement of the discovery of oil has also led to a migration of people from rural areas to the capital,which may put additional pressure on the authorities to enforce the economic diversification plan and avoid theso-called Dutch Disease syndrome. To this end, and in the context of abundant flow of oil resources, the findingsof the AfDB’s study on Maximising Oil Wealth for Equitable Growth and Sustainable Economic Development inthe country, approved in January 2012, indicate that “good governance and efficient management of the oilresources will provide unparalleled opportunity to structurally transform the economy.” It is, therefore,imperative for the country to learn from the positive experience of other African countries (e.g. Botswana,considered as a successful example) that have efficiently managed their natural resources wealth. Similarlyexperience could be obtained from other non-African and Portuguese-speaking countries such as Brazil andTimor-Leste, which have managed their hydrocarbon resources well and therefore avoided unnecessarydistortions and undesirable outcomes to achieve higher sustainable growth.

In recognising the importance and potential of the agriculture, tourism and fisheries sectors for overall economicdevelopment including job creation, development of SMEs and poverty reduction, the government has beenactively involved in and supportive of these sectors. In 2012 the government signed a USD 500 000 credit linewith commercial banks, supported by the Taiwanese government, to be used in the fishing, agro-industry andagro-tourism sectors. Similarly, in the second semester of 2012, another credit line of about EUR 200 000 wasagreed between the government and a commercial bank, with a local non-governmental organisation (NGO)acting as intermediary, that aims to boost the fisheries sector.

São Tomé and Príncipe has great potential to make the transition to a middle-income country, based on its sizeand GDP per capita, if its resource wealth is efficiently and transparently managed, thus avoiding the resourcecurse. Building capable institutions through reinforcing the capacity of line ministries, including judicialinstitutions, to enforce transparency and accountability, and the fight against corruption are key to sustainableand inclusive growth. In respect of development partners, continuous support and promotion of dialogue at alllevels are seen as necessary.

Notes

Gender Equality

In spite of the challenge of complying with legislation stipulating a mandatory representation of women inparliament of at least 30%, encouraging progress has been made by the authorities in comparison with previousyears when female representation was below the current 5%. According to the 2010 poverty survey themajority of inhabitants living under the poverty line are women: 71% against 63.4% of men. Nevertheless,gender equality and female empowerment are promoted. The ratio of female to male primary enrolment was97.3% in 2011, while that of female to male secondary enrolment was 115%.

The law makes provisions for equal access to economic activity. According to the 2010 UNDP poverty profile,there is a discrepancy in respect of employment between women and men. The report indicates that 59% ofmen are employed compared with 41% of women. The gaps in economic activity tend to be more predominantin rural compared with urban areas. Even though unemployment affects both genders, women are less likely tobe employed than men. This inequality is linked at some extent to the existence of some discrimination, thoughon a small scale, in access to jobs.

The government is also committed to full implementation of the United Nations Committee on the Eliminationof Discrimination against Women (CEDAW) convention. To this end it has engaged in dialogue with partnerswith a view to strengthening the special programme that provides training to women in business management.

1. Construction of the port, under the auspices of the French company Terminal Link (which was awarded theconcession in 2007), has been delayed because of the financial difficulties facing the company.









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Notes

1. Construction of the port, under the auspices of the French company Terminal Link (which was awarded theconcession in 2007), has been delayed because of the financial difficulties facing the company.









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Cameroon


Chad

Congo, Dem. Rep.

Congo, Rep.

Equatorial Guinea

Gabon

Madagascar


Regional Edition: Central Africa Cameroon


Chad

Congo, Dem. Rep.

Congo, Rep.

Equatorial Guinea

Gabon

Madagascar


The full report is available at:

Regional edition

Central Africa

AfricanEconomicOutlook2013

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African Economic Outlook 2013

