Country Overview

The Republic of Sao Tome and Principe (STP) is a lower middle income, small island developing state with a fragile economy and high vulnerability to exogenous shocks. An archipelago comprising two mains islands and four islets, STP is located in the Gulf of Guinea 350 km off the west coast of Africa. With a surface area of 1,001 sq. km, this Portuguese speaking country has a population of 197,900 people and a gross national income (GNI) per capita of $1,570 in 2014.

STP has limited resources. Its export base is undiversified and consists essentially of cocoa and a nascent tourism industry. Prospects for oil production are uncertain, following Total’s withdrawal from exploration activities in the Joint Development Zone (JDZ) shared with Nigeria.  STP has limited but fertile land in which agricultural products such as cocoa, coffee and various food crops are produced.

Political Context

The Independent Democratic Action Party (ADI) won an absolute parliamentary majority following the 2014 elections. This presents the first opportunity in over a decade for political stability in the country since the government can have a full four-year term in office. The ruling party currently occupies 148 out of 180 seats in the National Assembly. The next presidential elections will take place in 2016.

Social Context

In the 2012-13 Second Poverty Reduction Strategy (PRSP-II) implementation review report, the STP government acknowledges that the reduction of poverty rates since 2000 has been marginal. Poverty incidence is estimated at 62% of the population. Urban poverty is high compared to rural poverty due to limited employment opportunities, notably for youth. On a positive note, STP performs higher than the Sub-Saharan Africa average in the UNDP Human Development index, and has made good progress in improving other social indicators. It has a gross primary school enrollment of 110%, a life expectancy of 66 years, a mortality rate of children under five year old of 51 per 1,000 live births, access to an improved water source for 97% of the population, and access to electricity for 60% of the population.

STP is on track to meet the MDGs on universal primary education, promoting gender equality and empowering women, improving maternal health, and combating HIV/AIDS, TB, malaria and other diseases by 2015.

Economic Overview

STP’s economy has strengthened in recent years, but high public debt and persistent poverty continue to present policy challenges. GDP growth picked up slightly to 4.5% in 2014, driven by an increase in foreign direct investment (FDI), the launching of new donor financed projects, and improved tourism receipts. Supported by the exchange rate pegged to the euro, inflation continued is decline to 6.4% in 2014 and is projected to decline further to around 5% in 2015.

Fiscal consolidation remains a challenge. With underperformance in revenues, including as a result of non-payment of import duties by the main oil importer ENCO, and overruns in spending in the run-up to the 2014 parliamentary elections, the primary deficit rose sharply from 0.8% of GDP in 2013 to 3.4% of GDP in 2014. Also, net government domestic arrears continued to increase, having reached 15.9% of GDP in March 2015. A bulk of these are claimed by ENCO from the government on account of keeping pump prices below import and distribution costs since 2011. High levels of non-performing loans (18% in 2014) and a shortage of bankable projects contributed to the decline in bank credit to the private sector in 2014.

Strong cocoa exports and tourism receipts contributed for the improved external position. The current account deficit (excluding transfers) improved to 37% of GDP, an improvement of 1.2 percentage points compared to 2013.

The authorities project a growth rate of 5% in 2015 and an acceleration 5.5% in 2017 and 2018, driven by the scaling up of investments in infrastructure, as well as growth in tourism and agriculture. Improvements achieved in STP’s debt sustainability, combined with the existence of clearly identified growth enhancing medium term investments, have led to a lower concessionality threshold for the country, from 50% to 35%.

Development Challenges

For the foreseeable future, STP will continue to face significant challenges to overcome insularity, small market size, vulnerability to natural shocks and climate change, limited human capital, and scarce tradable resources to generate sustainable and inclusive growth and reduce poverty.

The authorities plan to implement an ambitious and comprehensive reform agenda, summarized in the planned 2016-2018 National Strategy Document that builds on the recently completed review of progress made in the implementation of PRSP-II.  Priority will continue to be given to: (1) promoting good governance and public sector reform; (2) promoting sustainable and inclusive growth; (3) strengthening human capital and social service delivery; and (4) strengthening social cohesion and social protection.

STP ranks 76th out of 175 countries in the 2014 Transparency International corruption perceptions index (place is shared with Montenegro). STP ranks 153rd out of 189 economies in the 2015 Doing Business report, having improved its rating from 160 in 2014.

Last Updated: Oct 01, 2015

World Bank Group Engagement in Sao Tome and Principe

The Bank’s Country Partnership Strategy (CPS) for STP covers the period FY 2014 - FY 2018 and is aligned with STP’s PRSP-II. The strategy has two pillars of engagement: (1) supporting macroeconomic stability and national competitiveness; and (2) reducing vulnerability and strengthening human capacity. A Performance and Learning Review (PLR) for STP will be prepared in the second half of FY16. The exercise will be followed by the preparation of a Systematic Country Diagnostic (SCD) and a Country Partnership Framework (CPF) in FY17 and FY18 respectively.

The IDA17 allocation for STP amounts to about $15 million. The World Bank portfolio currently stands at two projects with a total net commitment of $ 8.77 million, of which 45.1% is disbursed. The average project age is three years. There are also active Trust Funds that finance activities in power sector efficiency improvement, the financial sector, the social protection system, the business climate, extractive industries transparency (EITI), and adaptation to climate change.

Last Updated: Oct 01, 2015

Providing Quality Education for All

The International Development Association (IDA) financed Quality Education for All, supports the implementation of the government’s education and training plans. The project helps the government enhance the quality of education for all by improving the system of in-service teacher training, and by strengthening education human resource management.

The operation was approved by the World Bank Group Executive Board on December 20, 2013, for an amount of $900,000, and an additional financing of $3.5 million was approved on June 27, 2014.  The project is co-financed by a multiple donor Trust Fund for an amount of $1.1 million. The project became effective in May 2014 and good progress is being made in the implementation of the planned activities.

Increasing the Adaptive Capacity of Vulnerable Coastal Communities

The Global Environment Facility (GEF) financed Adaptation to Climate Change Project, supports the implementation of the government’s National Adaptation Program of Action (NAPA). The NAPA promotes priority actions on adaptation including in the fisheries, agriculture, forestry, infrastructure, civil protection, health, and energy and water sectors. Based on the NAPA, the government of STP established a National Adaptation to Climate Change Program with the goal of increasing the adaptive capacity of its population to reduce their vulnerability to the adverse impacts of climate variability and change. 

The operation was approved by the GEF on June 20, 2011, for a total amount of $4.5 million. The project is showing encouraging results: the number of fishermen lost at sea has been reduced to zero for two consecutive years after the introduction of the safety at sea program; 50% of fishermen have access to 12-hour weather forecasts during the fog/storm season; and a marine meteorological station - a first in Sao Tome and Principe - has also been installed, as well as a system of SMS-based alert developed.  

Last Updated: Oct 01, 2015

STP is highly aid-dependent but given its size and insularity it has a limited donor presence. International partners such as the World Bank, the African Development Bank, the European Commission, the International Monetary Fund, and the United Nations agencies have strengthened their coordination mechanisms in order to further the Paris Declaration and the Busan agenda in the country. Dialogue among the agencies has increased with the planned organization of a donor round table to foster private investment which will be held in London in October 2015.

Last Updated: Oct 01, 2015


Sao Tome and Principe: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments