Overview

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Context
Strategy
Results
Partners

The Republic of Sao Tome and Principe (STP) is a lower middle income, developing, small island state with a fragile economy. It is highly vulnerable to exogenous shocks. An archipelago divided into six districts and the Autonomous Region of Príncipe (Região Autónoma do Príncipe), it 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 more than 215,000 people, and a Gross National Income (GNI) per capita of $1,960 as of 2019. 
Political Context
The October 7, 2018 elections results reinforced the notion of Sao Tome and Principe being a model of democratic alternation in Central Africa. The Movement for the Liberation of Sao Tome and Principe – Social Democrat Party (MLSTP-PSD) now leads the government, thanks to a post-election agreement with the coalition PCD-MDFM-UDD, which gives them a majority in parliament.
The National Assembly is comprised of 55 seats, of which 25 are currently held by the Independent Democratic Action Party (ADI), 23 by the MLSTP-PSD, five by the coalition PCD-MDFM-UDD and two by the Sao Tome and Principe Independent Citizen Movement (MCISTP). 
Social Context
Despite methodological issues, there is a consensus that poverty incidence has not changed significantly between the last two household surveys (2000 and 2010). Recent World Bank estimates show that about one-third of the population lives on less than the international poverty line of $1.90 per day, and more than two-thirds of the population is poor, using the World Bank higher poverty line of $3.20 per day. Urban areas and southern districts such as Caué and Lembá have higher levels of poverty incidence.
STP performs higher than the Sub-Saharan Africa average on the UNDP Human Development index and has made progress 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 years 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.
Economy
STP faces challenges that are typical of small and insular states and affect its ability to deal with shocks and achieve a balanced budget. The limited number of people and workers in the country often prevent the efficient production of goods and services at the scale needed to meet the demand of both local and export markets. Its remoteness and insularity increase export costs, and the limited availability of land and small workforce prevent the country from diversifying its economy, making it more vulnerable to terms-of-trade shocks. The indivisibility in the production of public goods, and the difficulty of providing services to a scattered population imply a high cost of public goods and a high level of public expenditures.
STP has grown driven by agriculture, tourism, oil-fueled foreign direct investment, but mostly by government expenditure propelled by external aid and government borrowing.
Gross domestic product (GDP) grew at an average rate of 4.5% between 2010 to 2018 but has been decelerating since 2014. Economic growth was further hit in 2018 and 2019 by fuel and power shortages, government arrears to local suppliers, and crowding out of domestic financing. The negative shocks that started in 2018 continued to affect the performance of the economy in 2019. Real GDP growth rate is estimated to have slowed down to 2.4% in 2019 from 2.7% in 2018. Agriculture and fisheries have been affected by weather shocks, agricultural pests, and fuel and power shortages. STP is expected to suffer from a severe economic downturn as a result of the slump in tourism due to the COVID-19 (coronavirus) pandemic.
The pandemic has severely affected STP’s economy, primarily through losses in the tourism industry. STP’s economy was hit by a near-total drop in foreign tourist arrivals since early March. The tourism industry, which has been a driver of private sector growth in recent years and is responsible for a large share of formal employment, came to a stand-still, resulting in a loss of labor earnings, foreign exchange and fiscal revenues. While prior to the COVID-19 pandemic, growth in STP was expected to recover modestly in 2020, the disruptions caused by it are expected to result in a GDP contraction of 9.5% in 2020, which will be the first recession for STP since 1990. The Bank is supporting STP by providing quick financial assistance (including an already approved $2.5 million grant) and additional financing for social protection program. A new budget support operation around the third quart of 2020 would help to meet the government’s urgent financing need.

Last Updated: Jul 21, 2020
World Bank Group Engagement in Sao Tome and Principe
The World Bank Group’s Country Partnership Strategy (CPS) for Sao Tome and Principe covers the period FY2014 - FY2020 and is aligned with the country’s second Poverty Reduction Strategy (PRSP-II). The strategy has two pillars of engagement: supporting macroeconomic stability and national competitiveness; and reducing vulnerability and strengthening human capacity.  
The current portfolio, funded by the International Development Association’s (IDA) stands at five projects, with a total net commitment of $80 million, of which nearly 28% is disbursed. There are also active trust funds that finance activities to improve power sector efficiency, the financial sector, the social protection system, the business climate, extractive industries transparency (EITI), and adaptation to climate change.

Last Updated: Jul 21, 2020
Providing quality education for all: The International Development Association (IDA) financed the Quality Education for All project, which 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 World Bank’s overall financing for the project amount is at $4.4 million. 

As of mid-2017, the Project had successfully completed the first phase of the in-service teacher training program which included a 150-hours of face-to-face training in basic Portuguese and Mathematics delivered by ISEC (teacher training higher institute) to 558 primary and preschool teachers in all seven districts. Preparations for the second phase of this training which is a distance learning program that will count towards teacher certification have concluded. Nine training centers in various districts have been set-up to train for 515 primary education teachers and 100 supervisors/teacher trainers and activities were run from July 2018 through June 2019.

The Education Management Information System (EMIS) has been established and initial data from all schools have been collected and entered into this new system.   
Increasing reliable access to electricity: Sustainable power generation has been among one of chief challenges of STP. Through a $16 million financing from IDA, the project aims at increasing renewable energy generation and improve the reliability of the electricity supply. The World Bank Group board approved the project on July 5, 2016 and became effective on November 1, 2016.

All the project preparatory phases related to the rehabilitation of the Contador Hydroelectric Plant, and the related network and metering improvements are approaching to completion.

Several major studies have just been concluded, including the design study of Contador hydropower rehabilitation that considered innovative solutions to increase capacity and availability of electricity service, as well as Least Cost Power Development Plan (LCPDP). 

Studies have showed the need for additional financing to make Contador Hydroelectrical Plant more sustainable and to keep it apace with the current and future needs of electricity in STP.  
Coastal communities fight against climate change: A wide range of adaptation options which include protection, accommodation, and relocation were implemented to reduce flooding exposure in 10 coastal communities in STP. Since the completion of construction works, households that used to be affected by floods during heavy rains or storms report that their house and properties (e.g. animals, canoes, wood) are now protected, with flooding events having less impacts and the caused disturbances being shorter in time.

Last Updated: Jul 21, 2020
Sao Tome and Principe 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 joint organization of a donor round table to foster private investment which was held in London in October 2015.

Last Updated: Jul 21, 2020

LENDING

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

*Amounts include IBRD and IDA commitments

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