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 nearly 200,000 people, and a Gross National Income (GNI) per capita of $1,730 as of 2016.
Political Context
The results of the October 7, 2018 elections 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 $1.9per day, and more than two-thirds of the population is poor, using a poverty line of $3.2 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) has grown at an average rate of 4.5% between 2009 to 2017 but has been decelerating since 2014. The slowdown in growth has been caused by lower government spending on the back of reduced external aid, lower tax revenues, and government overborrowing. The economy was severely hit in 2018, by an energy crisis that in its most acute time reduced energy supply by 75%.
The country runs large structural external deficits because of its small production base. Its current-account deficit (excluding official transfers) declined from 20.2% of GDP in 2016 to 18.8% in 2017. The main contributing factor to the improvement in the external accounts was a decline in imports since exports of goods – which are highly concentrated in cocoa - remained stable.
STP also faces serious fiscal problems – having recorded budget deficits in nine out of the last ten years. The domestic primary deficit stood at an estimated 2.3% of GDP in 2018, despite strong budget cuts, due to the very low domestic revenue levels in STP (12.5% of GDP). This growth boosted by public expenditures led the government to increase external debt and accumulate large domestic arrears for a total debt around of 100% of GDP.
The new administration needs to act urgently to address the serious fiscal imbalances by raising domestic revenues and curb indebtedness.
Development Challenges
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 long-term challenge for STP is to move from ambitious plans to feasible actions that will help make the economy more dynamic and generate more jobs for the youth population.
Lack of up-to-date poverty data undermines efforts aimed at reducing poverty in the country. A new household budget survey data was conducted in 2018 and new poverty data will be available in 2019.

Last Updated: Mar 28, 2019
World Bank Group Engagement in Sao Tome and Principe
The Bank’s Country Partnership Strategy (CPS) for Sao Tome and Principe covers the period FY 2014 - FY 2020 and is aligned with the country’s second Poverty Reduction Strategy (PRSP-II). The strategy has two pillars of engagement: (i) supporting macroeconomic stability and national competitiveness; and (ii) 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 $42.29 million, of which 12.3% 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: Mar 28, 2019
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 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 7 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 are expected to 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^th, 2016 and became effective on November 1^st, 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.

Last Updated: Mar 28, 2019
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: Mar 28, 2019