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Tanzania: Despite robust growth outlook, Gabon must guard against loose fiscal policy – IMF

 Gabon’s growth outlook remains robust in the medium term, averaging about 6 percent for the next five years, despite a projected decline in oil production, according to findings by a mission from the International Monetary Fund (IMF) that Wednesday concluded a two-week consultation visit to Libreville, the country’s capital.

Summing up their findings, mission leader Montfort Mlachila said Gabon’s growth is projected to be driven by public investment, non-oil natural resources, and services.

Also. a number of projects underway in agro-industry, mining, and wood processing sectors should help sustain the projected non-oil growth.

“Gabon’s growth performance has been strong over the last four years. Real GDP growth has averaged about 6 percent during the period 2010-13 on the back of substantial scaling-up of public investment,” said Mlachila.

“However, there has been a slowdown in growth in 2014, from an estimated 5.6 percent in 2013 to a projected 5.1 percent in 2014, in part reflecting a substantial reduction in public spending,” the IMF official said.

Adjustment in government expenditure in 2014, according to the IMF mission, responded to a considerable weakening of the fiscal position caused by rapid increases in public investment spending in the past few years.

By 2013, overall budget surplus (commitment basis) had virtually disappeared from a high of about 6 percent of GDP in 2009, and significant payment arrears had accumulated. In line with developments in the sub-region, inflation pressures have risen.

Mlachila remarked that the foremost downside risk to the economic outlook in the short to medium term is loose fiscal policy and weak investment execution capacity, leading to further depletion of fiscal buffers and insufficient fiscal space to address binding constraints to growth.

“This is particularly the case in the context of the weak commodity price outlook, especially for oil,” he explained.

Mlachila said the mission’s discussion with government focused on creating the fiscal space necessary to finance the PSGE on a fiscally sustainable basis, notably by keeping rapid public debt accumulation in check; policies to strengthen competitiveness and promote economic diversification; and deepening the financial sector and enhancing financial stability.

In Libreville, the IMF mission had meetings with Prime Minister Daniel Ona Ondo, Minister of Economy, Investment Promotion and Prospective Régis Immongault, Minister of Budget and Public Accounts Christian Magnagna, Minister of Oil and Hydrocarbons Etienne Ngoubou, and Minister of Mining, Industry and Tourism Christophe Akagha-Mba.

The mission also had discussion with Rose Rogombé, President of the Senate; Denis Meporewa, National Director of the BEAC; Members of the Finance Committees of the National Assembly and the Senate; and other senior government officials. 

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