The African Development Bank Group Board of Directors has approved a $7.5 million supplemental financing grant from the Nigeria Trust Fund to support São Tomé and Príncipe’s economic reform programme, bringing total Bank support for the initiative to approximately $20 million over two years. The grant aims to close a critical financing gap in the country’s 2025 national budget while advancing fiscal reforms and energy sector transformation essential to economic recovery. After modest growth of 1.1 percent in 2024, the economy is projected to accelerate to 2.9 percent in 2025 and 4.8 percent in 2026, driven by agricultural exports, tourism recovery, and infrastructure investments. Pietro Toigo, African Development Bank’s Country Manager for São Tomé and Príncipe, emphasized that the financing supports a multi-year reform path in public financial management and energy transition to stabilize the economy following the 2023 crisis.
The Fiscal Sustainability and Economic Resilience Program tackles structural challenges that have constrained São Tomé and Príncipe’s growth potential. Despite showing resilience, the economy faces persistent energy shortages, limited domestic revenue mobilization, and vulnerability to external shocks. The programme focuses on two interconnected pillars: economic sustainability and energy sector transformation.
Significant revenue reforms have been implemented, including introducing a value-added tax system and modernizing customs administration through the Automated System for Customs Data (ASYCUDA). These measures are designed to increase the tax-to-GDP ratio, improve budget transparency, and enhance debt management. The electricity sector, long characterized by inefficiencies and high fiscal costs, is also a priority. Reforms include improved governance of the national power and water utility company, Empresa de Agua e Eletricidade, tariff adjustments to achieve cost recovery, and an accelerated transition to renewable energy sources. São Tomé and Príncipe has joined the Mission 300 Energy Compact initiative and approved a National Energy Compact for 2025-2030, reflecting its commitment to universal electrification through clean energy.
The supplemental financing complements support from multiple development partners, highlighting international confidence in São Tomé and Príncipe’s reform trajectory. As a small island developing state, the country remains highly vulnerable to climate change, commodity price fluctuations, and demographic pressures, importing all petroleum products and about half of its food requirements. The reforms aim to strengthen economic resilience by diversifying revenue sources, reducing energy import dependence, and creating fiscal space for investments in human capital and infrastructure. The programme also emphasizes strengthening oversight institutions, including anti-money laundering measures and combating terrorism financing, which are critical for sustainable economic growth and a stable financial sector.
Upcoming milestones include operationalizing public procurement reforms, finalizing anti-money laundering frameworks, implementing a comprehensive public financial management strategy, and rolling out prepaid electricity meters to improve utility revenue collection. The programme aligns with São Tomé and Príncipe’s Vision 2030 development strategy and the emerging National Strategy for Sustainable Development 2026-2040, which aim to structurally transform the economy and enhance population wellbeing.
