The agreement follows a mission led by IMF Mission Chief Slavi Slavov and forms part of a 52‑month Extended Credit Facility programme originally approved in December 2024. If approved by the IMF Executive Board, the agreement will unlock about $6.1 million, bringing total disbursements under the programme to roughly $19.9 million.

The IMF said the programme continues to play a central role in stabilising the economy and unlocking additional support from development partners.

The Fund warned that São Tomé’s economic recovery remains fragile. Growth is projected at just 0.4% in 2026, reflecting the combined impact of high global oil prices, ongoing electricity shortages and delays in the country’s energy transition.

The oil price shock linked to conflict in the Middle East has increased fuel costs and placed additional strain on public finances and the external balance. Prolonged power outages are also weighing on productivity and investment.

While inflation has eased to single digits, the IMF cautioned that rising import costs, particularly for fuel and essential goods, could reverse recent gains. Core inflation remains elevated, adding to pressure on households.

The country’s currency peg to the Euro has helped anchor stability, but persistent inflation differentials continue to weaken its external position. Low foreign reserves and rising fiscal pressures remain key risks.

The IMF stressed that reforming the energy sector is critical to easing these pressures and supporting long-term growth.

Despite the challenges, the Fund said the outlook could improve gradually, with growth expected to recover in 2027 and stabilise at around 2.75% over the medium term, supported by agriculture, tourism, remittances and public investment.

The IMF said continued fiscal discipline, structural reforms and improved energy supply will be essential to sustaining recovery.

–IMF/ChannelAfrica–