The International Monetary Fund, IMF, has announced that the Sao Tome government will introduce a Value Added Tax (VAT) and that fuel price adjustments will be made “on a truly automatic monthly basis”.
In a statement released in Washington, the IMF said it had reached an agreement with the Sao Tome government on “economic policies and reforms, backed by a new 40-month arrangement under the expanded credit facility worth about $20 million become”.
An IMF delegation was in São Tomé for several weeks in February and according to the statement now released, “São Tomé’s economy faces serious challenges”, citing as an example annual inflation, which stood at 23.6% in February.
The government’s IMF-backed economic program “includes an immediate and ambitious fiscal adjustment – which remains the key tool to reduce high public debt and rebalance the economy under the exchange rate peg – complemented by an end to monetary financing from the budget and tighter monetary policy.
“The authorities will introduce a Value Added Tax (VAT) that will replace some of the current taxes and broaden the tax base,” the statement said, adding that “the authorities will strengthen social safety nets and put the current money transfer program at risk.” households, with support from development partners.”
The IMF says authorities have resumed use of the automatic fuel price adjustment mechanism to “prevent implicit fuel subsidies, curb fiscal risks and ease pressure on international reserves.”
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