The International Monetary Fund, IMF, has revealed that the government of Sao Tome will introduce Value Added Tax (VAT) and that the adjustment of fuel prices will be made “on a truly automatic monthly basis”.
In a statement issued in Washington, the IMF said it had reached agreement with the Sao Tome government on “economic policies and reforms supported by a new 40-month arrangement under the Extended Credit Facility worth about $20 million.”
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 in February was 23.6%.
The government’s economic programme supported by the IMF “includes an immediate and ambitious fiscal adjustment – which continues to be the main instrument for reducing high public debt and restoring balance to the economy under the exchange rate peg regime – complemented by an end to monetary financing of the budget and a 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,” says the statement which adds that “the authorities will strengthen social safety nets and reinforce the current cash transfer program for vulnerable households, with support from development partners.”
The IMF says that to “prevent implicit fuel subsidies, contain fiscal risks, and reduce pressure on international reserves, the authorities have resumed the application of the automatic fuel price adjustment mechanism.”