Gabon’s Priority: Use Resources to Become Emerging Economy

Buoyed by large public investment plan, economic activity has been robust

Low fiscal savings make fiscal position vulnerable to oil price volatility

Better business climate, public investment key for inclusive growth

The key, the IMF said in its regular review of Gabon’s economy, lies in the efficient implementation of the program while managing downside risks.

While current economic conditions are supportive and Gabon has the fourth highest level of income per capita in sub-Saharan Africa, poverty and unemployment remain widespread. In this context, a critical issue for Gabon is how to use oil and mineral resources efficiently and in a transparent manner to support inclusive growth.

The IMF staff also noted that Gabon’s economy remains heavily dependent on oil, which makes it vulnerable to volatile oil prices.

Partly driven by a large scaling up of public investment since 2009, the non-oil economy has performed well, in particular mining, wood processing and construction, helping to boost real GDP growth to 7 percent in 2010–11 (see Chart 1).

Risks to emerging market goal

As a member of the Central African Economic and Monetary Community’s currency union, fiscal policy is the main tool in the Gabonese authorities’ hands to ensure macroeconomic stability. However, anchoring fiscal policy is particularly challenging for Gabon because of the country’s heavy reliance on highly volatile oil revenue and its large development needs.

Moreover, despite decades of oil production, fiscal savings remain low. For the “Emerging Gabon” plan to be successful and to avoid disruptive procyclicality of spending, fiscal policy should be set in a medium-term sustainable framework that takes into account the volatility of oil receipts and allows the buildup of adequate fiscal buffers through better containment of nonproductive expenditure such as wages and subsidies.

The IMF report said a scaling up of public investment is necessary to improve currently weak infrastructure services. To maximize the returns of the recent massive and rapid increase in public investment and mitigate risks of waste, implementation of projects will need to be enhanced.

Work is being undertaken with the assistance of international experts to strengthen the selection, preparation, and execution of investment projects, including a reform of the public procurement code, stricter requirements for technical studies underpinning specific investment projects, and better controls of work...