The World Bank in Sao Tome and Principe

The Republic of Sao Tome and Principe (STP) is a lower middle income, small island state with a fragile economy. It is highly vulnerable to exogenous shocks. An archipelago divided into six districts and the Autonomous Region of Príncipe (Região Autónoma do Príncipe), it is located in the Gulf of Guinea, 350 km off the west coast of Africa. With a surface area of 1,001 sq. km, this Portuguese-speaking country has a population of over  215,000 people, and a Gross National Income (GNI) per capita of $1,960 as of 2019. 

Political Context

STP has been a model of democratic transition of power in Central Africa and this was reinforced last August when the second round of presidential elections were held. The highly contested elections were won by the candidate supported by the opposition and the other candidates not only conceded defeat in a peaceful manner but also committed to work together with the new president. 

The government is led by the Movement for the Liberation of Sao Tome and Principe – Social Democrat Party (MLSTP-PSD), thanks to a post-election agreement with the coalition PCD-MDFM-UDD, giving them a majority in parliament. The next parliamentarian and local elections are scheduled for October 2022.

The National Assembly has 55 seats, with 25 currently held by the Independent Democratic Action Party (ADI), 23 by the MLSTP-PSD, five by the coalition PCD-MDFM-UDD and two by the Sao Tome and Principe Independent Citizen Movement (MCISTP). 

Social Context

Despite methodological issues, there is a consensus that poverty levels have not changed significantly between the last two household surveys (2000 and 2010). Recent World Bank estimates show that about one-third of the population lives on less than the international poverty line of $1.90 per day, and over two-thirds of the population is poor, using the World Bank higher poverty line of $3.20 per day. Urban areas and southern districts such as Caué and Lembá have higher levels of poverty incidence.

STP performs higher than the Sub-Saharan Africa average on the UNDP Human Development index and has made progress improving other social indicators. It has a gross primary school enrollment of 110%, a life expectancy of 66 years, a mortality rate of children under five years old of 51 per 1,000 live births, access to an improved water source for 97% of the population, and access to electricity for 60% of the population.

Economy

STP faces challenges that are typical for small and insular states and affect its ability to deal with shocks and maintain fiscal and external balance. The limited number of people and workers in the country often prevents the efficient production of goods and services at the scale needed to meet the demand of both local and export markets. Its remoteness and insularity increase export costs, preventing the country from diversifying its economy, and making it more vulnerable to terms-of-trade shocks. The indivisibility in the production of public goods, and the difficulty of providing services to a scattered population imply a high cost of public goods and a high level of public expenditure is required to provide adequate public services.

STP’s growth in the last two decades was driven mostly by government expenditure propelled by external aid and government borrowing along with by agriculture, tourism and foreign direct investment fueled by expectations for oil production.

Gross domestic product (GDP) grew at an average rate of more than 4 percent between 2010 to 2019, though decelerating to below 3 percent in 2018-19 due to severe power outages, government arrears to local suppliers, and crowding out of domestic financing. Agriculture and fisheries were also affected by weather shocks and agricultural pests. The COVID-19 pandemic affected STP as the country recorded a high rate of infection and the tourism industry, which had been a driver of private sector growth, came to a halt in March 2020. However, with significant external financing, the government was able to offset tourism workers’ lost income and other negative impacts on economic activity. According to official data, STP’s real GDP grew by 3.1 percent in 2020 despite the disruptions caused by the COVID-19 pandemic. Higher public expenditures on COVID-19 relief and other projects financed by exceptional international financial support have supported this growth performance. Despite an expected deceleration due to the unwinding of the externally-financed fiscal impulse, real GDP growth is projected to reach 2.1 percent in 2021 due to a strong upturn of the agricultural sector led by the global economic recovery, and a mild improvement of the tourism sector as the international travel gradually resumes.

The World Bank has supported STP since the beginning of the pandemic by providing quick financial assistance, including a $2.5 million grant for the health, additional financing for social protection, and budget support operation of $10 million.

Last Updated: Apr 07, 2022

World Bank Group Engagement in Sao Tome and Principe

The World Bank Group’s Country Partnership Strategy (CPS) for STP covers the period FY2014 - FY2020 and is aligned with the country’s second Poverty Reduction Strategy (PRSP-II). The strategy has two pillars of engagement: supporting macroeconomic stability and national competitiveness; and reducing vulnerability and strengthening human capacity.  

The current portfolio, funded by the International Development Association’s (IDA), has five projects, with a total net commitment of $80 million, of which nearly 28% is disbursed. There are also active trust funds that finance activities to improve power sector efficiency, the financial sector, the social protection system, the business climate, extractive industries transparency (EITI), and adaptation to climate change.

Last Updated: Apr 07, 2022

Increasing reliable access to electricity

Sustainable power generation has been among one of chief challenges of STP. Through a $16 million financing from IDA, the project aims at increasing renewable energy generation and improve the reliability of the electricity supply. The World Bank Group board approved the project on July 5, 2016 and became effective on November 1, 2016.

All the project preparatory phases related to the rehabilitation of the Contador Hydroelectric Plant, and the related network and metering improvements are approaching to completion.

Several major studies have just been concluded, including the design study of Contador hydropower rehabilitation that considered innovative solutions to increase capacity and availability of electricity service, as well as Least Cost Power Development Plan (LCPDP). 

Studies have showed the need for additional financing to make Contador Hydroelectrical Plant more sustainable and to keep it apace with the current and future needs of electricity in STP.  

Coastal communities fight against climate change

A wide range of adaptation options which include protection, accommodation, and relocation were implemented to reduce flooding exposure in 10 coastal communities in STP. Since the completion of construction works, households that used to be affected by floods during heavy rains or storms report that their house and properties (e.g. animals, canoes, wood) are now protected, with flooding events having less impacts and the caused disturbances being shorter in time.

Social Protection and Skills Development Project (SPSD)

The project is target to build a national safety net system for poor households in STP. Initially, the project benefited 8 000 poor households from 2019 to 2020. However, due to the constraints imposed by Covid-19 which affected the economy and livelihoods of many people, the project has been extended to benefit an additional 16 000 households that have fallen into poverty.  These 16,000 households represent 50 percent of the poor population in the country.

The World Bank (WB) has successfully contributed to Sao Tome and Principe’s efforts to prevent, detect and respond to the threat posed by COVID-19 and strengthen national systems for public health preparedness by providing support in the following areas:

• Emergency COVID-19 Response - support the government’s goal to vaccinate 70 percent of the country’s population free of cost.
• Strengthening Multi-sector, National institutions and platforms for policy development, and coordination of prevention and preparedness including One Health approach
• Implementation Management and Monitoring and Evaluation
• Contingent Emergency Response Component (CERC)

Transport Sector Development and Coastal Protection

The road rehabilitation project linking Sao Tome to the City of Neves is at the stage of improving and building new drainage in selected areas. The work includes small scale interventions to improve resilience of the road network based on analysis of the road accident black spots. This will also include realignment, and improvement of lighting and signs. 

Last Updated: Apr 07, 2022

Sao Tome and Principe is highly aid-dependent but given its size and insularity, it has a limited donor presence.

International partners such as the World Bank, the African Development Bank, the European Commission, the International Monetary Fund, and the United Nations agencies have strengthened their coordination mechanisms in order to further the Paris Declaration and the Busan agenda in the country. Dialogue among the agencies has increased with the joint organization of a donor round table to foster private investment which was held in London in October 2015.

Last Updated: Apr 07, 2022