ECONOMY
Since
the 1800s, the economy of Sao Tome and Principe has been based
on plantation agriculture. At the time of independence, Portuguese-owned
plantations occupied 90% of the cultivated area. After independence,
control of these plantations passed to various state-owned agricultural
enterprises, which have since been privatized. The dominant crop
on Sao Tome is cocoa, representing about 95% of exports. Other
export crops include copra, palm kernels, and coffee.
Domestic
food-crop production is inadequate to meet local consumption,
so the country imports some of its food. Efforts have been made
by the government in recent years to expand food production, and
several projects have been undertaken, largely financed by foreign
donors.
Other
than agriculture, the main economic activities are fishing and
a small industrial sector engaged in processing local agricultural
products and producing a few basic consumer goods. The scenic
islands have potential for tourism, and the government is attempting
to improve its rudimentary tourist industry infrastructure. The
government sector accounts for about 11% of employment.
Following
independence, the country had a centrally directed economy with
most means of production owned and controlled by the state. The
original constitution guaranteed a “mixed economy,”
with privately owned cooperatives combined with publicly owned
property and means of production. In the 1980s and 1990s, the
economy of Sao Tome encountered major difficulties. Economic growth
stagnated, and cocoa exports dropped in both value and volume,
creating large balance-of-payments deficits. Efforts to redistribute
plantation land resulted in decreased cocoa production. At the
same time, the international price of cocoa slumped.
In response
to its economic downturn, the government undertook a series of
far-reaching economic reforms. In 1987, the government implemented
an International Monetary Fund (IMF) structural adjustment program,
and invited greater private participation in management of the
parastatals, as well as in the agricultural, commercial, banking,
and tourism sectors. The focus of economic reform since the early
1990s has been widespread privatization, especially of the state-run
agricultural and industrial sectors.
The Sao Tomean Government has traditionally been reliant on foreign assistance from various donors, including the UN Development Program, the World Bank, the European Union (EU), Portugal, Taiwan, and the African Development Bank. Sao Tome qualified for debt relief when it reached decision point under the IMF's Heavily Indebted Poor Countries Initiative (HIPC) in December 2000, but went off track on its poverty reduction program in early 2001. After four years and satisfactory performance on an interim staff-monitored program, the IMF approved a new three-year $4.3 million Poverty Reduction and Growth Facility (PRGF) program for Sao Tome in September 2005. The ambitious new program aims to reduce inflation to a single-digit number, address the country's macroeconomic imbalances, and substantially reduce poverty.
In 2001, Sao Tome and Nigeria reached agreement on joint exploration for petroleum in waters claimed by the two countries. After a lengthy series of negotiations, in April 2003 the joint development zone (JDZ) was opened for bids by international oil firms. The JDZ was divided into 9 blocks; the winning bids for block one, ChevronTexaco, ExxonMobil, and the Norwegian firm Equity Energy, were announced in April 2004, with Sao Tome to take in 40% of the $123 million bid, and Nigeria the other 60%. Blocks 2 through 6 were allocated in June 2005. Nigeria and Sao Tome signed production sharing contracts with the winning bidders in November 2005. Chevron became the first firm to start exploratory drilling in January 2006.
Portugal
remains one of Sao Tome's major trading partners, particularly
as a source of imports. Food, manufactured articles, machinery,
and transportation equipment are imported primarily from the EU.
GDP (2005 est.): $71.38 million.
Annual real GDP growth rate (2006 est.): 4.4%.
Per capita GDP (2005 est.): $424.
Consumer price inflation (2006 est.): 15%.
Natural resources: Agricultural products, fish, petroleum (not yet exploited).
Agriculture (16.6% of GDP, 2006): Products--cocoa, coconuts, copra, palm kernels, cinnamon, pepper, coffee, bananas, beans, poultry. Cultivated land--484 sq. kilometers.
Industry (15.3% of GDP, 2006): Types--light construction, shirts, soap, beer, fisheries, shrimp processing, palm oil.
Trade: Exports (2006 est.)--$9.773 million (f.o.b.): 95% cocoa, copra, palm kernels, coffee. Major markets--Portugal, Netherlands, Spain, Germany, China. Imports (2006 est.)--$48.87 million (f.o.b.): food, fuel, machinery and electrical equipment. Major suppliers--Portugal (43%), France (16%), U.K. (14%).
Total external debt (2005 est.): $293.7 million.
Exchange rate (September 2005): 7787 dobras=U.S. $1.
Fiscal year: Calendar year.
