São TomÉ and Príncipe - Domestic policy

At the time of independence from Portuguese rule in 1975, São Tomé and Príncipe inherited a national economy ill-equipped to provide for the welfare of its citizens. The country was dependent on protected markets in Portugal for its agricultural products. President Pinto da Costa took virtually all enterprises into state control, a reflection of his training as an economist in East Germany. The government exercised a monopoly over foreign trade and controlled prices and retail commerce through a network of "people's shops." Socialist policies and a decline of world prices for cocoa brought the country to the brink of economic collapse. The 1980s and 1990s witnessed IMF-imposed structural adjustment programs, conditionalities, retrenchment of state employees, a failed coup in 1995 and massive popular unrest. The IMF suspended the Poverty Reduction and Growth Facility (PRGF) in November 2001 because of off-budget expenditures in the run-up to the presidential election.

De Menezes promised to root out corruption—a feature of São Toméan life—which has included unauthorized minting of coins, theft of ship registration fees, fraudulent issuing of treasury bills, illegal issue of diplomatic passorts to non-qualified individuals, and nepotistic and unfair allocation of scholarships. Following the 3 March 2002 National Assembly elections he condemned vote buying. The MLSTP-PSD is backed by Angolan money, and the MDFMPCD by Taiwanese and Nigerian money. It remains to be seen whether de Menezes will make good on his promises to shrink the civil service, and to strengthen the social and private sectors.

The main economic policy focus of the government is on poverty reduction. This effort will require a reduction in the fiscal deficit, increased tax revenues, and a ressurection of the Poverty Reduction and Growth Facility (PRGF) suspended by the IMF in November 2001. If favorable, an IMF review of government performance in the frst quarter of 2003 could mean a reinstatement of the program in late 2003, which would clear the way to sustained relief through the Heavily Indebted Poor Countries (HIPC) initiative. A second emphasis is on privatization of the state's 12 main enterprises, eight of which are under consideration for restructuring. The IMF and World Bank would like to see greater progress on this initiative but entrenched interests have slowed the pace of reform.

De Menezes has achieved some performance goals in economic policy. The administration's goal was to reduce inflation to 7%, increase real GDP growth to 5% and to reduce the fiscal deficit. In 2002 inflation was at 9% on average, real GDP growth at 5.0%, the GDP was $53 million, and foreign debt equalled $265 million. De Menezes advanced regional integration by drafting bidding guidelines on oil production with Nigeria, and strengthened political and institutional cooperation with Angola and Mozambique. Oil production is expected to begin in 2005–06 at 25,000 barrels a day.

The success of de Menezes' policies will depend largely on reaching a workable arrangement with a hung legislature. In September 2002, De Menezes dismissed prime minister Gabriel Da Costa replacing him with Maria das Neves of the MLSTP-PSD. As his fight with the National Assembly in January 2003 indicated, however, the pattern for political conflict under the present arrangement appears to be well-established.

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