São Tomé and Príncipe - Overview of economy

Presently São Tomé and Príncipe is in the process of diversifying its economy, which was dependent on cocoa production since the 19th century. After achieving independence in 1975 the nation adopted a socialist economy, imposing state control over major sectors of economy. The islands were mainly producing cocoa on the state-owned farms, and cocoa remains the main export commodity. Fishing and forestry are also important economic activities of São Toméans. The islands have no mineral resources with the exception of oil discovered in its territorial waters in 1998. The manufacturing sector is mainly limited to production of textiles, beer, soft drinks, and soap to cover the local demand. The country imports up to 90 percent of its food requirements, machinery, and petroleum products.

In the early 1980s São Tomé and Príncipe proclaimed itself a non-aligned state and started establishing trade links with non-socialist countries. In attempting to diversify its economy in the early 1990s, São Tomé requested international financial assistance. This economic development assistance was offered to the republic under conditions of economic liberalization , privatization , administrative reforms, and changes in the financial sector. During the 1990s the government increasingly relied on external sources to finance its liberalization program designed by the International Monetary Fund (IMF) and the World Bank.

According to a World Bank report, in 1999 São Toméan outstanding debt reached US$296 million, compared to US$135 million in 1989. This made about US$1,851 of debt per person, including infants, in 1999. The country is one of the largest recipients of aid per capita in the world; nonetheless, corruption and mismanagement undermined the administration of aid. The country sees its economic future in the development of offshore oil reserves and the expansion of tourism, which is not yet fully established. Beginning in 1993 the nation also sought to establish free trade zones to attract foreign investors and further develop the country's shipping and manufacturing sectors.

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