Sao Tome and Principe Economy

Economy

This small poor island economy has become increasingly dependent on cocoa since independence in 1975. Cocoa production has substantially declined in recent years because of drought and mismanagement, but strengthening prices helped boost export earnings in 2003. Sao Tome has to import all fuels, most manufactured goods, consumer goods, and a substantial amount of food. Over the years, it has had difficulty servicing its external debt and has relied heavily on concessional aid and debt rescheduling. Sao Tome benefited from $200 million in debt relief in December 2000 under the Highly Indebted Poor Countries (HIPC) program, but lacking a formal poverty reduction program with the IMF, it has not benefited from subsequent HIPC debt reductions. Sao Tome's external debt stands at over $300 million. Considerable potential exists for development of a tourist industry, and the government has taken steps to expand facilities in recent years. The government also has attempted to reduce price controls and subsidies. Sao Tome is optimistic about the development of petroleum resources in its territorial waters in the oil-rich Gulf of Guinea. The first production license was sold to a consortium led by US-based oil firms. Much of the 2005 budget is dependent upon the sale of additional production licenses.