Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
CONFIDENTIAL Gabonese Republic JULY 2008 GABONESE REPUBLIC Executive Summary 1 Strong economic performance in 2007 and in Q1 2008 Robust 5.6% real GDP growth in 2007 (6.2% for real non-oil GDP, 3.4% for real oil GDP) Overall balance of payments surplus Improvement in public finances Primary budget surplus and reduction of the non-oil deficit Ongoing reforms aiming at increasing permanent income (including non-oil permanent income) Continued efforts to strengthen control on public expenditures Active and prudent debt management Buyback of 86% of Paris Club debt leading to a decrease in external debt to 13.8% of GDP Creation at the World Bank of an amortization fund (‘Investment Management Account’) in respect of the US$1 bn international bond issue of December 12th 2007. First payment in the Investment Management Account will occur before 2008 year end. Continuation of privatizations Continued efforts to improve transparency and governance Publication of the 3rd EITI report Increase to 60% of the share of public contracts awarded on tender Establishment of a Medium Term Expenditure Framework (MTEF) Establishment of a Treasury committee in charge of supervising budget execution Improved investors’ assessment of Gabon’s efficiency, reflected in the continued increase in the price of Gabonese external bonds in the secondary market 1 GABONESE REPUBLIC Table of Contents 2 I ECONOMIC PERFORMANCE IN 2007 AND TRANSPARENCE EFFORTS II ECONOMIC EXPECTATIONS FOR 2008 III GABON’ S NEW EXTERNAL DEBT PROFILE IV POLITICAL ENVIRONMENT V SOCIAL ENVIRONMENT 2 GABONESE REPUBLIC I Economic Performance in 2007 and Transparence Efforts GABONESE REPUBLIC I ECONOMIC PERFORMANCE IN 2007 AND TRANSPARENCY EFFORTS Macroeconomic Developments Robust growth in 2007 5.6% increase in real GDP 6.2% increase in real non-oil GDP Recovered growth in the oil sector: real oil GDP growth at 3.4% Consumer prices 5.9% yoy increase in consumer prices mainly caused by the combined effect of a 26% adjustment in fuel prices in March 2007, inflation in imported foodstuff and internal demand pressures Strong external position: 20,1 % in December 2007 as the International bond issue proceeds were taken into account (13% in March 2007 and 10.3% in March 2008) Gabon’s contribution to the international reserves of the BEAC has been below expectations Budget surplus has been below expectations Non-oil deficit has decreased from 18.0% in 2006 to 13.3% in 2007, while expectations were at 11.6% (IMF program objective) 4 Fuel subsidies have reached FCFA 54.4 bn in 2007 (0.9% of non-oil GDP) Gabon’s own resources have served to buyback part of Paris Club debt The State has assumed insolvent public companies’ and public bodies’ debts, as well as local authorities’ deficits 4 GABONESE REPUBLIC I ECONOMIC PERFORMANCE IN 2007 AND TRANSPARENCY EFFORTS Macroeconomic Developments (cont’d) Monetary situation 6.9% money supply growth due to an increase in net foreign assets and growth of credit to the economy Decrease in State claims due to temporary accounting of the US$1 bn international bond proceeds on Citigroup Libreville’s balance sheet. This amount was subsequently transferred to Paris Club creditors in consideration of the Paris Club debt buyback in January 2008 Balance of payments The trade surplus more than compensates the deficit in services, income and current transfers Increased capital account deficit in 2007 (FCFA -773.9 bn) due to foreign investments in the oil sector and a still-high public debt amortization level (FCFA -246.5 bn) (FCFA bn) 2006 2007 925,5 867,8 Trade balance 2350,7 2531,5 Capital account balance -536,8 -773,9 193 8,7 Current account balance Overall balance 5 5 GABONESE REPUBLIC I ECONOMIC PERFORMANCE IN 2007 AND TRANSPARENCY EFFORTS Macroeconomic Developments (cont’d) 6 Developments in the key sectors of the Gabonese economy Oil Domestic production of crude oil recorded by all companies operating in Gabon in 2007 has reached 12,128 million tons, 1.7% higher than in 2008 (11,927 million tons), notably because of efforts made by the various operators in mature fields starting exploitation of marginal oilfields 0.5% increase in exports by end-December 2007, standing at 11,307 million tons The main destination, the USA, absorbs three quarters of Gabonese crude oil supply Decline in oil revenues vis-à-vis 2006 notably because of the recovery of investment by oil companies (amortization has accelerated) in 2007 the decline in production of principal operating companies (Total, Shell) and increased production companies whose marginal tax is lower Manganese Strong demand for manganese in a context of pressures on global ore supply, leading to an increase in production of manganese by 11.9% compared to 2006, reaching 3,333 million tons an increase in exports and sales of 13.7% and 13.8% respectively an increase in value of sales of 43.2% for a total of FCFA 272,483 bn in 2007 compared to FCFA 190 bn in 2006, bolstered by increasing prices of manganese ores Timber In 2007, 9.6% increase of exports of timber (all species combined), reflecting strong demand from China (largest consumer of Gabonese timber with 1,103 million cubic meters) Refining 14.9% increase of the volume of processed crude oil processed, reaching 821,011 metric tons (MT) against 716,776 MT in 2006 Imports of refined products, including diesel, by the Sogara to meet local demand 6 GABONESE REPUBLIC I ECONOMIC PERFORMANCE IN 2007 AND TRANSPARENCY EFFORTS Macroeconomic Developments (cont’d) Evolution of key figures % of annual change, unless otherwise stated Real sector GDP, constant prices Oil GDP Non-oil GDP GDP, current prices GDP deflator Oil GDP Non-oil GDP Consumer prices Yearly average End of period % of annual change, unless otherwise stated External sector Exports, f.o.b. (FCFA) Of which: oil Imports, f.o.b. (FCFA) Export volume Import volume Terms of trade (-: deterioration) Nominal effective exchange rate (-: depreciation) Real effective exchange rate (-: depreciation) Central Government finance Total revenue Oil revenue Non-oil revenue Total expenditure Current Capital 7 Expected May 2007 5.6 5.3 5.7 2.3 -3.1 -11.6 6.1 5.5 4.5 -2.1 -4.7 15.1 5.5 16.4 -6.1 Effective % of annual change, unless otherwise stated Money and credit End 2007 Credit to the economy 5.6 Broad money (M2) 3.4 Velocity of broad money (non-oil GDP) 6.2 % GDP, unless otherwise stated 11.1 Gross national savings 5.2 Public sector 4.1 Private sector 8 Gross fixed investment Public sector 4 Private sector 5.9 % GDP, unless otherwise stated Central government Non-oil primary balance (% of non-oil GDP) 9.7 Primary surplus (base case) 7.2 Domestic bank financing 17.7 Nex external financing 3.4 External current account balance (including official transfers) 15.7 External public debt (including to the IMF) 4.4 2.1 5.1 0.4 -7.4 14.4 -4 -6.2 3.4 5.4 19 3.9 1.2 -0.5 3.3 2007 2007 May 2007 20.5 14.4 2.5 End 2007 17.5 7.2 2.6 - 40.9 144 26.5 26.2 4.5 21.7 -11.6 9.7 -3.3 -3.9 16.9 27.6 -13.3 7.6 -8.1 4.4 14.8 * 34.9 Total gross public debt 36.7 * 44.5 Memorandum items Nominal GDP (FCFA billion) Nominal non-oil GDP (FCFA billion) Price of Gabonese crude oil (thousands FCFA per barrel) 5,106 2,713 28.6 5,544 2,777 33.3 * Exceptionally high public debt figures between international bond issue (December 2007) and Paris Club debt buyback (January 2008) 7 GABONESE REPUBLIC I ECONOMIC PERFORMANCE IN 2007 AND TRANSPARENCY EFFORTS Efforts towards diversification of the economy 8 20% increase in non-oil receipts, thanks to The computerization of tax services The establishment of a single tax interlocutor Strengthened control of public expenditure and higher capital expenditures in 2007 3.4% increase in capital expenditure Current expenditures over non-oil GDP have decreased to 30.2% in 2007 from 34.6% in 2006 8 GABONESE REPUBLIC I ECONOMIC PERFORMANCE IN 2007 AND TRANSPARENCY EFFORTS Efforts towards increased transparency Transparency 9 Management of oil revenues 3rd EITI report submitted in March 2008 Survey and comparison of payments to the State reported by the oil companies Reconciliation of oil revenue data from both Gabon’s budget and and the EITI report Fiscal policy transparency and strengthening of implementation follow-up Presentation of the 2008 budget in very tight timing New functional Central Government expenditures classification used for budget preparation Increase to 60% of the share of public contracts awarded on tender Establishment of a Medium Term Expenditure Framework (MTEF) taken into account in the preparation of the budget current and capital expenditures Restructuring and development of the health insurance system financing Employer contributions for employees and civil servants Creation of a 10% tax on mobile phone operators’ income (fully included in the budget) for economically weak Gabonese people in the framework of the Caisse d’assurance maladie 9 GABONESE REPUBLIC II Economic Expectations for 2008 GABONESE REPUBLIC II ECONOMIC EXPECTATIONS FOR 2008 Forecasts for 2008 have been revised compared to forecasts made in Dec 07 11 Key features Very good performance of manganese and timber (contributing to non-oil GDP) Lowered expectations for oil production Higher expected oil price – benchmark price: US$111 per barrel Upward revision of 2008 real oil GDP from 2.4% to 4.4% This forecast takes into account SOGARA’ s increased refining capacity Real non-oil GDP growth forecasts remain unchanged at 4.7% Price indexes expectations have been revised upwards, notably because of expected continuous increase in commodities’ prices The rate of growth of GDP deflator has been revised upwards, from 4.9% to 12.2% Consumer prices are expected to increase by 3.8% (3.0% before revision) Fiscal policy Fiscal surplus revised upwards: FCFA 896.5 bn (12.6% GDP), vs FCFA 661.6 bn (11.3%) before Establishment of strict measures FCFA 190.1 bn ceiling on goods and services expenses Non-SOGARA subsidies and transfers capped at FCFA 152.3 bn Capital expenditures limited to FCFA 279.9 bn, of which FCFA 73. 6 bn to be externally drawn Difficult short-term fuel prices adjustment and need to curb rising food prices because of the social context Non-oil primary deficit should be at 11.2% instead of 10.0% as initially forecasted Fiscal revenue loss of approximately FCFA 7 bn due to a suspension of rights and customs duties, value added taxes and all Para fiscal taxes to mitigate rising food prices Almost FCFA 5.7 bn expenditure in 2008 to support the price of flour Fuel subsidies revised upwards to FCFA 102.3 bn Wage bill forecast has been revised upwards from an initial FCFA 311.8 bn figure to FCFA 317.5 bn, vs FCFA 301.2 bn in 2007, to record already-taken measures (creation of new institutions and reintegration of temporarily seconded civil servants) 11 GABONESE REPUBLIC II ECONOMIC EXPECTATIONS FOR 2008 Reforms to increase Gabon’s permanent income Reforms of public finance management Publication in the national press by end-June 2008 of the list of projects selected for the 2008 “fêtes tournantes” and their costs Establishment of a Medium Term Expenditure Framework (MTEF) used for the 2009 budget preparation and better estimate 2008 expenditures Audit of cross-debts between the State, businesses and public bodies and of accumulation of arrears vis-à-vis third parties planned for late 2008 12 Implementation of these projects in accordance with the budgetary procedures Consolidation after verification of the financial statements of public companies and local budgets, so that the preparation of a TOFE for the entire public sector is made possible by 2010 Establishment of a treasury committee charged with examining budget execution and identify priorities, as well as with designing a quarterly cash plan in line with the program Modeling of oil resources and revenues by KPMG, that will Provide more reliable forecasts Permit a better evaluation of the contracts with oil companies 12 GABONESE REPUBLIC II ECONOMIC EXPECTATIONS FOR 2008 Reforms to increase Gabon’s permanent income (cont’d) Financial sector liberalization Government support to regional authorities in their efforts to monitor that banks comply with prudential ratios Preparation of an action plan to reduce the State’s involvement in banks by end-December 2008 and eliminate the requirement for banks to subscribe to equipment goods issues up to 10% of their deposits Removal of BEAC’ s statutory advances scheduled for January 1st 2009: Currently, BEAC may grant statutory advances to a member State up to a ceiling equivalent to 20% of budget revenues reckoned during the previous year The removal of these statutory advances began in 2002 and should be completed by January 2009 External liberalization Ongoing efforts to foster an environment conducive to financial sector development Contribution to the regional debate regarding external trade liberalization Reduction in CEMAC’s Common External Tariff (CET) Removal of the distortions in the rates applied by the different countries of the CEMAC impeding private sector’s growth Privatizations Continued privatization programme 13 Final disposal to Morocco Telecom of the majority stake of the State in Gabon Telecom The audit of 2006 financial statement was published on the website of the Ministry of Finance The State has assumed the new social plan to consolidate the financial position of the new company 13 GABONESE REPUBLIC III Gabon’s New External Debt Profile GABONESE REPUBLIC III GABON'S NEW EXTERNAL DEBT PROFILE Buyback of 86% of Paris Club debt Financing the buyback An international sovereign bond issue (US$1 bn) A regional bond issue (FCFA81.5 bn) in CEMAC Statutory advances granted by BEAC (FCFA130 bn) Gabon’s own resources for the balance Remaining Paris Club debt outstanding stands at US$260 mn (Germany, Canada, USA, Japan) Agreement with the World Bank concerning the creation of an account (IMA: Investment Management Account) dedicated to repayment of the principal of the international bond debt 15 Buyback of US$1.6 bn Paris Club debt owed to bilateral creditors who have accepted the Government’s tender, with resources coming from Gabon will pay up to US$50 mn per year in this fund These funds will be used to either buy back and cancel Gabon’s debt on the secondary market or invest in high quality zero coupon bonds maturing not later than Gabon’s international bond issue . Residual bonds not covered by the IMA is expected to reach approximately 40% of original bond issue at maturity, December 12th 2017 The agreement has already signed between Gabon , BEAC and the World Bank 15 GABONESE REPUBLIC III GABON'S NEW EXTERNAL DEBT PROFILE Gabon’s external debt profile (excluding IMA) US$ billion 1.20 1.00 0.80 0.60 0.40 0.20 2008 2009 2010 2011 2012 Int Fin 16 2013 Reg fin 2014 2015 2016 2017 2018 2019 Residual Paris Club debt service 16 2020 GABONESE REPUBLIC III GABON'S NEW EXTERNAL DEBT PROFILE Gabon’s external debt profile (including IMA) US$ billion 0,8 0,6 0,4 0,2 2008 2009 2010 2011 Fin int 17 2012 IMA 2013 Fin reg 2014 2015 2016 2017 2018 Service Club de Paris Residuel 17 GABONESE REPUBLIC III GABON'S NEW EXTERNAL DEBT PROFILE Continuous improvement in the appreciation of Gabon in the secondary market 9 8,5 8 7,5 Philippines (BB-/BB-) Jamaica (B+/B+) Ukraine (B+/BB-) Indonesia (BB-/BB-) Gabon (BB-/BB-) Ghana (B+/B+) 7 6,5 6 5,5 18 20 08 20 08 /0 8/ 20 /0 8/ 20 08 06 /0 7/ 20 08 23 /0 7/ 20 08 09 /0 6/ 20 08 25 /0 6/ 20 08 11 /0 5/ 20 08 28 /0 5/ 20 08 14 /0 4/ 20 08 30 20 08 /0 4/ 16 20 08 /0 4/ 02 /0 3/ 20 08 19 /0 3/ 20 08 05 /0 2/ 20 08 20 /0 2/ 20 08 06 /0 1/ 20 08 23 /0 1/ 20 07 09 /1 2/ 26 12 /1 2/ 20 07 5 18 GABONESE REPUBLIC III GABON'S NEW EXTERNAL DEBT PROFILE Terms of the bond issues GABON’S INTERNATIONAL BOND ISSUE 19 GABON’S REGIONAL BOND ISSUE Issuer Gabonese Republic Issuer Gabonese Republic Rating BB- (S&P, Fitch) Rating BB- (S&P) Format: RegS/144A Format: COSUMAF Bond Issue Amount US$1,000 million Amount FCFA81.5 billion Coupon 8.20% Coupon 5.5% Issue price 100% Issue price 100% Price Mid-swaps + 356 bps Maturity December 5, 2013 Maturity December 12, 2017 Profile Sinkable Profile Bullet Cotation BVMAC Spread over UST 426 bps Cotation London Stock Exchange Co-lead managers CITI, JPMORGAN 19 GABONESE REPUBLIC IV Political Environment GABONESE REPUBLIC IV POLITICAL ENVIRONMENT The political environment in 2008 21 Political stability has been maintained Formation of a new Government in January 2008 with a 20% reduction in the number of ministries Organization of transparent local elections in April 2008 International recognition of Gabon with the election of Mr. PING to the Presidency of the AU commission in March 2008 Active participation in resolving conflicts in the subregion (CAR, Chad…) 21 GABONESE REPUBLIC V Social Environment GABONESE REPUBLIC IV SOCIAL ENVIRONMENT The social environment in 2008 23 The main claim of the ‘Expensive Life’ action group relates to rising transport costs One of the main factors to take into account when adjusting fuel prices is the impact on transport costs A possible solution could be an improved management of transport facilities The Caisse d'Assurance Maladie Starts effectively in 2009 census of economically weak Gabonese people An additional tax on Western Union transfers is envisaged to complement the tax on mobile telephony (FCFA10 bn) 23