Gabon’s outstanding debt has exploded to around 70% of GDP in 2020 due to three factors, including the negative impact of Covid-19 on the economy. Faced with this situation, the government has adopted a strategy aimed at ultimately bringing the debt ratio down to around 50%.
After a downward trend over the period 2016-2019, Gabon’s debt ratio experienced a resurgence in 2020. According to the latest “Note of analysis on Gabon’s debt”, Ali Bongo’s country recorded a strong increase in the debt ratio to almost 70% of GDP at the end of 2020, compared to 59% a year earlier. According to the Ministry of the Economy, three factors explain this surge in outstanding debt.
The first is part of the dialogue the government has established with the private sector. These discussions led to the observation that a number of public commitments made by credit managers did not follow the traditional budgetary procedure. “This is how an audit of extra-budgetary expenditure for the 2015-2017 fiscal years was initiated. The provisional results of the said exercise were shared in 2019, ”said the administration of Nicole Jeanine Lydie Roboty Mbou.
The second factor has to do with the consequences of Covid-19 on the real economy. While the government anticipated a strong recovery in the economy, the negative effects of the spread of the pandemic caused the GDP to contract. “Real growth would be between -1% and -2% in 2020 instead of a forecast in the initial budget law of + 3.6%. In other words, the GDP which is the denominator of the debt ratio has contracted sharply, “said the Ministry of the Economy.
Also linked to the negative impact of Covid-19, the last factor explaining the explosion of debt in 2020 is the low mobilization of resources, combined with strong pressure on spending to meet health, social and support needs of the economic fabric. “It was therefore necessary to resort to loans to meet the financing needs”, justified Nicole Jeanine Lydie Roboty Mbou.
According to the government, the debt strategy was aimed at economic recovery through public investment with a view to controlling debt ratios in the medium term. It is clear that this strategy did not have the desired effects, as Mays Mouissi had recalled. In September 2020, the economic analyst affirmed that Gabon’s public debt has almost quadrupled in ten years, from 1300 to 5320 billion CFA francs between 2009 and 2019. And, according to him, the 4000 billion borrowed n ‘have unfortunately not been beneficial for the country.
In order to reduce the outstanding debt to a more “reasonable” level in the medium term, around 50%, the government has adopted a strategy. This is based on the audit of state commitments; examining all options for reprofiling public debt in order to ease the constraint on current public revenue; economic recovery, which aims to create greater wealth to generate the budgetary resources necessary to honor Gabon’s commitments and at the same time increase GDP; regular payment of public debt maturities.
“Among the actions of the said strategy, there was the constitution of a multidisciplinary team (Task force) at the beginning of the third quarter of 2020 (…). It is in this dynamic that claims of amounts less than 100 million began to pay, “said the Minister of the Economy.
