AfDB Approves $7.5M NTF Grant to Boost São Tomé and Príncipe’s Economic Reforms

São Tomé and Príncipe has also joined the Mission 300 Energy Compact, adopting a National Energy Compact for 2025–2030 aimed at achieving universal access to clean, reliable electricity.

The African Development Bank Group has approved a $7.5 million supplemental financing grant from the Nigeria Trust Fund (NTF) to support São Tomé and Príncipe’s ambitious, multi-year economic reform programme. With this new injection of resources, total Bank financing for the initiative reaches nearly $20 million over two years, underscoring strong international confidence in the island nation’s reform trajectory.

The grant will help close a significant financing gap in the 2025 national budget while accelerating structural reforms needed to strengthen fiscal management, improve energy sector performance, and lay the foundation for sustained economic recovery.

Economic projections reflect the programme’s potential: after modest growth of 1.1% in 2024, GDP is expected to rise to 2.9% in 2025 and 4.8% in 2026, driven by agricultural exports, a rebound in tourism, and scaled-up infrastructure investments.

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“A Multi-Year Reform Path at a Critical Moment”

Pietro Toigo, AfDB Country Manager for São Tomé and Príncipe, emphasized the strategic importance of the operation:

“This approval marks an important multi-year reform path in public financial management and energy transition that helped stabilize the economy after the acute crisis in 2023. We are delighted to collaborate with Nigerian and São Tomean authorities to mobilize additional NTF resources to close a critical funding gap.”

The Fiscal Sustainability and Economic Resilience Program tackles core structural challenges that have historically constrained São Tomé and Príncipe’s growth, including:

• Persistent electricity shortages

• Low domestic revenue mobilization

• High exposure to external shocks

• Elevated fiscal vulnerability

• Governance and institutional capacity gaps

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Strengthening Fiscal Governance and Revenue Mobilization

Under the programme’s first pillar, São Tomé and Príncipe has already enacted major fiscal reforms, including:

• Introduction of VAT, broadening the tax base

• Implementation of ASYCUDA, modernizing customs operations

• Improved budget transparency and debt management tools

• Strengthened oversight of public finances

These measures aim to increase the country’s tax-to-GDP ratio, reduce reliance on external financing, and create fiscal space for social and infrastructure investments.

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Transforming the Energy Sector for Long-Term Sustainability

Energy sector reform—a major constraint on private sector activity—is central to the programme’s second pillar.

Key interventions include:

• Governance reforms at Empresa de Água e Electricidade (EMAE)

• Introducing tariff adjustments to improve cost recovery

• Expanding investments in renewable energy

• Rolling out prepaid electricity meters to boost utility revenue collection

• Reducing dependence on imported fossil fuels

São Tomé and Príncipe has also joined the Mission 300 Energy Compact, adopting a National Energy Compact for 2025–2030 aimed at achieving universal access to clean, reliable electricity.

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A Coordinated, Multilateral Effort to Strengthen Resilience

The supplemental financing complements support from a coordinated network of development partners—including the EU, World Bank, IMF, and bilateral partners—amplifying its impact and reinforcing São Tomé and Príncipe’s reform credibility.

As a small island developing state, São Tomé and Príncipe faces heightened vulnerabilities:

• Heavy dependence on food and fuel imports

• Exposure to climate shocks and rising sea levels

• Limited economic diversification

• Demographic pressures on service delivery

The programme aims to reduce these vulnerabilities by diversifying revenue, improving energy security, and strengthening governance institutions. This includes support for anti-money laundering and counter-terrorism financing (AML/CFT) reforms, vital for maintaining financial stability and investor confidence.

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Looking Ahead: Key Milestones for 2025–2026

Upcoming priorities include:

• Operationalizing public procurement reforms

• Finalizing AML/CFT frameworks

• Implementing a comprehensive public financial management strategy

• Completing rollout of prepaid electricity meters

• Advancing renewable energy investments

• Supporting the new National Strategy for Sustainable Development 2026–2040

These reforms align with São Tomé and Príncipe’s Vision 2030, which aims to structurally transform the economy, reduce poverty, and enhance resilience.