Within 5 years, the electricity network should be more stable in São Tomé and Príncipe. The African Development Bank (AfDB) Group has given a boost to the Energy Transition and Institutional Support Programme (ETISP) launched in January 2020 in the country.
The ETISP supports the Government of São Tomé and Príncipe (GoSTP) in promoting green growth and the sustainable development of the country’s power system, as well as strengthening public financial management and the business climate.
The Programme is designed around three components aimed at:
The Programme will mainly finance urgent grid reinforcement and maintenance works on existing thermal plants, the rehabilitation of the Papagaio hydropower plant (
The ETISP will also support the implementation of an Energy Efficiency (EE) programme, improve airport facilities for increased cargo exports, improve critical public financial management IT systems and build institutional capacity in environmental and social (E&S) management and gender equality. The Programme will be implemented starting in 2020, in both São Tomé and Príncipe islands. A period of four years is estimated for the Programme implementation, entailing a total Programme cost of UA 10.44 million.
The AfDB financing, worth €12.46 million, represents more than 303 million São Tomean dobras. This considerable support will cover the major part of the programme, which in reality costs around €13 million (almost 317 million São Tomean Dobras). The rest of the funding, i.e. more than €550,000 (13.43 million São Tomean Dobras) will be supplemented by the government of this Central African country.
Other AfDB programme to be implemented in STP is the Economic Reform and Power Sector Support Program – Phase I (ERPSSP-I). The economy of STP is facing significant challenges as a result of both conjunctural pressures and structural imbalances. In fact, the request for budget support comes in the context of increased macroeconomic risks due to slowing growth, falling tax revenues, a vulnerability to a growing domestic primary deficit, electricity shortages, accumulating public sector arrears to the power utility, mounting arrears and public debt and falling international reserves observed in 2018. The situation warrants increased support and urgent action to avert risks to macroeconomic instability while at the same time facilitating structural reforms critical for sustainable long-term growth.
In this sense, the proposed project has a dual focus on public financial management and the power sector, as they represent not only the two key risks for macroeconomic stability but are also critical to unlock the country’s long-term economic potential. Indeed, the project’s support for power sector reforms comes at a critical junction where (i) an inadequate and rapidly decaying power generation infrastructure is limiting power supply and dampening economic activity and private investment and (ii) the country’s dependence on fossil fuel imports for electricity generation causes persistent fiscal and external imbalances that put macroeconomic stability at risk.
Thus, BAfD, through ERPSSP, is supporting both the government’s fiscal consolidation efforts to address short-term macroeconomic risks, and its structural reform program aimed at promoting sustainable and inclusive economic growth and poverty reduction. On the one hand, by supporting short-term government reforms to contain current expenditures, mobilize revenue, improve debt management increase the public sector’s energy efficiency and address fiscal risks posed by the power utility –as well as by bridging the government’s financing gap for 2019-2021. Moreover, ERPSSP supports the implementation of the government’s long-term development program through reforms to strengthen public financial management, improve the business climate, boost investment and enhance the sustainability and efficiency of the power sector.
Source © AfDB and Afrik 21