- Only a few years ago, oil-rich Gabon had to ask the International Monetary Fund (IMF) for help to reform its economy, which had accumulated an unsustainable level of foreign debts. Today, a recovered Gabonese economy enabled authorities to negotiate an early repayment of its US$ 2.3 billion debt burden.
Representatives of the Paris Club creditor countries yesterday met with Gabonese authorities in the French capital, agreeing on the terms for an early repayment of Gabon's large foreign debts. The face value of Gabon's debt to the Paris Club - an informal grouping of the world's largest creditor countries - amounts to around US$ 2.334 billion as of 1 July 2007.
As a result of the meeting, Paris Club creditors accepted the principle of a buyback by Gabon of its debt at market value. According to Paris Club rules, each creditor country may decide to participate or not in this early repayment operation. Several creditors have already announced their intention to participate in this operation.
For creditors willing to participate, the early repayment will take place between 2 December 2007 and 30 January 2008, after the conclusion of bilateral implementation agreements.
This early repayment operation is part of the policy of reforms initiated by the Government of the Gabonese Republic. This policy also recently led to the conclusion of a stand-by arrangement with the International Monetary Fund. It will allow Gabon to reduce its exposure to potential external shocks.
The early repayment agreement is a strong signal of a significant recovery of the Gabonese economy. Gabon saw its debt rescheduled by the Paris Club in 1994, 1995, 2000 and 2004, as the oil-rich economy had started retracting and the debt burden grew out of control.
The Gabonese economy since independence had been fuelled by large oil revenues to be shared by a very small population. But despite decades of formidable revenues, the authoritarian regime of President Omar Bongo failed to tackle poverty and to invest in education and infrastructure. Meanwhile, prestigious projects were financed through loans of which large-scale corruption took its toll. As oil production started decreasing in the mid-1990s, the debt burden soon grew unsustainable.
Plunged into an economic crisis by the turn of the millennium, President Bongo saw no other way out than asking the IMF for help to reform the economy. Structural reforms were prescribed, together with programmes to increase transparency and fight corruption. By 2005, the IMF concluded that the Gabonese economy was beck in control.
Meanwhile, record high oil prices and a slight increase in Gabon's oil production have poured large and unexpected revenues into the national budget. This has now empowered the Libreville government to increase the rate of its debt down-payment and further recovery of state accounts.
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