The World Bank in Sao Tome and Principe

Sao Tome and Principe has been a multiparty, semi-presidential, democratic system since its independence, and it has been a model for the democratic transition of power in Central Africa. The Independent Democratic Action (ADI) party, which holds 30 out of 55 parliamentary seats, has been mandated to govern from 2022 to 2026.

Economy
Sao Tome and Principe (STP) is a small, lower-middle-income country, composed of two islands of approximately 960 square km. Despite its size and remote location, it has a significant untapped natural wealth, including pristine rainforests with a rich and unique biodiversity, which is favorable for nature-based tourism.

The country faces structural challenges typical of small, remote countries. Its small size and low population of about 240,000 limits the development of large-scale economic activities, resulting in a small and undiversified productive base. Its remoteness and insularity increase trade costs and make it more vulnerable to terms-of-trade and climate shocks. Despite a GDP per capita of about $3,245, the country faces significant socio-economic vulnerability, due to elevated poverty, income inequality (Gini index of 40.7), and a lack of employment opportunities, which, in turn has been contributing to rising emigrations levels. Up to 45% of the population was living on less than $3.65 per day (2017 PPP), the international poverty line for lower-middle income countries.

The business environment is hampered by weak infrastructure, particularly costly, unreliable electricity, fragile institutions, limited connectivity, and the islands’ high vulnerability to climate shocks. Public finances are strained by the high cost of providing public services due to lack of scale in the provision of public goods, compounded by low domestic revenue mobilization and declining external financing.

Sao Tome and Principe's development has been driven by externally financed public expenditure, but this growth model has become unsustainable due to the structural decline and volatility of grants. To grow sustainably, STP needs to promote a private sector-led growth model focused on improving human capital, infrastructure, and the business environment to unleash its potential.

Recent developments and outlook
Real GDP growth is estimated to have recovered from 0.4% in 2023 to 0.9% in 2024, supported by increased electricity generation and tourism rebound. However, limited foreign currency and tight fiscal consolidation constrained economic activity, making this recovery insufficient to boost real income per capita. Growth is expected to accelerate with reforms, reaching 3.1% in 2025 and averaging 4.5% in the medium term, driven by agricultural exports, infrastructure investments, tourism, and energy sector reforms.

Annual inflation averaged 14.5% in 2024, down from 21.4% in 2023, but stagnated towards the end of the year. Sluggish growth and high inflation continued to strain households’ purchasing power, leaving 15.8% of the population on less than US$2.15/day.  Inflation is projected to average 9.6% in 2025 and stabilize at around 5% in the medium-term, as reforms alleviate supply bottlenecks and monetary policy remains tight. With tight macroeconomic policies and weak job creation, poverty reduction is expected to be limited over the next few years.

With IMF program support, the primary balance is expected to rise from 1.8% of GDP in 2024 to 3.9% by 2027. Revenues, including grants, are projected to remain stable, with expenditures set to drop (while preserving social spending). Central government debt to the National Fuel and Oil Company, ENCO—excluding debt owed by the Power and Water Company, EMAE—is expected to decline from 45.7 to 31.6% of GDP in 2024–27. However, the contingent liabilities of EMAE’s debt are expected to stay high, projected at 24% of GDP by 2027.

The external sector strengthened in 2024, with the current account deficit decreasing to 1.8% of GDP in January-September 2024 from 11.1% in the same period of 2023. Tourism exports nearly doubled, which, along with higher cocoa prices and lower fuel imports, reduced the trade deficit from 16.3 to 8.5% of GDP. Import coverage of international reserves rose in the second half of the year, supported by disbursements from the IMF, World Bank, and Portugal.

Despite declining foreign official transfers, a reduced trade-in-goods deficit, mostly from lower fuel imports, is expected to decrease the current account deficit from 10.8 to 5.7% of GDP over 2024-2027. Combined with temporary capital flow management measures, this is expected to bolster international reserves.

The economic outlook is subject to considerable uncertainty and downside risks. Delays in the implementation of urgent reforms could further undermine the government's fiscal position and foreign exchange reserves. The reduced availability of external financing, continued disruption of global supply chains, and climate-related events could weaken STP's prospects for growth and further impede poverty reduction.

Last Updated: Apr 11, 2025

World Bank Group engagement in the country is defined under the latest Sao Tome and Principe Country Partnership Framework (CPF) FY2024–2029, endorsed by the World Bank Group Board in January 2024. The strategy has five pillars: 1) Improve access to more affordable and greener electricity; 2) Strengthen public financial management; 3) Improve access to education and skills; 4) Strengthen road and digital connectivity; and 5) Increase the climate resilience of coastal communities.

Through a highly selective and sequenced set of engagements focusing on the energy, digital, road transport, and education sectors, the Word Bank Group aims to address critical constraints to sustainable and inclusive growth and development in STP.

The current portfolio, funded by the International Development Association (IDA), has 12 projects with a total net commitment of $246.6 million.

Last Updated: Apr 11, 2025

To support STP’s digital transformation agenda, the Digital Sao Tome and Principe Project has financed and supported several pillars of Sao Tome’s digital economy, including the modernization of the country’s legal and regulatory framework for telecommunications. It has also built the capacity of its regulator. Critically, the project has defined the technical and transactional specifications of the future submarine cable to Principe and is currently working on launching the first phases of cable procurement. A cybersecurity function has been developed with the elaboration of a National Cybersecurity Strategy and Action Plan and the development of a National Cybersecurity Council.  A National Computer Security Incident Response Team (CSIRT) is currently being developed and will be implemented within the next few months.

The project also strengthened the capacity of the National Agency for the Personal Data Protection (ANPDP) with the creation of an integrated data protection management platform and supported finalization of the Decree-Law on Electronic Signatures. The infrastructure and capacity of the National Data Centre at the Institute for Innovation and Research has been upgraded, in partnership with the Cape Verdean Information Society Operational Centre. As a result, the population census was delivered on time, on December 15, 2024.

The project is also supporting the government pilot of a digital ID and authentication layer, as well as an interoperability platform, with the goal of bringing public services closer to the citizen, increasing efficiency and unleashing innovation in the public and private sectors.

To support financial stability and strengthen tax administration, the Institutional Capacity Building Project financed an asset quality review of the banks in STP and financed the development of the value-added tax (VAT) system. As of December 2023, all four commercial banks licensed by the central bank were in compliance with capital and provisioning requirements, having corrected the deficiencies identified in the asset quality review. The aggregate non-performing loan ratio of the banking sector substantially reduced, following write-offs of impaired loans. The project has also financed necessary investments in a new IT system and in building the capacity of the tax authorities to manage the VAT system introduced in mid-2023: VAT collection in 2023 represented about 1% of GDP and more than 1,300 VAT taxpayers have been registered in the system.

Increasing reliable access to electricity
Sustainable power generation has been one of the chief challenges of STP. Through $28 million in financing from IDA, the STP Power Sector Recovery Project aims to increase the generation of renewable energy and improve the reliability of the electricity supply.

The preparatory phases of the project related to the rehabilitation of the Contador Hydroelectric Plant and network and metering improvements are nearing completion. Several major studies have now been concluded, including the design study of the Contador Hydropower Plant’s rehabilitation, which looked at innovative solutions to increase the capacity and availability of electricity services, as well as a Least Cost Power Development Plan (LCPDP). Studies have shown the need for additional financing to make the plant more sustainable and keep it in line with STP’s current and future needs for electricity.  

Helping coastal communities fight climate change
On average, around 30,000 people—13% of the population—are affected by flooding each year in STP. A wide range of adaptation options, including protection, accommodation, and relocation, were implemented to reduce exposure to flooding in 12 coastal communities. The West Africa Coastal Areas Resilience Investment Project (WACA) benefits STP and six other countries in the region. Since the completion of construction in most of those communities, households that used to be affected by floods during heavy rains or storms report that their houses and other property, such as animals, canoes, and stocks of wood are now protected, with flooding making less impact and floods lasting for a shorter time. Learn more about WACA beneficiaries in STP.

Since 2020, the Girls Empowerment and Quality Education for All (PEREQT) Project has supported Sao Tome and Principe’s efforts to equip girls with life skills and improve student learning outcomes for all. As of July 2024, results achieved in the following areas comprised:

• 1,316 students participated in one of the 75 adolescent clubs established in 15 secondary schools, created to promote the acquisition of life skills and strengthen sexual and reproductive health education
• Rehabilitation of WASH facilities has started in 13 out of the 15 selected schools
• The country conducted its first international learning assessment. Students in grades 2 and 6 were assessed, with results published and disseminated. The next round is planned for 2025 and will assess students in grades 2, 6, and 9.

The project will be extended until December 2026, with an additional financing from the Global Partnership for Education to scale up activities within the PEREQT framework and in accordance with the priorities established in the Partnership Pact from 2023 which identified learning and gender, access, and institutional capacity as key sector priorities.

The Social Protection and Skills Development  (PPSDC) Project, which closed in December 2024, provided youth with market-relevant training in tourism and entrepreneurship, while also reaching women and safety net program beneficiaries. Overall, 15,325 households benefited from social safety net programs, representing about 30% of the country’s total number of households. More than 80% of beneficiary households were female-led, and 97% were in the first and second quintile of the income distribution. All beneficiaries of the Vulnerable Family Program (VFP) were also registered in the country’s Social Registry. The Hospitality and Tourism School (EHT) was established and has contributed to expanding access to industry relevant TVET programs since March 2023. As of December 2024, 1,887 participants have successfully completed labor market relevant courses in tourism at the EHT, of which 60% were women. In secondary schools, 197 secondary school teachers have been trained as entrepreneurship trainers, and 13,171 students have been trained in entrepreneurship. An agreement was established with the Instituto Superior de Educação e Comunicação (ISEC) to ensure the sustainability of the entrepreneurship training program.

Health 
The Social Protection COVID-19 Response and Recovery Project supported Sao Tome and Principe’s efforts to prevent, detect, and respond to the threat posed by COVID-19 and to strengthen national health systems for public health preparedness by providing support in the following areas:

• Supporting the government’s goal to vaccinate 70% of the country’s population free of cost.
• Strengthening multi-sector, national institutions, platforms for policy development, and the coordination of prevention and preparedness, including the One Health approach.
• As of January 2023, the country had vaccinated 95% of its target population (from the age of 12) with at least one dose and 73.2% with two doses of the COVID-19 vaccines.

The Social Protection COVID-19 Response and Recovery Project focused on (i) strengthening the operational capabilities of the government to deliver social protection programs; (ii) supporting the Vulnerable Family Program (VFP)-COVID-19 for six months to mitigate the effects of COVID-19 (covering 16,000 households); and (iii) supporting the scale-up of the regular VFP. The VFP is a conditional cash transfer program targeting poor households, mainly those headed by women, that have at least one child below the age of 18 attending school. In 2023, the VFP expanded its coverage from 2,543 to 2,830 household beneficiaries, with 99% of these beneficiaries being female-headed households. Plans are underway to extend the VFP to another 5,000 households in 2024, representing 30% of households in the bottom 40% of the economy.

Transport Sector Development and Coastal Protection
The Transport Development and Coastal Protection Project’s road rehabilitation component, linking Sao Tome to the City of Guadalupe, is complete. The work included upgrading the drainage system along the road length. The project also supported project-affected people, including training for women traders and the building of facilities for those working as car and clothing washers.

Statistical Capacity Building
The World Bank supports statistical capacity-building activities in STP through the components of three projects, worth a total of over $7.5 million: the STP Institutional Capacity Building Project (PRCI), (approved in 2018 and closing in June 2025); the Digital Sao Tome and Principe Project (approved in 2022); and the Southern African Development Community Regional Statistical Project (SADC) (approved in 2023).

Key outputs from the PRCI project include: the 2018 household survey and resulting poverty and welfare measurements; the 2020 Enterprise Census; a renovation of the National Institute of Statistics’ headquarters and improvements in communication and information technologies; significant investments in staff capacity, including encouraging the acquisition of degrees in statistics and demography; and improvements to the national accounts’ methodology.

The Digital Project financed the first stage of the 2024 Housing and Population Census. Activities under the SADC Regional statistics project include the latest stage of the census (post-enumeration, thematic studies, etc.), the next household budget survey, labor force surveys, among others.

Last Updated: Apr 11, 2025

Sao Tome and Principe is highly aid-dependent but, given its size and insularity, has a limited donor presence. The World Bank, African Development Bank, European Commission, International Monetary Fund, and United Nations agencies work closely in the country and have strengthened their coordination mechanisms in support of the Paris Declaration and the Busan agenda in the country.

Last Updated: Apr 11, 2025