First Governance and Competitiveness Development Policy Operation

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The development objectives of the First Governance and Competitiveness Development Policy Operation (DPO1) Project for Sao Tome and Principe are to (i) strengthen economic governance, with a focus on improving the transparency and monitoring of public and natural resources, improving the management and reporting of public finances, promoting fiscal stability, and strengthening public debt management; and (ii) support broad-based growth by improving the business climate, with a focus on simplifying business regulations and reducing the cost of trading across borders, and by raising tourism prospects. This program document is the First Governance and Competitiveness Development Policy Operation, a grant in the amount of US$4.2 million equivalent Gross Domestic Product (about 2 percent of GDP) to the Democratic Republic of Sao Tome and Principe (STP). The operation is the first in a series of three single-tranche operations, consistent with the approach in the World Bank Group's Interim Strategy Note for 2011-12, discussed by the Board in May 2011. This series builds on the achievements and lessons of preceding operations, notably the Public Resource Management and Governance DPO approved in May 2011, and aims to consolidate reforms supported by previous operations, as well as an International Monetary Fund (IMF) program. It aims to strengthen the institutional framework to mitigate the effects of and build resilience to internal and external shocks, raise the efficiency and transparency of public expenditures, and improve the policy environment to promote competitiveness and employment opportunities. The design and implementation of the series is benefiting from a close collaboration with STP's development partners and various stakeholders. The operation also supports the Government's effort to mitigate the economic and poverty impact of the global economic slowdown. Exogenous shocks such as the ongoing global economic slowdown and sharp increases in international fuel and food prices have impacted adversely on STP's economy and fiscal outlook.