Friday, May 27, 2011

Economy of Gabon

Gabon's economy is dominated by oil. Oil revenues comprise roughly 46% of the government’s budget, 43% of gross domestic product (GDP), and 81% of exports. Oil production is now declining rapidly from its high point of 370,000 barrels per day in 1997. Some estimates suggest that Gabonese oil will be expended by 2025. In spite of the decreasing oil revenues, planning is only now beginning for an after-oil scenario.
Gabonese public expenditures from the years of significant oil revenues were not spent efficiently. Overspending on the Transgabonais railroad, the oil price shock of 1986, the CFA franc devaluation of 1994, and low oil prices in the late 1990s caused serious debt problems that still plague the country.
Gabon earned a poor reputation with the Paris Club and the International Monetary Fund (IMF) over the management of its debt and revenues. Successive IMF missions have criticized the government for overspending on off-budget items (in good years and bad), over-borrowing from the Central Bank, and slipping on the schedule for privatization and administrative reform. However, in September 2005, Gabon successfully concluded a 15-month Stand-By Arrangement with the IMF. Another 3-year Stand-By Arrangement with the IMF was approved in May 2007. Because of the financial crisis and social developments surrounding the death of President Omar Bongo and the elections, Gabon was unable to meet its economic goals under the Stand-By Arrangement in 2009. Negotiations with the IMF are ongoing.
Gabon's oil revenues have given it a strong per capita GDP of $8,600, extremely high for the region. On the other hand, a skewed income distribution and poor social indicators misrepresent the situation if only GDP is taken into account. The richest 20% of the population receive over 90% of the income while about a third of all Gabonese live in poverty.
The economy is highly dependent on extraction of abundant primary materials. Prior to the discovery of oil, logging was the pillar of the Gabonese economy. Today, logging and manganese mining are the other major income generators. Recent explorations point to the presence of the world’s largest unexploited iron ore deposit. For many living in the countryside without access to employment in extractive industries, remittances from family members in urban areas or subsistence activities provide income.
Many foreign and local observers have consistently lamented the lack of diversity in the Gabonese economy. Various factors have so far stymied additional industries—a small market of about 1 million people, dependence on French imports, inability to capitalize on regional markets, lack of entrepreneurial zeal among the Gabonese, and the fairly regular stream of oil "rent". Further investment in agricultural or tourism sectors is complicated by poor infrastructure. The small processing and service sectors that do exist are largely dominated by a few prominent local investors.
At World Bank and IMF insistence, the government embarked in the 1990s on a program of privatization of its state-owned companies and administrative reform, including reducing public sector employment and salary growth, but progress has been slow. The new government has voiced a commitment to work toward an economic transformation of the country but faces significant challenges to realize this goal.

No comments:

Post a Comment