Report No. PIC685
Project Name              Gabon-Economic Recovery Loan
Region                    Africa
Sector                    Non-sectoral
Project ID                GAPA783
Implementing Agency       Ministry of the Economy, Planning,
Restructuring of the Public
Enterprises and Privatization
Date PID Prepared         June 21, 1994
Project Board Date        June 21, 1994
Country Background and Adjustment Program
Since 1986, when the price of crude oil fell by 50 percent,
Gabon's economy has been in decline. Real non-oil GDP growth has been
negative, averaging -1.1 percent per annum from 1985 to 1993. Employment
in the formal sector has been significantly curtailed by the crisis.
From 1986 to 1991, the last year for which comprehensive data are
available, the loss-making parastatal sector received operating
subsidies and made losses amounting to an average CFA franc 43 billion
a year (about 3 percent of pre-devaluation GDP). As of December 1993,
external arrears accumulated to US$1.1 billion and domestic arrears to
about US$450 million (at the new exchange rate). Public and publicly
guaranteed external debt amounted to US$3.4 billion.
Against this backdrop of economic decline, political transformation
brought about multiparty legislative elections in September 1990 and
presidential elections in December 1993. The completion of the
transition to multiparty democracy sets the stage for a renewed focus on
economic adjustment
In January 1994, the parity of the CFA franc in terms of the French
Franc was realigned downwards by 50 percent and a new adjustment program
initiated. The objectives of the program are stabilization of the
economy after the devaluation, elimination of external arrears through
rescheduling and refinancing in cooperation with creditors, return to a
sustainable growth path and reduction of the incidence of poverty.
Objectives of the Loan
The objective of the Economic Recovery Loan (ERL) is to provide
emergency support to the Government's program of economic recovery to
complement the parity adjustment of January 12, 1994 and facilitate the
implementation of efficiency-enhancing reforms in the areas of trade
policy and pricing of energy, as well as the protection of the
budgetary allocation to social sector, in spite of short-run balance of
payments or budgetary financing constraints.
Previous Bank Assistance and ERL Financing
Between 1959-74, the Bank made seven loans to Gabon in the mining,
road, and education sectors, totaling US$69 million. In 1977, Gabon



graduated from Bank lending. Lending resumed in 1988 with a US$50
million Structural Adjustment Loan, which was justified by the sudden
fall in Gabon's per capita GNP below the graduation threshold due to the
downswing in oil prices and by the government's adoption of a structural
adjustment program. In 1989, the Bank approved a US$5 million
Technical Assistance Project, now closed, and a US$30 million Road
Maintenance Project. In 1991, a US$22.5 million Forestry and
Environment Loan was approved. These latter two are currently the only
Bank-financed projects under implementation.
The ERL is for US$30 million, to be disbursed in one tranche upon
loan effectiveness.
Environmental Impact
The project has no direct impact on the environment.
Poverty Category
The operation meets the criteria for a poverty-focused adjustment
loan as it (i) supports a reallocation of public expenditures towards
the social sectors of basic education and health, and (ii) focuses on
the elimination of two distortions that disadvantage the poor. First, by
reducing the excessive taxation of fuel, the operation will contribute
to reducing the cost of transportation of local produce to the major
urban centers. As a consequence, the cost of living will be reduced for
the low-income urban dwellers who allocate a higher share of their food
budget to local products. At the same time, new income opportunities
will be created for rural producers who include a very large number of
low-income earners. Second, the elimination of quantitative
restrictions on imports of cooking oil and sugar are expected to lower
prices and increase significantly the purchasing power of low income
earners, particularly in the cities.
Contact Point: Public Information Center
The World Bank
1818 H Street, N.W.
Washington, D.C. 20433
Telephone: (202)458-5454
Fax No.: (202)522-1500
Note: This is information based on an evolving project. Certain
components may not necessarily be included in the final project.
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