Sao Tome - Fiscal Sustainability and Economic Resilience Support Program FSERSP - IPR February 2024

Implementation progress and results report ipr a. report summary and proposed actions report data project name: fiscal sustainability and economic resilience support program fsersp project code: p-st-k00-013 country sao tome sector: multi -sector environmental categorization 3-low es risks and report type: date of report: 05.04.2024 mission: launching 1 from: 12.02.2024 to: 13.02.2024 prepared by task manager: fenwick dingiswayo kamanga alternate task manager : bernadette nakabuye kizito division manager : gebre -selassie kalayu ecgf2 project data project financing in uac financing sourceinstrument foreign currency local currency totala.d.f. struct. adjust. 0.00 4,,.00 4,,.00t o t a l 0.00 4,,.00 4,,.00processing milestones bank approved financing only loan number date approved date signed date of entry into force date effective for first disbursement disbursement deadline 2100155043119 01.12.2023 11.12.2023 11.12.2023 14.12.2023 30.06.2025 loan amount in uac loan number net loan approved uac signed uac cancelled uac net loan uac 2100155043119 4,,.00 4,,.00 4,,.00 0.00 4,,.00 t o t a l 4,,.00 4,,.00 0.00 4,,.00 disbursment status at supervision date in uac loan number disbursed to date disbursed to date uac disbursed to date undisbursed to date in uac undisbursed to date 2100155043119 4,,.00 4,,.00 100.00 0.00 0.00 t o t a l 4,,.00 100.00 0.00 0.00 executing and implementation agencies borrower gouvernemnt de sao tome and principe ministere de economie et des financesguarantor gouvernemnt de sao tome and principe ministere de economie et des financesexecuting agency gouvernemnt de sao tome and principe ministere de economie et des financesperformance status progress towards development objective rating on development objective do performance rating summary of key findings current previous all four outcome and 15 output level targets are expected to be achieved subject to approval of bills and strategic documents. there is need to fast -track in undertaking audits for nantional accounts and approval of bills and strategic actions by national assembly and council of ministers. satisfactoryimplementation progress rating on implementation progress ip performance rating summary of key findings current previous all ip related targets are on track. there is need however to conclude in updating the covid -19 procurement audit and in undertaking a flow of funds audit. highly satisfactoryoverall project performance classification overall project performance pp, or n performance rating summary of key findings current previous the pbo is non problematic operation. do ratings are rated satisfactory. ip ratings are rated highly satisfactory since this is a pbo which has fully disbursed. non potentialy problematic projectissues, risks and actions for management consideration issues affecting project implementation key issues corrective actions responsible deadline status program monitoring -government unresponsive to provide updates on progress may affect smooth monitoring and attainment of program measures government to designate a senior officer for program monitoring and reporting. ministry of planning and finance 30.05.2024before appraisal of phase ii of the pbo not yet implemented slowness in considering and approving legal and strategic frameworks may affect attainment of program measures and appraisal of phase ii of the operation government to follow -up with the national assembly and council of ministers on approval of bills and strategic documents ministry of planning and finance 30.05.2024before appraisal of phase ii of the pbo in progress absence of an imf program due to financing gap in the 2024 budget may affect timely processing of phase ii of the pbo government to move with speed in mobilising resources to cover the financing gap and conclude its discussions with imf ministry of planning and finance 30.05.2024before appraisal of phase ii of the pbo in progressmain risks and mitigation risks mitigation measures applied or proposed responsible deadline macroeconomic stp's fragile fiscal sustainability insufficient domestic resource mobilization, rigid current expenditures, and a strong dependence on external financing remains a major source of risk. also, stp's energy sector continues to be characterized by complex institutional arrangements, leading to mounting financial losses for the government. continue implementing reforms designed to contain the fiscal deficit, bring public debt on a declining path, and address structural challenges under the new imf program supported by fserp. adopt the restructuring plans for the energy sector, reducing ineff iciencies. ministry of planning and finance 30.06.2025 program closing date implementation capacity to implement reforms weak project implementation capacity could lead to start -up delays, weaken ownership of reforms, and affect pace of project implementation the bank through the isp -capem that is being processed in parallel will provide complementary technical assistance and capacity building in key areas to help implement reforms. other ongoing isps also help strengthen government capacity for implementation of the reforms under the fserp. ministry of planning and finance 30.06.2025 program closing date fiduciary risk the updated country fiduciary risk assessment cfra conducted by the bank for stp in 2023 indicates that the overall residual risk level is the program targets two key areas of weakness, enhancing the procurement framework and strengthening internal and external audits. the provision of technical assistance and capacity building support under the isp will help to mitigate the risks. to further mitigate against the risk, some ministry of planning and finance 30.06.2025 program closing date deemed substantial, taking into account the risk mitigation factors. performance measures, including undertaking a flow of funds audit, shall be implemented. b. results reporting and assessment progress towards development objective project purpose state the project development objective usually the project purpose as set out in the results -based logframe and assess progress the program objective is to improve fiscal sustainability and energy sector governance through strengthened pfm systems and energy sector reforms. it will support the government in its efforts to implement reforms to accelerate economic growth by creatin g a more conducive environment for the private sector, enhancing transparency and accountability, and boosting governance in the energy sector while building climate resilience. the set of reforms under the proposed program is organized around two mutua lly reinforcing and complementary components. component 1, improving fiscal transparency and sustainability, will support enhancing domestic revenue, improving public expenditure efficiency, and enhancing debt transparency and sustainability. component 2 , improving energy sector governance and transition to renewable energy, will support reforms in the energy sector and help in transitioning to green energy. outcome reporting outcome indicators as per rlf baseline value most recent value end target progress toward endtarget assesment fiscal transparency and sustainability improved tax revenue taxgdp ratio gp 13.100 13.100 15. 0.00 achievedlikely to be achieved no data for 2023 availableinternational budget partnership index on transparency scr 31. 31. 40. 0.00 achievedlikely to be achieved no current data availableenergy sector governance and transition to renewable energy improved electricity production by emae mw 19.850 19.850 24. 0.00 likely to be achieved with correctives actions no current data availablerenewable energies in the energy matrix 5. 5. 7. 0.00 achievedlikely to be achieved no current data availableoutcome rating rating on project outcomes performance rating summary of key findings current previous all outcome level targets expected to be achieved. 3output reporting output indicators most recent value annual target end target progress towards progress towards end of assessment annual target project target strengthened fiscal sustainability income tax law amended to increase the number of tax brackets ameded yn yes na yes na na on track income tax law increasing the number of tax brackets to improve domestic revenue mobilization submitted to the national assembly and got approved. this was a prior action. regulations to operationalize the national debt management committee approv edyn no na yes na na not on track no informamtion available the council of ministers approval of the regulations to operationalize the national debt management committee to strengthen coordination and the exchange of information across different budget units, ministries and agencies updated and amended customs legal framework approved yn yes na yes na na on track updated and amended customs legal framework was approved by council of ministers . this was a prior action. revised customs tariff approved in 2023 budget yn yes na yes na na on track revised customs tariff were approved in 2023 budget strengthened public expenditure efficiency and accountability 2020, 2021, and 2022 government financial audit reports completed, and submitted by the tdc to the national assembly nbr 1. 2.00 3. 50.00 33.33 on track 2020 -finalised and submitted to national assembly tdc processing the 2021 report final report to be submitted to national assembly in april 2024 mpf preparing the financial statement for 2022 and expected to submit to tdc by may 2024 for audit. the 2 023 financial statement expected to be submitted to tdc by december 2024 amended public procurement law approved by the council of ministers and submitted to the national assembly yn yes na yes na na on track council of ministers approved the amended public procurement law which was submitted to the national assembly. this was a prior action. e-gp strategy approved by the cabinet yn no na yes na na on track the e -gp strategy was completed and submitted to council of ministers for approval. however, the strategy cannot be approved before approval of the procurement bill by the national assembly amendment to the inspectorate general of finance igf 562006 decree law approved by the council of ministers yn yes na yes na na on track council of ministers approved the amendment to the inspectorate general of finance igf 562006 decree law . this was a prior action. approval of national amlcft risk assessment by council of ministers yn no na yes na na on track the national amlcft risk assessment report was drafted and submitted to ministry of planning, finance and blue economy in early february for approval. what remains is approval by council of ministers. approval of gender budget guidelines for gender mainstreaming in the public sector yn no na yes na na on track process underway for guideliness development strengthened energy sector governance and oversight improvement planturnaround strategy for emae approved by council of ministers yn yes na yes na na on track the council of ministers approved the improvement planturnaround strategy for emae with the objective of achieving financial viability, operational efficiency, and improvement in corporate governance practices . this was a prior action. renewable energy roadmap approved by council of ministers yn no na yes na na on track renewable energy roadmap approved by council of ministers but evidence yet to be submitted to the bank circular issued by the minister of infrastructure, natural resources, and environment mirna regarding decree 232022 on emae specifying key performance indicators yn yes na yes na na on track circular was issued. this was a prior action. joint ministerial order from mirna and mpfea approving application of the new tariff methodology for determining cost-recovery electricity tariff yn yes na yes na na on track joint ministerial order from mirna and mpfea approving application of the new tariff methodology for determining cost -recovery electricity tariff was issued. this was a prior action. ndc action plan 2022 -2030 approved by council of ministers yn no na yes na na on track ndc action plan 2022 -2030 in place and waiting for approval by council of ministers output rating rating on project outputs performance rating summary of key findings current previous government is on track in undertaking reforms and most of them are expected to be achieved subject to approval of bills by parliament and strategic actions by council of ministers 3development objective do rating progress towards development objective rating on development objective do performance rating summary of key findings current previous all four outcome and 15 output level targets are expected to be achieved subject to approval of bills and strategic documents. there is need to fast -track in undertaking audits for nantional accounts and approval of bills and strategic actions by national assembly and council of ministers. satisfactoryadditional andor unanticipated outcomesoutputs optional indicator baseline end target most recent value

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