AfDB Approves $7.9M Grant to Boost São Tomé and Príncipe’s Recovery & Energy Reform

A central component of the program is the drive to reform São Tomé and Príncipe’s energy sector, which has long been a barrier to sustainable development.

In a significant step towards revitalizing São Tomé and Príncipe’s economy, the African Development Bank Group (AfDB) has approved a $7.9 million grant to support the island nation's ongoing economic recovery and energy sector transformation. This grant represents the second phase of funding under the country’s Fiscal Sustainability and Economic Resilience Support Program (FSERSP), bringing the total support from the Bank to $13.2 million.

Strengthening Resilience through Strategic Reforms

The new funding, sourced from the African Development Bank’s Transitional Support Facility, will provide much-needed budgetary support to bolster macroeconomic stability and encourage key policy reforms in São Tomé and Príncipe. These reforms focus on improving domestic revenue mobilization, enhancing public expenditure efficiency, and addressing long-standing challenges in the energy sector, which is vital for fostering private sector growth.

The initiative aligns with several broader strategic frameworks, including the Country Strategy Paper 2024–2029, the AfDB’s Ten-Year Strategy (2024–2033), and the Bank’s High 5s development priorities—specifically, “Light up and Power Africa” and “Improve the Quality of Life for the People of Africa.”

Energy Sector at the Core of Economic Recovery

A central component of the program is the drive to reform São Tomé and Príncipe’s energy sector, which has long been a barrier to sustainable development. The country faces a persistent energy supply deficit, primarily due to aging fossil fuel-based generation infrastructure and a loss-making state-owned utility. These challenges have crippled the country's productivity and deterred private investment.

The African Development Bank’s intervention aims to support the transition to renewable energy, improve energy governance, and enhance the efficiency and financial sustainability of the electricity sector. These reforms are expected to not only reduce the country’s dependency on costly fossil fuels but also create a more enabling environment for private investment and business development.

Strategic Timing and Impact

AfDB Director General for Southern Africa, Leila Mokaddem, emphasized the strategic importance of the support at this moment in time:

“This budgetary support operation has come at a critical juncture to support economic recovery through revenue and public expenditure reforms while, at the same time, setting the foundations for sustainable energy sector reforms critical for a strong and vibrant private sector.”

Her sentiments were echoed by Pietro Toigo, the Bank’s Country Manager for Angola and São Tomé and Príncipe, who highlighted the acute financial pressures faced by the country:

“The budgetary support will greatly help close the financing gap faced by the country and boost foreign exchange reserves, which are currently at their lowest. It will further strengthen the government’s efforts to undertake necessary reforms for long-term economic recovery.”

Supporting Inclusive Growth

Beyond immediate fiscal relief, the operation underscores the Bank’s broader commitment to inclusive growth and resilience-building in fragile states. By supporting key institutional and policy reforms, the program will also enhance the government’s capacity to respond to future economic shocks while promoting transparency, accountability, and good governance in public financial management.

The approval of the second funding phase marks a vote of confidence in São Tomé and Príncipe’s reform trajectory and is expected to catalyze further support from international development partners. The initiative also provides a framework for policy dialogue and technical assistance—two pillars that are essential to ensuring the sustainability and effectiveness of the reform agenda.

Looking Ahead

As São Tomé and Príncipe grapples with the twin challenges of economic recovery and energy insecurity, the African Development Bank’s continued partnership offers a vital lifeline. The second phase of the FSERSP not only bridges a critical fiscal gap but also lays the groundwork for a greener, more resilient future that is powered by sustainable energy and driven by a vibrant private sector.

The success of this program will be a significant benchmark in the country’s efforts to achieve fiscal sustainability, energy security, and inclusive development—goals that are more pressing than ever in the face of global economic uncertainty and climate vulnerability.