Economy
GDP (2005 est.): $71.38 million.
Annual real GDP growth rate (2006 est.): 4.4%.
Per capita GDP (2005 est.): $424.
Consumer price inflation (2006 est.): 15%.
Natural resources: Agricultural products, fish, petroleum (not yet exploited).
Agriculture (16.6% of GDP, 2006): Products--cocoa, coconuts, copra, palm kernels, cinnamon, pepper, coffee, bananas, beans, poultry. Cultivated land--484 sq. kilometers.
Industry (15.3% of GDP, 2006): Types--light construction, shirts, soap, beer, fisheries, shrimp processing, palm oil.
Trade: Exports (2006 est.)--$9.773 million (f.o.b.): 95% cocoa, copra, palm kernels, coffee. Major markets--Portugal, Netherlands, Spain, Germany, China. Imports (2006 est.)--$48.87 million (f.o.b.): food, fuel, machinery and electrical equipment. Major suppliers--Portugal (43%), France (16%), U.K. (14%).
Total external debt (2005 est.): $293.7 million.
Exchange rate (September 2005): 7787 dobras=U.S. $1.
Fiscal year: Calendar year.

GEOGRAPHY
The islands of Sao Tome and Principe, situated in the equatorial Atlantic about 300 and 250 kilometers (200 mi. and 150 mi.), respectively, off the northwest coast of Gabon, constitute Africa's smallest country. Both are part of an extinct volcanic mountain range, which also includes the island of Bioko in Equatorial Guinea to the north and Mount Cameroon on the African west coast. Sao Tome is 50 kilometers (31 mi.) long and 32 kilometers (20 mi.) wide and the more mountainous of the two islands. Its peaks reach 2,024 meters (6,640 ft.). Principe is about 30 kilometers (19 mi.) long and 6 kilometers (4 mi.) wide. Swift streams radiating down the mountains through lush forest and cropland to the sea cross both islands.

At sea level, the climate is tropical--hot and humid with average yearly temperatures of about 27^oC (80^oF) and little daily variation. At the interior's higher altitudes, the average yearly temperature is 20^oC (68^oF), and nights are generally cool. Annual rainfall varies from 500 centimeters (200 in.) on the southwestern slopes to 100 centimeters (40 in.) in the northern lowlands. The rainy season runs from October to May.

SAO TOME AND PRINCIPE ECONOMY
Since the 1800s, the economy of Sao Tome and Principe has been based on plantation agriculture. At the time of independence, Portuguese-owned plantations occupied 90% of the cultivated area. After independence, control of these plantations passed to various state-owned agricultural enterprises, which have since been privatized. The dominant crop on Sao Tome is cocoa, representing about 95% of exports. Other export crops include copra, palm kernels, and coffee.

Domestic food-crop production is inadequate to meet local consumption, so the country imports some of its food. Efforts have been made by the government in recent years to expand food production, and several projects have been undertaken, largely financed by foreign donors.

Other than agriculture, the main economic activities are fishing and a small industrial sector engaged in processing local agricultural products and producing a few basic consumer goods. The scenic islands have potential for tourism, and the government is attempting to improve its rudimentary tourist industry infrastructure. The government sector accounts for about 11% of employment.

Following independence, the country had a centrally directed economy with most means of production owned and controlled by the state. The original constitution guaranteed a 'mixed economy,' with privately owned cooperatives combined with publicly owned property and means of production. In the 1980s and 1990s, the economy of Sao Tome encountered major difficulties. Economic growth stagnated, and cocoa exports dropped in both value and volume, creating large balance-of-payments deficits. Efforts to redistribute plantation land resulted in decreased cocoa production. At the same time, the international price of cocoa slumped.

In response to its economic downturn, the government undertook a series of far-reaching economic reforms. In 1987, the government implemented an International Monetary Fund (IMF) structural adjustment program, and invited greater private participation in management of the parastatals, as well as in the agricultural, commercial, banking, and tourism sectors. The focus of economic reform since the early 1990s has been widespread privatization, especially of the state-run agricultural and industrial sectors.

The Sao Tomean Government has traditionally been reliant on foreign assistance from various donors, including the UN Development Program, the World Bank, the European Union (EU), Portugal, Taiwan, and the African Development Bank. Sao Tome qualified for debt relief when it reached decision point under the IMF's Heavily Indebted Poor Countries Initiative (HIPC) in December 2000, but went off track on its poverty reduction program in early 2001. After four years and satisfactory performance on an interim staff-monitored program, the IMF approved a new three-year $4.3 million Poverty Reduction and Growth Facility (PRGF) program for Sao Tome in September 2005. The ambitious new program aims to reduce inflation to a single-digit number, address the country's macroeconomic imbalances, and substantially reduce poverty.

In 2001, Sao Tome and Nigeria reached agreement on joint exploration for petroleum in waters claimed by the two countries. After a lengthy series of negotiations, in April 2003 the joint development zone (JDZ) was opened for bids by international oil firms. The JDZ was divided into 9 blocks; the winning bids for block one, ChevronTexaco, ExxonMobil, and the Norwegian firm Equity Energy, were announced in April 2004, with Sao Tome to take in 40% of the $123 million bid, and Nigeria the other 60%. Blocks 2 through 6 were allocated in June 2005. Nigeria and Sao Tome signed production sharing contracts with the winning bidders in November 2005. Chevron became the first firm to start exploratory drilling in January 2006.

Portugal remains one of Sao Tome's major trading partners, particularly as a source of imports. Food, manufactured articles, machinery, and transportation equipment are imported primarily from the EU.