The larger part of Gabon’s economy is driven by oil revenues which consist of 46 percent of the country’s budget. The CFA franc is the commonly used currency in West African countries, predominantly in Gabon. Oil products are the major export in the country but its production is currently decreasing from its high amount of 37,000 barrels. Some sources predict that the country’s oil will be exhausted by the year 2025. This is due to the extravagant spending of revenue earned from the past years. The funds were overspent in establishing the Trans-Gabon railway. There was a period of low prices and low valuation of oil which led to an oil crisis in Gabon due to debt deficit issues. The government of Gabon has faced critics from IMF and other international financial institutions due to overspending on off-budget items. The government also borrows a lot of money from the country’s central bank.
Past Development Strategies
In 2005, the government of Gabon made arrangements with the IMF and came up with a 15-month agreement to control the state’s overspending. Several standby arrangements were made between 2005 and 2009 with the IMF but Gabon was unable to honor their part of the agreement since the country was facing a financial crisis influenced by the death of President Omar Bongo.
Gabon earns a significant amount of revenue and its GDP is estimated to be around 8,600 USD which is a special case for the region. Unfortunately, the economy of Gabon is not balanced since there is a huge gap between the rich and the poor. 20% of the richest group in the community utilize 90% of the total income while 80% of the poor suffer in abject poverty. Those working in urban areas provide to the unemployed people in the countryside. The economy of the country relies much on mining although materials are always scarce. Logging and mining of manganese were the order of the day for Gabonese before the discovery of oil existence. Recent explorations have revealed that Gabon is very rich in iron ore and could be the world's biggest producer of iron ore in the future.
Unfortunately, Gabon has monopolized its source of revenue in oil extraction. Instead, the country should diversify its economy. The main factors hindering the economic growth in Gabon include small market, over-reliance on imports, lack of capitalization of regional markets, and lack of entrepreneurial culture. The other sectors which could have earned revenue such as tourism have faced a significant challenge due to poor infrastructure. It is difficult for small businesses to develop due to overdominance by companies owned by the successful local investors. After World Bank and IMF involvement in 1990, the country embraced privatization of its companies and restructuring the administration which has improved job creation and an increase in wages but the process has been very sluggish due to unsatisfactory support from successive governments. The current administration is advocating for change in the economic structures though it is facing harsh reception from the established firms.