Political sketch
Independent from Portugal on 12 July 1975.
The island of São Tomé was probably uninhabited when European navigators first visited it in the 1470s. The Portuguese began to settle convicts and exiled Jews on the island and established sugar plantations there, using slave labor from the African mainland. São Tomé officially became a Portuguese colony in 1522. For some years São Tomé was a center of the slave trade. In the mid 1600s the island was held briefly by the Dutch. After a period of decline, the colony recovered its prosperity in the late 1800s by developing cocoa as an export crop. By 1909 British and German chocolate manufacturers were boycotting São Tomé cocoa because the indentured laborers used on local plantations were virtually slaves. With other Portuguese colonies, São Tomé and Príncipe were given the status of an overseas province in 1951. Local dissatisfaction with working conditions on the plantations led to numerous strikes from 1952 until 1973 and riots in 1953. São Tomé and Príncipe played only a minor role in the conflicts between African nationalism and Portuguese colonialism in the 1960s and early 1970s.
Portugese forces withdrew in 1975, following a coup of democratically minded leftist military personnel against the Portuguese dictatorship in April 1974. The islands became independent on 12 July 1975. Until 1990 the Movement for the Liberation of São Tomé and Príncipe (whose Portuguese initials were MLSTP) was the country's only political party. The constitution of September 1990 created a multiparty democracy that has worked peacefully. A bloodless military coup occurred in August 1995, but the coup plotters relinquished power in a week after the deposed president promised to pardon them. The main export is cocoa. Oil has been discovered in territorial waters.
Wars since 1500
Dutch-Portuguese Wars in West Africa, about 1620-1655, Batepa Massacre, 1953.
Convertibility
Portugal introduced exchange controls on 24 September 1914 and revoked them on 18 October 1937. There were also a few controls from perhaps 1939 to 1947. Controls were intensified in the summer of 1947, made extensive on 9 February 1948, and removed on 1 January 1993, long after Portugal had ceased to have any colonies except the Chinese city of Macau.
The escudo, introduced in Portugal in 1911 and in its African colonies in 1914, was a chronically weak currency until the currency reform of 1928. The Banco Nacional Ultramarino, Portugal's private monopoly note-issuer for its colonies, was not required to keep its colonial currencies at par with the Portuguese escudo, though its revised charter of 31 November 1901 did require it to accept notes of one branch at any other branch at a discount of no more than 2%, except regarding Mozambique. (The bank did not issue notes in Portugal.) In 1948 the separate colonial foreign-currency funds were centralized in Lisbon. The currency reform of 1953 unified the Portuguese escudo and the currencies of the Portuguese colonies, making them a true currency area similar to the sterling area or the French franc zone (Portugal, law of 27 June 1953). A Monetary Fund of the Escudo Zone was established by Portugal, Decree-Law 44/703 of 17 November 1962 (reprinted in Banco de Portugal annual report 1962: 129-40). On 21 February 1963 Portugal issued a ministerial decree liberalizing capital m ovements in the escudo zone (IMF ARER 1963: 313). On 1 March 1963 measures were taken to organize a new payments system for the zone (IMF ARER 1964: 390). However, Angola and Mozambique were persistently in deficit to the fund. The result was that high-priority payments were settled immediately at 1 overseas escudo = 1 Portuguese escudo, while low-priority payments experienced delays, which were a form of rationing, until the funds were available to settle them at the official rate. Exchange controls on private transfers from overseas territories to Portugal were imposed by Portugal, Decree-Law 478/71 of 6 November 1971 (reprinted in Banco de Portugal annual report 1971, v. 2: 55-67).
Other
Defaults on or restructurings of debt to the private sector (mainly from Purcell and Kaufman 1993 and Standard & Poor's 2004): 1987-1994 (foreign currency bank debt).
Banking crises (data since 1970s mainly from Caprio and Klingebiel 1999 and Frydl 1999): Problems in 1980s and 1990s; bank liquidations in 1993.
Frankel and Rose (1996) list of currency crashes: 1991.
No exchange rate data in Reinhart and Rogoff (2003).
References
Primary sources:
--Laws and decrees:
São Tomé and Príncipe. Gazette. 1857-present. Boletim official do Governo da Provincia de S. Thomé e Principe (1857-1928); Boletim oficial do Governo da Colónia de S. Tomé e Principe (1928-1951); Boletim oficial de S. Tomé e Principe (1951-1975); apparently no gazette published 1975-1977; Diário da República (1977-present). São Tomé: Imprensa Nacional (1857-1975, 1977-?); Empresa de Artes Gráficas (?-present).
Portugal. Gazette. 1715-present. Diário do governo (1715-1974); Diário da república (1974-present). Lisbon. Recent issues are online at <http://dre.pt/>.
--Publications of monetary authorities:
Banco Central de São Tomé e Príncipe. Annual report. 1992?-present. Relatório. São Tomé: Banco Central de São Tomé e Príncipe.
Banco Central de São Tomé e Príncipe. Bulletin. 1990s?-present. Boletim estatístico. São Tomé: Banco Central de São Tomé e Príncipe.
Banco Nacional de São Tomé e Príncipe. Annual report. 1976?-? Relatório do Conselho de Administracão. [São Tomé: Banco Nacional de São Tomé e Príncipe.] (I have only seen the 1976 issue of this report and do not know if others were published.)
Banco Nacional Ultramarino. Annual report. 1865-1999. Relatório do Banco Nacional Ultramarino. Lisbon: Banco Nacional Ultramarino. In English as Annual Report, 1973-1999? Lisbon: Banco Nacional Ultramarino. From 1920-1960 a separate volume appeared, entitled Relatório do Governo do Banco, parecer do Conselho Fiscal, balanço e contas referentes ao exercício de ....
--Web site of the current monetary authority (viewed 25 August 2005):
<http://www.bcstp.st>, especially the file <http://www.bcstp.st/banco/historial.html>.
--Other publications or Web sites:
None.
Main secondary sources:
Banco Nacional Ultramarino. Serviço de Documentação, Arquivo e Biblioteca. 1977. Papel-moeda para Moçambique, 1877/1973. Lisbon: Banco Nacional Ultramarino, Serviço de Documentação, Arquivo e Biblioteca. (Reproduces the bank's charter.)
Braga Paixão, Vítor Manuel. 1964. Cem anos do Banco Nacional Ultramarino na vida portuguesa, 4 v. Lisbon: Banco Nacional Ultramarino.
Clarence-Smith, [W.] Gervase. 1985. The Third Portuguese Empire, 1825-1975: A Study in Imperialism. Manchester: Manchester University Press.
IMF ARER. 1950-present. International Monetary Fund. Annual Report on Exchange Restrictions (1950-1978), Annual Report on Exchange Arrangements and Exchange Restrictions (1979-1988), Exchange Arrangements and Exchange Restrictions: Annual Report (1989-present). Washington: International Monetary Fund. (Contains information on IMF member countries and some of their dependencies.)
Monetary authorities: São Tomé and Príncipe
| Dates | Type | Name | Source | Remarks |
| 1868
-12 September 1974 |
private monopoly issue (as part of a currency union from 1953) | Banco Nacional Ultramarino (headquarters Lisbon, Portugal) | Portugal, law of 16 May 1864 chartering Banco Nacional Ultramarino, reprinted in Banco Nacional Ultramarino (1977: 20-2) | The Banco Nacional Ultramarino received permission to operate in Portuguese colonies (except, initially, Macau and East Timor). It had separately a marked note issues for each colony. The bank established a branch in São Tomé in 1868, the first bank in the territory. The second bank was the Banco Colonial Português (headquarters Lisbon, Portugal), in São Tomé, by 1924. It went into liquidation in 1925 or 1926 (Clarence-Smith 1985: 128). The second durable bank was the Banco Comercial de Angola (headquarters Luanda, Angola), which opened a branch in São Tomé at some point after the bank was founded in 1956. The first coins were issued in 1929. |
| 13 September 1974
-2 July 1975 |
de facto central bank (with commercial banking functions) | Banco Nacional Ultramarino (headquarters Lisbon, Portugal) | Portugal, Decree-Law No. 451/74, 13 September 1974 | The Portuguese government nationalized Portuguese-owned banks in Portugal and colonies after a coup by democratic-minded left-wing military officers in Lisbon on 25 April 1974. |
| 3 July 1975
-16 August 1976 |
central bank (with commercial banking functions) | Banco Nacional Ultramarino (headquarters São Tomé, São Tomé) / Banco Nacional de São Tomé e Príncipe (headquarters São Tomé, São Tomé) from 1 June 1976 | São Tomé and Príncipe, Decree-Law No. 56/T/75, Boletim Oficial No. 27, 3 July 1975; Lei Orgânica do Banco Nacional de São Tomé e Príncipe, Decree-Law No. 41/76, 3 September 1976, cited in Banco Nacional de São Tomé e Príncipe annual report 1976, v. 1: 31 | The government of São Tomé and Príncipe took over ownership of the nationalized Banco Nacional Ultramarino. On 1 June 1976, revisions were made to administrative structures inherited from Banco Nacional Ultramarino, which ceased to exist in the country. The decree-law of 3 September 1976 law retrospectively validated the changes. The first annual report of the central bank does not mention coins, but I assume the central bank took over responsibility for issuing them from the treasury. Anyway, it currently (2005) has responsibility for issuing coins. |
| 17 August 1976
-25 August 1992 |
monobank | Banco Nacional de São Tomé e Príncipe (headquarters São Tomé, São Tomé) | São Tomé and Príncipe, Decree No. 30/76, 17 August 1976, cited in Banco Nacional de São Tomé e Príncipe annual report 1976, v. 1: 31 | The government brought the only other bank, the Banco Popular de Angola (formerly Banco Comercial de Angola), under the control of the central bank. The government also merged its savings bank, the Caixa de Crédito, with the Banco Nacional (São Tomé and Príncipe, Decree-Law No. 37/76, 4 August 1976, cited in cited in Banco Nacional de São Tomé e Príncipe annual report 1976, v. 1: 31). The country adopted central planning, which made its banking system a monobank. São Tomé and Príncipe joined the IMF on 30 September 1977. |
| 26 August 1992
-present (2005) |
central bank | Banco Central de São Tomé e Príncipe (headquarters São Tom, São Tomé) | São Tomé and Príncipe, Law No. 8/92, 28 July 1992, cited in Banco Central de São Tomé e Príncipe Web site, viewed 25 August 2005 | The central banking functions of the Banco Nacional de São Tomé e Príncipe were spun off from its commercial banking functions. The central bank had been established on 1 August 1992. On 3 March 1993, certain functions of the Banco Nacional de São Tomé e Príncipe were spun off into a separate commercial bank, the Banco Internacional de São Tomé e Príncipe. |
Exchange rate arrangements: São Tomé and Príncipe
| Dates | Official arrangement | Source | Unofficial arrangement, if different | Remarks |
| 1522
-1859 |
fixed; used Portuguese and foreign coins | general histories | São Tomé and Príncipe became a Portuguese colony in 1522. | |
| 1859
-1868 |
fixed; used Portuguese real | Portugal, decree of 25 October 1859, cited in Braga Paixão (1964: [volume and page to come]) | Established Portuguese currency ratings in the colony. "Real" is Portuguese for "royal"; the plural is reis. The milreis (meaning "1,000 reals") and conto (1 million reals) were widely used units of account, especially toward the end of this period. In Portugal, the milreis became the main unit of account by Portugal, edict of 24 April 1835. Portugal and Portuguese colonies using its units of account became decimalized. | |
| 1868
-31 December 1913 |
pegged; 1 local real = 1 Portuguese real | Portugal, law of 16 May 1864 chartering Banco Nacional Ultramarino, reprinted in Banco Nacional Ultramarino (1977: 20-2) | The Banco Nacional Ultramarino established a local branch, so the exchange rate changed from fixed to pegged. | |
| 1 January 1914
-14 July 1976 |
pegged; 1 local escudo = 1 Portuguese escudo | Portugal, decree of 22 May 1911; decree of 28 October 1911; Decree No. 141, 18 September 1913 | Portugal changed the name of its currency to the escudo on 22 May 1911; 1 escudo = 1,000 reals (in Portuguese, reis), or 1 milreis. Accounting in the new unit did not actually begin overseas until 1 January 1914. The name escudo (meaning shield) reflected the revolution that overthrew Portugal's monarchy in 1910. The conto, formerly 1 million reals, now became 1,000 escudos. | |
| 15 July 1976
-16 August 1976 |
pegged; 1 São Tomé and Príncipe escudo (temporary currency) = 1 Portuguese escudo | São Tomé and Príncipe, Decree Law No. 23/76, 15 July 1976, cited in Banco Nacional de São Tomé e Príncipe annual report 1976, v. 1: 30 | São Tomé and Príncipe made its escudo more distinct from the Portugese escudo, as a temporary measure before introducing a currency with a different name. The local notes of Banco Nacional Ultramarino were overstamped from 20-27 July 1976. | |
| 15 July 1976
-7 September 1977 |
repressed (pegged); 1 São Tomé and Príncipe escudo (temporary currency) = 1 Portuguese escudo | São Tomé and Príncipe, Decree No. 30/76, 17 August 1976, cited in Banco Nacional de São Tomé e Príncipe annual report 1976, v. 1: 31 | Established a monobank, so the exchange rate became repressed. | |
| 8 September 1977
-21 July 1987 |
repressed (pegged to rigid basket); 45.25 São Tomé and Príncipe dobras = 1 SDR | São Tomé and Príncipe, Decree Law No. 23/76, 15 July 1976, cited in Banco Nacional de São Tomé e Príncipe annual report 1976, v. 1: 31; IMF ARER (1978: 347) | Parallel market premium over 100% in 1984, when data begin, peaking at 400% in 1986, then falling (World Currency Yearbook 1985: 715; 1988-1989: 154). | Introduced a new currency at 1 São Tomé and Príncipe dobra = 1 São Tomé and Príncipe escudo. The dobra was an old Portuguese coin. São Tomé and Príncipe never registered a gold parity with the IMF, since by this time the system of gold parities was in practice unused and was officially abolished by agreement of IMF members effective 1 April 1978 (International Monetary Fund, Board of Governors, Resolution No. 31-4, 30 April 1976 ["Second Amendment"]). Dobra is Portuguese for "doubloon," a Spanish and Portuguese coin used widely in colonial days. |
| 22 July 1987
-31 August 1991 |
repressed (flexible basket) | IMF ARER (1988: 421, 422; 1989: 416, 417; 1990: 422, 423) | Parallel market premium in double digits (World Currency Yearbook 1988-1989: 154; 1990-1993: 153). | Devalued to 100 São Tomé and Príncipe dobras = 1 SDR and switched the anchor from the SDR to a basket of the currencies of nine major trading partners. The weights of the currencies were not disclosed. On 16 July 1988, the currency was depreciated from 78.91 to 100 São Tomé and Príncipe dobras = US$1. From 1 January 1989-27 November 1989, the exchange rate depreciated in stages from 100 to 134 São Tomé and Príncipe dobras = US$1. Throughout this period the central bank's spread between buying and selling rates was around 3%, but unlike some other countries with similarly large spreads, the IMF did not classify São Tomé and Príncipe as having a dual exchange rate. |
| 1 September 1991
-25 August 1992 |
repressed (managed float) | IMF ARER (1992: 421) | In practice, the exchange rate was determined by a crawling peg to a flexible basket. The parallel market premium was in double digits (World Currency Yearbook 1990-1993: 153). | Devalued the currency about 40% to 280.021 São Tomé and Príncipe dobras = US$1 and began a crawling peg to a trade-weighted basket. The basket was composed of the currencies of São Tomé and Príncipe's nine major trading partners, but the weights were not disclosed. |
| 26 August 1992
-1 December 1994 |
managed float | consequence of São Tomé and Príncipe, Law No. 8/92, 28 July 1992, cited in Banco Central de São Tomé e Príncipe Web site, viewed 25 August 2005 | In practice, the exchange rate was determined by a crawling peg to a flexible basket. The parallel market premium was in double digits until data end in 1993 (World Currency Yearbook 1990-1993: 153). | The monobank system ceased, and the repressed exchange rate ceased with it. |
| 2 December 1994
-1996 |
independent float | IMF ARER (1995: 424) | Ceased reference to the basket. | |
| 1996
-27 February 1999 |
independent float, multiple rates | IMF ARER (1997: 728) | By 1996, IMF ARER (1997: 728) records that there were occasionally spreads exceeding 2% among the four exchange rates. | Previously there were different market segments with a single exchange rate or rates that differed by less than 2%, but by this time the market segments developed different rates. |
| 28 February 1999
-2003 |
independent float | IMF ARER (2000: 763, 765) | A parallel market continued to exist (IMF ARER 2004: 813). | The central bank loosened exchange controls considerably. IMF ARER classifies the exchange rate as unitary from an unspecified time in 1999, which I am guessing is this starting date. As of 2002, IMF ARER (2003: 17, 829) listed the exchange rate as a managed float in the multicountry table but called it an independent float in the main text. |
| 2003
-present (2005) |
managed float | IMF ARER (2004: 813) | IMF ARER mentions no parallel market. | The IMF reclassified the exchange rate arrangement as a managed float without explanation. The first foreign-exchange auction after a hiatus of some years occurred on 9 December 2004 (Banco Central de São Tomé e Príncipe, regulation of 17 March 2004, cited in IMF ARER 2005: 821). |