Located in the Atlantic Ocean, Sao Tomé and Principe were discovered in the second part of the fifteenth century. At the time, they were in a harsh environment and not a good economic prospect. The economy was reduced to intensive sugarcane cultivation and imported slaves in the first centuries of colonialism, a time marked by considerable social heterogeneity, strife, and a fight for control. Copper and bronze shackles, fabric, and assorted currencies were all commonly utilized as means of payment back then (including the slaves themselves). The period that followed was one in which almost no records of commercial activity were kept and economic exploration of the islands was all but abandoned. As the social and economic tensions persisted, so did the disruptions in the flow of money. There was hardly any monetary authority in the city proper, let alone issuing banks, and therefore the situation was not ideal.
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Monetary system
After the passing of Decree 56/75 by the provisional government in June 1975, BNU was replaced by the National Bank of Sao Tomé and Principe (BNSTP). Meanwhile, the BNSTP was officially founded by Decree-Law No. 41/76 of its Organic Law, which gave it authority over the country’s monetary system and the commercial and development sectors. The duties of BNSTP were consistent with the nationalized economic growth model in effect.
Yet, a strong and independent central bank is able to conduct monetary and exchange rate policies and regulate the activities of commercial banks. This was necessary throughout the transition from the centrally planned to the market economy in the late 1980s and early 1990s. Thus, the BNSTP’s commercial and development side had to be sold.
The BCSTP is the issuing bank, state banker, and supervisor of national financial institutions, and as such is responsible for protecting the value of the national currency, both domestically and abroad. It is governed by a board of directors presided over by a governor.
Policy regarding the money supply
Strategically, monetary policy should work to keep prices stable, bring about broad economic equilibrium, and then foster resilient economic expansion. The adopted exchange rate regime renders all macroeconomic measures subordinate to the intermediate objective of maintaining currency parity, by fixing price stability as the primary objective of monetary policy.
Managing the situation
The behavior of the country’s financial institutions is regulated by the Central Bank of Sao Tomé and Principe (BCSTP). According to the Manual of Organic Structure, the Directorate of Behavioral Supervision and Consumer Support (GSC) is responsible for regulating, supervising, and sanctioning the behavior of financial institutions. In the context of their relationships with their customers, with a particular emphasis on the terms in which the disclosures and contracts of financial products and services are established.
The purpose of conduct supervision is to promote the efficiency and stability of the financial system by ensuring that supervised organizations are providing their clients with accurate and truthful information while promoting their products and services.
The directorate of conduct supervision and consumer assistance has many responsibilities, but the following are particularly noteworthy:
- Collaborate with the Bank’s Directorate of Supervision of Financial Institutions to conduct inspections.
- Draft regulations to safeguard users of banking and related services.
- Help the consumer, investigate their complaints, and resolve any money transaction issues.
- Help with financial industry conflict resolution through education, forecasting, and mediation.
- Create and promote financial literacy guides via brochures and the BCSTP website.
- Review each institution’s submitted code of conduct and make any recommendations.
- Conduct the annual study of the institutions’ price list recommendations and revisions.
Statistics on money, finance, and currency exchange are compiled and disseminated.
When it comes to making sound decisions in today’s complex environment, numbers play a crucial role. With this in mind, the Central Bank of Sao Tomé and Principe plans to increase the quality standards in the production and dissemination of statistics. A crucial factor in consolidating the trust that users place in the statistics of their responsibility is to leave economic agents better prepared for the challenges of socioeconomic development.
