Despite buoyant oil revenue, Gabon's fiscal surplus is likely to contract over the forecast period thanks to ambitious public investment plans and costly populist concessions that would increase current spending. The draft 2011 budget submitted to the state council for review in December, full details of which are not yet publicly available, sees spending increase from CFAfr2.2trn (US$4.4bn) in the supplementary 2010 budget to CFAfr2.37trn, funded by buoyant international oil prices. Fulfilling government rhetoric to invest in infrastructure and development, capital spending will accelerate faster than current spending. This will still grow strongly, however; on top of an enlarged public payroll, trade union-appeasing tax cuts and price caps on various consumer essentials came into effect in January, following the bread subsidy implemented in October in response to higher wheat prices. The president has also stated his intention to clear long-standing arrears to the private sector, increasing borrowing from local banks to fund such payments to CFAfr911bn. The public payroll audit will generate some efficiency gains.

The government intends to finance spending through higher oil and other extractive sector receipts, accelerating economic growth and some borrowing. Yet despite higher current spending, the government is unlikely to achieve its overall spending goals owing to limited structural capacity to implement capital spending plans. Reform will improve both revenue collection and budget execution. The historically strong fiscal surpluses should remain relatively low over the forecast period, coming in at 2% and 2.7% of GDP in 2011 and 2012 respectively.