Côte d'Ivoire
Selected Issues and Statistical Appendix

This Selected Issues paper and Statistical Appendix examines performance of Cote d’lvoire under the 1994–96 programs. The paper highlights that the government’s medium-term adjustment strategy for 1994–96, which was supported by a three-year arrangement under the Enhanced Structural Adjustment Facility, aimed at a rapid restoration of the conditions necessary for sustained economic growth and accelerated progress toward domestic and external financial viability. In addition, the program focused on consolidation of the improved competitiveness of the economy strengthening of public finances and reorientation of public expenditure.

Abstract

This Selected Issues paper and Statistical Appendix examines performance of Cote d’lvoire under the 1994–96 programs. The paper highlights that the government’s medium-term adjustment strategy for 1994–96, which was supported by a three-year arrangement under the Enhanced Structural Adjustment Facility, aimed at a rapid restoration of the conditions necessary for sustained economic growth and accelerated progress toward domestic and external financial viability. In addition, the program focused on consolidation of the improved competitiveness of the economy strengthening of public finances and reorientation of public expenditure.

Côte d’Ivoire: Basic Data

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Sources: Ivoirien authorities; and staff estimates.

Including grants.

I. Performance Under the 1994–96 Program And Recent Economic Developments1

A. Introduction

1. Côte d’Ivoire experienced strong and sustained economic growth during the 1970s, with real GDP increasing by 6½ percent a year in an environment of rising international commodity prices. However, between 1985 and 1993, Côte d’Ivoire’s growth performance and external position were seriously affected by a marked loss of competitiveness and a sharp deterioration in the terms of trade, as well as the persistence of structural rigidities in the economy. The CFA franc appreciated by 43 percent over the period 1986–93 in real effective terms, while concurrently, many of Côte d’Ivoire’s major competitors experienced currency depreciations. In addition, substantial declines over 1985–93 in the world market prices for the major Ivoirien export crops led to a 46 percent fall in Côte d’Ivoire’s terms of trade. In these circumstances, the Ivoirien economy faced a protracted period of stagnation, and internal and external financial imbalances widened.

2. To address the economic and financial difficulties facing the country, the authorities pursued an internal adjustment strategy over the 1989–1993 period. However, this strategy was not successful in restoring competitiveness or external viability. In view of the high costs of the internal adjustment strategy and its limited results, in January 1994, the authorities decided to adopt a comprehensive adjustment strategy involving a 50 percent realignment in the parity of the CFA franc in terms of the French franc—in concert with the other member countries of the CFA franc zone—as well as appropriate accompanying macroeconomic and structural policies. The devaluation-induced change in relative prices and the accompanying measures implemented were instrumental in restoring Côte d’Ivoire’s competitiveness and improved its economic prospects.

B. The 1994–96 Program: Objectives and Outcome

Overview

3. The government’s medium-term adjustment strategy for the period 1994–96, which was supported by a three-year arrangement under the Enhanced Structural Adjustment Facility (ESAF), aimed at a rapid restoration of the conditions necessary for sustained economic growth and accelerated progress toward domestic and external financial viability. In addition, the program focused on consolidation of the improved competitiveness of the economy; strengthening of public finances and reorientation of public expenditure; and further development of human resources, including appropriate social safety net measures to mitigate the immediate impact of the exchange rate adjustment on disadvantaged groups.

4. The central objectives of the program were to achieve a sustained rate of economic growth of some 6 percent per annum by 1995–96; to lower inflation, as measured by the consumer price index (CPI) on an annual average basis, from a projected 35 percent in 1994 in the wake of the devaluation to about 7 percent in 1996; and to reduce the external current account deficit to 7.7 percent of GDP in 1994 and 5.6 percent by 1996 (Table 1). Over the program period, investment was to rise significantly in real terms, financed in part by a strong boost in domestic savings. Private savings were expected to rise sharply, reflecting in particular a substantial improvement in enterprise profits and higher economic growth. Moreover, the authorities intended to create a more enabling environment for private sector development by intensifying and accelerating structural reforms.

Table 1.

Selected Economic and Financial Indicators, 1991–97

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Sources: Ivoirien authorities; and staff estimates.

As approved at the time of the annual arrangements under the ESAF.

5. The adjustment programs adopted by Côte d’Ivoire over the 1994–96 period were broadly successful. Breaking with a long period of economic stagnation and consistent with improvements in the country’s external competitiveness, rapid growth was restored as real GDP increased by 2.1 percent in 1994, 7.1 percent in 1995, and is estimated to have increased by 6.8 percent in 1996 and 6 percent in 1997 (Figure 1). Inflation was successfully contained following the initial devaluation-induced surge in prices, falling to 3.5 percent by 1996 on a year-end basis (2.7 percent on an annual-average basis). Likewise, Côte d’Ivoire’s external position improved considerably, with the external current account deficit dropping from 11 percent of GDP in 1993 to below 5 percent in 1996. In line with the economic recovery and growing private sector confidence, investment and savings rebounded, with investment increasing by more than 6 percentage points of GDP between 1993 and 1996 to about 14 percent, and domestic savings rising almost 13 percentage points over the same period to over 22 percent of GDP.

FIGURE 1
FIGURE 1

COTE D’IVOIRE: MAIN ECONOMIC INDICATORS, 1991-1997

Citation: IMF Staff Country Reports 1998, 046; 10.5089/9781451807837.002.A001

Sources: Data provided by the Ivoirien authorities; and staff estimates and projections.

6. Côte d’Ivoire’s efforts to improve the fiscal situation were effective, as government revenue rose by about 5 percentage points of GDP between 1993 and 1996 to 22½ percent, and total expenditure declined by 4.7 percentage points over the same period to 19½ percent of GDP. The primary budget balance, excluding foreign-financed investment, turned around from a deficit of more than 2 percent of GDP in 1993 to a surplus of over 5½ percent in 1996, and the overall fiscal deficit was reduced from almost 12 percent of GDP in 1993 to 2.1 percent in 1996 (Statistical Appendix Table 20).

7. The economic recovery was sustained during 1997 and the rate of real GDP growth is provisionally estimated at 6 percent. In particular, the index of overall industrial production registered an increase of about 10 percent. The seasonal rise in the prices of food products was greater in 1997 than in 1996 and contributed to a rise in the general consumer price index of 5.2 percent in 1997, on a year-on-year basis; excluding food products, the increase was only 0.3 percent compared to 2.6 percent in 1996. The external current account deficit was reduced to 4.5 percent of GDP in 1997, despite lower cocoa exports. The overall fiscal deficit was limited to 2 percent of GDP in 1997.

8. In the structural area, the government made substantial progress on its reform agenda. It adopted a new, more flexible labor code and a new investment code; implemented a program of privatization and restructuring of public enterprises; initiated reforms of the legal, regulatory, and judicial framework; and undertook substantial trade and price liberalization, as well as reforms in key agricultural sectors (see below).

Production and prices

9. The devaluation of the CFA franc marked the beginning of a major turnaround in Côte d’Ivoire’s economic performance, as it restored external competitiveness and increased profitability in the export sector. During the three-year period 1994–96, real GDP grew by a cumulative 17 percent, led by a strong performance in the primary sector. Agriculture responded significantly to the change in relative prices, and growth in this sector was spearheaded by increased cocoa and coffee output, as well as by greater production of food crops and livestock products. Cocoa production rose by a cumulative 36 percent, with exports reaching a record 1.2 million tons in 1996, while coffee production, after declining in 1994, increased by 48 percent between 1994 and 1996 (Statistical Appendix Table 10). The industrial sector took advantage of the competitiveness gains as output grew by some 14 percent, boosted by the coming onstream of new oil and gas fields, as well as by the pickup of manufacturing and the continued growth in the utility and housing subsectors. As measured by the industrial production index, manufacturing output, which was stagnant between 1989 and 1993, rose by a cumulative 28 percent in 1994–96, led primarily by an expansion in textile production and food processing (Statistical Appendix Table 15). The services sector also recorded strong growth, with output rising by a cumulative 19 percent.

10. Domestic demand expanded by only 5.4 percent in real terms, on a cumulative basis, during 1994–96, in spite of strong increases in investment (Statistical Appendix Table 4). In real terms, consumption rose by 4 percent over the same period; private consumption declined from 74 percent of GDP in 1993 to 65 percent in 1994 and remained broadly stable at that level in 1995–96, while public consumption continued to decline from 16 percent of GDP in 1993 to 12 percent in 1996, owing to the restrained fiscal policies of the past few years. Boosted by a more favorable economic environment, fixed domestic investment rose from 7.8 percent of GDP in 1993 to 13.9 percent in 1996, reflecting an increase of 5½ percentage points of GDP of private investment over the period, while public investment increased by ½ a percentage point.

11. As measured by the CPI, inflation, which surged to 32.2 percent on a year-on-year basis in 1994 in the wake of the devaluation, decelerated to 7.7 percent in 1995 and to 3.5 percent by the end of 1996; on an annual-average basis, inflation fell from 26 percent in 1994 to 2.7 percent in 1996. This deceleration suggests that the price adjustments after the devaluation have worked themselves completely through the economy, as domestic inflation reflected the low levels of world inflation by the end of 1996. The reduction in inflation was aided by the relatively abundant supply of domestic goods and services in the economy, as well as by the containment of unit labor costs.

External sector developments

12. Côte d’Ivoire’s external position strengthened over the 1994–96 period, owing to an overall improvement in the terms of trade, as well as strengthened competitiveness following the depreciation in the real effective exchange rate (Table 2 and Figure 2). After depreciating by 34.5 percent in 1994, the CPI-based real effective exchange rate appreciated by 8 percent in 1995, and depreciated again by about 1 percent in 1996. The terms of trade fluctuated considerably over the period, improving by 9 percent in 1994 and by 15 percent in 1995, before deteriorating by 12 percent in 1996, owing primarily to the drop in world prices for cocoa and coffee. The overall balance of payments turned around from a deficit of 9.2 percent of GDP in 1993 to a surplus of 6.5 percent in 1994, before moving back to narrower deficits of 2 percent in 1995 and 3 percent in 1996. Meanwhile, the external current account deficit declined from 11 percent of GDP to 1 percent in 1994, before increasing to 6 percent in 1995, and dropping again to 4.8 percent in 1996 (Statistical Appendix Table 38).

FIGURE 2
FIGURE 2

COTE D’IVOIRE: NOMINAL AND REAL EFFECTIVE EXCHANGE RATES, JANUARY 1988-DECEMBER 1997

(Base 1990 = 100)

Citation: IMF Staff Country Reports 1998, 046; 10.5089/9781451807837.002.A001

Source: Information Notice System (INS) and World Economic Outlook.
Table 2.

Key External Indicators, 1991–97

(Percent change)

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Source: Statistical Appendix Table 44.

13. The improvement in the balance of payments was due primarily to the strong recovery in exports, which grew in volume terms on average by 11 percent per year in 1994–96. Exports benefited from the improved competitiveness of the local economy resulting from the devaluation, as well as from generally favorable trends in the world prices of the country’s key commodities in 1994 and 1995. Cocoa exports declined in volume terms by 12 percent in 1994 but then increased by 11 percent in 1995 and 40 percent in 1996 when they peaked at 1.2 million tons. Other exports also rebounded strongly during the same period, with timber, pineapple, rubber, textiles, petroleum, and manufacturing goods rising substantially in real terms (Statistical Appendix Table 40). Imports, which contracted initially in volume terms by 9.5 percent in 1994, rebounded strongly in 1995 by 41 percent and increased further in 1996 by about 7 percent, reflecting the overall upturn in domestic economic activity and increases in imports of capital and intermediate goods.

14. The services account continued to deteriorate throughout the three-year period, primarily because of the growing burden of external interest obligations. However, the capital account improved markedly in 1994, despite an increase in external public debt amortization, owing primarily to a surge in external financial assistance immediately following the devaluation and a significant increase in private sector capital inflows. The capital account’s surplus fell in 1995 and 1996 in spite of continued increases in private sector capital inflows, as net official capital transfers became negative again.

15. Côte d’Ivoire’s major trading patterns did not change substantially in 1994–96. France remained a key export destination, while exports to Germany and the Netherlands also benefited from the devaluation, increasing as a share of total exports (Statistical Appendix Table 41). Other important export markets include Italy, the United States, and Spain. Exports to partner countries within the West African Economic and Monetary Union (WAEMU) have remained insignificant, except for those to Burkina Faso and Mali, which have stabilized at about 6 percent of total export trade. As regards principal import markets, these also remained broadly unchanged. Accounting for 24 percent of the total in 1996, France was the largest source of imports (Statistical Appendix Table 43), followed by Nigeria (18 percent) and the United States (6 percent). Imports from the WAEMU member countries were very limited.

16. Côte d’Ivoire’s external public debt rose from US$14.2 billion in 1993 to US$16.2 billion by 1996, and as a share of GDP has remained high, increasing over the period from 142 percent to 155 percent (Statistical Appendix Tables 49 and 50). Debt owed to commercial banks represented 42 percent of total public debt at end-1996, that to multilateral creditors 26 percent, and the debt owed to bilateral creditors 32 percent. The country’s primary multilateral creditors remained the World Bank Group (14 percent of public debt at end-1996), the African Development Bank (5 percent), the Fund (3 percent), and the European Investment Bank (1 percent). France is the major bilateral creditor (10 percent), followed by Germany and the United States (1 percent each).

C. Progress on Policy Implementation

Fiscal policy

17. The 1994–96 period marked a decisive reversal of the deteriorating trend in public finances encountered during 1988–93, reflecting the strength of the recovery and the direct effects of the devaluation, as well as the determination of the authorities to consolidate the fiscal situation. As a result, the program’s fiscal targets were met and often exceeded, and the primary budget balance, excluding foreign-financed investment, turned around from a deficit equivalent to 2.2 percent of GDP in 1993 to a surplus of 3 percent in 1994 (compared with a program target of 1.3 percent) before rising to a surplus of 5.6 percent by 1996. Meanwhile, the overall fiscal deficit on a payment order basis declined steadily from 11.9 percent of GDP in 1993 to 2.1 percent in 1996 (Table 3).

Table 3.

Key Fiscal Indicators, 1991–97

(In percent of GDP)

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Source: Statistical Appendix Table 20.

18. The improvement in the fiscal position resulted in large part from a strong revenue performance, which rose by an average of 33.5 percent annually during 1994–96, reflecting the direct impact of the devaluation and revenue-raising measures taken, as well as the effect of the economic recovery. The government revenue-to-GDP ratio increased by nearly 5 percentage points to 22.5 percent in 1996, from 17.6 percent in 1993 (Statistical Appendix Table 21). The revenue outturn in 1994 was in large part due to increased import tax receipts, which were some 15 percent higher than programmed despite a reduction in customs duties on vehicles and equipment goods and rising import substitution. The improved performance on income tax receipts partly reflected the direct impact of the devaluation on the value of imports, as well as the impact of the reduced tax rates in limiting the incentives for fraud and smuggling. Revenue was also buttressed by the reintroduction of export taxes on cocoa and coffee, which had been suspended in 1989; however, export taxes were lower than programmed in 1994 because of lower shipments and the decision made to lower the export tax for coffee in order to reduce incentives for smuggling. Following a continued strong revenue performance in 1995, and to sustain the gains achieved, the authorities adopted in 1996 a number of revenue measures to improve the tax and customs administrations, reduce tax exemptions, and combat fraud. These measures included the establishment of a large taxpayers unit, the elimination of exceptional exemptions, and the reinforcement of actions to curtail fraud and tax evasion. Also, export taxes on cocoa and coffee were reduced.2

19. The government pursued a prudent spending policy, and noninterest expenditure was reduced to below 19½ percent of GDP by 1996, compared with 21.3 percent in 1993, despite an increase in public investment to 5.6 percent of GDP from 3.1 percent in 1993. A restrained wage policy was carried out, and the wage bill fell from 50 percent of primary expenditure in 1993 to less than 37 percent in 1996; as a share of GDP, the wage bill fell from 10.7 percent to 7.1 percent over the same period. The declining share of the wage bill was due to modest nominal wage increases and a reduction in staffing over the period.3

20. In 1994–95, nonwage spending in high-priority sectors, such as primary health and education, increased substantially as programmed, although slightly less than primary expenditures, and outlays for social security benefits and other transfers exceeded the objectives. However, targeted social expenditure fell short of budgetary allocations, while the implicit subsidies on wheat and rice were eliminated ahead of schedule. In 1996, the appropriations for essential services, especially in the education and health sectors, were fully utilized.

21. Investment spending picked up considerably over the 1994–96 period. The recovery of public investment was stronger than programmed in 1994, reflecting a larger increase in investment financed by domestic resources. Further improvements in the execution of the investment budget led to a boost in investment spending in 1995,4 and proceeded as planned in 1996. In 1996, total spending was kept broadly in line with the program, as higher nonwage primary spending was largely offset by a lower-than-projected wage bill and interest payments. However, 1996 was marked by an accumulation towards the end of the year of spending commitments for which payment orders have not been issued (dépenses engagées non ordonnancées—DENOs). As a consequence, the stock of DENOs rose by 44 percent in 1996 to CFAF 134 billion at the end of the year.

22. Reflecting the strong track record of economic policy implementation, there was a considerable increase in external program assistance for 1994–1996, and Paris Club creditors in 1994 rescheduled Côte d’Ivoire’s eligible public debt service obligations over a three-year period through 1996. Under the circumstances, the improvement in the primary budget balance enabled the government to eliminate all external payments arrears and most verified domestic arrears.

Monetary and credit developments

23. Monetary developments in 1994–95 were characterized by a recovery in money demand, an expansion of credit to the private sector, and a major strengthening of the net foreign assets position of the banking system. Following a reconstitution of money balances of 47 percent in 1994 in the wake of the devaluation, broad money continued to expand by 17 percent in 1995 (Statistical Appendix Table 30).5 Net credit to the central government declined by 16 percent of the beginning-of-period money stock in 1994 and 2 percent in 1995, reflecting the improved fiscal position, while credit to the private sector rose by 10 percent and by 20 percent, respectively. In this context, the net domestic assets of the banking system declined by 20 percent of the beginning-of-period money stock in 1994, but rose by 6 percent in 1995. The pickup in private sector credit was due in part to the easing of credit conditions, but more importantly to the general upturn in economic activity. The net foreign asset position of the banking system improved substantially over the two years, consistent with the positive differential maintained between the central bank’s rediscount rate and the French money market rate. After an initial sharp increase in the rediscount rate following the devaluation, the Central Bank of West African States (BCEAO) progressively eased credit conditions by lowering the rediscount rate in several steps from 14.5 percent in January 1994—immediately after the devaluation—to 7.5 percent by end-December 1995.

24. In contrast, monetary developments in 1996 were characterized by stagnant money demand, a rise in velocity, and slow growth in credit to the private sector. Broad money increased by only 3 percent in 1996. In turn, the velocity of circulation increased to 4.1 in 1996 from 3.9 in 1995. These developments reflected a continued reduction in the central government’s recourse to bank credit and the stabilization of credit to the private sector, as the latter rose by only 2 percent in 1996 due to the improved cash position of enterprises. As a result of the sluggish money demand, and the slight increase in the net domestic assets of the banking system, the net foreign assets of the banking system registered a small improvement. The BCEAO further reduced its rediscount rate to 6.25 percent by end-December 1996 and the differential with the French money market narrowed from about 5 percentage points in 1994 to 3 percentage points by December 1996.

25. In August 1994, the authorities issued in coordination with other WAEMU member countries tax-exempt, fixed-rate, 12-year securities with the aim of mopping up commercial banks’ excess liquidity following the devaluation, due in part to the return of flight capital. In this context, the BCEAO offered for sale CFAF 186 billion of government securities equivalent to the consolidated claims on the Ivoirien government that resulted from earlier bank restructurings. By September 1995, the entire stock of these securities had been sold, mostly to banks in other WAEMU countries. In August 1996, to increase the indirect instruments at the disposal of the BCEAO, and to further absorb excess liquidity in the banking system, the BCEAO introduced auctions of central bank bills. These bills were eagerly taken up by the banks.

26. In 1996, there was a shift from short-term credits to longer-term borrowing: while about three-fourths of the stock of commercial bank credit in Côte d’Ivoire in 1994–95 was short term in nature, short-term credit fell to 66 percent at end-December 1996 (Statistical Appendix Table 34). About two-thirds of the stock of credit was directed into manufacturing and commercial activities.

Structural reforms

27. To strengthen the competitiveness gains resulting from the devaluation of the CFA franc, the Ivoirien authorities embarked on a wide-ranging structural reform agenda aimed at reducing the weight of the public sector in the economy and expanding the economic incentives for private sector development (Box 1). Measures implemented included the privatization and restructuring of public enterprises, trade and price liberalization, and reform of cocoa and coffee marketing.

Côte d’Ivoire: Main Structural Measures, 1994–96

Privatization and public enterprise reform

  • Preparation and adoption of new enabling privatization legislation in 1994

  • Partial privatization of 13 public enterprises and total privatization of 16 others between 1994 and 1996, yielding CFAF 93 billion (2 percent of GDP)

  • Restructuring of 5 major public enterprises in difficulty

Civil service reform

  • Overall reduction in the number of civil servants through:

    • implementation of a voluntary departure program from the civil service

    • net reduction in the size of the civil service, resulting from control over new recruitment and normal departures from the civil service

    • transforming the legal status of national public agencies into public companies or semipublic enterprises

Public sector management

  • Reformulation and implementation of a system of three-year rolling public investment programs reestablishing consistency with the macroeconomic framework

  • Reassessment of individual projects in light of the devaluation

  • Adoption of public investment programs

Price and trade liberalization

  • Removal of certain nontariff barriers, including liberalization of import/marketing of premium rice in 1994

  • Reduction of the number of goods and services subject to price controls from 34 at the beginning of 1994 to 18 in August 1995 and 13 in December 1996

  • Liquidation of the equalization fund for consumer staples in early 1996

  • Elimination of subsidies on flour and wheat in early 1996

  • Liberalization of petroleum retail prices and introduction of a mechanism to adjust them automatically in line with changes in international prices at end-September 1996

  • Introduction of a mechanism to adjust automatically water and electricity rates in April 1996

  • Elimination of trade restrictions on imports of wheat and some categories of rice, bringing the number of products subject to nontariff barriers from 34 at end-1993 down to 6 at end-1996

  • Liberalization of maritime transport in 1996

Agricultural sector reform

  • Partial liberalization of domestic and external marketing in the cocoa/coffee sectors

  • Implementation in May 1996 of a new auction system for export rights in the cocoa/coffee sectors

  • Completion of a financial audit for CAISTAB (the price stabilization fund for cocoa and coffee) at end-September 1996

Legal and regulatory framework

  • Adoption in 1994 of a new labor code, which liberalized hiring-and-firing procedures

  • Adoption in 1995 of a new investment code

28. In 1994, several important steps were taken to liberalize the economy and reduce the role of the public sector: a number of nontariff barriers were dismantled; the import and marketing of premium rice were liberalized; and a new labor code, which liberalized hiring-and-firing procedures, was adopted. Delays were encountered during the first half of 1994 in carrying out the privatization program because of the need to prepare and adopt the enabling privatization legislation. With the reorganization of the privatization committee, however, the program gained momentum toward the end of the year, and six divestitures were effectively completed. In the area of public sector management, the authorities reformulated their system of three-year rolling public investment programs to reestablish consistency with the macroeconomic framework.

29. In 1995, structural reforms were broadly carried out as planned: (i) the number of goods and services subject to price controls was reduced from 34 at end-1993 to 18 in August 1995, and the equalization fund for consumer staples was liquidated; (ii) trade restrictions on imports of wheat and some categories of rice were phased out, and, following the elimination of trade restrictions on 6 other products in early 1996, only 6 products were still subject to nontariff barriers; (iii) domestic and external marketing in the cocoa and coffee sectors was partially liberalized, as was the maritime transport sector; (iv) the new labor code progressively began to govern collective agreements, and a new, more liberalized investment code and a mining code were adopted; and (v) the privatization program maintained momentum with the sale of 13 public enterprises.

30. Progress continued to be made on the structural front in 1996 and 1997. The privatization program proceeded as envisaged, including the finalization in early 1997 of the privatization of the telecommunications company (CI-TELCOM).6 Prices of several commodities were liberalized, and some subsidies were removed in early 1996 (including those on flour and wheat). Petroleum retail prices were liberalized, and a mechanism to adjust them automatically in line with changes in international prices was put in place at end-September 1996. A mechanism to adjust automatically water and electricity rates was also introduced in April 1996.

31. In 1997, a number of additional measures were carried out. Price controls were eliminated on a further set of products, and most of the remaining trade restrictions were lifted.7 Nine more public enterprises were privatized, and in the agriculture sector, upward adjustments were made to producer prices for cocoa and coffee. In June 1997, the government adopted an action plan to reduce poverty. In the judicial area, the Arbitration Court for Côte d’Ivoire was established. In the cocoa and coffee sectors, the new auction system for export rights became operational in May 1996, and the financial audit for CAISTAB (the price stabilization fund for these two commodities) was completed at end-September, albeit with some delays.

D. Conclusion

32. The internal adjustment strategy pursued by Côte d’Ivoire prior to 1994 was unable to halt the declining competitiveness of the economy or restore internal and external viability, and the required fiscal tightening deepened a protracted fall in economic activity. In this context, exports and imports both declined, as did investment and savings. Although there were some gains on the structural front, these proved insufficient to revive private sector confidence. In contrast, the adoption of a comprehensive adjustment program in 1994—involving the realignment of the exchange rate—proved successful in restoring competitiveness, reducing internal and external imbalances, and containing inflation. Structural reforms led to a reduction in the size of the public sector, greater flexibility in the economy, and a boost in private sector activity. Investment and savings rebounded considerably, thus setting the stage for sustained economic growth and a renewed attack on poverty. These gains will need to be consolidated in the period ahead.

33. Consolidation of the fiscal situation has been central to the success of Côte d’Ivoire’s adjustment efforts. These efforts will need to continue, in order to allow Côte d’Ivoire to reduce its dependence on external budgetary assistance, while generating substantial savings to meet the investment-financing needs of the economy, reduce the heavy public debt burden, and ensure that the government’s social objectives are met. Strengthened revenue performance, expenditure restraint, and a reorientation of spending toward priority areas will be necessary to achieve these objectives.

34. Further structural reforms will be essential for Côte d’Ivoire to remove any remaining rigidities in the economy so as to enhance private sector confidence and encourage investment and growth on a durable basis. These reforms should include further price and trade liberalization, and should foster a legal and regulatory framework more conducive to private sector activity. In addition, the authorities need to pursue with vigor their program of restructuring and privatizing public enterprises. Finally, further liberalization in the coffee and cocoa sectors is necessary to improve incentives to farmers and raise rural incomes. Progress on these fronts should allow Côte d’Ivoire to realize its growth potential and bring about a marked reduction in poverty, while ensuring internal and external financial viability over the medium term.

II. Recent Developments in the Coffee and Cocoa Sectors8

A. Background

35. The cocoa and coffee sectors play a key role in Côte d’Ivoire’s economy, accounting for about 15 percent of GDP in 1996, some 40 percent of total exports, and roughly one-fifth to one-fourth of total employment. Côte d’Ivoire is now the world’s largest producer of cocoa, providing more than 40 percent of world output (Figure 3), and maintains a market share of 3–4 percent of the world coffee market, including 7–8 percent of the world robusta coffee market.

FIGURE 3.
FIGURE 3.

World Cocoa Production, 1995/96

Citation: IMF Staff Country Reports 1998, 046; 10.5089/9781451807837.002.A001

Source: International Cocoa Organization.

36. Following the steady output growth and favorable international prices in the 1970s and early 1980s, sharp declines in world prices for cocoa and coffee beginning in the mid-1980s led to a fall in output and an increasingly unsustainable financial position for the sector. From 1984 to 1989, the average price for cocoa beans dropped from 109 cents/lb to 56 cents/lb, while the price of coffee collapsed from a level of 138 cents/lb in 1984 to 55 cents/lb by 1990 (Figure 4). Because of the fixed parity of the CFA franc, the exchange rate did not adjust to adverse movements in the terms of trade; as well, beginning in 1985, the French franc, to which the CFA franc is fixed, appreciated considerably against the US dollar with the result that the CFA franc became increasingly overvalued. In this context, combined export receipts from the two commodities more than halved from CFAF 791 billion in 1985 to CFAF 307 billion in 1990. The authorities’ efforts to mitigate the impact of the collapse in world prices on farmers through the price stabilization fund (Caisse de stabilisation et de soutien des prix des productions agricoles—CAISTAB) became increasingly costly, with price supports for cocoa and coffee in 1989 rising to 5.3 percent of GDP.

FIGURE 4.
FIGURE 4.

World Prices for Cocoa and Coffee, 1972-97

Citation: IMF Staff Country Reports 1998, 046; 10.5089/9781451807837.002.A001

Source: IMF, International Financial Statistics.

37. In the face of these developments, Côte d’Ivoire undertook an initial set of reforms in 1989 with the support of the World Bank and other donors. These reforms aimed at improving the financial equilibrium of the cocoa and coffee sectors by reducing costs while improving management and limiting government involvement in the sector. Although a number of gains were achieved, particularly in liberalizing certain domestic markets such as coffee dehulling, a number of other measures were not carried out. The transparency, accountability, and efficiency of CAISTAB’s operations did not significantly improve, operational audits that were undertaken were not followed up with remedial actions, and CAISTAB did not eliminate the transport subsidy as had been planned. In addition, the continued overvaluation of the exchange rate posed a significant constraint on the sectors: while their financial viability was largely restored, it was achieved by cutting producer prices in half, which led to a continued dampening of output.9 Between 1989 and 1990, the producer price of cocoa was reduced from CFAF 400/kg to CFAF 200/kg, and that of coffee from CFAF 405/kg to CFAF 200/kg. Between 1990 and 1993, coffee production fell from 285,000 tons to 150,000 tons, while cocoa production stagnated at about 800,000 tons over the same period. In addition, the reforms were unable to halt a deterioration in the quality of cocoa and coffee produced; particularly following the cut in producer prices, plantations were neglected or abandoned. Throughout this period from the mid-1980s to the early 1990s, agricultural incomes fell dramatically, with a consequent rise in poverty in rural areas.

B. Developments and Reforms Since 1994

38. The devaluation of the CFA franc in January 1994, which doubled export prices in local currency terms, provided a strong boost to the cocoa and coffee sectors. In addition, world prices picked up in 1994; cocoa prices rose steadily from 50 cent/pound in 1993, and by 1997 had edged above 75 cents/pound. Coffee prices shot up above 120 cents/pound in 1994 and 1995 from 54 cents/pound in 1993, and since have fluctuated in the range of 75–90 cents/pound.

39. These developments permitted a substantial upward adjustment in the indicative producer prices (Statistical Appendix Table 14), which for the 1994/95 agriculture season10 were raised from CFAF 200/kg to CFAF 315/kg for cocoa, and from CFA 170/kg to CFAF 650/kg for coffee.11 In the following campaign, the coffee price was raised to CFAF 700/kg, before being reduced to CFAF 500/kg for the 1996/97 season in line with the drop in world prices, and subsequently raised to CFAF 520/kg for the 1997/98 season. Concurrently, as CAISTAB began realizing sizable surpluses in its stabilization operations (Statistical Appendix Table 25), and in light of recent price trends, the producer price for cocoa was raised again to CFA franc 455/kg for the 1997/98 agriculture season.12 At the beginning of 1997/98 season, the producer prices for cocoa and coffee represented 56 percent and 72 percent of the export prices, respectively.

40. In this context, output and exports in the cocoa and coffee sectors responded strongly. Exports of cocoa increased by 50 percent in volume terms between 1994 and 1996 (Statistical Appendix Table 10), led by a record cocoa crop in the 1995/96 agriculture season of about 1.2 million tons. The 1996/97 cocoa crop totaled 1.1 million tons, down from the previous agriculture season but still high by historical standards. Coffee exports for the 1996/97 season picked up considerably, rising to a level of 230,000 tons, compared with about 140,000 tons in 1993/94. In CFA franc terms, after a virtual doubling in the value of cocoa and coffee exports in 1994 primarily due to the parity change,13 combined exports rose from CFAF 666 billion in 1994 to CFAF 968 billion in 1996.

41. In the context of improved prospects for the sectors, the authorities launched a reform program in the cocoa and coffee sectors in 1995 supported by the World Bank’s agricultural sector adjustment credit (ASAC) and other donors. Reforms that were implemented were intended to (i) reduce the role of CAISTAB in domestic and external marketing, thus providing greater incentives for farmers and a larger role for private sector participation in the sector; (ii) increase the transparency of CAISTAB’s operations and cut CAISTAB’s operating expenses; and (iii) decrease the taxation of cocoa and coffee exports. Although the stabilization system for coffee and cocoa was left in place (Box 2), the reforms introduced a greater role for the private sector and a correspondingly reduced role for CAISTAB.14

Côte d’Ivoire: Cocoa and Coffee Stabilization

Under the stabilization system, cocoa and coffee marketing is carried out by private producers, traders, and exporters within a predetermined indicative price structure and a system of controls managed by CAISTAB, whose key objective is to stabilize intra-annual prices. CAISTAB establishes at the beginning of each agricultural season a cost and price structure (barème), which includes the entire marketing chain from the farmgate to the export of the commodity and aims to achieve an ex ante financial equilibrium of the barème. Accordingly, CAISTAB sets the export reference price on the basis of current year prices and forward sales entered into by exporters, or by CAISTAB itself. After setting the export reference price, CAISTAB determines the costs for the different stages of the marketing chain, which include the level of the export tax (droit unique de sortie—DUS), profit margins, and CAISTAB’s own operating costs. This process determines the minimum producer price, the residual after all costs in the chain have been deducted from the export price. Although the producer price was converted from a guaranteed to an indicative price beginning with the 1995/96 crop year, CAISTAB tries to ensure that traders pay the indicative price.

42. In particular, the government implemented a number of measures in the area of domestic marketing to reduce the role of CAISTAB, including the elimination of CAISTAB purchasing centers, its removal from administering the transport cost allowance system, and the transfer of the responsibility for distributing bags from CAISTAB to the private sector. Since these reforms were put in place, exporters and traders pay the transport costs; the transport costs as reflected in the barème. should on average cover the actual costs. Regarding external marketing, a system in which CAISTAB assigned exports rights (déblocages) on a discretionary basis was replaced by a computer-aided system whereby export rights are auctioned off daily, precluding a direct role for CAISTAB in determining prices. The outcomes of the auctions influence the average export price, which may be below or above the export reference price; in the case of the former, the stabilization system would incur a loss, while in the case of the latter, a surplus would result.15 In addition, CAISTAB’s direct sales were limited to 15 percent of total sales.

43. Another area of reform focused on improving CAISTAB’s management and reducing its costs. CAISTAB’s costs, which act as an implicit tax on producers, have been very high. These costs were reduced steadily from CFAF 111/kg at the beginning of the 1994/95 campaign to CFAF 41/kg for the 1996/97 season. The reductions were achieved as a result of a diminished role for CAISTAB in marketing as stated above, as well as due to efficiency gains in CAISTAB’s management. For the 1996/97 season, about two-thirds of CAISTAB’s costs represented debt service on liabilities incurred to cover accumulated losses in the sector in the late 1980s and early 1990s, with another 15 percent of the costs consisting of subsidies paid to processing plants for the use of low-grade cocoa beans. The relative weight of these two areas, which the reform efforts were unable to reduce further, indicates the success that was achieved in reducing CAISTAB’s other costs related to marketing, storage, and administration.

44. Following the devaluation of the CFA franc, the unitary export tax (droit unique de sortie - DUS), which had been suspended in 1989, was reintroduced on cocoa and coffee exports in order to assure sufficient government revenue in the aftermath of the devaluation, as well as to allow, in light of weaknesses in Côte d’Ivoire’s tax administration, some form of taxation on agriculture income. The tax was initially set at 177 CFAF/kg for cocoa beans and 189 CFAF/kg for coffee beans before being raised to 200 CFAF/kg for both products at the beginning of the 1994/95 season.16 Subsequently, the tax was lowered in several steps to 150 CFAF/kg for cocoa beans and 10 CFAF/kg for coffee beans at the beginning of the 1996/97 season. Expressed as a percent of the export price, the DUS has fallen quite rapidly (Figures 5 and 6). From a level of 27 percent of the export price immediately following the devaluation, the DUS on cocoa fell to 19.5 percent for the 1996/97 season, and is expected to be about 17 percent for the 1997/98 season (Statistical Appendix Table 11). For coffee, the DUS has been effectively eliminated, dropping from about 18 percent of the export price immediately following the devaluation to just over 1 percent for the most recent campaign. As a share of government revenue, the DUS on cocoa and coffee has likewise declined, falling from 15 percent of government revenue in 1994 to about 12 percent in 1997.

FIGURE 5.
FIGURE 5.

Shares of Cocoa Export Price, 1992-97 1/

(In percent)

Citation: IMF Staff Country Reports 1998, 046; 10.5089/9781451807837.002.A001

Source: CAISTAB (price stabilization fund).1/ October-September crop years.
FIGURE 6.
FIGURE 6.

Share of Coffee Export Price, 1992-96 1/

(In percent)

Citation: IMF Staff Country Reports 1998, 046; 10.5089/9781451807837.002.A001

Source: CAISTAB (price stabilization fund).1/ October-September crop years.

45. A principal aim of CAISTAB has been to achieve an ex ante equilibrium for the coffee and cocoa sectors combined. However, until the 1996/97 crop year, CAISTAB maintained an explicit policy to support coffee production through “cross-stabilization” between the two sectors whereby surpluses on cocoa were used to support producer prices for coffee that would not have been justified on the basis of prevailing world prices. On an exceptional basis, and in agreement with donors concerned, this policy was extended for the 1996/97 crop year to mitigate the drop in producer prices from the previous year. Nonetheless, on an ex post basis, because of more favorable world prices for cocoa, lower costs, and higher volumes than envisaged, CAISTAB accumulated a surplus for the 1996/97 crop year of almost CFAF 80 billion, which was partly used to raise producer prices at the beginning of the 1997/98 crop year and partly to reduce outstanding debt of the sectors.

C. The Reform Agenda: Remaining Issues

46. Despite the reform efforts undertaken in recent years, particularly since 1994, there were a number of obstacles still in place at the end of the 1996/97 crop year that hampered the further development of the cocoa and coffee sectors and further improvements in farmers’ incomes. A key aim of the planned reforms in the period ahead is thus to continue raising the share of world prices that accrues to producers, an essential step in raising rural incomes and reducing rural poverty. For the 1997/98 crop year, farmers are receiving about 56 percent of the average export price for cocoa, and about 72 percent of the average export price of coffee.

47. Following the increases in producer prices after the devaluation, the indicative producer price for cocoa was raised only slightly (CFAF 5/kg) over the entire 1994/95—1996/97 period, in line with the relatively flat world prices for the period, before being boosted by CFAF 135/kg (42 percent increase) for the 1997/98 crop year; as noted earlier, the producer prices in place in 1993 would have been lower—and the subsequent increase following the devaluation would have been greater—had the export tax not been suspended until 1994. As a result of the upward adjustments in prices paid to producers, in real terms the producer price for cocoa is almost 50 percent higher than in 1993 (Figure 7). For coffee, the producer price in real terms is almost double that in 1993. These higher prices have provided a significant boost to farmers’ incomes.

FIGURE 7.
FIGURE 7.

Indicative Producer Prices for Coffee and Cocoa in Real Terms, 1993-97 1/

(CFAF/kg)

Citation: IMF Staff Country Reports 1998, 046; 10.5089/9781451807837.002.A001

Source: IMF.1/ Expressed in 1993 prices.

48. There is a strong link between rural incomes and poverty. According to a recent World Bank poverty report on Côte d’Ivoire, rural poverty increased after 1985, in line with the economic decline and the drop in world prices for cocoa and coffee.17 18 The World Bank report identified the producer prices of principal export crops as a key determinant of income opportunities and thus of poverty.19 In this vein, the gains achieved since 1994 should be reinforced; steps to boost efficiency and competition in the cocoa and coffee sectors would allow for higher producer prices, thereby directly benefitting the rural poor.

49. In spite of the gains achieved in recent years, the marketing system for cocoa and coffee in Côte d’Ivoire is still not fully efficient. CAISTAB continues to carry out important commercial functions, which are inconsistent with its role as the regulator of the sector. Its operating costs—even excluding debt service and subsidies paid to processing plants—remain relatively high and unnecessarily widen the gap between prices paid to producers and world prices. A recent positive step was the use of part of the surplus from the 1996/97 crop year to retire early a portion of CAISTAB’s debt, thereby reducing annual debt service in the years to come. Another weakness of the current system is the fixed margins under the barème, which inhibit efficiency in marketing. Coupled with the minimum producer prices, the fixed margins have made price discovery and cooperative marketing by producers unnecessary.

50. To address these issues, in the context of the medium-term reform program for the 1998–2000 period, the authorities have decided to fully liberalize marketing in the coffee and cocoa sectors beginning with the 1998/99 and 1999/2000 agriculture seasons, respectively. Prior to implementing the liberalization of the cocoa sector, the authorities will evaluate developments in the coffee sector, with the aim of identifying any additional measures or corrections necessary to ensure the success of the liberalization of cocoa marketing. In this context, it is envisaged that the entire price structure will be liberalized: (i) the export reference price system will be eliminated; (ii) the guaranteed producer price will be eliminated so that the producers negotiate prices directly with buyers; and (iii) the other elements of the barème will be negotiated directly among the different actors in the sector.

51. In order to ensure the success of the next phase of reforms, the authorities recently established a joint committee comprising CAISTAB and the main exporters’ grouping (GEPEX) that will co-manage the export auctions. In this context, the exporters’ group has also taken the responsibility for helping to ensure quality control, facilitate loading procedures for cocoa and coffee exports, and license exporters. To streamline exports and prevent weaknesses in customs surveillance, a one-stop CAISTAB/customs window for cocoa and coffee exports has been established.

52. Taxes on the export of cocoa are to be reduced from 19 percent of the export price for the most recently completed campaign to 16 percent by the year 2000.20 The DUS on coffee would remain symbolic, representing roughly 1 percent of the average export price. In the short term, an export tax has proved necessary as a means of taxing agricultural income. Given the weaknesses in Côte d’Ivoire’s tax administration, and the fact that many ongoing fiscal reforms are likely to bear fruit only after several years, export taxes serve as a useful, if not optimal, method of taxing income in the rural sector. Over the medium term, in the context of the liberalization of the coffee and cocoa sectors, the present system of export taxation is to be replaced with an appropriate broad-based domestic tax system.

53. On the producer side, the regulated system that has been in place until now has not been conducive to the development of self-sustaining producer organizations or to producers that are accustomed to negotiating with private traders and exporters. To ensure that producers are in a stronger position to take advantage of the opportunities that become available as the system is liberalized, the authorities are undertaking efforts to strengthen farmers’ organizations by providing training in management, accounting, and marketing, and by revising the regulatory regime so that these organization are able to borrow from the financial system. Similarly, an important gap until now in the marketing chain in Côte d’Ivoire is that exporters have not been able to cover forward sales contracts with forward purchase contracts with farmers for fear that these contracts will not be honored by the farmers, thereby requiring a role for a centralized intermediary such as CAISTAB to ensure deliveries. It is expected that as these producer organizations become more established, including greater use of the financial system, they will be more willing to enter into and honor forward purchase contracts with traders and exporters.

54. Finally, regarding production, yields in Côte d’Ivoire remain low relative to other cocoa and coffee producing countries. Although substantial land pressures limit the possibility of expanding cultivated areas, there is significant room for boosting yields through more intensive cultivation.21 More intensive cultivation will be possible only through the greater use of agricultural inputs. To this end, steps to improve the financing of agricultural activities in Côte d’Ivoire will be necessary to provide adequate investment resources for farmers. In cooperation with donors, the Ivoirien authorities recently bolstered the guarantee program for loans to agriculture producers, a measure which should make available more financing for agriculture activities.22

D. Conclusion

55. The reform efforts undertaken in the cocoa and coffee sectors during 1994–97, combined with a recovery in world prices over the period and the 1994 devaluation of the CFA franc, have led to a strong rebound of production and exports and an increase in the income of producers. Nonetheless, these sectors remained highly regulated and there is substantial room for efficiency gains. The ongoing efforts to liberalize coffee and cocoa marketing, and contain CAISTAB’s role to managing the auctions and monitoring quality norms, will be essential to reducing costs in the sector, introducing greater efficiency, and continuing to boost farmers’ incomes. Central to the success of these reform efforts will be a strong and dynamic private sector capable of taking advantage of the new opportunities offered by a liberalized system. In this vein, the ongoing steps to strengthen private sector participants, in particular producer organizations, should ensure a more smoothly functioning liberalized system. The ultimate objective, while maintaining Côte d’Ivoire’s share in the world market, is to raise further rural incomes, which should contribute to a sustained reduction in poverty and improvement in living standards in rural areas.

III. Poverty Reduction and Social Policies23

56. After more than a decade of economic stagnation in Côte d’Ivoire, which resulted in a sharp fall in living standards, economic growth picked up in the wake of the January 1994 CFA franc devaluation and the accompanying measures. Real GDP growth reached about 6–7 percent a year in 1995–97, and is projected to average 6 percent over the period 1998–2000, allowing an increase of more than 2 percent a year in per capita real GDP. In this context, poverty reduction is one of the major challenges facing the authorities. About 37 percent of the population was estimated to be under the poverty threshold in 1995, and past experience has shown that buoyant growth, although necessary, is not always sufficient to reduce poverty significantly. Against this background, the authorities adopted a Poverty Reduction Action Plan in June 1997, the implementation of which will be monitored closely under the 1998–2000 program. This section provides an overview of poverty in Côte d’Ivoire and presents the main elements of the authorities’ strategy to reduce poverty.24

A. Overview

57. Poverty in Côte d’Ivoire has been recently examined in studies and surveys carried out for the government by the Ivoirien National Institute of Statistics (INS) and by the World Bank, including the World Bank Poverty Assessment Report.25 However, two factors should be kept in mind when analyzing the conclusions of these reports: first, available studies and surveys cover only the period prior to June 1995, and therefore provide only limited information on developments in poverty after the economic upturn since 1995; and second, the 1995 survey was based on a small sample that might have biased results.

58. In the 1995 INS “Profil de Pauvret”é, two poverty lines are defined to assess the evolution of poverty over time. Poor households are defined as those with average per capita consumption26 below CFAF 144,800 per year,27 which was sufficient to meet minimum needs. Very poor households are defined as the poorest 10 percent of households and had per capita consumption levels below CFAF 94,600 per year, which was sufficient to meet only basic caloric requirements. Indicators of social welfare and qualitative perceptions of well-being are also useful to complement this definition of poverty and paint a broader picture of the various aspects of poverty in Côte d’Ivoire.

Trends and characteristics of poverty

59. In the 1960s and 1970s, rapid economic growth and rising personal incomes were accompanied by a reduction in poverty, even though this evolution cannot be fully quantified because of a lack of comparable data. Nonetheless, income disparities appear to have widened during this period, as evidenced by rising Gini coefficients and the declining share of the lowest quintile in total income.

60. During the period of stagnating output in the 1980s and early 1990s, average incomes fell by 45 percent in real terms from 1979 to 1993. As a result, and despite some leveling of income distribution during this period, it is estimated in the INS surveys that the proportion of poor households rose from 11 percent28 in 1985 to 32.3 percent in 1993 (Table 4).29 Following the 1994 economic upturn, per capita real GDP began to recover (with a 3 percent increase in 1995 and more than 2 percent in each of 1996 and 1997). At the time of the last survey in early 1995, however, it was clearly too early to expect a significant reduction in poverty. Indeed, according to the 1995 survey, the proportion of poor households rose to 36.8 percent. At the same time, the 1994 devaluation of the CFA franc and its accompanying measures appear to have had some redistributive effects: while export crop producers benefited from real producer price increases,30 poverty incidence increased among food crop producers; in urban areas, poverty declined among informal sector employees in most towns but increased significantly in Abidjan, as well as among families of public sector employees. Poverty levels after June 1995—when the effects of economic recovery should have begun to materialize—are not documented.

Table 4.

Côte d’Ivoire: Poverty Incidence, 1985–95

(In percent)

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Source: World Bank Poverty Assessment Report, 1997.

61. Social indicators in Côte d’Ivoire also point to low standards of living, including high infant and maternal mortality rates, low school enrollment, low adult literacy, and short life expectancy (Table 5). Even though these indicators are close to the average levels in sub-Saharan Africa, international comparisons suggest that higher levels of social development are needed in basic areas if Côte d’Ivoire is to attain stronger and sustained economic growth rates. In addition, Côte d’Ivoire’s performance on social development indicators is not commensurate with its average income level: the United Nations Development Program’s human development index, which combines key social indicators, ranks Côte d’Ivoire 145th among 174 countries, below the country’s rank of 130 in income terms. The use of public services in such basic areas as health and education appears to be lower among poor households—and especially among girls and women—in particular because of difficult access and high costs.

Table 5.

Côte d’Ivoire: Social Indicators, 1995

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Source: World Bank Social Indicators of Development (1996); and World Bank Poverty Assessment Report, 1997.

62. The locus of poverty expanded during the last decade from rural areas to urban areas, where one-fourth of poor households were found by 1995. In particular, the poverty rate in Abidjan rose very rapidly in the early 1990s, especially after 1993.

63. Finally, poverty is concentrated among farmers (in 1995, households headed by export crop and food crop producers are estimated to have accounted for 34 percent and 31 percent of the nation’s poor, respectively), and households headed by workers in the informal sector (16 percent). A large size and low levels of education are central features of poor households, and gender disparities are also quite important, as women lag behind men in key social indicators.

Economic reforms and prospects for poverty reduction

64. The realization of sustained economic growth over the period 1995–2000 and beyond should provide a favorable economic environment for poverty reduction. However, the pace of future poverty reduction will also depend on the policy and investment choices made in the years to come. The World Bank Poverty Assessment Report highlights three policy areas where actions to address poverty issues would strongly complement policies fostering economic growth and private sector development.

65. First, a number of key structural reforms being carried out as part of the authorities adjustment strategy and supported under ESAF- and International Development Association-supported programs have direct effects on poverty reduction. For example, policies aimed at enhancing economic competitiveness (such as containing inflation, reforming labor markets to encourage employment, reducing import taxes, and lowering transport or trade costs by removing restrictive practices and increasing competition) would directly benefit poor households, which are specially affected by higher consumer prices and scarce job opportunities. Tax reforms aimed at reducing distortions and taxes on international trade, and public expenditure policies aimed at reallocating expenditures toward basic social services, also contribute directly to the reduction of poverty. The liberalization of the coffee and cocoa sectors is expected to result in higher producer prices and rural incomes. The elimination of nontariff barriers to imports of rice, reduction of taxes on refined palm oil, and reduction of import taxes on sugar and flour are concrete examples of structural reforms that should directly benefit poorer Ivoiriens through lower consumption prices for essential goods.

66. Second, demographic policies are also essential for poverty alleviation, as rapid population growth (official projections estimate that the population will grow to 20 million by 2005) is a major constraint on long-term poverty reduction. These policies should aim both at strengthening the supply of family-planning services and at developing demand for family planning, especially among poorer Ivoiriens, through basic education systems and adult literacy programs that more effectively reach poorer girls and women.

67. Third, investment in basic human resources remains essential to achieve higher levels of social and economic development, notably in the areas of adult literacy, primary school enrollment, child survival, and preventive health coverage (see below). Progress in these areas will be necessary for Côte d’Ivoire to achieve strong and sustainable growth, thereby helping to reduce poverty.

Key poverty issues

68. In addition to the broad reform agenda detailed above, three areas in particular have a critical impact on the living conditions of poor households.

Education and health

69. The achievements in education and health in Côte d’Ivoire lag behind other countries with comparable income levels, and within the country, there exist disparities between higher-and lower-income groups, between men and women, and among provinces in terms of access and levels of attainment in these areas. Use of public social services by poor households remains limited because of high costs and difficult geographic access, as well as their low quality. A key objective is therefore to lower costs and improve quality and accessibility for poorer Ivoiriens. Moreover, public spending in health and education appears to have often benefited primarily the wealthier part of the population, thus reinforcing disparities. There is, therefore, a strong need to focus social spending on primary health services and primary education, and on quality and accessibility, in order to reach poorer Ivoiriens.

Food

70. On average, poor households are net producers of food, but a significant number, particularly in urban areas, are net consumers, and food represents 55 percent of expenditures among poor households. On the production side, a number of issues need to be addressed to strengthen the livelihoods of poorer households, including: secured access to land, shifts in agricultural research priorities to food crops, promotion of improved production techniques to allow farmers to farm more intensively in a sustainable fashion, and greater access to credit. On the consumption side, ensuring that food remains affordable for poor households will require keeping food prices down, particularly by avoiding any return to nontariff barriers on imports of rice and by developing efficient marketing networks (improving rural roads, transport regulation, market access, and food-processing technologies).

Work and employment

71. Labor force participation rates are high, and they are highest among poor Ivoiriens and in the rural areas. The emphasis therefore should be on increasing productivity rather than labor force participation. Extending job-training and adult education efforts to poor areas, providing infrastructure and services for informal sector activities, developing credit and financial services to address the needs of poorer households, and accelerating water supply and rural infrastructure investments are examples of policies aimed at allowing poorer Ivoiriens to benefit fully from economic growth.

B. Strategy to Reduce Poverty

72. During the 1970s, the Ivoirien government invested heavily in education, roads and infrastructure. Overall, however, public policies were not specifically or primarily oriented towards poverty alleviation, and even though poverty was reduced markedly, income disparities seem to have increased over the period, as all income groups were not able to benefit equally from rapid economic growth. Following the decade of economic stagnation, during which real incomes declined, the economic recovery, coupled with the adjustment strategy adopted by the authorities, has provided a favorable environment for poverty reduction. In this context, the government’s attention has turned firmly toward poverty reduction. Social safety nets (Fonds sociaux), which include measures targeted at women and young farmers, were put in place at the time of the 1994 devaluation. Also, since 1994, the authorities have begun to redirect public spending toward priority sectors, as part of a program of human resource development (Plan de Valorisation des Ressources Humaines), and in 1996, a health program (Plan National de Développement Sanitaire). covering the period 1996–2005 was adopted. In June 1997, in a major step that outlines the main orientations and measures of the government’s strategy to reduce poverty, the authorities adopted a Poverty Reduction Action plan (Axes prioritaires de la politique de lutte contre la pauvreté).

73. The action plan defines the general orientations (Axes prioritaires) of the authorities’ strategy to reduce poverty. Sectoral implementation programs are being prepared at a more-decentralized level. In order to address the cross-sectoral aspect of poverty issues, coordination mechanisms are being developed and a committee31—comprising representatives of the various ministries, of nongovernmental organizations (NGOs) and of the private sector—was created in January 1998 to ensure the monitoring of the plan’s implementation.

74. On the basis of an overall assessment of the poverty situation and actions already taken in this area, the plan reaffirms the authorities’ commitment to poverty reduction.32 The broad objectives of the poverty reduction plan include improving living standards, reducing the incidence of poverty, and strengthening institutional capacities. Moreover, the plan aims at redefining the role of local authorities in encouraging social and economic development, building partnerships among local authorities, NGOs, the public sector, and civil society, and increasing public participation in decision making. These broad objectives are complemented by more specific goals with respect to population and demography, health, education, employment, women, youth, housing and living conditions, and food. Specific targets and policies were set for the 1998–2000 period and are to be monitored under the ESAF- and IDA-supported programs. The key quantitative target is to reduce poverty incidence from nearly 37 percent in 1995 to below 30 percent by 2000. Other targets have been set for reducing fertility rates and infant and maternal mortality rates, increasing school enrollment rates, and developing basic infrastructure; these are summarized in Box 3.

Selected Poverty Reduction Targets

Overall Poverty Reduction

  • Reduce the level of poverty from 36.8 percent in 1995 to less than 30 percent in 2000

Education

  • Increase the net enrollment rates in primary education from 51 percent in 1996 to 55 percent in 2000

  • Improve children’s education, especially girls, notably in areas of low primary enrollment levels, with the percentage of girls in total students increasing from 42 percent to 44 percent in 2000

  • Improve the quality of teaching, emphasizing continued teachers training

  • Reduce the level of repetition to 5 percent per year

Literacy

  • Increase the adult literacy rate from 43 percent in 1996 to 48 percent in 2000

Health

  • Improve access and quality of health services, especially in rural and underserved urban areas

  • Increase infant vaccination rate from 60 percent in 1996 to 80 percent in 2000

  • Intensify the fight against AIDS

Family Planning

  • Reduce fertility rate from 5.6 to 4.5 by 2015

  • Increase modern contraceptive use from 4 percent to 10 percent in 2000

Basic Infrastructure

  • Increase access to safe water from 50 percent in 1996 to 65 percent in 2000 in rural areas, and from 75 percent in 1996 to 85 percent by 2000 in urban areas

  • Raise the coverage rate of rural electrification from 23 percent in 1996 to 33 percent in 2000

  • Improve living conditions of poorer populations in the areas of housing, health, and education

Rural Development

  • Increase incomes of poorer rural populations and particularly women

75. Under the authorities’ strategy, the measures to be taken include both general and specific actions. The general actions include (i) carrying out a study on poverty in Côte d’Ivoire to deepen understanding of the phenomenon; (ii) conducting surveys on household living standards; (iii) preparing an integrated program (at the national, regional, and local levels) to disseminate information on poverty issues; and (iv) better targeting the poorest populations in the public investment program.

76. Among the specific actions, the authorities intend to increase the share of expenditure on education and health, with priority given to primary education and basic health services. Strengthened efforts are to be made to increase primary school net enrollment rates and to reduce the illiteracy rate, especially in rural and deprived areas. Among other measures, the authorities intend to foster the development of the private education sector, increase the enrollment of girls and keep them in school, and improve the cost-effectiveness of public investment in the sector. In the health sector, the objective is to reduce the morbidity and mortality associated with major endemic diseases, mainly by improving the coverage and quality of health services. In addition, the authorities intend to render the health system more efficient, and to enhance the quality of health services by improving management.

77. As regards demographic policies, the objective of lowering the fertility rate is to be achieved through increasing contraceptive use and widening the availability of reproductive services and family planning in rural and poor areas. In the area of employment, the authorities intend to promote a social environment more favorable to job creation; to this effect, they are to promote the implementation of the national employment plan, adopted in 1995, focusing on job creation by the private sector in both urban and rural areas. Regarding the advancement of the role of women, measures to be taken include training young women for nontraditional careers with good earnings potential, taking additional steps to improve the status of women, and strengthening social policy and legal protection for women and children. Special emphasis is to be placed on training for entrepreneurship, and women will continue to benefit from a social fund to finance economic and commercial activities. Finally, improvements in basic infrastructure will be essential to raising living standards, particularly in rural areas. To this end, efforts will include extending the availability of potable water, undertaking an ambitious program of rural electrification, maintaining rural roads, and implementing specific measures for run-down districts, including the resettlement of displaced persons and the provision of rehabilitated areas with water supply and sanitation. Success in all these endeavors will be instrumental in reducing poverty and improving living standards for the population at large in Côte d’Ivoire.

APPENDIX

Côte d’Ivoire: Summary of the Tax System, as of December 31,1997

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STATISTICAL APPENDIX

Table 1.

Côte d’Ivoire: Selected National Accounts Indicators, 1990-96 1/

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Sources: Institut National de la Statistique (INS); Ministère de l’Economie et des Finances, Direction de la Conjoncture et de la Prévision Economique; and staff estimates.

New national accounts, INS, 1990-93; and estimates from the forecasting department of the Ministry of Economy and Finance for 1994-96.

Including oil production and other extractive industries.

Including import taxes and duties and public administration.

Table 2.

Côte d’Ivoire: GDP by Origin, 1990-96 1/

(In billions of CFA francs at current market prices)

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Sources: Institut National de la Statistique (INS); Ministère de l’Economie et des Finances, Direction de la Conjoncture et de la Prévision Economique; and staff estimates.

New national accounts, INS, 1990-93; and estimates from the forecasting department of the Ministry of Economy and Finance for 1994-96.

Table 3.

Côte d’Ivoire: Supply and Use of Resources, 1990-96 1/

(In billions of CFA francs at current market prices)

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Sources: Institut National de la Statistique (INS); Ministère de l’Economie et des Finances, Direction de la de la Conjoncture et de la Prévision Economique; and staff estimates.

New national accounts, INS, 1990-93; and estimates from the forecasting department of the Ministry of Economy and Finance for 1994-96.

Table 4.

Côte d’Ivoire: Supply and Use of Resources, 1990-96 1/

(In percent of GDP)

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Sources: Institut National de la Statistique (INS); Ministère de l’Economie et des Finances, Direction de la de la Conjoncture et de la Prévision Economique; and staff estimates.

New national accounts, INS, 1990-93; and estimates from the forecasting department of the Ministry of Economy and Finance for 1994-96.

Table 5.

Côte d’Ivoire: Deflators of Sectoral Output, 1990-96 1/

(Annual percentage changes; base year=1986)

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Sources: Institut National de la Statistique (INS); Ministère de l’Economie et des Finances, Direction de la de la Conjoncture et de la Prévision Economique; and staff estimates.

New national accounts, INS, 1990-93; and estimates from the forecasting department of the Ministry of Economy and Finance for 1994-96.

Table 6.

Côte d’Ivoire: Consumer Price Inflation in Abidjan, 1990-97

(Percentage change from year earlier)

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Sources: Ministère de l’Economie et des Finances; Institut National de la Statistique; and staff estimates.

European-type household.

African-type household, headed by a professional.

Based on a basket of goods derived from a new household consumption survey. The old moderate price index was discontinued in 1988.

Table 7.

Côte d’Ivoire: Decomposition of Consumer Price Index, 1994-97 1/

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Sources: Ministère de l’Economie et des Finances; and Institut National de la Statistique.

Low income price index (average November 1992 - October 1993 = 100).