Abstract
The economic recovery in Côte d’Ivoire is crucial to growth throughout the subregion. The fiscal results and mobilized domestic financing enabled the authorities to make payments to the World Bank and AfDB and reduce domestic arrears. Reporting on quasi-fiscal cocoa levies has improved. Energy sector audits are being finalized, and reporting on financial flows has improved. In view of the efforts made at both political and economic management fronts, authorities appreciated the Executive Board’s support for an additional assistance under the IMF’s Emergency Post-Conflict Assistance (EPCA) program.
1. This supplement provides an update on developments since the issuance of the Staff Report on March 21, 2008. The thrust of the staff appraisal remains unchanged.
2. Prices of foodstuffs and other necessities have increased rapidly in recent months, triggering demonstrations in Abidjan early this week. The seasonally adjusted food CPI rose by 4 percent between December and February, but several household staples items such as rice, sugar, flour, milk, and cooking oil rose by between 10 and over 50 percent in the first quarter. The increases reflect rising import prices, but likely also speculation because retail prices have risen much faster than wholesale prices. Overall inflation measured by the 12-month CPI accelerated from 1.5 percent at end-December 2007 to 3 percent at end-February 2008.
3. In response, the government has announced several measures, including tax suspensions. Short-term tax measures—effective April 1 for three-months—include (i) reduction in the VAT on milk, refined palm oil, canned tomatoes, sugar, and cement from 18 percent to 9 percent; and (ii) suspension of import duties on the same items and on flour, rice, and fish. The suspension of import duties on wheat, introduced last September, remains in force. The structural measures include (i) better monitoring of prices and concertation with the private sector to ensure orderly adjustment and fight speculation; (ii) steps to reduce racketeering by the military at roadblocks; and (iii) measures to increase the supply of locally produced foodstuffs. The authorities have indicated that the revenue impact (estimated at 0.06 percent of GDP) will be offset by expenditure cuts.
4. Growth and fiscal developments are in line with projections in the first two months of the year. Very preliminary data show a pick-up in activity in a range of sectors (including industry, electricity, and construction). The fiscal outcome shows revenue broadly on target and strong across-the-board expenditure restraint, which created the room needed to repay the arrears to the World Bank.
5. On April 1, the World Bank board approved the Economic Governance and Recovery Grant for the clearance of the remaining one-half of Côte d’Ivoire’s arrears to the Bank (some US$270 million) and new budget support (US$35 million). The clearance and disbursement have been completed.
6. The remaining elements of the prior actions have been implemented (MEFP, Table 2). Last week, the Government adopted the revisions to the 2008 budget in conformity with the program for 2008. It also adopted the detailed budget execution statements for 2007. The related Communications to the Council of Ministers have been made completely public, including through web posting.