Togo: 2009 Article IV Consultation and Second Review Under the Three-Year Arrangement Under the Poverty Reduction and Growth Facility—Informational Annex
Author: International Monetary Fund
Publication Date:
23 Jun 2009
eISBN:
9781451836677
Language:
English
Keywords:
ISCR; CR; phosphate sector; fiscal policy; PRGF-supported program; plan; reform agenda; government finance high frequency data; public finance; financial asset; authorities' effort; Fiscal accounting and reporting; Tax administration core functions; Monetary unions; CFA franc
Download PDF (449.5 KB)

This 2009 Article IV Consultation discusses that a nascent recovery in Togo’s economy is expected to be offset in 2009 by the impact of the global recession. The authorities have reiterated their commitment to the Poverty Reduction and Growth Facility (PRGF)-supported program and aim to accelerate growth-enhancing structural reforms. Executive Directors have commended the Togolese authorities for their strong implementation of economic policy and reforms, despite the adverse global and domestic circumstances. They have also welcomed the authorities’ intention to continue to focus on targeted measures to mitigate the social impact of shocks.

Abstract

This 2009 Article IV Consultation discusses that a nascent recovery in Togo’s economy is expected to be offset in 2009 by the impact of the global recession. The authorities have reiterated their commitment to the Poverty Reduction and Growth Facility (PRGF)-supported program and aim to accelerate growth-enhancing structural reforms. Executive Directors have commended the Togolese authorities for their strong implementation of economic policy and reforms, despite the adverse global and domestic circumstances. They have also welcomed the authorities’ intention to continue to focus on targeted measures to mitigate the social impact of shocks.

I. Relations with the Fund

(as of February 28, 2009)

I. Membership Status: Joined August 1, 1962; Article VIII

II. General Resources Account:

article image

III. SDR Department:

article image

IV. Outstanding Purchases and Loans:

article image

V. Financial Arrangements:

article image

VI. Projected Payments to the Fund 11

(SDR million; based on existing use of resources and present holdings of SDRs)

article image

VII. Implementation of HIPC Initiative:

article image

Assistance committed under the original framework is expressed in net present value (NPV) terms at the completion point, and assistance committed under the enhanced framework is expressed in NPV terms at the decision point. Hence these two amounts can not be added.

Under the enhanced framework, an additional disbursement is made at the completion point corresponding to interest income earned on the amount committed at the decision point but not disbursed during the interim period.

VIII. Exchange Arrangement

Togo is a member of the West African Economic and Monetary Union (WAEMU) and has no separate legal tender. The exchange system, common to all WAEMU countries, is free of restrictions on the making of payments and transfers for current international transactions. The union’s common currency, the CFA franc, is pegged to the euro at a rate of CFAF 655.957 = EUR 1, consistent with the official conversions rate of the French franc to the euro and the previous fixed rate of the CFA franc to the French franc of CFAF 100= F 1. On April 28, 2006, the rate of the CFA franc in terms of SDR was CFAF 769.68 = SDR 1.0. Effective January 1, 2007, the exchange arrangement of the WAEMU countries has been reclassified to the category of conventional pegged arrangement from the category of exchange arrangement with no separate legal tender. The new classification is based on the behavior of the common currency, whereas the previous classification was based on the lack of a separate legal tender. The new classification thus only reflects a definitional change, and is not based on a judgment that there has been a substantive change in the exchange regime or other policies of the currency union or its members

IX. Safeguards Assessments

The Central Bank of West African States (BCEAO) is the common central bank of the countries of the West African Economic and Monetary Union, which includes Togo. The most recent safeguards assessment of the BCEAO was completed on November 4, 2005. The assessment indicated progress has been made in strengthening the bank’s safeguards framework since the 2002 assessment and identified some areas where further steps would help solidify it. The BCEAO now publishes a full set of audited financial statements and improvements have been made to move financial reporting closer to International Financial Reporting Standards (IFRS). Furthermore, an internal audit charter has been put in place, mechanisms for improving risk management have been established, and follow-up on internal and external audit recommendations has been strengthened. The results of continuous safeguards monitoring indicate that while certain vulnerabilities remain in internal control systems and legal structure, there has been some progress in other areas, including through: (i) improving the external audit process by adopting a multi-year audit program; (ii) establishing an audit committee; (iii) expanding disclosures on financial positions of WAEMU countries with the Fund in the notes to the annual financial statements; and (iv) further strengthening of the effectiveness of the internal audit function.

X. Article IV Consultation

Togo is on the standard 24-month Article IV consultation cycle. The Executive Board completed the last 2007 Article IV consultation on June 8, 2007.

XI. Technical Assistance

A. AFRITAC West

Customs Administration

article image

Tax Administration:

article image

Public Expenditure Management:

article image

Debt Management and Financial Markets:

article image

Macroeconomic Statistics

article image

Real Sector Statistics

article image

Microfinance Supervision:

article image

B. Headquarters

article image

XII. Resident Representative

In September 2005, Mr. Koffi Yao became resident representative for Benin and Togo.

Notes

1

When a member has overdue financial obligations outstanding for more than three months, the amount of such arrears will be shown in this section.

II. Relations with the World Bank

(Updated March 25, 2009) 1

A. Partnership in Togo’s development strategy

1. Over the last decade and a half, Togo has been trapped in a cycle of political instability, economic decline, rising poverty, and donor disengagement. Togo was in non-accrual status with the International Development Association (IDA) from May 2002 to May 2008. During the non-accrual period, the Bank continued analytical and advisory activities (AAA) on key aspects of socioeconomic development. Together with other partners, the Bank also supported the Government’s efforts to prepare its I-PRSP and development strategies in health, education, agriculture and rural development, and HIV/AIDS.

2. Prior to the May 2008 re-engagement, the principal means for the Bank to provide support to Togo was through grants under the Low Income Country Under Stress (LICUS) Initiative. Since 2005, six grants have been provided. Three of these supported a community-driven Emergency Program for Poverty Reduction (EPPR) with the aim of halting the decline into extreme poverty and the deterioration of social indicators throughout the country.

3. Three additional LICUS projects aimed to (a) reform and revive the key sectors as well as create an environment for private sector-led growth (focusing on the sectors of phosphate, cotton, coffee, cocoa, and energy as well as on public procurement reforms); (b) preserve human capital (by minimizing the threat posed by Avian Influenza); and (c) achieve quick visible results on the ground (through an urban poverty infrastructure grant).

4. Successful implementation of initial political and economic reforms since 2005-06, including good performance under an IMF Staff Monitored Program, laid the foundation for strengthening donor assistance to support the process of clearing Togo’s arrears to IDA and other major creditors and thereby of full resumption of the Bank’s operations in the country. On May 29, 2008, the Bank’s Board discussed the Interim Strategy Note and approved a development policy operation (the Economic Recovery and Governance Grant, ERGG) that enabled Togo to clear its arrears to IDA and thereby normalize its relations with the Bank.

B. World Bank Group strategy

5. The Bank’s May 2008 Interim Strategy Note (ISN) sets out the Bank Group’s plan to help Togo recover from its long period of instability and begin laying the foundations for sustained, shared growth over the medium term. This would be achieved through support for the normalization of relations with the World Bank Group through the clearance of arrears, and assistance to address critical social needs on the ground. The ISN aimed to set realistic expectations with regard to the progress and achievements that could be realized from June 2008 through FY10. ISN support is under three main pillars in line with the I-PRSP priorities: (i) improve governance and transparency; (ii) promote the return to private sector-led growth; and (iii) provide for urgent social needs. The ISN builds on a Development Policy Needs Review (DPNR) prepared and discussed with the Government in early 2008.

6. The three pillars are supported through: (i) assistance for the clearance of Togo’s arrears to IDA; (ii) investment projects, development policy operations and LICUS trust fund grants to provide financial and technical support for the Government’s reform program under the three pillars; and (iii) analytical and advisory activities to inform the policy dialogue and the Government’s reform agenda, including preparation of the full PRSP. This support is complemented by ongoing and new World Bank regional activities in the areas of transport and transit facilitation, energy and mining.

7. Under Pillar 1 (Improve Governance and Transparency), there is a particular focus on supporting the Government’s own reform program to improve governance, transparency and efficiency in public expenditure management as well as to advance structural reforms aimed at improving governance and transparency in the key sectors of the economy (phosphates, energy, cotton and financial sector). This approach would lead over time to strengthened fiscal sustainability, enhanced transparency of State institutions and processes, improved economic governance and increased economic growth. In addition to the first ERGG, support is to be provided through two annual development policy operations and a Financial Sector and Governance Reform Technical Assistance project. The latter will support banking, social security and microfinance institutions restructuring and recovery. Ongoing analytical and advisory work includes a Trust Fund grant for Statistical Capacity Building, support to strengthen the country’s debt management capacity, and an updated Public Expenditure Management and Financial Review (PEMFAR).

8. Under Pillar 2 (Promote the Return to Private Sector-led Growth), private-sector development will be critical to ensuring that Togo returns to a path of recovery and economic growth. The Bank will support the government in identifying the challenges and obstacles to, and the potential entry points for, private sector investment as a catalyst for growth in Togo through a Country Economic Memorandum on the Sources of Growth, an Investment Climate Assessment and a Diagnostic Trade Integration Study. Lending will include a Support to Growth-inducing Sectors Project, which would focus on improving agricultural productivity and diversification and port infrastructure, and an Emergency Infrastructure Rehabilitation and Energy project, to provide energy investments and to upgrade roads and sanitation systems in selected urban areas. Togo is also expected to participate in the regional Abidjan-Lagos Transit and Transport Facilitation Project and a possible Adjarala Hydroelectric Project. In the energy sector, the World Bank is providing ongoing advisory assistance to the authorities in the context of support to the West Africa Regional Power Pool.

9. Under Pillar 3 (Provide for Urgent Social Needs), the strategy focuses on increasing the supply of, and improving access to, basic social services for the most vulnerable groups, thereby helping the Government deliver visible results to the population. Activities will help rebuild the minimal effectiveness of local basic services delivery systems and improve access to economic opportunities. This will be achieved by addressing urgent infrastructure rehabilitation needs in the poorest areas of Lomé, the capital city, and by scaling up, under the Community Development Project approved in June 2008, the approach implemented in Togo since 2004 through successive LICUS grants. In October 2008, IDA approved an additional US$7 million grant under the Global Food Crisis Response Program to complement the Community Development Project, to support Togo’s efforts to manage the global food price shocks.

10. In addition, the Bank has supported the Government in strengthening its poverty diagnosis, information systems, and statistical capacities. A Core Welfare Indicator Questionnaire survey was carried out in 2006 to provide for up-to-date and more reliable statistics. Recently, the Bank, in collaboration with the UNDP, conducted a background study on the sources of growth as input to preparation of the full PRSP. The Bank is preparing a Country Environmental Assessment Note to monitor the impact of activities included in the ISN on the environment.

C. IMF-World Bank collaboration

11. In the course of the re-engagement process, the IMF and World Bank staffs have established a collaborative relationship in supporting the Government’s macroeconomic and structural reforms, in line with the guidelines for enhanced Bank-Fund collaboration. This includes participation of Bank staff in the Fund’s program review missions, and IMF staff participation in Bank internal review meetings on key operations or studies. The IMF takes the lead in discussions on macroeconomic stabilization and the World Bank on social and structural areas, with close collaboration on a few structural areas that have a critical impact on macroeconomic stability (notably financial sector reforms). The Fund’s dialogue and conditionality are consistent with the structural programs agreed with the Bank, and the Bank’s policy framework with Togo is elaborated consistent with the Governments’ macroeconomic framework agreed with the Fund.

12. The Bank has worked closely with the IMF on a regional Financial Sector Assessment, and the two institutions have also cooperated in analysis of the debt situation and in bringing Togo to the HIPC Decision Point in November 2008.

III. Statistical Issues

1. Data provision is broadly adequate for surveillance, but weaknesses in the quality and timeliness of data hamper staff’s analysis. National accounts and balance of payments statistics are compiled based on very limited information, with only few surveys and scarce data on primary agriculture and private sector services. Moreover, government finance statistics are derived from a weak accounting system, and monetary data are reported by the BCEAO with a two-month lag.

2. The country has participated in the General Data Dissemination System (GDDS) since November 2001. Metadata on the national statistical system, including plans for improvement posted to the Fund’s Dissemination Standard Bulletin Board, were last updated in December 2004.

National accounts and consumer price index (CPI)

3. Like other West African Economic and Monetary Union (WAEMU) member states, Togo had embarked in late 2002 on implementing the System of National Accounts 1993 (1993 SNA), using the ERETES software. The NA for the new base year (2000) were completed in 2005 but since then due to a number of difficulties such as lack of staff, material and financial resources, the program was suspended and the NA for 2001 was not finalized. A West Afritac mission in March 2009 trained the staff into the 1993 SNA and the structure of the ERETES database and emphasized the necessity to achieve, as soon as possible, the 1993 SNA implementation process. As Togo only prepared the NA for the base year (2000), the mission recommended to proceed with the compilation of the NA for 2007 and to prepare afterwards the NA series for the missing years as an abridged version. The authorities demonstrated a stronger commitment to achieve the implementation of the 1993 SNA. The National Statistics Office (NSO) website has not been updated since June 2008. There is no hard copy publication on NA.

External sector statistics

4. Balance of payments statistics and international investment position data are compiled based on bank reports, a survey of enterprises, and customs data. Statistics are compiled with a six-month delay and are revised twice a year. A STA technical assistance mission in balance of payments statistics visited Lomé in September 2008 and found that significant progress had been made recently, in particular concerning informal trade, since the subregional unit for the reconciliation of intra-WAMU trade was set up. Trade in services seems to be well covered, as well as remittances. External trade on oil products had also been subject of a thorough study by the BCEAO which led subsequently to important revisions, and thereafter to a more appropriate reporting by the National Accounts Directorate. Data provided by BCEAO headquarters on the treatment of regional banknotes need to be reviewed at Headquarters level.

Government accounts and public debt data

5. The Government finance statistics accounting system is undergoing important improvements. The new WAEMU budget nomenclature now permits the economic and functional classification of expenditure. The monthly TOFE (Table of Central Government Financial Operations) is based on a mixture of administrative and accounting data and is sent to AFR with a two-month lag. Inconsistencies in domestic arrears records held by different units of the Ministry of Finance and the stock of domestic debt have been audited and a new database is being set up. Comprehensive external debt data and projections on a loan by loan basis are compiled regularly. Only budgetary central government data are reported for publication in the Government Finances Statistics Yearbook (GFSY), government finance high frequency data are not reported for publication in the IFS.

Monetary statistics

6. Monthly data for Togo, along with data for other members of the West African Monetary Union are regularly disseminated by the Central Bank of the West African Monetary Union (BCEAO) with a lag of about two months. Data on lending and borrowing rates, charged by domestic banks, are not compiled. In August 2006, as part of the authorities’ efforts to implement the methodology in the Monetary and Financial Statistics Manual, the BCEAO reported to STA monetary data for June 2006 for all member countries (including Togo) using Standardized Report Forms (1SR-central bank, 2SR-other depository corporations, and 5SR-monetary aggregates). In response to STA’s comments, the BCEAO recently provided a revised 1SR and indicated that 2SR was being revised.

Togo: Table of Common Indicators Required for Surveillance

(As of March 31, 2009)

article image

The general government consists of the central government (budgetary funds, extra-budgetary funds, semi-autonomous government agencies and institutions, and social security funds) and state and local governments.

Monthly (M), Quarterly (Q), Semi Annually (SA), Annually (A), on mission (OM).

Includes external gross financial asset and liability positions vis-à-vis nonresidents.

1

This note is updated on an annual basis by World Bank staff, or as warranted by developments in the Bank’s program.

Other IMF Content

Other Publishers

Cover IMF Staff Country Reports
Togo: 2009 Article IV Consultation and Second Review Under the Three-Year Arrangement Under the Poverty Reduction and Growth Facility: Staff Report; Public Information Notice and Press Release on the Executive Board Discussion; and Statement by the Executive Director for Togo
Author: International Monetary Fund
Volume/Issue:
Volume 2009: Issue 194
Publisher:
International Monetary Fund
ISBN:
9781451836677
ISSN:
1934-7685
Pages:
76
DOI:
https://doi.org/10.5089/9781451836677.002