Côte d'Ivoire
Second Review Under the Three-Year Arrangement Under the Extended Credit Facility, Request for Waivers of Nonobservance of Performance Criteria, and Financing Assurances Review: Staff Report; Staff Statement; Press Release on the Executive Board Discussion; and Statement by the Executive Director for Côte d'Ivoire
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International Monetary Fund
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Publication Date:
27 Jul 2010
eISBN:
9781455205844
Language:
English
Keywords:
ISCR; CR; authority; reform; staff appraisal; Ivorian authorities; government subsidy; financing cost; government plan; reform plan
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Economic activity strengthened in Côte d’Ivoire in 2009, but it is expected to decelerate. Financial performance under the Extended Credit Facility-supported program was broadly satisfactory. Good progress was made in restructuring external debt. The program is in line with the agreed reform goals, but reflects the constraints imposed by the pre-election political situation. Tight expenditure management remains critical for the success of the program. Structural reforms are essential to strengthen growth. The risks to the program are high but manageable.

Abstract

Economic activity strengthened in Côte d’Ivoire in 2009, but it is expected to decelerate. Financial performance under the Extended Credit Facility-supported program was broadly satisfactory. Good progress was made in restructuring external debt. The program is in line with the agreed reform goals, but reflects the constraints imposed by the pre-election political situation. Tight expenditure management remains critical for the success of the program. Structural reforms are essential to strengthen growth. The risks to the program are high but manageable.

I. Introduction

1. The political tension has increased in 2010. Public debate over the preconditions for presidential elections has become highly charged. The reconfigured Election Commission has taken concrete steps towards finalizing the voter list, but no new date for the presidential elections has been announced. Progress in the administrative reunification of the government-controlled South and rebel-controlled Center-North-West (CNW) of the country and the disarmament of former combatants has been limited.

II. Program Implementation: Satisfactory Fiscal Performance, but Slow Structural Reforms

A. Economic Performance 2009–early 2010

2. Economic performance in 2009 strengthened—Côte d’Ivoire was little affected by the global financial crisis and benefitted from high world cocoa prices (Figure 1). Growth reflected mainly an abundant harvest, higher-than-expected oil extraction, and expanding telecommunications. Per capita growth was positive for the first time in over a decade (Table 1, Figure 2–3). After a temporary spike in 2008, inflation declined in 2009 as food, energy and transport prices eased. Favorable terms of trade pushed the external current account surplus to 7.2 percent of GDP. While imputed reserves increased, so did private capital outflows in light of the deteriorating political climate and low levels of confidence (Tables 2–3; MEFP ¶5).

Figure 1.
Figure 1.

Côte d’Ivoire: Real GDP Growth

Citation: IMF Staff Country Reports 2010, 228; 10.5089/9781455205844.002.A001

Sources: WEO; AND IMF staff estimates and projections1/ Sub-Saharan Africa, excluding Nigeria and South Africa.2/ WAEMU, excluding Côte d’Ivoire.

3. The economy has been affected by electricity outages (Box 1), growing political tensions, and strikes during the first half of 2010. As a result, growth projections have been revised down to 3 percent for the year. With continued high international cocoa and oil prices, another sizeable current account surplus is expected (MEFP ¶6).

Electricity Crisis

Côte d’Ivoire was hit in late 2009–early 2010 by an electricity crisis after a major turbine failed. Only 60–70 percent of the installed capacity (1,320 MW) is available due to poor maintenance and high technical losses. The turbine failure in late 2009 reduced supply by 150 MW, resulting in widespread power outages through April 2010 and the temporary suspension of electricity exports.

The government took steps to address the immediate shortage (MEFP ¶44). These included delaying overdue maintenance of other turbines, electricity imports from Ghana, and the 2-year rental of a mobile thermal power station (70 MW) that came on stream in May 2010.

Long-term solutions to address the sector’s structural problems and reduce the large government subsidy have been long delayed.1 However, the government recently reached an agreement in principle with the biggest gas producer to lower the contractual purchase prices of natural gas, an important input for power generation; negotiations on the details of the purchase contracts are ongoing with all gas suppliers, with the support of the World Bank. A 10 percent tariff increase is planned for October 2010 as a first step toward tariff reform. Significant further tariff increases over the medium term are needed in order to achieve a sustainable financial position for the sector and build new generating capacity.

1 A 2009 study by the WAEMU Commission indicated that electricity shortages are the most important handicap for business productivity and competitiveness in the WAEMU zone.

B. Fiscal Performance and Financing

4. Fiscal performance at end-2009 was broadly in line with program objectives (Text table 1). The authorities met four of the six performance criteria (PC), missing two (overall fiscal balance and non-accumulation of external arrears) by small margins (Tables 4–5).

  • Revenue fell slightly short of the program target (MEFP ¶7–8). Strong cocoa tax and VAT collections partially offset a 13 percent shortfall in customs receipts and delays in dividend transfers from the national oil company.

  • Expenditures were marginally higher than programmed MEEP (¶9). Overruns on subsidies to cover the deficits of the electricity sector and the pension funds and on other non-wage current expenditure were partly offset by significant savings on external interest after generous Paris Club debt relief.

  • Fiscal balances fell short of program targets (MEFP ¶10): the primary surplus by ½ percent of GDP, and the overall deficit (including grants) by 0.3 percent of GDP. The deficit was financed largely by central bank credit and debt relief. Domestic arrears were reduced by slightly more than programmed.

Text Table 1.

Côte d’Ivoire: Fiscal Operations, 2009–10

(Percent of GDP)

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Includes compensation payments to the electricity and telecommunication sectors in 2009, which have counterpart in tax receipts.

Since the presentation of the program, the part of oil revenue previously shown under non-tax revenue (0.6 percent of GDP in 2009) was reclassified to direct tax revenue in line with the GFS classification.

Total revenue, excluding grants, minus total expenditure, excluding interest and foreign-financed investment expenditure.

Figure 2.
Figure 2.

Côte d’Ivoire: Selected Macroeconomic Indicators, 2007–11

(Percent of GDP, unless otherwise indicated)

Citation: IMF Staff Country Reports 2010, 228; 10.5089/9781455205844.002.A001

Sources: Ivorian authorities; IMF staff estimates and projections.
Figure 3.
Figure 3.

Côte d’Ivoire: WAEMU, and SSA - Macroeconomic Development and Outlook, 2007–11

(Percent of GDP, unless otherwise indicated)

Citation: IMF Staff Country Reports 2010, 228; 10.5089/9781455205844.002.A001

Sources: WEO; and IMF staff estimates and projections.1/ WAEMU, excluding Côte d’Ivoire.2/ SSA, excluding Nigeria and South Africa.

5. Good progress has been achieved in external debt restructuring (MEFP ¶11). Virtually all bilateral agreements under the 2009 Paris Club rescheduling have been signed.1 The exchange of Brady bonds closed successfully in April 2010.2 The authorities have continued good faith efforts to reach collaborative agreement with the remaining external creditors in line with the Paris Club’s comparability of treatment requirement, the HIPC Initiative, and the Fund’s lending into arrears policy (MEFP ¶11, 31).

C. Structural Reforms and PRSP Implementation

6. Implementation of structural reforms has been slow. Of the 13 structural benchmarks for 2009, eight were met, four recorded some progress, and no progress was made on one (Table 6). The authorities continued work on implementing the latter five benchmarks in the first half of 2010, but political realities rendered one impossible (involving border posts in the CNW) and delayed one (adoption of the draft law on the reform of the private pension fund (CNPS)) to allow more time for consultations.

7. Progress in public finance reforms in 2009 was mixed. Advances were made in strengthening inland revenue collection, budget management and execution and implementing PEMFAR recommendations (MEFP ¶13). The authorities reduced outstanding VAT credits, domestic arrears, and the use of Treasury advances for expenditures. However, the plan to rationalize tax exemptions and a report on how to reduce electricity sector subsidies have lagged. Progress in civil service and pension reforms was limited (MEFP ¶12, 20).

Financial Sector Reforms

Reforms of the financial sector continued, largely in line with FSAP recommendations, albeit at a slow pace (MEFP ¶19, 37–39):

  • Strengthening the prudential and supervisory framework: the authorities have taken steps to incorporate the WAMU institutional reforms into national law, supported the activities of the Banking Commission, and adopted the law on combating the financing of terrorism.

  • Addressing problems of distressed banks: the authorities enforced minimum capital requirements and monitored the banks subject to the Banking Commission injunctions. Contrary to FSAP advice, Versus Bank and the Bank for Agricultural Financing (BFA) became state-owned when the government injected capital for their bad loan portfolios.

  • Continuing restructuring of other financial institutions: CNCE (Postal Savings Bank) received a banking license and started its banking operations on April 1, 2010; BHCI (National Housing Bank) increased its capital through the participation of a third shareholder, which helped improve its financial position; finally, BNI (National Investment Bank) is taking actions on the findings of the operational and financial audits undertaken in 2009.

  • Reforming microfinance: the government prepared a reform plan for 2010–18.

8. Reforms in other macro-critical areas have been slow, including financial sector reform (Box 2) and improving the business climate and governance (MEFP ¶21–22). In the coffee/cocoa sector (MEFP ¶14), the authorities conducted audits of sector agencies, reduced export taxes, and consulted widely on a new institutional and regulatory framework. In the hydrocarbon sectors (MEFP ¶15), the authorities implemented an automatic petroleum pricing mechanism in April 2009 (Box 3) and strengthened the monitoring of oil extraction.

Fuel Pricing

The authorities applied an automatic fuel pricing mechanism during April 2009-March 2010 (MEFP ¶15, 43–44). The aim was to reduce government subsidies and pass world prices through to consumers, thus improving overall resource allocation. The formula for pump prices is based on international market prices for refined products, plus import duties, levies and taxes, and a distribution margin. Adjustments are made monthly if international prices change by more than 2.5 percent, subject to a cap (FCFA 35/l for super).

Because of relatively high taxes, pump prices in Côte d’Ivoire are higher than in other West African countries (Text Table 2 and Figure 4).

Text Table 2.

Côte d’Ivoire: Fuel Taxation in Mid-2009

(US$ per liter)

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Source: IMF calculations based on country data.
Figure 4.
Figure 4.

Côte d’Ivoire: Diesel Prices in West African Countries, January 2008-May 2010

(CFA francs per liter)

Citation: IMF Staff Country Reports 2010, 228; 10.5089/9781455205844.002.A001

Source: AFR Department database.

The financial position of the oil refinery (SIR) deteriorated in 2009. The automatic price mechanism reduced its domestic margin. At the same time, refinery margins worldwide fell sharply, further squeezing SIR as it exports two-thirds of its production. Despite SIR being technically more efficient than other refineries in the region, losses mounted. In early 2010, the government paid upfront its debt to SIR, and partially forewent its receipts from fuel taxes, reallocating them to SIR.

Confronted with transport strikes in early April 2010 that paralyzed Abidjan, the government raised prices by less than the amount implied by the fuel pricing mechanism, opting to reduce the tax wedge on diesel and super. The authorities intend to resume implementation of the mechanism, with a lower tax wedge in July 2010, and to revise the adjustment mechanism for 2011 after completing consultations with all parties concerned.

9. The authorities prepared a draft of the first annual PRSP progress report in early 2010 (MEFP ¶24–26) covering 2009. Overall pro-poor spending increased as programmed in 2009, but investment fell short of plans. The draft, which is still being finalized, details the institutional set up and the status of a long list of projects, but lacks detail and analysis of the implementation record. The next progress report will cover 2010.

III. Program Discussions 2010

A. Fiscal Program: Containing Expenditure While Supporting Growth

10. To address the unexpected events in early 2010, the authorities proposed a temporary loosening of the fiscal program. They target a primary basic surplus of 0.1 percent of GDP (compared with 0.6 percent envisaged earlier and 0.4 percent actual surplus in 2009) and an overall fiscal deficit of 2 percent of GDP (Text Table 1, MEFP ¶28).

  • Revenue is to rise by 0.9 percent of GDP with the abolition of rice import exemptions, the reintroduction of the supplementary income tax for reconstruction, continued higher cocoa prices (albeit lower tax rates), and additional revenue administration efforts, especially in customs (MEFP ¶32).

  • Expenditures are projected to rise by 1.0 percent of GDP owing to a higher wage bill as the government begins to honor past wage commitments (MEFP ¶29, 33–34), a temporary increase in subsidies to the electricity sector and the oil refinery to sustain output (MEFP ¶44), costs related to the delay in the elections, and more net lending related to bank restructuring. Pro-poor spending would continue to rise.

  • The financing need is expected to be filled largely by debt relief, budget support from multilateral institutions, and domestic financing (MEFP ¶30-31).

11. Staff accepted the proposed changes to the fiscal program: the adjustment in the main reflected unanticipated outlays that are one-off in nature (to restore electricity supply, secure operations of the oil refinery, and added election-related costs), the modest increase in the deficit can be financed without difficulty, and the pre-election political situation left little scope for utility tariff adjustments or other compensatory measures.

B. Strengthening Public Financial Management and Staying on Track Towards Fiscal Sustainability

12. The government intends to increase revenue through strengthening administration. This includes re-establishment of tax administration in the CNW, systematic collection of dividends from public enterprises, and integration of quasi-fiscal fees into the budget (MEFP ¶32, 36, 45).

13. Expenditure management is to continue focusing on transparency and efficiency (MEFP ¶33). The authorities intend to better exploit the capabilities of the SIGFIP budget execution system and further limit the use of treasury advances for expenditures. The government will continue to strengthen public procurement, and is committed to full compliance with the public procurement code.

14. The government is developing a medium-term wage bill strategy to resolve accumulated wage commitments (MEFP ¶34). A civil service census is under way to eliminate ghost workers and an integrated record system is being set up to improve personnel management.

15. The government intends to develop a medium-term debt strategy, and has requested IMF and World Bank technical assistance for this (MEFP ¶35).

16. The authorities will continue the reforms of the pension system and consult broadly in order to put it on a sound financial basis (MEFP Box 10). This includes increasing further the retirement age, other parametric reforms of the two pensions funds, and enhancing the collection of contributions.

C. Structural Reforms: Improving Efficiency and Competitiveness

17. Financial sector reforms will aim at reducing vulnerabilities (Box 2; MEFP ¶37–39). Building on the recommendations of the 2009 FSAP, the authorities are developing a comprehensive financial sector reform strategy, including the microfinance sector. They are pursuing the restructuring of banks in distress without further injection of public funds.

18. The government recognizes the need for long-term structural reform in the electricity sector, but is focusing on short-term emergency measures (Box 1; MEFP ¶44). The World Bank is supporting the overall sector reforms. To reduce the state utility’s chronic deficit, the government is committed to increase electricity tariffs. Also, the government is negotiating lower gas purchase prices with suppliers and has set up an investment fund to expand generating capacity and keep up regular maintenance.

19. Reforms are also needed in the oil sector. The authorities continue to strengthen transparency in the oil sector and are seeking to comply with EITI criteria (MEFP ¶43). They sought to put the refinery back on a sound financial footing in early 2010 (MEFP ¶47) and plan to reinstate the automatic fuel pricing mechanism in July, albeit with a lower tax wedge.

20. The government is strengthening the monitoring of other public enterprises and is committed to honoring its own obligations to those companies in a timely manner (MEFP ¶45). It will pay the water company (SODECI) monthly and apply from 2011 the water tariff increases agreed in 2008 (MEFP ¶46).

21. The reform plan for the cocoa/coffee sector is being finalized with World Bank assistance and will apply for the 2010/11 crop season (MEFP ¶42). It includes a new regulatory framework and further tax reduction.

22. The authorities will pursue efforts to improve governance and the business climate, despite the difficult political climate (MEFP ¶40–41). By end-2010, implementation of the national good governance and anti-corruption plans will start. To improve bottlenecks in the judiciary, the government plans to expedite the setting up of commercial courts and improve the enforcement of decisions by arbitration boards.

IV. Program Monitoring

23. The authorities request two waivers for the nonobservance of performance criteria (PCs) by small margins. There was a very small overrun in the overall fiscal balance, partly reflecting lower customs revenues. The authorities are undertaking significant reforms of customs administration. In addition, new external arrears were accumulated when a loan guarantee was called in late 2009. These arrears were cleared in late 2009 and early 2010. The authorities will focus on further strengthening internal coordination mechanisms between the treasury and external debt departments to avoid a recurrence.3

24. The authorities are making progress toward implementation of the HIPC completion point triggers (MEFP ¶26), and expect to complete them in early 2011.

Table 1.

Côte d’Ivoire: Selected Economic and Financial Indicators, 2008–12

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Sources: Ivorian authorities; and IMF staff estimates and projections.

Based on end-of-period changes in relative consumer prices and the nominal effective exchange rate.

Defined as total revenue minus total expenditure, excluding all interest and foreign-financed investment expenditure.

Table 2.

Côte d’Ivoire: Monetary Survey, 2006–10

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Sources: Central Bank of West African States (BCEAO); and IMF staff estimates and projections
Table 3.

Côte d’Ivoire: Balance of Payments, 2008–12

(Billions of CFA francs, unless otherwise indicated)

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Sources: Ivorian authorities; and IMF staff estimates and projections.
Table 4.

Côte d’Ivoire: Performance Criteria (PC) and Indicative Targets (IT), ECF 2009

(Billions of CFA Francs)1/

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Cumulative change from beginning of the year, unless otherwise indicated. See Technical Memorandum of Understanding (TMU) for detailed definitions, including of adjusters.

This floor will be adjusted: i/ downward/upward for higher/lower than programmed external project loans; ii/ downward for higher than programmed program loans; iii/ downward for lower than programmed program grants - up to a ceiling of CFAF 40 billion; and iv/ upward for a shortfall in program loans in excess of CFAF 40 billion.

Performance criteria for 2009 (numbers for 2008 are reported for comparison only) on the issuance by the central government of all debt instruments in CFAF to domestic and WAEMU financial market creditors and borrowing from the BCEAO. The ceiling excludes domestic arrears and their securitization, rescheduling agreement of central government debt and new borrowing for projects from the regional development banks (BOAD, BIDC). If program grants and program loans are lower than programmed, the ceiling will be adjusted upwards in the amount of the shortfall, up to a maximum of CFAF 40 billion. The ceiling includes a margin of CFAF 25 billion over the net cumulative flows projected for each period (see TMU).

Continuous performance criterion on all non-concessional borrowing as defined in the TMU. This ceiling does not apply to normal import-related commercial credits that have a maturity of up to one year; rescheduling agreements; loans from regional development banks BOAD and BIDC of up to CFAF 25 and 20 billion respectively; drawings on the Fund; public offerings in CFAF of government debt initially issued to resident of the WAEMU (see TMU).

Continuous performance criterion (see TMU).

Includes pro-poor expenditure, as defined in the classification of the Integrated Financial Management System (SIGFIP); see TMU Table 1..

Net banking system claims on the government represent the difference between government debt and its claims on the central bank and commercial banks, as defined in the TMU.

Table 5a.

Côte d’Ivoire: Central Government Financial Operations, 2008–12 1/

(Billions of CFA francs, unless otherwise indicated)

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Sources: Ivorian authorities; and IMF staff estimates and projections.

Payment order basis.

Program and arrear clearance grants in 2009 are below the line in the program column, and above the line in the outcome column.

3/ Total revenue (excl. grants) minus expenditure net of scheduled interest and foreign-financed capital expenditure, excluding net compensation proceeds from toxic waste damage.

Based on the treatment of Paris and London Club debt in context of the HIPC Initiative. The 2009 unpaid debt service on loans under debt restructuring discussions are not considered arrears for program purposes.

Table 5b.

Côte d’Ivoire: Central Government Financial Operations, 2008–12 1/

(Percent of GDP, unless otherwise indicated)

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Sources: Ivorian authorities; and IMF staff estimates and projections.

Payment order basis.

Program and arrear clearance grants in 2009 are below the line in the program column, and above the line in the outcome column.

Total revenue (excl. grants) minus expenditure net of scheduled interest and foreign-financed capital expenditure, excluding net compensation proceeds from toxic waste damage.

Based on the treatment of Paris and London Club debt in context of the HIPC Initiative. The 2009 unpaid debt service on loans under debt restructuring discussions are not considered arrears for program purposes.

Table 6.

Côte d’Ivoire: Structural Conditionality, 2009

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Table 7.

Côte d’Ivoire: Performance Criteria and Indicative Targets, ECF 2010

(Billions of CFA Francs)1/

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Cumulative change from beginning of the year, unless otherwise indicated. See Technical Memorandum of Understanding (TMU) for detailed definitions, including of adjusters.

This floor will be adjusted: i/ downward/upward for higher/lower than programmed external project loans; ii/ downward for higher than programmed program loans; iii/ downward for lower than programmed program grants - up to a ceiling of CFA 40 billion; iv/ upward for a shortfall in program loans in excess of CFAF 40 billion

Performance criteria for 2010 on the issuance by the central government of all debt instruments in CFAF to domestic and WAEMU financial market creditors and borrowing from the BCEAO. The ceiling excludes domestic arrears and their securitization, rescheduling agreement of central government debt and new borrowing for projects projects from the regional development banks (BOAD, BIDC). If program grants and program loans are lower than programmed, the ceiling will be adjusted upwards in the amount of the shortfall, up to a maximum of CFAF 40 billion. The ceiling includes a margin of CFAF 25 billion over the net cumulative flows projected for each period (see TMU).

Continuous performance criterion on all non-concessional borrowing as defined in the TMU. This ceiling does not apply to normal import-related commercial credits that have a maturity of up to one year; rescheduling agreements; loans from regional development banks BOAD and BIDC of up to CFAF 25 and 20 billion respectively; drawings on the Fund; public offerings in CFAF of government debt initially issued to resident of the WAEMU (see TMU).

Continuous performance criterion (see TMU).

Includes pro-poor expenditure, as defined in the classification of the Integrated Financial Management System (SIGFIP); see TMU Table 1.

Net banking system claims on the government represent the difference between government debt and its claims on the central bank and commercial banks, as defined in the TMU.

Table 8.

Côte d’Ivoire: Prior Actions and Structural Benchmarks (SBM) for 2010

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Table 9.

Côte d’Ivoire: External Financing Requirements, 2006–10

(Billions of CFA francs)

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Sources: Ivorian authorities; IMF staff estimates and projections.
Table 10.

Côte d’Ivoire: Proposed Schedule of Disbursements and Timing of Reviews Under ECF Arrangement (SDR millions), 2009–12

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Appendix—Letter of Intent

Abidjan, June 24, 2010

Mr. Dominique Strauss-Kahn

Managing Director

International Monetary Fund

Washington DC, 20431

Dear Mr. Strauss-Kahn:

1. The Ivoirian economy has weathered well the effects of the global financial crisis of 2008–09, but unforeseen events that took place in early 2010 could affect growth. Growth accelerated to 3.8 percent in 2009, compared to 2.3 percent in 2008, in part due to export agriculture, especially cocoa, and mining. Thus for the first time in a decade per capita growth was positive. However, at the beginning of 2010 power outages and unexpected strikes have weakened activity; this could slow down growth to 3 percent in 2010.

2. The Government sought to implement in a satisfactory manner its economic program supported by the Extended Credit Facility (ECF). In this context, all quantitative performance criteria for end 2009 were met, except two that exceeded the objectives slightly. Thus we request waivers for the slight slippage of the overall fiscal deficit and for the temporary accumulation of new external debt arrears when a loan guarantee in the cotton sector was called unexpectedly. We have made progress in restructuring our external debt by signing agreements with almost all our Paris Club creditors and by successfully swapping our Brady bonds for new bonds that are more favorable to us.

3. The budget execution in 2009 was characterized by unexpected and contrasting developments in several important budgetary variables that largely offset each other. Total revenue was slightly lower than envisaged; a sizable shortfall in customs revenue and in public enterprise dividends was largely offset by higher receipts from VAT and the coffee/cocoa registration tax. The expenditures slightly exceeded projections owing mainly to electricity subsidies. However, these overruns were counterbalanced by significant savings on external debt service. The programmed increase in pro-poor spending was implemented.

4. Efforts in the area of structural reforms continued despite some delays. We have continued the implementation of PFM reforms recommended by the PEMFAR exercise, and the preparation of the coffee/cocoa sector reform with assistance from the World Bank, as well as the financial sector reform. We have also prepared the draft first annual status report of our poverty reduction strategy and made progress in setting up medium-term expenditure frameworks for the main social ministries.

5. The attached Memorandum of Economic and Financial Policies (MEFP) describes progress made under the economic program for 2009, as well as the objectives for 2010, which reflect our poverty reduction strategy. In connection with the completion of the second program review, the Government requests assistance in the amount of SDR 35.772 million from the International Monetary Fund under the Extended Credit Facility, i.e. 11 percent of quota.

6. The Government envisages loosening fiscal policy temporarily to take into account pressures resulting from the unforeseen events mentioned earlier on economic activity. We aim for a basic primary surplus of 0.1 percent of GDP and an overall fiscal deficit of 2 percent of GDP. The Government is undertaking efforts to increase tax revenue and to contain spending, while favoring the continued rise in pro-poor spending and accommodating wage adjustments. We envisage financing the resulting deficit with concessional external financing as well as with recourse to the domestic and regional financial market.

7. Structural reforms will continue. We will strengthen revenue administration, especially customs, to increase revenue. In the area of public financial management, the Government will improve budget execution procedures, strengthen public procurement, prepare a medium-term wage bill strategy that is sustainable, and reform the pension systems. To improve economic efficiency and governance, we will continue reforms in the financial sector, the business climate, and the electricity sector. Specifically, we will also take short-term measures to reduce the electricity sector deficit.

8. The Government believes that the policies and measures set forth in this Memorandum are adequate for attaining the program objectives It will consult with IMF staff, whether on its own initiative or at the request of the IMF Managing Director, prior to the adoption of any additional measures that it will deem necessary, or in the event of changes to the policies set forth in this Memorandum. The Government also commits to cooperate fully with the IMF in attaining the program objectives.

9. The Ivorian authorities consent to the release to the public of this Letter of Intent, the attached Memorandum of Economic and Financial Policies, and the attached Technical Memorandum of Understanding, as well as the IMF staff report relating to the request for the second ECF review. We hereby authorize their publication and inclusion on the IMF website, following completion of the review by the IMF Executive Board.

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Annexes: - Memorandum of Economic and Financial Policies (MEFP)

- Technical Memorandum of Understanding (TMU)

Attachment I—Côte d’Ivoire: Memorandum on Economic and Financial Policies

June 24, 2010

This memorandum follows up on the supplementary memorandum of November 2, 2009. It summarizes the progress made in 2009 in the context of the economic program and continues the discussions on the 2010 program, presented in the memorandum of November 2, 2009.

I. Introduction

1. After a lengthy process, Côte d’Ivoire has consolidated its exit from the crisis that should lead to transparent democratic elections in 2010. The registration of the population led to the identification of 6.5 million persons. Based on the verification of the electoral list by cross-checking the registration data with the data in the historical records, a provisional list was published, and claims have been filed against the inclusion of one million persons. The priority of the new entities, established following the dissolution of the Independent Electoral Commission (CEI) and the government at end-February, is to complete the registration process so as to quickly lead to the organization of the first round of the presidential election. In addition, a definitive solution has been found to the military issues which are an important aspect of the peace process, and 8,000 joint staff from the Integrated Command Center (CCI) are being deployed to ensure the safe conduct of the elections. The demobilization of former combatants as well as the disbanding of militias has effectively started, and their reabsorption into civil society is under way.

2. The new government is committed to pursuing and strengthening the implementation of the economic and financial program. The first review carried out in November 2009, based on the data at end-June 2009, was satisfactory, as evidenced by the government’s sound performance in improving fiscal management and implementing structural reforms. It intends to further its efforts for the rest of the program, with the objective of implementing the triggers to reach the completion point under the Heavily Indebted Poor Countries (HIPC) Initiative as soon as possible. To that end, the government will abide by the commitments made under the program supported by the Extended Credit Facility (ECF).

3. The execution of the 2009 budget was marked by a slight decline in revenue, and the control of expenditure though with an increase in social spending. The efforts made resulted in a fiscal balance (excluding arrears clearance grants) of -1.6 percent of GDP, practically in line with the program target. In addition, progress was made in implementing the fiscal reforms, in particular with respect to the Public Expenditure Management and Financial Accountability Review (PEMFAR), the audits of expenditure under the crisis-exit program, quarterly reports, and the tracking of expenditure on large public works.

4. The program for 2010 is well under way and takes into account the challenges of the refining and electricity sectors since the early months of the year. The government plans to strengthen the orientation of the budget toward poverty reduction and investment and to accelerate reforms in the areas of governance, economic efficiency, and transparency. The fiscal objectives of the economic and financial program for 2010 are based on the macroeconomic assumptions that project a real GDP growth rate of 3 percent and an annual inflation rate (harmonized consumer price index) of 1.5 percent on average. The 2010 budget is aimed at consolidating the gains of 2009, with a view to sustaining the economic recovery and combating poverty by increasing capital expenditure, which may lead to a slight deterioration of the overall fiscal balance (excluding grants for the settlement of arrears) to 2 percent of GDP, compared with 1.6 percent of GDP in 2009. Also, the reforms related to improving the business climate and to managing public resources effectively will be pursued, to enhance the impact of the implementation of the Poverty Reduction Strategy Paper (PRSP) on the population. To that end, the remaining measures of the triggers will be fully implemented, so that the completion point under the HIPC Initiative can be reached as soon as possible.

II. Recent Economic Developments

5. Despite the global economic crisis, economic growth accelerated in 2009, inflation declined, and the country’s external position strengthened. Notwithstanding a difficult international environment, the economy benefited from the positive sociopolitical, economic, and financial achievements. These consisted mainly of the continuation of the crisis-exit process with the identification and electoral registration of the population, the submission of the economic and financial program, and the attainment of the decision point under the HIPC Initiative in March 2009.

  • This positive national environment was accompanied by good performance in the primary sector (6.4 percent), reflecting increases in the production of cocoa (14.6 percent), coffee (107 percent), and crude oil (12.3 percent) and in the tertiary sector (5 percent) related to transportation, telecommunications, and services. Real economic growth stood at 3.8 percent in 2009, despite a decline in the secondary sector. On the demand side, growth was driven primarily by exports (11.4 percent) and investment (5.6 percent).

  • Consumer prices were influenced by the fall in the international prices of energy and food products and the continued duty reductions for rice imports. Average 12-month inflation declined steadily throughout the year 2009. It stood at 0.9 percent, below the Community threshold of 3 percent, after reaching 6.3 percent in 2008.

  • The current account balance improved to CFAF 788.6 billion (7.3 percent of GDP) in 2009, compared with CFAF 201.9 billion (1.9 percent of GDP) in 2008. This was attributable to the sound performance of export agriculture, especially cocoa and its price, and the fall in imports as a result of the drop in the international prices of most imports. By contrast, the capital and financial account deficit worsened to CFAF 660.9 billion, compared with CFAF 195.7 billion in 2008.

6. In light of recent developments, marked by the energy crisis in the first quarter of 2010, growth is expected to be below initial forecasts. The impact of the shortfall in the supply of electricity is expected to bring real GDP growth down to 3 percent, compared with an initial projection of 4 percent. However, the government is making every effort to find a comprehensive, diligent solution to the crisis in the energy sector, with a view to reducing its impact on the economy as much as possible.

III. Implementation Of The Ecf-supported Program In 2009
A. Fiscal Policy and Program Implementation

7. The sound execution of the budget was affected by shortfalls in customs revenue; nevertheless, the balance targets were almost achieved. In 2009, problems arose in the collection of customs revenue, leading to large shortfalls. However, the performance of other tax receipts and the efforts made to contain expenditure, in particular the freeze of operating expenditure at end-October 2009, helped contain the fiscal balance at -1.6 percent of GDP.

8. Revenue increased beyond program targets. Tax receipts were CFAF 24 billion (0.2 percent of GDP) higher than programmed.

  • This surplus was the result of solid performance by the principal taxes, namely: (i) the VAT, which, despite the amount of refunded VAT credits, recorded a surplus owing to the effects of reforms and anti-fraud actions; (ii) payroll taxes (impôts sur traitements et salaires—ITS) in line with the efforts made to collect tax arrears; and (iii) coffee/cocoa registration taxes, which benefited from the upswing in world prices and the rate increase to 10 percent in the 2008/09 crop year.

  • By contrast, customs revenue fell short by CFAF 139.8 billion (1.3 percent of GDP) in 2009. The main reasons for this poor performance were the general decline in merchandise imports, the continuation of the exemption of customs duty on rice, a number of administrative problems (dockers’ strike and the reform of the import declaration form), technical problems with the automated customs clearance system (SYDAM-World), and problems implementing risk and value management. These shortfalls were alleviated by measures taken during the last quarter of 2009 to: (i) improve the network’s response time; (ii) optimize access to the database by establishing parameters for the memory allocated to the dedicated server; and (iii) increase the number of files that can be used simultaneously. These measures led to significant improvements in collections, accounting for 33 percent of the annual customs revenues.

  • Nontax receipts recorded a shortfall of CFAF 47.2 billion, related to the reclassification of all oil and gas revenue as tax receipts and to the collection shortfall of CFAF 13 billion in National Petroleum Company (PETROCI) dividends.

9. Given the problems related to shortfalls in revenue, the government managed to adjust spending, while favoring poverty reduction expenditures. To ensure a balance between government resources and expenditure and thus reduce the budget deficit, the government stopped committing expenditure at end-October 2009, except that earmarked for pro-poor activities.

  • However, current expenditure exceeded the program target by CFAF 55.7 billion (0.5 percent of GDP) as a result, in particular, of the overrun in the subsidy to the electricity sector of 0.2 percent of GDP, and the overrun in social spending of 0.1 percent of GDP, compared with the targets.

  • The wage bill was contained within the program target.

  • The operating expenditure of the Government and the national agencies (EPNs) exceeded the projection by 0.3 percent of GDP level, including 0.2 percent in “compensation” payments for past utility services.

  • Capital expenditure, picked up in the second half of the year, exceeding the target by about 0.1 percent of GDP, reflecting social sector activities financed with project grants.

  • Implementation of the major public works was contained within the CFAF 40 billion budget envelope, in line with the institutional framework set up.

  • Regarding crisis-exit expenditures, only 68.4 percent of the CFAF 148.7 billion appropriated was spent because of the postponement of the presidential elections.

  • In addition, pro-poor spending totaled CFAF 843 billion, slightly above the floor of CFAF 838.7 billion.

Table 1.

Status of Pro-Poor Expenditure Execution

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Source: SIGFIP-DGBF

Revenue Measures for 2009

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10. Progress was made in reducing domestic arrears in the financing of the 2009 program. To boost the economy the government reduced its debt to the private sector.

  • The net reduction of the government’s domestic payment arrears in cash totaled CFAF 70.3 billion (0.7 percent of GDP). This operation was possible in part because of support from the IMF, the World Bank, and the Central Bank of West African States (BCEAO), and the Treasury was able to pay off all small creditors and start paying large creditors.

  • Côte d’Ivoire benefited from the decision taken by the West African Monetary and Economic Union’s (WAEMU) Council of Ministers in August 2009 for the BCEAO to grant a loan backed by IMF’s general allocation of Special Drawing Rights (SDRs). The WAEMU decision envisaged that this loan and other financing would be used to repay two thirds of the end-2008 stock of domestic arrears. This new general allocation for Côte d’Ivoire totals SDR 241.1 million, or about CFAF 172.2 billion (1.6 percent of GDP).

  • Also, in line with the program, there was no new accumulation of domestic arrears in 2009, despite cash flow pressures.

  • However, at end-2009 the float amounted to CFAF 112.6 billion (1 percent of GDP) and was partially reduced during the first quarter of 2010.

  • Domestic financing was undertaken exclusively in the form of issuance of government securities on the regional market, as agreed in the program. The government raised a gross total of CFAF 751.1 billion on the regional financial market in 2009.

11. As regards restructuring external debt, the government was able to sign agreements with most of its Paris Club and London Club creditors.

  • The Paris Club creditors concluded an agreement on May 15, 2009, with the government on the restructuring of its external public debt on Cologne terms. By mid-March 2010, twelve (12) bilateral agreements were signed out of a total of fourteen (14). These agreements led to the immediate cancellation of debt totaling CFAF 513.7 billion. Debt service payable to the Paris Club creditors (arrears at end-March 2009 plus current maturities of 2009–12) was reduced by 93.4 percent, from CFAF 2,216 billion to CFAF 149.4 billion. In addition, Paris Club creditors undertook to grant the remaining portion of the debt relief envisaged under the HIPC Initiative as soon as Côte d’Ivoire has reached the completion point.

  • As regards the London Club (the Coordinating Committee of Brady Bond Holders), a preliminary agreement on the restructuring of private debt was signed in Paris on September 28, 2009. The operation was successfully completed in April 2010. The restructuring is based on three main elements: a discount of 20 percent on the stock of debt estimated at December 31, 2009, representing forgiveness of CFAF 287 billion, and the issuance by Côte d’Ivoire of a new security for the remaining claims (80 percent of the stock) maturing in 23 years, including a six-year grace period, bearing a low fixed interest rate of 2.5 percent a year during the grace period, and growing gradually thereafter up to 5.75 percent a year over the long term.

  • In the case of the European Investment Bank (EIB), an agreement to restructure the arrears on equity capital was concluded on May 19, 2009. This agreement provides for rescheduling of the sum of CFAF 18.8 billion over seven years, including a three-year grace period, and the granting of a subsidy of CFAF 3.9 billion to Côte d’Ivoire to help it repay its debt. In addition, the arrears payable at March 31, 2009 under the European Development Fund (EDF) of CFAF 16.4 billion were cancelled by the Commission of the European Union following an agreement of December 7, 2009.

  • Regarding the other commercial debt, discussions are under way with the commercial creditors on restructuring the debt on terms comparable to those concluded with the Paris Club and the Coordinating Committee of Brady Bond Holders (London Club).

  • A total of CFAF 6.2 billion in arrears at end-2009 was accumulated on external debt service under a guarantee suddenly activated in November 2009. This amount was paid in the first quarter of 2010.

B. Implementation of the Structural Reforms

12. Progress was made in civil service reform despite some delays. The reforms launched are aimed at: (i) controlling staffing based on the census of civil servants and government employees, establishing the Single Reference File (FUR) and the Integrated Civil Servant and Government Employee Management System (SIGFAE); (ii) raising the retirement age; and (iii) reorganizing the civil service.

Civil Service Reform Plan and Measures in 2009

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13. Progress was recorded in implementing reforms stemming from the PEMFAR review. Progress, by strategic pillar, was as follows:

  • Regarding the improvement of the legal and institutional framework of the fiscal management system, member states are required to transpose into their national laws and regulations, by December 31, 2011, the directives adopted in March and June 2009 by the WAEMU Council of Ministers. They relate to the fiscal management transparency code, the budget law, the government budget classification, the general rules on public accounting, the government chart of accounts, and the fiscal reporting table. The changes that are necessary for compliance with these directives are under way. To this end, the organic law related to the budget law was validated and sent to the Audit Chamber for an opinion. The organic law on the transparency code is being drafted, along with the decrees on the four other texts.

  • In connection with the strengthening of transparency in fiscal management, most of the commitments were met through the conduct of studies and seminars, except for a feasibility study to clarify the modalities for budgeting the receipts from the quasi-tax levies in the oil and coffee/cocoa sectors. In addition, economic and financial information have been published regularly on the website of the Ministry of Economy and Finance (www.finances.gouv.ci.)

  • As regards the optimization of resource allocation for the sectors involved with poverty reduction—in particular, agriculture, education, and health—the strategy has been broken down into priority actions. In 2009 the budgets of these sectors exceeded their 2008 allocations by 9.8 percent, 4.8 percent, and 19.7 percent, respectively.

  • In the area of strengthening of fiscal discipline, progress was made through the voting, especially since 2008, of the government budget before the end of the current fiscal year; the curtailment of the recourse to treasury advances; and the production of a quarterly budget execution summary that is reviewed and adopted in Council of Ministers.

  • As regards the improvement of the traceability and control of budget execution the establishment of the SIGFIP (budget execution)/ASTER (accounting) interface that began in April 2009 was completed in December 2009. In addition, the module for the management of treasury advances was created and tested, and will be put into operation in 2010.

  • As regards the development of accountability mechanisms, the deadlines for transmission of draft budget review laws to the Audit Chamber are taken into account when draft organic laws on government finances are being prepared. Accordingly, the 2008 draft budget review law was forwarded in October 2009.

  • Concerning the improvement of the legislative and regulatory framework, as well as the strengthening of the institutional and operational framework of public procurement, a new public procurement code was adopted in August 2009. In addition, the National Public Procurement Regulation Authority (ANRMP) was set up and the members were appointed, paving the way for implementation of the new code since January 2010. Moreover, the minutes of meetings to open and assess bids are published routinely on the website of the Public Procurement Directorate (www.dmp.finances.gouv.ci) and in the Public Procurement Bulletin.

Structural Fiscal Reforms in 2009

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14. Measures were taken to reduce taxation in the coffee/cocoa sector while improving transparency in the use of the quasi-tax levies for investment. The government has continued to discuss in the Council of Ministers and to publish quarterly reports on the collection and use of the quasi-fiscal levies on the coffee/cocoa sector. Since June 2009, they have included the half-yearly execution of the operating budgets of the sector’s Management Committee and agencies. In addition, the Management Committee continues to bolster the confidence of actors in the sector and of development partners, by streamlining the use of resources for projects, especially those of a public nature (Rural Investment Fund (FIMR)) combating diseases that attack coffee and cocoa and initiating a quantity-quality-growth (2QC) program. With a view to improving the situation of producers, the government has continued to reduce the levies. In the context of implementing the reform strategy for the coffee/cocoa sector, a draft report was submitted to the President of the Republic in October 2009.

Reforms in the Coffee/Cocoa Sector

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15. Progress was made in improving transparency in the hydrocarbon sector.

  • For transparency in the sector, the government has continued the production and publication of quarterly reports to the Council of Ministers on physical and financial flows. The automatic petroleum product pricing mechanism was adopted in February and has been scrupulously implemented since April 2009. The implementation of the mechanism has weakened the financial position of the national oil refinery (SIR), which is now receiving a very low level of protection (3 percent) and has a moderate refining margin, given the evolution of the price of crude oil on the international market.

  • The final sector report for 2006 and 2007, in accordance with the Extractive Industries Transparency Initiative (EITI) criteria and prepared by the Administrator, has been completed. The process of validation in compliance with the EITI standards is under way and is expected to be completed in May or, at the latest, in July 2010. It will be disseminated by communications personnel and published on the website of the Ministry of Economy and Finance (www.finances.gouv.ci.)

  • Concerning the institutional framework for monitoring extraction, the Tax Directorate (DGI) was integrated within the existing framework and a Petroleum Activities Unit was created. It conducted a survey of taxpayers in the sector and collected production-sharing contracts. Also, a report specifying the respective shares of the beneficiaries of each shipment is prepared every quarter by the Crude Oil Shipment Monitoring Committee.

16. In the electricity subsector, tariffs were increased by 10 percent on average at the beginning of 2009, to improve the financial position of the sector. But because of persistent problems, a more comprehensive approach was adopted, through the formulation of a strategy, the commissioning of a tariff study, and the start of negotiations with a view to reducing electricity production costs in 2009. The subsidy to the sector by the government in 2009 was CFAF 47.4 billion.

Reforms in the Energy Sector

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17. As regards the large public works, the government has converted five of the framework agreements into public procurement contracts, validated its debt to the operator, and stayed within the budget execution procedures. Framework agreements are being converted into public procurement contracts as follows: (i) finalization of the detailed technical studies by the operator; (ii) review, by the National Bureau for Technical and Development Studies (BNETD), of the technical documents received from the operator; (iii) drafting of the specifications and related prices by the BNETD; and (iv) conversion of the agreements into public procurement contracts. Given the large volume of public works involved, five agreements were converted into public contracts in 2009. In addition, in accordance with commitments, the remaining agreements will be converted in 2010. As regards the government debt to the operator, the audit has been completed, the final report is available, and two settlement agreements have been signed.

18. Regarding the restructuring and privatization of public enterprises, audits and operational controls have continued. State corporations are being checked and monitored through operational inspections and audits by the Participation and Privatization Directorate (DPP). Accordingly, nine state corporations had operational inspections and 11 others were audited. These actions to enhance oversight of the portfolio have led to the gradual improvement of the results of public enterprises. To consolidate further the inspection and monitoring of state corporations, it seems necessary to build the capacity of the DPP, through recruitment and training of staff. In addition, since 2005 the government has restructured several state corporations.

19. The government has continued the reform of the financial sector and conducted the financial sector assessment program (FSAP).

  • In 2009, the government adopted the law on combating the financing of terrorism and an ordinance on banking regulation, incorporating the institutional reform of the West African Monetary Union (WAMU) and of the BCEAO. The national financial intelligence unit (CENTIF), operational since April 2008, continues its activity and regularly produces reports submitted to the BCEAO. Other Community laws and regulations have been incorporated into the national legislation. These include the laws and regulations relating to: (i) measures to promote financial deepening and the use of non-cash means of payment; (ii) closed-end investment companies in the WAMU; (iii) the organization of the accounting profession; and (iv) the crackdown on violations with respect to checks, bank cards, and other electronic forms of payment.

  • The government has adopted some of the recommendations resulting from the FSAP conducted in May 2009. In this regard, in November 2009, it set up a financial sector monitoring committee responsible for formulating and implementing the strategy for financial sector restructuring and development. This committee is also responsible for monitoring the action plan for the implementation of the regional FSAP.

  • Banks in distress did not receive financial support from the government in 2009. In December, the Banking Commission gave its consent to the request for authorization to change the structure of the corporate capital of Versus Bank and the Agricultural Financing Bank (BFA), which have become, respectively, a state corporation and a corporation in which the state holds majority ownership. It also carried out spot inspections at these banks in February 2010.

  • An action plan based on the findings of the financial and operational audit and the recommendations of the Banking Commission was prepared and adopted by the Board of Directors of the National Investment Bank (BNI). Its implementation is the subject of regular reports that indicate progress.

  • After the consent of the Banking Commission was obtained in September 2009, the Postal Savings Fund (CNCE) was granted a license to operate as a bank in October 2009. Steps were taken to cap the periodic cash transfers (nivellements décadaires) to the CNCE at CFAF 5.41 billion in 2009. The CNCE started its banking operations in April 2010, and the cash transfers ended.

  • Concerning the national housing bank (BHCI), following an initial capital increase of CFAF 5 billion in 2009, a second capital increase of CFAF 5.4 billion is planned by end-2010, which will bring its total capital to CFAF 12.1 billion and thus consolidate the bank’s financial position.

  • As for the microfinance institutions, the government has devised a plan to restructure the sector, for implementation between 2010 and 2018. In the context of its implementation, the Committee for the Preparation of a Donor Roundtable for the National Microfinance Strategy was put in place on May 4, 2010, in addition to the National Microfinance Committee that was restructured in March 2009.

20. The reforms of the social security institutions have progressed. As regards, the CNPS, draft amended laws and regulations for the Social Security Code, aimed at restoring financial balance and introducing supplementary pensions, were prepared. In addition, its reform plan and the draft enabling law were forwarded to the Government Secretariat (SGG) in September 2009, following the validation of the actuarial study in November 2008. The draft law was discussed by the Government Council on January 5, 2010 and by the Council of Ministers on March 18, 2010. In this context the Government decided to set up a Committee in charge of the reform of the private pension fund. It also intends to follow an approach similar to that for the public pension fund and to go forward with a broad-based consultation of the social partners, safeguarding the cohesion of the reforms of the pension funds. In the case of the CGRAE, the plan of reforms to improve financial viability was adopted on August 6, 2009. A committee to steer the reform was set up on October 8, 2009.

21. Progress was achieved in implementing the measures related to the improvement of governance. The diagnostic study for adoption of the national good governance plan was completed and validated by all those concerned in September 2009. Likewise, projects and programs to promote good governance were identified and validated in November 2009. The final version of the national plan was forwarded to the SGG for adoption in the first half of 2010.

22. The reforms related to improvement of the business climate, launched in 2009, will be pursued in 2010.

Measures to Improve the Business Climate in 2009

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23. The government is engaged in the regional integration process within the WAEMU and the Economic Community of West African States (ECOWAS), as well as in trade policy. The ECOWAS Heads of State decided in January 2006 to establish a fifth tariff band in the structure of their common external tariff (CET). In October 2008, the Ministerial Committee to monitor the Economic Partnership Agreement (EPA) negotiations adopted that fifth band at the rate of 35 percent. The list of products to be included in that band is yet to be determined. In the context of the EPA with the European Union, the conclusion of an interim regional EPA is under negotiation, to replace the interim EPA concluded by Côte d’Ivoire with the European Union in December 2007. On the matter of accompanying measures, the EPA Development Program (EPADP) was adopted in February 2009 by ECOWAS member states. Specifically concerning Côte d’Ivoire, a Program of Support for Trade and Regional Integration (PACIR), related to the interim EPA, is being implemented.

IV. Social Policies and PRSP Implementation in 2009 and Progress under the HIPC Initiative

24. The institutional framework of the PRSP has been strengthened. The PRSP was adopted by the Council of Ministers on March 26, 2009, and the National PRS Monitoring Council was created by decree in August 2009. The three organs of the Council are functional. The strategy has been broken down into sectoral action plans. For the implementation of the activities selected, the government has set up local PRSP monitoring and implementation committees in the 10 regional centers. In addition, the draft 2009 annual report on PRSP implementation is being finalized and will be published at end-June 2010.

25. The government is implementing the PRS through the orientation of the budget toward pro-poor spending. The strengthening of budget appropriations for the pertinent sectors, as well as their execution, has led to improvements in social indicators.

  • In the area of education, the upgrading and building new classrooms, as well as the recruitment of teachers, have resulted in a drop in the teacher/ pupil ratio to 1 teacher for 45 pupils in 2007/08 and 2008/09. The implementation of the PRSP by way of orientation of the budget toward social needs will allow to improve this ration in the coming years.

  • As regards health, the upgrading and construction of new health centers, as well as the recruitment of medical and paramedical personnel have led to an improvement in the rate of childbirths assisted by qualified personnel, from 63.9 percent in 2008 to 64.5 percent in 2009. Concerning the Public Health Pharmacy (PSP), a payment of CFAF 8.6 billion was made on the outstanding balance of amounts owed, the remainder of which at end-2009 was the subject of an agreement for its settlement in 2010. Also, an additional budgetary effort was made for the full settlement of the liabilities of the PSP, with a supplementary appropriation of CFAF 3 billion.

26. With the aim of reaching the completion point under the HIPC Initiative soon, the government has placed special emphasis on implementation of the triggers. Their implementation status is as follows:

Triggers for the HIPC Completion Point

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V. ECF-Supported Program for 2010

27. The objectives of our program are closely linked to the PRSP and its implementation. Our ECF-supported program aims at assuring macroeconomic stability, creating the basis for sustained growth with its fruits shared equitably, and fighting more effectively against poverty, by reinforcing the management of public finances and the construction of economic and social infrastructure. The 2010 budget is focused on the social sectors through the increase in pro-poor spending and investment. The structural reforms to be undertaken in the program aim at assuring the regular supply of the economy with energy, and at finalizing the reform of the cocoa-coffee sector so as to improve farmers’ incomes. In addition, the consultations with the actors in the sectors paved the way for the design of sectoral action plans and the quantification of needs. To strengthen the alignment of the government budget to the PRSP objectives, the programs generated by those action plans will serve as the basis for the formulation of medium-term expenditure frameworks (MTEFs), which will be finalized in 2010 for the Ministries of Education and of Health. In addition, the Government plans to organize a donor roundtable.

A. Principal Objectives of the 2010 Budget

28. The 2010 budget is consistent with the commitments made in November 2009 and aims to strengthen poverty reduction and public investment while containing deficits. The 2010 program is aimed at: (i) achieving real GDP growth of 3 percent; (ii) containing the average annual inflation rate to 2.5 percent, and (iii) increasing pro-poor spending by about 0.4 percent of GDP and capital expenditure financed from its own resources by 0.4 percent of GDP. In aggregate, this would lead to an overall fiscal deficit (excluding grants for the settlement of arrears) of 2.0 percent of GDP.

29. The government intends to pursue its policy of orienting spending in favor of social and growth-supporting sectors. Accordingly, the 2010 budget provides for an increase in pro-poor spending that is expected to total 8.1 percent of GDP, compared with 7.7 percent in 2009, and to maintain investment spending at 3.1 percent of GDP. In addition, spending on large public works will be kept at its 2009 level of CFAF 40 billion, about 0.3 percent of GDP. Meanwhile, expenditure in the 2010 budget will be based on containing current expenditure through a strengthening of controls on government consumption of utilities and of the wage bill. Crisis-exit expenditure will total 1.3 percent of GDP, up 0.1 percent from 2009, as a result of the postponement of the presidential elections. The crisis-exit program will be supported by the donors and lenders in an amount equivalent to 0.2 percent of GDP.

30. The financing requirement for 2010 remains considerable. The unmet financing requirement totals CFAF 95.4 billion in 2010, despite the efforts to optimize the tax potential, streamline expenditure, and after taking into account already identified projects that are externally funded and the net financing expected from the WAEMU financial market. To ensure full financing of the program, the government plans to mobilize all the budget support identified, especially from the multilateral institutions (IMF, World Bank, ADB, and EU) and bilateral partners in 2010, and, if possible, to seek further external support. It also expects to benefit from a better response from the regional market. Consistent with this, the government will harmonize and validate on a monthly basis changes in the issuance timetable based on cash needs, and will submit them to the BCEAO for coordination with other issuance plans in the WAEMU zone. In addition, it will hold regular sessions of the Treasury Committee to adjust expenditure execution in line with projected revenue collection. On this basis, the government plans to continue achieving a net reduction of the outstanding liabilities to the private sector of at least CFAF 45 billion in 2010, after the net cash payment on accounts payable (restes à payer) of CFAF 70.3 billion in 2009 compared to a planned CFAF 60 billion.

31. The government aims to reach debt restructuring agreements with all its external creditors. The exchange of outstanding Brady bonds for a new security, which was launched on March 15, 2010, was accepted by virtually all creditors—99.98 percent of the bonds. In addition, the government plans to conclude bilateral agreements with the two remaining Paris Club creditors. The government will make every effort to finalize restructuring agreements with its non-Paris Club bilateral creditors and other commercial creditors (Standard Bank London: BNI bonds; and Standard Bank New Jersey: Sphynx bonds), on terms comparable to those obtained from the Paris Club. The government will pursue restructuring in conformity with the requirements of Paris Club comparability and with the Heavily Indebted Poor Countries (HIPC) Initiative of the IMF and the World Bank. We intend to conduct it in a way that is consistent with the IMF’s lending into arrears policy, including information transparency, inter-creditor equity, and dialogue with creditors.

B. Structural Reforms in the Area of Public Finance

32. Tax policy is based upon increasing receipts from domestic taxes and customs duties, while promoting private investment and the reconstruction of the country. Specifically, solving the problems identified in customs will require sustained measures in several areas.

Structural Fiscal Measures Related to Revenues for 2010

Taxes (DGI)

  • Completion of the redeployment of the Tax Administration in the CNW zones and strengthening of the measures to restart operations and recover revenue.

  • Finalization of the software package for monitoring exemptions before end-October 2010, and quarterly production of exemption amounts by type of tax, beginning November 2010.

  • Strengthening the control of the standardized VAT forms, following an increase in staffing.

Customs (DGD)

  • Continue the streamlining of exemptions by reviewing the existing regulations, as well as implementing the recommendations of the technical assistance mission of April 2010, with a view to amending the laws and regulations following the seminar planned for May 2010; and implementation of the new provisions beginning of September 2010.

  • Systematic detailed production of data on foregone revenue because of exemptions, using the SYDAM World software package for customs clearance management.

  • Put into operation the mechanism for providing funds to the VAT credit refunds agency, in particular by taking this item into account in SYDAM World, as of May 2010.

  • Establishment of simplified procedures (by taking account of the electronic transmission to SYDAM World, already taking place) between Bivac and the DARRV, so that the latter can have quick, early certification of value and the related customs documents.

  • Following the strengthening of staffing and of the resources of the Risk Analysis Unit (DARRV), preparation of a report on the results of the strengthening of risk analysis by December 2010.

  • Temporarily, until the DAARV becomes fully operational, training of a specialist in tariffs and assessment, to strengthen the “front-office” staff.

  • As a first phase in the restructuring of “middle-office” staff, creation of a unit responsible for deferred control.

  • Finalization of the audit of the Customs IT system (July 2010) and implementation of the recommendations.

DGI/DGD/DGTCP

  • Adoption and implementation of the technical assistance recommendations in order to strengthen anti-fraud efforts.

  • Capacity building: training of customs officers in appraisal techniques; request for continued assistance from experts in this area hired by the DGD; making available to customs units (and, over time, to the DGI), at end-June 2010, a databank on risks and violations.

  • Limitation of the stock of VAT credits to be refunded to CFAF 10 billion.

Other structures

  • Continued streamlining, following the 2009 inventory, of revenue collected for services by the ministries, through the creation of new revenue collecting agencies.

  • Finalization of the procedures manual on the setting up of service fees.

  • Regular monitoring of the status, and systematic collection, of dividends from public enterprises.

33. Implementation of the fiscal management action plan will be pursued.

Structural Fiscal Measures Related to Expenditure for 2010

  • Strengthening the control of subscriptions and of water, electricity, and telephone consumption by the state.

  • Taking account of the results of the survey of civil servants and government employees, in the preparation of the 2011 budget.

  • Monitoring and managing expenditure execution deadlines in the SIGFIP, after consultation with those concerned.

  • Of the transfer of the SIGFIP through the connection of five new areas.

  • Production and transmission to the IGF by all DAAFs, of a quarterly report on the physical and financial execution of expenditure, within 30 days, followed by the production of a summary report by the IGF, within the next 15 days.

  • Continued limitation of the systematic use of cash advances, in accordance with the Order of March 2009.

  • Actual start-up of ANRMP activities, in September 2010; production and publication of quarterly progress reports, within a month of the end of each quarter.

  • Calls for bids for public contracts will be the subject of systematic quarterly publications.

  • Conversion of the four remaining framework agreements into public procurement contracts related to the state-funded major works, at end-July 2010.

  • Formulation of MTEFs in the Ministries of Education and Health at end-August 2010, so that they can be taken into account in the 2011 budget.

  • Compilation of a guide on MTEF methodology at year-end, to facilitate preparation of the budget documents of the other ministries.

  • Finalization of the draft organic law on budget laws and a functional budget classification in accordance with the 2001 Manual on Government Finance Statistics.

  • Expansion of the SIGIP/ASTER interface to five new locations.

34. The control of civil service staffing and the improvement of its management will be pursued. The government plans to adopt a medium-term wage bill management strategy. In addition, the reform of public- and private-sector pension systems will continue.

Structural Reforms in the Public Administration

  • Finalization of the census of civil servants and government employees, in 2010, followed by wage bill control in the highest-staffed sectors (education, health, higher education, and police).

  • Preparation, by end-September 2010, of a program of reforms of the public administration, based on the findings of the organizational studies of the ministries, including, in particular, the creation of Ministry Secretaries-General.

  • Adoption, before end-2010, of the laws and regulations on increasing the retirement age for all civil servants from 57 to 60 years old, except for certain professions, with effect from January 2011.

  • Preparation of a note on the medium-term evolution of staffing and the wage bill, taking into account the settlement of the wage revaluation balances by end-May 2010 (prior action).

  • Establishment of an integrated system for the management of civil servants and government employees (SIGFAE) and compilation of the Single Reference File, in December 2010.

  • Validation of the balance of contributions not transferred to the CNPS and the CGRAE by the public enterprises and EPNs involved, and the establishment of a plan for the settlement of outstanding debts, before end-May 2010.

  • Implementation of the reform of the CGRAE, in particular through: (i) the launch of a public consultation, as of May 2010; (ii) estimation of the needed parametric and institutional changes in the pension system, with a view to including the financial impact of the sectoral reforms in the 2011 budget; and (iii) the submission of draft documents on the reforms to the government, in November 2010.

  • Limitation of the CGRAE deficit to be covered by the government budget in 2010, at CFAF 56.4 billion.

  • Creation of a reform committee in June 2010, preparation and holding of a social dialogue, proposal of a parametric system aiming to achieve financial balance of the system, and formalization of the accepted proposals through the adoption of draft laws and decrees before end-December 2010.

35. A medium-term debt management strategy will be prepared with technical assistance from the IMF and the World Bank. Côte Côte d’Ivoire’s attainment of the completion point under the HIPC Initiative should enable it to receive substantial relief on the stock of its external debt. To ensure that these benefits are sustained, and that the government remains current on future debt service obligations, the government will prepare with reference to its technical and financial partners, in particular the IMF and the World Bank, a medium-term debt management strategy. This, coupled with continued sound fiscal management, will help ensure ongoing debt sustainability. In addition, it will set up a National Public Debt Committee (CNDP) in 2010, in accordance with the WAEMU recommendations.

36. The government plans to conduct in-depth review on the transition in tax policy, starting immediately. For this, it will implement the action plan resulting from the pertinent WAEMU recommendations. Also, to prevent losses of tax receipts attributable to implementation of the EU EPA, the government intends to seek technical assistance from the IMF to strengthen the performance of the administrations responsible for domestic taxes. This should result in a wider tax base and the introduction of incentives through which the informal sector would gradually be brought into the tax base.

C. Monetary Policy and Financial Sector Reforms

37. The government has requested financial assistance from the Financial Sector Reform and Strengthening (FIRST) Initiative for preparing a financial sector development strategy. To that end:

  • The Committee responsible for the financial sector development strategy (CODESFI), created in November 2009, will do further work on the diagnostic study and the FSAP recommendations on the financing of economic activity, banks, microfinance, insurance, social security, and justice.

  • The government plans, in relation with the regional monetary and financial bodies, to revitalize the financial sector so that it can better contribute to the financing of the economy. To this end, a workshop, for which a financing request has been made to the FIRST Initiative by the government, will be held in September 2010, and its findings, as well as the results of the additional studies to be done in the fourth quarter, will serve as the basis for the drafting, and adoption by the end of the second quarter of 2011, of a financial sector restructuring and development strategy. The CODESFI will ensure that this strategy is implemented in 2011.

  • The financial sector restructuring and development strategy will define the role of the government in that sector.

38. The government plans to pursue its efforts to monitor the restructuring of banks in distress, without injecting further public resources in banks that are majority-owned by the state (BFA, Versus).

Measures for Financial System Reform in 2010

  • Continued implementation of the BNI action plan based on the recommendations of the Banking Commission and those of the financial and operational audit.

  • Limiting the implicit government subsidy related to the cash transfers (nivellements décadaires) to the CNCE to CFAF 5 billion in 2010, in light of its conversion to bank status,.

  • Establishment of the CNCE audit and credit committees by the Board of Directors.

  • Continuation of the reforms at the public banks to improve compliance with the prudential ratios.

  • Continuation of the improvement in the governance and quality of the portfolios of the microfinance institutions.

  • Assessment of the financial position of Versus Bank and of the BFA by the WAMU Banking Commission in February 2010.

  • Formulation, based on the recommendations of the Banking Commission, of action plans for Versus Bank and the BFA, the implementation of which will begin before-2010.

  • Purchase by the state of the bad loan portfolio of the BFA, valued at CFAF 36.8 billion, for CFAF 31.3 billion, after a discount of CFAF 5.5 billion. Establishment of a Collections Committee using public authority to collect the claims over a 12-year period from 2010, with the objective of collecting CFAF 2.6 billion a year, so that the state can meet its annual payments obligation of the same amount.

  • Purchase by the state of the bad loan portfolio of Versus Bank, valued at CFAF 20.7 billion, for CFAF 15.1 billion, after a discount of CFAF 5.6 billion. Establishment of a Collections Committee using public authority to collect the claims over a 10-year period from 2009, with the objective of collecting CFAF 1.5 billion a year, so that the state can meet its annual payment obligation of the same amount.

  • Monitoring by the government of the increase in the corporate capital of the Housing Bank of Côte d’Ivoire (BHCI) to CFAF 12.1 billion by end-2010, so as to consolidate its financial position and put the bank in full compliance with the prudential standards.

  • The government will undertake in 2010 a study on housing financing policy, with a view to defining a strategy for the financing of low-cost housing and specific measures, where applicable, to be taken to benefit the BHCI.

39. The government will continue to rely on the Banking Commission and support the institutional reform of the WAMU. The ordinance on banking regulation was adopted on December 1, 2009. Following the adoption of the new WAMU Treaty and the new Convention governing the Banking Commission, the instruments for ratification of these two documents were forwarded on March 2, 2010 to the government of Senegal, which is the depositary. Finally, the institutional reform of the WAMU and the BCEAO became effective as of April 1, 2010. Supporting this reform, the government made arrangements for: (i) appointing its representatives within the new Community bodies; and (ii) upholding the implementation of any decisions or recommendations they may eventually make. In addition, the draft ordinance on the regulation of decentralized financial systems will be adopted in 2010.

D. Governance and Other Structural Reforms

40. The government will pursue its efforts to improve governance.

  • The Council of Ministers will adopt the national good governance and anti-corruption plan, and its implementation will commence before end-2010.

  • The government will update the draft law on unlawful enrichment, adopt it, and place it before Parliament by end-2010.

  • As regards the drafting of the Code of Ethics and the Code of Good Conduct, a questionnaire on the promotion of the values of ethics and good conduct was sent to the various public, private, and civil society agencies. The adoption process will carried out along the following plan: (i) the questionnaire data will be processed by a consultant who will prepare a draft charter of ethics and a draft code of good conduct; (ii) the drafts will prevalidated; (iii) the draft charter of ethics and the draft code of good conduct for the public administration will be finalized at end-June 2010; and (iv) the code and charter will be adopted by the Council of Ministers no later than end-September 2010.

41. The government will pursue its efforts to improve the business climate. A “Doing Business” task force on improving the business climate was created in February 2010. The government intends to issue decrees creating a Côte d’Ivoire Business Facilitation Center and an Agency for the Management of Commercial Plots, before end-September 2010. Similarly, it intends to complete the implementation of the following actions, with the support of development partners.

Reforms to Improve the Business Climate

  • Adoption of the Ordinance on the enforcement (exéquatur) of decisions of Arbitration Boards to expedite the resolution of business disputes and to help unclog the courts (before end-September 2010).

  • Creation of commercial courts (tribunaux de commerce), before end-2010; and continued training of judiciary staff in commercial matters.

  • Validation of a reform plan to enhance the efficiency and fairness of the judicial system, and publication of judicial decisions (September 2010).

  • Adoption by the Council of Ministers of the draft law on competition (Loi sur la concurrence), in particular to combat noncompetitive practices (before end-September 2010).

42. The government intends to finalize in 2010 the reform of the coffee/cocoa sector. This involves adopting, before the 2010/11 crop year, a new strategy defining a new legal and regulatory framework, a new marketing mechanism, and a tax reform which would ensure an improvement of farmers’ incomes, in line with the pro-poor objective of the reform.

Measures in the Coffee/Cocoa Sector in 2010

  • Continuation of the submission to the Council of Ministers within 45 days, and publication, of quarterly analytical reports on physical and financial flows.

  • Transformation, for the 2010/2011 crop year, of all the levies on the coffee/cocoa sector into an ad valorem tax not exceeding 22 percent. To that end, two studies on the operating costs of the sector agencies and the pass-through of international prices to producers following the change in the taxation of the sector were launched in April 2010, for completion in June 2010. The recommendations of these studies will contribute to the definition of the strategy on the introduction of the new taxation.

  • Completion of the audit on the survey of producers, for the revitalization of the sectoral bodies at end-July 2010, and implementation of the recommendations of the audit.

  • Adoption by the Council of Ministers and publication of the coffee/cocoa sector strategy, by end- September 2010.

43. Efforts to improve transparency and efficiency in the energy sector should be pursued during 2010.

  • The independent assessment reports on the sector, prepared in accordance with the EITI criteria for 2006 and 2007, were adopted by the EITI National Board and submitted to the international agencies. On the basis of these reports, Côte d’Ivoire hopes to be eligible for the status of a country compliant with the EITI criteria, during the second half of 2010.

  • As regards the reform of the upstream oil subsector, the draft hydrocarbons code, a production sharing contract, and association agreements, will be finalized at end- June 2010.

  • With respect to the downstream oil subsector, the automatic pricing mechanism for petroleum products at the pump was strictly applied until April 2010. However, faced with a transporters’ strike, the government had to reduce the single specific tax (TSU) and other levies on diesel and super in April/May/June by, respectively, CFAF 30/59/59 and 0/22/16 a liter. In consultation with all parties concerned, the government intends to resume application of the automatic monthly pricing mechanism for diesel and super in early July.

  • In addition, the government intends to adopt before end-2010 a new pricing formula. The revision of the price structure, in particular the level of taxation, will involve all actors in the distribution chain of petroleum products. It will reflect the international refining margin, with a view to avoiding operating losses for the SIR related to a possible reduction of refining margins.

44. The government will pursue its efforts to restructure the electricity sector. The measures necessary for clarifying the legal and regulatory framework of the SOGEPE as the custodian of state assets in this sector were adopted in March 2010. On this basis, the physical assets of the former national electricity company (Energie Electrique de Côte d’Ivoire, EECI) were transferred to the new electricity sector holding company (SOGEPE). To resolve the electricity supply shortage, aggravated by a major outage and maintenance operations, the government granted an additional subsidy of CFAF 21.5 billion, bringing the overall amount granted to the sector to CFAF 80.8 billion, including the rental of mobile power stations. Furthermore, as part of the efforts to reduce the subsidy to the electricity sector, consultations have begun with all stakeholders to identify how they can contribute to reducing the sector’s deficit. This will combine a renegotiation of the purchase price of gas with the three principal gas producers, a review of the tariff structure, the creation of investment funds, and further tariff increases. The negotiations are expected to lead to the restoration of a sustainable financial balance of the sector in the medium term.

Measures in the Energy Sector

  • Continued submission to the Council of Ministers, within 45 days of the end of each quarter, of data on the physical and financial flows in the energy sector.

  • An increase in electricity rates by 10 percent, on average, at the beginning of October 2010.

  • Finalization and adoption in Council of Ministers at end-July 2010, of the draft hydrocarbons code, the production sharing contract, and the association agreement.

  • Redefinition of roles and responsibilities in the oil and gas sector through, in particular, the approval of a performance contract for PETROCI, at end-June 2010.

45. The government intends to define a new overall strategy for public enterprises. The objective of this reform, which will be adopted in Council of Ministers during the third quarter of 2010, is to improve the performance of the portfolio as well as reduce subsidies and the number of enterprises in difficulty. To that end, the government plans to: (i) strengthen the control of public enterprises, assistance to enterprises in difficulty, and the budgetary process; (ii) improve the transmission of financial statements, and the government’s enterprise information and management system; and (iii) draw up performance contracts. The implementation of this new strategy should help increase the contributions of public enterprises to the government budget.

46. The government will take steps to contribute to the financial sustainability of the national water supply company (SODECI) and assure that it is able to supply water to the population. In February 2010, the government paid SODECI CFAF 10 billion, covering matured securities valued at CFAF 7.5 billion and outstanding bills owed to it, of CFAF 2.5 billion. Regarding its bills for the State’s water consumption, the government intends to make monthly payments as of April 2010. In addition, the government plans to apply to customers the water rates set in 2008, starting from April 2011. The delay in implementing this new tariff is related to the socioeconomic crisis facing the country. However, since 2008, the remuneration of the concessionaire was adjusted on the basis of the new tariff of 2008.

47. The situation of the SIR requires that measures be taken to ensure its financial viability over time. To improve the financial position of the Ivorian Refinery Company (SIR), the government has contracted from the banking sector a loan of CFAF 35 billion to pay off its commercial debt to the company as at December 31, 2008. For this purpose, the sum of CFAF 40 a liter, deducted from the TSU on petroleum product prices and initially earmarked to repay this commercial debt to SIR, has been reallocated: (i) to SIR during the first quarter; and (ii) as of April, half of it (CFAF 20), to repaying the loan from the banking sector, with the remaining half serving as a subsidy to improve the refining margin of the SIR.

E. Regional Integration and Trade Policies

48. The government is determined to pursue the regional integration process within the WAEMU and the ECOWAS. It will continue to support the establishment of a common market, by: (i) identifying the products to be included in the fifth band of the CET established by the ECOWAS; (ii) supporting the implementation of a common trade policy toward third countries; and (iii) supporting the free flow of persons, goods, services, and capital. In addition, the government will support the conclusion of an interim regional Economic Partnership Agreement (EPA), to replace the interim EPA for Côte d’Ivoire. The negotiations on the financing of the EPA Development Program (EPADP) by the European Union will be continued in 2010, with a view to the including various financing commitments in the wording of the agreement. Similarly, Côte d’Ivoire will continue implementing the Program of Support for Trade and Regional Integration (PACIR). Given the delay in signing the regional EPA, the government will again negotiate with the European Union, the postponement of the dismantling of the tariff structure.

VI. Statistics and Capacity Building

49. The government undertakes to continue its efforts to improve the statistics system, with a view to regularly produce quality economic and financial data. To that end, the 2009–13 Master Plan for Statistics will be adopted by end-September 2010, and a resource mobilization strategy will be defined to facilitate its implementation. This involves, among other things: (i) support for national and sectoral surveys; (ii) workshops on the establishment of the database for the Integrated Information Management System (SIGI); (iii) revising the harmonized consumer price index; (iv) compilation of the yearbook of ministerial statistical services; and (v) the survey on the informal sector in Abidjan.

50. The government will strengthen its administrative capacity, in particular in the areas affected by the crisis. The government will continue to receive assistance from the IMF and other development partners to: (i) strengthen the tax and customs administrations; (ii) review tax exemptions; (iii) help implement the action plan for the reform of public finances; (iv) improve national accounts by defining a new base year, with a view to constructing a social accounting matrix; and (v) formulating the financial sector development strategy. In addition, to strengthen public debt management, the government plans to undertake a capacity building program for the purpose of supporting the formulation and implementation of a medium-term debt strategy. For this purpose, the government will request technical assistance from the IMF.

VII. Program Monitoring

51. The program will continue to be the subject of half-yearly reviews by the IMF’s Executive Board, on the basis of quantitative indicators and structural benchmarks. These indicators, and the prior actions, are defined in the Technical Memorandum of Understanding (TMU) of March 13, 2009, and in the Supplement to the TMU of November 2, 2009, and in the attached Supplement. The third review of the program will be based on the performance criteria at end-June 2010, and is scheduled to be completed by November 15, 2010. The fourth review will be based on the performance criteria at end-2010, and is scheduled to be completed by March 15, 2011.

52. The government has established national structures for monitoring the program. To ensure effective implementation of the three-year program, the government has created a number of interministerial committees. The Interministerial Committee Monitoring the Economic and Financial Program, under the authority of the Prime Minister which was established in March 2009, is operational and monitoring implementation of the 2009–11 program. It is supported by the Strategic Unit and the Technical Secretariat for Monitoring the Economic and Financial Program in its day-to-day monitoring. The Committee will coordinate closely with the Treasury Committee, the work of specific interministerial committees, including the Coffee/Cocoa Sector Management Committee, the Interministerial Commodities Committee, and the PRSP Committee. In addition, to ensure traceability in the implementation of large public works, the Interministerial Major Works Monitoring Committee has been established. Similarly, a set of consistent tools have been adopted to ensure expenditure execution follows with the existing framework. This Memorandum on Economic and Financial Policies will be published within the government, government departments and agencies, and the Ivoirian society.

53. For the duration of the program, the government undertakes, for any new domestic borrowing, to issue government securities by auction through the BCEAO or through any other form of competitive tendering on the domestic or WAEMU financial market, and to consult with IMF staff. It also undertakes not to introduce or intensify restrictions on payments and transfers for current international transactions, introduce multiple currency practices, conclude any bilateral payments agreements that are inconsistent with Article VIII of the Fund’s Articles of Agreement, or impose or intensify any import restrictions for balance of payments purposes. Moreover, the authorities, in consultation with Fund staff, undertake to adopt any new financial or structural measures that may be necessary for the success of the program.

Table 1.

Côte d’Ivoire: Performance Criteria (PC) and Indicative Targets (IT), ECF 2009

(Billions of CFA Francs)1/

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Cumulative change from beginning of the year, unless otherwise indicated. See Technical Memorandum of Understanding (TMU) for detailed definitions, including of adjusters.

This floor will be adjusted: i/ downward/upward for higher/lower than programmed external project loans; ii/ downward for higher than programmed program loans; iii/ downward for lower than programmed program grants - up to a ceiling of CFAF 40 billion; and iv/ upward for a shortfall in program loans in excess of CFAF 40 billion.

Performance criteria for 2009 (numbers for 2008 are reported for comparison only) on the issuance by the central government of all debt instruments in CFAF to domestic and WAEMU financial market creditors and borrowing from the BCEAO. The ceiling excludes domestic arrears and their securitization, rescheduling agreement of central government debt and new borrowing for projects from the regional development banks (BOAD, BIDC). If program grants and program loans are lower than programmed, the ceiling will be adjusted upwards in the amount of the shortfall, up to a maximum of CFAF 40 billion. The ceiling includes a margin of CFAF 25 billion over the net cumulative flows projected for each period (see TMU).

Continuous performance criterion on all non-concessional borrowing as defined in the TMU. This ceiling does not apply to normal import-related commercial credits that have a maturity of up to one year; rescheduling agreements; loans from regional development banks BOAD and BIDC of up to CFAF 25 and 20 billion respectively; drawings on the Fund; public offerings in CFAF of government debt initially issued to resident of the WAEMU (see TMU).

Continuous performance criterion (see TMU).

Includes pro-poor expenditure, as defined in the classification of the Integrated Financial Management System (SIGFIP); see TMU Table 1.

Net banking system claims on the government represent the difference between government debt and its claims on the central bank and commercial banks, as defined in the TMU.

Table 2.

Côte d’Ivoire: ECF--Prior Actions and Structural Indicators, 2009

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Table 3.

Côte d’Ivoire: Performance Criteria and Indicative Targets, ECF 2010

(Billions of CFA Francs)1/

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Cumulative change from beginning of the year, unless otherwise indicated. See Technical Memorandum of Understanding (TMU) for detailed definitions, including of adjusters.

This floor will be adjusted: i/ downward/upward for higher/lower than programmed external project loans; ii/ downward for higher than programmed program loans; iii/ downward for lower than programmed program grants - up to a ceiling of CFAF 40 billion; and iv/ upward for a shortfall in program loans in excess of CFAF 40 billion.

Performance criteria for 2009 (numbers for 2008 are reported for comparison only) on the issuance by the central government of all debt instruments in CFAF to domestic and WAEMU financial market creditors and borrowing from the BCEAO. The ceiling excludes domestic arrears and their securitization, rescheduling agreement of central government debt and new borrowing for projects from the regional development banks (BOAD, BIDC). If program grants and program loans are lower than programmed, the ceiling will be adjusted upwards in the amount of the shortfall, up to a maximum of CFAF 40 billion. The ceiling includes a margin of CFAF 25 billion over the net cumulative flows projected for each period (see TMU).

Continuous performance criterion on all non-concessional borrowing as defined in the TMU. This ceiling does not apply to normal import-related commercial credits that have a maturity of up to one year; rescheduling agreements; loans from regional development banks BOAD and BIDC of up to CFAF 25 and 20 billion respectively; drawings on the Fund; public offerings in CFAF of government debt initially issued to resident of the WAEMU (see TMU).

Continuous performance criterion (see TMU).

Includes pro-poor expenditure, as defined in the classification of the Integrated Financial Management System (SIGFIP); see TMU Table 1.

Net banking system claims on the government represent the difference between government debt and its claims on the central bank and commercial banks, as defined in the TMU.

Table 4.

Côte d’Ivoire: Prior Actions and Significant Structural Reforms and Benchmarks (SBM) for 2010

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Attachment II—Côte d’Ivoire: Supplement to the Technical Memorandum of Understanding

June 24, 2010

Note: this document is a supplement to the Technical Memorandum of Understanding (TMU) of March 2009 and its supplement of November 2009. These TMUs remains fully valid except for the points as amended below. Changes with respect to the original text appear in italics.

Paragraph 2:

For program-monitoring purposes, the performance criteria are set for June 30, 2010 and December 31, 2010; these are indicative targets for March 31, 2010, and September 30, 2010.

Paragraph 5:

… (see table 2)…

Paragraph 6:

The petroleum/gas revenues estimate for 2010 is based on: an average crude oil price of US$77.5 per barrel; a volume of 17.9 million barrels; and an average exchange rate of CFAF 524.4 = US$1.

Paragraph 12:

Within the framework of the program, the government, in 2010, will (i) undertake a cash reduction of CFAF 45 billion in the stock of balances outstanding as defined in paragraph 11 (quantitative indicator); …

Paragraph 16, footnote 1:

See “Guidelines on Performance Criteria with Respect to External Debt in Fund Arrangements,” Executive Board Decision No. 6230-(79/140), amended by Executive Board Decision No. 14416-(09/91) of August 31, 2009.

Paragraph 19: (Domestic and WAEMU market borrowing) For any new borrowing over and above a cumulative amount of CFAF 30 billion over the year 2010,…

Table 1.

Côte d’Ivoire: Crisis Exit Programs 2008–10

(Billions of CFAF, unless otherwise indicated)

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Sources: Ivorian authorities; and IMF staff estimates and projections.
Table 2.

Côte d’Ivoire: Pro-Poor Spending (incl. Social Spending), 2008–10

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Source: Ivorian authorities.
1

Good progress has been made in preparing the remaining bilateral agreements with the United Kingdom and Brazil.

2

See Box 2 of IMF Country Report No. 09/326.

3

Safeguards assessment is included in IMF Country Report No. 10/63.

Other IMF Content

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Cover IMF Staff Country Reports
Côte d'Ivoire: Second Review Under the Three-Year Arrangement Under the Extended Credit Facility, Request for Waivers of Nonobservance of Performance Criteria, and Financing Assurances Review: Staff Report; Staff Statement; Press Release on the Executive Board Discussion; and Statement by the Executive Director for Côte d'Ivoire
Author:
International Monetary Fund
Volume/Issue:
Volume 2010: Issue 228
Publisher:
International Monetary Fund
ISBN:
9781455205844
ISSN:
1934-7685
Pages:
86
DOI:
https://doi.org/10.5089/9781455205844.002
  • Figure 1.
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    Figure 1.

    Côte d’Ivoire: Real GDP Growth

  • Figure 2.
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    Figure 2.

    Côte d’Ivoire: Selected Macroeconomic Indicators, 2007–11

    (Percent of GDP, unless otherwise indicated)

  • Figure 3.
    View in gallery
    Figure 3.

    Côte d’Ivoire: WAEMU, and SSA - Macroeconomic Development and Outlook, 2007–11

    (Percent of GDP, unless otherwise indicated)

  • Figure 4.
    View in gallery
    Figure 4.

    Côte d’Ivoire: Diesel Prices in West African Countries, January 2008-May 2010

    (CFA francs per liter)

Figure 1.

Côte d’Ivoire: Real GDP Growth
Figure 2.

Côte d’Ivoire: Selected Macroeconomic Indicators, 2007–11

(Percent of GDP, unless otherwise indicated)
Figure 3.

Côte d’Ivoire: WAEMU, and SSA - Macroeconomic Development and Outlook, 2007–11

(Percent of GDP, unless otherwise indicated)
Figure 4.

Côte d’Ivoire: Diesel Prices in West African Countries, January 2008-May 2010

(CFA francs per liter)