Togo
Enhanced Heavily Indebted Poor Countries (HIPC) Initiative Completion Point Document and Multilateral Debt Relief Initiative (MDRI)
Author: International Monetary Fund
Publication Date:
26 Jan 2011
eISBN:
9781455213863
ISBN:
9781455213863
Language:
English
Keywords:
ISCR; CR; government; sensitivity analysis; Togolese authorities; balance of payments; initiative completion point document; present value; government website; procurement authority; MDRI debt relief
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This paper discusses Togo’s progress under the Enhanced Heavily Indebted Poor Countries (HIPC) Initiative. In November 2008, the Boards of Executive Directors of the IDA and the IMF agreed that Togo had met the requirements for reaching the decision point under the Enhanced HIPC Initiative. This paper assesses Togo’s performance in reaching the completion point under the Enhanced HIPC Initiative and provides an updated debt relief analysis. In the opinion of the IDA and IMF staff, satisfactory progress has been made in implementing the reforms specified for reaching the completion point.

Abstract

This paper discusses Togo’s progress under the Enhanced Heavily Indebted Poor Countries (HIPC) Initiative. In November 2008, the Boards of Executive Directors of the IDA and the IMF agreed that Togo had met the requirements for reaching the decision point under the Enhanced HIPC Initiative. This paper assesses Togo’s performance in reaching the completion point under the Enhanced HIPC Initiative and provides an updated debt relief analysis. In the opinion of the IDA and IMF staff, satisfactory progress has been made in implementing the reforms specified for reaching the completion point.

I. Introduction

1. This paper discusses Togo’s progress under the Enhanced Heavily Indebted Poor Countries (HIPC) Initiative. It recommends that the Executive Directors of the International Development Association (IDA) and the International Monetary Fund (IMF) approve the completion point for Togo under the Enhanced HIPC Initiative. In the view of the staffs of IDA and IMF, Togo has made satisfactory progress in achieving all completion point triggers. It has fully implemented the triggers on the preparation and implementation of a Poverty Reduction Strategy (PRS), the maintenance of macroeconomic stability, public financial management, governance, debt management and social sectors.

2. In November 2008, the Boards of Executive Directors of IDA and the IMF agreed that Togo had met the requirements for reaching the decision point under the Enhanced HIPC Initiative. The amount of debt relief committed at the decision point was $270 million in PV terms, calculated to reduce the PV of debt-to-revenue ratio to 250 percent on the basis of end-December 2007 data. This relief represents an overall reduction of 19 percent in the PV of all public and publicly guaranteed external debt as of end-December 2007, after application of traditional debt relief mechanisms. At the same time, the Boards of IDA and the IMF agreed to provide Togo with relief through arrears clearance and interim debt relief, respectively, until Togo reached the completion point. Relief through concessional arrears clearance and loan rescheduling was also granted by the African Development Fund (AfDF), the European Investment Bank (EIB), the Islamic Development Bank (IsDB) and the OPEC Fund for International Development (OFID). Paris Club creditors provided debt relief through flow rescheduling on Cologne terms. The total debt relief in PV terms provided through arrears clearance operations and debt service reduction in the period before the completion point amounts to $239 million. Executive Directors had determined that the floating completion point would be reached when the triggers in Box 2 of the Decision Point Document1 have been met.

3. This paper assesses Togo’s performance in reaching the completion point under the Enhanced HIPC initiative and provides an updated debt relief analysis. The paper is organized as follows. Section II assesses Togo’s performance in meeting the triggers for reaching the completion point under the Enhanced HIPC Initiative. Section III provides an updated debt relief analysis (DRA), including the status of creditor participation, and delivery of debt relief under the Enhanced HIPC and MDRI Initiatives. Section IV summarizes the main conclusions, and Section V presents issues for discussion by the Boards of IDA and the IMF. Appendix I offers an update on debt management in Togo and a LIC debt sustainability analysis (DSA) is presented in Appendix II.

II. Assessment of Requirements for Meeting the Completion Point

4. In the view of the staffs of IDA and the IMF, Togo has met the triggers for reaching the completion point. The description of the triggers and their implementation status are presented in Table 1 of this document. At the decision point, the Boards of IDA and the IMF agreed that Togo would reach the floating completion point on the basis of the following criteria:

  1. preparation of a full Poverty Reduction Strategy Paper (PRSP) and its satisfactory implementation for at least one year, as evidenced by a PRSP Annual Progress Report submitted by the government to IDA and the IMF;

  2. maintenance of macroeconomic stability as evidenced by satisfactory implementation of the ECF arrangement;

  3. adopt a mechanism to track public expenditures for poverty reduction on the basis of a functional expenditure classification and publish at least two quarterly reports on these expenditures covering a period of at least two consecutive quarters preceding the completion point;

  4. appoint the judges for the Court of Accounts and give them work space, equipment, and materials; and submit the draft of the Budget Execution Law and draft General Treasury Balance (Balance Générale du Trésor) to the Court of Accounts and Parliament for at least one fiscal year preceding the completion point;

  5. adopt a decree creating the Procurement Regulatory Authority in conformity with the WAEMU Procurement Directives; nominate its managerial staff, and give them an adequate budget and monthly publication in a public procurement gazette or on a government website of a summary of all signed contracts, including sole source contracts and public concessions, for at least six months immediately preceding the completion point;

  6. implement regular public reporting of payments to, and revenues received by, the government for the phosphates sector in line with this aspect of the EITI criteria, with a recent annual report during at least the year immediately preceding the year in which the completion point is reached;

  7. consolidate external and domestic debt data under a single unit charged with all public debt management tasks;

  8. publish an annual report on a government website giving accurate and complete data on external and domestic public debt, including information on debt stocks, actual debt service, and new loans within six months after the end of the year, for at least one year immediately preceding the completion point;

  9. adopt the medium-term National Health Development Plan and the medium-term Health Sector Human Resources Development and Management Plan after costing of the plans has been completed;

  10. start implementation of the national education sector plan by training at least 500 new teachers and conducting remedial training of at least 4,000 existing teachers.

Table 1.

Togo: Triggers for the Floating HIPC Completion Point1

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Information as of November 2, 2010. The first two triggers (PRSP implementation and satisfactory macroeconomic performance) are requirements for reaching the completion point under the IMF PRGF-HIPC Trust Instrument.

West African Economic and Monetary Union.

Extractive Industries Transparency Initiative.

A. PRSP and Poverty Monitoring

5. In July 2009, Togo adopted its first full PRSP, covering the period 2009–11. The PRSP was prepared through an extensive participatory process involving a broad range of stakeholders including civil society, the private sector, development partners, and communities representing the country’s different regions. An interim poverty reduction strategy document was adopted by the government in March 2008 and served as a basis for re-engagement with the international community. The full PRSP approved by the Council of Ministers on July 6, 2009 is a comprehensive strategy covering most of the challenges and areas of action to foster growth and reduce poverty. It is based on four strategic pillars: (i) strengthening of governance; (ii) consolidation of the bases for strong and sustained growth; (iii) development of human capital; and (iv) reduction of regional imbalances and promotion of community development. In addition to these pillars, the PRSP also integrates cross-cutting themes related to the environment, HIV/AIDS, gender and human rights.

6. The Boards of the IMF and IDA concluded that the PRSP provided a credible framework for poverty reduction. The Boards’ discussions addressed the PRSP in November and December 2009, respectively. As noted in the corresponding JSAN, the PRSP has many strengths, most notably its strong ownership deriving from a broad participatory process, the use of a results-based framework, and the clear and consistent link provided between the reform agenda and the medium-term budget at the aggregate level. The JSAN also pointed out a number of areas that could benefit from further attention, including the need for a detailed implementation plan for some critical aspects of the growth and poverty reduction agenda, and the risks facing the implementation of the strategy (including capacity constraints, political tensions and adverse economic and natural disaster shocks).

7. The government is making progress in operationalizing the institutional framework for participatory monitoring and evaluation of the PRS implementation. There still is an urgent need to enhance the availability of reliable up-to-date statistics and improve the available information systems, as planned under the PRSP and other strategy documents. However, the lack of financial resources and administrative, as well as technical, capacity constraints have caused delays in implementing plans to enhance the statistical evidence base crucial for monitoring and evaluation. The government also recognizes the need to advance in the implementation of monitoring and evaluation units in all line ministries and to create sectoral committees linked to a central coordinating structure for effective tracking of PRSP implementation.

8. The staffs consider that implementation of the PRSP was satisfactory in 2009 and 2010. The first Annual Progress Report (APR) on implementation of the PRS was prepared by the government through a participatory process. The APR and its corresponding JSAN will be considered by the Boards of IDA and the IMF jointly with this document. The APR highlights progress in many areas, including political and economic governance, as well as public financial management (see section II.C below). In particular, during 2009 and 2010, a Truth, Justice and Reconciliation Commission was established, and democratic institutions such as the Constitutional Court were strengthened as a prelude to the presidential elections held in March 2010. The government also took action to promote agricultural development, to enhance management of state-owned enterprises (SOEs) in natural resource extraction sectors and to restructure the banking sector. The staffs of IDA and the IMF have reviewed progress on each of the PRSP pillars and concluded that PRSP implementation and monitoring have been satisfactory over the past year. Poverty reducing spending has grown significantly under the interim and complete PRSPs (Figure 1). However, many challenges remain, particularly related to the impact of the changing international environment, difficulty in mobilizing external resources to finance key activities, and inadequate administrative capacity. Policies in specific areas related to the HIPC completion point triggers are reviewed in the remainder of Section II.

Figure 1.
Figure 1.

Togo: Poverty Reducing Public Expenditures

Citation: IMF Staff Country Reports 2011, 028; 10.5089/9781455213863.002.A001

Source: Togolese authorities and staff estimates and projections.Note: Poverty reducing expenditures are defined as domestically and foreign financed current and investment spending in health, education and other social sectors.

B. Macroeconomic Stability

9. Macroeconomic stability has been maintained since the decision point in November 2008, and the outlook for 2011 and 2012 is favorable. The government maintained a prudent fiscal stance—anchored by targets on the domestic primary balance—despite an adverse external environment and sensitive political environment. The solid implementation of the ECF-supported program contributed to improving confidence in the government’s fiscal management and stabilizing the political and economic situation, coupled with an improving macroeconomic environment. Efforts to rehabilitate the banking sector have improved confidence in the financial system and have led to growth in deposits and credit to the private sector since the second quarter of 2009. After a relatively short-lived surge in prices linked to global trends in food and oil prices, consumer price index inflation has dropped sharply and stabilized around 2 percent.

10. The acceleration of growth initially envisaged in the PRSP did not fully materialize due largely to a number of exogenous shocks.2 Economic growth in 2008 was depressed by flood damage and surges in international oil and food prices. Growth is estimated to have recovered somewhat in subsequent years to exceed 3 percent in 2009 and 2010 (Table 2) and is projected to increase to 3.7 percent in 2011, but has remained below its estimated potential of 4 percent, which it is now expected to be reached only in 2012. Over the period 2009–12, real GDP per capita growth is projected to be 0.8 percent on average. The main determinants of this modest performance were the adverse effects of the international financial crisis and ensuing the global recession, which has delayed recovery following Togo’s protracted domestic crisis. The main drivers of growth in this period were the agricultural sector (especially food production), the secondary sector (in particular, clinker and cement) and construction and public works linked to increases in public investment.

Table 2.

Togo: Selected Economic and Financial Indicators 2008–12

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Sources: Togolese authorities and IMF staff estimates and projections.

The macroeconomic framework assumes that Togo reaches the HIPC completion point in 2010.

Change as a percentage of broad money at the beginning of the period. Impact of SDR allocation in 2009 is included.

Revenue minus expenditure, excluding grants, interest, and foreign-financed expenditure.

Includes state owned enterprises debt. Debt service after HIPC, MDRI and beyond HIPC

11. Despite difficult economic conditions, Togo’s fiscal performance was satisfactory. The fiscal stance in 2009 and 2010 provided some stimulus to the economy; which was justified for social and countercyclical reasons, as well as to address post-domestic crisis needs, particularly for public infrastructure. Over the period 2009–10, implementation of the fiscal program remained broadly on target, despite some modest slippages in budget execution that led to missing the fiscal balance and domestic financing performance criteria for end-2009 by 0.2 percent and 0.7 percent of GDP, respectively. The 2010 budget framework was tightened somewhat compared to previous plans to offset partially the impact of these slippages.

12. Togo’s macroeconomic framework for 2011 remains appropriate. In particular, the budget framework has an ambitious, pro-growth orientation, while remaining feasible and consistent with debt sustainability. Domestically financed investment spending is projected to rise to 5.0 percent of GDP, from 3.3 percent in 2010, as the authorities aim to reduce the deficit in basic infrastructure that developed during the domestic crisis. A strong improvement in revenue mobilization and the sale of a third mobile telephone license would finance this increase, whilst current spending will remain stable as a proportion of GDP. As a result, fiscal balances would remain consistent with fiscal sustainability and an end to the countercyclical fiscal stimulus policies. The financing situation is manageable, although financing equal to 0.3 percent of GDP still needs to be identified. The authorities are prepared to cut spending if adequate financing is not forthcoming.

13. The global recession has also increased balance of payments pressures, with current account deficits averaging about 7½ percent of GDP in 2009 and 2010 and projected to remain high through 2012. Adverse external conditions were particularly marked by falls in remittances inflows and foreign direct investment during these years. The global slowdown also had a clear if moderate impact on export growth, whilst import growth was sustained in part because of countercyclical fiscal policy.

14. Macro-critical structural reforms to strengthen fiscal governance and promote conditions for growth have also advanced in the program period (Box 1). Togo has made progress in addressing a number of constraints to growth from the legacy of 15 years of domestic social and political crisis. Important fiscal governance reforms including the reduction in the number of Treasury accounts to enhance monitoring of Treasury operations and the simplification of the expenditure chain by removing redundant control points were successfully completed by September 2010. Significant progress was also achieved in domestic arrears clearance to private suppliers. Reforms have also advanced in bank restructuring and in the governance and management of key state-owned enterprises (especially cotton and phosphate). While fiscal risks from these sectors have fallen, the impact of reforms on growth potential has not yet been fully realized.

15. The staffs of IDA and the IMF consider that Togo has fully implemented the trigger on the maintenance of macroeconomic stability as evidenced by broadly satisfactory implementation of the ECF-supported program. Overall macroeconomic performance has been satisfactory in 2009 and 2010, despite output growth still not reaching its estimated potential level. All the quantitative targets through June 2010 have been achieved, and good progress has been made with the structural reforms launched under the ECF-supported program. The policy framework for 2011 is considered to be appropriate.

C. Public Financial Management

16. Given the government’s continued implementation of the public financial management reform agenda, the authorities have made notable progress in improving the efficiency of budget planning, preparation, and execution, as well as in procurement (Box 1). The completion point triggers required the Togolese authorities to:

  • adopt a mechanism to track public expenditures for poverty reduction on the basis of a functional expenditure classification and publish at least two quarterly reports on these expenditures covering a period of at least two consecutive quarters preceding the completion point;

  • appoint the judges for the Court of Accounts3 (Cour des Comptes) and provide them with work space, equipment, and materials; and submit the draft Budget Execution law and draft General Treasury Balance to the Court of Accounts and Parliament for at least one fiscal year preceding the completion point; and

  • adopt a decree creating the Procurement Regulatory Authority in conformity with the WAEMU Procurement Directives, nominate its managerial staff, and provide them with an adequate budget; and monthly publication in a public procurement gazette or on a government website of a summary of all signed contracts, including sole source contracts and public concessions, for at least six months immediately preceding the completion point.

17. A mechanism to track public expenditures for poverty reduction and publication, and the reporting of those expenditures have been established, and the Court of Accounts started operations. Monthly tables of fiscal operations (Tableau de Bord) have been regularly elaborated since January 2009. The table of financial operations of the State (TOFE) and budget execution reports are published on the website of the Permanent Secretariat for the Monitoring of Reforms (SP-PRPF, www.togoreforme.com). Staffs of the budget office and sectoral ministries have been trained to track expenditures linked to poverty reduction, based on the functional classification and have been adequately performing these tasks, despite the difficulties posed by capacity constraints. The Court of Accounts has been operational since the last quarter of 2009. The judges were nominated in July 2009 and took office in September 2009. The Court of Accounts has received space, equipment, and materials. The 2010 budget as well as the 2011 draft budget allocate resources to the Court of Accounts. The treasury accounts and drafts of the Budget Execution Laws (Loi de Réglement) for 2007 and 2008 have been transmitted to the Court of Accounts for review and to Parliament for information. The training to the judges expected in 2010 has been postponed to 2011 due to lack of financing.

Recent Public Financial Management Reforms

Considerable progress has been achieved in key areas of Public Financial Management (PFM) in recent years. At the request of the authorities, the World Bank undertook three diagnostic studies—two Public Expenditure Management and Financial Accountability Reviews (PEMFAR) in 2006 and 2009 and the Public Expenditure and Financial Accountability (PEFA) assessment in 2008—that mapped strengths and weaknesses of Togo’s PFM system. The authorities have sought World Bank, IMF, and EU assistance to help design and implement their PFM reform agenda.

The institutional framework for budget preparation was unified and strengthened, including by allotting more time to line ministries to prepare their 2011 budget proposals. Also, in January 2009, Togo adopted a budget nomenclature based on WAEMU recommendations.

Several important measures were taken in the area of budget execution and control. The Integrated Budget Execution and Reporting System (SIGFiP) was introduced in 2009 on a pilot basis at the central level and five regional Treasury offices. The rationalization and simplification of the expenditure chain was initiated with: (i) the removal of the Finance Directorate’s redundant control on commitments, and (ii) the increase of the Financial Control staff from 20 to 54. Expenditure tracking, including priority poverty-reducing spending, has improved (HIPC trigger, Table 1). Procurement authority and procedures were strengthened (HIPC trigger). Moreover, the Court of Accounts (CoA) was established (HIPC trigger) and 27 judges appointed.

Progress was also achieved in the area of Treasury and cash management. The number of bank accounts held by public administration entities was reduced from 966 to 256, between July 2009 and July 2010. For the first time, a monthly treasury plan accompanied the 2010 budget to the National Assembly. After an independent audit of domestic arrears was completed in February 2009, the authorities agreed with private suppliers and adopted a strategy to clear their validated arrears. More than half of the validated claims were cleared as of mid-2010. Debt management has also been strengthened (HIPC triggers).

There are also improvements in the area of public accounting and reporting. Budget execution laws as well as monthly reports on budget execution have been prepared on a regular basis. The 2007 and 2008 budget execution laws have been transmitted to the Court of Accounts for review and to Parliament for information.

The authorities are pursuing these priority reforms to address continuing weaknesses. They developed a Strategy and a 2010–12 Action Plan (AP) for reforms in PFM, following technical assistance (TA) from the IMF Fiscal Affairs Department (FAD) and broad consultation with stakeholders, including development partners. This Strategy is awaiting final approval by the Council of Ministers. The priority actions include: (i) the preparation by all line ministries of sectoral Medium Term Expenditure Frameworks as building blocks of the Medium Term Budget Framework; (i) the further simplification and shortening of the expenditure chain, while strengthening the capacity of entities for internal (e.g., General Inspectorate of Finance) and external control (e.g., CoA); and (iii) the full roll out of the SIGFiP in all its functionalities, including its accounting module, to all ministries, institutions, and regions, so as to improve coordination between line ministries and the Treasury and better track priority spending.

18. The public procurement code in conformity with the WAEMU Procurement Directives was adopted by the National Assembly in November 2009. The Procurement Regulatory Authority and the National Directorate for the Audit of Public Procurement were established in December 2009. The managerial staffs of these structures have been nominated and a functional budget structure allocated. Furthermore, summaries of procurement contracts, including sole source contracts, are published since June 2009 on a monthly basis, on the Chamber of Commerce newsletter and on the SP-PRPF website (www.togoreforme.com). A dedicated journal for procurement is under preparation and a first issue is expected this calendar year. A dedicated website is also being prepared and expected to be operational before end December 2010.

19. The staffs of IDA and the IMF consider that Togo has fully implemented the triggers on public financial management.

D. Governance

20. Since the decision point in November 2008, substantial progress has been achieved in the area of governance, which will lead to greater transparency in the phosphate industry. The completion point trigger required the implementation of regular public reporting of payments to, and revenues received by, the government for the phosphates sector in line with this aspect of the EITI criteria, with a recent annual report during at least the year immediately preceding the year in which the completion point is reached. Final reports on the collection and reconciliation of the sector flows for 2008 and 2009 have been prepared and published on the SP-PRPF website.

21. To enhance sector transparency and governance, Togo made a notable effort to meet various criteria to become an EITI candidate, a status officially granted in October 2010. EITI implementation will involve a range of activities to strengthen resource revenue transparency as documented in the national work plan, which was discussed and agreed by stakeholders. The audit exercise, that commenced with the publication of 2008 and 2009 payments and revenues served as an introduction to the EITI program. Furthermore, an external financial and strategic audit of the sector was concluded in September 2009. Based on this report, the government adopted on March 30, 2010 a strategy for the long-term development of the sector, which could include the participation of a strategic partner in the future.

22. In light of these actions, the staffs consider that the trigger on governance has been fully implemented.

E. Debt Management

23. The first debt management trigger required the government to consolidate external and domestic debt data under a single unit charged with all public debt management tasks.

24. The Public Debt Directorate (PDD) keeps debt records of the entire stock of the public debt, i.e., external debt, Treasury bonds and bills, advances from the central bank and arrears to domestic suppliers. External debt, Treasury bonds and advances from the central bank are maintained in the DMFAS debt management system. The PDD is responsible for making payments on external debt. Domestic securities are paid automatically from the central bank’s accounts (which is common practice in the WAEMU), so the PDD’s responsibility is only to update domestic debt data on the scheduled repayment date. The remainder of domestic debt data is at available at the PDD as separate spreadsheet files. This includes Treasury bills4 and data on domestic arrears to suppliers, social funds and banks. The Treasury is responsible for repaying the domestic arrears, and it informs the PDD monthly of the arrears repaid, after which the PDD updates the spreadsheet file.

25. Although not formally required by the trigger, the PDD maintains data on external loans to SOEs. However, the PDD does not yet have a framework to keep these data comprehensive and up-to-date, and it has needed to contact the creditors to update the outstanding amount. However, it has begun setting up a reporting system to track debt service payments, disbursement, and new borrowing by SOEs.

26. The second trigger required the government to publish an annual report providing accurate and complete data on external and domestic public debt.

27. The PDD has published reports on the total outstanding external and domestic debt as of end-2008, end-2009 and mid-2010.5 The reports record the external debt (outstanding, disbursements, new loans agreements, and actual and projected debt service), domestic securities and advances from the central bank (outstanding and debt service projections), other domestic debt (outstanding and arrears) and long-run projections of key debt ratios. The PDD plans to increase the frequency of this publication to quarterly.

28. The data is generally accurate and complete, although there are some weaknesses. The total external stock of debt at end-2009 published in the March 2010 report is close to the reconciled debt stock used in this document, but there are some notable differences with the debt reconciliation conducted in conjunction with the HIPC initiative in the composition across multilateral, bilateral and commercial creditors. There are also differences with respect to the debt service projections, especially debt service to the Paris Club. One reason is the lack of communication between the departments involved in project execution and the PDD, which leads to an underestimation of disbursements and therefore of the debt outstanding, and the lack of regular debt reconciliation between the PDD and creditors. These weaknesses stem from administrative capacity constraints and the relative newness of the procedures. Staffs expect a continued strengthening of debt data and reporting, particularly in light of the authorities’ demonstrated commitment and ongoing technical assistance.

29. IDA and IMF staffs conclude that both triggers on debt management have been fully implemented.

Togo and the DeMPA

Togo is the first country to take advantage of both a Debt Management Performance Assessment (DeMPA mission in late 2007)1 and a follow up DeMPA (with a mission in July 2010), showing Togo’s commitment to reform and transparency. DeMPAs are conducted by the World Bank and other implementing partners2 to assess current strengths and areas for improvement in debt management operations.

The 2010 assessment underway is measuring progress since the 2008 report. Preliminary observations suggest that debt management has improved in a number of areas, notably in those areas related to the completion point triggers, the high-level legal framework (including the creation of a National Public Debt Committee as required by the WAEMU), a basic debt management strategy, and coordination with fiscal and monetary policy; however, more reforms will be needed to ensure that debt management remains on a sound and sustainable footing going forward.3

This follow-up DeMPA will also establish a new benchmark for monitoring progress going forward, in particular as the country moves beyond the HIPC Initiative completion point.

1The Debt Management Performance Assessment (DeMPA) is a methodology for assessing debt management performance through a set of 15 indicators covering the full range of debt management functions. After the DeMPA was piloted in five countries, Togo was the first country where a full DeMPA was conducted. The government of Togo has released the report for disclosure, and it is available at http://go.worldbank.org/4VX651FHB0.2Centre for Latin American Monetary Studies (CEMLA), Commonwealth Secretariat, United Nations Conference on Trade and Development (UNCTAD)/DMFAS program, Debt Relief International (DRI), Macroeconomic and Financial Management Institute of Eastern and Southern Africa (MEFMI), Pôle-Dette (West and Central African Franc Zone member states), and West African Institute for Financial and Economic Management (WAIFEM).3Appendix I discusses debt management in Togo in more detail.

F. Social Sectors

30. Given the magnitude of the incidence of poverty (62 percent)6, the government implemented a series of policy actions to improve quality in the delivery of health and education services that have led staffs to conclude that social sector triggers have been satisfied. The main objectives were to improve health and education sector programs as well as the development and management of human resources. The completion point triggers required the authorities to: (i) adopt the medium-term National Health Development Plan and the medium-term Health Sector Human Resources Development and Management Plan after costing of the Plans has been completed; and (ii) start implementation of the national education sector plan as evidenced by completing the training of at least 500 new teachers and the remedial training of at least 4,000 existing teachers. Both the National Health Development Plan and the Health Sector Human Resources Development and Management Plan were adopted by the Council of Ministers in July, 2009. Both plans include detailed costing plans. The estimation costs of the National Health Development Plan and Health Sector Human Resources Development and Management Plan are approximately CFAF 317 billion and CFAF 10.2 billion, respectively. In the education sector, training to pre-school and primary school teachers has been provided with the overall objective of improving the quality of education. Initial training of 511 new teachers was completed between July 2009 and March 2010 and remedial training of 4,909 teachers was completed between December 2009 and August 2010. In the context of the Education for All Project 10,800 teachers are expected to receive remedial training.

31. During the last 12 months, there have been major improvements in the education sector. Thanks to the success in implementing the abolition of school fees, enrolment in pre-school and in Grade 1 of primary school has increased by respectively 54 percent and 27 percent between 2008 and 2009. The access rate to Grade 1 jumped from 107 percent in 2007 to 129 percent in 2009. Moreover, most of the new enrollees are from the most disadvantaged groups and thus the reform should contribute significantly to poverty reduction.

32. The national Education Sector Plan (ESP) was adopted in March 2010 and endorsed by development partners and the Education For All-Fast Track Initiative (EFA-FTI). The ESP is a comprehensive sector-wide plan, with a wide range of ambitious targets and policies for all sub-sectors. Its primary objective is to achieve universal quality primary education by 2020, and it proposes a balanced development of the education and training system as a whole, with an emphasis on improving quality and external efficiency of post-basic education in order to contribute more to economic growth.

33. According to the recent PRSP implementation report and WHO figures, the health situation in Togo remains precarious, and the country is far from the achievement of the MDGs. This is mainly explained by the pervasive poverty and the long socio-political crisis that affected the resources allocated to social sectors. However, during the past ten years the country experienced improvements in some key health indicators, such as a decrease in infant mortality rate (from 80 per thousand in 1998 to 74 per thousand in 2008), an increase in vaccines coverage, and an increase in the number of children correctly treated for malaria (more than doubled in ten years).

34. One of the main challenges of the Togolese health system is the lack of adequate human resources and their unequal distribution in the country. It is estimated that less than 8,000 health professionals exist in Togo for a population of 6.5 million habitants, and 80 percent of those professionals are in the main cities. The health sector Human Resources Development and Management Plan was approved in 2009 to respond to this situation. The objective is the recruitment of new professionals and the retention of health professionals, especially those working in rural areas. The first round of recruitment has been completed in 2009, but the second round planned for 2010 has been delayed due to lack of financial resources. Both the National Health Development Plan and the Health Sector Human Resources Development and Management Plan face a lack of financial resources for their implementation.

III. Updated Debt Relief Analysis

A. Revision of Data Reconciliation Exercise as of the Decision Point

35. The stock of HIPC-eligible external debt in PV terms at end-2007 was revised upward slightly from the decision point, following the debt reconciliation exercise. The staffs of IDA and the IMF, together with the Togolese authorities, reviewed the end-2007 stock of debt data that was presented at the decision point document against recent creditor information. As a result, the nominal stock of debt has increased from $2,208.2 million to $2,217.5 million, and the PV of debt after traditional debt relief has been revised upward from $1,410.8 million to $1,422.8 million (Figure A1 and Table A2). The upward revision is attributable to increases in debt of other official, bilateral and commercial creditors, partly offset by decreases in debt of multilateral and Paris Club creditors.

Figure A1.
Figure A1.

Togo: Composition of External Debt by Creditor Group, End-2007 and End-2009

(in percent)

Citation: IMF Staff Country Reports 2011, 028; 10.5089/9781455213863.002.A001

Table A1.

Togo: Discount and Exchange Rate Assumptions as of End- 2007 and End-2009

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Sources: OECD; and IMF, International Financial Statistics.

The discount rates used are the average commercial interest reference rates over the six-month period prior to end-December 2007 and 2009, respectively, i.e., the end of the period for which actual debt and revenue data are available.

The exchange rates are expressed as national currency per U.S. dollar in end-of-period terms.

The IsDB uses the Islamic dinar (ISD), which is based on the same currency basket as the SDR and therefore has the same exchange rate and discount rate.

Table A2.

Togo: Nominal Stock and Present Value of Debt as of End-2007, by Creditor Groups

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Sources: Togolese authorities; and Fund and World Bank staff estimates.

Includes arrears.

Includes a hypothetical stock-of-debt operation on Naples terms at end-2007 and at least comparable treatment by other official bilateral and commercial creditors on eligible debt (pre-cutoff and non-ODA).

Includes debt by the European Investment Bank and loans administered on behalf of the European Union.

The loans that have been cancelled in 2007 have been added back to the PV of debt as of end 2007 in line with the HIPC methodology applied to other countries.

  • Multilateral creditors. The total PV of multilateral debt as of end-2007 has decreased by $2.1 million due mainly to data revisions by the West-African Development Bank (BOAD)7, and a correction in the calculation of arrears to the International Fund for Agricultural Development (IFAD).

  • Paris Club creditors. The PV of debt to Paris Club creditors at end-2007 after traditional debt relief has been revised downward from $922.7 million to $917.1 million. This decrease by $5.6 million is attributable to the revisions of debt data in accordance with updated information received from creditors.8

  • Other official bilateral creditors. The PV of the stock of debt owed to other official bilateral creditors has increased from $66.1 to $81.3 million due mainly to new information on the Kuwaiti loans. Consistent with the decision point data, the debt stock includes cancelled Chinese claims of $20.35 million (equivalent to $18.5 million in PV values after traditional debt relief). This amount was reinstated into the decision point database to account for creditor’s debt relief efforts made before the decision point in the form of outright debt cancellations.9

  • Commercial creditors. The commercial debt stock at end-2007 has slightly increased by $0.6 million, which is attributable to creditors’ statements provided by the authorities allowing the addition of claims in the debt stock.

  • Estimates of fiscal revenue in 2007 remain unchanged at $456 million. So the denominator used to calculate the HIPC assistance remains the same as the decision point’s figure.

  • Exports of goods and services used for the estimate of HIPC assistance were revised downward. The estimates of the 2005–07 average of exports of goods and services used to evaluate HIPC assistance at the decision point have been revised downward from $947 million to $778 million.10 This revision would qualify Togo also under the export window with a common reduction factor of 18 percent; however the amount of HIPC debt relief remains larger under the fiscal window with a common reduction factor of 20 percent (see footnote in the next paragraph).

B. Revision of HIPC Assistance as of the Decision Point and Status of Creditor Participation

36. The required HIPC assistance in end-2007 PV terms has been revised upward from $270 million estimated at the decision point to $282 million. As a result, the common reduction factor has marginally increased from 19 percent to 20 percent (Table A4).111213

Table A3.

Togo: Nominal Stock and Present Value of Debt as of End-2009, by Creditor Groups

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Sources: Togolese authorities; and Fund and World Bank staff estimates.

Includes arrears.

Assumes full delivery of HIPC assistance as of end-December 2010.

IDA, AfDF, EIB, IsDB and OFID have already given full debt relief through arrears clearance and concessional arrears rescheduling before end-2009. For these creditors the end-2009 legal situation reflects the situation after HIPC debt relief.

Includes debt by the European Investment Bank and loans administered on behalf of the European Union.

Fortis Bank, the original creditor, became BNP Paribas Fortis as BNP Paribas bought it in March 2009. FAGACE provided a guarantee to that loan which was called in 2010.

Table A4.

Togo: Revised HIPC Assistance as of the Decision Point under a Proportional Burden-Sharing Approach /1/2

(in millions of U.S. dollars, unless otherwise indicated)

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Sources: Togolese authorities; and IMF and World Bank staff estimates and projections.

The proportional burden sharing approach is described in “HIPC Initiative–Estimated Costs and Burden Sharing Approaches” (IDA/SEC M 97-306, 7/7/97).

Includes a hypothetical stock-of-debt operation on Naples terms (end-December 2007) and comparable treatment by other official bilateral creditors.

Each creditor’s PV reduction in percent of its exposure at the reference date, end-December 2007, calculated as (A-B)/A.

2007 central government revenues excluding grants.

Exports are defined as in IMF, Balance of Payments Manual, 5th edition, 1993.

37. At completion point, Togo has received financing assurances by creditors accounting for 98 percent of the PV of HIPC assistance estimated at the decision point (Table A11). Almost all multilateral creditors (55 percent of total HIPC assistance) have confirmed their participation.14 Moreover, the AfDF, EIB, IDA, IsDB and OFID (88 percent of the multilateral HIPC assistance) have already fully delivered their share of HIPC assistance through arrears clearance and concessional rescheduling of arrears. All Paris Club creditors (36 percent of total HIPC assistance) have confirmed their participation. China delivered its share of relief through a 2007 debt cancellation, as did Kuwait through a 2009 loan rescheduling agreement. The authorities are making good faith efforts toward reaching agreements on provision of debt relief at the completion point with Saudi Arabia and with commercial creditors.

Table A5.

Togo: Present Value of External Debt, 2009–29

(in millions of U.S. dollars, unless otherwise indicated)

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Sources: Togolese authorities and staff estimates and projections.

After full debt relief through arrears clearance and concessional arrears rescheduling by IDA, AfDF, EIB, IsDB and OFID.

Includes the impact of the (hypothetical) rescheduling of (remaining) arrears by OFID, IsDB and FEGECE, as well as the 2007 loans cancellation by China.

Assumes a hypothetical stock of debt operation on Naples terms and comparable treatment from other bilateral and commercial creditors.

Assumes interim relief under the enhanced HIPC Initiative from December 2008 to December 2010 and full delivery of assistance at completion point.

Assumes full delivery of estimated HIPC initiative debt relief at end-2009.

MDRI assistance applies to the World Bank and the AfDB Group and starts after the completion point (December 2010).

Paris Club creditors deliver, under bilateral initiatives, additional debt relief beyond the HIPC Initiative at the completion point. The EIB/EU delivers full cancellation of remaining EU special loans under the Least Developed Countries (LDC) Initiative. Details on the modalities of the delivery are presented in Table A11.