Côte D’Ivoire: First Review Under the Three-Year Arrangement Under the Extended Credit Facility, Request for Modification of Performance Criteria, and Financing Assurances Review

This paper presents key findings of the First Review for Côte d'Ivoire under the Extended Credit Facility. Program performance at end-2011 was broadly satisfactory. All quantitative performance criteria for end-2011 were met, but the implementation of structural reforms has been mixed. Although good progress has been made to strengthen public financial management, improve the business climate, and reform the cocoa-coffee sector, action on other benchmarks for the financial and energy sectors fell short of program targets. Prospects for 2012 are favorable, notwithstanding the weak external environment.

Abstract

This paper presents key findings of the First Review for Côte d'Ivoire under the Extended Credit Facility. Program performance at end-2011 was broadly satisfactory. All quantitative performance criteria for end-2011 were met, but the implementation of structural reforms has been mixed. Although good progress has been made to strengthen public financial management, improve the business climate, and reform the cocoa-coffee sector, action on other benchmarks for the financial and energy sectors fell short of program targets. Prospects for 2012 are favorable, notwithstanding the weak external environment.

I. Relations with the Fund

(As of March 31, 2012)

I. Membership Status: Joined: March 11, 1963.

Article VIII

II. General Resources Account:

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III. SDR Department:

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IV. Outstanding Purchases and Loans:

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V. Latest Financial Arrangements:

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Formerly PRGF.

VI. Projected Payments to Fund (without HIPC Assistance) 2/ (SDR Million; based on existing use of resources and present holdings of SDRs):

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

VII. Projected Payments to Fund: (With Board-approved HIPC Assistance):3/ (SDR Million; based on existing use of resources and present holdings of SDRs):

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VIII. Implementation of HIPC Initiative:

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

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

IX. Implementation of Multilateral Debt Relief Initiative (MDRI): Not Applicable

Decision point - point at which the IMF and the World Bank determine whether a country qualifies for assistance under the HIPC Initiative and decide on the amount of assistance to be committed.

Interim assistance - amount disbursed to a country during the period between decision and completion points, up to 20 percent annually and 60 percent in total of the assistance committed at the decision point (or 25 percent and 75 percent, respectively, in exceptional circumstances).

Completion point - point at which a country receives the remaining balance of its assistance committed at the decision point, together with an additional disbursement of interest income as defined in footnote 2 above. The timing of the completion point is linked to the implementation of pre-agreed key structural reforms (i.e., floating completion point).

X. Safeguards Assessments:

The Central Bank of West African States (BCEAO) is a common central bank of the countries of the West African Economic and Monetary Union (WAEMU), which includes Côte d’Ivoire. The most recent safeguards assessment of the BCEAO was completed on March 1, 2010. The 2010 update assessment found that the BCEAO continues to have controls in place at the operational level. The overall governance framework needed nonetheless to be strengthened by the addition of an audit committee to ensure that the Board of Directors exercises appropriate oversight over the control structure, including the audit mechanisms and financial statements. Such committee was established after the completion of the assessment following the Institutional Reform of the WAEMU and the BCEAO. Efforts to implement fully the International Financial Reporting Standards reporting framework should also be pursued.

XI. Exchange Arrangements:

Côte d’Ivoire is a member of the WAEMU; the exchange system, common to all members of the union, is free of restrictions on payments and transfers for current international transactions. The common currency, the CFA franc, is pegged to the euro at the rate of €1 = CFAF 655.957.

XII. Article IV Consultation:

Côte d’Ivoire is on the standard 24-month Article IV consultation cycle. The Executive Board completed the 2011consultation in November 2011.

XIII. Technical Assistance:

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XIV. Resident Representative:

A Fund resident representative was first posted in Abidjan in 1984. There were interruptions for security reasons in 2005–06 and 2010–11, but a resident representative has been continuously assigned since May 2011.

II. Joint Bank-Fund Work Program, 2011–12

(As of April 2012)

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III. African Development Bank (AfDB) Group Operations and Strategy in Côte d’Ivoire

Bank Group Portfolio:

Since it started operations in Côte d’Ivoire in 1971, the AfDB has so far approved 62 operations for the country, of which 41 have been fully completed, 14 cancelled, 7 ongoing (2 newly approved). All approved operations amount to a net commitment of UA 1,330.3 million (CFA F 1012 billion). AfDB Group-financed operations have been mainly loan-based and channeled, by order of importance, to the rural development and agriculture sector (26.2%), infrastructure (20.4%), multi-sector (16.7%), the social sector (16.5%) and energy, water and telecommunications (15.6%). The operations were financed mainly with resources from the ADB window (more than 70%). The bulk of these funds (94.4%) was directed towards the public sector. It should be noted that funding for the private sector concerns electricity, telecommunications, transport and industry. In addition to bilateral funding, Côte d’Ivoire received additional ADF resources to finance studies and/or projects in the fields of infrastructure and agriculture, to enhance subregional integration in West Africa.

Considering the long period of inactivity of the portfolio (six years) due to the suspension of disbursements to the country, the Bank: (i) streamlined the portfolio by cancelling the outstanding balance of eight old operations; and (ii) recently, in early June 2011, has restructured two other operations (PADER-Moyen-Comoé and PVRH). With the prospects of recovery in economic activity, particularly the restoration of government services, the portfolio will be improved.

Since the end of the post-election crisis, the Bank approved, in accordance with the pillars of the Country Brief, three operations, totaling nearly UA 177 million (CFA F 130 billion). These include: (i) The Emergency Programme to Restore Basic Social and Administrative Services (PURSSAB); (ii) The agricultural infrastructure support project in the region of Moyen Comoé; and (iii) The Project construction of bridge toll Henri Konan BEDIE (Private sector). With these approvals, the Bank’s active portfolio includes seven operations for a total amount of commitments of nearly UA 222.7 million (CFA F 170 billion).

The table below gives an overview of Bank’s portfolio status in Côte d’Ivoire.

Status of Portfolio as of April 2012–;in UA Million (1 UA=1SDR)

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Strategy for re-engagement by AfDB in Côte d’Ivoire:

To assist Côte d’Ivoire in addressing its immense needs, the Bank is committed to a rapid operational re-engagement. Consistent with the AfDB’s Fragile States Facility, a Country Brief defines the framework for the Bank’s rapid re-engagement in Côte d’Ivoire over the period 2011–12. The proposed strategy, in consultation with the Ivoirian authorities, consists of two pillars: (i) restoring infrastructure and basic social services; and (ii) improving governance and capacity building. A full Country Strategy Paper is planned for the period 2013–17 to assist the country with its quest for strong and inclusive growth.

Indicative Work Program for 2012–13

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IV. Côte d’Ivoire–Statistical Issues

As of April 2012

I. Assessment of Data Adequacy for Surveillance

General: Data provision has some shortcomings, but is broadly adequate for surveillance. There are weaknesses in the areas of national accounts and balance of payments and public finance statistics, as well as in the reconciliation of fiscal and monetary data. Generally, the authorities provided the required statistical indicators to the Fund (see attached table) on a timely basis.

National Accounts: Comprehensive national accounts data for 1996 onwards is compiled in line with the 1993 System of National Accounts methodologies, using 1996 as the base year. As the base year is dated, technical assistance has been provided by AFRITAC West to implement a new base year and update implicit deflators.

Price statistics: A harmonized consumer price index (CPI) has been adopted by all WAEMU members. A new base year (2008) has been adopted in 2010.

Labor market statistics: No such statistics are published regularly.

Government finance statistics: The authorities provide annual data on the budgetary central government for publication in the Government Finance Statistics Yearbook. While no monthly or quarterly fiscal data are provided for publication, they are made available to the IMF African Department, although metadata is lacking. The authorities have committed to addressing weaknesses in coverage of general government units and public enterprises and are making efforts to improve the reconciliation of fiscal and monetary data. In addition, the authorities are seeking the assistance of Afritac to improve the compilation of government finance statistics. The report on financial operations executed by the government over the crisis period (January–April 2011) is still not available.

Monetary and financial sector statistics: Monetary data for Côte d’Ivoire are prepared by the national agency of the BCEAO and officially released by BCEAO headquarters. Some shortcomings of the monetary statistics are common to all eight member countries of the WAEMU, while others relate to systemic issues in Côte d’Ivoire’s bank and nonbank financing of the operations of the central government and the rest of the public sector. Recently there have been improvements in the timeliness of reporting data on depository corporations and interest rates. The BCEAO and private banks are struggling to clear operations executed when the national office of the BCEAO was officially closed.

External sector statistics: The national agency of the BCEAO in Abidjan is responsible for compiling and disseminating annual balance of payments statistics and the international investment position. BCEAO headquarters delineates the methodology and calculates international reserves managed for WAEMU countries. With respect to merchandise trade, the customs computer system allows for satisfactory monitoring of trade data, but the coverage of services and transfers, and particularly workers’ remittances, has shortcomings. Concerning the financial accounts, foreign assets of the private nonbanking sector are not adequately covered, while reporting of private capital flows, especially foreign direct investment in Côte d’Ivoire, is weak. There is also not sufficient information on private debt stocks and debt service flows.

II. Data Standards and Quality

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III. Reporting to STA

Côte d’Ivoire regularly reports data to STA for re-dissemination in IMF statistical publications.

Côte d’Ivoire: Table of Common Indicators Required for Surveillance

(As of April 2012)

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Includes reserve assets pledged or otherwise encumbered as well as net derivative positions.

Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.

Foreign, domestic bank, and domestic nonbank financing.

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

Including currency and maturity composition.

Daily (D), weekly (W), monthly (M), quarterly (Q), annually (A), irregular (I); and not available (NA).