Côte d’Ivoire is recovering from a long period of economic stagnation and political conflict. The authorities have over the last two years made considerable headway toward their objective of boosting medium-term growth to raise living standards and transform the economy into an emerging market by 2020. Together with a surge in public investment to renew and expand public infrastructure, they are implementing reforms, notably, to improve the business climate, strengthen the energy and financial sectors, and reduce poverty. Sustaining high growth rates will, however, require maintaining the reform effort over the medium term.


Côte d’Ivoire is recovering from a long period of economic stagnation and political conflict. The authorities have over the last two years made considerable headway toward their objective of boosting medium-term growth to raise living standards and transform the economy into an emerging market by 2020. Together with a surge in public investment to renew and expand public infrastructure, they are implementing reforms, notably, to improve the business climate, strengthen the energy and financial sectors, and reduce poverty. Sustaining high growth rates will, however, require maintaining the reform effort over the medium term.


Côte d’Ivoire is recovering from a long period of economic stagnation and political conflict. The authorities have over the last two years made considerable headway toward their objective of boosting medium-term growth to raise living standards and transform the economy into an emerging market by 2020. Together with a surge in public investment to renew and expand public infrastructure, they are implementing reforms, notably, to improve the business climate, strengthen the energy and financial sectors, and reduce poverty. Sustaining high growth rates will, however, require maintaining the reform effort over the medium term.

A. Context

1. Following high growth in the 1960s, terms-of-trade shocks in the late 1970s contributed to a long period of economic stagnation, compounded by political instability and conflict from 2000 to 2011. The social cost has been severe: real per capita income in 2011 was only about 57 percent of its peak 1978 level; the poverty rate increased from 37 percent in 1995 to almost 50 percent in recent years; and governance indicators weakened. The 2013 UNDP Human Development Report ranks Côte d’Ivoire among countries with low human development (168 out of 186 in the 2013 Human Development Index). Progress towards achieving the Millennium Development Goals has been slow and the official unemployment rate was estimated at about 9½ percent in late 2012, with a much higher rate among the young, the women, and in Abidjan.

2. The socio-political situation has improved substantially since the end of the 2010/11 post-electoral crisis, but serious challenges remain, including meeting expectations of improved living standards. The administrative reunification of the country and a full election cycle have been completed, and insecurity has declined substantially. Some progress has been made in incorporating former combatants into the security forces and the civil service, leading the UN Security Council to recently approve a gradual scaling down of ONUCI’s military presence. Progress towards political reconciliation and restoring social cohesion continues, but remains difficult. In addition, the population is anxious to see tangible improvements in living standards and higher wages.

MEFP ¶¶ 1, 2

3. The authorities’ key challenge is to build the foundations for sustainable, robust and inclusive growth. The 2012–15 NDP lays out a comprehensive reform agenda aimed at delivering double-digit growth and halving the poverty rate. To this end, the government is boosting public investment to tackle infrastructure bottlenecks and creating a more business-friendly environment. To address poverty, it has reformed the cocoa sector, thereby increasing income of about 700 thousand farmers and raised pro-poor spending. Other measures include programs to expand mining output, boost rice production—an important basic staple—, setting up a mechanism to guarantee a minimum price for cotton and cashew, and establishing a universal health insurance scheme.

4. Macroeconomic performance since the 2011 Article IV consultation has been strong. Following the end of the post electoral crisis, sizable external financial support and a large fiscal stimulus helped limit the 2011 recession to 4.7 percent. The 9.8 percent rebound in economic growth in 2012 and a projected 8.7 percent in 2013 have been further helped by an upturn in business and consumer confidence and the impact of structural reforms, including in the cocoa sector. Preliminary indications in 2013 point to a rise in the number of business starts, increased employment in the formal sector, robust domestic consumption of energy, strong activity in the construction and public works, retail, and energy sectors, as well as in the agro-food sector. Average inflation dropped from a peak of 4.9 percent in 2011 to 1.3 percent in 2012. The overall fiscal deficit narrowed from 5.7 percent of GDP in 2011 to 3.4 of GDP in 2012. The current account balance moved into deficit, driven by a surge in investment-related imports and the strong economic rebound.

5. 2011 Article IV recommendations. At the November 2011 Board meeting, Directors emphasized the importance of broadening the tax base, limiting current spending, and strengthening tax and expenditure administration to create fiscal space for higher investment and social spending. They gave high priority to financial sector deepening and strengthening to support private sector development. Directors welcomed the proposed cocoa sector reforms, noted the significant effort needed to place the energy sector on a sound financial footing, and stressed the importance of governance and other reforms to improve the business climate and enhance external competitiveness

6. Implementation of previous staff advice has been uneven. The authorities have restructured the public external debt,1 taken steps to improve tax administration, and notably refocused expenditure towards higher investment and social spending, while lowering the fiscal deficit. They have also implemented major structural reforms to shore up the financial situation of the energy sector, reform the cocoa sector, and improve the business climate. However, decisive measures to deepen the financial sector and restructure the state-owned banks are not yet in place, while governance and expenditure management remain weak.

B. Recent Economic Developments, Medium-Term Outlook and Risks

7. Continued strong growth is expected in 2013 and 2014. In the near term, growth is projected to remain robust (8.7 percent in 2013 and 8.2 percent in 2014), driven by strong public investment. Rising private sector investment is also expected to support growth. Despite higher food prices early in 2013, inflation would remain below the 3-percent regional convergence criterion. The overall fiscal deficit is expected to decline to 2.7 percent of GDP in 2013 and 2.3 percent of GDP in 2014, while the primary basic fiscal deficit would narrow from 0.2 percent of GDP in 2013 to 0.1 percent of GDP in 2014. The current account deficit would increase to about 1.8 percent in 2013 and 3.1 in 2014 owing to higher imports of consumption goods and a stronger increase for capital goods, while the balance of payments would record a small surplus, supported by higher FDI and project loans.

Text Table 1.

Côte d’Ivoire: Output Growth Decomposition

(Contribution to annual growth rates, percent)

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Sources: IMF staff calculations based on Penn World Table, Version 8; the Barro and Lee education attainment dataset; and country household surveys.

Strong investment and structural reforms have contributed to higher total factor productivity growth for the first time in over three decades.

8. Medium-term growth is expected to remain high. In the staff’s projections, high growth rates would remain at about 8 percent through 2015 and would gradually decline to about 7 percent over the medium term, while inflation would remain moderate. Growth would be driven by a broad-based increase of private investment, in agriculture, mining, and housing, but also in food processing and services, supported by public investment in infrastructure and the improvement of the business climate. Exports would remain strong as a result of measures to support agricultural production and processing, and of higher mining output (gold in particular). The fiscal deficit would remain small at around 3 percent of GDP, while the current account deficit would widen somewhat reflecting high imports of capital goods, financed in part by FDI and project loans. This high-growth baseline scenario is contingent on sustained reform momentum to allow high and efficient investment.2 It also assumes significant reforms to further improve the business climate and governance. Box 2, which analyzes best practices from non-natural resource producing countries in Africa with a high-growth record, underlines the importance of achieving a sustained increase in investment. Also, it is noteworthy that 5 out of 6 of the fast-growing countries in Box 2 delivered very rapid productivity (TFP) growth making an important contribution to overall growth; while recent structural reforms in Côte d’Ivoire have resulted in a return to positive productivity growth after 3 decades of negative growth, it has not yet achieved the productivity growth rate of the best performing countries, which underscores the need for additional progressive reforms to further strengthen the business climate.

Text Table 2.

Côte d'Ivoire: Medium-Term Macroframework, 2011–18

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Sources: Ivoirien authorities and IMF staff estimates and projections.

Staff’s Views

9. There are downside and upside risks to the medium-term scenario. While Côte d’Ivoire has had high growth rates since the end of the crisis, sustaining high growth rates once the recovery period is completed will require further sustained reform efforts.

  • The most significant downside risk is that the strong scaling-up of public investment may fail to deliver high growth, in absence of sufficient crowding in of private sector investors. While recent reforms have strengthened private sector confidence and the business climate, more needs to be done to boost private investment—both FDI and domestic. Lower-than-projected growth would narrow the fiscal space, reducing the resources available for public investment and social spending (see Text Table 3 for an illustrative lower-growth scenario).

    Text Table 3.

    Selected Economic Indicators, 2013–33

    (Percent of GDP, unless otherwise indicated)

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    Sources: Ivoirien authorities; and IMFstaff estimates.

  • Lack of further progress toward political reconciliation, in particular in the run up to the 2015 presidential elections may also negatively affect growth prospects.

  • The population’s anxiousness to see tangible improvements in living standards and higher wages also carries risks. While the promise of higher salaries in the civil service from 2014 has contributed to eliminating the work stoppages seen in 2012 and the first part of 2013 (in particular in the health and education sector), a resurgence is possible.

  • The impact of potential external risks, including higher financing costs following the end of an accommodative monetary policy in the US; a worsening of the economic outlook of the main trading partners and donors; and a deterioration of the overall regional security,3 appear comparatively more limited. However, higher prices for imported basic staples such as rice and adverse weather shocks would present significantly high risks.

  • Upside risks to the baseline scenario could arise from higher-than-projected FDI flows and an even stronger crowding in of private investment if the NDP’s goals of creating one of the best business climates in Africa and becoming a regional leader on good governance and anti-corruption are materialized early on.

Authorities’ Views

10. The authorities viewed staff projections as too conservative. Their own growth projections are much more ambitious, with real growth rates of 9 percent in 2013 and 10 percent in 2014–15, driven by higher private investment. They noted that staff had already had to revise its growth projections upward on several occasions. They reiterated their commitment to implement the reforms required for reaching the high levels of private investment in the NDP, and indicated their readiness to adopt measures to address these downside risks, if they were to materialize.

MEFP ¶18–25

Côte d’Ivoire: Inclusive Growth

Poverty increased following a marked decline in real per capita income since the late 1970s and the period of conflict from the early 2000s to the end of the post-electoral crisis of 2010–11. Poverty indicators have not been updated since 2008, as the crisis prevented the National Statistics Institute from carrying out a new Living Standard Measurement Survey. Yet, despite data deficiencies, the authorities estimate that the displacements of population and the sharp deterioration of social services in most of the country during the crisis resulted in slightly more than half the population living below the poverty line in 2011. The 2013 human development report estimates that 61.5 percent of the population lives in multidimensional poverty despite an increase in some human development indicators (see table below).

Human Development Index, 1990–2012

Citation: IMF Staff Country Reports 2013, 367; 10.5089/9781484313213.002.A001

Source: UNDP, Human Development Report, 2013.

Reducing poverty and making growth more inclusive is at the center of the authorities’ strategy in the NDP and progress has most likely already taken place, although data is not available. The authorities have already adopted measures that will alleviate poverty, such as the cocoa reform and the setting up of a minimum price for cotton and cashew. They have also achieved a strong increase in pro-poor spending, with priority given to the health and education sectors for new hiring and the renovation of a number of health and education facilities. They are also considering the creation of a universal health insurance system. While the high and broad-based growth performance in 2012 and 2013 have resulted in an increase in employment in the formal sector and most likely in a decline in poverty incidence, data deficiencies do not allow to assess the percentage by which poverty has been reduced.


Making growth more inclusive will remain a long-term challenge. The population is relatively young and growing at about 3 percent per year, with the labor force growing rapidly. Employment remains dominated by agriculture, mostly in subsistence activities and low productivity jobs. Average skill levels in the labor force will take time to improve. Sustaining strong growth over an extended period of time will further increase per capita income, but a key challenge in the years ahead will be to improve human development indicators. Policy priorities will continue to include addressing the infrastructure gaps, strengthening productivity in agriculture, investing in health, education, and vocational training and upgrading education and skill levels to shift people from vulnerable employment to better wage-paying jobs, supporting access to credit for smaller and newer enterprises, facilitating the creation of markets with supporting infrastructure (such as transportation networks) both locally and at the provincial level, and continued efforts to strengthen the basic social protection system to help the most vulnerable.

Selected Human Development Indicators

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Sources: UNDP, World Development Indicators; Authorities.

Côte d’Ivoire: Risk Assessment Matrix (RAM)

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  • The discussions focused on the key policies needed to achieve high growth rates consistent with the government’s vision set out in the NDP: (i) ensuring long-term fiscal sustainability; (ii) strengthening the financial sector; (iii) bolstering external stability and improving the business climate; and (iv) enhancing governance.

A. Policy Theme #1: Ensuring Long-Term Fiscal Sustainability

11. Sustaining fiscal discipline over the medium term, while preserving space for pro-poor and infrastructure spending. The authorities have implemented prudent fiscal policies since 2011, allowing both a major reduction in the fiscal deficit and a surge in public investment. This fiscal stance, however, is facing increasing headwinds. On the revenue side, the tax base has been eroded by incentives contained in the 2012 investment code and other sector codes. On the spending side, in addition to demands for higher wages for civil servants, the significantly improved but still fragile financial position of the electricity sector still requires sizable subsidies and bears risks.4 In addition, fiscal and debt management has been further complicated by the need to settle longstanding domestic arrears, the rollover risk of financing from the regional market5, and contingent liabilities in the public sector. The planned creation of a universal health insurance system also presents fiscal risks. The authorities have taken steps to address these pressures, including by preparing medium-term strategies to contain the wage bill and the debt.

Staff’s Views

12. Maintaining prudent fiscal management over the medium and long term will require a comprehensive strategy. Staff welcomed the reduction in the deficit, but noted that further efforts would be required to address rising budgetary pressures. In particular, staff recommended:

  • Continued VAT reform aimed at enlarging the tax base and mobilizing the full potential of VAT in Côte d’Ivoire.6

  • Strengthening tax policy in general and refraining from granting further special tax regimes to specific sectors; improving revenue administration by strengthening the large taxpayer office, setting up a medium-size taxpayer office, and reinforcing tax and customs’ controls and audits.

  • Ensuring that the wage bill strategy can deliver its goal of putting the wage bill on a sustainable financial path, bringing it down as a share of tax revenue over the medium to long term (in compliance with the WAEMU convergence criterion). Staff noted, however, that the wage strategy would benefit from greater front-loading and from concentrating new hiring on health and education in the longer run.

  • Proceeding with caution as regards the creation of a universal health insurance system, appropriately balancing the benefits of such a reform in terms of growth inclusiveness with potentially large fiscal costs.

  • Strengthening cash planning and cash management, in particular to adequately manage the tight cash flow position that the bunching of domestic debt repayments in the last two months of the year will generate in 2013 and 2014 (as well as in 2016).

  • Continuing to reform the electricity sector by restructuring the currently regressive tariffs to make them progressive and by introducing periodic automatic adjustments to maintain relative prices and provide adequate incentives.

Authorities’ Views

13. The authorities broadly agreed with staff’s recommendations. They were generally cautious on VAT, stressing the potential social impact of reforms. They indicated, however, that the 0.3 percent of GDP rise in various taxes (including excise taxes, the tax on telecommunications, etc) included in the draft 2014 budget would strengthen revenue mobilization and that they plan further VAT reforms in due course.

MEFP ¶7, ¶17

  • They considered that the recently formulated wage bill strategy could deliver on its goal to put it on a sustainable path over the medium to long term, even while also delivering on commitments made in this area after a more than 20-year freeze of public sector wages. They agreed with staff that the fiscal costs of a universal health insurance system should be kept under control and assured staff that proper study of these costs was under way.

  • They acknowledged that their cash position would be tight toward the end of the year in 2013 and 2014, as noted by staff, but viewed it as manageable. They indicated that they would actively manage cash and the pace of expenditures to ensure timely repayment of the amounts of domestic debt falling due that may not be rolled over.

    MEFP ¶15

  • The authorities were also cautious regarding prompt action to reform the electricity sector to make it financially sustainable. While agreeing with staff on the need to cap the fiscal cost of subsidies to the sector and implement reforms over the medium term, they stressed that reform measures already passed in 2012–13 together with the decision to bring export prices closer to the marginal cost in 2014 had reestablished the financial position of the electricity sector in the short term and limited budgetary costs.

    MEFP Box 2

B. Policy Theme #2: Reducing Financial Sector Vulnerabilities and Fostering Financial Deepening

14. Strengthening the soundness of the banking sector and enhancing its contribution to the NDP growth objectives.

  • Strengthening the soundness of the banking sector. While Côte d’Ivoire’s banking sector is broadly sound,7 public banks (along with a couple of small domestic banks) do not meet most prudential requirements and are largely undercapitalized.

  • Deepening financial intermediation. Côte d’Ivoire’s banking system is shallow, with a private sector credit-to-GDP ratio of about 18 percent and limited access to financial services (11 percent of the population, including microfinance). Loans are predominantly short-term and concentrated on larger companies, with limited provision of credit to medium and small size enterprises. Despite progress in financial deepening, the banking sector lags relative to peers and several WAEMU countries in terms of depth and access.8 Financial intermediation is weakened by insufficiencies regarding land and property registries, difficulties faced by creditors when they attempt to recover debts through the judicial system, and the lack of a widely used borrower’s registry.

  • To address these issues, a gradual reform program, supported by Fund TA, focuses in the near-term on eliminating key constraints to private credit and helping banks’ manage liquidity. The authorities have started to reform land registration laws and have established commercial courts, with the first already operating in Abidjan. They also actively support reforms undertaken at the regional level by the BCEAO, including the establishment of a credit bureau by end 2013 and regulations allowing primary dealers to operate. The latter reform would facilitate the emergence of a secondary market for government securities and the management of banks’ liquidity. The authorities are formulating a comprehensive strategy to develop the financial system with the support of the World Bank. Following financial and strategic audits, the authorities are also working on a restructuring of the public banks.

Staff’s Views

15. Strengthening financial sector soundness will require restructuring of the public banks. While these banks do not represent a systemic risk for the financial system, staff urged the authorities to act promptly, beginning with those banks for which there is a clear resolution strategy, drawing on the recommendations of the recent audits and of the September 2013 MCM technical assistance mission. Staff stressed the importance of minimizing contingent liabilities from these institutions, while including the full cost of resolution in the budget. 9

16. Effective implementation of recent reforms and of the financial sector development strategy should foster financial intermediation. Staff welcomed the recent reforms adopted in Côte d’Ivoire and at the regional level, and the ongoing preparation of the financial sector development strategy. The mission urged the authorities to take the lead in the effective implementation of the recent decision of the BCEAO to allow the creation of primary market dealers and in the projected establishment of a credit bureau. The mission encouraged the authorities to create an environment favorable to broadening the financing available for small-and medium-sized enterprises, while noting that this could be done without necessarily needing public banks.

Authorities’ Views

17. The authorities agreed with staff views, noting that they intend to adopt an action plan for resolving the troubled public banks before end-2013 and that the draft budget incorporates funding for the bank resolution costs to be incurred during 2014.

MEFP ¶17, ¶36–39

18. They underscored the key role of the financial sector for promoting strong growth and indicated that the comprehensive financial sector strategy under preparation will aim at broadening access to medium-and long-term credit. For this purpose, they are still considering retaining some public banks to channel credit to specific sectors. To reduce obstacles to deeper financial intermediation, they plan to gradually extend the operation of commercial courts to outside of Abidjan and will support the central bank’s regulations regarding primary dealers and credit bureaus.

C. Policy Theme #3: Maintaining External Stability

19. Preserving external stability through prudent borrowing and addressing non-price competitiveness issues

  • External stability risks are moderate. CGER model-based approaches suggest the real effective exchange rate is broadly in line with fundamentals, and in line with the regional WAEMU real effective exchange rate assessment.10 The current account deficit is projected to widen driven by the investment-led growth strategy, with a large part financed through FDI flows and project loans. Côte d’Ivoire’s external debt profile improved substantially following HIPC Completion Point in 2012,11 creating scope for new borrowing. The economy and external stability, however, remain vulnerable to macroeconomic shocks, including lower exports and GDP growth.

  • The authorities are finalizing a medium-term debt strategy (MTDS) which aims to diversify the investor base and lengthen maturities, and are considering issuing a Eurobond in an amount equivalent to US$500 million in 2014.12 The amount of public debt held by domestic and regional banks is already sizable (partly because of the forced restructuring of domestic debt arrears during the 2010–11 post electoral crisis) and its average maturity is relatively short.13 Diversifying the investor base to include international markets and lengthening maturities would improve debt management over the medium term. While the authorities have initiated the process of getting a sovereign rating, they do not see a rating as a precondition for the Eurobond.

  • Further strengthening external stability will require significant improvements in non-price competitiveness indicators. Several indicators measuring the business environment (including the World Bank’s Doing Business, the Global Competitiveness Index, and Global Enabling Trade Index) rank Côte d’Ivoire relatively poorly. Difficulties in accessing financing, corruption, inadequate infrastructure, and legal uncertainty are among the main factors contributing to this ranking.

  • To strengthen competitiveness, the authorities have implemented several measures to improve the business climate. A new investment code was approved in June 2012, and the electricity and mining codes are being finalized. Substantial progress has been made in reducing the obstacles to doing business through several measures, including the establishment of a center for promoting investments (Centre de Promotion des Investissements en Côte d’Ivoire) that provides a one-stop facility for investors, measures to reduce the cost and time required to open up a business; and the creation of a commercial court in Abidjan. Another one-stop facility designed to streamline import procedures is also being planned.

Staff’s Views

20. A medium-term debt strategy that focuses on debt sustainability and high quality projects will be critical for maintaining external stability. Staff welcomed the preparation of the medium-term debt strategy to better guide financing decisions and ensure prudent borrowing. The mission noted that replacing regional financing with a Eurobond would leave unchanged Côte d’Ivoire’s risk of debt distress, and would contribute to broadening the investor base and lengthening maturities. It also noted, however, that the issuance should only take place if offered rates are reasonable. The staff recommended that Côte d’Ivoire wait until it has obtained a sovereign rating since such a rating secures greater access to capital markets, particularly with respect to institutional investors, and better rates.

MEFP ¶17, ¶40

21. Further significant improvements in the business climate will be needed to strengthen competitiveness and encourage strong private investment. Staff noted that recent improvements to the business climate have not yet been fully taken into account by the competitiveness rankings, with some rankings still based on 2010–11 data. However, even after taking into account the full impact of the recent reforms, significant bottlenecks would remain and much needs to be done to improve the business climate, the effectiveness of the rule of law, governance and anti-corruption efforts to encourage the amount of private investment needed in the years ahead.

Authorities’ Views

22. The authorities believed the proposed Eurobond would improve medium-term debt management and partially address their difficulties in mobilizing longer term financing. The authorities noted that the final decision on the Eurobond issuance will depend on the foreseeable market yield, in particular taking into account the foreseen unwinding of unconventional monetary policies in the US.14

MEFP ¶41

23. The authorities underscored that the ranking of Côte d’Ivoire in the 2014 Doing Business report had improved as a result of their reform efforts.15 They acknowledged the need for further progress in this area, and reiterated their commitment to continue introducing reforms, consistent with the NDP’s objective of creating one of the best business climates in Africa.

MEFP Box 1

D. Policy Theme #4: Enhancing Governance

24. The authorities have passed legislation to strengthen governance but decisive action is needed. Despite recent improvements,16 Côte d’Ivoire’s ratings in various governance indices (including the World Bank’s Worldwide Governance Indicators and the Economic Freedom Index of the Heritage Foundation) remain poor. The government has reiterated its intention to improve governance and emphasized that two ordinances have been adopted in September 2013: one aimed at improving the legal framework to prevent and fight corruption, while the other established the High Authority for Good Governance, the Haute Autorité pour la Bonne Gouvernance. The country also became EITI compliant in May 2013. Nonetheless, the amount of public procurement granted on a non-competitive basis reached about 80 percent in the first semester of 2013.

MEFP ¶47, ¶48

Staff’s Views

25. Staff welcomed the governance improvements and urged the government to take further action in this area. The recent legislation designed to reduce corruption and grant special protection to whistle blowers denouncing corruption signals important progress. However, its potential positive impact on private sector investors will only materialize if enforcement is forceful. Staff also highlighted the need to significantly reduce the amount of public procurement granted on a non-competitive basis, and urged that both the spirit and the letter of the procurement code be applied effectively.

Authorities’ Views

26. The authorities indicated that they intend to reduce the share of non-competitive public sector contracts and to grant most of them on a competitive basis. They noted that the council of ministers had adopted a measure aimed at reducing the share of non-competitive contracts and enhancing transparency. They indicated, however, that in some cases they were compelled to award contracts on a non-competitive basis owing to the importance of moving fast on specific key projects. In other cases, because of the limited availability of large-scale concessional financing for projects, rather than stall indefinitely key projects, they had agreed to loans notwithstanding that they were tied to pre-selected companies.

MEFP ¶17, ¶¶47, 48


A. 2013

27. Fiscal performance was good through end-June 2013. All performance criteria and indicative targets at end-June were met. Revenue slightly exceeded the program target despite VAT and import taxes shortfalls owing mostly to the higher-than-anticipated cost of exemptions under the new investment code adopted in 2012. Expenditures fell below the programmed objective, with externally-financed investment exceeding its target and domestically-financed investment executed at a slower pace.

MEFP ¶¶7, 10, T1

28. The fiscal position for 2013 is expected to improve more than projected. The primary basic deficit is projected to decline from 0.3 percent of GDP to 0.2 percent of GDP, while the overall deficit would decrease from 3.2 percent of GDP to 2.7 percent of GDP. This is largely due to a downward revision of public investment. As noted above, the cash position at end-December is expected to be tight but manageable, reflecting the large amount of domestic debt redemptions falling due as a result of the end-2011 restructuring of the outstanding stock of T-bills into 2-year T-bills, and 3- and 5-year bonds.

MEFP ¶13–15

29. Satisfactory structural reform progress has been made so far, but decisive actions are needed to complete reforms in some key areas. Ten out of 14 structural benchmarks were met through end-October (MEFP Table 2). In particular, progress was made to improve public financial management, with the adoption by the Council of Ministers of the organic laws for fiscal transparency and the budget system law transposing the WAEMU directives; the medium-term expenditure framework (MTEF 2014–16) was also attached to the budget documentation for 2014. A new electricity code was also adopted by the Council of ministers and is awaiting its transmission to the National assembly. However, although considerable progress was made in: (i) drawing up a medium-term strategy for controlling the wage bill; (ii) elaborating a medium-term debt strategy; (iii) finalizing a new mining code; and (iv) preparing an action plan for restructuring public banks (financial and strategic audits have been completed) and another one for regularizing domestic arrears (the arrears have been audited),17 delays were encountered in completing these reforms by their due date.

MEFP ¶11, T2

30. The authorities are committed to stepping up efforts to complete the planned reforms. This includes, in particular, the adoption of the medium-term wage bill strategy, the reorganization of the debt management unit along functional lines (front-, middle-, back-office), the regularization of domestic arrears to suppliers in line with the action plan expected to be adopted in November 2013, the restructuring of public banks, and the adoption of a financial sector development strategy.

MEFP ¶17

B. 2014

31. The draft 2014 budget is built on a conservative macroeconomic scenario and prudent revenue projections. Overall, total tax revenue is projected to remain stable in percentage of GDP relative to its 2013 level. The projected reduction in cocoa revenue, which reflects an expected lower production, would be offset by the good performance of direct and indirect taxes. The government has included specific fiscal measures in the draft 2014 budget to enhance revenue collection. These include, in particular, removing two VAT exemptions, raising the tax rate on the telecommunication sector, aligning the rate of the tax on capital gains with the WAEMU norm, and raising excise taxes on beverages and tobacco. Grants from France, in the context of the debt-for-development swap mechanism (C2D), and from other development partners are expected to rise to 2.4 percent of GDP in 2014 from 1.7 percent of GDP in 2013. In total, revenue and grants are projected to increase from 21.3 percent of GDP in 2013 to 22 percent of GDP in 2014.

MEFP ¶26–31

32. The authorities are committed to containing current expenditure to allow capital spending to continue growing in 2014. In spite of a higher wage bill (+0.2 percent of GDP), current expenditures are expected to decline by 0.1 percent of GDP owing to a reduction in spending on subsidies, stemming from the government’s decision to bill some electricity exports at the marginal cost of production in 2014. The wage bill would increase to deliver on promises made by the previous regimes; in addition, step increases which had been frozen for many years would start being implemented with retroactive effects spread over the medium term. Capital expenditure would continue to increase (+0.5 percent of GDP), focused on infrastructure projects in energy and roads, in line with the National Development Plan.

33. Overall, the fiscal adjustment would continue in 2014. The primary basic deficit would edge down to 0.1 percent of GDP in 2014 from 0.2 percent in 2013, while the overall fiscal deficit would decline from 2.7 percent of GDP in 2013 to 2.3 percent in 2014. The deficit would be financed by a net mobilization of funds in the regional market (2.3 percent of GDP in 2014 against 2.4 percent in 2013), and net external financing (0.4 percent of GDP in 2014 against 0.7 percent in 2013). The somewhat tighter fiscal stance in 2014 reflects: (i) conservative assumptions on the volume of new net additional financing available in the regional market; and (ii) the authorities’ prudent decision to build the budget on a solid basis by only including already-committed external loans. If additional resources were to become available, a supplementary budget would be considered.

34. As regards new structural reforms, the authorities intend to take further actions to improve public financial management. A consolidated commitment and procurement plan is being prepared to smooth cash management. A stocktaking of various government and public entity accounts in commercial banks and at the BCEAO is planned with a view to setting up a Treasury Single Account. In addition, the government will evaluate the expenditure process and adopt corrective measures to reinforce controls, eliminate exceptional spending procedures, and limit the recourse to cash advances.

35. The authorities have requested an increase in an amount equivalent to US$500 million in the program’s ceiling for 2014 on new nonconcessional external debt to accommodate the issuance of a new Eurobond.18The Eurobond would permit restructuring the government’s debt liabilities, notably by lengthening maturities, and widen Côte d’Ivoire’s presence on international markets. Staff supports this request while emphasizing that the decision on whether to issue a bond should take into account the implications for overall debt service costs and the need to avoid too high a concentration of external maturities in a relatively short period in the mid-2020s. Côte d’Ivoire’s risk of debt distress would remain at a moderate level (see DSA).

MEFP ¶41

36. Program criteria (PC) will remain unchanged and staff supports the proposed set of quantitative PCs for end-June 2014. The definitions of the variable monitored are provided in the Technical Memorandum of Understanding (TMU). Structural benchmarks are proposed as shown in the MEFP, Table 2. The new SBs, covering the period through November 2014, focus on public financial management.


37. Côte d’Ivoire has achieved considerable progress over the last two years. Under the authorities’ program, Côte d’Ivoire is experiencing a strong recovery. The implementation of a number of structural reforms and the surge in public investment, coupled with prudent fiscal policy, have resulted in the removal of infrastructure bottlenecks and improvements in the business climate while boosting demand. These policies have been conducive to sustained high growth, while inflation has remained low.

38. The government’s policies should result in inclusive growth and tangible improvements in living standards. Strong growth associated with a high level of pro-poor spending, and structural reforms leading to higher incomes for some groups of farmers, such as in the cocoa sector, should increase jobs and income, raise living standards, and improve access to public services to a wide range of the population.

39. Provided the reform momentum is sustained, the medium-term outlook is positive with continued robust growth and a stable macroeconomic environment. Preliminary indications in 2013 that private sector confidence has increased and that crowding in of private investment is taking place augurs well for the authorities’ capacity to achieve sustained growth over the medium term while keeping inflation low. Nevertheless, reaching the authorities’ ambitious targets of high growth and poverty reduction will require further reform efforts. At the same time, this medium-term outlook is vulnerable to a significant downside risk: if the foreseen high growth rates do not materialize, it would be important for the authorities to take corrective measures to safeguard fiscal and macroeconomic stability and to strengthen sustainable growth dynamics.

40. Strengthening fiscal sustainability over the medium term and increasing the fiscal space for infrastructure and social spending will require further reforms. The government should enhance revenue mobilization through additional tax policy and administration reform, and curtail widespread exemptions. The staff welcomes the government’s commitment to further strengthen public financial management including through a reform of exceptional spending procedures; it urges it to significantly strengthen cash management and cash planning to better manage the bunching of domestic debt payments toward the end of the year. There is also a need to put the electricity sector on a sound financial footing and contain budget subsidies to it.

41. Developing the financial sector will contribute to strong and inclusive growth, through greater financing options for medium-and small companies and broader access to financial services for a larger share of the population. Staff welcomes the authorities’ intent to adopt a financial sector reform strategy and urges them to begin implementation as soon as possible. It is encouraged by the progress made in preparing options for the restructuring of public banks and the authorities’ planned adoption of an action plan by end-November 2013; it recommends rapid implementation of the first steps of this plan.

42. Preserving external stability will require continued prudent borrowing—largely on concessional terms. Prudent borrowing policies are in particular necessary to avoid any deterioration in Côte d’Ivoire’s moderate risk of debt distress. In this regard, staff welcomes the medium-term debt strategy that the authorities plan to adopt by end-November and the reinforcement of debt management capacity. Staff supports the authorities’ consideration of a Eurobond issue aimed at improving asset-liability management, while noting that this decision should weigh the implications for overall debt service costs and the need to avoid an excessive concentration of maturities. Staff also urges the authorities to obtain a sovereign rating as a first step, to help obtain the best issuance terms.

43. Further measures to improve the business climate and governance are needed to provide a favorable environment for strong private sector investment. The authorities have made important progress in strengthening the business environment, as demonstrated by the recent improvement in Côte d’Ivoire ratings in the 2014 Doing Business report, and in strengthening the legal framework to prevent and fight corruption. Further enhancements in governance and in the business climate, aimed in particular at enforcing the rule of law, will be key for attracting significant FDI and domestic private investment. Staff urges the authorities to significantly reduce the amount of public procurement granted on a non-competitive basis and to ensure the effective implementation of the spirit and the letter of the procurement code.

44. Program performance has been good. All end-June performance criteria and indicative targets have been met and progress on structural reforms has been solid, although with some delays and missed structural benchmarks.

45. Staff recommends completion of the fourth review and a disbursement of an amount equivalent to SDR 48.78 million under the ECF arrangement. It supports the authorities’ request for raising the ceiling for new nonconcessional external debt and the proposed performance criteria for end-June 2014. It is proposed that the next Article IV consultation take place in accordance with the Decision on Article IV consultation cycles for program countries (Decision No. 14747-(10/96), as amended).

Côte d’Ivoire: High-Growth in Non-Natural Resource Producing African Countries

Côte d’Ivoire will need to implement a comprehensive reform strategy to reach the ambitious medium-term growth and poverty reduction objectives it is targeting over the medium term. In that context, what can it learn from other African countries that have sustained high growth rates in recent years?

The Regional Economic Outlook analyzes the experience of the six LICs in sub-Saharan Africa—Burkina Faso, Ethiopia, Mozambique, Rwanda, Tanzania, and Uganda—that experienced the fastest sustained growth during 1995–2010, although they were not natural resource producers during that time. While these countries followed different paths, their experience demonstrates that a shift in macroeconomic policy making, combined with comprehensive structural reforms and sustained external financing can create the fiscal space to finance productive investment and generate a growth dividend.

The chapter highlights the key points that contributed to this virtuous circle of sustained high growth:

Macroeconomic stability. All countries in the sample show that improved macroeconomic policies, structural reforms, and a greater degree of overall stability are crucial for economic growth. Greater fiscal space—reflecting expenditure prioritization and a combination of debt relief, aid, and greater domestic resource mobilization—can translate into higher levels of social and investment spending, supporting growth in both the near-and medium term. Lower inflation and a more predictable economic environment reduce risks and transaction costs, encouraging private sector activity. Improved macroeconomic policies also help to attract foreign financing, both in the form of foreign aid and private resources, such as FDI.

Effective use of foreign aid. The increased level and predictability of foreign aid enabled a greater focus on medium-term planning and greater opportunities for alignment with national poverty-reduction strategies.

Strong national policy-making institutions. Identifying and translating increased fiscal space into sustainable growth requires effective macro policymaking and strong institutions, in particular regarding PFM capacity.

High investment levels. Sustained high investment levels are crucial to increase the capital stock and boost overall productivity levels. Investment in infrastructure is particularly important, as it promotes private sector development through lowering overall business costs. The lack of an adequate transport infrastructure can bar large segments of the population from access to markets, in particular in rural areas, where poverty is concentrated.

Deeper financial markets. Deeper financial markets support growth by enhancing domestic savings to finance investment. Financial inclusion has tended to lag, and could—including through use of new technologies—be prioritized to make the growth process more inclusive.

1 Excerpt from AFR’s Fall 2013 REO, “Drivers of Growth in Non-resource-Rich Sub-Saharan African Countries”, IMF, Washington DC.
Table 1.

Output Growth Decomposition

(Contribution to annual growth rates, percent)

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Sources: IMF staff calculations based on Penn World Table, Version 8; the Barro and Lee education attainment dataset; and country household surveys.
Figure 1.
Figure 1.

Côte d’Ivoire: Real and External Sectors, 2009–14

Citation: IMF Staff Country Reports 2013, 367; 10.5089/9781484313213.002.A001

Sources: Ivoirien authorities; and IMF staff estimates and projections.
Figure 2.
Figure 2.

Côte d’Ivoire: Fiscal Developments, 2009–14

Citation: IMF Staff Country Reports 2013, 367; 10.5089/9781484313213.002.A001

Sources: Ivoirien authorities; WEO database and IMF staff estimates and projections.
Figure 3.
Figure 3.

Côte d’Ivoire: Medium-Term Outlook, 2011–18

Citation: IMF Staff Country Reports 2013, 367; 10.5089/9781484313213.002.A001

Sources: Ivoirien authorities; and IMF staff estimates and projections.
Table 1.

Côte d'Ivoire: Selected Economic Indicators, 2011–18

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

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

2011 ratios based on Q2-Q4 fiscal aggregates over Q2-Q4 of GDP.

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

This is the poverty rate in 2008.

Table 2.

Côte d'Ivoire: Balance of Payments, 2011–18

(In billions of CFA francs, unless otherwise indicated)

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

In 2012, this includes Fund's debt cancellation following the HIPC completion point.

Table 3a.

Côte d'Ivoire: Fiscal Operations of the Central Government, 2011–18

(In billions of CFA francs, unless otherwise indicated)

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

2011 aggregates are based on Q2-Q4.

Total revenue (excl. grants) minus expenditure net of scheduled interest and foreign-financed capital expenditure.

In the CFA franc zone, Fund resources are channeled via the regional central bank that provides equivalent domestic currency credit to the relevant government. In 2012, the amount includes Fund’s debt cancellation following HIPC completion point.

Debt Service and cancellation reflect the impact of the HIPC completion point at end-June 2012.