IMF Executive Board Approves US$658.9 Million Under the ECF and EFF Arrangements for Côte d’Ivoire

Côte d'Ivoire has experienced an impressive turnaround since 2012, with growth averaging 9 percent during 2012-15, accompanied by prudent fiscal policies and debt management, improved access to capital markets, and the return of foreign direct investment. However, per capita GDP remains below its 1978 peak, poverty continues to be relatively high, and human development indicators have been slow to improve. The authorities' 2016-20 National Development Plan (NDP) aims to consolidate the conditions for strong and inclusive growth and poverty reduction through investment in infrastructure and social sectors, as well as the structural transformation of the economy by the private sector.

Abstract

Côte d'Ivoire has experienced an impressive turnaround since 2012, with growth averaging 9 percent during 2012-15, accompanied by prudent fiscal policies and debt management, improved access to capital markets, and the return of foreign direct investment. However, per capita GDP remains below its 1978 peak, poverty continues to be relatively high, and human development indicators have been slow to improve. The authorities' 2016-20 National Development Plan (NDP) aims to consolidate the conditions for strong and inclusive growth and poverty reduction through investment in infrastructure and social sectors, as well as the structural transformation of the economy by the private sector.

On December 12, 2016 the Executive Board of the International Monetary Fund (IMF) approved two three-year arrangements under the Extended Credit Facility (ECF)1 and the Extended Fund Facility (EFF)2 for Côte d’Ivoire for a combined total of SDR 487.8 million (about US$658.9 million, or 75 percent of Côte d’Ivoire’s quota) to support the country’s economic and financial reform program.

The program will aim to achieve a sustainable balance of payments position, inclusive growth, and poverty reduction by investing in infrastructure and priority social projects. It will also focus on containing current spending, catalyzing official and private financing, and building resilience to future economic shocks.

The Executive Board’s decision will enable an immediate disbursement of total amount of SDR 69.686 million (about US$94.1 million). The remaining amount will be phased over the duration of the program, subject to semi-annual reviews.

Following the Executive Board discussion on Côte d’Ivoire, Deputy Managing Director Mr. Furusawa, and Acting Chair, said:

“Côte d’Ivoire’s economy has made an impressive turnaround since 2012 and its outlook remains favorable. Nevertheless, reducing poverty and closing human capital and infrastructure gaps will take time, and structural bottlenecks pose challenges. Against this backdrop, the authorities’ new economic program under the Extended Credit Facility and

Extended Fund Facility appropriately focuses on inclusive, sustainable growth; structural transformation of the economy; and poverty reduction. The program builds on the solid performance under the previous Fund-supported program in 2011–15 and is expected to catalyze official and private financing.

“The authorities’ goal is to maintain fiscal discipline and strengthen buffers for future shocks, while creating fiscal space for infrastructure and social spending. To this end, improving tax administration and adopting new tax policy measures will help increase revenue mobilization. Containing current spending will be also critical, while prudent public financial and debt management will help ensure debt sustainability. Enhancing surveillance of public enterprises and extending budget coverage to extra-budgetary entities would strengthen control over all government’s activities and improve transparency. Reinforcing the framework for public-private partnerships and pressing ahead with the reform of public enterprises will mitigate fiscal risks.

“The authorities’ measures to recapitalize and strengthen public banks and their efforts to promote financial inclusion will help sustain healthy credit expansion and contribute to private sector-led economic growth.

“Further improvements to the business environment are crucial, particularly in the areas of paying taxes, obtaining permits, and facilitating trade. The authorities’ continued efforts to improve the quality and dissemination of economic statistics would support policy making and private investment.”

Annex

Recent Economic Developments

Côte d’Ivoire’s economy has achieved an impressive turnaround since 2012. Political normalization, supportive fiscal policy facilitated by extensive debt relief, reforms to improve the business climate, and rising world cocoa prices have enabled a strong rebound in economic activity. Real GDP grew by 9 percent per year on average during 2012–15, driven by investment and consumption, partly reversing a decade-long fall in per capita income.

The robust economic performance since 2012 has not fully shed the socio-economic legacies of decades of sluggish growth compounded by conflict. Significant disparities remain across the country, and in the areas of education attainment, employment and income. As such, the authorities’ 2016–20 National Development Plan (NDP) appropriately prioritizes inclusive and sustainable growth, focusing on structural transformation and improving living standards.

Solid macroeconomic performance continued in the first half of 2016 notwithstanding the impact of a drought on agriculture, and real GDP growth is projected at around 8 percent for the entire year. The budget deficit is projected at 4 percent of GDP in 2016, reflecting higher spending, including for security, health and education. Economic growth is forecast to remain strong over the medium term, averaging 7.7 percent per year during 2017–19, reflecting buoyant domestic demand. Inflation is projected to remain below 3 percent. Reflecting investment-driven imports, the external current account deficit would widen to about 2.5 percent of GDP.

Program Summary

Building on progress made under the 2012–15 program (see Press Release No. 11/399), the new three-year program will support the broad objectives of the NDP and help implement a sustainable balance of payments position, inclusive growth, and poverty reduction.

The authorities’ program aims to create fiscal space for infrastructure investment and social spending, and strengthen policy buffers; maintain public debt on a sustainable path; facilitate debt restructuring of the national oil refinery and enhance monitoring of the debts of state-owned enterprises; address vulnerabilities in the public banks; improve the business climate; enhance the quality of economic data; and increase Côte d’Ivoire’s contribution to the regional foreign exchange reserves pool.

Under the program’s planned policies, the government’s budget deficit would converge to the West African Economic and Monetary Union norm of 3 percent of GDP by 2019 in order to preserve public debt sustainability and support the regional international reserves pool. Prudent public financial and debt management practices along with public enterprise reform would ensure fiscal sustainability and mitigate fiscal risks. Financial sector polices would focus on reducing vulnerabilities, including in the public banks, and fostering financial inclusion. Structural reforms will improve the business environment. Measures to improve the quality and dissemination of economic statistics will support policy making and investment.

Background

Côte d’Ivoire, which became a member of the IMF on March 11, 1963, has an IMF quota of SDR 650.40 million.

For additional information on the IMF and Côte d’Ivoire, see: http://www.imf.org/external/country/civ/index.htm

Côte d’Ivoire: Selected Economic Indicators: 2015–20

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

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

1

The ECF is a lending arrangement that provides sustained program engagement over the medium to long term in case of protracted balance of payments problems.

2

The EFF was established to provide assistance to countries: (i) experiencing serious payments imbalances because of structural impediments; or (ii) characterized by slow growth and an inherently weak balance of payments position.