Togo: Second Review Under the Extended Credit Facility Arrangement and Request for Modification of Performance Criteria
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International Monetary Fund. African Dept.
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Publication Date:
22 Jun 2018
eISBN:
9781484362884
Language:
English
Keywords:
ISCR; CR; debt; Togo; real GDP; expenditure reduction; recapitalization; bank recapitalization; IMF staff estimate; broad money; debt service; state-owned enterprise; Africa; West Africa
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Second Review Under the Extended Credit Facility Arrangement and Request for Modification of Performance Criteria

Abstract

Second Review Under the Extended Credit Facility Arrangement and Request for Modification of Performance Criteria

Context and Recent Developments

A. Recent Developments: Economic Costs of Socio-Political Tensions

1. The socio-political tensions are increasingly taking a toll on economic activities (Text Figure 1). Since the eruption of the political turmoil in August 2017, economic activities have decelerated. The turnover of large companies in some key sectors has fallen. Tertiary sector activities are the hardest hit. Private sector credit during the second half of 2017 was lower by 4.2 percent relative to the first half of 2017; the largest decline was in the construction sector. Thus, despite strong agricultural production, economic growth is estimated to have decelerated from 5.1 percent in 2016 to 4.4 percent in 2017. The current account deficit is estimated to have improved from 9.3 percent of GDP in 2016 to 8.0 percent of GDP in 2017, as imports related to public investment projects are dropping. Inflation has remained subdued, entering positive territory to 1.1 percent (year-on-year) at end-March 2018, after falling below zero in November 2017, due primarily to a sharp decline in food and energy prices, and possibly to slowing domestic demand. Core inflation, according to the WAEMU definition, rose to 0.7 percent in March 2018.

Text Figure 1.
Text Figure 1.

Togo: GDP and Financial Conditions

Citation: IMF Staff Country Reports 2018, 184; 10.5089/9781484362884.002.A001

Sources: Togolese authorities, and IMF staff estimates.

2. Despite the large revenue underperformance, the fiscal position improved significantly as expenditure was curtailed (Text Table 1). The strong fiscal performance in the first half of 2017 loosened in the second half, as the expected boost in revenue did not materialize. The domestic primary balance swung from a surplus of 1.6 percent of GDP to a deficit of −0.8 percent, respectively during the two semesters.1 Nonetheless, the full-year domestic primary surplus of 0.8 percent of GDP represents a significant consolidation of 5.3 percentage points of GDP relative to 2016. The overall primary balance and the overall balance (commitment basis) improved by about 9 percentage points of GDP. This strong consolidation was mostly driven by the halting of investment prefinancing, which led to a reduction of domestically financed investment by 4.6 percentage points of GDP. 2 Externally financed investment declined by 3 percent of GDP. Current expenditure also declined, by 1.8 percent of GDP.

Text Table 1.

Togo: Fiscal Developments, 2016–17

(percent of GDP)

article image
Sources: Togolese authorities and IMF staff estimates.

3. The political dialogue has stalled and protests have resumed. The dialogue between the government and opposition, facilitated by the Presidents of Ghana and Guinea, stumbled on the retroactivity of the two-term limit for the President. The opposition resumed protests in mid-April, which were dispersed by the police, leading reportedly to several injuries and arrests. Tensions have been re-intensifying.

B. Program Performance: Broadly Satisfactory

4. All continuous and end-December 2017 quantitative performance criteria (QPCs) were met while the indicative targets were missed (MEFP¶4, Text Table 2). The QPC on the domestic primary surplus for end-December 2017 under the program was exceeded by 0.3 percent of GDP. The QPC on net domestic financing was met; even if the higher-than-programmed arrears repayment is taken into account, the QPC would be met with a margin of about 1 percent of GDP. The government refrained from contracting or guaranteeing non-concessional external debt and continually remained current on its external debt obligations. Moreover, the government did not provide any guarantees for domestic suppliers and contractors and refrained from any new prefinancing. The indicative target on revenue collection was missed by 2 percent of GDP. The indicative target on domestically financed social spending was missed by a small margin (0.2 percent of GDP).

Text Table 2.

Togo: Fiscal Developments, 2017

(percent of GDP)

article image
Sources: Togolese authorities and IMF staff estimates.

Include ECF financing.

GDP figures for original program approval and authorities’ revised budget reflect contemporaneous estimates.

5. Structural reforms are also progressing (MEFP¶6). All the four end-December 2017 structural fiscal benchmarks were met. The authorities reported that all controls were in place by August 2017 to detect and tax inaccurate declarations in the phosphate, clinker, cement, and iron sectors. A decree reorganizing the Ministry of Economy and Finance was adopted in September 2017. The authorities developed a cash management plan for 2018, which is consistent with consolidated procurement and commitment plans received from line ministries. A budget for FY2018 consistent with the Fund-supported program was adopted in November 2017. The end- February structural benchmark on the bank restructuring plan was not met but implemented with delay.

C. Medium-term Outlook: Downside Risks

6. Medium-term projections have been revised downward to account for the political uncertainty (Text Table 3). Growth projections have been lowered in the near future; growth is expected to gradually return to potential in outer years as the socio-political shock may dissipate and the recent upgrading of public infrastructure is expected to boost productivity and motivate private investment. Inflation is expected to remain below the WAEMU criterion of up to 3 percent. The current account deficit is expected to narrow to around 5 percent of GDP from 2021, reflecting reduced imports of public capital goods and better export performance. The debt-to-GDP ratio is forecast to decline below 60 percent by 2021.

Text Table 3.

Togo: Selected Economic Indicators, 2015–23

article image
Sources: Togolese authorities; and IMF staff estimates and projections.

Includes central government domestic arrears, state-owned enterprises debt and bank recapitalization costs.

7. Risks are tilted to the downside. Despite the authorities’ sustained efforts under the program, should public discontent persist, the government may face greater pressure to slow the ambitious fiscal consolidation and other planned reforms. The legislative and local elections scheduled for this year, possibly combined with a constitutional referendum, could put pressure to expand public expenditure. A strong reduction in public investment may lead to a greater-than-expected slowdown in growth, particularly if private investment lags. Furthermore, the uncertain behavior of the WAMU regional financial market may pose challenges to program implementation. Finally, weaker-than-expected global growth and unfavorable global financial conditions may also cloud program implementation (Annex I).

Policy Discussions

Fiscal policy aims at achieving the debt reduction envisaged under the original program for 2017–19 to ensure public debt sustainability and WAEMU regional external stability. Due to the significant revenue underperformance in 2017, revenue projections have been lowered for 2018. The revenue loss is addressed by a combination of revenue and expenditure measures and a slightly looser 2018 fiscal balance target. This loosening is warranted given the tense sociopolitical context and weak economic activity. Financial sector policies will focus on the implementation of the restructuring plan for the two troubled public banks. Structural reforms will be geared toward starting the implementation of the National Development Plan and the Compact with Africa initiative.

A. Fiscal Policy: Reducing Debt while Absorbing Shocks

8. Revenue projections for 2018 have been lowered to reflect the 2017 underperformance and account for the economic and socio-political situations (MEFP¶8). Whereas revenue was expected to increase by about 1 percent of GDP from 2016 to 2017, it declined by about 0.5 percent of GDP. This weak performance was due to a combination of two main factors. First, the deceleration of economic activities resulting from the socio-political tensions has hindered revenue collection. More importantly, the economic activities that form the tax base (such as commerce and construction) have been hit harder by the tensions than the non-taxed activities (such as agriculture). In addition to the direct impact on the tax base, the socio-political tensions have also altered the tax compliance behavior. Second, some weaknesses seem to persist in the tax administration; some reforms planned under the creation of the revenue authority (Office Togolais des Recettes) remain unfinished. Given this weak performance in 2017, the baseline revenue projections—without corrective measures—were lowered by about 1.5 percent of GDP, relative to the revenue contemplated in the adopted 2018 budget.

9. Given the lower revenue and the adverse political developments, some loosening of deficit targets is necessary in 2018 (MEFP¶8). The revised fiscal framework loosens the domestic primary balance (excluding bank recapitalization)—the fiscal indicator under the authorities’ direct control—by about 1 percent of GDP relative to the original program, after an overperformance of about 0.3 percent of GDP in 2017. This loosening is warranted in the context of weakening economic activities resulting from the political tensions. It also reflects difficulties to significantly reduce expenditure in the current context; considering the socio-political tensions and some key elections—local, legislative, and possibly constitutional—expected in 2018, spending pressures will likely mount and the government may be unable to repeat compressing spending below budgeted amounts, as it did in 2017.

10. The remaining revenue shortfall will be addressed through a combination of revenue and expenditure measures (MEFP¶8). In the original 2018 budget, in the context of the ECF first review, some tax and non-tax policy measures were introduced to boost revenue collection, amounting to about 1.2 percent of GDP. In the revised 2018 budget, some of these measures were redesigned and new measures were adopted, expected to yield additional revenue of about 0.5 percent of GDP relative to the original 2018 budget or 1.7 percent of GDP relative to 2017 (Box 1). On the expenditure side, the authorities have undertaken a comprehensive review of expenditure, with support from an international consulting firm. The review aims at identifying areas where expenditure efficiency could be improved to allow savings of about 0.5 percent of GDP in 2018 and up to 2 percent of GDP annually in the medium term. The adoption of a revised 2018 budget in line with this revised fiscal framework is a prior action for the conclusion of this second ECF review; this action is necessary to achieve fiscal sustainability and debt reduction, which are key objectives of the program.

11. This revised fiscal framework preserves the program’s overall fiscal and external objectives (MEFP¶9). Under the original program, the magnitude of debt reduction envisaged for 2017–19 was about 12 percentage points of GDP (excluding bank recapitalization); under the above revised fiscal framework, debt is expected to decline by about 14 percent during this period. In 2017, Togo’s overall fiscal deficit (commitment basis) of 0.3 percent of GDP complied with the WAEMU convergence criteria of 3 percent of GDP. In 2018, the overall fiscal deficit (commitment basis and excluding bank recapitalization) is projected to miss the WAEMU convergence criteria only by a very small margin. From 2019 onwards, the domestic primary balance (commitment basis) is programmed at a surplus of 2.9 percent of GDP.3 This corresponds to an overall fiscal deficit (commitment basis) of 0.5 percent of GDP, which is well within the WAEMU convergence criterion (Text Table 4). Togo will also be on track to meet the program’s long-term debt-sustainability objective of reducing the NPV of debt below 38 percent by 2025. Togo’s compliance with the WAEMU convergence criteria, despite the loosening of the fiscal framework in 2018, contributes to help rebuild WAEMU external reserves, which stood at US$17.9 billion at end-April 2018.4 Furthermore, the expected increase in external financing can also bolster external reserves.

Text Table 4.

Togo: Compliance with the WAEMU Convergence Criteria, 2015–23

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Sources: Togolese authorities and IMF staff estimates and projections.

Excludes bank recapitalization costs of CFAF 42 billion (1.4 percent of GDP).

Includes central government domestic arrears and state-owned enterprise debt.

12. The above 2019 and medium-term fiscal objectives, both in terms of the WAEMU criteria and the more ambitious program targets, are within reach. The fiscal consolidation required in 2019 to meet the WAEMU convergence criteria of an overall fiscal balance at a deficit under 3 percent of GDP is 0.1 percentage point of GDP on commitment basis. The fiscal consolidation required in 2019 to meet the program target on the overall fiscal balance is 2.6 percentage points of GDP on commitment basis (Text Table 5). These adjustments seem feasible given (i) Togo’s large expenditure increase in recent years; (ii) the higher level of expenditure in 2018 relative to peer countries (Text Figure 2); and (iii) the cross-country experiences on fiscal adjustment (Text Figure 3). The WAEMU targets are well within reach; although the program targets are more challenging, they seem feasible.

Text Table 5:

Togo. Fiscal Adjustment, 2018–191

(percent of GDP)

article image
Sources: Togolese authorities; and IMF staff estimates.

Commitment basis, incl. grants and excl. bank recapitalization costs.

Text Figure 2:
Text Figure 2:

Togo. Public Expenditure, 2018–2021

(percent of GDP)

Citation: IMF Staff Country Reports 2018, 184; 10.5089/9781484362884.002.A001

Sources: World Economic Outlook; Togolese authorities; and IMF staff estimates.
Text Figure 3:
Text Figure 3:

Togo. Fiscal Adjustment in Cross-Country Context

(percent of GDP)

Citation: IMF Staff Country Reports 2018, 184; 10.5089/9781484362884.002.A001

Sources: Escolano, J. et al (2014), “How Much is A Lot? Historical Evidence on the Size of Fiscal Adjustments”, IMF Working Paper No. 14/179 (Washington: International Monetary Fund); Togolese authorities; and IMF staff estimates.1/ Sample of 49 countries covering fiscal adjustments undertaken from 1945–2012.2/ Adjustment in primary balance needed to reach WAEMU convergence criterion of overall deficit (committment basis) of 3 percent or less.

B. Fiscal Management: Strengthening Revenue Administration and Public Financial Management

13. The large revenue underperformance calls for measures to bolster revenue administration (MEFP¶F10–12). Since its creation in 2012, the revenue authority (Office Togolais des Recettes) has implemented several measures, including, in 2017, payments online and through mobile phones, collateral against tax disputes, and expanded the use of computers in customs clearance procedures. Nonetheless, some key reforms remain unfinished. In 2018, the revenue authority plans to strengthen the collection of property taxes, document and streamline tax exemptions, expand further the functionalities and coverage of the digital customs clearance procedures, and tighten controls (Box 1).

Bolstering Revenue Collection

Faced with the weak revenue collection, the authorities are redesigning and taking new corrective measures, both on tax policy and tax administration. These measures are expected to yield about 1.7 percent of GDP of revenue in 2018 relative to 2017. Some additional measures, which have not been quantified nor included in the above package yet, will also be introduced to guard against risks of underperformance.

Tax Policy Measures:

  • VAT rates: the reduced rates introduced in 2017 are phased out (on a range of basic food and textile products, electronic and telecommunication equipment, and solar power panels). The reduced rates did not lead to a decline in end-consumer prices and facilitated tax fraud.

  • Telecommunication sector: the 5-percent turnover tax envisaged in the original 2018 budget has been substituted with license fees, which yield higher revenue for 2018. As such license fees will likely not reoccur permanently in the future, revenue yields from this measure are reduced in outer years.

  • Property tax: first, a general land survey is underway country-wide to establish and (re)evaluate the property tax base. Second, a digital detailed land registry will be put in place for the capital city of Lomé to identify zones and neighborhoods with large potential tax revenue (“niches fiscales”). The communication to the Cabinet meeting of this digital land registry is a prior action for the conclusion of this second ECF review.

  • Interest earnings: currently, interest earnings from deposits in accounts below CFAF20 millions are exempted from tax payment. This threshold will be lowered to CFAF10 million and limited to only one exempted account per person. The latter measure will prevent fraudulent behavior to split deposits in multiple accounts below the threshold.

  • Service fees: revenue previously collected by various government entities or agencies and used for various purposes outside the budget will be collected directly by the revenue authority through new collection offices and will feed into the budget.

  • Dividends: some state-owned enterprises with strong financial position will distribute dividends. As such dividends may not accrue sustainably in the future, revenue yields from this measure are reduced in outer years.

  • Tax expenditures: a comprehensive record will be produced and appended to the 2019 draft budget law to be submitted to Parliament.

Tax Administration Measures:

  • Tax arrears: several tax adjustment notifications have been sent out; some large amounts have already been settled and paid.

  • e-Service: the mandatory online declaration for large taxpayers and the mobile payment for transport activities, which were implemented in 2017, will be expanded in 2018 for several other sectors.

  • Tax certificate: the use of VAT ineligibility certificate (“certificat de détaxe”) will be limited to VAT payments only; the use of this mechanism will be disallowed for the payment of other taxes. This measure will prevent the abusive use of these certificates and will protect the collection of other (non-VAT) taxes.

  • Digital procedures: customs declaration will be gradually conducted through digital procedures, including customs declaration documents. This measure will accelerate clearance and reduce opportunities for fraud.

  • Auctions: the functionalities in ASYCUDA to record and process activities related to auctions will be activated.

  • Pre-clearance control: all controls and adjustments on customs declarations will mandatorily be completed and recorded in the computer system before clearance can be given and before the merchandises can leave the customs area.

Togo: Yield from Fiscal Measures in Revised 2018 Budget

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Sources: Togolese authorities; and Fund staff estimates.

14. To complement the ongoing efforts on clearing the stock of arrears, the institutional framework will be strengthened to prevent new accumulation (MEFP¶13). The authorities made strong efforts to repay arrears in 2017; net repayment reached CFAF50 billion or about 2 percent of GDP, which corresponds to 41 percent of total recent arrears stock.5 The fiscal framework under the IMF-supported program envisages further net repayments of CFAF65 billion (2.2 percent of GDP) in 2018 and CFAF35 billion (1.1 percent of GDP) in 2019. To support these efforts and prevent new accumulation, the government plans to synchronize the entire expenditure chain with the cash management plan. The procurement, commitment, and cash management plans will be updated on a monthly basis to ensure coordination and guide the pace of commitment authorizations (structural benchmark for end-December 2018). The authorities will send to staff, starting from July 2018, monthly data on the stock of payment arrears by age (structural benchmark for end-December 2018). The coverage of the treasury single account will be expanded. Furthermore, a cost-effectiveness analysis of public investment projects will be carried out and enforced under the 2019 budget (structural benchmark for end-September 2018).

15. A mechanism could be set up to facilitate the recording and projections of financing from development partners. There seem to be some delays in the recording of the status of some foreign-financed projects in the budget execution. Information on disbursement plans could also be harmonized between partners and the authorities to ensure accurate budget formulation and smooth budget execution.

C. Borrowing Policies: Strengthening Debt Management and Reprofiling Public Debt

16. The authorities are implementing some key measures to improve debt management (MEFP¶14). In the context of the reorganization of the Ministry of Finance, the functions of cash flow forecasting and debt management have been brought together under a single general directorate; the latter is organized in front, middle, and back offices to enhance its efficiency. A procedures manual is under preparation to guide debt management operations under the new debt office. The manual describes the operational practices that need to be followed under the new organizational structure, the roles and responsibilities of each unit pertaining to debt management activities, and the information flows between teams within the new debt office and other institutions such as the Budget General Directorate, the Central Bank, Agence UMOA-Titres, and the Ministry of finance.

17. To alleviate the heavy debt service burden, the authorities are considering borrowing externally at more favorable terms to repay more costly domestic debt (MEFP¶15). At end-December 2017, the external debt-to-GDP ratio was 19.9 percent and the domestic debt-to-GDP ratio was 58.8 percent. Total debt service amounted to 24 percent of revenue in 2017. While the ECF-supported program currently includes a zero-limit on non-concessional debt, Togo is currently rated as being at ‘moderate’ risk of external debt distress, and hence the program can accommodate non-zero non-concessional borrowing limits if they do not lead to an external risk-rating downgrade. 6 However, to ensure that the reprofiling operation achieves its objective of improving the overall public debt profile, it should maintain or reduce the present value of total public debt, after taking into account all costs such as fees and charges. The operation should be limited to a magnitude that keeps Togo comfortably at moderate risk of external debt distress (i.e. below the NPV-of-external-Debt-to-GDP ratio of 30 percent); at end-December 2018, this ratio is currently forecast to be 18.2 percent. Other DSA thresholds would also need to be scrutinized and complied with. The debt reprofiling operation could alleviate some short and medium-term liquidity constraints, which is beneficial for Togo considering the uncertain behavior of the regional financial market. Nonetheless, the authorities will need to persevere in the ongoing fiscal consolidation to fundamentally address the debt burden.

D. Financial Sector: Implement the Bank Restructuring Plan

18. The restructuring plan was submitted to the general secretariat of the WAMU banking commission for review and approval in June 2018 (MEFP¶16–18).7 The restructuring process of the two ailing public banks—which is the main strategy intended to restore financial stability under the program—will be guided by the following principles: adequate recapitalization in line with latest prudential requirements by the WAMU regulator; no bail-out of minority shareholders; minimum cost for the government while preserving financial stability; active collection of non-performing loans by an entity within the bank; clear public interest mandate; strengthening of the bank’s governance framework; strengthening of internal control; closing of non-profitable activities or branches; and setting-up of an efficient organizational structure. The Board of Directors of the new bank will comprise four independent and three non-executive members, with the heads of audit and risk committees chosen among the independent members. A mechanism will be put in place to ensure full independence of the governance structure of the new public bank resulting from the merger of the two state-owned banks (structural benchmark for end-December 2018). The recapitalization is estimated at about CFAF42 billion (or about 1.5 percent of GDP).

19. Beyond the bank restructuring, the high NPLs ratio—17 percent at end-December 2017—also needs to be addressed (Text Figure 4). The two public banks—which together account for 20.1 percent of total assets of the banking system at end-2017—have contributed to the country-wide deterioration in solvency ratios and increase in the fraction of non-performing loans over time. Their merger and restructuring includes a resolution mechanism for the stock of NPLs accumulated in the two banks. More precisely, an NPLs recovery unit will be created inside the newly merged bank, with the option to outsource some difficult debts. The bank will identify the positions and functions involved in the collection process and staff will be selected and trained on the best techniques and practices to ensure successful loan recovery and good customer relations. A system of incentives for staff will be added to the base salary, with a collection fee designed to include higher fees for the recovery of higher default amounts.

Text Figure 4.
Text Figure 4.

Togo: Non-Performing Loans (NPLs) and Provision, 2014Q2 – 2017Q4

(in percent)

Citation: IMF Staff Country Reports 2018, 184; 10.5089/9781484362884.002.A001

Sources: Togolese authorities; and IMF staff estimates.

20. The general secretariat of the WAMU banking commission has opened collaboration with staff. They communicated to staff that they have been regularly informed of the progress on the bank restructuring since the authorities’ decision to proceed with the merger. They have begun examining the restructuring plan. This plan is scheduled to be submitted to the WAMU banking commission during their session in June 2018; an approval is expected, provided that the application meets the requirements.

E. Structural Reforms: New National Development Plan and Compact with Africa

21. A new National Development Plan (NDP) has been finalized to anchor public policies and partners’ programs for 2018–2022 (MEFP¶F19–20). The overarching objective of the NDP is to pave the way for a structural transformation of the Togolese economy through a major logistic hub, a dynamic financial center, a strong manufacturing base, and inclusive and social policies. The logistic hub, leveraging Togo’s geographical location, will be supported by the deep-water Port of Lomé, the newly-renovated international airport, and littoral and hinterland corridors. The objective of a dynamic financial center will build on the presence in Togo of headquarters of several regional banking and insurance groups, and the development of the digital economy. The inclusive and social policies to tackle poverty will be based on agricultural clusters, manufacturing through industrial parks, and consolidation of the mining sector. The ECF-supported program’s emphasis on safeguarding social spending in the context of fiscal consolidation is fully in line with the NDP’s objectives on inclusive and social policies to tackle poverty. A successful implementation of the NDP will benefit from greater prioritization of projects and greater emphasis on domestic resource mobilization.

22. Given Togo’s desire to become a regional commercial and transportation hub, it is paramount to develop an inviting business climate. Some measures have been initiated to improve the business environment. Based on the findings of the Doing Business survey (Text Figure 5), the government, in consultation with the private sector, produced and publicized an action plan which targets the improvement of the main indicators on which Togo performs subpar. The authorities adopted some measures to improve the access to electricity, business creation, dealing with construction permits, and contract enforcement. However, reforms are needed in areas where performance seems lower than peer countries, i.e., registering property, easiness of paying taxes, and access to credit. Property title registration and the related legal framework could be improved to allow the use of property as collateral in loans to small- and medium-sized enterprises. As a first step, the authorities committed to digitize the stock of existing land property titles and open the central window for the liquidation and payment of fees, and clear the entire backlog of pending mortgage handover documents (structural benchmark for end-December 2018). In addition, high government presence and intervention in key sectors—such as phosphates and telecoms— is stifling private initiative.

Text Figure 5.
Text Figure 5.

Togo: Doing Business Indicators, 2018

(0=lowest, 100=highest performance)

Citation: IMF Staff Country Reports 2018, 184; 10.5089/9781484362884.002.A001

Source: World Bank Doing Business Report 2018.

23. Togo has been admitted to the Compact with Africa (CwA) (MEFP¶F22). The macroeconomic reforms in the policy matrix are aligned with the ECF-supported program, covering macroeconomic stability, mobilization of domestic revenue, public investment management, and public financial institutions. Other reforms include business environment and regulation, investor protection and dispute resolution, legal framework for public-private partnership, and mobilization of private and institutional investors. These reforms are consistent with the National Development Plan. The authorities intend to leverage the CwA membership to attract foreign direct investment.

Program Modalities and Other Issues

24. The program will continue to be reviewed semi-annually based on quantitative performance criteria, indicative targets, and structural benchmarks. The authorities are requesting—and staff supports—a modification of the end-June 2018 QPCs on the domestic primary balance and net domestic financing as well as the continuous QPC on non-concessional external borrowing. One structural benchmark is proposed to be reset from end-June 2018 to end- September 2018; five new structural benchmarks are proposed for end-December 2018. These structural benchmarks are expected to strengthen cash management, prevent arrears accumulation, ensure fiscal sustainability, restore financial stability, and improve business environment. The third review of the program will be based on the end-June 2018 criteria/targets/benchmarks and is scheduled to be discussed by the IMF Board on or after September 15, 2018. The program is financed with support from development partners including the World Bank, the European Union, and the African Development Bank, while ECF disbursements will close the remaining financing needs.

25. Safeguards assessment: An updated safeguards assessment of the BCEAO, completed in April 2018, found that the central bank has maintained a strong control environment since the last assessment in 2013 and its governance arrangements are broadly appropriate. In addition, audit arrangements have been strengthened, International Financial Reporting Standards (IFRS) were adopted as the accounting framework beginning with the 2015 financial statements, and a 2016 external quality review of the internal audit function found broad conformity with international standards. The BCEAO’s risk management framework established in 2014 is also progressing well with implementation of its work across the bank.

26. Capacity to repay: Togo’s capacity to repay the Fund remains adequate (Table 6). Obligations to the Fund would peak in 2025 at only 2.5 percent of government revenue or 0.5 percent of GDP.

27. Capacity Development: The TA priorities are aligned with the program objectives. Focus is on revenue administration, public financial management, financial sector, and real sector statistics (Annex II).

Table 1.

Togo: Selected Economic and Financial Indicators, 2015–23

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Sources: Togolese authorities and IMF staff estimates and projections.

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

Includes state-owned enterprise external debt.

Includes prefinancing debt, domestic arrears and state-owned enterprise domestic debt.

Includes prefinancing debt, domestic arrears and state-owned enterprise debt.

Includes prefinancing debt and domestic arrears.

Table 2a.

Togo: Central Government Financial Operations, 2015–20 (billions of CFA Francs)

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Sources: Togolese authorities and IMF staff estimates and projections.

Reflects projected cost for the recapitalization of the two merged state owned banks.

Arrears accumulations were rolled over in 2016 using 2016 revenues.

2018 figures include an adjustor for arrears payment of CFAF 59.3 billion (2 percent of GDP).

Includes treasury bills and bonds held by commercial banks.

Table 2b.

Togo: Central Government Financial Operations, 2015–20 (Percent of GDP)

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Sources: Togolese authorities and IMF staff estimates and projections.

Reflects projected cost for the recapitalization of the two merged state owned banks.

Arrears accumulations were rolled over in 2016 using 2016 revenues.

2018 figures include an adjustor for arrears payment of CFAF 59.3 billion (2 percent of GDP).

Includes treasury bills and bonds held by commercial banks.

Table 3.

Togo: Balance of Payments, 2015–23

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Sources: Togolese authorities and IMF staff estimates and projections.

In line with WAEMU BoP methodology, includes commercial bank NFA and Togoloese public sector NFA holdings at the BCEAO.

2018 value is for end-April.

Table 4.

Togo: Monetary Survey, 2015–23

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Sources: Central Bank of West African States and IMF staff estimates and projections.
Table 5.

Togo: Financial Soundness Indicators of the Banking System, 2014–17

(Percent)

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Source: BCEAO.
Table 6.

Togo: Indicators of Capacity to Repay the Fund, 2017–20291

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Sources: IMF staff estimates and projections.

Includes proposed extension and augmentation of access.

Total debt service includes IMF repurchases and repayments.

Includes state-owned enterprises debt.

Staff Appraisal

28. Economic activities have weakened due to the continuing socio-political tensions. Economic growth is estimated to have decelerated from 5.1 percent in 2016 to 4.4 percent in 2017. Private-sector credit during the second half of 2017 was lower by 4.2 percent relative to the first half of the year. Inflation has remained subdued at 1.1 percent (year-on-year) at end-March 2018. The current account deficit is estimated to have improved from 9.3 percent of GDP in 2016 to 8.0 percent of GDP in 2017, as imports related to public investment projects are declining.

29. Risks are tilted to the downside. Although recent infrastructure upgrades may boost productivity and motivate private investments in the medium term, a persistence of the sociopolitical tensions could weigh on macroeconomic performance. The government may face greater pressure to slow the ambitious fiscal consolidation and other reforms. The legislative and local elections scheduled for this year, possibly combined with a constitutional referendum, could put pressure to expand public expenditure. A strong reduction in public investment may lead to a greater-than-expected slowdown in growth, particularly if private investment lags.

30. Staff commends the authorities’ satisfactory performance under the ECF-supported program despite difficult circumstances. Despite weak revenue collection, the fiscal position shows a strong consolidation as expenditure was curtailed; the domestic primary balance at end-2017—the fiscal indicator under the control of the government—improved by about 5 percentage points of GDP relative to 2016. Public debt declined from 81.6 percent of GDP in 2016 to 75.7 percent of GDP in 2017. The authorities are undertaking a review of expenditure to improve its efficiency. They have started implementing measures to improve public debt management. They have reduced the stock of arrears by about 2 percent of GDP.

31. Staff recommends pursuing debt reduction, implementing the bank restructuring plan, and persevering on structural reforms. The magnitude of debt reduction originally envisaged under the program for 2017–19 should be maintained, while allowing for a slight loosening in 2018 to account for the weak economic activities and the ensuing revenue underperformance. Staff reiterates the importance of progressing toward adherence to the WAEMU convergence criteria to help rebuild regional reserves. Reforms should be pursued to address weak revenue collection, prevent new arrears accumulation, and improve the cost-effectiveness of public investment projects. The restructuring plan of the two public banks should be implemented, including adequate recapitalization, strengthened governance, and financial viability.

33. Staff recommends completion of the second ECF review as well as the modification of the performance criteria on domestic primary balance and net domestic financing (both for end-June) and on non-concessional external borrowing (continuous). This recommendation is based on the authorities’ good performance under the program as well as their commitments going forward.

Figure 1.
Figure 1.

Togo: Indicators of Economic Activity

Citation: IMF Staff Country Reports 2018, 184; 10.5089/9781484362884.002.A001

Sources: Togolese authorities; and IMF staff estimates.
Figure 2.
Figure 2.

Togo: External Sector, 2012–2017

Citation: IMF Staff Country Reports 2018, 184; 10.5089/9781484362884.002.A001

Sources: Togolese authorities; and IMF staff estimates.
Figure 3.
Figure 3.

Togo: Fiscal Developments, 2017

Citation: IMF Staff Country Reports 2018, 184; 10.5089/9781484362884.002.A001

Sources: Togolese authorities; and IMF staff estimates.
Table 7.

Togo: Schedule of Disbursements Under ECF Arrangement 2017–20

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Sources: Togolese authorities; and IMF staff estimates.

In addition to the generally applicable conditions under the Extended Credit Facility

Annex I. Risk Assessment Matrix1

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Annex II. Capacity Development Strategy

As a low-income fragile country, Togo faces capacity and institution building challenges, which are being addressed with tailored capacity development, including technical assistance and training. This assistance is coordinated with the IMF-supported program and covers the areas of revenue administration, public financial management, bank restructuring, and statistics.

1. The priorities under the ECF-supported program and recent economic developments require extensive capacity development (CD). The key policy priorities under the authorities’ program supported by the ECF are to (i) pursue fiscal consolidation to ensure debt sustainability; (ii) enhance fiscal governance on revenue administration and PFM; and (iii) solve the problem of the two public banks to ensure financial stability and prevent future fiscal costs. Recent developments in those areas call for stepping up CD: revenue has significantly underperformed; arrears continue to accumulate; the efficiency of investment needs to be bolstered following the phasing-out of prefinancing; and the recently developed bank restructuring plan should be implemented swiftly. Despite notable progress made by the authorities in the areas where the IMF provided CD, some obstacles to effective absorption of CD remain. The implementation of CD recommendations has been uneven across sectors; obstacles are mostly related to capacity weaknesses, insufficient ownership, need for prioritization, and internal coordination issues.

Key CD Priorities and Objectives for FY2018:

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Authorities’ Views:

2. The authorities agree with the thrust of the CD strategy. They see the CD as being aligned with their reform agenda. The CD from the IMF has helped feed their reform agenda by providing specific measures. The implementation/absorption of the recommendations could be improved through more training and outreach.

Appendix I. Letter of Intent

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To

Ms. Christine Lagarde

Managing Director

International Monetary Fund

Washington, D.C. 20431

Dear Ms. Lagarde:

1. The Togolese government requests the completion of the second review under the ECF arrangement based on the satisfactory implementation of the program. All continuous and end-December 2017 quantitative performance criteria were met. The domestic primary balance and domestic financing targets were met. We refrained from contracting any new prefinancing, contracting or guaranteeing non-concessional external debt, and providing any guarantees for domestic suppliers and contractors. All structural benchmarks at end-December 2017 were also met; the structural benchmark on the bank restructuring plan due by end-February was not met but implemented with delay. We also completed the prior actions on submitting to the Parliament a revised 2018 budget consistent with the program and submitting to the Cabinet a draft proposal to enhance property tax revenue. The Indicative Target (IT) on revenue collection was missed and the IT on domestically financed social spending was marginally below target. We propose modification of the end-June 2018 performance criteria on domestic primary balance and net domestic financing as well as the continuous performance criteria on non-concessional external borrowing.

2. We have carried out the fiscal consolidation as envisaged under our program supported by the ECF arrangement. Despite a large revenue underperformance, the 2017 fiscal outturn shows a substantial consolidation relative to 2016 driven by significant expenditure optimisation. The domestic primary balance, which reflects the fiscal effort under the control of the government, improved from a deficit of about 4 percent of GDP in 2016 to a surplus of about 1 percent of GDP in 2017. At the same time, good progress was made in implementing our structural reform agenda, including on revenue administration and public financial management.

3. The government remains committed to continue addressing the high debt level. The government has submitted to the parliament a revised 2018 budget accounting for the revenue shortfall and consistent with the targets under the ECF-supported program. While this revised budget shows a slight loosening of the 2018 fiscal balance target relative to the initial budget, the revised fiscal framework broadly preserves the original magnitude of debt reduction during program period as well as the external objectives, due partly to the overperformance in 2017. Our policies will ensure that Togo adheres to the regional convergence criteria and contribute to the joint WAEMU countries’ efforts to help rebuild regional reserves. Furthermore, we will continue to focus our policies on sustainable and inclusive growth, including the protection of social spending despite the fiscal consolidation. As part of the continuation of the program, our structural reforms under the ECF-supported program in the second half of 2018 will focus on six (6) structural benchmarks related to: (i) the transmission to IMF staff, starting with July 2018, of monthly data on the stock of payment arrears by age (December 2018); (ii) strengthening of the implementation of the cash plan and control of commitment authorizations (December 2018); (iii) guidelines to include in 2019 budget only investment projects selected through cost-benefit analysis (reset for September 2018); (iv) adoption of 2019 budget in line with program objectives (December 2018); (v) mechanism to ensure full independence of the governance structure of the new public bank resulting from the merger of the two state-owned banks (December 2018); and (vi) putting in place mechanisms and procedures to facilitate land registration (December 2018).

4. Our financial sector program aims at maintaining financial stability, and ensuring that all banks are well capitalized and viable, with owners and managers that meet the fit-and-proper and financial-strength criteria, in line with the regulations set by the BCEAO. With that objective, the government will pursue policy reforms to strengthen the financial situation of the two public banks, while minimizing future risks to the budget. Such reforms include finalizing the ongoing merger and restructuring process as well as putting in place an independent governance.

5. We are considering reprofiling a portion of our domestic debt into external debt on more favorable terms. We request that the zero-ceiling on non-concessional external debt be modified to allow for such operations. We commit to limiting the magnitude of any such operations to ensure that Togo maintains a moderate risk of external debt distress and that these do not increase our total public debt level in net-present-value terms. We further commit to providing Fund staff, prior to undertaking any reprofiling operations, all necessary data to confirm that they are consistent with our ECF-supported program.

6. We are confident that the policies set out in the attached MEFP will enable us to achieve our program objectives. However, we will take any further measures that may become necessary for this purpose. We will consult with the IMF on the adoption of such measures, and in advance of revisions to the policies contained in the MEFP, in accordance with the IMF’s policies on such consultations. We will provide such information as the IMF may request about progress in implementing our economic and financial policies. We authorize the publication of the staff report for the second review under the ECF arrangement, this letter of intent, and the attached memorandum of economic and financial policies and technical memorandum of understanding.

Very truly yours,

Minister of Economy and Finance

/s/

Sani Yaya

Attachments:

  • I. Memorandum of Economic and Financial Policies

  • II. Technical Memorandum of Understanding

Attachment I. Memorandum of Economic and Financial Policies (MEFP)

1. This Memorandum informs on recent economic developments, reports on performance under Togo’s program supported by the ECF arrangement, and describes the authorities’ policies going forward. It takes stock of continuous and end-December 2017 quantitative performance criteria and structural benchmarks and sets the targets for end-June and end-December 2018.

Recent Economic Developments

2. Economic activity has weakened due to continuing socio-political tensions. Economic growth is estimated to have decelerated due to a slowdown in tertiary sector activities that are the most affected by the political demonstrations, despite bumper agricultural production. The consumption of some key products has softened in the second half of 2017, including energy, petroleum products, and construction materials. Stagnant since early 2017, the turnover of large companies in several key sectors waned in the last quarter as did credit to the private sector. The trade balance continued to improve, driven by considerably lower imports related to public investments. Inflation has remained subdued, entering positive territory to 1.1 percent (year-on-year) at end-March 2018, after dropping below zero in November 2017 due primarily to a sharp decline in food and energy prices, and possibly to slowing domestic demand.

3. Despite the revenue underperformance, we were nonetheless able to achieve a substantial consolidation relative to 2016 driven by a significant expenditure optimization. The primary fiscal balance improved by 8.7 percentage points of GDP to a surplus of 1.5 percent of GDP. The overall balance improved by more, while the domestic primary balance improved by 5.3 percentage points of GDP. This consolidation was mostly driven by our halting of investment prefinancing, combined with some optimization of current expenditure. It also reflected a decline of foreign-financed investment by about 3 percentage points of GDP.

Program Implementation

4. All continuous and end-December 2017 quantitative performance criteria (QPCs) under the program have been met. The QPC on the domestic primary surplus for end-December 2017 under the program was exceeded by 0.3 percent of GDP. In the revised 2017 budget, we had envisaged to tighten the domestic primary balance further than the program objective to make room for significant arrears repayment, but we were unable to reach this ambitious target due to the revenue underperformance. The QPC on net domestic financing ceiling was met. The government refrained from contracting or guaranteeing non-concessional external debt and continually remained current on our external debt obligations. The government did not provide any guarantees for domestic suppliers and contractors and refrained from any new prefinancing. The memo items on the overall primary balance and contracting of concessional external debt were overperformed by significant margins.

5. Despite the revenue shortfall, we have protected social spending. They were executed at 98 percent of the level planned in the program; we will continue our efforts to preserve priority social spending. As noted above, fiscal revenue lagged expectations, leading the end-December Indicative Target (IT) on revenue collection to be missed by 2 percent of GDP.

6. We have successfully implemented the structural reforms laid out in our ECF-supported program. All the four end-December structural fiscal benchmarks were met: (i) all controls were in place by August 2017 to detect and tax inaccurate declarations in the phosphate, clinker, cement and iron sectors; (ii) in September 2017, we adopted a decree reorganizing the Ministry of Economy and Finance; (iii) in December 2017, we produced a cash management plan for FY2018; and (iv) a budget for FY2018 consistent with the Fund-supported program was adopted by the Cabinet in November 2017. The structural benchmark on the bank restructuring plan due by end-February 2018 was not met but implemented with delay.

Economic and Financial Policies for 2018–19

Macroeconomic Framework

7. Notwithstanding the challenges presented by the current socio-political environment, we intend to continue efforts to revive the Togolese economy. While growth may face some new headwinds in the near term, we expect economic activity to gradually pick up in coming years, as the political situation improves and the recent upgrading of public infrastructure boosts productivity and motivates private investment. Inflation should remain within the WAEMU convergence criterion of up to 3 percent. The current account deficit will narrow to about 5 percent of GDP by 2021, reflecting reduced imports of public capital goods and better export performance.

Fiscal Policy

8. We have revised the 2018 budget to take into account the weaker-than-expected revenue performance and the adverse political developments (prior action). Thus, we have taken measures at both revenue level (an increase of about 0.5 percent of GDP) and spending (an optimization of about 0.5 percent of GDP) and have slightly relaxed the budget balance target. Revenues will be boosted primarily by additional non-tax revenues, including mobile phone license revenues. Expenditure savings will be obtained from an optimization effort that we are undertaking with the support of an international consulting firm. The loosening of the budget deficit is warranted by our good performance in 2017 and as a countercyclical fiscal policy in a context marked by the slowdown in economic activities, in connection with the socio-political tensions.

9. This revised fiscal framework broadly preserves the program’s overall fiscal and external objectives. It maintains the magnitude of debt reduction envisaged under the original program for 2017–19, of about 12 percentage points of GDP. Implications for the regional WAEMU reserves are also similar to the original program. From 2019 onwards, the domestic primary balance (commitment basis) is projected at a surplus of 2.9 percent of GDP. This fiscal path will ensure that, by the end of the program in 2019, we will meet the WAEMU convergence criterion of reducing the overall deficit to under 3 percent of GDP.

Fiscal Management and Institutions

10. We implemented several administrative measures in 2017 to improve revenue collection. The Revenue Authority (Office Togolais des Recettes – OTR) has made online reporting mandatory for large companies. The OTR has also introduced the mobile payment option for Used Vehicle Fleet (PVO) and Motor Carrier Income Tax (IRTR) transactions. Recovery measures have been strengthened regarding the request for suspension of payment and the lodging of a guarantee in the event of dispute of charges. The recovery of declarative defaulters has been made systematic. Finally, the IT tool has been extended to all clearance procedures.

11. We will continue our efforts in 2018 to correct the revenue underperformance in 2017. To this end, aware of a significant fiscal niche at the property tax level, we have taken steps to enhance property tax collections (prior action). We have prepared and submitted to the Cabinet a methodological document for the establishment of the Urban Land Registry (Régistre Foncier Urbain) of Lomé, which will allow the control of the matter and the taxable persons with a view to increasing and consolidating the revenues from land taxation. The RFU allows setting up a land map identifying and locating each property, as well as land databases. The RFU can be defined as a multipurpose Land Information System (Système d’Informations Foncières) based on digitized parcel mapping. It is thus assimilated to a simplified cadaster and has a purely fiscal purpose. The methodological note describes the various stages, the actors and their role, the detailed estimated cost, the timing of the realization of the RFU. The activities will start with pilot areas with high potential in 2018.

12. Other revenue enhancing measures are also under consideration. The tax exemption threshold for interest income on funds deposited in savings account will be reduced from 20 to 10 million CFA francs, all accounts combined. The e-service—related to online declaration and payments and mobile payments—will be expanded to all other taxpayers. The use of exemption eligibility certificate (certificat de détaxes) will be limited to the sole payment of VAT and this mechanism will be disallowed for other taxes. Customs clearance procedures and related documentation will be gradually digitalized. The functions of trans-shipment and auctions in ASYCUDA will be activated. All ex-ante controls and all adjustments to customs declarations will be completed and reported in the IT system by officers before clearance. Finally, all tax expenditures will be compiled and attached to the next budget law for FY2019.

13. With the goal of accelerating arrears clearance and preventing new accumulation, our government will strengthen the entire expenditure chain and cash management. Beginning with July 2018, the Ministry of Economy and Finance will complete monthly procurement and commitment plans consistent with a cash plan derived from the revised 2018 budget. We will bolster the implementation of the cash plan and the control of commitment authorizations (structural benchmark end-December 2018). We will provide IMF staff with monthly data on the stock of payment arrears by age (structural benchmark end-December 2018). Reforms will continue on the coverage of the Treasury Single Account (TSA) with a view to centralizing public funds. Furthermore, the government will pursue the cost-benefit analysis of investment projects (structural benchmark end-September 2018).

Borrowing Policies and Debt Management

14. We remain committed to reducing public debt to approach the WAEMU debt convergence criterion of 70 percent of GDP by the end of the ECF-supported program in 2019. We will also be on track to meet our program’s long-term debt-sustainability objective of reducing the NPV of debt below 38 percent by 2025. We are strengthening our debt management capacities. To this end, we centralized the debt management functions, organized the debt management unit with front, middle and back offices; the managers will be appointed as soon as possible to allow the new structure to function properly. To further support these efforts, we will develop a procedures manual for debt management by around end-June 2018 following the recommendations of AFRITAC technical assistance; the manual will guide the activities of this structure.

15. We are considering reprofiling a portion of our domestic debt into external debt on more favorable terms. We request that the zero-ceiling on non-concessional external debt be modified to allow for such operations. We will limit the magnitude of any such operations to ensure that Togo maintains a moderate risk of external debt distress and that these do not increase our total public debt level in net-present-value terms. Before undertaking any debt-management operations, we commit to consult with the IMF staff and provide IMF staff with all data necessary to confirm that they comply with our ECF-supported program.

Financial Sector Policy

16. We have completed the comprehensive restructuring plan of the two problem banks (structural benchmark end-February 2018). The plan is guided by principles in line with best practices: adequate capitalization of the merged and restructured bank; no bailout of minority shareholders; minimization of costs for the state while preserving financial stability; active collection of nonperforming loans by a dedicated unit within the bank; a clear public interest mandate and strengthened governance free from political interference; strengthened management and internal control in the new bank resulting from the merger of the two state-owned banks; elimination of loss-making activities; and improved organizational efficiency. The cost of the restructuring to the budget is estimated at about 1.4 percent of GDP. The government submitted the plan in April 2018 to the WAMU Banking Commission for review. The legal transfer for the merger is expected to be completed by end-June 2018 (structural benchmark end-June 2018).

17. We are committed to taking measures to ensure long-term independent governance of the new bank and prevent future risks to the budget. To build a viable and well-managed bank, we are committed to strengthening the governance framework of the new bank by setting up a mechanism ensuring that the Board effectively exercises independent and objective judgment. In particular, the majority of the Board members will be independent and the Board will deliberate only in the presence of a majority of independent members. Given the critical role of the Board Chair for Board effectiveness, specific skills will be required for this position. For this purpose, the chairman of the Board will be either an independent director, or a non-executive director operating within a framework to be defined in coordination with IMF staff. The principles of governance of the bank, replacement and election of directors will be set forth in the bank’s statutes. We will put in place, before the legal merger at the end of June 2018, a formal framework guaranteeing the accountability of the Board. This relationship framework will allow the State to set high-level expectations and strategic orientations, based on which the Board will develop and/or fine-tune the strategy of the bank. The Ministry of Economy and Finance will act as a representative of the State while a unit within the ministry will monitor the strategy and financial performance of the bank. Following the legal merger, we will set up the new governance structure (structural benchmark end-December 2018)

18. Going forward, further reforms may be possible. In case such reforms entail modifications to the ownership structure, any such step would be governed by existing Togolese law and BCEAO regulations, including (but not limited to) fit-and-proper and solvency requirements for any potential shareholder. We will timely consult with IMF staff prior to taking such steps. Furthermore, given the high NPL ratio of about 17 percent at end-December 2017, we will develop a resolution plan, including measures and time-bound reduction targets.

Structural Reforms and Inclusive Growth

19. We completed and validated our National Development Plan (NDP). It will guide our policies in the coming years to spur growth and tackle poverty. This plan covers the period 2018–22, succeeding the Accelerated Growth and Employment Promotion Strategy (Stratégie de Croissance Accélérée et de Promotion de l’Emploi, SCAPE) which expired in 2017. The NDP is based on Government’s general policy principles. It is also inspired by the 2030 Agenda for Sustainable Development, the 2063 Agenda of the African Union, and the Vision 2020 of the Economic Community of West African States (ECOWAS). The overarching objectives of the plan are to pave the way for a structural transformation of the Togolese economy through the setting up of a major logistic hub, a dynamic financial center, a solid manufacturing base, accompanied by inclusive and social policies. The medium-term social priorities of the NDP dovetail with our commitment under our ECF-supported program to protect social spending, in particular for projects that have a high impact on poverty reduction. We have submitted a consolidated version of the NDP, which is our new Economic Development Document (EDD) for the information of the Executive Boards of the IMF and the World Bank.

20. The process of developing the NDP has actively involved all categories of development actors (public administration, institutions of the Republic, private sector, civil society in all its components, and development partners). Stakeholder mapping giving an indication of the specializations of the centers of interest and the intentions of the various partners intervening in Togo to support public policies has been established. Furthermore, consultations on development priorities were conducted at the central level and in the capitals of the five regions of the country.

21. Despite the considerable progress we have made toward improving the business environment, we recognize that more remains to be done. Based on the findings of the World Bank Doing Business survey and other competitiveness indicators, our government, in consultation with the private sector, produced an action plan to address key shortcomings and has recently adopted several measures to improve the granting of building permits, the access to electricity, the transfer of existing property titles, contract enforcement, and paying taxes. Our immediate concerns are land reform, business creation, cross-border trade, contract enforcement, and increasing the competitiveness of the Togolese economy (i.e., putting in place a legal framework governing dynamic public-private partnerships, acceleration of the tax telepayment). Regarding the land reform that is among the most pressing, we commit to put in place mechanisms and procedures to facilitate land registration, which shall include digitizing the stock of existing land property titles and open the central window for the liquidation and payment of fees, and clearing the entire backlog of pending mortgage handover documents (structural benchmark end-December 2018). Furthermore, we will take steps to further open some key sectors, such as phosphates and telecommunications, to private investment.

22. We are hopeful that Togo’s recent accession to the Compact with Africa will help us attract more investors. The matrix of reforms and the investment prospectus submitted as part of the CwA process capitalize on Togo’s major reforms to ensure a stable macroeconomic framework and an attractive investment framework. We pledge to use the Compact with Africa as a catalyst to advance reforms aimed at improving the business climate.

Program Monitoring and Data Issues

23. The program will continue to be reviewed semi-annually based on quantitative performance criteria, indicative targets, and structural benchmarks (Tables 1 and 2). Based on the revised fiscal framework explained above, we request a modification of the quantitative performance criteria for end-June 2018 on the domestic primary balance and net domestic financing. We also request a modification of the continuous performance criterion on non-concessional external borrowing. We propose quantitative performance criteria for end-December 2018 and indicative targets for end-September 2018 and end-December 2018. The performance criteria and indicators are defined in the attached Technical Memorandum of Understanding (TMU), along with the relevant adjustors. The third and fourth reviews of the program will be based on performance criteria for end-June 2018 and end-December 2018, respectively, and discussions of the program by the IMF Board will take place on or after September 15, 2018 and March 15, 2019, respectively.

24. The government will continue to strengthen the institutional capacity to ensure adequate monitoring of the program. The Permanent Secretariat for Reform Policies and Financial Programs (Secrétariat permanent chargé des politiques de réformes et des programmes financiers – SP-PRPF) will provide (i) technical program monitoring and quarterly progress reports; (ii) liaison between national structures, technical and financial partners; and (iii) coordination of technical assistance.

25. We recognize and acknowledge the weaknesses of our statistics and will take remedial measures in this regard. We have already reduced the lags in the production of final national accounts. In addition, efforts are being made to improve GDP estimates. We will take steps to avoid any delay in the production of final national accounts. The quality of the data will continue to improve. We have made progress in compiling and producing fiscal reports, particularly the government financial operations table (Tableau des Opérations Financières de l’Etat). We will ensure that the budget projections for the following year are based on estimates of budget execution of the current year.

26. We are confident that the policies included in this memorandum will allow for the achievement of the objectives of the economic program. We stand ready, however, to take any further measures that may become necessary to ensure the success of its policies, after consultation with the IMF. During the program period, we will not introduce or intensify restrictions on payments and transfers for current international transactions or introduce or modify any multiple currency practice without the IMF’s prior approval, conclude bilateral payments agreements that are incompatible with Article VIII of the IMF’s Articles of Agreement, or introduce or intensify import restrictions for balance of payments reasons.

Table 1.

Togo: Quantitative Performance Criteria and Indicative Targets December 2017 – December 2018

(Billions CFA Francs)

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Sources: Togolese authorities; and IMF staff estimates.

March indicative targets were set during the 1st review and do not align with the revised 2018 budget.

Performance criteria and indicative targets for 2018 will be adjusted downwards by the actual amount spent on bank recapitalization as defined in paragrah 16 of the MEFP.

Continous performance criterion and cumulated from the approval of the arrangement on May 5,2017.

Performance criteria and indicative targets for 2018 will be adjusted upwards by the actual amount spent on bank capitalization as defined in paragraph 16 of the MEFP. They will be adjusted downwards by the amount corresponding to the debt management operations as described in the TMU, and subject to the constraint that these operations do not increase the net present value of the public debt stock. The adjustor is capped at the nominal equivalent of 260.3 billion CFA francs in net-present-value terms. Performance criteria and indicative targets for 2018 will be adjusted upwards as well to offset deviations from projected external program financing, subject to a cap of CFAF 10 billion. If net arrears repayment in 2018 is less than the one evisaged in the revised 2018 budget, currently projected at CFAF 64.8 billion, the 2018 performance criteria and indicative targets for net domestic financing will be adjusted downwards by the difference between the arrears repayment outturn and the budgeted repayment. The current performance criteria and indicative targets shown are consistent with a net arrears repayment in 2018 of CFAF 64.8 billion.

Continous performance criterion. Performance criteria and indicative targets for 2018 will be adjusted upwards by the amount corresponding to the debt management operations as described in the TMU, and subject to the constraint that these operations do not increase the net present value of the public debt stock. The adjustor is capped at the nominal equivalent of 260.3 billion CFA francs in net-present-value terms.

Continous performance criterion and cumulated from the approval of the arrangement on May 5,2017.

Continous performance criterion and cumulated from the approval of the arrangement on May 5,2017.

Before bank recapitalization and with arrears repayment as envisaged in the 2018 budget.

Table 2a.

Togo: Structural Benchmarks for the 2nd Review

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Table 2b.

Togo: Structural Benchmarks for the 3rd and 4rd Reviews

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Attachment II. Technical Memorandum of Understanding

1. This Technical Memorandum of Understanding (TMU) defines the structural and quantitative benchmarks and performance criteria to monitor the program supported by the Extended Credit Facility for the period January 1, 2017 through the end of the arrangement. It also specifies the periodicity and the deadlines for the transmission of data to Fund staff for program monitoring purposes.

2. Unless otherwise specified, the government is defined in this TMU as the central administration of the Togolese Republic. It does not include any political subdivisions, the Central Bank of West African States (BCEAO), or any public entity with a separate legal personality.

3. Unless otherwise indicated, public entities are defined in this TMU as majority government-owned companies, and other public entities receiving earmarked tax and quasi-tax revenues.

Definition of Terms

4. For program purposes, the definition of debt is set out in paragraph 8(a) of the Guidelines on Public Debt Conditionality in Fund Arrangements attached to IMF Executive Board Decision No. 15688-(14/107), adopted on December 5, 2014.1

(a) For the purpose of these guidelines, the term “debt” will be understood to mean a current, i.e., not contingent, liability, created under a contractual arrangement through the provision of value in the form of assets (including currency) or services, and which requires the obligor to make one or more payments in the form of assets (including currency) or services, at some future point(s) in time; these payments will discharge the principal and/or interest liabilities incurred under the contract. Debts can take a number of forms; the primary ones being as follows:

(i) loans, i.e., advances of money to the obligor by the lender made on the basis of an undertaking that the obligor will repay the funds in the future (including deposits, bonds, debentures, commercial loans and buyers’ credits) and temporary exchanges of assets that are equivalent to fully collateralized loans under which the obligor is required to repay the funds, and usually pay interest, by repurchasing the collateral from the buyer in the future (such as repurchase agreements and official swap arrangements);

(ii) suppliers’ credits, i.e., contracts where the supplier permits the obligor to defer payments until sometime after the date on which the goods are delivered or services are provided; and

(iii) leases, i.e., arrangements under which property is provided which the lessee has the right to use for one or more specified period(s) of time that are usually shorter than the total expected service life of the property, while the lessor retains the title to the property. For the purpose of these guidelines, the debt is the present value (at the inception of the lease) of all lease payments expected to be made during the period of the agreement excluding those payments that cover the operation, repair, or maintenance of the property.

(b) Under the definition of debt set out in this paragraph, arrears, penalties, and judicially awarded damages arising from the failure to make payment under a contractual obligation that constitutes debt are debt. Failure to make payment on an obligation that is not considered debt under this definition (e.g., payment on delivery) will not give rise to debt.

5. Public debt includes obligations of the central government and public entities.

6. Domestic debt is defined as debt contracted or serviced in the franc of the Financial Community of Africa (CFAF), while external debt is defined as debt contracted or serviced in a currency other than the CFAF.

A debt is considered contracted for purposes of the program at the time of issuance of a “no objection” opinion by the Supreme Court, where such an opinion is required under domestic law. Otherwise, a debt will be considered contracted when it enters into effect.

Quantitative Performance Criteria and Indicative Targets

7. For program monitoring purposes, periodic quantitative performance criteria (PCs) and indicative targets (ITs) are set for end-June 2018 and end-December 2018, and the indicative targets for end-September 2018.

  • The PCs include:

  • (a) a floor on domestic primary fiscal balance;

  • (b) a zero ceiling on accumulation of arrears on external public debt;

  • (c) a ceiling on net domestic financing;

  • (d) a ceiling on government contracting or guaranteeing of nonconcessional external debt;

  • (e) a zero ceiling on government guaranteeing of domestic loans to suppliers and contractors;

  • (f) a zero ceiling on government guarantees on bank prefinancing for public investments.

  • The ITs are:

  • (a) a floor on total fiscal revenue;

  • (b) a floor on total domestically-financed social spending.

A. Domestic Primary Fiscal Balance
Definition

8. The domestic primary fiscal balance is defined as the difference between (i) the government’s fiscal revenue and (ii) total fiscal expenses, net of interest and capital spending financed by donors and lenders. The balances for the periods from end-December 2017 to end-June 2018 and to end-December 2018 (performance criteria) and the periods from end-December 2017 to end-September 2018 (indicative targets) must be equal to or greater than the amounts indicated in Table 1 of the attachments to the MEFP. The data are sourced from the Government Financial Operations Table (Tableau des opérations financières de l’État – TOFE), prepared monthly by the Directorate of Economy of the Ministry of Economy and Finance (statistical TOFE). The statistical TOFE will be prepared by the Directorate of Economy in close cooperation with revenue offices and the Treasury. The data provided by the Directorate of Economy will take precedence for program purposes. The domestic primary fiscal balance will be adjusted downwards by the amount spent on bank recapitalization as defined in MEFP¶16.

Reporting Deadlines

9. Detailed data concerning the domestic primary fiscal balance will be reported monthly within eight weeks of the end of the month.

B. Arrears on External Public Debt
Definition

10. The government will not accumulate payment arrears on external public debt (continuous performance criterion). For purposes of the PC on the non-accumulation of new external payment arrears, arrears are defined as external debt obligations of the government that have not been paid when due in accordance with the relevant contractual terms (taking into account any contractual grace periods). This PC excludes arrears on external financial obligations of the government subject to rescheduling. This criterion excludes arrears on debts subject to dispute or renegotiation. The source of the data is the Public Debt Directorate.

C. Net Domestic Financing
Definition

11. Government net domestic financing is defined as the sum of (i) net credit from the banking sector to the government; (ii) net domestic nonbank financing of the government; and (iii) unidentified financing. Net domestic financing for the periods from end-December 2017 to end-June 2018 and to end-December 2018 (performance criteria) and the periods from end-December 2017 to end-September 2018 (indicative targets) must be equal to or less than the amounts indicated in Table 1 appended to the MEFP.

12. Adjustors. The ceiling on net domestic financing shall be adjusted upwards by the amount spent on bank recapitalization as defined in MEFP¶16. It will be adjusted downwards by the amount of domestic debt retired as a result of debt management operations. For the purposes of this performance criterion, the definition of “debt-management operations” in paragraph 20, below, shall apply. The adjustor related to debt-management operations is capped at the nominal equivalent of the net present value of CFAF 260.3 billion after converting the nonconcessional external debt into CFA francs using the prevailing exchange rate at the time of the transaction. The ceiling on net domestic financing shall also be adjusted upwards to make up for gaps between projected and actual external financing for the program, subject to a cap of CFAF 10 billion. Finally, the performance criterion on the ceiling for net domestic financing will be adjusted up or down in line with payments of arrears over the course of 2018. The total adjustment to net domestic financing for arrears payments over the entirety of 2018 is subject to a ceiling of CFAF 64.8 billion; the end-June performance criterion includes CFAF 30.4 billion as part of the adjustor for arrears payments. The arrears adjustor on the net domestic financing ceiling will be calculated as follows. In the statistical TOFE, the authorities will continue to use their existing methodology of tracking all balances outstanding within the fiscal year (instances de paiements) and payments of balances outstanding from previous years. The sum of these two flows will be defined as domestic arrears for the purposes of calculating the net arrears payment for the adjustor on the net domestic financing ceiling.

13. Net credit from the banking sector to the government is equal to the balance of government claims and debts to national banking institutions in Togo. Government claims include balances in the Togolese Treasury, Treasury deposits in the central bank, Treasury deposits in commercial banks (excluding the deposits of other arms of government, such as deposits from projects financed with external resources and CNSS accounts), and blocked accounts. Government debts to the banking system include assistance from the central bank (excluding BCEAO credits to the government tied to IMF financing), assistance from commercial banks (including government securities denominated in CFA francs held by commercial banks), and deposits in postal checking accounts.

14. Net domestic nonbank financing of the government includes: (i) changes in the balance of government securities issued in CFA francs (including on the WAEMU regional financial market) not held by Togolese commercial banks, calculated on the basis of the initial amount underwritten; (ii) changes in the deposit accounts of Treasury correspondents; (iii) changes in various deposit accounts, including trustee accounts (comptes de consignation) in the Treasury and accounts in which fines and sentences are deposited pending distribution; (iv) repayment of other domestic public debt (including bank loans to the economy assumed by the government and securitized arrears) to nonbank entities (including nonresidents); and income from privatization. The assumption or securitization of debts and arrears by the government is not included in the definition of net domestic financing, whereas the repayment of that debt by the government is included.

15. Unidentified financing is the difference between total financing (net domestic financing plus exceptional financing) and the overall balance on a cash basis (including grants and changes in arrears).

16. Net credit from the banking sector to the government is calculated by the BCEAO, whereas Treasury bill and bond amounts are determined by the Agence UMOA-Titres. Net domestic nonbank financing of the government is calculated by the Togolese Treasury. Their data will take precedence for program purposes. Data are reported in the Government Financial Operations Table (statistical TOFE) prepared monthly by the Directorate of Economy of the Ministry of Economy and Finance.

Reporting Deadlines

17. Data concerning net domestic financing of the government will be reported monthly within eight weeks of the end of the month.

18. Details concerning any domestic borrowing by the government will be reported every month within six weeks of the end of the month. Data on domestic borrowing will be categorized as short term (less than one year) and long term (one year or more). This rule will also be applied to government-guaranteed domestic loans to government suppliers and contractors.

D. Government or Government-Guaranteed Non-concessional External Debt
Definition

19. Other than as specified below, the government undertakes not to contract or financially guarantee any new nonconcessional external debt at maturities of one year or more (continuous performance criterion). Nonconcessional external debt is defined as all external debt with a grant element of less than 35 percent (http://www.imf.org/external/np/pdr/conc/calculator/default.aspx). The level of concessionality of loans is calculated based on a discount rate of 5 percent. This performance criterion applies not only to the debt as defined in paragraph 8(a) of the Guidelines on Public Debt Conditionality in Fund Arrangements attached to IMF Executive Board Decision No. 15688-(14/107), adopted on December 5, 2014, but also to any commitment contracted or guaranteed for which no value has been received. However, this criterion does not apply to reschedulings that take the form of new debts, or to bond borrowing, Treasury bills, and Sukuk or other instruments issued in CFA francs on the WAEMU regional financial market. For the purposes of this performance criterion, “government” is understood to cover not only the definition given in paragraph 2 above, but also public institutions of an industrial or commercial nature (établissements publics à caractère industriel et commercial – EPIC), public administrative agencies (établissements publics administratifs – EPA), public scientific and technical institutions, public professional establishments, public health agencies, local authorities, public enterprises, national corporations (public corporations with financial autonomy, in which the government holds at least 50 percent of the capital), and state agencies.

20. This performance criterion will be adjusted upwards by the amount of nonconcessional external borrowing used for debt-management operations that improves the overall public debt profile. For debt-management operations executed in 2018 and 2019, this adjustor will be capped at the nominal equivalent of the net present value of CFA francs 260.3 billion after converting the nonconcessional external debt into CFA francs using the prevailing exchange rate at the time of the transaction. For the purposes of this performance criterion, “debt-management operations” will be limited to the exchange of domestic debt for nonconcessional external debt. The NPV of the domestic debt to be reprofiled shall be calculated as the sum of the discounted debt service flows using a discount rate of 5 percent. The NPV of the external debt to be acquired shall be calculated in the same manner. The net effect of a debt-management operation will be calculated as the difference between the NPV of the domestic debt to be reprofiled, minus the net cost of the domestic debt repurchase, and the NPV of the external debt to be acquired, plus any fees associated with the external debt issuance. The net effect of a debt-management operation must be to either reduce or leave unchanged the total stock of public debt in NPV terms. Should any operation involving the contracting or guaranteeing of nonconcessional external debt lead to an increase in the stock of debt in NPV terms, the operation will not be considered to be a debt-management operation and would constitute a non-observance of this performance criterion. Before undertaking any debt-management operations, the government will consult with the IMF staff and will provide IMF staff with data on the terms of the debt to be exchanged and the terms of the new non- concessional debt to be contracted, along with data on all fees and costs associated with the transaction, as well as any costs and fees associated with compensating current domestic bondholders and lenders for not holding the debt which will be retired to maturity.

E. Government-Guaranteed Domestic Loans to Suppliers and Contractors
Definition

21. The government is committed to not providing new financial guarantees for domestic loans to its suppliers or contractors (continuous performance criterion). The concept of “government” used for this performance criterion includes the definition of government in paragraph 2, public institutions of an industrial or commercial nature (EPIC), public administrative agencies (EPA), public scientific and technical institutes, public vocational establishments, public health agencies, local authorities, public enterprises, national corporations (public corporations with financial autonomy, in which the government holds at least 50 percent of the capital), and state agencies.

F. Government Guarantees on Bank Prefinancing for Public Investments

22. The government undertakes not to guarantee new bank prefinancing for public investments (continuous performance criterion). In a typical prefinancing arrangement, a private company granted a public works contract by the government obtains a loan from a domestic commercial bank or a group of commercial banks. The Ministry of Economy and Finance guarantees this loan and, at the same time, signs an unconditional and irrevocable substitution of debtor agreement to service all principle and interest, which are paid automatically from the Treasury account at the BCEAO. The concept of “government” used for this performance criterion includes the definition of government in paragraph 2, public institutions of an industrial or commercial nature (EPIC), public administrative agencies (EPA), public scientific and technical institutions, public professional establishments, public health agencies, local authorities, public enterprises, national corporations (public corporations with financial autonomy, in which the government holds at least 50 percent of the capital), and state agencies.

G. Total Fiscal Revenue
Definition

23. Total fiscal revenue includes tax and nontax revenue, and excludes external grants, the revenue of autonomous agencies, and income from privatization. The data are calculated by revenue offices and reported in the Government Financial Operations Table (statistical TOFE) prepared monthly by the Directorate of Economy of the Ministry of Economy and Finance. The revenue is reflected on a cash basis.

24. Revenue collection for the periods from end-December 2017 to end-June 2018, end-September 2018, and end-December 2018 must be equal to or greater than the amounts indicated in Table 1 attached to the MEFP. The revenue floor is an indicative target for the entire duration of the program.

Reporting Deadlines

25. This information will be reported monthly to the IMF within four weeks of the end of the month.

H. Domestically Financed Social Spending
Definition

26. Total (current and capital) domestically financed social spending is calculated for each category of current and capital accounts (wages, goods and services, transfers and subsidies, other) and capital accounts financed with domestic resources. In a national context, social spending is considered to be public expenditure targeting the following social sectors: (1) Ministry of Education: primary and secondary education, technical and vocational training, and higher education with respect to scholarships and relief allowances: (i) scholarships are awarded to students in need who are pursuing their undergraduate degree (article 21 of Decree No. 2011–173/PR of November 30, 2011, regarding the reform of the scholarship, internship, and relief allowance system, and article 1 of Decree No. 2011–174/PR of November 30, 2011, establishing the scholarship, internship, and relief allowance rates); (ii) relief allowances are granted to students recognized as belonging to a disadvantaged or vulnerable category (article 31 of Decree No. 2011–173/PR of November 30, 2011, regarding the reform of the scholarship, internship, and relief allowance system, and article 2 of Decree No. 2011–174/PR of November 30, 2011, establishing the scholarship, internship, and relief allowance rates); (2) Ministry of Health; (3) Ministry of Social Action, Advancement of Women, and Literacy; (4) Ministry of Grassroots Development, Crafts, Youth, and Youth Employment; (5) Ministry of Agriculture, Livestock, and Fisheries; (6) Ministry of Mines and Energy (rural electrification projects); (7) Emergency Program for Community Development (Programme d’Urgence de Développement Communautaire – PUDC); involved in financing basic socio-economic development actions through socio-economic projects and infrastructure in rural and semi-urban areas (schools, health centers, drinking water and basic sanitation points, rural roads, hydro-agricultural schemes, infrastructure for storing and processing agricultural products, rural electrification, and more generally access to all sources of energy); (8) Support Program for Vulnerable Populations (Programme d’Appui aux Populations Vulnérables –PAPV). Total current and capital social expenditure financed with owner equity covers spending financed with domestic resources, including revenue, domestic financing, and general foreign budgetary support, and excludes all social spending financed with project-specific grants or loans. The source of the data is SIGFiP, from the Budget Directorate (Ministry of Economy and Finance) prepared at monthly intervals.

27. Social spending financed with domestic resources for the periods from end-December 2017 to end-June 2018, end-September 2018, and end-December 2018 must be equal to or greater than the amounts indicated in Table 1 attached to the MEFP. The data provided by the Budget Directorate and the Directorate of Economy will take precedence for program purposes. The floor on (current and capital) social expenditure financed with domestic resources is an indicative target for the entire program period.

Reporting Deadlines

28. The data on social expenditure financed with domestic resources will be reported every month within eight weeks of the end of the month.

Structural Benchmarks

29. For the purpose of the end-December 2018 structural benchmark on the monthly report of the stock of payment arrears by age, the following methodology and definitions shall apply:

  • a. Domestic payment arrears are defined as domestic debt obligations of the government to nonfinancial public and private entities and the domestic debt service (excluding the BCEAO) that have not been paid within 90 days after the contractual due date (taking into account any contractual grace periods).

  • b. Floating debt refers to domestic debt obligations of the government to nonfinancial public and private entities and the domestic debt service (excluding the BCEAO) that have not been paid when due in accordance with the relevant contract terms (taking into account any contractual grace periods) and for which such due date has been exceeded by fewer than 90 days.

  • c. Data concerning the stock of domestic payment arrears and floating debt by age will be reported monthly within eight weeks of the end of the month starting from July 2018, continuously through December 2018.

30. For the end-December 2018 structural benchmark in strengthening the implementation of the cash plan and the control commitment authorizations, the authorities will ensure that the cash plan is updated on a monthly basis by the Treasury Committee of the Ministry of Finance. This monthly update will include updates to the commitment plan and the procurement plan, with data consistent between the three plans. The authorities will align expenditure authorizations with these plans.

Reporting Deadlines

31. The cash management, commitment and procurement plans will be reported every month within eight weeks of the end of the month.

32. For the end-December 2018 structural benchmark on an independent governance structure for the newly-merged bank, the authorities will ensure that the Board exercises independent and objective judgement. A fully independent bank governance structure includes at the minimum the following features: (1) a majority of independent Board members, with this majority of independent members required for Board deliberations; (2) distinct audit and risk committees headed by independent directors; (3) a chairman of the Board being either an independent director, or a nonexecutive director operating within a framework designed to ensure an equivalent degree of independence; (4) the principles of governance of the bank, replacement and election of directors enshrined in the bank’s statutes; (5) a formal framework guaranteeing the accountability of the Board, through which the State (represented by the Ministry of Economy and Finance, via an internal unit which monitors the strategy and financial performance of the bank) sets high-level expectations and strategic orientations, based on which the Board develops and/or fine-tunes the strategy of the bank.

33. For the end-December 2018 structural benchmark on land registration, the following actions will be taken: digitize the stock of existing land property titles and open the central window for the liquidation and payment of fees; and clear the entire backlog of pending mortgage handover documents.
1

The domestic primary balance reflects the fiscal effort under the direct control of the government.

2

Investment prefinancing is a non-orthodox mechanism to finance investment which had led to soaring public debt in recent years, preceding the approval of the ECF arrangement.

3

The consolidation in 2019 is expected to come from a reduction of investment expenditure, which has soared in recent years and remains above peer countries. No further consolidation is expected after 2019.

4

Gross reserves were USD 13.0 at end-2017, covering 4.2 months of imports. However, coverage has increased significantly since, reflecting primarily the issuance of Eurobonds by Cote d’Ivoire and Senegal in March.

5

Recent arrears stock refers to post-2006 arrears.

6

“Guidance Note on the Bank-Fund Debt Sustainability Framework for Low Income Countries,” International Monetary Fund, Washington, D.C., February 2018.

7

The WAMU banking commission is the independent regional supervisory entity of the WAMU credit and microfinance institutions. The general secretariat of the WAMU banking commission is supporting the banking commission by deploying supervisory activities. The general secretariat oversees the implementation of the banking commission’s decisions by the national authorities, carries out off- and on-site supervision, conducts financial stability studies for the WAMU region, and reviews the applications for approval and authorizations.

1

The Risk Assessment Matrix (RAM) shows events that could materially alter the baseline path (the scenario most likely to materialize in the view of IMF staff). The relative likelihood is the staff’s subjective assessment of the risks surrounding the baseline (“low” is meant to indicate a probability below 10 percent, “medium” a probability between 10 and 30 percent, and “high” a probability between 30 and 50 percent). The RAM reflects staff views on the source of risks and overall level of concern as of the time of discussions with the authorities, Non-mutually exclusive risks may interact and materialize jointly.

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Cover IMF Staff Country Reports
Togo: Second Review Under the Extended Credit Facility Arrangement and Request for Modification of Performance Criteria
Author:
International Monetary Fund. African Dept.
Volume/Issue:
Volume 2018: Issue 184
Publisher:
International Monetary Fund
ISBN:
9781484362884
ISSN:
1934-7685
Pages:
77
DOI:
https://doi.org/10.5089/9781484362884.002
Text Figure 1.

Togo: GDP and Financial Conditions
Text Figure 2:

Togo. Public Expenditure, 2018–2021

(percent of GDP)
Text Figure 3:

Togo. Fiscal Adjustment in Cross-Country Context

(percent of GDP)
Text Figure 4.

Togo: Non-Performing Loans (NPLs) and Provision, 2014Q2 – 2017Q4

(in percent)
Text Figure 5.

Togo: Doing Business Indicators, 2018

(0=lowest, 100=highest performance)
Figure 1.

Togo: Indicators of Economic Activity
Figure 2.

Togo: External Sector, 2012–2017
Figure 3.

Togo: Fiscal Developments, 2017