Front Matter Page
IMF Country Report No. 19/205
TOGO
2019 ARTICLE IV CONSULTATION, FOURTH REVIEW UNDER THE EXTENDED CREDIT FACILITY ARRANGEMENT, AND REQUEST FOR WAIVER OF NONOBSERVANCE OF PERFORMANCE CRITERION AND MODIFICATION OF PERFORMANCE CRITERIA—PRESS RELEASE; STAFF REPORT; AND STATEMENT BY THE EXECUTIVE DIRECTOR FOR TOGO
July 2019
In the context of the Article IV Consultation and fourth review under the Extended Credit Facility, the following documents have been released and are included in this package:
A Press Release including a statement by the Chair of the Executive Board.
The Staff Report prepared by a staff team of the IMF for the Executive Board’s consideration on June 26, 2019, following discussions that ended on May 8, 2019, with the officials of Togo on economic developments and policies underpinning the IMF arrangement under the Extended Credit Facility. Based on information available at the time of these discussions, the staff report was completed on June 10, 2019.
An Informational Annex prepared by the IMF staff.
A Debt Sustainability Analysis prepared by the staffs of the IMF and the Internal Development Association.
A Statement by the Executive Director for Togo.
The documents listed below have been or will be separately released:
Letter of Intent sent to the IMF by the authorities of Benin*
Memorandum of Economic and Financial Policies by the authorities of Togo*
Technical Memorandum of Understanding*
Selected Issues Paper
*Also included in Staff Report
The IMF’s transparency policy allows for the deletion of market-sensitive information and premature disclosure of the authorities’ policy intentions in published staff reports and other documents.
Copies of this report are available to the public from
© 2019 International Monetary Fund
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Front Matter Page
TOGO
STAFF REPORT FOR THE 2019 ARTICLE IV CONSULTATION, FOURTH REVIEW UNDER THE EXTENDED CREDIT FACILITY ARRANGEMENT, AND REQUEST FOR WAIVER OF NONOBSERVANCE OF PERFORMANCE CRITERION AND MODIFICATION OF PERFORMANCE CRITERIA
June 10, 2019
Key Issues
Context. Economic activity has been recovering, driven by robust performance in the export and agricultural sectors. Fiscal consolidation efforts have continued; Togo complied with the WAEMU deficit convergence criteria in 2017 and 2018, two years ahead of the timeline agreed by member states; public debt declined from 81 percent of GDP at end-2016 to 76 percent of GDP at end-2018. Inflation stood at 2 percent in March 2019 (y-o-y). The external position has improved. The privatization process for the first public bank encountered delays.
Outlook and Risks. Economic growth is expected to gradually increase in the medium term, benefiting from an improved infrastructure network, progress on the business environment, and productivity gains in the agricultural sector. Public debt is expected to decline below 70 percent of GDP from 2020 and is projected to be reduced to a prudent level by 2023. The key risk to the program is related to the uncertain socio-political situation, particularly ahead of the presidential elections planned for March 2020. Other risks include a surge in regional insecurity, a tightening of global financial conditions, and a rise in protectionism.
Program Performance. Five out of six end-December 2018 performance criteria (PCs) were met as well as five out of seven structural benchmarks (SBs). The PC on net domestic financing was missed, but without jeopardizing the program objectives. The SB on the privatization of the first public bank was also missed as negotiations are still underway. Two indicative targets (ITs) at end-December 2018—on fiscal revenue and social spending—were missed, albeit by a small margin for the former. The ECF-supported program was approved in May 2017. Total planned disbursements under the program amount to SDR176.16 million.
Key Policy Objectives. In 2019, under the ECF-supported program, the fiscal framework will accommodate some one-off urgent spending while safeguarding the hard-won fiscal consolidation and pursuing debt reduction. Some important tax policy and revenue administration measures will be implemented to bolster permanent revenue and address the reliance on ad-hoc and uncertain revenue sources. Expenditure efficiency will be improved through a revised multi-year public investment program and the roll-out of the program-based budgeting. The privatization of the two weak public banks will be finalized; in case of delays, an alternative strategy will be put in place that minimizes risks to financial stability and the State budget. The high non-performing loans will be addressed. From a medium-term perspective, to unlock growth potential, existing governance legal frameworks will need to be enforced, and the relevant institutions and entities will need to become fully operational and independent. Building on recent progress, the business environment will need to be improved further to ensure that private investment substitutes for the decline in public investment. Social spending efficiency should be strengthened, and income and gender inequality should be reduced to foster inclusive growth. Togo will continue to support the WAEMU regional policies, including through continuous adherence to the regional convergence criteria, as part of the joint WAEMU countries’ efforts to help maintain strong regional reserves.
Staff Views. Staff recommends completion of the fourth review and supports the authorities’ request for a waiver for nonobservance of one PC as well as modification of PCs for end-June and end-September 2019. The waiver and modifications do not jeopardize the thrust of program objectives. Upon completion of the review, a disbursement of SDR 25.17 million (17.1 percent of quota) will be made available, for a cumulative amount of SDR 125.9 million or 85.5 percent of quota.
Approved By
Dominique Desruelle and Edward R. Gemayel
Discussions on the Article IV consultation and the fourth review under the ECF arrangement took place in Lomé during March 20 -April 2, 2019 and continued until May 8, 2019. The IMF staff team comprised Mr. Razafimahefa (head), Ms. Bunda, Mr. Engstrom, Mr. Tapsoba (Resident Representative), Mr. Nachega (all AFR), Mr. Binici (SPR), and Mr. Sowou (Local Economist). Ms. Nikaein provided research assistance. Ms. Ndome-Yandun, Ms. Margevich, Ms. Kinvi-Boh, and Ms. Tolbert provided administrative assistance. Ms. Boukpessi (OED) also joined the mission. The mission met with Mr. Sani Yaya, Minister of Economy and Finance; Mr. Kodjo Adedze, Minister of Commerce, Industry, Private Sector, and Local Consumption; Ms. Léa T. Kolani Yentchare, Minister for Social Action and Advancement of Women; Mr. Kossi Ténou, BCEAO National Director; and other senior officials as well as representatives of the private sector and development partners. The mission also held a press conference.
Contents
CONTEXT AND RECENT DEVELOPMENTS: ECONOMIC RECOVERY AMID SOCIO-POLITICAL UNCERTAINTY
PROGRAM PERFORMANCE
MEDIUM-TERM OUTLOOK AND RISKS
POLICY DISCUSSIONS
A. Accommodate Urgent Spending but Safeguard Fiscal Consolidation
B. Reduce Banks’ Vulnerabilities and Enhance Financial Access
C. Strengthen the Foundation for Strong and Inclusive Growth
D. Improve Debt Management Capacity
PROGRAM MODALITIES
STAFF APPRAISAL
BOXES
1. Main Recommendations from the 2016 Article IV Consultations and Current Status
2. Risk Assessment Matrix
3. Revenue Measures
4. Policies for Successful Bank Privatization
5. Efficiency of Social Spending in Togo
6. Governance and Institutions
FIGURES
1. Economic and Socio-Political Context
2. Real Sector Developments
3. External Sector Developments
4. Fiscal, Monetary, and Banking Sectors Developments
5. Medium-Term Economic Prospects, 2011–24
TABLES
1. Selected Economic and Financial Indicators, 2016–24
2a. Central Government Financial Operations, 2017–24 (Billions of CFA Francs)
2b. Central Government Financial Operations, 2017–24 (Percent of GDP)
3. Balance of Payments, 2016–24
4. Monetary Survey, 2016–24
5. Financial Soundness Indicators of the Banking System, 2014–18Q2
6. Quantitative Performance Criteria and Indicative Targets, September and December 2018
7. Indicators of Capacity to Repay the Fund, 2019–29
8. Schedule of Disbursements Under ECF Arrangement 2017–19
ANNEXES
I. External Sector Assessment
II. Financial Access and Inclusion in Togo
III. Gender Inequality and Development in Togo
IV. Capacity Development Strategy
APPENDIX
I. Letter of Intent
Attachment I. Memorandum of Economic and Financial Policies
Attachment II. Technical Memorandum of Understanding
Front Matter Page
TOGO
STAFF REPORT FOR THE 2019 ARTICLE IV CONSULTATION, FOURTH REVIEW UNDER THE EXTENDED CREDIT FACILITY ARRANGEMENT, AND REQUEST FOR WAIVER OF NONOBSERVANCE OF PERFORMANCE CRITERION AND MODIFICATION OF PERFORMANCE CRITERIA—INFORMATIONAL ANNEX
June 10, 2019
Prepared By
The African Department
(In consultation with other departments)
Contents
RELATIONS WITH THE FUND
RELATIONS WITH OTHER IFI’S
STATISTICAL ISSUES
Front Matter Page
TOGO
STAFF REPORT FOR THE 2019 ARTICLE IV CONSULTATION, FOURTH REVIEW UNDER THE EXTENDED CREDIT FACILITY ARRANGEMENT, AND REQUEST FOR WAIVER OF NONOBSERVANCE OF PERFORMANCE CRITERION AND MODIFICATION OF PERFORMANCE CRITERIA—DEBT SUSTAINABILITY ANALYSIS
Approved By
Dominique Desruelle (IMF) and Marcello Estevão (IDA)
Prepared by the staffs of the International Monetary Fund and the International Development Association
Front Matter Page
Press Release No. 19/250
FOR IMMEDIATE RELEASE
June 27, 2019
International Monetary Fund
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Front Matter Page
Press Release No. 19/244
FOR IMMEDIATE RELEASE
June 26, 2019
International Monetary Fund
700 19th Street, NW
Washington, D. C. 20431 USA
Telephone 202–623–7100
Fax 202–623–6772
