Public Information Notice: IMF Concludes 2003 Article IV Consultation with Côte d'Ivoire

April 21, 2004

Public Information Notices (PINs) are issued, (i) at the request of a member country, following the conclusion of the Article IV consultation for countries seeking to make known the views of the IMF to the public. This action is intended to strengthen IMF surveillance over the economic policies of member countries by increasing the transparency of the IMF's assessment of these policies; and (ii) following policy discussions in the Executive Board at the decision of the Board.

On March 31, 2004, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Côte d'Ivoire.1


Once a stable and relatively prosperous country, Côte d'Ivoire has suffered from continued political instability and economic stagnation since 1999, leading to an estimated contraction of 7.4 percent in real GDP between 1999 and 2003. The recurrent political crises halted the momentum of trade and private investment that had underpinned the rapid economic expansion following the 1994 CFA franc devaluation. An incipient economic recovery in 2002 was cut short by the breakout of civil war in September 2002. For 2002 as a whole, real GDP declined by an estimated 1.6 percent, despite a relatively stable agricultural output, including a better-than-expected cocoa harvest and rising export prices. Preliminary staff estimates suggest that real GDP fell by 3.8 percent in 2003, dragged down by a sharp drop in industrial production. Consumer price inflation, which reached 4½ in 2001, is estimated to have slowed to below 4 percent in 2003, despite some temporary pressures in the aftermath of the September 2002 crisis.

The breakout of the civil war interrupted the promising fiscal performance in the first half of 2002, as unplanned, crisis-related expenditure reached 0.7 percent of GDP in the second half of 2002. The overall fiscal balance slipped into a deficit of 1.5 percent of GDP for 2002 as a whole. The fiscal situation deteriorated further in 2003, as the continuing political and security concerns raised pressures for crisis-related spending. Primary expenditure is estimated to have reached 15.2 percent of GDP in 2003, in excess of the budgeted amount of 14.4 percent of GDP, despite a fall in domestically financed investment. With the economic environment deteriorating, tax revenue shrank and the overall deficit widened to 2.1 percent of GDP. Net borrowing from commercial banks, the sale of government securities in September 2003, and the limited inflow of external project and program loans were insufficient to finance the deficit and the scheduled debt amortization payments. With Côte d'Ivoire fully honoring only its obligations to the World Bank and the Fund, domestic and external payment arrears rose to 5.2 and 8.3 percent of GDP, respectively, by end-2003.

The money supply grew sharply in 2001 and 2002, reflecting largely the developments in the balance of payments, but it contracted in 2003, owing mainly to a decline in net domestic credit, as both the government and private sector repaid the banking system (on a net basis). The combined effect of these developments tripled the commercial banks' excess reserves between 2001 and September 2003, despite a flight into cash owing mainly to bank closures in the rebel-held areas. The Central Bank of West African States (BCEAO) reduced its discount rate on two occasions, in July and October 2003, lowering it to 5 percent from 6.5 percent. Money market and commercial bank interest rates remained largely unaffected by this reduction, in view of the excess liquidity in the system.

Fluctuations in export revenue from the main crop, cocoa, accounted for large movements in the country's balance of payments during 2000-03. Cocoa export revenue doubled between 2000 and 2002, buoyed by a good harvest and strong international market prices. This increase, coupled with the depressed level of imports caused by the downturn in economic activity, helped strengthen the current account in 2002 and 2003. However, large external debt obligations and sharply diminished access to foreign financing moved the overall balance into a deficit in 2003. The crisis also disrupted Côte d'Ivoire's patterns of trade and prevented the country from playing a full role in regional integration policy initiatives.

Executive Board Assessment

Executive Directors expressed deep concern over the political instability that has marred Côte d'Ivoire's economic performance in recent years and adversely affected neighboring countries. Directors regretted the recent renewal of violence and political tensions and stressed that renewed progress in political normalization as agreed to under the U.N.-supported Linas-Marcoussis Agreement (LMA) and improvement in the security situation were essential for securing economic growth. They urged the authorities to redouble their efforts to achieve lasting peace and national reconciliation.

Directors emphasized that actions to stabilize the political and security situation should be accompanied by steps to develop a coherent economic policy framework that would lay the basis for promoting private sector confidence and an economic recovery. They considered that the key elements of the framework should include a strengthening of the public finances, including through the resolution of the large debt and payment arrears, and a more determined effort to implement key structural reforms. Directors indicated that a credible program of fiscal consolidation and structural reform would facilitate Fund support, initially in the form of post-conflict emergency assistance, which could pave the way for a PRGF arrangement.

Directors expressed concern about the deterioration of public finances in the second half of 2002 and 2003, and called on the authorities to put in place a bold and comprehensive fiscal strategy to arrest the deterioration and place the public sector finances on a sound footing. A priority is to formulate a credible budget for 2004. Directors recommended that the budget should aim for a more ambitious primary budget surplus, in view of the uncertainty about the availability of external resources and the need to address the problem of a large stock of domestic and external arrears. They called for a strengthening of the procedures for collecting oil and gas revenues, and noted that it would be important to persevere with the government's efforts to reduce tax evasion and fraud. In this connection, Directors noted that the exemptions recently granted or planned by the government risk undermining the integrity of the tax system and do not conform to the WAEMU harmonization requirements. On expenditures, Directors saw the key tasks as restraining military expenditure, and reducing the civil service wage bill by containing recruitment, tightening expenditure management, and prioritizing other outlays. They looked forward to the findings of the multidonor assessment mission, which is helping to identify priorities for the reconstruction period ahead.

Directors stressed that the buildup of arrears by the public sector to the domestic private sector represented a serious constraint on business recovery and impeded access by the private sector to bank credit. They viewed the reduction in domestic arrears as a key priority for spurring an economic recovery and improving the finances of the banks.

Directors commended the prudent monetary policy—conducted through the regional central bank, and aimed at maintaining the peg of the CFA franc to the euro—which has resulted in a lowering of inflation. They observed that the recent appreciation of the CFA franc risked affecting competitiveness. Directors urged the authorities to guard against such risks by pressing forward with reforms aimed at improving the business climate and containing the growth in costs.

Directors expressed concern about the deterioration in the soundness of the banking system. They urged the authorities to be proactive in responding to weaknesses identified in the recent FSAP report, and in implementing the recommended corrective measures. In particular, it will be important to strengthen the supervision and operations of the microfinance sector. Directors noted that the financial situation of the state-owned bank (CAA) remains fragile, and its continued operation posed risks for the payments system while raising the government's contingent liabilities. They encouraged the authorities to continue to explore, in close collaboration with the World Bank, options for the resolution of the bank. Directors urged the authorities to continue to strengthen the legal framework for combating money laundering.

Directors emphasized the need for a strong commitment by the authorities to a comprehensive program of reforms that would promote investment and growth, and help reverse the decline in social indicators. As regards the public sector, Directors called for actions to improve the financial position of the public enterprises and the transparency of their operations. Directors suggested that these actions should include the implementation of appropriate tariff policies in the public utilities, normalizing the relationship between the treasury and the public enterprises by introducing audit procedures, and eliminating intra-public sector arrears. Also, they saw scope for further efforts to strengthen governance, including by ensuring greater transparency in awarding licenses and concessions, and enforcing claims against delinquent borrowers from state-owned agencies.

Directors expressed concern about the financial and institutional weaknesses in the cocoa sector. Noting that the preliminary findings of the financial audit of agencies in the sector had identified serious shortcomings in governance, Directors called for a rapid completion of the audit and urged the authorities to develop, in collaboration with the World Bank, an action plan to improve the sector's transparency and its operations. In this connection, some Directors cautioned that the high taxes on cocoa production and exports posed risks for the profitability and growth of the sector.

Directors noted that a return to sustained growth and progress in the fight against poverty will require the assistance of the international community. They encouraged the authorities to normalize relations with their bilateral and multilateral partners in order to permit a resumption of budgetary and development assistance. Directors noted that progress in disarmament, demobilization, and reintegration, as required under the LMA, strengthened coordination within the government, and a concerted international effort to aid Côte d'Ivoire, will be essential complements to the re-engagement of the Fund in the country. In light of the deterioration in poverty in recent years, Directors welcomed the authorities' plans to adopt a realistic timetable to develop a revised Poverty Reduction and Strategy Paper, based on a broad consultative process.

Directors noted that Côte d'Ivoire's statistical base is comprehensive, but needed strengthening in a number of areas, in particular national accounts and balance of payments. They encouraged the authorities to intensify their efforts to address these weaknesses.

Côte d'Ivoire: Selected Economic Indicators







(Annual changes in percent)

Domestic economy


Real GDP





Consumer prices















Real effective exchange rate 1/






(In percent of GDP, unless otherwise indicated)

Gross domestic investment





Gross national saving





Current account balance





Overall balance of payments





Financial variables


Central government revenue





Total expenditure





Primary balance





Overall balance





Change in broad money (in percent)





External public debt






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

1/ Negative change indicates depreciation.


1 Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board. At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities.


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