IMF Executive Board Concludes First Review under the Extended Credit Facility Arrangement for Togo and Approves US$35.6 Million Disbursement

December 14, 2017

  • Program implementation under the ECF arrangement has been good, with moderate economic growth and low inflation in 2017.
  • Fiscal consolidation, while protecting priority social spending, is essential to put debt firmly on a downward path and preserve macroeconomic stability.
  • Successful restructuring of weak banks will be critical to restore financial stability and minimize the fiscal cost.

The Executive Board of the International Monetary Fund (IMF) completed today the first review of Togo’s performance under the program supported by the Extended Credit Facility (ECF) on a lapse-of-time basis. [1] The completion enables the release of SDR25.17 million (about US$35.61 million), bringing total disbursements under the arrangement to SDR50.34 million (about US$71.22 million). The ECF arrangement for SDR176.16 million (120 percent of Togo’s quota in the IMF) to support the country’s economic and financial reforms was approved on May 5, 2017 (see Press Release No. 17/151).

Program implementation under the ECF-supported program has been good. All quantitative performance criteria and prior actions were met as well as four out of five structural benchmarks.

The fiscal consolidation envisaged under the ECF-supported program has begun. The primary deficit improved from an annual average of about 6 percent of GDP in 2013-16 to a surplus of 1.4 percent of GDP in the first half of 2017, due primarily to expenditure rationalization and the halting of non-orthodox financing of public investment. Public debt is projected to decline from the peak of 81.5 percent of GDP at end-2016 to 77.3 percent of GDP by end-2017. Economic activity is estimated to have expanded by 4.8 percent in 2017, with low inflation. The current account deficit remains large but is expected to narrow gradually.

The medium-term growth projections were revised slightly downward and the balance of risks is tilted to the downside. The recent infrastructure upgrading and external concessional financing are expected to support productivity, stimulate private investments, and thus compensate for the negative fiscal impulse resulting from the fiscal consolidation. However, country-specific and regional/global factors may cloud program implementation. In particular, if the tensions in recent months persist, the private investment boost that is expected to compensate for the public investment retrenchment may not fully materialize.

Fiscal consolidation is set to continue in 2018, while accommodating tighter domestic and external constraints. Sustained fiscal efforts will help reduce debt further and create room for additional social spending, which is critical for poverty reduction. Strengthening fiscal institutions and debt management is essential. The efficiency of public spending will be improved by requiring that public investment projects follow established procurement and budgetary processes. The authorities are enhancing controls to broaden the taxpayer base and improve revenue collection. Improved cash management and prudent borrowing policies will result in lower government borrowing costs, further helping the fiscal adjustment. Moreover, given the harmful impact of government payment arrears on economic activity, the authorities plan to step up efforts to verify the arrears stock, proceed with its clearance, and strengthen the system of public financial management to prevent new arrears accumulation.

The restructuring of weak banks should be accelerated to help restore financial stability and prevent the reemergence of risks to the state budget. The restructuring should be guided by sound principles, which will provide a solid basis for the operations of the newly-merged bank. The timely finalization and adoption of a comprehensive restructuring plan, including measures to restore financial viability and a business plan of the new bank, are priorities.

Broader structural reforms are essential to boost productivity, competitiveness, and inclusive growth. As public investment returns to a sustainable level, the private sector is expected to play an increasing role as the engine of growth. It is essential to improve the business climate, including by opening-up some key sectors.

Table 1. Togo: Selected Economic and Financial Indicators, 2014–22

2014

2015

2016

2017

2018

2019

2020

2021

2022

Est.

Proj.

(Percentage change, unless otherwise indicated)

National income, prices, and exchange rates

Real GDP

5.9

5.3

5.0

4.8

5.0

5.2

5.3

5.4

5.6

Real GDP per capita

3.1

2.5

2.2

2.0

2.2

2.4

2.5

2.6

2.8

GDP deflator

-0.1

2.7

2.5

0.9

1.5

1.6

2.0

2.7

3.0

Consumer price index (average)

0.2

1.8

0.9

-0.1

1.2

1.4

2.0

2.0

2.0

GDP (CFAF billions)

2,259

2,443

2,628

2,779

2,962

3,166

3,400

3,680

4,012

Exchange rate CFAF/US$ (annual average level)

493.6

591.2

592.7

…

…

…

…

…

…

Real effective exchange rate (appreciation = –)

-1.2

7.1

-1.0

…

…

…

…

…

…

Terms of trade (deterioration = –)

3.2

-11.5

-0.2

-2.3

-0.8

0.9

1.4

0.8

2.5

(Percentage change of beginning-of-period broad money)

Monetary survey

Net foreign assets

-7.0

-3.6

5.1

0.1

0.1

0.1

0.1

0.1

0.1

Net credit to government

1.3

-2.1

-2.3

-4.0

-2.3

-0.6

-2.3

-1.6

-2.9

Credit to nongovernment sector

1.2

13.2

10.1

11.2

10.6

8.9

11.1

11.0

13.1

Broad money (M2)

3.7

20.6

12.6

5.7

6.6

6.9

7.4

8.2

9.0

Velocity (GDP/end-of-period M2)

2.1

1.9

1.8

1.8

1.8

1.8

1.8

1.8

1.8

(Percent of GDP, unless otherwise indicated)

Investment and savings

Gross domestic investment

32.7

33.8

33.8

31.8

32.1

29.1

31.0

31.9

31.8

Government

11.3

13.1

14.0

11.0

10.6

7.1

8.5

8.5

8.4

Nongovernment

21.4

20.7

19.9

20.7

21.5

22.1

22.5

23.4

23.4

Gross national savings

22.7

22.7

24.1

23.5

23.9

21.9

24.6

26.5

26.8

Government

4.5

4.2

4.4

8.7

8.2

7.3

7.7

7.2

7.3

Nongovernment

18.2

18.5

19.8

14.8

15.8

14.5

16.9

19.3

19.5

Government budget

Total revenue and grants

20.7

22.1

21.7

25.3

25.6

25.4

25.5

25.4

25.4

Revenue

18.3

19.7

18.9

20.0

21.7

21.3

21.4

21.3

21.3

Total expenditure and net lending

27.5

31.1

31.4

27.6

28.0

25.1

26.2

26.7

26.5

Domestic primary expenditure

21.5

23.0

23.4

17.8

18.2

16.0

17.5

17.6

17.5

Domestic primary balance1

-3.1

-3.2

-4.5

2.3

3.5

5.3

3.9

3.7

3.8

Overall primary balance (cash basis)

-6.5

-5.4

-7.2

-2.7

-2.2

2.0

2.0

2.0

2.0

Overall balance (cash basis)

-8.0

-7.8

-9.6

-4.8

-4.6

-1.1

-0.8

-1.3

-1.0

External sector

Current account balance

-10.0

-11.2

-9.7

-8.2

-8.2

-7.3

-6.4

-5.4

-5.0

Exports (goods and services)

39.7

36.3

34.9

33.9

32.9

33.7

34.1

35.0

34.5

Imports (goods and services)

-57.7

-58.5

-54.9

-52.3

-50.9

-50.8

-50.3

-50.2

-49.2

External public debt2

17.3

21.2

20.4

21.0

23.4

26.1

26.6

26.8

26.6

External public debt service (percent of exports) 2

2.9

3.1

5.2

4.2

3.7

3.9

4.7

4.9

5.3

Domestic public debt3,4

47.8

54.3

61.2

56.3

51.0

44.1

40.1

36.3

32.3

Total public debt4,5

65.1

75.6

81.5

77.3

74.4

70.2

66.7

63.0

58.9

Sources: Togolese authorities and IMF staff estimates and projections.

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

2 Includes state-owned enterprise external debt.

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

4 Does not include bank recapitalization costs, estimated at 2-4 percent of GDP. Realization of these costs will worsen the debt profile.

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


[1] The Executive Board takes decisions under its lapse-of-time procedure when a proposal can be considered without convening formal discussions.

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