Côte d'Ivoire and the IMF
Enhanced Structural Adjustment Facility
Policy Framework Paper, 1998–20001
Prepared by the Ivoirien Authorities in cooperation
with the staffs of the International Monetary Fund and
the World Bank Staffs
February 9, 1998
1. Since early 1994, the government of Côto d'Ivoire has implemented a comprehensive adjustment strategy, taking full advantage of the competitiveness gains resulting from the realignment of the parity of the CFA franc and geared primarily to achieving fiscal consolidation and accelerating the pace of ongoing structural reforms. This strategy has aimed at (a) achieving strong, sustainable, and diversified economic growth; (b) improving the living standards of the population; (c) curbing the inflation rate; and (d) achieving a viable external position. The policies adopted under this strategy have been carried out in the context of increasing regional integration and have been supported by the International Monetary Fund and the World Bank, as well as by the African Development Bank, the European Union, and a number of bilateral and other multilateral donors.
2. Under the 1994–96 program, Côto d'Ivoire made considerable progress in reducing financial imbalances, controlling inflation, liberalizing the economy, and establishing a sound basis for sustainable economic growth. These efforts continued during 1997 notwithstanding some difficulties. Despite the positive results obtained and the achievement of the program's main economic objectives, the Ivoirien economy remains vulnerable and continues to face certain constraints that in the absence of more forceful corrective measures, could hamper the country's economic and social development. First, the public finance situation remains fragile and is marked by serious cash-flow difficulties. Second, private sector development still needs further consolidation; efforts should be intensified to create a climate that is more supportive of the private sector, so that it can fully play its role as the main engine of economic growth. Third, the rebound in economic growth has led to an increase in per capita income over the last two years, particularly in rural areas, but further efforts are still needed to significantly reduce poverty and to improve access to basic social services. Fourth, Côto d'Ivoire's high level of indebtedness, in the context of reduced international financial assistance from both bilateral and multilateral sources, is a major obstacle to achieving the country's economic and social development targets. In this context, the government is aware of the need to consolidate the progress made in 1994–97, to intensify its efforts to achieve fiscal consolidation, and to accelerate the pace of ongoing structural reforms in coming years, in order to attain a high rate of sustainable growth, a significant reduction in poverty, and internal and external financial viability over the medium term. After benefiting from the debt-reduction initiative for the Highly Indebted Poor Countries (HIPC), Côto d'Ivoire will not need further exceptional external assistance.
3. This policy framework paper (PFP) covers the three-year period 1998–2000 and presents in detail the measures and reforms contained in Côto d'Ivoire's medium-term economic and social reform strategy.2 The implementation of the envisaged policies and reforms, accompanied by a substantial reduction in the external public debt, will facilitate the achievement of the government's objectives. To support these reforms, the government of Côto d'Ivoire is seeking IMF assistance in the context of a new arrangement under the Enhanced Structural Adjustment Facility (ESAF), assistance from the World Bank in the form of new structural adjustment credits, and financial assistance from other multilateral and bilateral donors. The government is also seeking the support of the IMF and the World Bank in the context of the HIPC Initiative.
4. Overall, the macroeconomic objectives of the 1994–96 program were achieved. Following a long period of economic stagnation in the 1980s and early 1990s, Côto d'Ivoire's economic growth resumed in 1994. Led by a strong rise in exports and investment, gross domestic product increased in real terms by 2.1 percent in 1994 and by 7.1 percent in 1995, and it is estimated to have increased by 6.8 percent in 1996, thereby exceeding over the last two years the annual population growth rate of 3.8 percent. On average, the index of industrial production rose by 8.6 percent annually during these three years. Petroleum production, which restarted in mid-1995, reached 5 million barrels in 1996 as new fields came into operation. Inflation, as measured by the Abidjan consumer price index, reached more than 32 percent on a year-to-year basis in 1994 following the devaluation, but slowed considerably to 7.7 percent in 1995 and to 3.5 percent in 1996.
5. In large part owing to the pursuit of a prudent demand-management policy and wage restraint in the public and private sectors, Côto d'Ivoire was able to maintain the substantial competitiveness gains brought about by the devaluation. In this context, the volume of exports rose by an annual average rate of about 11 percent from 1994 to 1996. This good performance was spread to all products-not only the main export crops of cocoa and coffee, but also nontraditional exports, particularly those of manufactured goods, which registered a substantial increase of some 15 percent annually from 1994 to 1996. The volume of imports, which had initially fallen after the devaluation, rebounded by an annual average of 25 percent in 1995 and 1996, primarily on account of imports of capital goods and intermediate products. The external current account deficit was reduced from 11 percent of GDP in 1993 to 4.8 percent in 1996. Reflecting these developments, and supported by substantial external assistance, Côto d'Ivoire's contribution to the net foreign assets of the Central Bank of West African States (BCEAO) improved markedly.
6. The volume of private investment almost doubled between 1993 and 1996. Over the same period, the government raised the level of public investment from 3.7 percent of GDP to 4.3 percent. The ratio of overall investment to GDP thus rose from 7.8 percent in 1993 to 13.9 percent in 1996. At the same time, the domestic savings rate grew from 9.4 percent of GDP to 22.3 percent, largely because of the improvement in the government's financial position, but also because of the upturn in private savings.
7. Beginning in 1994, the public finance situation improved considerably, as a marked increase in revenue combined with expenditure restraint led to a rise in budgetary savings and a narrowing of the overall fiscal deficit. Steps were taken to strengthen the tax and customs administrations, broaden the tax base, reduce exemptions, and combat fraud and tax evasion. Accordingly, from 1993 to 1996, the ratio of government revenue to GDP increased from less than 18 percent to 22.5 percent, while that of primary expenditure to GDP fell from 21.3 percent to 19.4 percent. In particular, the wage bill declined from 10.7 percent of GDP in 1993 to 7.1 percent in 1996, while priority spending on education and health rose by about 10 percent annually during 1994–96. The government's basic primary balance, excluding externally financed capital expenditure, moved from a deficit of more than 2 percent of GDP in 1993 to a surplus of over 5½ percent of GDP in 1996. The overall fiscal deficit was reduced from almost 12 percent of GDP in 1993 to 2.1 percent of GDP in 1996. In addition, the government has made considerable efforts since 1994 to reduce verified domestic arrears and to eliminate non-reschedulable external payments arrears. The mobilization of exceptional external assistance and the external public debt relief granted by the Paris Club creditors contributed to reducing government's net indebtedness vis-à-vis the banking system during the period 1994–96.
8. With regard to money and credit, the money supply increased by 47 percent in 1994 following the devaluation, before slowing to 17 percent in 1995 and 3 percent in 1996. During this period, the banking system's net domestic assets recorded a moderate increase, partly because of the decline in government recourse to commercial bank and central bank credit, but also because of the weak growth of credit to the economy resulting from the improved cash position of enterprises and the settlement of arrears owed by the government. In carrying out its monetary policy, the BCEAO focused on adjusting key interest rates in accordance with regional monetary objectives. The effectiveness of a monetary policy based on indirect instruments was strengthened by the improvements in the functioning of the money market and the introduction of open market operations featuring regular auctions outside the BCEAO.
9. The encouraging results obtained under the program were also due to the effective implementation of a number of structural reforms aimed at correcting the distortions in the Ivoirien economy and developing a framework of incentives to encourage the emergence of a dynamic private sector. To this end, a new, more flexible labor code and a new investment code were adopted, as well as petroleum and mining codes. The government accelerated its policy of withdrawing from productive activities by privatizing, since 1994, some 30 public enterprises and establishing performance targets embodied in performance contracts between the parapublic sector and the state. In addition, the government liberalized foreign and domestic trade, notably through the dismantling of most nontariff barriers, as well as transport (maritime transport, in particular), and took initial steps to strengthen the legal, regulatory, and judicial framework. Marketing in the main agricultural sectors was liberalized, and the stabilization fund (CAISTAB) was reformed. Finally, price controls on most products were eliminated.
10. The economic recovery was sustained during 1997 and the rate of real GDP growth is provisionally estimated at 6 percent. In particular, the index of overall industrial production registered an increase of about 10 percent. The seasonal rise in the prices of food products was greater in 1997 than in 1996 and contributed to a rise in the general consumer price index of 5.2 percent in 1997, on a year-to-year basis; excluding food products, the increase was only 0.3 percent compared to 2.6 percent in 1996. The external current account deficit was reduced to 4.5 percent of GDP in 1997, despite lower cocoa exports. The money supply rose 8 percent in 1997, in line with nominal GDP. Despite the consolidation of the expansion of the economy, the government encountered difficulties in executing the budget during the first nine months of 1997 because of shortfalls in government revenue early in the year, and a rapid pace of expenditure commitments. The government adopted and implemented beginning in May 1997 a series of measures to strengthen revenue collection, which enabled the authorities to attain a level of total receipts of CFAF 1,328 billion at end-December 1997, slightly exceeding projections. To correct the spending overruns and prevent a further accumulation of DENOs, the government decided to freeze from September 1997 uncommitted budgetary appropriations for nonwage current expenditure other than for education and health, and to impose a monthly limit on the consumption of the remaining credits. As a result of these efforts, the revised objectives for end-December 1997 were broadly attained and the overall deficit was limited to 2 percent in 1997. Structural reforms were also carried out in 1997. The principal measures included: (a) the elimination in June 1997 of price controls on a number of products as well as most of the remaining trade restrictions; (b) the privatization of 9 public enterprises; (c) the adoption in June 1997 of an action plan to fight poverty; (d) the upward adjustments to producer prices for cocoa and coffee; and (e) the setting up of the Arbitration Court of Côto d'Ivoire and the Côto d'Ivoire Export Promotion Association (APEXCI).
11. Notwithstanding the progress made thus far, the government recognizes that Côto d'Ivoire's financial situation remains fragile and there are a number of structural and social reforms that must be carried out to alleviate the remaining rigidities in the Ivoirien economy, set the stage for strong and durable economic growth, and continue to reduce poverty. In addition, fiscal consolidation is needed to achieve lasting internal and external financial viability. This requires in particular (a) strengthening revenue collection by the tax and customs administrations, reducing tax exemptions, further deepening the fight against tax fraud and evasion, and broadening the domestic tax base; (b) pursuing a more prudent spending policy while continuing to give priority to human resource development and basic infrastructure, factors essential for growth; and (c) further improving cashflow and debt-service management. On the structural front, reforms are still needed to enhance private sector confidence so as to encourage investment and growth on a durable basis. In particular, stepped-up efforts are still needed in the areas of (a) the liberalization of the economy; (b) the further withdrawal of the public sector from productive activities; and (c) the improvement of the regulatory and judicial systems. Finally, on the social front, the adoption of an ambitious action plan to reduce poverty, in conjunction with the economic recovery since 1994, should in time benefit the entire population and expand the availability of basic social services.
12. Against this background, and building on the positive results achieved since 1994, the government is determined in the context of its reform strategy for 1998–2000 to undertake a second generation of reforms aimed at ensuring financial viability, keeping the economy on a path of sustained growth, reducing poverty, and substantially improving the living standards of the population. Therefore, the next phase of economic reform will focus on three key policy components: (a) strengthening fiscal consolidation measures through actions essential to broadening the tax base and restructuring government expenditure in favor of priority social sectors and basic infrastructure; (b) deepening structural reforms that promote private sector development and investment and thus build a sound basis for sustainable growth; and (c) pursuing an ambitious social agenda, especially in education and health and in the reduction of poverty. Particular emphasis will continue to be put on good governance, especially through more efficient use of public resources and the fight against fraud. Moreover, the private sector will remain the engine of growth, and reforms will continue to be carried out in the context of more rapid regional integration. In light of the fixed parity of the CFA franc, regional monetary and financial policy will continue to be designed to strengthen the zone's foreign assets while seeking to establish adequate mechanisms for the financing of private sector activities.
13. In accordance with this strategy, the principal macroeconomic objectives for the period 1998–2000 are to (a) achieve a real annual GDP growth rate of 6 percent; (b) maintain the inflation rate at about 3 percent; and (c) reduce the external current account deficit to about 2 percent by 2000. The government will also intensify its efforts to achieve its objectives in the social and environmental areas, especially (a) to reduce poverty; (b) to facilitate job creation through promotion of the private sector; (c) to develop human resources; and (d) to strengthen environmental protection.
14. Increased investment and a strong recovery of savings will be essential if the economic growth objective is to be achieved. Accordingly, the investment rate is projected to rise from 13.9 percent of GDP in 1996 to 19.3 percent in 2000, reflecting a projected sustained growth in private investment to about 15 percent of GDP in 2000, against 9.6 percent in 1996. Domestic savings are expected to increase from 22.3 percent of GDP in 1996 to 27.6 percent in 2000 as a result of the continued fiscal consolidation and a positive response by private sector savings to the economic liberalization.
15. A tight fiscal policy will be pursued, aimed at generating substantial savings to meet investment financing needs of the economy and reduce the excessive public debt burden. Tax policy will be geared toward stabilizing the tax burden at about 18 percent of GDP while broadening the tax base, eliminating existing distortions, and increasing the share of domestic taxation over taxes on international trade. The restructuring of government expenditure and the subcontracting of the financing and management of some public infrastructure projects to the private sector will be pursued. The wage bill and nonpriority current expenditure will be controlled, while spending for priority sectors (primary health care, education, and basic infrastructure) will be promoted.
16. The expansion of the private sector will be the main source of economic growth. To achieve this objective, the government will make every effort to foster a legal and regulatory framework that is more conducive to the development of private investment and to external private capital inflows. Furthermore, the government will pursue vigorously the liberalization of the economy, particularly in the coffee and cocoa sectors, to enhance domestic and external competitiveness. The program of withdrawing the public sector from directly productive activities will be intensified.
17. With respect to poverty alleviation, the government is convinced that strong, sustainable economic growth is essential for significantly reducing poverty in Côto d'Ivoire. In addition, the government will continue to increase the producers' share of revenue from export crops in line with world prices and will enhance the effectiveness of the social funds to help integrate youth, the less educated, and women into the economy. To increase life expectancy and improve the standard of living of the population, the government intends to step up its efforts to control major endemic diseases, particularly AIDS and malaria, improve access to primary health care, widen the scope of child vaccination, increase the literacy rate, and improve rural and urban housing, especially for the poorest segments of society. In addition, the government aims to reduce infant mortality and carry out a public awareness campaign for women, particularly in rural areas. Lastly, the government will increase its information, education, and communication activities in connection with health and family planning.
18. The government will strengthen its efforts to further improve public finances and implement a rigorous fiscal policy that will ensure the internal and external financial viability of Côto d'Ivoire. The key fiscal objective will therefore be to achieve primary surpluses, excluding externally financed capital expenditure, of about 5 percent of GDP during the period 1998–2000. The overall budget deficit, which was reduced to 2 percent of GDP in 1997, will be virtually eliminated by 2000. These objectives are to be achieved through measures designed to maintain government revenue at a level of at least 21 percent of GDP over the period 1998–2000 and to reduce primary expenditure to 18 percent of GDP by the end of the period. In addition, the non-reschedulable external payments arrears that were accumulated during 1997 were eliminated by end-1997 (with the exception of arrears owed to commercial banks, which will be eliminated in the framework of the agreement reached with the London Club). Domestic payments arrears, verified following recently completed audits, will be eliminated by end-1998. The government will ensure that expenditure commitments and payments procedures, as well as their execution, are strengthened, so as to prevent the emergence of new arrears.
19. To improve revenue collection, the government will vigorously pursue reforms aimed at improving the tax system, broadening the tax base, and strengthening the efficiency of the tax and customs administrations. These measures are especially important in view of the steady decline in external financial assistance and the reductions in the fiscal and parafiscal levies on the cocoa and coffee sectors. Accordingly, the government will spare no effort to (a) further streamline the tax system; (b) significantly reduce tax and customs exemptions; (c) improve the efficiency of revenue collection by the tax and customs administrations; (d) pursue the ongoing harmonization efforts within the West African Economic and Monetary Union (WAEMU) in the areas of taxation, external tariffs, and customs procedures; and (e) ensure compliance with the convergence criteria for economic policy within WAEMU.
20. Specific measures will be adopted to enhance the yield of certain taxes (particularly property taxes). In the context of the liberalization of the coffee and cocoa sectors, an appropriate broad-based domestic tax is to replace the present export taxes. The strengthening of the tax and customs administrations will promote taxpayer awareness, which should contribute to better compliance. Decentralization will be accompanied by the adoption of local taxation and will facilitate closer contacts between taxpayers and their tax authorities. Moreover, the government will reform the forestry tax with a view to improving the conservation of forestry resources.
21. On the expenditure side, the government will pursue its efforts to (a) contain current outlays, with the exception of priority expenditure on health, education, and basic infrastructure; and (b) continue improving the preparation, programming, and execution of investment expenditure. The ongoing reform of the budget and government accounting system will contribute significantly toward achieving these objectives. It is designed to improve the management of treasury operations through the adoption of a unified cash management system. To this end, the adoption of a standardized budget and a new regulatory framework governing public accounting is planned for January 1999.
22. The government will continue to rationalize public expenditure in the context of its restrained fiscal policy. Accordingly, primary expenditure will be reduced from 19.4 percent of GDP in 1996 to less than 18 percent by 2000. In particular, personnel expenditure will be reduced from 7.1 percent of GDP to about 6 percent of GDP over that period. In this connection, the monitoring of the civil service and the management of government personnel will be strengthened by the effective use, beginning in 1998, of a single payroll and civil service database. The size of the civil service (including national public agencies - EPNs) will be lowered from 117,545 at end-1997 to 110,185 by end-1998 through a reduction in the number of temporary and day laborers, and through strict enforcement of the rules governing retirement and voluntary departures from the civil service, accompanied by efforts to strictly limit recruitment largely to the health, education, judicial, and security sectors. Moreover, nonpriority expenditure will be further contained, while measures will be taken to ensure that sufficient allocations are made for health and education services. Government investment spending, which will be maintained at the level of about 6 percent of GDP during the period 1998–2000, will be primarily directed to the education, health, and infrastructure sectors. In addition, the government has adopted and begun implementing an infrastructure development program predicated, in particular, on the subcontracting of a number of public infrastructure projects to the private sector (currently 12), and on the use of private financing without the financial guarantee of the government.
B. Regional Monetary Policy and Financial Sector Reforms
23. Monetary policy, which is conducted at the regional level by the BCEAO, is to be implemented in accordance with WAEMU objectives and will be geared toward controlling inflation and strengthening the external reserves position. For Côto d'Ivoire, the money supply is projected to increase at a rate close to that of nominal GDP over the 1998–2000 period, about 9 percent per year. The improvement in the fiscal position should enable the government to reduce its indebtedness to the banking system, so as to make more room for increased bank lending to the private sector. Banking supervision, strengthened by the role of the WAEMU Banking Commission, will also be pursued through the strict enforcement of regulatory and prudential provisions, in order to enhance the credibility of the banking system.The Ivoirien government will continue its consultations with the other WAEMU member countries, with a view to improving the range of indirect instruments available to the BCEAO and enhancing the effectiveness of monetary policy.
24. Over the period 1998–2000, the government will continue to strengthen the financial sector, with the aim of increasing domestic savings and boosting the competitiveness and efficiency of banking and financial institutions. To this end, legal and regulatory reforms will be pursued, and the range of financial services and instruments made available to private sector investors and depositors will be expanded, in particular through (a) the launching of the regional financial market; and (b) the development of decentralized, local financial institutions. The authorities will take all measures necessary to address the weaknesses noted by the Banking Commission at end-1997 concerning non-performing agriculture credits. The government will continue the restructuring of the SIPE and will adopt by end-June 1998 the decrees separating the postal services from the financial services. In addition, the authorities will continue to diversify financial instruments, so that the financial system can better collect the long-term resources needed for investment by enterprises. The goal will be to develop the issuance of negotiable debt instruments. In addition, the government will carry out public awareness programs to promote savings by the general public, as well as to broaden the debate on creating an incentive framework for this purpose.
25. The government will intensify its efforts to improve the environment for more vigorous economic activity by the private sector. This strategy is predicated on (a) revitalizing the partnership between the public and private sectors; (b) strengthening the institutional management capacities of the public sector; (c) reinforcing security for property and individuals; (d) further improving and streamlining the regulatory framework and the judicial system, as applied to business activities; (e) pursuing liberalization and strengthening the competitiveness of the economy; and (f) continuing the privatization process. Moreover, the government will continue to involve the private sector in the management and construction of certain public sector projects and will ensure private sector operators a greater market transparency. The private sector will also play a key role in fostering the development of industries engaged in the processing of local raw materials, as well as of export-oriented industries, focusing on small- and medium-scale enterprises.
26. On the basis of major reforms already in progress with respect to the liberalization of foreign trade, domestic trade, and prices, as well as of stronger measures to enforce competition, the government is committed to rapidly completing its price and trade liberalization program. In this context, the prices of goods and services still regulated were liberalized in June 1997, reducing the number of categories of regulated prices from thirteen to six (butane gas; baguette bread; public utilities comprising water, electricity, and post and telecommunications; pharmaceuticals; school textbooks; and certain indicative prices for agricultural products). Four of the six remaining nontariff barriers were also eliminated-except for the monopoly of the oil refinery (SIR) on imports of petroleum product supplies, which will be removed by end-1998, and for cotton fabrics (as allowed by the World Trade Organization). The number and level of customs tariffs will also be reduced, effective March 31, 1998, as part of the tariff harmonization in WAEMU. The Council of Ministers of WAEMU decided on November 28, 1997 to set the new rates at 0 percent, 5 percent, 10 percent, and 20 percent, to be put in place by January 1, 2000 in all the WAEMU member countries. It has also been decided that the statistical tax will be reduced from 2.5 percent to 1 percent.
B. Privatization and Public Enterprise Reform
27. Over the period 1998–2000, the government will continue implementing its privatization program and strengthen the monitoring of the remaining public enterprises and their financial position. The objectives of the privatization and public enterprise reform program are to (a) enlarge the private sector's role in the development and financing of economic activities through new investment in the productive base; (b) boost the productivity and competitiveness of enterprises; (c) increase job market opportunities; (d) improve domestic savings through the creation of shareholders throughout the country; and (e) increase government budgetary resources.
28. The full privatization of 13 public enterprises and the partial privatization of 16 other enterprises generated privatization proceeds of over CFAF 93 billion during the period 1994–96. In 1997, nine additional enterprises were privatized and a hotel complex was put under a management contract with a private operator. These privatizations generated CFAF 144 billion, of which CFAF 105 billion came from the partial privatization (51 percent) of the telecommunication company (CI-TELCOM) concluded in February 1997. The government's program calls for the privatization of 15 public enterprises in 1998, 15 in 1999, and 10 in 2000. These privatization efforts will focus on the cotton sector (the textile company-CIDT), the petroleum sector (Société ivoirienne de raffinage), the hotel sector, and the transport sector. The government, in consultation with the World Bank, also intends to conduct a study of its privatization program by end-June 1998 to evaluate privatization procedures and their economic and social impact.
29. The accountability of managers of those enterprises remaining in the government's portfolio will be increased, as will the monitoring of their performance by the Department of Equity Investments and Portfolios. In this regard, the government has adopted a law amending the standard articles of incorporation of public enterprises and defining their management methods and supervision mechanisms. This law will be rigorously applied during the period 1998–2000, and a report will be prepared on the financial position of public enterprises as at end-December of each year. The government also intends to sell some of its minority share holdings on the regional stock exchange.
C. Sectoral Policies
30. The government will implement an appropriate incentive framework aimed at accelerating the development and diversification of the agricultural sector. It will also continue its policy of withdrawing from production and marketing activities in the sector, to the benefit of the private sector and professional agricultural organizations. Improvement of agricultural sector productivity remains a priority of the government. The measures for 1998–2000 aim in particular at completing the reforms in the cocoa and coffee sectors, carrying out further price liberalization, and moving forward with the privatization program for agroindustries. In addition, special emphasis will be placed on promoting employment in agricultural areas through the provision of assistance to young farmers. The government will also undertake a comprehensive land reform so as to lay the foundation for efficient and sustainable natural resource management. With the goal of improving food security, the government has decided to implement the recommendations set forth in the action program of the study on food production, and has reformed the rice sector by deregulating imports of ordinary and broken rice as of January 1997; imports of other types of rice are already free.
31. The liberalization of the coffee and cocoa sectors is being carried out in the context of the continuation and strengthening of the positive results achieved under earlier reform efforts, in particular those —such as the liberalization of domestic marketing —put in place under the Agricultural Sector Adjustment Program (ASAP) with the support of the World Bank, the African Development Bank, the European Union, France, and Germany. In this context, the government will redefine the role of CAISTAB in the coffee and cocoa sectors.
32. In order to allow producers to continue benefiting from increased remuneration in line with world prices, the reforms carried out over the 1998–2000 period will focus on three areas: (a) liberalization of the coffee sector beginning with the 1998/99 agriculture season, while putting in place accompanying measures as well as a program to monitor and evaluate the reform; (b) in light of the results of these measures and any necessary corrections, liberalization of the cocoa sector beginning with the 1999/2000 agricultural season; and (c) restructuring of the CAISTAB according to a schedule in conformity with the different stages of the liberalization.
33. During the 1997/98 agriculture season, the government is implementing the following measures: (a) introducing new regulations governing the auction system in order to improve its effectiveness; and (b) creating a joint committee comprising CAISTAB and the organization of exporters (GEPEX) to more closely involve the private sector in the management of the sector. In addition, the producer price for cocoa was increased in October 1997 from CFAF 320 to CFAF 415 per kilogram, and the surpluses from the coffee and cocoa sectors for the 1996/97 and 1997/98 agriculture seasons are being used, in agreement with the donors concerned, to further increase the price paid to cocoa producers to CFAF 455 per kilogram effective in early November 1997, reduce the debt of the sector, and finance accompanying measures necessary to prepare for the total liberalization of the coffee and cocoa sectors. In December, the producer price of coffee was raised from CFAF 500 to CFAF 520 per kilogram. Also during the 1997/98 agricultural season, the government, in partnership with all actors in the sector (the state, donors, exporters, producer organizations, and banks) will put in place the measures necessary for the success of the liberalization. These measures primarily include (a) creating a database that will serve as a reference source for evaluating the results of the liberalization of the coffee sector; (b) training and organizing the producers; (c) restructuring the producer and exporter organizations and strengthening their professional skills; (d) adapting financing mechanisms to the needs of the agriculture sector; and (e) instituting an extensive information program for all actors in the sector.
34. The restructuring plan for CAISTAB will take into account the need to respond to certain issues posed by the liberalization of the sector, including (a) legal agreements held by roasting and processing factories; (b) statistical and tax problems; (c) monitoring of international contracts; (d) protection of the label designating products made in Côto d'Ivoire; (e) reorientation and adaptation of CAISTAB to its new role; and (f) maintenance of a system of forward sales organized by professionals in the sector.Protection of the environment and forests
35. Despite the significant efforts that have been made, the environment and forests are faced with a number of problems, particularly soil degradation, overfishing, deforestation, the loss of biodiversity, and pollution. In view of these problems, which have an adverse effect on living standards, the government will endeavor to improve the management and use of Côto d'Ivoire's natural resources. Policy in this area will focus on applying the national environmental action plan (PNAE) through the implementation of appropriate sectoral strategies that will enable Côto d'Ivoire to participate in international efforts to protect the environment. To this end, an environmental protection code will be implemented, and national programs will be pursued to educate the public regarding the importance of environmental protection.
36. The government's strategy to rehabilitate forestry will aim to (a) create a policy and institutional environment enabling local populations to directly manage forest resources located in nondesignated rural areas; (b) support effective implementation of the forest management plans designed for priority forests; and (c) initiate the protection and management of designated forests located in the savannah zone. In this context, to discourage illicit settlement in the forests, cash crop farmers in designated forests and national parks will be gradually moved elsewhere. To support more sustainable use of forest land and logging practices, taxation on wood will shift from a product-based system to a forest-resource-based system. In addition, new policies creating long-term transferable forest concessions will be tested in collaboration with the private sector.
Mining and petroleum
37. The government intends to transform the mining and petroleum sector by the year 2000 into one of the critical sectors of the economy, alongside agriculture. More specifically, the Ivoirien authorities are determined to provide for the country's energy needs and to develop energy exports by implementing a national energy plan focused on the development of offshore oil and natural gas deposits. To achieve these objectives, the government intends to: (a) strengthen regulatory provisions; (b) promote the liberalization of the sector; (c) intensify the exploration, production, storage, and distribution of petroleum products; (d) improve the competitiveness of the petroleum industry; (e) develop mining projects; and (f) promote a viable artisanal mining sector. The government also intends to encourage the use of natural gas and butane gas for home use as part of its efforts to limit deforestation.
38. A key objective of the government is to strengthen and modernize the national infrastructure, with the aim of improving its efficiency. This objective reflects the need to reverse rapidly the infrastructure deterioration that occurred in the 1980s and early 1990s, and to meet the demands of economic growth and rapid urbanization. During the period 1998–2000, the government will focus on maintaining the infrastructure, implementing projects judged economically viable, and ensuring greater involvement by the private sector in financing infrastructure.Energy and water supply
39. In the energy sector, the rural electrification program will be intensified through both conventional methods and new technologies, which will increase the coverage of the country in electrical energy. The cost-based automatic adjustment of electricity charges, which was initiated in 1996, will be pursued. The government will also continue to improve the legal and regulatory framework for the electric power sector, with the intention of encouraging independent energy producers.
40. With respect to water policy, the objective is to make drinking water accessible to a larger share of the population by expanding the coverage of the water supply system to 85 percent in urban areas and 65 percent in rural areas by the year 2000, as opposed to 75 percent and 50 percent, respectively, in 1996. The program in this sector will involve increased reliance on the private sector to extend the water distribution network to towns and major urban areas, and on the construction of wells equipped with manual pumps in villages and settlements with populations of at least 100.Transport
41. To consolidate the competitiveness of the economy, the government will focus on (a) improving the overall efficiency of the transport system; and (b) further deregulating transport activities. The road transport program will emphasize the maintenance and rehabilitation of the existing road system, especially rural roads, while continuing the construction of new roads. These measures will be underpinned by a deepening of the liberalization of transport activities, in particular the privatization of road maintenance; at the same time, an entity responsible for maintenance contracts will be kept in place. Port transit procedures and road inspections will be eased. Lastly, with respect to air transport, the Ivoirien government envisages a significant improvement in the quality of service provided by Abidjan international airport through the already completed privatization of its operation and management, together with the upcoming privatization of the airline Air Ivoire, and the considerable upgrading of regional Ivoirien airports.Telecommunications
42. The government's main objectives in this sector are to (a) expand the coverage of telecommunications throughout the country, in particular through increased access to telephone services; (b) develop international, urban, and rural networks, increase telephone density, and reduce imbalances between Abidjan and the rest of the country; and (c) put in place new telecommunications services and information highways. The recent privatization of CI-TELECOM will facilitate the achievement of these objectives.Regional development and decentralization
43. To allow regional capitals to play their important role in economic development, they must be provided with the means to sustain the development of their respective regions and boost their productivity. The government will accelerate the implementation of its new regional strategy, which is based on the promotion of the region socioeconomic potential, decentralization, and the restoration of regional balance. To that end, the government will carry out the following actions: (a) intensify regionalization by focusing development efforts on regional capitals; (b) promote regional private investment, (c) strengthen the management capacity of regional government entities; and (d) putting in place a rural land scheme.Public housing
44. Côto d'Ivoire's housing needs are considerable-on the order of 40,000 new dwellings a year, with one-half of these accounted for by the city of Abidjan alone. More than one-half of these needs are for low-income housing. The government's objective is to improve housing conditions in Côto d'Ivoire, especially for the poorest households. This objective is to be attained by (a) implementing a housing policy based on a reform of the legal and tax frameworks to promote the construction of housing, and improving financing of housing investment and the monitoring of housing; (b) ensuring that housing sites are readily outfitted with utilities available at a cost compatible with low-income levels, improving living standards, and promoting the construction of housing for the largest numbers of people; and (c) encouraging greater private sector participation in the achievement of public housing objectives.
D. Social Policy and Action Plan Against Poverty
45. The prolonged economic stagnation experienced by Côto d'Ivoire in the late 1980s and the early 1990s contributed to a worsening of the poverty indicators. Successful efforts to reduce poverty hinge on attaining the medium-term growth objectives and implementing a policy to actively redistribute the benefits of this growth. Therefore, providing incentives for producers (including prices, credit, education and technology) aimed at increasing rural incomes is a central element of this comprehensive policy of poverty reduction. In urban areas, the recovery in manufacturing and services, along with the promotion of labor-intensive activities supported by various reforms in the labor market, should lead to higher employment and reduced poverty. In June 1997, the government adopted a poverty reduction action plan aimed at reversing the deterioration of the poverty indicators; the plan includes specific measures and actions targeting assistance to the poor and focusing on the improvement of the living standards of the most vulnerable members of society. To ensure the success of this plan, the government set up in January 1998 a committee to supervise and oversee these actions, and it will establish a system for systematically tracking poverty indicators. Annual surveys will be conducted to monitor the living standards and conditions of households, starting in 1998.Education
46. The government's efforts, as presented in the national plan for the development of education (PNDE), will focus on building an educational system consistent with the development objectives and capable of combining quality with quantity. The new education law, promulgated in September 1995, assigns as priorities of the education system the following: (a) improving the quality of education and tailoring it to economic, social, and cultural needs; and (b) providing greater access to education for all citizens. These priorities will be reflected in an increase in the share of education in government primary expenditure (excluding foreign-financed investment) to 39 percent (5.4 percent of GDP) by the year 2000, compared with 31.6 percent (4.5 percent of GDP) in 1996, and within this envelope, they will also result in better targeted budget appropriations for basic education.
47. The government's main objective is to continue remedying the weaknesses of the education system and to raise the primary school enrollment rate from 51 percent in 1996 (69 percent in gross terms) to 55 percent (73 percent in gross terms) by the year 2000. The government also intends to significantly reduce the illiteracy rate. To this effect, it will (a) foster the development of the private education sector; (b) increase the enrollment of girls and keep them in school; (c) boost the demand for education, especially in rural and disadvantaged areas; (d) implement a consistent national literacy policy and a literacy network throughout Côto d'Ivoire; and (e) improve the cost-effectiveness of public investment in the sector, in particular through measures to contain the cost of school infrastructure and textbook production.
48. Technical and vocational training will also have to be strengthened to respond effectively to Côto d'Ivoire's economic and social development needs. The government's efforts will therefore also focus on developing modular training programs aimed at establishing employability, programs alternating work and training, and wider access to apprenticeships. In the area of higher education, the government will focus on improving quality, exploring options for expanding the system at the lowest cost, promoting scientific and technological research reflecting economic and social development needs, and continuing the process of decentralization and regionalization.Health
49. The objectives, strategies, activities, and resources required to develop the health sector are set forth in the national health development plan (PNDS) covering the period 1996–2005, which the government adopted in April 1996. The plan's general objective was previously defined in the human resources development program (PVRH), namely, to improve the health and well-being of the population by establishing a better quantitative and qualitative balance between the supply of health services and the population's basic needs. Achieving this balance will involve increasing the health sector's share of government primary expenditure to 10.8 percent (1.5 percent of GDP) by the year 2000, compared with 7.1 percent (1 percent of GDP) in 1996.
50. The health program to be implemented has two specific objectives. The first is to reduce the morbidity and mortality associated with major endemic diseases by improving access to health services for the entire population and, in particular, the most vulnerable target group, mothers and children. This objective is to be achieved by promoting primary health care through the provision of a minimum package of services. The second objective is to render the health system more efficient and enhance the quality of health services by improving management. In particular, the program to delegate responsibilities and resources to regional and departmental directorates (health districts) should be continued, research should be promoted, and the increased development and optimum use of human resources should be pursued. In addition, the government will implement a bold national population policy to contain demographic growth and fertility, and to target sustainable human development.Employment
51. In the area of employment, the government's objectives are based first on the expected effects of economic growth. The government will also emphasize the optimal use of human resources, and will promote a social environment more favorable to job creation. To attain these objectives, the government will promote the implementation of the national employment plan (PNE), adopted in 1995, which is based on a strategy that focuses mainly on job creation by the private sector in both urban and rural areas. Accordingly, the government will take steps to (a) employ young graduates and school dropouts, particularly through the employment programs for women and rural youth; (b) develop self-employment; (c) strengthen the legal framework to make hiring more attractive while protecting wage earners' social welfare; (d) monitor employment trends so that training can be adjusted accordingly; and (e) continue improving resource management to render workers more efficient and functional.Women and family development
52. Regarding the advancement of the role of women in development, the following measures are envisaged: (a) training young women for nontraditional careers with good earnings potential; (b) taking additional steps to improve the status of women; (c) improving the living conditions of the poorest groups; (d) strengthening social policy and protection for women and children; (e) implementing a policy to deal more effectively with marginalization; and (f) reducing the illiteracy rate. Furthermore, special emphasis will be placed on training for entrepreneurship. In that connection, women will continue to benefit from a social fund to finance economic and commercial activities. With respect to family development, a family code and a number of laws in favor of the family are to be drafted. The aim is to provide legal protection for family members, especially women and children, and to improve the social framework of the family by, among other things, initiating a number of campaigns to raise awareness about issues in health, environment, and education of young women.
E. Regional Integration
53. In the context of ongoing economic globalization, Côto d'Ivoire's reforms will take into account the process of economic integration among WAEMU member countries, in particular the need to harmonize structural reforms, the creation of a common external tariff, the implementation of a common legal and tax framework, the enhancement of regional surveillance of economic policies, and a number of regional development projects, such as road infrastructure and the interconnection of the national electric power networks.
54. Côto d'Ivoire's efforts to liberalize its economy and promote the private sector also reflect the regional integration policy being pursued within WAEMU. Steps that will be taken include putting in place convergence and performance criteria in various policy areas, harmonizing indirect taxation and customs duties, and adopting a common simplified investment promotion framework and a common West African accounting system.Côto d'Ivoire and the governments of the other member countries are also expected to adopt common sectoral policies and promote regional sectoral projects. In addition, in the context of the Organization for the Harmonization of Business Law in Africa (OHADA), and in particular with the establishment of the common court of justice and arbitration, the Ivoirien authorities intend to implement uniform business laws and enhance the operations of the judicial system.
F. Improvement of Statistics
55. The government recognizes the importance of possessing an adequate statistical database, and serious efforts are being made to improve the quality and coverage of economic and social data. To that end, in coordination with the BCEAO, the government will implement an action plan to improve balance of payments statistics, in line with the recommendations made by the IMF technical assistance mission in August 1996. The government will also address other weaknesses in the statistical database, in particular the procedures used for gathering and recording real sector data, and the data on prices and on external debt (including private debt). In the area of monetary statistics, the authorities will accelerate the pace of dissemination of the data and improve data quality; they will also ensure that the monthly monetary survey is available within six weeks following the end of the month in question. As regards the compilation of fiscal data, efforts are under way in the context of WAEMU to harmonize the coverage and the presentation of the central government's financial operations.
VI. External Sector Outlook and Financing Requirements
56. The effective implementation of the measures described in this document should enable Côto d'Ivoire to achieve medium-term external viability. The projected stabilization of its terms of trade, the continued dynamism of nontraditional exports, and the slowdown in the growth of imports should result in a reduction of the external current account deficit from 4.8 percent of GDP in 1996 to 2 percent in 2000. A significant portion of the financing of the current account deficit is expected to be covered by inflows of private capital, in line with the government's strategy to develop the private sector and achieve subregional integration within WAEMU, and with the further normalization of relationships between Côto d'Ivoire and the international financial community in the wake of the agreement reached with the London Club. The private capital inflows will take the form of new investment opportunities available as a result of the improved economic environment and the development of the stock market. Medium-term official external assistance, although in decline, will also remain sizable over the program period.
57. Côto d'Ivoire expects a gross external financing requirement (after net private capital inflows) for 1998–2000 of some CFAF 1,833 billion (US$3.1 billion), resulting from a cumulative external current account deficit (including interest payments but excluding net official transfers) of CFAF 737 billion; external debt service amortization payments amounting to CFAF 1,182 billion, including repurchases of Fund resources and the up-front payments under the London Club agreement; and an increase in gross official reserves of CFAF 378 billion (US$641 million). Over the same period, concessional loans for the public investment program are estimated at CFAF 318 billion and official transfers at CFAF 86 billion; identified commitments of exceptional assistance from bilateral and multilateral donors amount to CFAF 683 billion, including prospective disbursements of amounts outstanding under structural adjustment loans from the World Bank and use of Fund resources under the requested ESAF arrangement, as well as multilateral and bilateral contributions to the financing of the up-front cost of the debt-reduction operation with commercial banks. A residual financing gap of CFAF 746 billion remains for the entire period 1998–2000, which will be filled with additional exceptional assistance from multilateral and bilateral donors and further rescheduling of debt service by official bilateral creditors in the Paris Club on Lyon terms. The government intends to complete the restructuring of commercial bank debt in the context of the London Club by end-March 1998 and to request a new debt restructuring agreement from its official bilateral creditors in the Paris Club as soon as the new ESAF arrangement is approved.
58. The government will seek concessional terms for new borrowing. It will neither contract nor guarantee loans with grant elements of less than 35 percent, except for loans with a maturity of more than 12 years and a grant element of 10–35 percent to finance high-return public investments not exceeding a total of US$20 million in 1998. The government will also avoid the accumulation of new external payments arrears in an effort to normalize Côto d'Ivoire's relationships with its private and official creditors. The government is convinced that such a normalization will restore the confidence of the international banking community in Côto d'Ivoire's future and make foreign banks more inclined to support private investment and other industrial and commercial activities in the country. The government will intensify its efforts to improve the external debt database. It will improve debt data management and will ensure in particular that external debt statistics of public enterprises are reported on a timely basis to the debt management unit.
VII. Debt Sustainability
59. Côto d'Ivoire is mindful of the heavy burden imposed on its economy by its large debt stock and debt-service obligations. At end-1996, the total stock of debt (including nonguaranteed commercial debt) amounted to US$19.5 billion, or 183 percent of GDP, with public debt equivalent to US$16.2 billion, or 152 percent of GDP. The ratios of the net present value of the total debt and the public debt to exports of goods and nonfactor services were 432 percent and 353 percent, respectively, and the ratio of the net present value of the external public debt to total government revenue was 643 percent. Commercial banks make up the largest group of creditors, with a total stock of claims of US$6.8 billion, followed by the Paris Club (US$5.1 billion) and multilateral institutions (US$4.2 billion). In 1996, the debt service payable on the external public debt amounted to the equivalent of 25 percent of exports of goods and nonfactor services and 52 percent of total government revenue. The debt is a heavy burden on government resources, especially at a time of declining external budgetary support, and it is generating negative net transfers to the government.
60. Before new official debt relief, the ratio of the net present value of the total debt to exports of goods and nonfactor services is expected to decline by some 177 percentage points to 255 percent by the year 2000 and by another 149 points to 106 percent by 2016. The same ratio for the public debt would show a comparable decline to 181 percent by the year 2000 (down 172 percentage points) and drop further to 43 percent in 2016 (down an additional 138 percentage points). The ratio of the net present value of the external public debt to total government revenue is expected to turn out at 360 percent in the year 2000. The ratios of total debt service and public debt service to exports could fall 6-7 percentage points by 2000 to 29 percent and 18 percent, respectively, and fall another 13 percentage points over the period 2000-2016. The ratio of public debt service to total government revenue could decline by 14 percentage points to 38 percent by the year 2000 and to 12 percent by 2016.
61. After an assumed stock-of-debt operation at Naples terms-providing a 67 percent net present value reduction-with Paris Club creditors and the full implementation of the debt restructuring agreement with commercial bank creditors in early 1998, the ratio of the net present value of public debt to exports would decline to 148 percent by 2000 and to 35 percent by 2016, with the public debt-service-to-exports ratio also falling to 13 percent and 6 percent, respectively. Similarly, as regards the fiscal burden of debt, the assumed debt relief would let the ratio of the net present value of public debt to government revenue drop to 293 percent by 2000 and to 68 percent by 2016 and the ratio of public debt service to revenue to 27 percent and 11 percent, respectively.
62. In light of the foregoing considerations, the government will make every effort to find lasting solutions to the debt problem, particularly by reducing the total stock of debt to a sustainable level. To this end, the Ivoirien authorities realize that they must maintain rigorous macroeconomic and fiscal policies in the years to come and not allow any slippages in the implementation of the structural adjustment program.