Press Release: IMF Approves Second Annual Loan for Cote d'Ivoire Under the ESAF
May 22, 1995The International Monetary Fund (IMF) was approved the second annual loan for Cote d'Ivoire under the Enhanced Structural Adjustment Facility (ESAF)1 equivalent to SDR 119.10 million (about $183 million), to support the Government's 1995 economic reform program. The loan will be disbursed in two equal semiannual installments, the first of which is available immediately.
The Ivoirien economy reacted positively in 1994 to the shift in relative prices and the improvement in external competitiveness brought about by the devaluation of the CFA franc in January 1994. The objectives of the 1994 economic reform program, supported by the first ESAF loan, were achieved and, in some cases, were exceeded in terms of output, prices, and demand. Production of nontraditional agricultural exports, food crops, and livestock increased markedly, as did that of manufactures, reflecting the shift toward locally produced goods. Real GDP grew by 1.7 percent, double the original target; inflation was brought under control; and the cumulative rise in prices was held at 32.2 percent, slightly lower than initially forecast.
The 1995 Program
In order to consolidate gains in competitiveness, and achieve high, sustainable growth, the authorities are focussing on further improvements in public finances and on stepping-up structural measures. The main objectives of the 1995 program are to: (i) achieve a real GDP growth rate of 6.4 percent; (ii) bring inflation down to about 5 percent by the end of the period; (iii) reduce the external current account deficit, including official transfers, to 2.2 percent of GDP; and (iv) reduce the overall fiscal deficit by more than 2 percentage points to 5.5 percent of GDP.
To achieve these objectives, the authorities are strengthening public finances. On the revenue side, the tax system will be rationalized, the tax base broadened, and the yield from existing taxes enhanced. As a result, reliance on coffee and cocoa export taxes will be reduced. The authorities are also working to coordinate external and intraregional customs tariffs among the member countries of the West African Economic and Monetary Union (WAEMU). On the expenditure side, current noninterest expenditure is programmed to decline by more than 1 percentage point to 15.4 percent of GDP in 1995. This will be accomplished by limiting the increase in the wage bill and by implementing measures to reduce the number of civil service employees by 2.4 percent. The authorities will continue reorienting public expenditure towards priority sectors such as primary health and education. They will also increase capital spending by 19 percent, based on a revised public investment program, to be presented to donors at a consultative group meeting in June 1995. A program to eliminate all domestic payment arrears by end 1996 will be published soon. Monetary policy, which will maintain the prudent stance followed in 1994, will limit domestic demand growth to a rate consistent with the currency peg, and further increase Cote d'Ivoire's contribution to the net foreign assets of the WAEMU.
The authorities intend to strengthen and accelerate structural reforms in 1995, with a view to developing the private sector. The privatization program and the restructuring of the parapublic sector will be accelerated in 1995, price controls will be further reduced, in line with the elimination of some remaining non tariff barriers, and far-reaching reforms will be launched in the agricultural sector. Government intervention in the cocoa and coffee sectors will be scaled down. Significant reforms of public administrations are also under way, notably to improve the budgeting process.
Addressing Social Costs
The Government's poverty alleviation strategy has three main elements: policies to achieve more rapid growth in per capita income, improved access to basic social services, and measures targeted at the poorest segments of the population. With respect to social services, the Government will improve access to, and the quality of, primary education and health services. It will also increase budget appropriations to enable municipalities to launch public utility works and labor-intensive rehabilitation programs.
The Challenge Ahead
The authorities must complete the agenda of structural and sectoral reforms in order to facilitate the attainment of the program's objectives and the targeted growth rate. As a result of the concessional rescheduling granted by the Paris Club and other creditors in 1994, the outlook for Cote d'Ivoire's external debt situation has improved. Nevertheless, progress toward external viability will continue to depend for a number of years on Cote d'Ivoire's continued access to exceptional financial assistance on highly concessional terms and debt relief.
Cote d'Ivoire joined the IMF on March 11, 1963 and its quota2 is SDR 238.20 million (about $366 million). Its outstanding use of IMF credit currently totals SDR 205.94 million (about $316 million).
Sources: Ivoirien authorities; and IMF estimates and projections.
1. The ESAF is a concessional IMF facility for assisting eligible members that are undertaking economic reform programs to strengthen their balance of payments and improve their growth prospects. ESAF loans carry an interest rate of 0.5 percent and are repayable over 10 years, with a 5 1/2-year grace period.
2. A member's quota in the IMF determines, in particular, the amount of its subscription, its voting weight, its access to IMF financing, and its allocation of SDRs.