Côte d'Ivoire and the IMF
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The International Monetary Fund (IMF) approved today a three-year arrangement under the Enhanced Structural Adjustment Facility (ESAF),1 in an amount equivalent to SDR 285.8 million (about US$384 million), to support Côte d’Ivoire’s economic program for 1998-2000. The first annual arrangement, equivalent to SDR 123.9 million (about US$167 million), is available in two semiannual installments, the first of which , in an amount of SDR 83.370 million (about US$112 million), will be available on March 25, 1998. The IMF also considered the eligibility of Côte d’Ivoire under the Initiative for the Highly Indebted Poor Countries2.
Côte d’Ivoire’s performance under the three-year ESAF arrangement that expired in June 1997 was broadly satisfactory. Progress was made in removing distortions, reducing financial imbalances, containing inflation, and improving the competitiveness of the economy, thus revitalizing the private sector and boosting growth. Real GDP growth is estimated to have reached 6.8 percent in 1996 and 6 percent in 1997, inflation was 3.5 percent in 1996 and 5.2 percent in 1997, and the external current account deficit narrowed to 4.8 percent of GDP in 1996 and 4.5 percent in 1997. Nonetheless, Côte d’Ivoire is at a critical juncture: despite the progress made so far, the economy remains vulnerable and continues to face constraints that, if not removed, could hamper the country’s development. The fiscal situation is fragile, marked by cash-flow difficulties and weaknesses in expenditure control; private sector development continues to fall short of expectations; further liberalization of the cocoa and coffee sectors is required; and governance issues need to be addressed forcefully to ensure transparency and sound management of public resources.
Medium-Term Strategy and the 1998 Program
The medium-term adjustment strategy for 1998-2000 focuses on three key policy components: (a) prudent fiscal policy to bring the budget close to balance by 2000 and achieve a surplus thereafter; (b) structural reforms to promote private sector development and investment, including foreign direct and portfolio investment; and (c) an ambitious social development agenda, designed to reduce poverty, especially through well-targeted and efficient public spending on education and health. The basic macroeconomic objectives for 1998-2000 are to: (a) achieve real GDP growth of about 6 percent a year, allowing per capita income to rise by more than 2 percent annually; (b) maintain an inflation rate of about 3 percent a year, consistent with the exchange rate peg (of the CFA franc vis-à-vis the French franc); and (c) lower the externalcurrent account deficit to 2 percent of GDP by 2000. Within this medium-term strategy, the 1998 program being supported by the first annual ESAF loan aims at: (a) achieving a real GDP growth rate of 6 percent; (b) limiting inflation to 3 percent; and (c) narrowing the external current account deficit to 4.1 percent of GDP. To achieve these objectives, fiscal policy is designed to reduce the overall deficit further to 1.5 percent of GDP in 1998, from 2 percent in 1997. On the revenue side, efforts will be focused on improving efficiency in customs and tax administration, reducing fraud, and broadening the tax base. On the expenditure side, the authorities will pursue a prudent policy, while adequately providing for basic health and education services and infrastructure maintenance. Monetary policy, conducted at the regional level, will remain consistent with the fixed exchange rate regime, and a further improvement of the CFA franc zone’s net foreign assets position.
The authorities have already moved to speed up the implementation of their unfinished structural reform agenda, particularly in the areas of trade and price liberalization, cocoa and coffee marketing, and privatization. Trade liberalization is being pursued in the context of regional arrangements. Coffee marketing will be fully liberalized in October 1998, and cocoa marketing in October 1999. At the same time, privatization of state-owned enterprises will be accelerated with the sale of 15 enterprises in 1998.
Addressing Social Needs
The authorities’s strategy to improve living conditions and to reduce poverty is based on achieving sustained high economic growth, coupled with the implementation of social policies and measures targeted to the most vulnerable groups of the population. The comprehensive poverty reduction action plan adopted by the government in June 1997 includes specific measures and actions targeting the poor. The authorities are continuing to redirect public spending in favor of education, health, and infrastructure maintenance. A steering committee has been set up to supervise actions taken under this plan and to establish a system to monitor poverty indicators.
The Challenges Ahead
Poverty reduction is a major challenge facing Côte d’Ivoire, given the strong deterioration in living standards during the period of economic decline from the mid-1980s to the early 1990s. Also, further fiscal consolidation is necessary to achieve financial viability over the medium term and to increase public saving. It is thus crucial to strengthen government revenue performance and expenditure controls, as well as to ensure transparency and sound management of public resources. To foster private sector confidence and fully realize the country’s economic potential, the authorities will have to carry out the next phase of structural reforms with strong resolve. Ensuring good governance and strengthening the judicial system will also be essential.
Côte d’Ivoire joined the IMF on March 11, 1963, and its quota3 is SDR 238.2 million (about US$320 million). Its outstanding use of IMF financing currently totals SDR 333 million (about US$448 million).
1The 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 a year and are repayable over 10 years, with a 5½-year grace period.
IMF EXTERNAL RELATIONS DEPARTMENT