Press Release: IMF Executive Board Completes First Review Under Côte d’Ivoire’s Extended Credit Facility Arrangement and Approves US$100 Million Disbursement
May 11, 2012Press Release No.12/175
May 11, 2012
The Executive Board of the International Monetary Fund (IMF) completed today the first review of Côte d’Ivoire’s economic performance under the program supported by an Extended Credit Facility arrangement (ECF),1 which had been approved in early November 2011. The Board’s decision, which was taken on a lapse of time basis,2 enables the immediate disbursement of an amount equivalent to SDR 65.04 million (about US$100 million), bringing total disbursements under the arrangement to an amount equivalent to 146.34 SDR million (about US$224.9 million).
The Executive Board approved a three-year arrangement for Côte d’Ivoire in November 2011 for an amount equivalent to SDR 390.24 million (120 percent of the country’s quota in the IMF, see Press Release No. 11/399).
Economic activity bounced back after the late 2010-early 2011 post-election crisis. Strong external support, favorable weather conditions, and supportive macroeconomic management helped limit the contraction in economic activity.
The implementation of the macro-economic program supported under the ECF was broadly satisfactory at end-2011. All quantitative targets were met. A broad and ambitious agenda of long-delayed structural reforms is being pursued. Significant efforts have been made to strengthen public financial management, improve the business climate (judicial reform, the new investment code, business facilitation efforts, and improvements in governance) and reform the cocoa sector, but there were delays in implementing energy and financial sector reforms.
While important progress has been made, reaching financial sustainability in the electricity sector requires further actions, including tariff increases to cover a larger share of the generating cost. Without this, much-needed investment in new generating capacity will remain elusive. A move to automatic pricing of fuel products, while at the same time protecting the most vulnerable population, is also needed.
Financial sector reforms include the formulation of a financial sector development strategy. This should reduce the costs of intermediation, enhance financial deepening, and facilitate private sector access to credit. An urgent challenge in this area is the design and adoption of a sound restructuring plan for the ailing publicly-owned commercial banks. To ensure that debt is kept at a sustainable level following debt relief, while addressing the financing needs of the authorities’ ambitious investment plans over the medium and long term, it will be important to make the National Public Debt Management Committee fully operational and to build up its capacity.
Côte d’Ivoire’s near term economic outlook is favorable, with both upside and downside risks. Growth is expected to pick up in 2012, supported by higher investment spending in construction, transport, and oil exploration. Inflation should remain low, although upside risks exist. The fiscal stance of limiting the budget deficit gradually from its high level in 2011 is appropriate, and the resulting financing needs from the regional market are high but manageable.
1 The Extended Credit Facility (ECF) has replaced the Poverty Reduction and Growth Facility (PRGF) as the Fund’s main tool for medium-term financial support to low-income countries by providing a higher level of access to financing, more concessional terms, enhanced flexibility in program design features, and more focused streamlined conditionality. Financing under the ECF carries a zero interest rate, with a grace period of 5½ years, and a final maturity of 10 years (http://www.imf.org/external/np/exr/facts/ecf.htm). The Fund reviews the level of interest rates for all concessional facilities every two years.
2 The Executive Board takes decisions under its lapse of time procedure when it is agreed by the Board that a proposal can be considered without convening formal discussions.