Press Release: Togo and IMF Team Reach a Staff-Level Agreement on ECF-Supported Program
September 9, 2013Press Release No. 13/333
September 9, 2013
An International Monetary Fund (IMF) mission led by Montfort Mlachila visited Togo during August 21-September 6, 2013 to conduct the annual Article IV consultation and to conduct policy discussions with the authorities about possible IMF support for the government’s economic program under a three-year Extended Credit Facility (ECF).
The mission met with Prime Minister Kwesi Ahoomey-Zunu, Minister of the Economy and Finance Adji Otèth Ayassor, Minister of Rural Development, Handicrafts, Youth and Youth Employment Victoire Tomegah-Dogbé, Minister of Planning, Development and Regional Planning Mawussi Semodji, Minister of Transport and of Energy and Mining, DammipiNoupokou, Minister of Trade and Private Sector Promotion, Bernadette Legzim-Balouki, National Director of the Banque Centrale des États de l’Afrique de l’Ouest (BCEAO) Kossi Ténou, senior government officials, civil society, trade unions, the business community, and development partners.
At the conclusion of the visit, Mr. Mlachila issued the following statement:
“The mission has reached a staff-level agreement with the authorities on an economic program that could be supported by a three-year arrangement under the Extended Credit Facility totaling about SDR 55 million (about CFAF 41 billion). The agreement is subject to review by IMF Management and approval by the IMF Executive Board.
“Economic conditions in Togo remain favorable and the outlook remains positive despite a weak global economic environment. Real economic growth accelerated in 2012 to 5.9 percent, from 4.8 percent in 2011, reflecting dynamism in agriculture, mining, and construction. Growth is expected to decelerate slightly in 2013 to about 5½ percent as a result of unfavorable weather and weakening mining activity. However, growth is expected to rebound to about 6 percent on average over the next three years on account of agricultural and export performance. Inflation in 2012 was low and averaged 2.6 percent, and the outlook is stable. The external current account balance deficit in 2012 is estimated at 11.8 percent of GDP, but is projected to decline markedly over the medium term.
“Government finances in 2013 have come under pressure in part due to an expansionary budget. Recognizing this, the authorities took decisive action and a revised budget was approved in the middle of the year to stabilize the fiscal situation. Revenue performance has been strong, notably in customs, but spending growth has outstripped that of revenues. In particular, election-related spending exceeded budgeted amounts, and fuel subsidies remain high.
“The pace of structural reforms slowed significantly since the attainment of the completion point of the Highly-Indebted Poor Country initiative (HIPC), and public debt management weakened. The authorities were able to privatize two banks successfully, but the privatization of two other banks was unsuccessful. Reforms in mining, telecommunications and energy sectors have advanced slowly.
“Policy discussions focused on resetting fiscal policy on a more solid footing to close remaining financing gaps for 2013 and agree on the framework for the 2014 budget; strengthening public financial management (especially public debt management); putting in place the revenue authority (Office togolais des recettes—OTR); addressing emerging financial sector vulnerabilities; addressing growth bottlenecks; and making growth more inclusive.
“The authorities’ fiscal policies aim at significantly increasing revenue mobilization to finance much-needed infrastructure and social needs. Revenue collections are expected to improve on the basis of operational reforms which should be facilitated by the establishment of the OTR. Public financial management reforms will focus on improving cash and treasury management, simplifying the expenditure circuit, and measures to strengthen the technical and operational capacity of the debt management unit.
“The authorities are committed to addressing emerging financial difficulties in the financial sector to ensure continued stability. They intend to step up their capacity to address financial weaknesses and improve monitoring of under-regulated and illegal entities in the microfinance sector.
“An overriding objective of the authorities’ reforms is to ensure that growth is strong, sustainable, and inclusive. Weaknesses in the energy sector, especially financial difficulties faced by power companies and the rapid increase of demand for electricity, could lead to power shortages in the medium term, thereby undermining growth prospects. To address this potential challenge, the authorities intend to implement measures to address accumulated arrears to the electricity companies and to avoid their re-emergence. Specific measures to reduce poverty and make growth more inclusive, especially in rural areas, include constructing small dams and expanding feeder roads.
“IMF staff would like to thank the Togolese authorities for the fruitful discussions and their warm hospitality.”
IMF COMMUNICATIONS DEPARTMENT