## cr17127 — 55.1 percent in 2015 from 61.7 percent in 2006, though it remains geographically concentrated.

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### Context and recent developments
- Economy expanded at a healthy rate in recent years driven by construction of main road networks, expansion of the port and the airport, and agricultural production; economy expanded at 5.2 percent in 2014-16.
- Poverty rates declined from 61.7 percent in 2006 to 55.1 percent in 2015, but remain geographically concentrated:
  - Rural areas: 68.7 percent
  - Lomé: 34.8 percent
  - Other urban areas: 37.9 percent
- Fast public investment pace addressed transport infrastructure deficiencies but:
  - Contributed to a pronounced increase in public debt and the current account deficit.
  - Domestic arrears, including to utility companies, accumulated to 5.7 percent of GDP in 2016.
  - The current account deficit reached 9.8 percent of GDP in 2016, largely due to investment-related imports.
- Authorities ended prefinancing in the second half of 2016 and committed to:
  - Not undertake any new prefinanced investments.
  - Wind down existing prefunded investments and include prefinanced debt in published debt stocks.
  - Follow regular budgeting and procurement procedures for new public investments.
  - Refocus policies on sustainable and inclusive growth through targeted social spending defined in community development programs and the National Development Plan for 2018-2022.

### Fiscal and public debt developments
- Public debt dynamics:
  - Public debt (including prefinancing debt, domestic arrears, and public enterprise debt) increased from 48.6 percent of GDP in 2011 to 80.8 percent in 2016.
  - Public debt excluding public enterprise debt: 76.2 percent of GDP in 2016.
  - Projected peak public debt: 81.3 percent of GDP in 2017 (77 percent in NPV terms).
  - Public debt expected to be reduced to 73 percent of GDP by 2019 (65 percent in NPV terms).
- Domestic arrears and debt service pressures from prefinancing placed considerable pressure on the budget.
- Government commitments under the program include strengthening public financial management and debt management.

### Medium-term outlook and risks
- Growth projections:
  - Growth is estimated at 5 percent in 2016.
  - Growth is expected to pick up to 5.6 by 2021 (2.8 percent per capita by 2021).
  - Economic recovery driven by improved transportation network and productivity gains in the agricultural sector; private sector expected to play an increasing role as public investment returns to sustainable levels.
- Current account:
  - Current account deficit was 9.8 percent of GDP in 2016.
  - Projected to improve to 7.3 percent by 2019 and to 5.2 percent by 2021.
- Inflation:
  - Inflation was well contained and forecast to remain moderate in coming years.
- Risks to the outlook:
  - Capacity constraints in implementation of structural reforms.
  - Resistance to reforms from interest groups.
  - Further slowdown in Togo’s main regional trading partners.
  - Pressures from interest groups to slow down the pace of reforms.
- Debt distress assessment:
  - Togo expected to remain at a moderate risk of external debt distress during the medium term.

### Program summary, objectives, and policy measures
- Extended Credit Facility (ECF) request:
  - Authorities requested a three-year arrangement under the ECF in the amount of SDR 176.16 million (120 percent of quota).
- Key program objectives:
  - Reduce the overall fiscal deficit substantially upfront to ensure long-term debt and external sustainability.
  - Refocus policies on sustainable and inclusive growth through targeted social spending and sustainably-financed infrastructure spending.
  - Resolve existing weaknesses in the financial sector, especially in the two public banks.
- Fiscal policy and public financial management measures:
  - Increase revenue, reduce domestically-financed capital spending, and redistribute recurrent spending allocations to target key social needs.
  - Reorganize the Ministry of Finance and ensure public investments follow established procurement and budgetary processes.
  - Bolster tax administration by broadening the tax base and better monitoring of exemptions.
  - Further modernize and automate customs practices.
- Financial sector measures:
  - Authorities plan to legally resolve two under-capitalized public banks by the end of the first year of the program, replacing them with a single well-capitalized public bank.
- Staff view:
  - IMF staff supports the authorities’ request for an ECF arrangement and finds the Memorandum of Economic and Financial Policies sets out appropriate policies to pursue program objectives.

### Fiscal adjustment design and key targets
- Fiscal anchor and program targets:
  - Program targets an overall primary surplus (cash basis, including grants) of 2 percent of GDP by 2019, an improvement of 9.2 percentage points from 2016.
  - Program expected to reduce Togo’s overall fiscal deficit below the WAEMU convergence criterion of 3 percent of GDP by 2019.
  - Performance Criterion (PC) on fiscal balance will be set on the domestic primary balance (excluding foreign-financed capital spending); overall primary balance included as a memorandum item.
  - Program sets a zero ceiling on contracting or guaranteeing of new non-concessional external debt and a nominal target on contracting or guaranteeing of new concessional external debt by the public sector; government will consult IMF staff before contracting new concessional loans.
- Fiscal adjustment composition (Contributions to primary balance improvement):
  - Revenue mobilization increase: 2.9 (change 2016-2019).
  - Grants increase: 1.2 (change 2016-2019).
  - Primary expenditure savings: 5.1 (change 2016-2019).
  - Capital spending contribution: 5.9 (change 2016-2019).
  - Arrears payment savings: -0.9 (change 2016-2019).
- Arrears strategy:
  - Independent audit to verify stock of domestic arrears by end-September 2017 (SB).
  - Full clearance plan combining upfront cash payments in 2017 and securitization with phased payment over 2-5 years for residual arrears.
  - Annual arrears clearance equivalent to 0.9 percent of GDP over 2017-2021 included in the overall primary balance.

### Strengthening fiscal management and institutions (PFM and debt management)
- PFM weaknesses and planned actions:
  - Reorganize the Ministry of Finance: create an effective debt management directorate; strengthen budget department; establish a tax policy unit. Decree reorganizing Ministry to be signed by end-December 2017 (SB).
  - No new prefinanced investments (PC); all new investment projects to follow procurement process and be fully integrated in budget process.
  - Improve public investment management: medium-term planning, ex-post assessments, prioritization, alignment with fiscal funding, transparency.
  - Submit methodology to track and verify domestic arrears to the Fund by end-June 2017 (SB).
  - Improve treasury management and progress towards establishing a Treasury Single Account (TSA); submit annual cash plan for 2018 by end-December 2017 (SB).
- Revenue and customs modernization:
  - Broaden taxpayer base via a tax census and higher registration of economic operators; focus on fighting tax evasion and implement controls in phosphate, clinker, cement, and iron sectors (SB, end-December 2017).
  - Customs: simplify clearance, strengthen cargo inspections, move to full automation, reinforce import valuation and control of exemptions; audit 30 percent of revenue waived under 2016 exemptions (SB, end-June 2017).

### Financial sector diagnosis and reform measures
- Financial sector vulnerabilities (end-September 2016):
  - Aggregate solvency ratio: 3.6 percent (aggregate); excluding two undercapitalized public banks: 11.7 percent.
  - Aggregate NPL-rate: 20 percent.
  - Solvency Ratios (Regulatory Capital / Risk-weighted Assets): 11.7 / 11.4 / 11.4 / 8.5 / 6.8 / 3.6 (2011–2016, end-September).
  - NPLs / Gross Loans: 10.9 / 11.4 / 12.5 / 15.4 / 16.6 / 19.8 (2011–2016).
  - Return on Assets: 2.0 / 1.6 / 1.6 / 0.9 / 0.7 / 0.3 (2011–2016).
- Two public banks:
  - Both undercapitalized; one under provisional administration; the other’s situation worsened in 2016.
  - One bank has latent capital in the form of its head office fully amortized on its balance sheet.
- Program measures:
  - Prior action: contract independent audit of the two public banks (MEFP, ¶ 18); audit findings to be provided to Fund and Banking Commission.
  - Restructuring options: (1) establish a new bank to assume liabilities and good assets of both banks if WAEMU rules allow; (2) stronger public bank assumes liabilities within existing WAEMU framework.
  - Steering Committee to formulate and implement reorganization; Cabinet approval for restructuring plan by end-June 2017 (SB); complete legal transfers by end-December 2017 (SB).
  - Estimated recapitalization need up to 4 percent of GDP (included in fiscal framework for 2017).
  - Authorities committed to improve governance in the banking sector and minimize resolution costs by encouraging loan recoveries.

### Microfinance sector and supervision
- Microfinance diagnostics:
  - Out of 190 microfinance institutions active in Togo, only 20 respect all prudential ratios.
  - Out of the 16 institutions supervised by the Banking Commission, only four are fully compliant.
  - NPL rate in microfinance: over 8 percent (above the 3 percent prudential standard).
  - About 140 institutions operate without a license.
- Program response:
  - Strengthen supervision; institutions operating without a license to be incorporated or closed.

### Debt sustainability, external outlook, and DSA findings
- Public domestic debt, including state-owned enterprises, amounts to 61 percent of GDP in 2016, up from 32 percent in 2010.
- A revision added an average of 7 percentage points of GDP to domestic debt over 2013-16.
- Public debt expected to be reduced from 80.8 percent of GDP (76.1 in NPV terms) in 2016 to 73 percent (65.2 in NPV terms) by 2019.
- CA approach of the EBA-lite indicates an overvaluation of about 7 percent at end-2015.
- Current account deficit projected to narrow from 11 percent of GDP in 2015 to 5.2 percent of GDP by 2021 under program assumptions.
- DSA conclusions:
  - Risk of external debt distress: Moderate.
  - Heightened overall risk of public debt distress driven by high domestic debt.
  - Under the program (primary surplus of 2 percent of GDP by 2019 sustained post-program), PV of public debt projected to be brought below 38 percent of GDP by 2025.

### Key statistics and projections (selected series and levels preserved exactly as presented)
- Real GDP growth: 6.1 (2013), 5.4 (2014), 5.3 (2015), 5.0 (2016), 5.0 (2017), 5.3 (2018), 5.4 (2019), 5.6 (2020), 5.6 (2021)
- Real GDP per capita: 3.3 (2013), 2.6 (2014), 2.5 (2015), 2.2 (2016), 2.2 (2017), 2.5 (2018), 2.6 (2019), 2.8 (2020), 2.8 (2021)
- Consumer price index (average): 1.8 (2013), 0.2 (2014), 1.8 (2015), 0.9 (2016), 1.5 (2017), 1.9 (2018), 2.0 (2019), 2.0 (2020), 2.0 (2021)
- Gross domestic investment (percent of GDP): 24.5 (2013), 25.7 (2014), 27.0 (2015), 27.4 (2016), 26.1 (2017), 24.3 (2018), 23.1 (2019), 23.5 (2020), 24.1 (2021)
- Government investment (percent of GDP): 9.3 (2013), 11.3 (2014), 13.0 (2015), 14.0 (2016), 11.7 (2017), 9.5 (2018), 8.0 (2019), 8.1 (2020), 8.1 (2021)
- Gross national savings (percent of GDP): 11.4 (2013), 15.7 (2014), 15.9 (2015), 17.6 (2016), 17.1 (2017), 16.0 (2018), 15.8 (2019), 17.3 (2020), 18.9 (2021)
- Total public debt (percent of GDP): 56.4 (2013), 65.2 (2014), 75.6 (2015), 80.8 (2016), 81.3 (2017), 78.1 (2018), 73.0 (2019), 67.8 (2020), 62.7 (2021)
- Domestic debt (percent of GDP): 42.1 (2013), 48.1 (2014), 54.5 (2015), 61.0 (2016), 58.4 (2017), 53.3 (2018), 45.6 (2019), 40.0 (2020), 34.3 (2021)
- External public debt (percent of GDP): 14.3 (2013), 17.1 (2014), 21.1 (2015), 19.7 (2016), 22.9 (2017), 24.8 (2018), 27.4 (2019), 27.9 (2020), 28.4 (2021)
- Current account balance (percent of GDP): -13.2 (2013), -9.9 (2014), -11.1 (2015), -9.8 (2016), -9.0 (2017), -8.3 (2018), -7.3 (2019), -6.2 (2020), -5.2 (2021)

### Program monitoring, financing, and conditionality
- Program monitoring:
  - Quantitative performance criteria (PCs) and indicative targets (ITs) set for end-June 2017, end-September 2017 (IT), and end-December 2017.
  - Program reviewed every six months with final test date end-September 2019.
- Financing package (2017-19):
  - Projected financing gap over 2017-19 (about 2 percent of GDP) covered by:
    - World Bank budget support: about CFAF 44 billion.
    - EU: about CFAF 36 billion.
    - African Development Bank: about CFAF 7 billion.
    - Proposed disbursements from the Fund under the three-year ECF arrangement with access at SDR 176.16 million (120 percent of quota).
  - Schedule of ECF disbursements: seven tranches of SDR 25.17 million each on specified review-completion and date conditions between May 5, 2017 and December 15, 2019.
- Key program performance criteria (selected, amounts in CFAF billion for 2017):
  - Domestic primary fiscal balance (floor): End-June 2017 = -19.0; End-September 2017 (IT) = 8.4; End-December 2017 = -99.1
  - Non-accumulation of arrears on external public debt (continuous PC): End-June 2017 = 0.0; End-September 2017 = 0.0; End-December 2017 = 0.0
  - Net domestic financing (ceiling): End-June 2017 = 80.3; End-September 2017 = 157.8; End-December 2017 = 144.1
  - Total fiscal revenue (floor): End-June 2017 = 246.3; End-September 2017 = 398.5; End-December 2017 = 567.5
  - Total domestically financed social spending (floor): End-June 2017 = 87.4; End-September 2017 = 141.9; End-December 2017 = 218.4

### Data, statistical capacity, and reporting commitments
- Data weaknesses and planned improvements:
  - Latest finalized national account statistics are for 2013; large variations exist between GDP estimated by the GDP Committee and finalized national accounts.
  - Data production is compartmentalized and not cross-checked for consistency across departments.
  - Commitments: reduce lags in national accounts production, improve preliminary GDP data, strengthen staffing within INSEED; guarantee quality of quarterly budget execution and TOFE reports and ensure consistency.
- Reporting requirements:
  - Monthly reporting of social expenditure financed with domestic resources within eight weeks of the end of the month.
  - Monthly TOFE and detailed monthly data to be reported within specified deadlines to the Fund as per the TMU.

### Staff appraisal and policy priorities
- Staff assessment:
  - Fast public investment supported growth but contributed to a pronounced increase in public debt and current account deficit.
  - Large debt service payments for prefinancing debt put pressure on the budget, crowded out social spending, and contributed to domestic arrears.
- Prioritized policy directions:
  - Frontloaded fiscal deficit reduction to ensure debt and external sustainability.
  - Reorient spending to targeted social programs and sustainably-financed infrastructure.
  - Resolve financial sector weaknesses (legal resolution of two public banks into a single well-capitalized public bank).
  - Strengthen PFM, debt management, revenue administration, and customs modernization.
  - Advance structural reforms to improve the business climate and address chronic electricity shortages.
  - Improve timeliness and consistency of macroeconomic and fiscal data.

*Source: IMF staff report for the 2016 Article IV consultation and request for a three-year arrangement under the Extended Credit Facility, April 27, 2017 (cr17127).*

### 55.1 percent in 2015 from 61.7 percent in 2006, though it remains geographically concentrated.

### cr17127 - 55.1 percent in 2015 from 61.7 percent in 2006, though it remains geographically concentrated.

### Context and recent developments
- Economy expanded at a healthy rate in recent years driven by construction of main road networks, expansion of the port and the airport, and agricultural production; economy expanded at 5.2 percent in 2014-16.
- Poverty rates declined from 61.7 percent in 2006 to 55.1 percent in 2015, but remain geographically concentrated:
  - Rural areas: 68.7 percent
  - Lomé: 34.8 percent
  - Other urban areas: 37.9 percent
- The fast pace of public investment addressed transport infrastructure deficiencies but:
  - Contributed to a pronounced increase in public debt and the current account deficit.
  - Domestic arrears, including to utility companies, accumulated to 5.7 percent of GDP in 2016.
  - The current account deficit reached 9.8 percent of GDP in 2016, largely due to investment-related imports.
- The authorities ended the practice of prefinancing in the second half of 2016 and committed to:
  - Not undertake any new prefinanced investments.
  - Wind down existing prefunded investments and include prefinanced debt in published debt stocks.
  - Follow regular budgeting and procurement procedures for new public investments.
  - Refocus policies on sustainable and inclusive growth through targeted social spending defined in community development programs and the National Development Plan for 2018-2022.

### Fiscal and public debt developments
- Public debt dynamics:
  - Public debt (including prefinancing debt, domestic arrears, and public enterprise debt) increased from 48.6 percent of GDP in 2011 to 80.8 percent in 2016.
  - Public debt excluding public enterprise debt: 76.2 percent of GDP in 2016.
  - Projected peak public debt: 81.3 percent of GDP in 2017 (77 percent in NPV terms).
  - Public debt is expected to be reduced to 73 percent of GDP by 2019 (65 percent in NPV terms).
- Domestic arrears and debt service pressures from prefinancing have placed considerable pressure on the budget.
- Government commitments under the program include strengthening public financial management and debt management.

### Medium-term outlook and risks
- Growth projections:
  - Growth is estimated at 5 percent in 2016.
  - Growth is expected to pick up to 5.6 by 2021 (2.8 percent per capita by 2021).
  - Economic recovery driven by improved transportation network and productivity gains in the agricultural sector; private sector expected to play an increasing role as public investment returns to sustainable levels.
- Current account:
  - Current account deficit was 9.8 percent of GDP in 2016.
  - Projected to improve to 7.3 percent by 2019 and to 5.2 percent by 2021.
- Inflation:
  - Inflation was well contained and forecast to remain moderate in coming years.
- Risks to the outlook:
  - Capacity constraints in implementation of structural reforms.
  - Resistance to reforms from interest groups.
  - Further slowdown in Togo’s main regional trading partners.
  - Pressures from interest groups to slow down the pace of reforms.
- Debt distress assessment:
  - Togo expected to remain at a moderate risk of external debt distress during the medium term.

### Program summary, objectives, and policy measures
- Extended Credit Facility (ECF) request:
  - Authorities requested a three-year arrangement under the ECF in the amount of SDR 176.16 million (120 percent of quota).
- Key program objectives:
  - Reduce the overall fiscal deficit substantially upfront to ensure long-term debt and external sustainability.
  - Refocus policies on sustainable and inclusive growth through targeted social spending and sustainably-financed infrastructure spending.
  - Resolve existing weaknesses in the financial sector, especially in the two public banks.
- Fiscal policy and public financial management measures:
  - Increase revenue, reduce domestically-financed capital spending, and redistribute recurrent spending allocations to target key social needs.
  - Reorganize the Ministry of Finance and ensure public investments follow established procurement and budgetary processes.
  - Bolster tax administration by broadening the tax base and better monitoring of exemptions.
  - Further modernize and automate customs practices.
- Financial sector measures:
  - Authorities plan to legally resolve two under-capitalized public banks by the end of the first year of the program, replacing them with a single well-capitalized public bank.
- Staff view:
  - IMF staff supports the authorities’ request for an ECF arrangement and finds the Memorandum of Economic and Financial Policies sets out appropriate policies to pursue program objectives.

### Key statistics and projections (selected)
- Real GDP growth: 6.1 (2013), 5.4 (2014), 5.3 (2015), 5.0 (2016), 5.0 (2017), 5.3 (2018), 5.4 (2019), 5.6 (2020), 5.6 (2021)
- Real GDP per capita: 3.3 (2013), 2.6 (2014), 2.5 (2015), 2.2 (2016), 2.2 (2017), 2.5 (2018), 2.6 (2019), 2.8 (2020), 2.8 (2021)
- Consumer price index (average): 1.8 (2013), 0.2 (2014), 1.8 (2015), 0.9 (2016), 1.5 (2017), 1.9 (2018), 2.0 (2019), 2.0 (2020), 2.0 (2021)
- Gross domestic investment (percent of GDP): 24.5 (2013), 25.7 (2014), 27.0 (2015), 27.4 (2016), 26.1 (2017), 24.3 (2018), 23.1 (2019), 23.5 (2020), 24.1 (2021)
- Government investment (percent of GDP): 9.3 (2013), 11.3 (2014), 13.0 (2015), 14.0 (2016), 11.7 (2017), 9.5 (2018), 8.0 (2019), 8.1 (2020), 8.1 (2021)
- Gross national savings (percent of GDP): 11.4 (2013), 15.7 (2014), 15.9 (2015), 17.6 (2016), 17.1 (2017), 16.0 (2018), 15.8 (2019), 17.3 (2020), 18.9 (2021)
- Total public debt (percent of GDP): 56.4 (2013), 65.2 (2014), 75.6 (2015), 80.8 (2016), 81.3 (2017), 78.1 (2018), 73.0 (2019), 67.8 (2020), 62.7 (2021)
- Domestic debt (percent of GDP): 42.1 (2013), 48.1 (2014), 54.5 (2015), 61.0 (2016), 58.4 (2017), 53.3 (2018), 45.6 (2019), 40.0 (2020), 34.3 (2021)
- External public debt (percent of GDP): 14.3 (2013), 17.1 (2014), 21.1 (2015), 19.7 (2016), 22.9 (2017), 24.8 (2018), 27.4 (2019), 27.9 (2020), 28.4 (2021)
- Current account balance (percent of GDP): -13.2 (2013), -9.9 (2014), -11.1 (2015), -9.8 (2016), -9.0 (2017), -8.3 (2018), -7.3 (2019), -6.2 (2020), -5.2 (2021)

*Source: IMF staff report for the 2016 Article IV consultation and request for a three-year arrangement under the Extended Credit Facility, April 27, 2017.*

### 9.      The key recommendations of the 2016 Article IV consultation are to (i) reduce the

### 9.      The key recommendations of the 2016 Article IV consultation are to (i) reduce the

### A.   Achieving Fiscal and Debt Sustainability
- Key recommendations of the 2016 Article IV consultation:
  - (i) reduce the overall fiscal deficit substantially upfront to ensure long-term debt and external sustainability;
  - (ii) refocus policies on sustainable and inclusive growth through targeted social spending and sustainably-financed infrastructure spending;
  - (iii) resolve the existing financial sector weaknesses, especially in the two public banks.
- Recent fiscal context and problems:
  - Fiscal policy remained expansionary in recent years due to a rapid increase in domestically-financed infrastructure spending through prefinancing, leading to widening primary deficits, debt accumulation, and domestic arrears.
  - Prefinanced loans were not included in public debt, even though the full liability rested with the government; servicing of these debts appeared in fiscal accounts but were included in capital expenditures, misclassifying fiscal data for 2013-16.
  - Domestic arrears, including to the utility companies, increased sharply to 5.7 percent of GDP in 2016.
  - There is an additional 7½ percent of GDP stock of audited outstanding arrears from before 2007, counted in the debt stock, but not expected to require significant financial resources as most companies have not brought forward required evidence.
- 2017 budget and fiscal measures:
  - Authorities committed to refrain from guaranteeing or assuming domestic loans to suppliers or contractors starting in 2017 (PC).
  - Staff expects domestically-financed capital expenditures will decline to 4.8 percent of GDP from 8.4 percent in 2016.
  - Improved domestic primary balance of 0.5 percent of GDP, excluding bank recapitalization cost, from -4.5 percent in 2016.
  - Stock of prefinancing debt of CFAF 198 billion at end 2016 will be paid off in 2017 using a domestic loan with better financing conditions.
- Fiscal anchor and program targets:
  - Program targets an overall primary surplus (cash basis, including grants) of 2 percent of GDP by 2019, an improvement of 9.2 percentage points from 2016.
  - The program is expected to reduce Togo’s overall fiscal deficit below the WAEMU convergence criterion of 3 percent of GDP by 2019.
  - Public debt-GDP ratio projected to reach 73 percent of GDP in 2019, down from a peak of 81.3 percent in 2017—including public enterprise debt and public bank recapitalization.
  - Assuming the 2 percent of GDP primary surplus is sustained post-program, the present value of public debt would be brought below the threshold for heightened risk of public sector debt by 2025 (DSA Figure 2).
  - Performance Criterion (PC) on fiscal balance will be set on the domestic primary balance (excluding foreign-financed capital spending); overall primary balance included as a memorandum item.
  - Program sets a zero ceiling on contracting or guaranteeing of new non-concessional external debt and a nominal target on contracting or guaranteeing of new concessional external debt by the public sector; government will consult IMF staff before contracting new concessional loans.
  - Given tight constraints, vigorous efforts to meet revenue targets are particularly important.
- Fiscal adjustment requirements and contributions to primary balance improvement:
  - Fiscal adjustment will require reduced capital spending, tight limits on recurrent spending, avoidance of new arrears, and improvements in revenue mobilization.
  - Text Table 2: Contributions to Adjustment in the Primary Balance, in Percent of GDP, 2013–19
    - Change 2013-2016 / Change 2016-2019
    - Overall primary balance (cash basis, incl. grants): -2.5 / 9.2
    - Revenue mobilization increase: 0.8 / 2.9
    - Grants increase: -0.5 / 1.2
    - Primary expenditure savings: -2.7 / 5.1
    - Primary current spending: 1.3 / 0.1
    - Capital spending: -4.7 / 5.9
    - Arrears payment savings: 0.7 / -0.9
- Fiscal elements of the program (MEFP, ¶ 10):
  - Revenues:
    - Review tax policy, including overhauling the exemption and tax expenditure system, and accelerate reforms in revenue administration.
  - Capital spending:
    - Reduce domestically-financed capital expenditure; elimination of prefinancing and strengthening public investment management to control capital expenditures and improve quality.
    - Emphasis on making full use of grant and concessional financing for priority investment projects.
    - Public private partnerships could be an alternative as long as risks are factored appropriately.
  - Recurrent spending:
    - Redistribute allocations toward social spending per the National Development Plan.
    - Government will return to policy to increase wages no more than with the inflation rate and wage drift, ensuring wage bill declines in percent of GDP and exercise strict control on number of employees.
    - Contain fuel price subsidies by consistently applying the existing price adjustment formula.
    - Full elimination of subsidies is advisable provided it does not lead to large increases in smuggling and loss in tax base; vulnerable segments should be compensated; current policy to subsidize kerosene, largely used by the poor, should be continued.
  - Arrears:
    - Independent audit to verify stock of domestic arrears by end-September 2017 (SB).
    - After audit completion, government plans full clearance of arrears by combining upfront cash payments in 2017 and securitization with phased payment over 2-5 years for residual arrears.
    - This corresponds to an annual arrears clearance of 0.9 percent of GDP over 2017-2021, included in the overall primary balance (Table 2b).
- Refocusing policies on sustainable and inclusive growth (MEFP, ¶ 10):
  - Programs established: Emergency Program for Community Development and Vulnerable Populations Support Program.
  - National Development Plan (NDP) 2018-2022 centered on five pillars:
    - (i) Reducing poverty and improving social well-being.
    - (ii) Promoting sustained and inclusive economic growth.
    - (iii) Strengthening the potential of growth-supporting sectors.
    - (iv) Sustainably managing the environment and reducing geographic inequalities.
    - (v) Strengthening governance and peace.
  - Program establishes a floor on domestically-financed social spending (IT), set in consultation with development partners, emphasizing projects with high impact on poverty reduction.

### B.   Strengthening Fiscal Management and Institutions
- Institutional and capacity constraints:
  - Poor public financial management (PFM) practices, notably related to prefinanced investments, led to low efficiency in capital expenditures.
  - Poor cash-management practices caused liquidity-induced spending bottlenecks.
  - Public Investment Management Assessment (PIMA) found management of public investments in Togo lags other SSA countries and LICs; efficiency of public investment spending was 70 percent below potential. Recommendations included: better medium-term planning, systematic ex-post assessments, strengthened prioritization, alignment with fiscal funding availability, and greater transparency.
- Revenue Authority (OTR) reforms and performance:
  - Establishment of OTR led to operational improvements and good revenue performance in 2015; 2016 outturns lagged.
  - Key achievements: traceability of tax payments through direct deposit into designated bank accounts; streamlining taxpayer segmentation; operationalization of customs IT system including a “single window.”
  - Customs revenue weaker in 2016 due to drop in transshipments after currency devaluations, slower growth in trading partners (Ghana, Nigeria), and diversion of shipments to other ports due to stricter tariff enforcement at Lomé and tighter overland-shipping regulations.
- Key PFM and debt management actions (MEFP, ¶ 13):
  - Reorganize the Ministry of Finance:
    - Create an effective debt management directorate.
    - Strengthen budget department for preparation, monitoring, and medium-term budget frameworks.
    - Establish a tax policy unit; Ministry of Finance will define tax policy (OTR tasked with revenue administration).
    - Decree reorganizing the Ministry of Finance to be signed by end-December 2017 (SB).
  - No new prefinanced investments (PC); all new investment projects to follow procurement process, be fully integrated in budget process, and require payments after verification of completed work.
    - Improve public investment management through medium-term planning, ex-post assessments, prioritization, alignment with fiscal funding, and transparency.
    - FY 2018 budget consistent with Fund-supported program to be adopted and guidelines by end-December 2017 to include only investment projects selected through cost-benefit or cost-effective analysis (SB).
  - Arrears verification:
    - Ministry of Finance to identify methodology to track and verify stock of domestic arrears before paying them down and submit methodology to the Fund by end-June 2017 (SB).
  - Cash management:
    - Improve treasury management and progress towards establishing a treasury single account (TSA).
    - Submit to the Fund by end-December 2017 an annual cash plan for 2018 consistent with the 2018 procurement plan and quarterly commitments for 2018 (SB).
  - OTR modernization of revenue administration:
    - Broaden taxpayer base by improving tax payments by SMEs via a tax census and higher registration of economic operators, including identifying stop filers.
    - Focus on fight against tax evasion beginning with resolution of detected evasion cases in specific sectors.
    - Implement controls to detect and tax inaccurate declarations and potential evasions in phosphate, clinker, cement, and iron sectors (SB, end-December 2017).
  - Customs objectives:
    - Simplify customs clearance and strengthen cargo inspections at the port; move to complete automation to remove manual procedures and facilitate tracking of transit cargoes.
    - Reinforce import valuation and control of customs exemptions through improved risk analysis, transparent inspection and auditing.
    - OTR to examine 30 percent of revenue waived under 2016 exemptions through a post-clearance audit program (SB, end of June 2017).
    - Strengthen cooperation between domestic tax and customs units and improve communication strategy with the private sector.

### ENHANCING FINANCIAL SECTOR DEVELOPMENT AND STABILITY
#### A.   Background
- Financial sector vulnerabilities:
  - By end-September 2016, aggregate solvency ratio stood at 3.6 percent, with 3 out of 13 banks undercapitalized.
  - Excluding the two undercapitalized public banks (accounting for 17 percent of total banking sector assets) pushes the aggregate solvency ratio up to 11.7 percent.
  - Aggregate NPL-rate stood at 20 percent at end-September 2016.
  - NPLs driven by loose past lending standards and insufficient collateral; accumulation of domestic arrears may have contributed to recent NPL increases.
- Financial Soundness Indicators (Text Table 3), in percent, end of period (2011–2016; 2016 corresponds to end-September):
  - Solvency Ratios:
    - Regulatory Capital / Risk-weighted Assets: 11.7 / 11.4 / 11.4 / 8.5 / 6.8 / 3.6
    - Excl. Two Public Banks: 11.7
    - Base Capital / Risk-weighted Assets: 10.6 / 9.8 / 10.0 / 7.2 / 6.1 / 2.5
    - Excl. Two Public Banks: 10.3
  - Asset Quality:
    - NPLs / Gross Loans: 10.9 / 11.4 / 12.5 / 15.4 / 16.6 / 19.8
  - Profitability:
    - Return on Assets: 2.0 / 1.6 / 1.6 / 0.9 / 0.7 / 0.3
    - Return on Equity: 13.6 / 22.9 / 24.0 / 19.4 / 18.7 / 14.9
  - Liquidity:
    - Liquid Assets / Total Assets: 33.4 / 44.6 / 43.8 / 43.5 / 44.3 / 47.8
    - Liquid Assets / Total Deposits: 46.4 / 65.7 / 67.3 / 63.3 / 66.5 / 75.4
  - Source: BCEAO and Fund staff calculations.
- Situation of the two public banks:
  - Both remain undercapitalized; one under provisional administration for a number of years and the other’s situation worsened in 2016.
  - The first bank possesses latent capital in the form of its head office, fully amortized on its balance sheet but carrying positive practical value.
  - The other public bank’s capital position deteriorated in 2016 mainly due to WAEMU Banking Commission recommendation to take provisions for loans deemed non-performing.

*TOGO INTERNATIONAL MONETARY FUND*

### 21.      Togo’s microfinance sector fulfills an important role in promoting financial inclusion,

### Togo’s microfinance sector fulfills an important role in promoting financial inclusion,

### Microfinance sector: diagnostics and risks
- Out of the 190 microfinance institutions active in Togo, only 20 respect all prudential ratios.
- Out of the 16 institutions supervised by the Banking Commission, only four are fully compliant.
- The rate of non-performing loans stands at over 8 percent and continues to be higher than the 3 percent prudential standard.
- The sector is populated by about 140 institutions that operate without a license.

### Safeguards assessment of the BCEAO
- The 2013 Safeguards Assessment of the WAEMU regional central bank, the BCEAO, found a continuing strong control environment.
- All recommendations from the assessment have been implemented, including:
  - Strengthening external audit arrangements by appointment of an international firm with ISA experience for the audits of FY 2015–17.
  - Reinforcing the capacity of the audit committee with external expertise to oversee the audit and financial reporting processes.
  - Adopting IFRS starting with financial year 2015.

### Program measures: bank supervision, audits, and restructuring
- Enforcement of regulatory framework:
  - Banks not properly capitalized will be called to increase their capital.
  - Banks currently not respecting the regulatory minima will be asked to take immediate remediation action or implement resolution strategies.
  - Institutions operating without a license will either be incorporated in the regulatory system or closed.
- Prior action:
  - The government will contract an independent audit of the two public banks (MEFP, ¶ 18).
  - Audit findings will be made available to the Fund and the Banking Commission and will help assess costs and the appropriate manner of resolution.
  - An appraiser will value one public bank’s property portfolio, particularly its headquarters, to obtain an improved sense of latent capital.
- Restructuring options for the two public banks (MEFP, ¶ 19):
  - Option 1: If WAEMU rules allow, establish a new bank to assume all liabilities and all ‘good’ assets of both public banks, enabling a revaluation of real estate and thereby a capital injection.
  - Option 2: The stronger public bank functions as the assuming bank, feasible within the current WAEMU legal framework.
- Governance and process:
  - Authorities will create a Steering Committee to formulate and implement the reorganization and will seek legal advice, particularly around a possible new bank.
- Timing and approvals:
  - By end-June 2017, authorities will obtain Cabinet approval for a restructuring plan for the two public banks and request any necessary regulatory approval (SB) (MEFP, ¶ 21).
  - The comprehensive and time-bound restructuring plan will result in a single public bank.
  - If required, an application for the creation of a new bank will be submitted to the WAEMU Banking Commission by end-June 2017.
  - All legal transfers required in the restructuring plan will be completed by end-December 2017 (SB).

### Recapitalization need and resolution mechanics
- Staff estimates a recapitalization need of up to 4 percent of GDP, an amount included in the fiscal framework for 2017.
- When recapitalizing banks, authorities will ensure a healthy liquidity situation.
- To minimize resolution costs, most of the non-performing loans will be recovered by the current creditor banks.
- The structure of remuneration for the liquidator will be such that it encourages the recovery of loans.
- Authorities are committed to improve governance in the banking sector to prevent recurrence.

### External sustainability and current account projections
- The CA approach of the EBA-lite indicates an overvaluation of about 7 percent at end-2015.
- The current account deficit is projected to narrow from 11 percent of GDP in 2015 to 5.2 percent of GDP by 2021.
- Projections assume increases in private sector-led investment that will boost exports, containment of imports following slowdown in public sector investment and improvements in agricultural production, and a rise in private sector capital imports in line with its investments.
- Other components of the current account (services, primary and secondary income) are expected to remain around their 2015 levels.

### Debt management policy and public debt dynamics
- Public domestic debt, including state-owned enterprises, amounts to 61 percent of GDP in 2016, up from 32 percent of GDP in 2010.
- A revision added an average of 7 percentage points of GDP to domestic debt over 2013-16.
- Public debt is expected to be reduced from 80.8 percent of GDP (76.1 in NPV terms) in 2016 to 73 percent (65.2 in NPV terms) by 2019.
- If the improved fiscal stance is sustained, the NPV of public debt would be brought below the threshold of 38 percent of GDP for elevated public sector debt risks by 2025.
- Program external debt limits:
  - Zero ceiling on contracting or guaranteeing of new non-concessional external debt.
  - A nominal target on contracting or guaranteeing of new concessional external debt by the public sector (as mentioned in ¶ 12).
- Actions to strengthen debt management (MEFP, ¶ 28):
  - Suspended non-binding existing external non-concessional loan contracts.
  - Put in place borrowing plans to reduce the NPV of debt to GDP.
  - Aim to deepen and diversify the domestic and regional creditor base and develop the secondary bond market.
  - Placed Sukuk bonds of FCFA 150 billion in August 2016 and is considering another tranche in 2017.
  - Reorganization of the government’s debt management unit into front, middle, and back office to centralize operations and improve MTDS design and implementation.

### Authorities’ views on debt coverage
- Authorities concurred with staff recommendations but preferred a more narrow coverage of public debt.
- Authorities intended to exclude public institutions of an industrial or commercial nature from public sector debt if possible.
- Following Fund policy, DSA coverage includes all public enterprises that the government controls, such as by owning more than half of the voting shares.

### Structural reforms to support growth and improve the business climate
- Doing Business performance:
  - Togo’s ranking improved by two positions to rank 150th out of 189 countries in the Bank’s 2016 Doing Business Index.
  - Areas needing improvement: access to electricity, enforce contracts, resolve insolvent businesses.
- Governance challenges: bottom third for voice and accountability, government effectiveness, regulatory quality, rule of law, and control of corruption in the World Bank’s 2015 Worldwide Governance Indicators.
- Authorities’ commitments (MEFP, ¶ 25):
  - Increase dialogue with the private sector and civil society and communicate the government’s medium term strategy.
  - Target Doing Business Indicators where Togo performs poorly through a monitorable and highly publicized action plan.
  - Open key sectors with high government presence—mining, telecoms, energy—to more private sector competition.
  - Seek long-term solutions to increase domestic generation and establish a regulatory framework to increase access to energy in a cost-effective manner.

### Data issues and planned improvements
- National accounts:
  - Latest finalized national account statistics are for 2013, prepared with support from AFRITAC.
  - Large variations exist between GDP estimated by the GDP Committee and the finalized national accounts.
- Data production is compartmentalized and not cross-checked for consistency across departments.
- Budget preparation is weakened by limited information on execution during the year.
- Government commitments to improve data:
  - Reduce lags in production of national accounts, improve production of preliminary GDP data, and strengthen staffing within INSEED.
  - Guarantee the quality of quarterly budget execution and TOFE reports and ensure consistency between the two.
  - Base budget projections for the following year on projections for budget execution in the current year (MEFP, ¶ 31).

### Program modalities, monitoring, and financing
- Program monitoring:
  - Proposed quantitative performance criteria (PC) and indicative targets (IT) are set out in MEFP Table 1.
  - Prior action and structural benchmarks draw on Fund TA recommendations (MEFP Table 2).
  - Program will be monitored every six months based on quantitative criteria for end-June and end-December, starting from June 2017.
  - Final test date would be end-September 2019 to allow sufficient time to complete the final review within the period of the arrangement.
- Fiscal target:
  - Fiscal program designed to deliver a primary surplus of 2 percent of GDP by 2019.
  - Due to delays in tracking foreign-financed capital spending, the PC on the fiscal balance will be set on the domestic primary balance, excluding foreign-financed capital spending.
- Borrowing controls and mitigations:
  - Absence of a quantitative PC or IT on concessional borrowing raises risks of higher-than-programmed concessional borrowing.
  - Short-run mitigation: agreement to consult with staff before contracting new concessional loans.
  - Medium-term mitigation: PFM reforms to allow fiscal monitoring of the overall primary balance.
- Financing:
  - Projected financing gap over 2017-19 (about 2 percent of GDP) covered by:
    - World Bank budget support: about CFAF 44 billion.
    - EU: about CFAF 36 billion.
    - African Development Bank: about CFAF 7 billion.
    - Proposed disbursements from the Fund under the three-year ECF arrangement with access at SDR 176.16 million (120 percent of quota).
  - Proposed Fund access would help strengthen reserve cover in the WAEMU and is commensurate with program fiscal adjustment goals.
  - Phasing is proposed evenly with equal installments in each review.
- Repayment capacity:
  - Togo’s capacity to repay the Fund is adequate.
  - DSA indicates Togo remains at moderate risk of debt distress; debt sustainability indicators are projected to improve over the program period and beyond.

### Staff appraisal and key policy directions
- Assessment:
  - Fast pace of public investment has supported growth but contributed to a pronounced increase in public debt and the current account deficit.
  - Large debt service payments, notably for prefinancing debt, have put pressure on the budget and crowded out social spending, contributing to domestic arrears and a high current account deficit.
- Program aims:
  - Reduce the overall fiscal deficit substantially upfront to ensure long-term debt and external sustainability.
  - Refocus policies on sustainable and inclusive growth through targeted social spending and sustainably-financed infrastructure spending.
  - Resolve financial sector weaknesses, especially in the two public banks.
- Fiscal policy measures:
  - Overhaul tax exemptions and accelerate revenue administration reforms.
  - Reduce domestically-financed capital spending and maximize grant and concessional financing for priority investments.
  - Redistribute recurrent spending allocations to social spending in line with the National Development Plan.
- Public financial management and debt management reforms:
  - Reorganize the Ministry of Finance to strengthen debt management, improve budget preparation, monitoring, and medium-term budget framework, and establish a tax policy unit.
  - Ensure public investments follow procurement and budgetary processes; no new prefinancing arrangements.
  - Bolster tax administration by broadening the tax base and better monitoring exemptions; modernize and automate customs practices.
- Financial sector resolution:
  - The two under-capitalized public banks are expected to be legally resolved by the end of the first year of the program, resulting in a single well-capitalized public bank after a full audit and in accordance with WAEMU banking regulations.
  - Authorities will strengthen supervision in the microfinance sector.
- Structural reform priorities:
  - Implement reforms to develop an inviting business climate and address chronic electricity shortages through increased domestic generation and regulatory reforms.
- Data improvements:
  - Prioritize timely and internally-consistent compilation of monthly fiscal accounts and improved treasury management practices.
  - Shorten the long lag in reporting national accounts and improve the coverage and timeliness of balance of payments statistics.

*Source: IMF staff report chapter on Togo (cr17127).*

### 51.      Staff supports the authorities’ request for a program under the ECF arrangement with

### 51.      Staff supports the authorities’ request for a program under the ECF arrangement with

### Program endorsement
- Staff supports the authorities’ request for a program under the ECF arrangement.
- Access approved: SDR 176.16 million (120 percent of quota).
- Staff recognizes the authorities’ commitment to "ambitious adjustment goals."

### Policy framework
- The "Letter of Intent and Memorandum of Economic and Financial Policies" set out appropriate policies to pursue the program’s objectives.

### Capacity to repay and risk assessment
- "The capacity to repay the Fund is adequate."
- "Risks to the program are manageable."

*Source: cr17127 - 51. Staff supports the authorities’ request for a program under the ECF arrangement with*

### 52.      Staff recommends that the next Article IV consultation for Togo be held on the 24-

### Staff recommends that the next Article IV consultation for Togo be held on the 24-month cycle.

### Indicators of Economic Activity (2014–16)
- In 2016 economic activity was supported by another strong harvest, in particular foodstuffs, which compensated for weak performance in export crops.
- Extraction and industrial activities showed solid performance.
- Electricity production showed no improvement in Togo's chronic shortage of electricity production.
- Airport arrivals continued to increase as new capacity came online.
- Inflation:
  - Inflation in food prices was negative and core inflation was subdued.
- Selected series and measures presented:
  - Foodstuff agricultural production (Volumes, base=100 in 2012): series shown for Manioc, Rice, Millet and Sorghum (2014–2016).
  - Agricultural Export Production (Volumes, base=100 in 2012): series shown for Cacao, Cotton, Coffee (2014–2016).
  - Main Extraction and Industrial Activities (In millions of tonnes): Cement, Clinker (2014–2016).
  - Electricity production (In millions of Kw h): Medium voltage, Low voltage (2014–2016).
  - Airport Passenger Arrivals (Number of individuals) (2014–2016).
  - Food Inflation and Measures of Core Inflation (Year-on-year change, in percent) (Jul-10 to Jan-17): series for Food inflation, Non-food inflation, Non-food non-transportation.

### External Sector (2012–16)
- The current account deficit remained high and improved only modestly.
- The strengthening trade balance was driven by lower costs of oil and reduction of capital imports as public investment projects slowed.
- WAEMU reserves:
  - Togo's high current account deficit has contributed to pressures on regional reserves.
  - WAEMU reserves in months of imports (next year imports, excluding intra-regional trade) shown (2010–2016).
- Indicators and trends (2012–2016):
  - Current Account Balance (In percent of GDP): components shown for Balance of goods, Balance of services, Primary income balance, Secondary income balance.
  - Trade Balance (In percent of GDP): Exports of goods, Imports of goods, Exports of services, Imports of services.
  - Imports by Category (In percent of GDP): Petroleum products, Capital goods, Consumption goods, Intermediate goods.

### Medium-Term Macroeconomic Prospects (2013–21)
- Growth and inflation:
  - Growth momentum is expected to be maintained.
  - Inflation is expected to remain contained.
- Fiscal and external outlook:
  - Total revenue would continue to rise gradually on the back of revenue administration reforms.
  - Savings in capital expenditures will contribute to fiscal retrenchment.
  - The fiscal position would improve substantially under the program, helping to strengthen the external position.
- Projections (2013–2021) shown for:
  - Real GDP (Percent change) including SSA and WAEMU excl. Togo comparisons.
  - CPI average (Percent change) including SSA and WAEMU excl. Togo comparisons.
  - Government Revenue (Percent of GDP): Tax revenue and Non-tax revenue.
  - Government Expenditure (Percent of GDP): Primary domestic current, Interest payments, Capital.
  - Fiscal Position (Percent of GDP): Overall balance, excl. grants; Overall primary balance; Overall balance.
  - External Position (Percent of GDP): Trade balance; Current account balance.

### Comparison of Article IV Projections (2011–16)
- Fiscal outcomes for 2013–2016 have been revised and take into account prefinancing investments.
- The 2016 domestic primary deficit is now larger than projected at the time of the 2015 Article IV.
- The overall fiscal deficit is larger than previously projected, mainly due to:
  - Higher-than-projected domestically-financed investments.
  - Higher current expenditure.
- Revenue performance was in line with the 2015 projections, but debt accumulation is higher than in the last Article IV projections.
- Charts compare 2015 Art IV and 2016 Art IV series for:
  - Domestic Primary Balance (Percent of GDP).
  - Overall Fiscal Balance, cash basis (Percent of GDP).
  - Total Public Debt (Percent of GDP).
  - Tax Revenue (Percent of GDP).
  - Domestically Financed Public Investment (Percent of GDP).
  - Current Expenditure (Percent of GDP).

### Selected Economic and Financial Indicators (Table 1: 2013–21)
- National income, prices, and exchange rates (selected entries):
  - Real GDP: 6.1 5.4 5.3 5.0 5.0 5.3 5.4 5.6 5.6 (years across 2014–2021).
  - Real GDP per capita: 3.3 2.6 2.5 2.2 2.2 2.5 2.6 2.8 2.8.
  - GDP deflator: 0.6 1.2 2.7 1.7 1.9 2.0 2.0 2.0 2.0.
  - Consumer price index (average): 1.8 0.2 1.8 0.9 1.5 1.9 2.0 2.0 2.0.
  - GDP (CFAF billions): 2,135 2,277 2,462 2,628 2,812 3,020 3,247 3,497 3,767.
- Monetary survey (annual percent changes and levels):
  - Net foreign assets: 4.6 -7.7 10.5 6.3 5.6 4.2 4.3 4.4 5.0 (percent change of beginning-of-period broad money).
  - Credit to government: -4.1 3.1 -1.4 -5.8 -5.0 -0.3 -0.2 -0.2 -0.2.
  - Credit to nongovernment sector: 9.0 7.9 11.2 11.1 8.0 8.5 8.8 9.1 9.2.
  - Broad money (M2) growth: 10.3 9.8 20.2 12.9 13.4 13.5 13.6 13.7 13.7.
  - Velocity (GDP/end-of-period M2): 2.1 2.1 1.9 1.8 1.7 1.6 1.5 1.4 1.3.
- Investment and savings (Percent of GDP, selected):
  - Gross domestic investment: 24.5 25.7 27.0 27.4 26.1 24.3 23.1 23.5 24.1.
  - Gross national savings: 11.4 15.7 15.9 17.6 17.1 16.0 15.8 17.3 18.9.
- Government budget (Percent of GDP, selected):
  - Total revenue and grants: 21.5 20.5 21.9 21.7 24.7 25.2 25.9 26.0 26.0.
  - Revenue: 18.1 18.2 19.6 18.9 20.2 21.0 21.8 21.8 21.9.
  - Total expenditure and net lending: 26.6 27.3 30.8 31.4 23.5 27.9 25.7 25.4 25.5.
  - Domestic primary balance (Revenue minus expenditure, excluding grants, interest, and foreign-financed expenditure): -2.7 -3.1 -3.2 -4.5 -3.5 3.2 5.1 5.0 5.0.
  - Overall primary balance (cash basis): -4.7 -6.4 -5.4 -7.2 -6.7 -0.2 2.0 2.0 2.0.
  - Overall balance (cash basis): -5.8 -7.9 -7.8 -9.6 -9.7 -3.6 -0.7 -0.4 -0.5.
- External sector (Percent of GDP, selected):
  - Current account balance: -13.2 -9.9 -11.1 -9.8 -9.0 -8.3 -7.3 -6.2 -5.2.
  - Exports (goods and services): 46.5 39.4 36.0 35.1 36.4 36.7 37.4 37.8 39.0.
  - Imports (goods and services): -66.3 -57.3 -58.0 -55.1 -55.2 -54.6 -54.4 -53.7 -53.8.
- Public debt (Percent of GDP):
  - External public debt: 14.3 17.1 21.1 19.7 22.9 24.8 27.4 27.9 28.4.
  - Domestic debt: 42.1 48.1 54.5 61.0 58.4 53.3 45.6 40.0 34.3.
  - Total public debt: 56.4 65.2 75.6 80.8 81.3 78.1 73.0 67.8 62.7 (including prefinancing debt, domestic arrears and state-owned enterprise debt).
- Notes:
  - Data for 2016 are staff estimates.
  - Fiscal outturns for 2013–2016 have been revised and have taken into account prefinancing investments.
  - External public debt includes state-owned enterprise external debt.
  - Domestic debt includes prefinancing debt, domestic arrears and state-owned enterprise domestic debt.
  - Revenue minus expenditure, excluding grants, interest, and foreign-financed expenditure corresponds to the domestic primary balance.

### Central Government Financial Operations (Tables 2a and 2b, 2013–21)
- Levels (In billions of CFA Francs) and percent of GDP shown for revenue, expenditure, financing, and balances.
- Selected level entries (2015–2021, In billions of CFA Francs):
  - Revenue and grants: 458.1 (2015), 466.8 (2016), 539.5 (2017 Est.), 571.3 (2018 Budg.), 740.0 (2019 Proj.), 695.8 (2020 Proj.), 761.8 (2021 Proj.), 840.6, 907.6, 978.6 (later years as shown).
  - Total revenue: 386.4 (2015), 413.9 (2016), 482.3 (2017 Est.), 495.7 (2018 Budg.), 614.8 (2019 Proj.), 567.5 (2020 Proj.), 635.0 (2021 Proj.), 707.4, 764.1, 824.0.
  - Tax revenue: 338.4 (2015), 369.6 (2016), 427.6 (2017 Est.), 444.7 (2018 Budg.), 550.2 (2019 Proj.), 514.0 (2020 Proj.), 577.7 (2021 Proj.), 645.7, 697.7, 752.5.
  - Public investment: 197.5 (2015), 256.2 (2016), 319.6 (2017 Est.), 367.3 (2018 Budg.), 310.1 (2019 Proj.), 328.0 (2020 Proj.), 286.7 (2021 Proj.), 261.0, 284.2, 305.8.
  - Domestically financed investment: 96.9 (2015), 152.9 (2016), 181.1 (2017 Est.), 220.8 (2018 Budg.), 1.3 (2019 Proj.), 136.3 (2020 Proj.), 85.8 (2021 Proj.), 58.1, 66.1, 72.5.
- Selected percent-of-GDP entries (2015–2021):
  - Revenue and grants: 21.5 20.5 21.9 21.7 26.3 24.7 25.2 25.9 26.0 26.0.
  - Total expenditure and net lending: 26.6 27.3 30.8 31.4 27.5 33.5 27.9 25.7 25.4 25.5.
  - Dom. primary expenditures: 20.8 21.3 22.8 23.4 17.7 23.7 17.8 16.7 16.8 16.9.
  - Public investment (percent of GDP): 9.3 11.3 13.0 14.0 11.0 11.7 9.5 8.0 8.1 8.1.
  - Domestic primary balance (percent of GDP): -2.7 -3.1 -3.2 -4.5 4.1 -3.5 3.2 5.1 5.0 5.0.
  - Overall primary balance, cash basis, including grants: -101.3 -146.1 -132.2 -189.7 23.1 -188.3 -5.8 65.5 69.6 74.4 (in billions CFAF; table presents both levels and percent of GDP in Table 2b).
- Financing and arrears:
  - Change in arrears (levels): -14.3 (2015), -26.0 (2016), 28.3 (2017), 0.0 (2018), 0.0 (2019), -25.9 (2020), -27.8 (2021), -29.9, -32.2, -34.9.
  - Total post-2006 arrears accumulation, including arrears to utility companies, stood at 5.7 percent of GDP at end-2016.
  - Domestic financing (net) and composition (banking system, nonbank financing) shown in levels and percent of GDP.
- Notes:
  - For 2017, reflects recapitalization of two state-owned banks.
  - Includes treasury bills and bonds held by commercial banks.
  - The 2019 residual gap anticipates three disbursements from an ECF over the course of the year.
  - Arrears accumulations were rolled over in 2016 using 2016 revenues.

### Balance of Payments (Table 3, 2013–21)
- Selected level entries (Billions of CFA Francs):
  - Current account balance: -280.7 (2013), -226.4 (2014), -272.6 (2015), -256.5 (2016 Est.), -253.1 (2017 Proj.), -249.8 (2018), -237.5 (2019), -218.1 (2020), -196.5 (2021).
  - Trade balance: -430.0 (2013), -438.4 (2014), -610.8 (2015), -586.6 (2016), -599.3 (2017), -618.9 (2018), -635.2 (2019), -648.1 (2020), -659.9 (2021).
  - Exports: 751.9 (2013), 655.5 (2014), 597.7 (2015), 633.0 (2016), 706.4 (2017), 765.9 (2018), 844.0 (2019), 920.5 (2020), 1,028.1 (2021).
  - Imports: 1,182.0 (2013), 1,093.9 (2014), 1,208.5 (2015), 1,219.6 (2016), 1,305.7 (2017), 1,384.8 (2018), 1,479.2 (2019), 1,568.6 (2020), 1,688.1 (2021).
  - Current and capital account balance: -125.1 (2013), -68.8 (2014), -113.2 (2015), -109.7 (2016), -79.3 (2017), -70.6 (2018), -52.1 (2019), -25.9 (2020), 3.1 (2021).
  - Overall Balance: -2.4 (2013), -48.2 (2014), -171.6 (2015), -11.8 (2016), -133.3 (2017), -78.0 (2018), -47.4 (2019), -15.7 (2020), -53.5 (2021).
- IMF ECF projections (percent of GDP series shown):
  - Current account balance: -13.2 -9.9 -11.1 -9.8 -9.0 -8.3 -7.3 -6.2 -5.2 (2013–2021).
  - Trade balance: -20.1 -19.3 -24.8 -22.3 -21.3 -20.5 -19.6 -18.5 -17.5.
  - Exports (percent of GDP): 35.2 28.8 24.3 24.1 25.1 25.4 26.0 26.3 27.3.
  - Imports (percent of GDP): 55.4 48.0 49.1 46.4 46.4 45.9 45.6 44.9 44.8.
- Financing gaps and memorandum items:
  - Financing gap (levels): 77.3 (2017), 69.1 (2018), 88.1 (2019), 8.1 (2020), 0.0 (2021) in table presentation.
  - BCEAO NFA (in months of next year's WAEMU imports): 4.5 4.7 4.6 3.7 3.5 3.9 4.0 4.0 4.0 (2013–2021).

### Monetary Survey (Table 4, 2013–21)
- Levels (Billions of CFA Francs, selected):
  - Money supply (M2): 999.0 (2013), 1,096.9 (2014), 1,319.0 (2015), 1,489.4 (2016 Est.), 1,688.7 (2017), 1,917.1 (2018), 2,177.8 (2019), 2,476.0 (2020), 2,816.2 (2021).
  - Currency in circulation: 161.5 (2013), 145.8 (2014), 240.5 (2015), 245.2 (2016), 262.4 (2017), 281.8 (2018), 303.0 (2019), 326.3 (2020), 351.5 (2021).
  - Bank deposits: 837.5 (2013), 951.1 (2014), 1,078.6 (2015), 1,244.1 (2016), 1,426.3 (2017), 1,635.3 (2018), 1,874.9 (2019), 2,149.6 (2020), 2,464.7 (2021).
- Annual change (as percent of beginning-of-period broad money):
  - Money supply (M2): 10.3 9.8 20.2 12.9 13.4 13.5 13.6 13.7 13.7 (2013–2021).
  - Credit to nongovernment sector (annual percent change): 9.0 7.9 11.3 11.2 8.0 8.5 8.8 9.1 9.2.
- Memorandum items:
  - Velocity (GDP/end-of-period M2): 2.1 2.1 1.9 1.8 1.7 1.6 1.5 1.4 1.3.
  - Money supply (M2) growth in percent of GDP series presented: 46.8 48.2 53.6 56.7 60.1 63.5 67.1 70.8 74.8 (2013–2021).

### Capacity to Repay the Fund (Table 5, 2016–2028)
- Fund obligations based on existing and prospective credit (in millions of SDRs):
  - Principal repayments (in millions of SDRs): 2.3 (2016), 19.1 (2017), 17.8 (2018), 11.0 (2019), 7.5 (2020), 1.8 (2021), 2.5 (2022), 12.6 (2023), 22.7 (2024), 35.3 (2025), 35.3 (2026), 32.8 (2027), 22.7 (2028).
  - Charges and interest (in millions of SDRs): 0.0 (2016), 0.2 (2017), 0.3 (2018–2028 each year shown).
  - Total in millions of SDRs: 2.3 (2016), 19.3 (2017), 18.0 (2018), 11.3 (2019), 7.7 (2020), 2.0 (2021), 2.8 (2022), 12.9 (2023), 22.9 (2024), 35.5 (2025), 35.5 (2026), 33.0 (2027), 22.9 (2028).
- Selected ratios and memorandum items:
  - In percent of government revenue (annual): 0.4 (2016), 2.8 (2017), 2.4 (2018), 1.3 (2019), 0.8 (2020), 0.2 (2021), 0.3 (2022), 1.1 (2023), 1.9 (2024), 2.7 (2025), 2.5 (2026), 2.2 (2027), 1.4 (2028).
  - Outstanding IMF credit (in millions of SDRs): 57.1 (2016), 88.4 (2017), 121.1 (2018), 185.6 (2019), 178.2 (2020), 176.4 (2021), 173.9 (2022), 161.3 (2023), 138.6 (2024), 103.3 (2025), 68.0 (2026), 35.3 (2027), 12.6 (2028).
  - Outstanding IMF credit (in billions of CFAF): 47.1 (2016), 73.9 (2017), 101.4 (2018), 155.4 (2019), 149.0 (2020), 147.8 (2021), 145.7 (2022), 135.2 (2023), 116.1 (2024), 86.6 (2025), 57.0 (2026), 29.6 (2027), 10.6 (2028).
  - Outstanding IMF credit in percent of government revenue: 9.5 (2016), 13.0 (2017), 16.0 (2018), 22.0 (2019), 19.5 (2020), 17.9 (2021), 16.4 (2022), 14.2 (2023), 11.3 (2024), 7.9 (2025), 4.8 (2026), 2.3 (2027), 0.8 (2028).
  - Net use of IMF credit (millions of SDRs): -17.3 (2016), -4.3 (2017), 30.1 (2018), 26.8 (2019), 0.0 (2020), -1.8 (2021), -2.5 (2022), -12.6 (2023), -22.7 (2024), -35.3 (2025), -35.3 (2026), -32.8 (2027), -22.7 (2028).
- Memorandum items:
  - Nominal GDP (in billions of CFAF): 2,628 (2016), 2,812 (2017), 3,020 (2018), 3,247 (2019), 3,497 (2020), 3,767 (2021), 4,057 (2022), 4,364 (2023), 4,687 (2024), 5,027 (2025), 5,384 (2026), 5,767 (2027), 6,176 (2028).
  - Government revenue (in billions of CFAF): 496 (2016), 567 (2017), 635 (2018), 707 (2019), 764 (2020), 824 (2021), 888 (2022), 955 (2023), 1,025 (2024), 1,100 (2025), 1,178 (2026), 1,261 (2027), 1,351 (2028).

### Schedule of Disbursements Under ECF Arrangement (Table 6, 2017–19)
- Disbursement tranches and conditions:
  - SDR 25.17 million (17.1 percent of quota) — May 5, 2017 — Following Executive Board Approval of an ECF arrangement.
  - SDR 25.17 million (17.1 percent of quota) — September 15, 2017 — Observance of continuous and end-June 2017 performance criteria and completion of the first review under the arrangement.
  - SDR 25.17 million (17.1 percent of quota) — March 15, 2018 — Observance of continuous and end-December 2017 performance criteria and completion of the second review under the arrangement.
  - SDR 25.17 million (17.1 percent of quota) — September 15, 2018 — Observance of continuous and end-June 2018 performance criteria and completion of the third review under the arrangement.
  - SDR 25.17 million (17.1 percent of quota) — March 15, 2019 — Observance of continuous and end-December 2018 performance criteria and completion of the fourth review under the arrangement.
  - SDR 25.17 million (17.1 percent of quota) — September 15, 2019 — Observance of continuous and end-June 2019 performance criteria and completion of the fifth review under the arrangement.
  - SDR 25.17 million (17.1 percent of quota) — December 15, 2019 — Observance of continuous and end-September 2019 performance criteria and completion of the sixth review under the arrangement.
- Note: In addition to the generally applicable conditions under the Extended Credit Facility.

*International Monetary Fund staff report: Togo (figures, tables, and text as presented in the source content).*

### Annex I. Authorities’ Response to Main Recommendations from

### Annex I. Authorities’ Response to Main Recommendations from the 2015 Article IV Consultations

### Authorities’ summary response to staff’s key areas
- Staff emphasized key areas to maintain macroeconomic stability and promote inclusive growth.
- The authorities noted they had taken the following steps:
  - Place fiscal balances on a sustainable path, while generating fiscal space for social spending:
    - New prefinancing arrangements have been halted, which will allow for fiscal space for greater social spending.
  - Complete implementation of key reforms:
    - The Ministry of Finance has prepared a reorganization plan that aims to:
      - Establish of a cash management team, guided by a cash management template;
      - Operationalize the TSA;
      - Close various non-TSA accounts;
      - Channel all revenues intended to meet the expenses of the government budget to the TSA;
      - All budgetary support will be channeled to the BCEAO account of the Central Government Treasury Account;
      - A draft service agreement has been prepared with one of the public banks and the postal service.
    - The OTR has developed a plan to improve revenue administration.
  - Enforce regulatory framework in the financial sector, resolve problem banks, and strengthen microfinance supervision:
    - The regulatory framework for the financial sector is set by the WAEMU, not by the government.
    - One public bank is under provisional administration and a new CEO has been appointed for the other public bank.
  - Complement capital spending in transportation network by:
    - Improving public investment management (including elimination of prefinancing);
    - Opening to private sector competition in key economic sectors, such as mining, telecom, and energy;
    - Further improving the business environment.
    - Authorities note Togo’s economy has been open since independence and ongoing efforts to improve the business climate.
  - Produce national accounts and fiscal data in a more timely and consistent manner:
    - The National Statistics Agency has received support from the EU and AFRITAC-West to speed up production of national accounts.
    - Fiscal data are now being compiled monthly and are in line with WAEMU directives.

### Risk Assessment Matrix — summarized risks, impacts, and policy responses
- Short Term risks:
  - Surge in the US dollar and/or higher rates
    - Likelihood: High
    - Expected impact on the economy: High
    - Nature of impact: Increase external debt servicing costs and import prices of capital and intermediate goods; main impact on inflation.
    - Policy response: Adjust fiscal balance and implement competitiveness-enhancing structural reforms to improve long-term external sustainability.
  - Significant slowdown in other large EM/frontier economies
    - Likelihood: Medium
    - Expected impact: Medium
    - Nature: Transmission via key trading partners such as Ghana and Nigeria; effect moderate given diversified exports.
    - Policy response: Adjust fiscal balance and implement competitiveness-enhancing structural reforms.
  - Delays in fiscal adjustment
    - Likelihood: Low/Medium
    - Expected impact: High
    - Nature: Policy slippages could increase debt; no adequate policy response exists to delays in fiscal consolidation.
    - Policy response: Reduce spending in other areas and accelerate revenue raising measures as a second-best option.
  - Risks to financial sector stability
    - Likelihood: High
    - Expected impact: High
    - Nature: Deteriorated financial soundness indicators and weak microfinance institutions pose fiscal risks.
    - Policy response: Apply existing prudential rules, limit regulatory forbearance, resolve difficulties of the two public banks, regulate microfinance institutions.
- Medium Term risks:
  - Significant China slowdown in 2015-16
    - Likelihood: Low/Medium
    - Expected impact: Low/Medium
    - Nature: May reduce availability of non-concessional external funding for infrastructure projects.
    - Policy response: Prioritize investment projects.
  - Structurally weak growth in key advanced and emerging economies
    - Likelihood: High/Medium
    - Expected impact: Medium
    - Nature: Transmission via key trading partners; effect moderate due to diversified exports.
    - Policy response: Adjust fiscal balance and implement competitiveness-enhancing structural reforms.
  - Resistance to reforms from entrenched interests affecting mining, infrastructure investment and business environment reform
    - Likelihood: Medium
    - Expected impact: Medium
    - Nature: Reform delays could slow growth, increase inequality, and potentially lead to political pressure.
    - Policy response: Accelerate reforms, liberalize markets, and continue to improve the business environment.
  - Power supply shortfalls
    - Likelihood: High
    - Expected impact: High
    - Nature: Poor management may lead to widespread power cuts with short-term budget costs and long-term growth constraints.
    - Policy response: Invest in power generation capacity, reform pricing to promote private participation, ensure public entities pay bills to avoid arrears accumulation.
  - Social unrest
    - Likelihood: Low
    - Expected impact: Low
    - Nature: Failure to reach out to the opposition may lead to unrest; public order currently well established despite recent demonstrations.
    - Policy response: Increase allocations for targeted social spending; reach consensus with unions for balanced solutions.
  - Weather shock: drought or flooding
    - Likelihood: Medium
    - Expected impact: Medium
    - Nature: Recurring, typically short-lived or localized impacts.
    - Policy response: Implement disaster mitigation programs with donor support.

### Letter of Intent and program commitments (highlights)
- The government requests an IMF arrangement under the Extended Credit Facility (ECF) for a total amount equivalent to SDR 176.16 million to support the 2017–2019 program.
- Program pillars:
  - Reduce the overall fiscal deficit to ensure debt sustainability and external stability.
  - Design policies to foster sustainable and inclusive growth through targeted social spending and sustainably financed infrastructure spending.
  - Remediate weaknesses in the financial sector.
- Fiscal and debt objectives and constraints:
  - The government undertakes to reduce the overall fiscal deficit and to refrain from new contracting or guaranteeing of nominal nonconcessional external debt; comply with agreed levels for new external borrowing on concessional terms.
  - Strengthen debt management by restructuring public debt management departments.
  - Finalize restructuring of the two public banks by end-December 2017; the restructuring plan to be approved by end-June 2017.
  - An independent audit of the two public banks was concluded as a prior action to present the program request to the IMF’s Executive Board.
- Commitments on consultation and transparency:
  - The government will consult with the Fund on adoption of measures and revisions to the MEFP in accordance with Fund policies.
  - Authorities agree to provide IMF with implementation information per the Technical Memorandum of Understanding and authorize IMF publication of the letter and attachments after Executive Board review.

### Memorandum of Economic and Financial Policies — context, objectives, and program design
- Recent developments and context:
  - Economy expanded at 5.2 percent in 2014−2016.
  - Public debt (including prefinancing debt, domestic arrears, and public enterprise debt) increased from 48.6 percent of GDP in 2011 to 80.8 percent in 2016 (76.2 percent excluding public enterprise debt).
  - Domestic arrears, including to utility companies, accumulated to 5.7 percent of GDP in 2016.
  - Current account deficit at 9.8 percent of GDP in 2016, owing to investment-related imports.
  - In the second half of 2016 the government ended prefinancing, committed to wind down existing prefinanced investments, and to include prefinanced debt in published debt stocks; compliance with budget and procurement procedures for new public investments.
- Program objectives:
  - Reduce public debt to a sustainable level over the next decade primarily by controlling capital spending and improving revenue collection.
  - Refocus policies on sustainable and inclusive growth via targeted social spending and sustainably financed infrastructure spending.
  - Address financial sector weaknesses via accelerated implementation of the financial sector development strategy.
- 2017–2019 macroeconomic program:
  - Medium-term outlook:
    - Growth expected to increase gradually from 5 percent in 2016 to 5.6 by 2021.
    - Public debt, including public enterprise debt, expected to be reduced from 81.3 percent of GDP in 2017 to 73 percent by 2019.
    - Current account deficit projected to improve from 11.1 percent in 2015 to 7.3 percent by 2019.
  - Fiscal and debt sustainability:
    - The 2017 budget features significant fiscal retrenchment and regularization of prefinancing debt.
    - Starting in 2017, government committed to refraining from guaranteeing or assuming domestic loans to suppliers or contractors (performance criterion – PC).
    - Domestic primary balance targeted to improve to -2.7 percent of GDP in 2017 (excluding bank recapitalization cost) from -7.2 percent in 2016.
    - Estimated stock of prefinancing debt of CFAF 198 billion at end-2016 will be substituted in 2017 by debt with more favorable conditions.
    - Program target: primary surplus (cash basis, excluding grants) of 2 percent of GDP by 2019, an improvement of 9 percentage points from 2016.
    - With 2 percent of GDP primary surplus sustained post-program, present value of public debt projected to be below 38 percent of GDP by 2025.
    - Given weak monitoring of foreign-financed capital spending, the performance criterion on fiscal balance is set on the domestic primary balance (excluding foreign-financed capital spending). Government agrees to consult IMF staff before contracting new concessional loans.
  - Fiscal adjustment components:
    - Revenue: Review tax policy including overhauling exemption and tax expenditure system; accelerate revenue administration reforms.
    - Capital spending: Reduce domestically financed capital expenditure; emphasize grant and concessional financing; consider PPPs but will not enter PPP contracts until a PPP legal framework has been adopted in consultation with Fund staff.
    - Recurrent spending: Redistribute allocations toward social spending; respect indicative target on social spending agreed with development partners; wage increases limited to no more than inflation and wage drift; strict control over number of employees; improve targeting of expenditures; contain fuel price subsidies via existing price adjustment formula.
    - Arrears: Independent audit to verify the stock of domestic arrears by end-September 2017 (SB). After audit, plan full clearance by combining upfront cash payments in 2017 and securitization with phased payment over 2-5 years for residual arrears.
    - Poverty-reducing measures: Refocus policies through targeted social spending and sustainably financed investment under PUDC and PAPV; integrate development priorities from PND 2018–2022 into the budget; PND centered on five pillars (i) combating poverty and improving social well-being; (ii) promoting sustained, inclusive economic growth; (iii) building potential of growth sectors; (iv) sustainably managing the environment and reducing spatial inequality; (v) strengthening governance and peace. Authorities will establish a floor on domestically financed social spending for high-impact poverty reduction projects.

*Source: Annex I. Authorities’ Response to Main Recommendations from the 2015 Article IV Consultations (cr17127).*

### 11.      Institutional constraints have hampered the government’s ability to achieve

### 11.      Institutional constraints have hampered the government’s ability to achieve

### Institutional constraints and public investment efficiency
- A Public Investment Management Assessment (PIMA) found that management of public investments in Togo lags that of both other countries in sub-Saharan Africa (SSA) and other LICs.
- The efficiency of public investment spending was 70 percent below potential.

### Revenue administration and the Togolese Revenue Authority (OTR)
- Operational improvements after creation of the OTR contributed to good revenue performance in 2015. Key achievements include:
  - better tax payment tracking through the banking system;
  - simplified taxpayer segmentation;
  - bringing the customs computer system on stream.
- Customs revenue performance was substantially weaker than expected in 2016 due to:
  - lower growth in Togo’s major trading partners, such as Ghana and Nigeria;
  - diversion of shipments to other ports owing to stricter enforcement by Togo of Community regulations regarding axle load and dimension control;
  - additional costs (SEGUCE, ANTASER) affecting freight volume at the Lomé port.

### Planned reforms, timelines, and structural benchmarks (SB)
- Reorganize the Ministry of Finance:
  - create a new effective debt management directorate;
  - strengthen the budget directorate (budget preparation, monitoring, medium-term budget frameworks);
  - establish a tax policy unit to define tax policy.
  - Sign a decree reorganizing the Ministry of Finance by end-December 2017 (structural benchmark – SB).
- Investments and public investment management:
  - refrain from undertaking any new prefinanced investments (PC);
  - ensure all investment projects follow procurement, fully integrate into budget phases, and require payments after verification of completion of works;
  - put in place a mechanism for monitoring contract execution in partnership with the private sector;
  - improve medium-term planning, ex-ante and ex-post assessments of large projects, prioritization, alignment with fiscal funding, and transparency;
  - adopt a budget for FY 2018 consistent with the Fund-supported program and put guidelines in place by end-December 2017 (SB) to include in the 2019 budget only investment projects selected through cost-benefit or cost-effectiveness analysis.
- Domestic arrears:
  - identify a methodology to track and verify the stock of domestic arrears to the private sector, public enterprises, and pension funds before paying them down;
  - submit a methodology to identify and verify domestic arrears (SB) by end-June 2017; the government will use this methodology to estimate domestic arrears.
- Cash management:
  - improve Treasury cash management and complete the establishment of the Treasury Single Account (TSA);
  - submit to the Fund by end-December 2017 an annual cash plan for 2018 consistent with the 2018 public procurement plan and the quarterly commitments for 2018 (SB).
- Building on the OTR to modernize tax administration:
  - broaden the taxpayer base by improving tax payments by small and medium-sized enterprises, including consolidation of the taxpayer file via a tax census and higher registration of economic operators;
  - focus on fighting tax evasion beginning with potential evasion cases already detected in specific economic sectors;
  - implement controls and initiatives to detect and tax inaccurate declarations and potential evasions in phosphate, clinker, cement, and iron (SB, end-December 2017).
- Customs modernization:
  - simplify customs clearance and strengthen port cargo control; continue and enhance automation by reducing manual procedures; better track cargo in transit;
  - enhance assessment of imports and control tax exemptions through improved risk analysis and effective, transparent audit and control;
  - audit 30 percent of revenues foregone from customs exemptions for 2016 through a post-customs clearance audit program (SB, end-June 2017).
  - improve tax and customs cooperation leveraging the semi-autonomous agency and continue to improve private-sector communication.

### Financial sector development and stability
- Vulnerabilities as of June 2016:
  - 3 out of 13 banks, among which 2 public banks, were undercapitalized;
  - levels of capitalization at other banks were in line with minimum requirements and consistent with the WAEMU average.
- Public banks:
  - One public bank has been under provisional administration for a number of years and possesses latent capital in the form of its head office, fully amortized on its balance sheet but carrying positive practical value.
  - The other public bank’s capital position deteriorated further recently, driven mainly by recent provisions on recommendation of the WAEMU Banking Commission for nonperforming loans.
- Microfinance sector:
  - Out of 190 microfinance institutions active in Togo, only 20 respect all prudential ratios;
  - Out of 16 institutions supervised by the Banking Commission, only four are fully compliant;
  - The rate of nonperforming loans stands at over eight percent and remains higher than the three percent prudential standard for 90-day risk portfolios;
  - About 140 institutions operate without a license.
- Enforcement measures:
  - Banks not properly capitalized will be called to increase their capital or take remediation action or implement resolution strategies.
  - Microfinance institutions operating without a license should be closed.
- Prior action and audits:
  - As a prior action, the government concluded a contract for an independent audit involving the two public banks; the audit report will be transmitted to Fund staff by end-May 2017.
- Restructuring plans and recapitalization:
  - Two options under consideration for restructuring the two public banks:
    - establish a new bank to take over all liabilities and all “good” assets (if WAEMU legal framework allows); this would allow revaluation of real estate and injection of Tier 1 capital;
    - have the stronger public bank function as the assuming bank within current WAEMU legal framework.
  - Governance at the new bank must be improved.
  - An injection by the government of new capital will be needed; estimated recapitalization need of up to four percent of GDP in 2017 (amount included in the macroeconomic framework of the program for 2017).
  - An evaluator will assess the asset portfolio, particularly the head office, to assess latent capital value.
  - The government will form a Steering Committee (SC) to formulate and implement a restructuring plan, seek legal advice, and approve a comprehensive, time-bound restructuring plan for the two public banks by end-June 2017; if required, submit an application for creation of a new bank to the Banking Commission; complete all legal transfers required in the restructuring plan by end-December 2017 (SB).
  - The WAEMU Banking Commission’s support will be critical for approving the restructuring plan.

### Growth, business environment, and external vulnerabilities
- Current account outlook:
  - The current account deficit is projected to narrow from about 11 percent of GDP in 2015 to 7.3 percent of GDP by 2019.
  - Imports would be contained following slowdown in public sector investment.
- Business environment:
  - Togo ranks 154th out of 189 countries in the World Bank’s 2017 Doing Business Index—better than sub-Saharan-Africa’s average, but worse than the WAEMU average.
  - Togo is among economies improving the ease of doing business the most, with noted improvements in obtaining credit, paying taxes, trading across borders (one-stop window), and resolving insolvency.
- Government commitments to foster growth:
  - Increase dialogue with the private sector and civil society and communicate the government’s medium-term strategy;
  - Develop a monitorable and publicized action plan to improve Doing Business Indicators where Togo performs poorly;
  - Improve property title registration and the judicial system to allow property as collateral for SMEs;
  - Open energy, telecommunications, and mining to more private-sector competition;
  - Address chronic lack of energy through long-term solutions to increase domestic generation and establish a regulatory framework for cost-effective increased access.

### Borrowing policies and debt management
- Debt distress assessment:
  - Togo remains at a moderate risk of external debt distress and a heightened risk of overall debt distress based on the Bank–Fund Debt Sustainability Analysis (DSA).
  - Main sources of debt accumulation: Treasury bills and bonds and Sukuk operations, external and domestic commercial loans of the central government and public enterprises to finance public investments, including prefinancing.
- Debt targets and commitments:
  - Aim to lower public debt, including public enterprise debt, to 73 percent of GDP by 2019 from 81.3 percent in 2017.
  - Commit to no new contracting or guaranteeing of nominal external nonconcessional debt (PC) and set a target on contracting or guaranteeing of nominal concessional external debt.
  - Borrowing plans will seek to reduce debt vulnerabilities and avoid excessive buildup of short-term debt, considering rollover and foreign exchange risks.
- Debt management strengthening:
  - Centralize all debt management functions in one entity and organize the debt department into front, middle, and back offices (SB);
  - Build capacity and train staff;
  - The reorganized public debt department will be operational in 2017;
  - The budget must be in line with the medium-term debt strategy.

### Addressing data weaknesses
- National accounts and data production:
  - Latest finalized national account statistics are for 2013, prepared with support from AFRITAC West.
  - There have been large variations between the GDP estimated by the GDP Committee and the finalized national accounts.
  - Data production is compartmentalized and not cross-checked for consistency across departments.
  - The budget preparation process is weakened by limited information on budget execution during the year.
- Government actions:
  - Reduce lags in production of national accounts, improve production of preliminary GDP data, and strengthen staffing within INSEED;
  - Guarantee quality of quarterly budget execution and TOFE reports and ensure consistency between the two;
  - Base budget projections for the following year on projections for budget execution in the current year.

### Program financing, monitoring, and key quantitative targets
- Financing for the 2017–2019 program is estimated to be covered; additional financing will be mobilized on the regional market and with external partners.
- For 2017, budget financing needs will be covered by recourse to regional money and financial markets (bond borrowing and Sukuk bonds) and assistance from the World Bank, IMF, African Development Bank, French Development Agency, and the European Union.
- Monitoring:
  - The program will be monitored every six months based on quantitative criteria for end-June and end-December, starting from end-June 2017, with the final test date set for September 2019.
  - Quantitative performance criteria (PCs) for end-June 2017 and end-December 2017 and indicative targets (ITs) for end-September 2017 are defined; first and second program reviews on or after September 15, 2017 and March 15, 2018 respectively.
  - The Permanent Secretariat for Reform Policies and Financial Programs (SP-PRPF) will provide technical program monitoring and produce quarterly progress reports.

- Selected quantitative performance criteria and indicative targets for January 1, 2017 – December 31, 2017 (CFAF billion)
  - Domestic primary fiscal balance (floor) 1: End-June 2017 = -19.0; End-September 2017 (Indicative Target) = 8.4; End-December 2017 = -99.1
  - Non-accumulation of arrears on external public debt 2,4: End-June 2017 = 0.0; End-September 2017 = 0.0; End-December 2017 = 0.0
  - Net domestic financing (ceiling) 1: End-June 2017 = 80.3; End-September 2017 = 157.8; End-December 2017 = 144.1
  - Net domestic financing (ceiling adjusted) 1,3: End-June 2017 = 80.3; End-September 2017 = 157.8; End-December 2017 = 144.1
  - Government contracting or guaranteeing of nominal nonconcessional external debt (ceiling) 2,4: End-June 2017 = 0.0; End-September 2017 = 0.0; End-December 2017 = 0.0
  - Government guaranteeing of domestic loans to suppliers and contractors (ceiling) 2,4: End-June 2017 = 0.0; End-September 2017 = 0.0; End-December 2017 = 0.0
  - Government guarantees on bank prefinancing for public investments (ceiling) 2,4: End-June 2017 = 0.0; End-September 2017 = 0.0; End-December 2017 = 0.0
  - Total fiscal revenue (floor): End-June 2017 = 246.3; End-September 2017 = 398.5; End-December 2017 = 567.5
  - Total domestically financed social spending (floor): End-June 2017 = 87.4; End-September 2017 = 141.9; End-December 2017 = 218.4
  - Memorandum Item — Overall primary balance 1: End-June 2017 = -70.2; End-September 2017 = -84.8; End-December 2017 = -188.3
  - Government contracting or guaranteeing of nominal concessional external debt: End-June 2017 = 49.6; End-September 2017 = 88.8; End-December 2017 = 138.0
  - Notes: 1 Performance criterion will be adjusted by the amount spent in banking capitalization. 2 Continuous performance criterion. 3 According to the TMU, the ceiling on net domestic financing will be adjusted to offset deviations from projected external program financing, subject to a cap of CFAF 10 billion. 4 Cumulated from the approval of the arrangement on May 5, 2017.
- Structural benchmarks and prior actions (selected, timing):
  - Prior action: conclude a contract for an independent audit of the two public banks (Prior action).
  - Revenue administration SBs:
    - Implement controls and initiatives to detect and tax inaccurate declarations and potential evasions in phosphate, clinker, cement, and iron (End-December 2017).
    - Verify 30 percent of revenue foregone from customs exemptions in 2016 through a post-clearance audit program (End-June 2017).
  - Public financial management SBs:
    - Sign a decree reorganizing the Ministry of Finance (End-December 2017).
    - Submit an annual cash plan for 2018 consistent with the 2018 procurement plan and quarterly commitments for 2018 (End-December 2017).
  - Debt management SBs:
    - Strengthen debt management by centralizing functions and organizing the debt department into front, middle, and back offices (End-September 2017).
    - Submit a methodology to identify and verify domestic arrears (End-June 2017).
    - Conduct an independent audit of domestic arrears (End-September 2017).
  - Public investment management SB:
    - Adopt a budget for FY 2018 and put guidelines in place by end-December 2017 to include in the 2019 budget only investment projects selected through cost-benefit or cost-effectiveness analyses (End-December 2017).
  - Financial sector SBs:
    - Based on the independent audit findings, approve a comprehensive, timebound restructuring plan for the two public banks; if required, submit an application for creation of a new bank to the WAEMU Banking Commission (End-June 2017).
    - Complete legal transfers required in the restructuring plan at least cost to the government (End-December 2017).

*Sources: Togolese authorities; and IMF staff estimates.*

### 1. This Technical Memorandum of Understanding (TMU) defines the structural and quantitative

### This Technical Memorandum of Understanding (TMU) defines the structural and quantitative benchmarks and performance criteria to monitor the program supported by the Extended Credit Facility for the period January 1, 2017 through the end of the arrangement.

### A. Definition of Terms
- Government: the central administration of the Togolese Republic; excludes political subdivisions, the Central Bank of West African States (BCEAO), and public entities with separate legal personality unless otherwise specified (paragraph 2).
- Public entities: majority government-owned companies and other public entities receiving earmarked tax and quasi-tax revenues unless otherwise indicated (paragraph 3).
- Debt (program definition): as set out in paragraph 8(a) of the Guidelines on Public Debt Conditionality in Fund Arrangements (IMF Executive Board Decision No. 15688-(14/107), adopted December 5, 2014). Key elements preserved:
  - Debt means a current (not contingent) liability under a contractual arrangement requiring future payments in assets or services; forms include:
    - (i) loans (including deposits, bonds, debentures, commercial loans, buyers’ credits, repurchase agreements, official swap arrangements);
    - (ii) suppliers’ credits (deferred payment contracts);
    - (iii) leases (debt is present value at lease inception of expected lease payments excluding operation/repair/maintenance).
  - Arrears, penalties, and judicially awarded damages from failure to make payment under a contractual obligation that constitutes debt are debt; payment failures on obligations not considered debt (e.g., payment on delivery) do not give rise to debt (paragraph 4(b)).
- Public debt: obligations of the central government and public entities (paragraph 5).
- Domestic debt: debt contracted or serviced in the franc of the Financial Community of Africa (CFAF) (paragraph 6).
- External debt: debt contracted or serviced in a currency other than the CFAF (paragraph 6).
- Contracted debt (program): considered contracted at issuance of a “no objection” opinion by the Supreme Court where required under domestic law; otherwise when it enters into effect (paragraph 7).

### B. Quantitative Performance Criteria and Indicative Targets
- Coverage and timing:
  - Periodic quantitative performance criteria (PCs) and indicative targets (ITs) set for end-June 2017 and end-December 2017 (PCs), and indicative targets for end-September 2017 (paragraph 8).
- Performance criteria (PCs) include:
  - (a) a floor on domestic primary fiscal balance;
  - (b) a zero ceiling on accumulation of arrears on external public debt;
  - (c) a ceiling on net domestic financing;
  - (d) a zero ceiling on government contracting or guaranteeing of nominal nonconcessional external debt;
  - (e) a zero ceiling on government guaranteeing of domestic loans to suppliers and contractors;
  - (f) a zero ceiling on government guarantees on bank prefinancing for public investments (paragraph 8).
- Indicative targets (ITs) include:
  - (a) a floor on total fiscal revenue;
  - (b) a floor on total domestically financed social spending (paragraph 8).

Domestic Primary Fiscal Balance
- Definition:
  - Domestic primary fiscal balance = government fiscal revenue minus total fiscal expenses, net of interest and capital spending financed by donors and lenders (paragraph 9).
  - Balances for end-December 2016 to end-June 2017 and to end-December 2017 (PCs) and end-December 2016 to end-September 2017 (ITs) must be equal to or greater than amounts in Table 1 of the attachments to the MEFP (paragraph 9).
  - Data source: Government Financial Operations Table (Tableau des opérations financières de l’État – TOFE), prepared monthly by the Directorate of Economy of the Ministry of Economy and Finance (statistical TOFE). The Directorate of Economy’s data take precedence for program purposes (paragraph 9).
- Reporting deadline:
  - Detailed data reported monthly within eight weeks of the end of the month (paragraph 10).

Arrears on External Public Debt
- Definition and rule:
  - Government will not accumulate payment arrears on external public debt (continuous performance criterion); excludes arrears on debts subject to dispute or renegotiation (paragraph 11).
  - Data source: Public Debt Directorate (paragraph 11).

Net Domestic Financing
- Definition:
  - Net domestic financing = (i) net credit from the banking sector to the government; (ii) net domestic nonbank financing of the government; and (iii) unidentified financing (paragraph 12).
  - Net domestic financing for end-December 2016 to end-June 2017 and to end-December 2017 (PCs) and end-December 2016 to end-September 2017 (ITs) must be equal to or less than amounts in Table 1 appended to the MEFP (paragraph 12).
  - Ceiling on net domestic financing shall be adjusted to make up for gaps in projected external financing as indicated in Table 1, subject to a cap of CFAF 10 billion (paragraph 12).
- Components:
  - Net credit from the banking sector: balance of government claims and debts to national banking institutions in Togo; government claims include Togolese Treasury balances, Treasury deposits in the central bank, Treasury deposits in commercial banks (excluding deposits of other arms of government), and blocked accounts; government debts include assistance from the central bank (excluding BCEAO credits tied to IMF financing), assistance from commercial banks (including government securities in CFA francs held by commercial banks), and postal checking account deposits (paragraph 13).
  - Net domestic nonbank financing: includes (i) changes in balance of government securities issued in CFA francs (including on WAEMU regional market) not held by Togolese commercial banks, calculated on basis of initial amount underwritten; (ii) changes in deposit accounts of Treasury correspondents; (iii) changes in various deposit accounts (including trustee accounts [comptes de consignation]) in the Treasury and accounts where fines/sentences are deposited pending distribution; (iv) repayment of other domestic public debt to nonbank entities (including nonresidents); and income from privatization. Assumption or securitization of debts and arrears by the government is not included in net domestic financing, whereas repayment of that debt by the government is included (paragraph 14).
  - Unidentified financing: difference between total financing (net domestic financing plus exceptional financing) and the overall balance on a cash basis (including grants and changes in arrears) (paragraph 15).
- Data producers and precedence:
  - Net credit from the banking sector calculated by the BCEAO; Treasury bill and bond amounts by Agence UMOA-Titres; net domestic nonbank financing calculated by the Togolese Treasury. Their data take precedence for program purposes. Data reported in the statistical TOFE prepared monthly by the Directorate of Economy (paragraph 16).
- Reporting deadlines:
  - Net domestic financing data reported monthly within eight weeks of the end of the month (paragraph 17).
  - Details concerning any domestic borrowing reported monthly within six weeks of the end of the month; domestic borrowing categorized as short term (less than one year) and long term (one year or more). Rule also applies to government-guaranteed domestic loans to suppliers and contractors (paragraph 18).

Government or Government-Guaranteed Nominal Nonconcessional External Debt
- Continuous performance criterion:
  - Government undertakes not to contract or financially guarantee any new nonconcessional external debt at maturities of one year or more (continuous performance criterion) (paragraph 19).
- Definition and calculation:
  - Nonconcessional external debt = external debt with a grant element of less than 35 percent. Level of concessionality calculated based on a discount rate of 5 percent (paragraph 19).
  - Criterion applies to debt as defined in paragraph 8(a) of the Guidelines and to any commitment contracted or guaranteed for which no value has been received; does not apply to reschedulings that take the form of new debts, or to bond borrowing, Treasury bills, and Sukuk or other instruments issued in CFA francs on the WAEMU regional financial market (paragraph 19).
- Expanded concept of government for this criterion:
  - Includes entities beyond paragraph 2’s definition: EPIC, EPA, public scientific and technical institutions, public professional establishments, public health agencies, local authorities, public enterprises, national corporations (government holds at least 50 percent of capital), and state agencies (paragraph 19).

Government-Guaranteed Domestic Loans to Suppliers and Contractors
- Continuous performance criterion:
  - Government committed to not providing new financial guarantees for domestic loans to its suppliers or contractors (continuous performance criterion) (paragraph 20).
- Concept of government for this criterion:
  - Includes definition in paragraph 2 and also EPIC, EPA, public scientific and technical institutes, public vocational establishments, public health agencies, local authorities, public enterprises, national corporations (government holds at least 50 percent of capital), and state agencies (paragraph 20).

Government Guarantees on Bank Prefinancing for Public Investments
- Continuous performance criterion:
  - Government undertakes not to guarantee new bank prefinancing for public investments (continuous performance criterion) (paragraph 21).
- Typical arrangement described:
  - Private company with public works contract obtains loan from domestic commercial bank; Ministry of Finance guarantees the loan and signs unconditional and irrevocable substitution of debtor agreement to service all principal and interest, paid automatically from Treasury account at BCEAO (paragraph 21).
- Concept of government for this criterion:
  - Includes definition in paragraph 2 and EPIC, EPA, public scientific and technical institutions, public professional establishments, public health agencies, local authorities, public enterprises, national corporations (government holds at least 50 percent of the capital), and state agencies (paragraph 21).

Total Fiscal Revenue
- Definition:
  - Total fiscal revenue includes tax and nontax revenue, excludes external grants, revenue of autonomous agencies, and income from privatization. Data calculated by revenue offices and reported in the statistical TOFE prepared monthly by the Directorate of Economy. Revenue is on a cash basis (paragraph 22).
- Targets:
  - Revenue collection for end-December 2016 to end-June 2017, end-September 2017, and end-December 2017 must be equal to or greater than amounts indicated in Table 1 attached to the MEFP. The revenue floor is an indicative target for the entire duration of the program (paragraph 23).
- Reporting deadline:
  - Reported monthly to the IMF within four weeks of the end of the month (paragraph 24).

Domestically Financed Social Spending
- Definition and coverage:
  - Total current and capital domestically financed social spending calculated across account categories (wages, goods and services, transfers and subsidies, other) and capital accounts financed with domestic resources (paragraph 25).
  - Social sectors covered: (1) Ministry of Education (primary and secondary education, technical and vocational training, higher education insofar as scholarships and relief allowances), (2) Ministry of Health, (3) Ministry of Social Action, Advancement of Women, and Literacy, (4) Ministry of Grassroots Development, Crafts, Youth, and Youth Employment, (5) Ministry of Agriculture, Livestock, and Fisheries, (6) Ministry of Mines and Energy (rural electrification projects), (7) Emergency Program for Community Development (PUDC), and (8) Support Program for Vulnerable Populations (PAPV) (paragraph 25).
  - Scholarships and relief allowances governed by Decree No. 2011-173/PR and Decree No. 2011-174/PR of November 30, 2011 (paragraph 25).
  - Total current and capital social expenditure financed with own resources covers spending financed with domestic resources, including revenue, domestic financing, and general foreign budgetary support; excludes social spending financed with project-specific grants or loans (paragraph 25).
  - Data source: SIGFiP (Budget Directorate of the Ministry of Economy and Finance), prepared monthly (paragraph 25).
- Targets:
  - Social spending financed with domestic resources for end-December 2016 to end-June 2017, end-September 2017, and end-December 2017 must be equal to or greater than amounts indicated in Table 1 attached to the MEFP. Data provided by the Budget Directorate and Directorate of Economy take precedence for program purposes. The floor on social expenditure financed with domestic resources is an indicative target for the entire program period (paragraph 26).

Reporting deadlines (additional)
- Social spending and other program-related data: SIGFiP/Budget Directorate and Directorate of Economy data prepared at monthly intervals; specific reporting timelines specified above (paragraphs 24–26).

*International Monetary Fund — Technical Memorandum of Understanding (TMU) for the Extended Credit Facility program — Togo (excerpts).*

### 27. The data on social expenditure financed with domestic resources will be reported every month

### 27. The data on social expenditure financed with domestic resources will be reported every month

### Reporting requirement
- The data on social expenditure financed with domestic resources will be reported every month within eight weeks of the end of the month.

### Context within IMF staff report for Togo (April 27, 2017)
- Document: STAFF REPORT FOR THE 2016 ARTICLE IV CONSULTATION AND REQUEST FOR A THREE-YEAR ARRANGEMENT UNDER THE EXTENDED CREDIT FACILITY—INFORMATIONAL ANNEX.
- Prepared by: The African Department (In consultation with other departments).
- Date on document: April 27, 2017.

### Statistical capacity and data quality (key findings)
- Data provision is broadly adequate for surveillance, but weaknesses in quality and timeliness hamper analysis.
- National accounts:
  - Compiled based on very limited information, with only few surveys and scarce data on primary agriculture and private sector services.
  - Published with considerable delays and only available on annual frequency.
  - Base year for constant price GDP is 2007.
  - National accounts for the new base year (2007) were completed in 2012; DGSCN published National Accounts GDP numbers covering 2000-2007 in 2013; 2009 and 2010 National Accounts GDP numbers were finalized and published in 2014 and 2015 respectively.
  - INSEED established in February 2015 is executing a plan, with AFRITAC West support, to clear delays for 2011–15 by 2017; national accounts through 2013 were published in early 2017.
  - Plans to build quarterly national accounts were cancelled to prioritize closing publication delays and transition to SNA 2008.
- Price statistics:
  - Base year for CPI index is 2008.
  - CPI basket revised in 2010; first observations for a national coverage CPI began January 2015 and index published beginning in January when the first 12-month variation became available.
- Fiscal sector statistics:
  - Government finance statistics derived from a weak accounting and reporting system.
  - Timely and accurate tracking of government arrears has been inadequate; incorporation of audited domestic arrears through end-2006 into the debt stock has occurred, but incorporation of more recent arrears has lagged.
  - Monthly TOFE is based on a mixture of administrative and accounting data and is sent to AFR with a two-month lag.
  - Only budgetary central government data are reported for publication in the Government Finances Statistics Yearbook (GFSY); government finance high frequency data are not reported for publication in the IFS.
  - A bridge table was established (with STA assistance) to transpose TOFE data from GFS86 to GFSM01.
- Balance of payments statistics:
  - Data are reported on an annual frequency with long lags (data corresponding to 2012 published February 2015; 2013 published June 2015).
  - Coverage is incomplete and there are significant consistency issues between the IIP and other balance of payments data.
  - Compiled based on bank reports, a survey of enterprises, and customs data; compiled following principles of the 6th balance of payment manual.
  - Central bank continues efforts to better cover informal trade, notably with sub-regional reconciliation of intra-WAMU trade.
- Monetary data:
  - Reported by the BCEAO and sent to AFR within 45 days.
  - Monthly data for Togo (and other WAEMU members) are regularly disseminated by BCEAO with a lag of about two months.
  - Data on lending and borrowing rates charged by domestic banks are compiled and available monthly.

### Data dissemination and participation
- Togo has participated in the General Data Dissemination System (GDDS) since November 2001.
- Metadata on the national statistical system and improvement plans were last updated in December 2004.

### Government finance, public debt, and DSA summary (key conclusions)
- Debt Sustainability Analysis (DSA) prepared jointly by IMF and World Bank; updates the 2015 DSA and uses the latest low-income countries DSA template.
- Debt data include external and domestic debts of the central government, external debt of public enterprises, and government-guaranteed debt. Domestic debt is defined as debt denominated in franc de la Communauté financière d’Afrique (FCFA).
- Risk of external debt distress: Moderate.
- Augmented by significant risks stemming from domestic public debt? Yes.
- Summary conclusions:
  - Togo’s risk of external debt distress continues to be moderate with heightened overall risk of debt distress—unchanged from the previous DSA published in October 2015.
  - A return to historical levels of growth and fiscal deficits would lead to a rapid accumulation of debt.
  - A shock to growth combined with a reduction in FDI and capital transfers would push Togo above the external debt-distress threshold for the PV of debt-to-GDP.
  - Overall public debt dynamics show heightened vulnerabilities, with the debt-to-GDP ratio remaining above the indicative benchmark for a significant part of the projection period.
  - The analysis highlights the need for sustained fiscal consolidation, improved debt management, and macroeconomic policies to reduce public debt to prudent levels over the medium term.

### Key numeric/statistical items reported in the document
- IMF Quota (SDR million): Quota 146.80 (100.00 percent of Quota).
- Fund holdings of currency: 127.89 (87.12 percent of Quota).
- Reserve Position: 18.93 (12.90 percent of Quota).
- SDR Department net cumulative allocation (SDR million): 70.33 (100.00 percent of Quota).
- SDR Department holdings: 9.63 (13.69 percent of Quota).
- Outstanding Purchases and Loans—ECF Arrangements: 54.81 (37.33 percent of Quota).
- Financial Arrangements (selected entries shown):
  - ECF Apr 21, 2008 – Jul 26, 2011: Amount Approved (SDR million) 95.41; Amount Drawn (SDR million) 95.41.
  - ECF Sep 16, 1994 – Jun 29, 1998: Amount Approved (SDR million) 65.16; Amount Drawn (SDR million) 54.30.
  - ECF May 31, 1989 – May 19, 1993: Amount Approved (SDR million) 46.08; Amount Drawn (SDR million) 38.40.
- Projected Payments to the Fund (SDR million; based on existing use of resources and present holdings of SDRs):
  - Principal forthcoming: 2017 16.77 17.76 11.04 7.48 1.76 (presented in table form in source).
  - Charges/Interest forthcoming: 0.18 0.25 0.25 0.25 0.25.
  - Total forthcoming: 16.95 18.01 11.29 7.73 2.01.
- HIPC Initiative figures:
  - Assistance committed by all creditors (US$ Million): 282.00.
  - IMF assistance (US$ million): 0.32.
  - (SDR equivalent in millions): 0.22.
  - Completion point date: Dec. 2010.
  - Disbursement of IMF assistance (SDR Million) — Assistance disbursed to the member: 0.22; Interim assistance 0.08; Completion point balance 0.14; Additional disbursement of interest income 0.01; Total disbursements 0.22.
- Togo: Table of Common Indicators Required for Surveillance (as of March 2017) — selected entries:
  - Exchange Rates: Date of latest observation February 2017; Date received March 2017; Frequency Monthly; Frequency of Reporting Monthly; Publication Published.
  - International Reserve Assets and Reserve Liabilities of the Monetary Authorities: Date of latest observation January 2017; Date received March 2017; Frequency Monthly; Publication Published.
  - Reserve/Base Money: January 2017; March 2017; M; M; Published.
  - Broad Money: January 2017; March 2017; M; M; Published.
  - Central Bank Balance Sheet: January 2017; March 2017; M; M; Published.
  - Consolidated Balance Sheet of the Banking System: January 2017; March 2017; M; M; Published.
  - Interest Rates: January 2017; February 2017; M; M; Published.
  - Consumer Price Index: February 2017; March 2017; M; M; Published.
  - Revenue, Expenditure, Balance and Composition of Financing – General Government: n.a.; n.a.; n.a.; n.a.; Not published.
  - Revenue, Expenditure, Balance and Composition of Financing – Central Government: December 2016; February 2017; M; M; Published.
  - Stocks of Central Government and Central Government-Guaranteed Debt: December 2016; February 2017; M; M; Not published.
  - External Current Account Balance: December 2014; July 2016; A; A; Published.
  - Exports and Imports of Goods and Services: December 2014; July 2016; A; A; Published.
  - GDP/GNP: December 2013; February 2017; A; A; Published.
  - Gross External Debt: December 2014; July 2016; M; M; Published.
  - International Investment Position: December 2014; July 2016; A; A; Published.

### Policy implications and recommendations (from report)
- Sustain fiscal consolidation to reduce public debt vulnerabilities.
- Improve debt management to prevent rapid accumulation of debt under adverse scenarios.
- Strengthen macroeconomic policies to bring public debt to prudent levels over the medium term.
- Improve quality and timeliness of national statistics: prioritize closing delays in national accounts publication, transition to SNA 2008, expand CPI coverage, and improve fiscal reporting (including comprehensive arrears tracking and broader reporting beyond budgetary central government).

*Staff report for Togo: STAFF REPORT FOR THE 2016 ARTICLE IV CONSULTATION AND REQUEST FOR A THREE-YEAR ARRANGEMENT UNDER THE EXTENDED CREDIT FACILITY—INFORMATIONAL ANNEX (April 27, 2017).*

### 2.      The previous DSA assessed the level of Togo’s risk of external debt distress to be moderate

### 2.      The previous DSA assessed the level of Togo’s risk of external debt distress to be moderate

### Previous assessment and overall risk
- The previous DSA assessed the level of Togo’s risk of external debt distress to be moderate owing to the large increase in government debt to finance infrastructure projects following the HIPC completion point.
- Togo’s public and publicly guaranteed (PPG) external debt dropped from 52.6 percent of GDP in 2009 to 18 percent in 2010 at the enhanced HIPC Initiative completion point (December 2010).
- The PV of PPG external debt was 15.1 percent of GDP in 2016 and under the baseline is projected to increase to 21.9 by 2037, remaining below the 30 percent threshold throughout the projection period.
- Conclusion summary: Togo remains at a moderate risk of external public debt distress but has a heightened risk of overall public debt distress, reflecting vulnerabilities in domestic debt.

### External debt composition and recent trends (2010–2016)
- End-2010, End-2013, End-2016 headline figures (from Text Table 1):
  - Total Public Debt: 767.3 (billions of CFAF) / 1,004.8 percent of public debt / 1,193.3 (billions of CFAF) ... 2,122.8 (billions of CFAF) 100 80.8 (percent of GDP)
  - External Debt: 283.6 (billions of CFAF) 37 (percent of public debt) 18.0 (percent of GDP) ... 295.8 ... 19.7 (percent of GDP) at end-2016
  - Central Government external debt: 237.7 ... 24.8 ... 2419.7 (percent of GDP) at end-2016
  - Multilateral share fell to 32 percent (from 65 percent) between 2010 and 2016; bilateral share rose to 65 percent (from 34 percent).
- The shift reflects recent large borrowing from China and India Exim-Banks to finance development projects, including the extension of the Port and the Lomé airport.

### Public domestic debt dynamics and drivers
- Domestic debt nearly doubled between 2010 and 2016, reaching 61 percent of GDP in 2016.
- Domestic debt share in total public debt increased by 13 percentage points to 76 percent of public debt.
- Government securities on the regional market increased from 9.7 percent of GDP to 29.1 percent of GDP between 2010 and 2016, with increased use of Treasury bills and bonds.
- By end–2016, Togo had the highest levels of domestic debt-to-GDP and total debt-to-GDP ratios within the WAEMU.

### Infrastructure prefinancing and fiscal/financial sector impact
- Beginning in 2013 the government used a financing tool where private sector contractors prefinanced public infrastructure through domestic commercial bank loans to be repaid by the government.
- Prefinancing contracts were generally obtained through direct negotiations and averaged 7 percent of GDP annually over 2013-16, peaking at 10½ percent in 2015.
- Prefinancing repayments were reported as capital spending (debt service) rather than execution of investment; prefinancing obligations were not included in public debt.
- This practice increased the stock of domestic debt by about 7½ percent of GDP by end-2016, deteriorating the fiscal situation and weakening financial sector stability.
- The government has discontinued this public financial management practice.

### Policy performance and debt thresholds
- Togo is considered a weak policy performer for DSA purposes: World Bank CPIA averaged 2.98 from 2013 to 2015.
- External debt burden thresholds (without remittances) used in the DSA:
  - PV of debt in % of Exports: 100
  - PV of debt in % of GDP: 30
  - PV of debt in % of Revenue: 200
  - Debt service in % of Exports: 15
  - Debt service in % of Revenue: 18
- Total public debt benchmark:
  - PV of total public debt in percent of GDP: 38
- With remittances low in Togo, the scenario with remittances was not considered.

### Baseline macroeconomic assumptions (selected)
- Real GDP growth: expected to increase from 5.2 percent in 2014-16 to 5.6 percent by 2021. Long-run real GDP growth estimated at 5 percent.
- Public investment: reached 13 percent of GDP in 2015 and is estimated at 14 percent of GDP in 2016; expected to decline in 2017 and 2018 before stabilizing around 8 percent by 2019-21.
- Commodity price projections (oil, phosphates, cotton, cocoa, coffee) through 2021 sourced from the WEO (January 2017) and assumed constant in real terms thereafter.
- Inflation: declined to 0.9 percent in 2016 from 1.8 percent in 2015; projected 1.5 percent in 2017 and stable at 2 percent afterwards.
- Total revenue: reached 21.7 percent of GDP in 2016 and projected to reach 26 percent by 2037.
- Domestic primary fiscal deficit: expected to improve to 3.5 percent of GDP in 2017 from 4.5 percent in 2016.
- Overall primary balance (cash basis, including grants): expected to reach 2 percent of GDP by 2019, an improvement of 9.2 percentage points from 2016.
- Current account deficit: projected to narrow from 9.8 percent in 2016 to 7.3 percent by 2019.
- FDI: expected to stabilize around an inflow of about 4.7 percent of GDP per year in the long run.

### External Debt Sustainability Analysis — baseline and stress tests
- Baseline: external debt indicators remain below indicative policy-relevant thresholds through 2017–37.
  - PV of PPG external debt 15.1 percent of GDP in 2016, rising to 21.9 by 2037 but below the 30 percent threshold.
  - PV of external debt relative to revenues and to exports remain stable and below thresholds.
  - Debt service measures remain well below thresholds and broadly downward.
- Alternative scenarios and stress tests:
  - Most extreme combined shock (low growth + large reduction in non-debt creating flows—FDI and public transfers set at historical average minus one standard deviation for 2017 and 18) leads the PV of external debt-to-GDP ratio to breach the threshold in 2019 and remain above for about a decade before declining below the threshold.
  - Export shock produces the most extreme impact on PV of external debt-to-exports ratio; this ratio is also vulnerable to non-debt creating flow shocks and combined growth/non-debt creating flow shocks.
  - Under the most extreme shocks, debt service ratios remain under their policy relevant thresholds.
  - Under the historical scenario (parameters set to historical values), the three PV debt ratios breach their relevant policy dependent thresholds while debt service-to-exports and debt-service-to-revenue ratios remain broadly below thresholds.

### Public sector debt sustainability (including domestic debt)
- Domestic debt projected to decline to 58.4 percent of GDP in 2017 from 61 percent of GDP in 2016.
- By 2037, repayment of arrears combined with significant fiscal consolidation is expected to significantly reduce domestic debt and total public and publicly guaranteed debt.
- PV of public debt–to-GDP stood at fully twice the benchmark level of 38 percent in 2016.
- Under the authorities’ ECF-supported program (spending restraint and strengthened revenue), the overall primary balance reaching 2 percent of GDP by 2019 would allow PV of public debt-to-GDP to reach the 38 percent benchmark by 2025 and decline gradually thereafter.
- Under the historical scenario and a scenario keeping the primary balance unchanged from 2017, PV of public debt-to-GDP remains above the benchmark throughout the projection period as the country accumulates more debt.

### Authorities’ views
- Authorities broadly agreed with staff’s assessment and recommendations on debt management policy, acknowledging current debt levels pose risks and the recent pace of accumulation is not sustainable.
- Fiscal measures to place debt on a downward path are a key element of the authorities’ ECF-supported program.
- Authorities intend to use IMF technical assistance and training to strengthen debt management capacity.
- Authorities preferred a narrower coverage of public debt excluding public institutions of an industrial or commercial nature; Fund policy requires inclusion of public enterprises that the government controls (e.g., owning more than half of voting shares).

### Key vulnerabilities and policy implications
- Major vulnerabilities:
  - External debt vulnerable to adverse shocks on exports (low external demand or commodity price declines) and to reductions in non-debt creating flows (FDI, grants).
  - Overall public debt dynamics present heightened vulnerabilities driven by high domestic debt and accumulated liabilities from liquidated SOEs.
  - Togo had the largest debt-to-GDP ratio in WAEMU in 2016, 80.8 percent of GDP (76.2 percent excluding public enterprise debt), composed largely of non-concessional loans.
- Policy implications:
  - Strengthen debt management capacity and practices to reduce vulnerability of debt service needs.
  - Maintain fiscal consolidation (spending restraint and revenue strengthening) to bring PV of public debt-to-GDP to the 38 percent benchmark by 2025 under the baseline.
  - Reduce reliance on non-concessional borrowing and stabilize non-debt creating flows (FDI, grants).
  - Avoid reintroduction of prefinancing arrangements and ensure full inclusion of government-contingent liabilities in public debt monitoring.

*Source: IMF staff report (Text: DSA section).*

### 13.      Togo’s debt burden calls for the authorities’ commitment to improve debt management

### 13.      Togo’s debt burden calls for the authorities’ commitment to improve debt management

### Core findings and recommendations
- Debt management should be strengthened through the creation of good information systems capable of feeding a comprehensive borrowing plan.
- The comprehensive borrowing plan should include well-defined development objectives for investment projects and their financing options so that sound financing decisions can be undertaken.
- The zero ceiling on external nonconcessional borrowing should help improve the financing mix.
- Efforts should be made to strengthen revenue mobilization and to improve the efficiency of public spending, especially capital investment, to identify saving and foster growth.

### Policy actions urged
- Create and operationalize robust information systems for debt recording and analysis.
- Prepare a comprehensive borrowing plan tied to clearly defined development objectives for investment projects.
- Maintain the zero ceiling on external nonconcessional borrowing to improve the financing mix.
- Strengthen revenue mobilization.
- Improve the efficiency of public spending, with emphasis on capital investment.

### Debt dynamics, projections and stress testing (summary)
- The chapter presents multi-year baseline projections and stress-test scenarios for public and publicly guaranteed external debt for 2017–2037 (Figures 1 and 2; Tables 1a, 2a, 2b).
- The most extreme stress test is defined as the test that yields the highest ratio on or before 2027; identified most extreme shocks for panels include Combination shock, Exports shock, and One-time depreciation shock.
- Revenues in the analysis are defined inclusive of grants.

### Selected key statistics (from Tables 1a and 2a)
- External debt (nominal) series (in percent of GDP): 18.4, 23.0, 21.5, 25.5, 27.7, 30.4, 31.0, 31.6, 32.0, 34.2, 37.2
- Of which: public and publicly guaranteed (PPG) external debt (in percent of GDP): 17.1, 21.1, 19.7, 22.9, 24.8, 27.4, 27.9, 28.4, 28.6, 30.8, 34.4
- Change in external debt (percent of GDP): 3.2, 4.6, -1.5, 4.0, 2.2, 2.8, 0.6, 0.6, 0.3, 0.5, 0.2
- Identified net debt-creating flows (percent of GDP): 15.4, 11.4, 6.2, 5.6, 4.3, 2.8, 1.2, -0.2, 0.0, -0.2, 3.0
- Non-interest current account deficit (percent of GDP): 9.7, 10.8, 9.4, 8.5, 2.3, 8.6, 7.8, 6.8, 6.8, 5.7, 4.7
- Exports (percent of GDP): 39.4, 36.0, 35.1, 36.4, 36.7, 37.4, 37.8, 39.0, 38.8, 40.3, 42.0
- PV of PPG external debt (in percent of GDP, selected projection entries): ......15.1, 18.5, 18.9, 19.6, 19.4, 19.3, 19.1, 19.5, 21.9
- PV of PPG external debt (in percent of exports, selected entries): ......43.1, 50.9, 51.5, 52.4, 51.2, 49.4, 49.1, 48.3, 52.1
- PV of PPG external debt (in percent of government revenues): ......80.1, 91.7, 89.9, 90.9, 88.6, 88.1, 87.1, 89.0, 100.0
- PPG debt service-to-revenue ratio (in percent): 6.4, 5.7, 7.4, 7.5, 6.3, 6.2, 6.4, 6.8, 6.6, 5.3, 5.3
- Total gross financing need (Billions of U.S. dollars): 0.8, 0.5, 0.4, 0.4, 0.4, 0.3, 0.3, 0.2, 0.3, 0.3, 1.3
- Grant-equivalent financing (in percent of GDP, selected entries): .........5.1, 6.4, 6.7, 5.8, 5.6, 5.6, 5.6, 5.6, 5.5
- Government revenues (excluding grants, in percent of GDP): 18.2, 19.6, 18.9, 20.2, 21.0, 21.8, 21.8, 21.9, 21.9, 21.9, 21.9
- Nominal GDP (Billions of U.S. dollars, memorandum): 4.6, 4.2, 4.4, 4.6, 4.9, 5.2, 5.7, 6.1, 6.5, 9.3, 18.4

### Stress-test and sensitivity results (high-level)
- Sensitivity analysis presents alternative scenarios (A1, A2) and bound tests (B1–B6) for 2017–2037 across indicators: PV of debt-to-GDP ratio, PV of debt-to-exports ratio, PV of debt-to-revenue ratio, debt service-to-exports ratio, debt service-to-revenue ratio.
- Examples of bound-test shocks considered:
  - B1: Real GDP growth at historical average minus one standard deviation.
  - B2: Export value growth at historical average minus one standard deviation.
  - B3: US dollar GDP deflator at historical average minus one standard deviation.
  - B4: Net non-debt creating flows at historical average minus one standard deviation.
  - B5: Combination of B1–B4 using one-half standard deviation shocks.
  - B6: One-time 30 percent nominal depreciation relative to the baseline in 2018.
- A2 scenario: New public sector loans on less favorable terms in 2017–2037 assumes the interest rate on new borrowing is by 2 percentage points higher than in the baseline, while grace and maturity periods are the same as in the baseline.

### Public sector debt profile (selected)
- Public sector debt (percent of GDP) historical and projected series (selected entries): 65.2, 75.6, 80.8, 81.3, 78.1, 73.0, 67.8, 62.7, 58.3, 54.3, 50.4, 46.5, 44.2, 43.4, 42.9
- Of which: foreign-currency denominated (percent of GDP): 17.1, 21.1, 19.7, 22.9, 24.8, 27.4, 27.9, 28.4, 28.6, 29.3, 29.3, 29.8, 30.3, 30.3, 30.8, 34.4
- Gross financing need (percent of GDP, selected entries): 20.5, 27.5, 23.0, 16.3, 10.3, 7.3, 10.5, 10.5, 9.6, 7.3, 6.8, 7.0, 6.8, 7.1, 7.2

*Statement by Mr. Sembene, Executive Director for Togo and Mr. N'Sonde, Senior Advisor to the Executive Director, May 5, 2017 — source document: cr17127*

### 1.   The Togolese authorities appreciate the constructive and candid policy

### 1.   The Togolese authorities appreciate the constructive and candid policy

### Recent economic developments and 2016 Article IV consultations
- The authorities held a constructive and candid policy dialogue with Fund staff during the 2016 Article IV consultations and negotiations for the three-year arrangement under the Extended Credit Facility (ECF).
- After years of expansion driven by strong agricultural production and public investments in roads, port and airport, Togo recently faced a challenging external environment and rising fiscal imbalances.
- Inflation remains well contained owing to higher agricultural production, and lower energy and transportation costs.
- Large public investment projects financed mostly through pre-financing debt contributed to raising public debt significantly in recent years.
- Current account deficit remained elevated owing to large investment-related imports.
- Authorities halted the practice of prefinancing, committed to wind down existing prefinanced investments, and increased transparency in public debt statistics.
- Going forward, the authorities will comply with budget and procurement procedures for all new public investments and establish an adequate framework for public investment while partnering with the private sector and technical and financial partners.
- Recent government reforms improved Togo’s ranking in the World Bank’s Doing Business Index in areas including obtaining credit, paying taxes, trading across borders, and resolving insolvency.
- Progress has been made in improving the timeliness and quality of fiscal data with technical support from the EU and AFRITAC.
- Medium-term outlook assumes positive impact from recent road infrastructure investments, increased agricultural productivity and pickup in private sector contribution to the economy.
- Authorities share staff’s view on risks to growth (implementation capacity constraints and slowdown in regional trading partners) but are cautiously more optimistic on medium-term growth due to greater private sector expansion.
- Discussions under the 2016 Article IV consultations focused on: ensuring long-term debt and external sustainability; refocusing policies on sustainable and inclusive growth; and resolving financial sector weaknesses.
- Authorities commit to: (i) pursuing strong adjustment policies to preserve debt and external sustainability by substantially reducing the overall fiscal deficit through frontloaded effort; (ii) reorienting strategy for sustainable and inclusive growth while protecting social spending; and (iii) ensuring financial sector stability. These pillars align with the National Development Plan for 2018-2022.

### Policies envisaged under ECF-supported program
- The ECF-supported program aims to: secure long-term fiscal and debt sustainability; foster sustainable and inclusive growth; and improve the health of the financial system.
- The program will monitor fiscal adjustment through performance criteria and indicative targets agreed with Fund staff.

### Ensuring Fiscal and Debt Sustainability
- The authorities will use the primary fiscal balance as the main anchor to restore debt sustainability while protecting social spending.
- Fiscal measures include: refraining from guaranteeing domestic loans to suppliers or contractors; lowering domestically-financed capital expenditures; streamlining current spending; and creating space to meet social needs.
- Existing prefinancing debt will be unwound and substituted by debt with more favorable conditions.
- The bulk of external financing will be allocated to infrastructure and social projects.
- Revenue-side reforms: overhaul the exemption and tax expenditure system to rationalize and broaden the tax base; speed up reforms to enhance revenue administration by implementing the modernization plan prepared by the revenue agency (OTR).
- Expenditure-side reforms: further reduce domestically-financed capital spending; adopt a legal framework governing public-private partnerships (PPPs) to contain associated risks; anchor social spending through an indicative target (floor) defined in the National Development Plan for 2018-2022; target social spending and sustainably-financed investment through programs such as the Emergency Program for Community Development and the Support Program for Vulnerable Populations.
- Wage bill measures: strict determination of wage increases; contain the wage bill through control of the number of civil servants and special public employees.
- Fuel subsidy measures: consistently apply the existing fuel price adjustment formula to streamline subsidies while preserving subsidies on kerosene used mostly by vulnerable groups.
- Arrears: commission an independent audit to verify the stock of domestic arrears and prepare an arrears clearance plan; arrears clearance expected through cash payments in 2017 and securitization of residual arrears with phased payments afterwards.
- Debt contracting limits: commitment to no new contracting or guaranteeing of nominal external non-concessional debt and to a target on contracting or guaranteeing of nominal concessional external debt.
- Borrowing plans will aim to reduce debt vulnerabilities, prevent excessive buildup of short-term debt and limit rollover and foreign exchange risks.
- Institutional measures: create a single entity tasked with all debt management functions with enhanced capacity and well-trained staff; ensure annual budgets align with the medium-term debt strategy.
- Authorities will closely monitor debt dynamics and continue improving debt statistics; they question staff’s approach to including in the DSA all public enterprises’ debts regardless of the degree of central government’s exposure to these entities.
- Planned fiscal management and institutional actions:
  - (i) reorganize the Ministry of Finance by end-December 2017 to establish a new effective debt management entity; strengthen the budget department’s capacity in budget preparation, monitoring and medium-term budget frameworks; and create a tax policy unit in charge of defining tax policy;
  - (ii) improve public investment management through a mechanism for monitoring contract execution, better medium-term planning and prioritization of projects, alignment with fiscal funding, and increased transparency in public investment spending;
  - (iii) enhance cash management to prevent spending bottlenecks caused by liquidity shortages;
  - (iv) modernize OTR’s revenue administration;
  - (v) simplify the clearance process and strengthen tracking and controls at customs.
- Treasury reforms: improve cash management and establish a Treasury Single Account (TSA); close multiple treasury accounts outside the TSA; channel all revenues towards the TSA for budgeted government expenses; direct all budgetary support to the central bank (BCEAO) account of the central government treasury account.

### Strengthening Financial Sector Stability and Development
- Authorities prioritize a stable and well-functioning financial sector, including microfinance, to promote financial inclusion.
- Planned actions: strengthen enforcement of the regulatory framework; require undercapitalized banks to increase their capital; resolve non-compliant banks; close microfinance institutions operating without a license.
- An independent audit of the two undercapitalized public banks has been launched to ensure effective restructuring; the audit report will be transmitted to the Fund as soon as it becomes available.
- The restructuring process of these banks will consider Fund staff’s recommendations and WAEMU regulations; all legal transfers required in the restructuring plan are expected to be completed by end-December 2017.

### Promoting Growth-Enhancing Structural Reforms
- Authorities will develop and publicize a monitorable action plan to improve Doing Business Indicators, increase dialogue with the private sector and civil society, and improve property title registration and the judicial system to use property as collateral for SME loans.
- They will seek to promote more private sector competition in the energy, telecommunications and mining sectors.
- Statistical capacity: continue to improve the timeliness, quality and consistency of national accounts, the quarterly budget execution report and the Central Government Financial Operations report; strengthen capacity and staffing at the national statistics agency with expected technical support from the Fund and other partners.

### Conclusion
- Authorities value policy dialogue with the Fund and have elaborated strong adjustment and reform measures in consultation with Fund staff to which they are strongly committed.
- They will rely on continued Fund technical assistance to strengthen implementation capacities.
- The ECF arrangement is expected to support the reform agenda and catalyze other partners’ assistance.
- Authorities request Fund support under the Extended Credit Facility (ECF) to support adjustment and reform efforts and catalyze assistance from identified partners (World Bank, European Union, and African Development Bank).
- The authorities welcome Directors’ support for a three-year ECF arrangement.

*Source: cr17127 - 1.   The Togolese authorities appreciate the constructive and candid policy*

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_Source: https://www.imf.org/-/media/files/publications/cr/2017/cr17127.pdf_