## 1tgoea2019003

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---

### Executive summary and program objectives
- Program under the ECF arrangement approved in May 2017 for a three-year period; total planned disbursements SDR 176.16 million.
- Program objectives:
  - Persevere with fiscal consolidation to reduce public debt vulnerabilities; enforce measures from the spending review to contain current spending; strengthen permanent revenue.
  - Strengthen fiscal governance via tax and customs administration reforms and multi-year program-based budgeting.
  - Address financial weaknesses of the two public banks to secure financial stability, minimize State budget costs, ensure transparency; follow up and complete privatization with safeguards.
  - Pursue growth-enhancing structural reforms in the National Development Plan and the Compact with Africa.
  - Support WAEMU regional policies, including adherence to regional convergence criteria.

### Recent economic developments (2018–mid‑2019)
- Growth and activity:
  - Real GDP: 4.9 percent in 2018; projected 5.3 percent in 2019; expected to hover around 5.5 percent over the medium term.
  - Export-oriented sectors: phosphate, coffee and cocoa, cotton performed robustly.
  - Port and airport traffic: expanded by about 5 percent (January–May 2019 vs. same period 2018).
  - Energy consumption: increased by about 7 percent (January–May 2019 vs. same period 2018).
  - Credit to the private sector: grew by about 5 percent (January–June 2019 vs. same period 2018).
- Inflation:
  - Headline inflation: 0.6 percent at end-July 2019 (year-on-year).
  - Core inflation: about 0.4 percent (WAEMU definition).
- Fiscal execution (Jan–Jun 2019, percent of GDP; Rev. prog. = programmed; Actual = outturn):
  - Revenue and grants: Rev. prog. 10.7; Actual 9.9.
  - Revenue: Rev. prog. 8.9; Actual 9.5.
  - Customs: Rev. prog. 3.5; Actual 3.9.
  - Grants: Rev. prog. 1.7; Actual 0.5.
  - Expenditure and net lending: Rev. prog. 14.3; Actual 10.1.
  - Current expenditure: Rev. prog. 8.7; Actual 8.3.
  - Capital expenditure: Rev. prog. 5.6; Actual 1.9.
  - Domestic primary balance: Rev. prog. -1.2; Actual 1.5.
  - Overall balance (commitment basis, incl. grants): Rev. prog. -3.6; Actual -0.2.
  - Financing: Rev. prog. 4.8; Actual 0.1 (Domestic financing: 1.7 vs. -0.4; External financing: 3.1 vs. 0.5).
- Socio-political environment:
  - Tensions abated since mid-2018; constitutional amendments in May 2019 capping presidential mandates to two five-year terms (non-retroactive).
  - Presidential election scheduled for 2020; uncertainty remains high.

### Medium-term outlook, targets, and risks
- Projections and targets:
  - Growth: around 5½ percent over the medium term.
  - Inflation: expected around 2 percent over the medium term.
  - Fiscal deficit: expected around 1–2 percent of GDP (within WAEMU criterion).
  - Current account deficit: expected in the range of 5 percent of GDP.
  - Public debt trajectory:
    - Total public debt (including SOE debt): projected to fall below 70 percent of GDP from 2020 and decline below the benchmark NPV of 55 percent of GDP in 2023.
- Risks (tilted to the downside):
  - National: potential resurgence of socio-political tensions around the 2020 election; pressure to postpone fiscal adjustment and structural reforms; delayed/unsuccessful privatization of two state-owned banks posing financial stability risks.
  - Regional: increased security risks including terrorism could hinder investment, tourism, and hub ambitions.
  - Global: rising protectionism, retreat from multilateralism, sharp rise in global risk premia, further financial vulnerability build-up, and weaker global growth.

### Fiscal outlook and consolidation (2019–2020)
- 2019 adjustments:
  - Authorities widen the 2019 overall fiscal deficit ceiling from 2.7 percent of GDP to 2.9 percent of GDP to bring forward election-related spending initially programmed for 2020.
  - Election-related spending brought forward to 2019 amounts to 0.2 percent of GDP.
- Requirements to meet the 2019 deficit target:
  - Continued revenue collection efforts.
  - Firm control over goods and services spending.
- Goods and services spending:
  - Target: reduce full-year goods and services spending from 4.9 percent of GDP in 2018 to 3.7 percent of GDP in 2019.
  - Outturn at end-June 2019: 2.1 percent of GDP.
- 2020 fiscal target:
  - 2020 deficit ceiling tightened from 2.1 percent of GDP to 1.9 percent of GDP after bringing 0.2 percent of GDP election spending forward to 2019.
  - Primary current expenditure expected to revert broadly to its 2017 level.
  - If 1.9 percent of GDP deficit is attained, Togo would realize an overall fiscal consolidation of about 7.5 percentage points of GDP during 2017-20.
- Longer-term fiscal trajectory:
  - Overall fiscal deficit projected to remain below 2 percent of GDP beyond 2020.
  - Deficits are consistent with WAEMU deficit criterion of not exceeding 3 percent of GDP.
  - Deficits below 2 percent of GDP would keep the debt trajectory on a firm downward path.

### Measures to contain spending and improve efficiency (2019)
- Implementation of spending-review recommendations, including:
  - Reference prices revised downwards for most procurement contracts.
  - Centralized negotiation and management of building rental contracts.
  - Centralized purchases of air travel tickets and fuel with a single company.
  - Some medical purchases channeled through the Global Fund.
  - Phasing out exemptions on some equipment.
  - Tightened controls over road tolls and management of the road maintenance fund.
  - Use of the recently completed civil servants census to clean up the payroll.

### Revenue administration and tax policy
- Revenue performance and drivers:
  - Revenue collection slightly ahead of target at end-June 2019 but requires continued effort due to past volatility and uncertainty.
  - 2018 improvement driven primarily by non-permanent and temporary sources (non-tax revenue and exceptional revenue).
- Reform priorities (post-merger into OTR):
  - Design and implement an action plan based on a recent TADAT evaluation.
  - Extend online filing system to at least half of the large companies.
  - Adopt voluntary compliance measures to increase voluntary tax payments.
  - Produce an action plan for complete dematerialization of customs declarations and activate corresponding ASYCUDA World functionality.
  - Strengthen internal controls over all OTR services.
- Tax expenditures:
  - Declined from 4.3 percent of GDP in 2016 to 1.9 percent of GDP in 2018.
  - These efforts helped increase tax revenue by about 0.5 percent of GDP in 2018 notwithstanding falling gross tax collections.

### Borrowing policy, debt management, and debt reprofiling
- Debt reduction priority:
  - Safeguard long-term fiscal and external sustainability.
  - Togo assessed at moderate risk of external debt distress and high risk of overall public debt distress, notably due to high domestic debt.
- Debt management actions:
  - New debt department being brought to full operation with adequate staffing.
  - IMF technical assistance helped document business processes; a procedures manual has been approved.
- Planned debt reprofiling operation before end-2019:
  - Aim: reduce the present value (PV) of public debt stock and mitigate rollover risks by borrowing externally at more favorable terms to repay domestic/regional debt.
  - Staff assumption for reprofiling scenario: authorities would repay USD 316 million (5.8 percent of GDP) of domestic debt; interest rate on the new borrowing assumed lower by about 300 basis points relative to the domestic/regional loans to be repaid; duration expected to be twice longer.
  - Expected benefits: significantly lower interest rate; longer duration; reduced short-term rollover risks; reduced fiscal crowding out; strengthened regional foreign exchange reserves at transaction time.
  - Identified risks: (i) issuance market conditions less favorable than assumed; (ii) opportunity cost of using part of Togo’s World Bank financing allocation; (iii) higher external debt and external debt ratios; (iv) greater exchange rate risk; and (v) higher rollover risk in international markets.
  - Recommended safeguards:
    - Cap size of operation below a limit that does not deteriorate the external debt distress rating.
    - Conduct operation only for debt management purposes and ensure it reduces PV of public debt.
    - Target least favorable domestic/regional loans and loans without early repayment penalties.
    - Manage execution risks through established procedures.
    - Strengthen authorities’ debt management capacity to handle higher exposure to international market risks.

### Financial sector: public banks, vulnerabilities, and privatization
- Privatization plan:
  - Privatization of both public banks undertaken through an open tender process after a planned direct sale of the second public bank was not completed.
  - Tenders for both banks were planned by end-August 2019; first step launched in mid-September 2019 (prior action).
  - Privatization expected to be completed by 2020Q1.
  - Government may incur some fiscal costs to ensure successful completion of privatization.
  - Importance of attracting reputable strategic investors and ensuring full transparency.
- Financial soundness indicators and risks:
  - Non-performing loans (NPLs): 16.9 percent of gross loans at end-June 2019; 17 percent of gross loans at end-June 2019 reported elsewhere; 18.3 percent in 2018Q2; 17.8 percent as of December 2018 (text reports multiple close values).
  - Overall capital adequacy ratio—per new BCEAO regulation aligned to Basel II/III—dropped at end-June 2018 due to significant capital shortfall of the two public banks.
  - Excluding the public banks, aggregate capital adequacy ratio of the rest of the banking system comfortably exceeds regulatory requirements.
  - Recommended actions:
    - Closely monitor liquidity situation of public banks.
    - Address persistently high NPL rate.
    - Improve credit infrastructure, including the credit bureau.
    - Strengthen powers of debt collection agencies and capacity building for commercial courts.

### Program performance, conditionality, and capacity development
- Performance and structural benchmarks:
  - All end-June 2019 performance criteria (PCs) were met, with margins on the domestic primary balance and net domestic financing of 2.7 percent of GDP.
  - Continuous zero-ceiling PCs on non-concessional external debt and government guarantees met.
  - Indicative targets (ITs) on fiscal revenue and non-accumulation of domestic arrears met.
  - End-June 2019 IT on social spending missed by 0.7 percent of GDP (also missed in previous reviews); causes include backloaded or under-execution of public investment projects and insufficient budget reporting functionalities.
  - All three end-June structural benchmarks on revenue administration and public expenditure management were met.
- Program modalities and financing:
  - All quantitative performance criteria and structural benchmarks remain unchanged from the fourth review, except the end-December 2019 SB on the banks.
  - The program is fully financed with firm commitments from development partners; ECF disbursements will fill remaining financing needs.
- Capacity development (FY2020 focus):
  - Revenue administration, fiscal policy, public financial management, and statistics.
  - Authorities request strong TA support on debt management, including a resident advisor.

### Structural reforms, governance, and AML/CFT
- Structural reform priorities:
  - Continue reforms in tax policy, revenue administration, and public expenditure management.
  - Maintain improvements in the business environment to boost domestic and foreign private investment.
  - Continue land reforms and improvements of the land management system under the NDP.
- Governance and anti‑corruption measures:
  - New criminal code adopted in 2015; anti-corruption agency (HAPLUCIA) launched in 2017; new AML/CFT law adopted in 2018.
  - Implementation priorities: enforce legal frameworks; ensure institutions become fully operational; intensify AML/CFT efforts in line with multisectoral national risk assessment; prepare for GIABA evaluation in 2020.
  - Undertake to adopt all implementing legislation for the 2018 AML/CFT Act; formalize the National Coordination Committee.
- Program assurances:
  - Authorities commit not to introduce or intensify restrictions on payments and transfers for current international transactions and to consult IMF staff on measures where required.

### Selected key statistics (selected series as reported)
- Real GDP growth: 5.6 (2016); 4.4 (2017); 4.9 (2018); 5.3 (2019); 5.5 (2020–2024).
- Consumer price index (average): 0.9 (2016); -0.2 (2017); 0.9 (2018); 1.4 (2019); 2.0 (2020–2024).
- Current account balance (percent of GDP): -9.8 (2016); -2.0 (2017); -4.9 (2018); -5.5 (2019); -6.0 (2020); -5.5 (2021); -5.2 (2022); -5.3 (2023); -5.1 (2024).
- Total public debt (including SOE debt, percent of GDP): 81.4 (2016); 76.0 (2017); 76.2 (2018); 73.1 (2019); 68.9 (2020); 64.7 (2021); 60.8 (2022); 57.0 (2023); 53.3 (2024).
- Total public debt (excluding SOE debt, percent of GDP): 78.0 (2016); 72.7 (2017); 73.6 (2018); 70.9 (2019); 67.1 (2020); 63.2 (2021); 59.6 (2022); 56.0 (2023); 52.5 (2024).
- External public debt (percent of GDP): 20.2 (2016); 20.1 (2017); 20.5 (2018); 22.2 (2019); 21.9 (2020); 21.5 (2021); 21.1 (2022); 20.5 (2023); 19.8 (2024).
- Non-performing loans to total gross loans: 15.6 (2014); 16.8 (2015); 16.2 (2016); 19.3 (2017); 18.3 (2018Q2).
- GDP (CFAF billions): 2,649 (2016); 2,789 (2017); 2,975 (2018); 3,199 (2019); 3,469 (2020); 3,767 (2021); 4,089 (2022); 4,440 (2023); 4,821 (2024).

### Debt Sustainability Analysis (DSA) — baseline and scenarios
- Baseline macro assumptions:
  - Real GDP growth and inflation slightly higher than June 2019 forecast; primary fiscal surplus around 1.0 percent of GDP over the medium term.
  - Current account deficit stabilizes around 5 percent of GDP over the medium term.
- External debt indicators under baseline:
  - PV of PPG external debt: 16.6 percent of GDP in 2019; projected to decrease to around 12.3 percent of GDP by 2029.
  - External debt service indicators: external debt service-to-exports ratio projected between 3 to 5 percent; external debt service-to-revenue ratio projected between 4 to 8 percent.
- Alternative scenario A. Debt Reprofiling:
  - ECF arrangement allows a debt reprofiling operation of up to about 8 percent of GDP without worsening external debt risk rating.
  - Under reprofiling staff assumptions: PV of public debt would decline to 22.8 percent of GDP in 2039 compared with 25.3 percent in the baseline.
  - Risks: higher external debt ratios and greater exchange rate risks; recommended safeguards include capping size and ensuring PV reduction.
- Overall public debt risk:
  - Togo remains at high risk of overall public debt distress; sustained fiscal consolidation and improved debt management required.

### Program monitoring, targets, and structural benchmarks (selected)
- All end-June 2019 and continuous QPCs met; end-June IT on social spending missed by 0.7 percent of GDP.
- Proposed adjustments at end-December 2019:
  - Modification proposed for the IT on the domestic primary balance to accommodate election-related spending.
  - Modification proposed on the IT on net domestic financing to accommodate election-related spending and postponement of the last ECF disbursement to early 2020.
- Selected structural benchmarks (deadlines and statuses):
  - Lump sum deposit of 10 to 15 percent on imports by inactive agents: Deadline End-June 2019. Status: Met.
  - Prohibit customs clearance by agents with outstanding tax arrears: Deadline End-June 2019. Status: Met.
  - Program-based budget covering 2020-22: Deadline End-June 2019. Status: Met.
  - Launch tenders for privatization of two public banks: Prior action Met.

### Staff appraisal and recommendation; authorities’ stance
- Staff appraisal:
  - Program performance broadly satisfactory; economic recovery underway; growth projected at 5.3 percent in 2019 and around 5½ percent over the medium term.
  - Downside risks from elections, financial sector vulnerabilities, regional insecurity, and global developments.
  - Continued fiscal consolidation expected to bring total public debt below the benchmark of medium debt carrying capacity over time.
- Staff recommendation:
  - Completion of the fifth ECF review recommended.
- Authorities’ views:
  - Broad agreement with staff assessment; request completion of the fifth review and continued Fund support.
  - Commitments to sustain fiscal consolidation, protect social spending, advance structural reforms, finalize privatization of public banks, and pursue debt reprofiling with safeguards.

*From: TOGO — FIFTH REVIEW UNDER THE EXTENDED CREDIT FACILITY ARRANGEMENT (October 4, 2019), International Monetary Fund (IMF) staff.*

### 2020. Debt has declined and is expected to fall below 70 percent of GDP from 2020. Discussions

### 2020. Debt has declined and is expected to fall below 70 percent of GDP from 2020. Discussions

### Executive summary and program objectives
- Program under the ECF arrangement approved in May 2017 for a three-year period; total planned disbursements SDR 176.16 million.
- Program objectives:
  - Persevere with fiscal consolidation to reduce public debt vulnerabilities; enforce measures from the spending review to contain current spending; strengthen permanent revenue.
  - Strengthen fiscal governance via tax and customs administration reforms and multi-year program-based budgeting.
  - Address financial weaknesses of the two public banks to secure financial stability, minimize State budget costs, ensure transparency; follow up and complete privatization with safeguards.
  - Pursue growth-enhancing structural reforms in the National Development Plan and the Compact with Africa.
  - Support WAEMU regional policies, including adherence to regional convergence criteria.

### Recent economic developments
- Growth and activity:
  - Real GDP: 4.9 percent in 2018; projected 5.3 percent in 2019; expected to hover around 5.5 percent over the medium term.
  - Export-oriented sectors (phosphate, coffee and cocoa, cotton) performed robustly.
  - Port and airport traffic: expanded by about 5 percent (January–May 2019 vs. same period 2018).
  - Energy consumption: increased by about 7 percent (January–May 2019 vs. same period 2018).
  - Credit to the private sector: grew by about 5 percent (January–June 2019 vs. same period 2018).
- Inflation:
  - Headline inflation: 0.6 percent at end-July 2019 (year-on-year).
  - Core inflation: about 0.4 percent (WAEMU definition).
- Fiscal execution (Jan–Jun 2019, percent of GDP; Rev. prog. = programmed; Actual = outturn):
  - Revenue and grants: Rev. prog. 10.7; Actual 9.9.
  - Revenue: Rev. prog. 8.9; Actual 9.5.
  - Customs: Rev. prog. 3.5; Actual 3.9.
  - Grants: Rev. prog. 1.7; Actual 0.5.
  - Expenditure and net lending: Rev. prog. 14.3; Actual 10.1.
  - Current expenditure: Rev. prog. 8.7; Actual 8.3.
  - Capital expenditure: Rev. prog. 5.6; Actual 1.9.
  - Domestic primary balance: Rev. prog. -1.2; Actual 1.5.
  - Overall balance (commitment basis, incl. grants): Rev. prog. -3.6; Actual -0.2.
  - Financing: Rev. prog. 4.8; Actual 0.1 (Domestic financing: 1.7 vs. -0.4; External financing: 3.1 vs. 0.5).
- Socio-political environment:
  - Tensions abated since mid-2018; constitutional amendments in May 2019 capping presidential mandates to two five-year terms (non-retroactive) and other provisions.
  - Presidential election scheduled for 2020; uncertainty remains high.

### Medium-term outlook and risks
- Projections and targets:
  - Growth: around 5½ percent over the medium term.
  - Inflation: expected around 2 percent over the medium term.
  - Fiscal deficit: expected around 1–2 percent of GDP (within WAEMU criterion).
  - Current account deficit: expected in the range of 5 percent of GDP.
  - Public debt trajectory:
    - Total public debt (including SOE debt): projected to fall below 70 percent of GDP from 2020 and decline below the benchmark NPV of 55 percent of GDP in 2023.
- Risks (tilted to the downside):
  - National: potential resurgence of socio-political tensions around the 2020 election; pressure to postpone fiscal adjustment and structural reforms; delayed/unsuccessful privatization of two state-owned banks posing financial stability risks.
  - Regional: increased security risks including terrorism could hinder investment, tourism, and hub ambitions.
  - Global: rising protectionism, retreat from multilateralism, sharp rise in global risk premia, further financial vulnerability build-up, and weaker global growth.

### Program performance and implementation
- Quantitative and structural targets:
  - All end-June 2019 performance criteria (PCs) were met, with margins on the domestic primary balance and net domestic financing of 2.7 percent of GDP.
  - Continuous zero-ceiling PCs on non-concessional external debt and government guarantees met.
  - Indicative targets (ITs) on fiscal revenue and non-accumulation of domestic arrears met.
  - End-June 2019 IT on social spending missed by 0.7 percent of GDP (also missed in previous reviews).
- Social spending underperformance:
  - Causes: backloaded or under-execution of public investment projects; insufficient budget recording/reporting functionalities to monitor specific spending categories.
  - Corrective measures: change operational management of PUDC from central non-government entity to decentralized elected officials (mayors); strengthen budget reporting system on a functional basis.
- Structural benchmarks and privatization:
  - All three end-June structural benchmarks on revenue administration and public expenditure management were met.
  - Customs measures: importers deemed inactive required to deposit a lump sum equivalent to 15 percent of import value before clearance; prohibiting clearance for importers with outstanding tax obligations.
  - Program-based budget covering 2020–22 adopted by the council of ministers and discussed in Parliament in July 2019.
  - Privatization of two public banks: direct sale of smaller bank could not be finalized; authorities submitted revised strategy launching a tender by end-August 2019. Tenders for both banks were launched with a delay in September 2019 (prior action).

### Policy discussions and priorities
- Fiscal policy:
  - Pursue fiscal consolidation while accommodating some previously-agreed urgent spending and preserving social spending.
  - Enforce spending-review recommendations to contain current spending and strengthen permanent revenue.
- Revenue administration:
  - Continue bolstering permanent revenue via tax and customs reforms and improved administration.
- Public financial management:
  - Modernize budget preparation through multi-year program-based budgeting and improved functional budget reporting.
- Borrowing and debt management:
  - Persevere with debt reduction; if debt reprofiling is considered, the operation should lead to a reduction of the NPV of public debt and include safeguard measures to address related risks.
- Financial sector:
  - Address weaknesses in the two public banks transparently.
  - A successful privatization of the two banks would safeguard financial stability and minimize costs to the State budget.
  - Monitor broader financial sector developments and take corrective actions as needed, including regarding high non-performing loans.
- Structural reforms and inclusiveness:
  - Continue reforms in tax policy, revenue administration, and public expenditure management.
  - Maintain improvements in the business environment to boost domestic and foreign private investment.
  - Strengthen the AML/CFT framework; fully implement recently adopted legal framework on governance and anti-corruption and ensure related institutions become fully operational.

### Key statistics (selected, as reported)
- Real GDP growth: 5.6 (2016); 4.4 (2017); 4.9 (2018); 5.3 (2019); 5.5 (2020–2024).
- Consumer price index (average): 0.9 (2016); -0.2 (2017); 0.9 (2018); 1.4 (2019); 2.0 (2020–2024).
- Current account balance (percent of GDP): -9.8 (2016); -2.0 (2017); -4.9 (2018); -5.5 (2019); -6.0 (2020); -5.5 (2021); -5.2 (2022); -5.3 (2023); -5.1 (2024).
- Total public debt (including SOE debt, percent of GDP): 81.4 (2016); 76.0 (2017); 76.2 (2018); 73.1 (2019); 68.9 (2020); 64.7 (2021); 60.8 (2022); 57.0 (2023); 53.3 (2024).
- Total public debt (excluding SOE debt, percent of GDP): 78.0 (2016); 72.7 (2017); 73.6 (2018); 70.9 (2019); 67.1 (2020); 63.2 (2021); 59.6 (2022); 56.0 (2023); 52.5 (2024).
- External public debt (percent of GDP): 20.2 (2016); 20.1 (2017); 20.5 (2018); 22.2 (2019); 21.9 (2020); 21.5 (2021); 21.1 (2022); 20.5 (2023); 19.8 (2024).
- External public debt service (percent of exports): 4.9 (2016); 5.9 (2017); 4.9 (2018); 3.9 (2019); 3.9 (2020); 3.6 (2021); 3.8 (2022); 4.4 (2023); 4.8 (2024).
- Domestic public debt (percent of GDP): 61.2 (2016); 55.8 (2017); 55.7 (2018); 50.9 (2019); 47.0 (2020); 43.2 (2021); 39.7 (2022); 36.5 (2023); 33.5 (2024).
- GDP (CFAF billions): 2,649 (2016); 2,789 (2017); 2,975 (2018); 3,199 (2019); 3,469 (2020); 3,767 (2021); 4,089 (2022); 4,440 (2023); 4,821 (2024).

*From: TOGO — FIFTH REVIEW UNDER THE EXTENDED CREDIT FACILITY ARRANGEMENT (October 4, 2019), International Monetary Fund (IMF) staff.*

### 7.      The authorities are widening the 2019 deficit slightly to 2.9 percent of GDP to allow

### 1tgoea2019003 - 7.      The authorities are widening the 2019 deficit slightly to 2.9 percent of GDP to allow

### Fiscal outlook and consolidation (2019–2020)
- Authorities widen the 2019 overall fiscal deficit ceiling from 2.7 percent of GDP to 2.9 percent of GDP to bring forward election-related spending initially programmed for 2020.
- The election-related spending brought forward to 2019 amounts to 0.2 percent of GDP.
- Meeting the 2019 deficit target requires:
  - Continued revenue collection efforts.
  - Firm control over goods and services spending.
- Goods and services spending targets and outturns:
  - Target: reduce full-year goods and services spending from 4.9 percent of GDP in 2018 to 3.7 percent of GDP in 2019.
  - Outturn at end-June 2019: 2.1 percent of GDP.
- Authorities prepared to reprioritize domestically-financed public investment if the deficit target is at risk.
- 2020 fiscal target:
  - 2020 deficit ceiling tightened from 2.1 percent of GDP to 1.9 percent of GDP after bringing 0.2 percent of GDP election spending forward to 2019.
  - Primary current expenditure expected to revert broadly to its 2017 level.
  - If the 1.9 percent of GDP deficit is attained, Togo would realize an overall fiscal consolidation of about 7.5 percentage points of GDP during 2017-20.
- Longer-term fiscal trajectory:
  - Overall fiscal deficit projected to remain below 2 percent of GDP beyond 2020 (unchanged from previous projections).
  - Deficits are consistent with WAEMU deficit criterion of not exceeding 3 percent of GDP.
  - Deficits below 2 percent of GDP would keep the debt trajectory on a firm downward path, with debt dropping below 70 percent of GDP from 2020 and below the benchmark of medium debt carrying capacity from 2023.

### Measures to contain spending and improve efficiency (2019)
- Implementation of spending-review recommendations, including:
  - Reference prices revised downwards for most procurement contracts.
  - Centralized negotiation and management of building rental contracts for cost savings.
  - Centralized purchases of air travel tickets and fuel with a single company to allow negotiating discounts.
  - Some medical purchases channeled through the Global Fund.
  - Phasing out exemptions on some equipment.
  - Tightened controls over road tolls and management of the road maintenance fund.
  - Use of the recently completed civil servants census to clean up the payroll.

### Revenue administration and tax policy
- Revenue collection was slightly ahead of target at end-June 2019 but requires continued effort due to past volatility and uncertainty.
- Revenue performance drivers:
  - 2018 improvement driven primarily by non-permanent and temporary sources (non-tax revenue and exceptional revenue).
- Revenue administration reform priorities (post-merger into OTR):
  - Design and implement an action plan based on a recent TADAT evaluation.
  - Extend online filing system to at least half of the large companies.
  - Adopt voluntary compliance measures to increase voluntary tax payments.
  - Produce an action plan for complete dematerialization of customs declarations and activate corresponding ASYCUDA World functionality.
  - Strengthen internal controls over all OTR services.
- Tax expenditures:
  - Declined from 4.3 percent of GDP in 2016 to 1.9 percent of GDP in 2018.
  - These efforts helped increase tax revenue by about 0.5 percent of GDP in 2018 notwithstanding falling gross tax collections.

### Public financial management (PFM)
- Progress since program start:
  - Supplier arrears have gradually been cleared.
  - System in place to synchronize commitment, procurement, and treasury plans to prevent new arrears.
  - Methodological guide produced to prioritize and select public investment projects; circular sent to line ministries to enforce framework.
  - Treasury single account (TSA) consolidated by gradually closing government accounts in commercial banks.
  - Improvements in publication and transparency of budget execution; submissions to Parliament within the Organic Budget Law deadline.
- Next major PFM reform:
  - Adopt multi-year and program-based budgeting (requirement under WAEMU directive).
  - First program-based budget covering 2020-22 adopted by Cabinet and sent to Parliament in June 2019.
  - Test phase of program-based budgeting to run in parallel in 2020; complete switch planned for 2021.
  - Expand TSA coverage to other government entities.
  - Make Public Private Partnership unit within the debt department fully functional with legal and institutional tools.

### Borrowing policy and debt management
- Debt reduction is a priority to safeguard long-term fiscal and external sustainability.
- Risk assessments:
  - Togo assessed at moderate risk of external debt distress and high risk of overall public debt distress, notably due to high domestic debt.
- Debt management actions:
  - New debt department being brought to full operation with adequate staffing.
  - IMF technical assistance helped document business processes; a procedures manual has been approved.
- Planned debt reprofiling operation before end-2019:
  - Aim: reduce the present value (PV) of public debt stock and mitigate rollover risks by borrowing externally at more favorable terms to repay domestic/regional debt.
  - Expected benefits (with World Bank policy-based guarantee support): significantly lower interest rate on external borrowing relative to regional instruments; longer duration; reduced short-term rollover risks; reduced fiscal crowding out; strengthened regional foreign exchange reserves at transaction time.
  - Identified risks: (i) issuance market conditions less favorable than assumed; (ii) opportunity cost of using part of Togo’s World Bank financing allocation; (iii) higher external debt and external debt ratios; (iv) greater exchange rate risk; and (v) higher rollover risk in international markets.
  - Safeguards recommended:
    - Cap the size of the operation below a limit that does not deteriorate the external debt distress rating.
    - Conduct operation only for debt management purposes and ensure it reduces PV of debt.
    - Target the least favorable domestic/regional loans (in terms of interest rate and maturity) and loans without early repayment penalties.
    - Manage execution risks through established procedures.
    - Strengthen authorities’ debt management capacity to handle higher exposure to international market risks.
  - Staff prepared a preliminary debt reprofiling scenario based on assumptions from ongoing discussions (DSA Appendix).

### Financial sector: public banks and systemic vulnerabilities
- Privatization of both public banks:
  - Undertaken through an open tender process after a planned direct sale of the second public bank was not completed.
  - Tenders for both banks were planned by end-August 2019, but the transaction advisor required more time; first step of tenders launched in mid-September.
  - Government may incur some fiscal costs to ensure successful completion of privatization.
  - Importance of attracting reputable strategic investors and ensuring full transparency.
  - Privatization expected to be completed by 2020Q1.
- Financial soundness indicators and risks:
  - Non-performing loans (NPLs) remain high at 16.9 percent of gross loans at end-June 2019.
  - Overall capital adequacy ratio—per new BCEAO regulation aligned to Basel II/III—dropped at end-June 2018 due to significant capital shortfall of the two public banks.
  - Excluding the public banks, aggregate capital adequacy ratio of the rest of the banking system comfortably exceeds regulatory requirements.
  - Capital restoration calls were made for two non-systemic private banks undergoing private restructuring after takeover by private strategic investors.
- Recommended actions to reduce vulnerabilities:
  - Closely monitor liquidity situation of public banks.
  - Carefully examine broader financial sector developments and take corrective actions as needed.
  - Address persistently high NPL rate.
  - Improve credit infrastructure, including the credit bureau, to foster financial inclusion and enable additional economic activity.
- Diagnostic findings (Box 1):
  - Strengthened risk-based prudential regulations and revised accounting standards revealed preexisting weaknesses at the two state-owned banks.
  - Enforcement of new regulatory standards in 2018 (including increasing minimum capital) magnified gaps to regulatory minima for these banks.
  - Excluding the two state-owned banks (about 19 percent of total assets), the Togolese banking sector comfortably meets regulatory capital requirements.
  - Privatization strategy aims to sell shareholdings and/or open majority capital of the two state-owned banks to strategic investors to safeguard financial stability and minimize fiscal costs.
  - Success factors for privatization include full relinquishment of government control, sale to strategic investors, open bidding (including foreign banks), quality of prudential review by supervisory authorities, and sound governance and competition environment.

### Structural reforms and private investment
- National Development Plan (NDP) vision requires rapid expansion of private investment to become a regional commercial and transportation hub, a manufacturing base, and a regional financial center.
- Progress and remaining gaps:
  - Togo showed one of the largest improvements under the latest Doing Business Indicators.
  - Togo lags peers in access to credit and tax payments (Text Figure 5).
- Continued reforms under NDP and Compact with Africa needed to bolster private investment and promote inclusive growth, including continued land reforms and improvements of the land management system.

*Source: IMF staff report content provided in the supplied PDF excerpt.*

### 18.      Governance could be improved by effectively implementing recently-adopted

### 18.      Governance could be improved by effectively implementing recently-adopted

### Governance and anti‑corruption measures
- Recent legal and institutional measures adopted:
  - New criminal code adopted in 2015.
  - Non-transparent pre-financing of public investment projects was phased out in 2017.
  - Anti-corruption agency (HAPLUCIA) launched in 2017.
  - New AML/CFT law adopted in 2018.
  - First two commercial courts to deal with business conflicts will be made fully operational.
- Implementation priorities and risks:
  - Governance and anti-corruption legal frameworks should be enforced and new institutions should become fully operational.
  - AML/CFT efforts should be intensified in line with the findings of the recent multisectoral national risk assessment.
  - Timely implementation of the relevant action plan is important considering the upcoming evaluation by the GIABA in 2020.
  - Asset declaration legislation should be strengthened and enforced.

### Program modalities and financing
- Quantitative and structural targets:
  - All quantitative performance criteria and structural benchmarks remain unchanged from the fourth review, except the end-December 2019 SB on the banks (MEFP ¶24).
  - The last quantitative PCs to be assessed at the sixth and final review cover end-September 2019.
  - At end-December 2019, modification is proposed for the IT on the domestic primary balance to accommodate the election-related spending.
  - Modification is also proposed on the IT on net domestic financing to accommodate the election-related spending and the postponement of the last ECF disbursement to early 2020.
- Financing:
  - The program is fully financed with firm commitments from development partners for the remainder of the program including the World Bank, the European Union, and the African Development Bank.
  - ECF disbursements will fill the remaining financing needs.

### Safeguards and repayment capacity
- Safeguards assessment (2018 update of the BCEAO):
  - Central bank maintained a strong control environment.
  - Audit arrangements were in broad conformity with international standards.
  - Financial statements were prepared in accordance with the International Financial Reporting Standards.
  - The BCEAO has recently enhanced the oversight role of its audit committee in line with the assessment recommendations.
- Capacity to repay the Fund:
  - Obligations to the Fund would peak in 2025 at 2.5 percent of government revenue or 0.5 percent of GDP (Table 7).

### Capacity development
- FY2020 focus areas:
  - Revenue administration, fiscal policy, public financial management, and statistics.
  - Technical assistance from the IMF has helped support the reform agenda (Annex II).

### Staff appraisal — growth, risks, and fiscal performance
- Growth and medium-term outlook:
  - Economic growth is projected to accelerate to 5.3 percent in 2019 and hover around 5½ percent over the medium term.
  - The current account deficit is projected to remain in the range of 5 percent of GDP over the medium term.
  - Large public investment projects completed in recent years (new roads and expanded port and airport) and improvements in the business environment are expected to boost domestic and foreign private investment.
- Downside risks:
  - National: socio-political tensions have abated but uncertainty remains, including risks related to the presidential elections scheduled for 2020 and the outcome of the privatization of the two state-owned banks.
  - Regional: security risks—including terrorism threats—have increased.
  - Global: rising protectionism, retreat from multilateralism, a possibly sharp rise in risk premia on global financial markets, further build-up of financial vulnerabilities, and weaker-than-expected global growth.
- Program performance and fiscal metrics:
  - All end-June 2019 and continuous performance criteria have been met as well as four out of five structural benchmarks.
  - The overall fiscal deficit stood at 0.2 percent of GDP at end-June 2019.
  - Revenue collection overperformed the program target.
  - Reforms progressing on tax policy, revenue and customs administration, and public expenditure management.
  - Privatization process for the two public banks encountered delays; tenders for privatization were launched in September 2019.
- Fiscal consolidation and debt:
  - 2019 supplementary budget caps the overall fiscal deficit at 2.9 percent of GDP.
  - Draft 2020 budget aims at reaching an overall fiscal deficit slightly below 2 percent of GDP.
  - Under these deficit ceilings, Togo will continue to comply with the WAEMU convergence criterion of an overall deficit not exceeding 3 percent of GDP.
  - Togo is currently assessed at moderate risk of external debt distress and high risk of overall public debt distress, notably owing to a high level of domestic debt.
  - Continued fiscal consolidation is expected to bring total public debt below the benchmark of medium debt carrying capacity over time.
  - Planned debt reprofiling should help reduce the present value of public debt but safeguard measures are needed to address risks related to the operation.

### Structural reforms and financial sector issues
- Revenue and administration reforms:
  - Revenue authority implementing measures identified from a recent tax administration diagnostic assessment (TADAT).
  - Efforts to improve voluntary tax compliance; online tax payments and declarations and dematerialization of customs procedures are being enhanced.
  - Program-based budget to be rolled out in parallel with the traditional input-based budget presentation in 2020; full switch in 2021.
- Business environment and governance:
  - Significant progress has been made on improving the business environment.
  - Important to persevere with reforms outlined in the National Development Plan and the Compact with Africa to promote private investment.
  - Recently adopted legal framework on governance and anti-corruption should be fully enforced and related institutions should become fully functional.
- Public banks and financial stability:
  - Authorities opted for open tenders for privatization after direct sale could not be completed; first of two steps completed but with delay.
  - Meanwhile, authorities should closely monitor the liquidity situation of both banks.
  - Successful completion of privatization expected to ensure financial stability, minimize costs to the State budget, and ensure transparency.
  - Authorities should monitor broader financial sector developments and take corrective actions as needed, such as on non-performing loans which remained high at 17 percent of gross loans at end-June 2019.

### Staff recommendation
- Staff recommends the completion of the fifth ECF review:
  - Program performance has been broadly satisfactory.
  - The LOI/MEFP sets out appropriate policies to achieve the program objectives.
  - The capacity to repay the Fund is adequate.

*IMF staff appraisal and program notes as presented in the source document.*

### 0.4 percent of GDP.

### 1tgoea2019003 - 0.4 percent of GDP.

### Fiscal outcomes and financing
- Projected balances were met with a significant margin on both the overall balance and the domestic primary balance because of underexecution of public investment.
- Both external and domestic financing were significantly less than projected.
- Public investment (billions of CFA Francs, central government, 2018–24 projections):
  - 2018: 201.7
  - 2019: 60.1
  - 2020: 284.5
  - 2021: 322.9
  - 2022: 290.0
  - 2023: 329.6
  - 2024: 321.5
  - 2025 (Proj. horizon in tables): 348.8; 389.3; 433.3; 478.6 (as presented across projections)
- Public investment financing split (billions of CFA Francs):
  - Domestically financed: 70.8 (2018), 28.6 (2019), 95.3 (2020), 133.7 (2021), 125.2 (2022), 138.7 (2023), 140.2 (2024), 162.9 (2025), 187.5 (2026), 211.7 (later projections)
  - Foreign financed: 130.9 (2018), 31.5 (2019), 189.2 (2020), 189.2 (2021), 156.4 (2022), 204.4 (2023), 182.8 (2024), 208.6 (2025), 226.4 (2026), 245.9 (later projections), 266.9 (later projections)
- Central government fiscal indicators (percent of GDP, selected):
  - Total revenue and grants: 23.9 (2018), 9.9 (2019), 25.0 (2020), 24.0 (2021)
  - Total expenditure and net lending: 24.7 (2018), 10.1 (2019), 25.4 (2020), 26.6 (2021)
  - Domestic primary balance: 2.4 (2018), 1.5 (2019), 3.8 (2020), 1.6 (2021)
  - Overall balance (commitment basis, incl. grants): -0.8 (2018), -0.2 (2019), -0.4 (2020), -2.7 (2021)
  - Financing (percent of GDP): 6.4 (2018), 0.1 (2019), 3.8 (2020), 4.8 (2021)
- Central government nominal figures (billions of CFA Francs, selected):
  - Total revenue: 604.9 (2018), 303.0 (2019), 668.7 (2020), 635.9 (2021)
  - Total expenditure and net lending: 733.8 (2018), 324.1 (2019), 813.9 (2020), 852.3 (2021)
  - Overall balance (commitment basis, incl. grants): -23.0 (2018), -6.6 (2019), -13.9 (2020), -85.1 (2021)
  - Financing: 189.7 (2018), 3.2 (2019), 120.5 (2020), 153.5 (2021)
- Quantitative performance criteria (billions of CFA Francs, March and June 2019):
  - Domestic primary fiscal balance (floor): Indicative target -21.9; Adjusted -5.1; Actual Met
  - Domestic primary fiscal balance (floor) (June): Indicative target -38.0; Adjusted 47.1; Actual Met
  - Net domestic financing (ceiling): Indicative target 75.0; Adjusted 75.0; Actual 35.4 Met
  - Net domestic financing (ceiling) (June): Indicative target 72.4; Adjusted 72.4; Actual -13.1 Met
  - Non-accumulation of arrears on external public debt: 0.0 Adjusted; 0.0 Actual Met

### Banking sector health and financial soundness
- Key qualitative summary:
  - NPLs remain high; capital cushions are diminishing; and concentration remains elevated.
  - Although some diversification is noted relative to the past, loans remain concentrated on a few sectors.
- Financial Soundness Indicators, 2014–2018 Q2 (percent, selected):
  - Regulatory capital to risk-weighted assets: 14.0 (2014), 8.7 (2015), 5.8 (2016), 8.4 (2017), 6.0 (2018Q2)
  - Regulatory Tier 1 capital to risk-weighted assets: 12.5 (2014), 8.0 (2015), 4.6 (2016), 7.4 (2017), 4.4 (2018Q2)
  - Provisions to total assets: 16.7 (2014), 14.0 (2015), 13.9 (2016), 16.1 (2017), 13.9 (2018Q2)
  - Capital to assets: 5.7 (2014), 4.3 (2015), 2.9 (2016), 4.3 (2017), 3.5 (2018Q2)
  - Loans to top 5 borrowers to capital: 136.3 (2014), 166.6 (2015), 186.0 (2016), 128.7 (2017), 157.2 (2018Q2)
  - Non-performing loans to total gross loans: 15.6 (2014), 16.8 (2015), 16.2 (2016), 19.3 (2017), 18.3 (2018Q2)
  - Bank provisions to non-performing loans: 69.2 (2014), 66.2 (2015), 77.3 (2016), 77.8 (2017), 81.9 (2018Q2)
  - Non-performing loans net of provisions to total loans: 5.4 (2014), 6.4 (2015), 4.2 (2016), 5.0 (2017), 3.9 (2018Q2)
  - Non-performing loans net of provisions to capital: 53.3 (2014), 82.1 (2015), 70.8 (2016), 54.4 (2017), 51.3 (2018Q2)
  - Return on assets (ROA): 0.7 (2014), 0.6 (2015), 0.6 (2016), 1.1 (2017)
  - Return on equity (ROE): 11.9 (2014), 11.7 (2015), 9.8 (2016), 28.6 (2017)
- Interest rates on bills issued in the regional market are broadly stable (Interest Rate of Bills, Jan-2016 – Jun-2019):
  - Weighted average interest rate series shown between 4.0 and 7.5 percent on chart axis.
  - Marginal interest rate series shown between 4.0 and 7.5 percent on chart axis.

### Medium-term economic prospects and growth drivers
- Growth and investment outlook (Figure: Medium-Term Economic Prospects, 2011–24):
  - While Togo is expected to continue growing faster than Sub-Saharan Africa, growth is slightly slower than the rest of WAEMU.
  - The driver of growth is expected to shift from public to private investment, as the former is returning to its level before the surge.
  - As fiscal consolidation is expected to continue, public debt should follow a downward path.
  - The external current account is expected to converge to its fundamentals as government imports are contained.
- Real GDP (percent change, Table 1: Selected Economic and Financial Indicators):
  - 2016: 5.6
  - 2017: 4.4
  - 2018: 4.9
  - 2019: 5.3
  - 2020: 5.5
  - 2021: 5.5
  - 2022: 5.5
  - 2023: 5.5
  - 2024: 5.5
- Investment and savings (percent of GDP, Table 1):
  - Gross domestic investment: 33.5 (2016), 25.9 (2017), 26.8 (2018), 30.1 (2019), 31.8 (2020), 32.7 (2021), 32.9 (2022), 33.2 (2023), 33.3 (2024)
  - Government investment: 13.9 (2016), 6.3 (2017), 6.8 (2018), 9.1 (2019), 9.3 (2020), 9.3 (2021), 9.5 (2022), 9.8 (2023), 9.9 (2024)
  - Nongovernment investment: 19.6 (2016), 19.6 (2017), 20.0 (2018), 21.0 (2019), 22.5 (2020), 23.4 (2021), 23.4 (2022), 23.4 (2023), 23.4 (2024)

### External sector and balance of payments
- Current account and trade (Table 3, Billions of CFA Francs and percent of GDP):
  - Current account balance (billions): 2017: -56.1; 2018: -146.7; 2019: -176.5; 2020: -207.9; 2021: -208.5; 2022: -211.0; 2023: -234.0; 2024: -246.9
  - Current account balance (percent of GDP): -2.0 (2017), -4.9 (2018), -5.5 (2019), -6.0 (2020), -5.5 (2021), -5.2 (2022), -5.3 (2023), -5.1 (2024)
  - Exports (billions): 591.5 (2017), 588.6 (2018), 654.3 (2019), 707.7 (2020), 782.7 (2021), 869.8 (2022), 959.7 (2023), 1,061.5 (2024)
  - Exports (percent of GDP): 21.2 (2017), 19.8 (2018), 20.5 (2019), 20.4 (2020), 20.8 (2021), 21.3 (2022), 21.6 (2023), 22.0 (2024)
  - Imports (billions): 965.3 (2017), 1,039.2 (2018), 1,136.5 (2019), 1,241.2 (2020), 1,336.1 (2021), 1,452.5 (2022), 1,596.0 (2023), 1,746.6 (2024)
  - Imports (percent of GDP): 34.6 (2017), 34.9 (2018), 35.5 (2019), 35.8 (2020), 35.5 (2021), 35.5 (2022), 35.9 (2023), 36.2 (2024)
  - Trade balance on goods (billions): -373.8 (2017), -450.6 (2018), -482.2 (2019), -533.6 (2020), -553.3 (2021), -582.7 (2022), -636.2 (2023), -685.0 (2024)
  - Petroleum products, net (billions): -97.1 (2017), -99.6 (2018), -102.4 (2019), -105.0 (2020), -109.8 (2021), -117.6 (2022), -128.0 (2023), -141.7 (2024)
- Capital and financial flows (billions of CFA Francs):
  - Capital account balance: 141.4 (2017), 171.5 (2018), 209.2 (2019), 209.2 (2020), 219.1 (2021), 229.7 (2022), 241.1 (2023), 253.4 (2024)
  - Financial account (- = inflow): 117.8 (2017), 53.0 (2018), 61.7 (2019), 1.0 (2020), -18.6 (2021), -12.2 (2022), -25.5 (2023), -37.2 (2024)
  - Direct investment, net (billions): -70.3 (2017), -74.3 (2018), -85.9 (2019), -103.7 (2020), -121.2 (2021), -142.0 (2022), -160.2 (2023), -178.4 (2024)
  - Other investment, net (billions): 11.6 (2017), 102.2 (2018), 136.3 (2019), 95.7 (2020), 99.9 (2021), 130.3 (2022), 139.0 (2023), 150.1 (2024)
- External public debt and debt service (Table 1, percent of GDP and percent of exports):
  - External public debt (percent of GDP): 20.2 (2016), 20.1 (2017), 20.5 (2018), 22.2 (2019), 21.9 (2020), 21.5 (2021), 21.1 (2022), 20.5 (2023), 19.8 (2024)
  - External public debt service (percent of exports): 4.9 (2016), 5.9 (2017), 4.9 (2018), 3.9 (2019), 3.9 (2020), 3.6 (2021), 3.8 (2022), 4.4 (2023), 4.8 (2024)
  - Total public debt (percent of GDP): 81.4 (2016), 76.0 (2017), 76.2 (2018), 73.1 (2019), 68.9 (2020), 64.7 (2021), 60.8 (2022), 57.0 (2023), 53.3 (2024)

### Monetary and financial aggregates
- Monetary survey (billions of CFA Francs, Table 4, selected):
  - Net foreign assets: 552.5 (2017), 560.2 (2018), 589.9 (2019), 622.3 (2020), 656.5 (2021), 692.7 (2022), 730.8 (2023), 770.9 (2024)
  - Credit to nongovernment sector: 1,176.9 (2017), 1,225.7 (2018), 1,292.6 (2019), 1,445.1 (2020), 1,611.5 (2021), 1,792.1 (2022), 1,992.6 (2023), 2,219.5 (2024)
  - Credit to private sector (of which): 1,099.3 (2017), 1,085.7 (2018), 1,200.4 (2019), 1,336.9 (2020), 1,486.3 (2021), 1,648.0 (2022), 1,827.3 (2023), 2,026.0 (2024)
  - Money supply (M2): 1,561.5 (2017), 1,702.0 (2018), 1,858.6 (2019), 2,032.3 (2020), 2,221.6 (2021), 2,428.4 (2022), 2,653.9 (2023), 2,904.0 (2024)
- Monetary growth (percent change of beginning-of-period broad money):
  - Money supply (M2): 12.6 (2016), 10.0 (2017), 9.0 (2018), 9.2 (2019), 9.3 (2020), 9.3 (2021), 9.3 (2022), 9.4 (2023)
- Memorandum items:
  - Velocity (GDP/end-of-period M2): 1.9 (2016), 1.8 (2017), 1.7 (2018), 1.7 (2019), 1.7 (2020), 1.7 (2021), 1.7 (2022), 1.7 (2023)

### Key messages and implications
- Fiscal:
  - Meeting projected balances with a margin was largely driven by underexecution of public investment rather than stronger-than-expected revenues.
  - Both external and domestic financing were lower than projected, influencing the financing composition and potentially deferring investment.
- Financial sector:
  - NPLs remain elevated (18.3 percent in 2018Q2), regulatory capital ratios have weakened (regulatory capital to risk-weighted assets at 6.0 percent in 2018Q2), and loan concentration to top borrowers is high (Loans to top 5 borrowers to capital at 157.2 in 2018Q2), indicating ongoing vulnerabilities.
- Growth and external:
  - Growth is expected to remain relatively strong (real GDP at 5.5 percent in 2019–24 projections) with a shift from public to private investment.
  - Current account deficits are sizable but projected to align with fundamentals as government imports are contained (current account percent of GDP moving from -5.5 to around -5.1 over 2019–24).

*Sources: UMOA Titres; BCEAO; Togolese authorities; and IMF staff estimates.*

### 133.9    Met

### 1tgoea2019003 - 133.9    Met

### Performance Criteria and Targets (selected results and memoranda)
- Total domestically financed social spending (floor): 37.2; 49.4; Met; 109.3
- Net domestic arrears accumulation (ceiling): 3; 0.0; 0.0; -2.5; Met; 0.0; 0.0; -17.9 Met
- Overall primary balance (Memorandum Item): 4; -41.5; -33.0; -77.2; -6.5
- Government contracting or guaranteeing of nominal concessional external debt: 19.6; 7.6; 39.2; 17.0; 260.3; 0.0; 260.3; 0.0
- Notes on targets and adjustments:
  - Continuous performance criterion and cumulated from the approval of the arrangement on May 5, 2017.
  - Performance criteria and indicative targets for 2019 are adjusted upwards to offset deviations from projected external program financing, subject to a cap of CFAF 10 billion.
  - Indicative targets calculated cumulatively from the beginning of 2019. Indicative targets will be adjusted for one half of the deviation from projected external program financing.
  - With arrears repayment as envisaged in the 2019 budget.

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

### Indicators of Capacity to Repay the Fund (2019–2030 projections)
- Fund obligations based on existing and prospective credit (principal, in millions of SDRs): 2.3; 7.5; 1.8; 2.5; 12.6; 20.1; 35.2; 35.2; 32.7; 22.7; 15.1; 0.0
- Charges and interest (in millions of SDRs): 0.0 repeated for 2019–2030
- Total obligations based on existing and prospective credit (in millions of SDRs): 2.3; 7.5; 1.8; 2.5; 12.6; 20.1; 35.2; 35.2; 32.7; 22.7; 15.1; 0.0
- Total obligations in billions of CFAF: 1.9; 6.0; 1.4; 2.0; 10.1; 16.1; 28.1; 28.1; 26.1; 18.1; 12.0; 0.0
- Total obligations as percent of government revenue: 0.3; 0.9; 0.2; 0.2; 1.1; 1.6; 2.5; 2.3; 1.9; 1.2; 0.7; 0.0
- Total obligations as percent of exports of goods and services: 0.2; 0.5; 0.1; 0.1; 0.7; 1.0; 1.6; 1.4; 1.2; 0.8; 0.5; 0.0
- Total obligations as percent of debt service: 2; 2.7; 8.1; 1.9; 2.3; 8.8; 11.5; 17.6; 15.7; 14.1; 10.2; 6.9; 0.0
- Total obligations as percent of GDP: 0.1; 0.2; 0.0; 0.0; 0.2; 0.3; 0.5; 0.5; 0.4; 0.3; 0.2; 0.0
- Total obligations as percent of quota: 1.6; 5.1; 1.2; 1.7; 8.6; 13.7; 24.0; 24.0; 22.3; 15.4; 10.3; 0.0

- Outstanding IMF credit (in millions of SDRs): 185.4; 177.9; 176.2; 173.6; 161.1; 140.9; 105.7; 70.5; 37.7; 15.1; 0.0; 0.0
- Outstanding IMF credit (in billions of CFAF): 149.7; 143.5; 141.4; 139.0; 128.8; 112.4; 84.3; 56.2; 30.1; 12.0; 0.0; 0.0
- Outstanding IMF credit as percent of government revenue: 23.5; 20.6; 18.5; 16.6; 14.0; 11.1; 7.5; 4.5; 2.2; 0.8; 0.0; 0.0
- Outstanding IMF credit as percent of exports of goods and services: 14.6; 12.9; 11.6; 10.3; 8.7; 6.9; 4.7; 2.8; 1.4; 0.5; 0.0; 0.0
- Outstanding IMF credit as percent of debt service: 2; 216.8; 191.7; 188.4; 155.1; 112.9; 80.6; 52.8; 31.4; 16.3; 6.8; 0.0; 0.0
- Outstanding IMF credit as percent of GDP: 4.7; 4.1; 3.8; 3.4; 2.9; 2.3; 1.6; 1.0; 0.5; 0.2; 0.0; 0.0
- Outstanding IMF credit as percent of quota: 126.3; 121.2; 120.0; 118.3; 109.7; 96.0; 72.0; 48.0; 25.7; 10.3; 0.0; 0.0

- Net use of IMF credit (millions of SDRs):
  - Disbursements: 0.0 repeated for 2019–2030
  - Repayments and repurchases: 7.5; 1.8; 2.5; 12.6; 20.1; 35.3; 35.3; 32.7; 22.7; 15.1; 0.0; 0.0

- Memorandum items:
  - Nominal GDP (in billions of CFAF): 3,199; 3,469; 3,767; 4,089; 4,440; 4,821; 5,234; 5,683; 6,170; 6,699; 7,273; 7,896
  - Exports of goods and services (in billions of CFAF): 1,026; 1,112; 1,224; 1,353; 1,488; 1,640; 1,799; 1,975; 2,168; 2,380; 2,613; 2,867
  - Government revenue (in billions of CFAF): 636; 695; 764; 840; 923; 1,011; 1,128; 1,249; 1,383; 1,532; 1,699; 1,882
  - Debt service (in billions of CFAF): 69; 75; 75; 90; 114; 140; 160; 179; 185; 177; 175; 160
  - CFAF/SDR (period average): 807; 806; 803; 801; 800; 798; 798; 798; 798; 798; 798; 798

*Sources: IMF staff estimates and projections.*

### Schedule of Disbursements Under ECF Arrangement 2017–19 (select tranches)
- 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 25.14 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
- Total amount of the arrangement: SDR 176.16 million (120 percent of quota)
- Note: In addition to the generally applicable conditions under the Extended Credit Facility.

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

### Risk Assessment Matrix — Key risks, likelihood, expected impact, and mitigating policies
- External Risks
  - Rising protectionism and retreat from multilateralism (ST, MT): Relative likelihood High; Expected Impact High
    - Impact: Reduced international aid, FDI, trade flows, and growth.
    - Mitigants: Ensure prudent budgetary management; bolster regional policy coordination and regional trade.
  - Sharp rise in risk premia (ST): High; High
    - Impact: Government difficulties in raising financing; higher debt servicing costs.
    - Mitigants: Bolster investor confidence via credible medium-term fiscal adjustment strategy.
  - Further build-up of financial vulnerabilities (MT): High; High
    - Impact: Easing monetary policy may encourage risk taking and increase leverage.
    - Mitigants: Implement credible and prudent medium-term fiscal and debt management strategy.
  - Weaker-than-expected global growth (ST, MT): High/Medium; High/Medium
    - Impact: Exports and growth adversely affected, notably via Ghana and Nigeria; partially mitigated by export diversification.
    - Mitigants: Implement competitiveness-enhancing structural reforms; diversify export market locations.
- Regional and Domestic Risks
  - Surge of insecurity in the region (ST, MT): High; High
    - Impact: Decline in private investment and tourism; higher security-related spending.
    - Mitigants: Ensure prudent budgetary management.
  - Socio-political tensions (ST, MT): Medium; High
    - Impact: Slower economic activity; intensified spending pressure; weaker reform support.
    - Mitigants: Accelerate growth-inclusiveness measures; communicate and discuss reforms with stakeholders.
  - Lingering weaknesses of public banks (ST, MT): Medium; Medium
    - Impact: Threat to financial stability and fiscal costs.
    - Mitigants: Accelerate privatization of the public banks to fit-and-proper buyers.
  - Setback in fiscal adjustment and reforms (ST): Medium; Medium
    - Impact: Continued large public works and delayed structural reforms.
    - Mitigants: Persevere in fiscal consolidation; accelerate structural reforms; establish social programs for vulnerable groups.
  - Power-supply shortfall (ST, MT): Low; Medium
    - Impact: Widespread power cuts, budgetary costs, inhibited growth.
    - Mitigants: Invest in power generation capacity; reform pricing to promote private participation; ensure public sector pays bills to prevent arrears.

### Capacity Development Strategy — context and FY2020 priorities
- Context:
  - Togo is described as a low-income fragile country with capacity and institution building challenges.
  - IMF Technical Assistance (TA) has been implemented across revenue administration, public financial management (PFM), financial sector, and statistics.
  - Implementation of TA recommendations has been uneven due mostly to capacity constraints, insufficient prioritization, and internal coordination issues.
  - Recent needs: lower-than-projected revenue, incomplete PFM reforms, weak and inconsistent fiscal and economic statistics, delayed banking sector reforms, and high NPLs.
- Key CD Priorities and Objectives for FY2020:
  - Revenue administration:
    - (i) Increase domestic revenue generation, including by reduced tax exemptions;
    - (ii) modernize customs administration, including extension of SYDONIA World to cover all clearance phases;
    - (iii) comprehensive diagnostic through TADAT;
    - (iv) coordination/synchronization of tax and customs databases.
  - Fiscal policy:
    - Strengthen the fiscal/tax policy unit at the Ministry of Finance.
  - Public financial management:
    - (i) Improve public investment efficiency, including implementation of the methodological guide for prioritization of investment based on a cost-benefit analysis;
    - (ii) improve the coverage and quality of fiscal reporting;
    - (iii) implement program-based budgeting.
  - Statistics:
    - (i) Strengthen the compilation and dissemination of macroeconomic data and financial statistics;
    - (ii) participation in GDDS.

### Authorities’ Views on Capacity Development
- The authorities agree with the CD strategy and see it aligned with their reform agenda.
- IMF CD has helped design and implement reforms, but authorities request more training and outreach to improve absorption.
- Authorities request strong TA support on debt management, including a resident advisor; discussions are underway between AFR and MCM.

### Letter of Intent — Government commitments and actions (summary)
- Request completion of the fifth review under Togo’s ECF arrangement based on satisfactory program implementation.
- Claimed achievements:
  - Met all end-June 2019 and continuous quantitative performance criteria (QPCs) and four structural benchmarks (SBs).
  - Domestic primary balance and net domestic financing outperformed targets by considerable margins.
- Policy commitments and measures:
  - Sustain fiscal consolidation in second half of 2019 and comply with WAEMU deficit criterion of 3 percent of GDP for the third year in a row.
  - Protect social spending despite fiscal consolidation.
  - Advance structural reforms to improve revenue collection, strengthen customs, and reduce vulnerabilities to corruption:
    - (i) Formalize and reinforce the Revenue Collection and Receivables Recovery Unit (SB at end-October);
    - (ii) Deploy hardware and software for cash registers, develop spot-check strategy, appoint focal points in large and medium taxpayer unit (SB at end-October);
    - (iii) Make mandatory online submission of declarations and documents for customs clearance for the 30 largest importers or filers (SB at end-October), aiming for total dematerialization of customs declarations.
    - Design and implement action plan based on TADAT evaluation findings.
    - Revise and enforce multi-year public investment program (SB at end-October).
    - Develop standard framework of performance indicators and train stakeholders (SB end-October).
  - Finalize privatization of the two public banks; switched to open tender for the first bank; published prequalification notice (prior action); request modification of end-December SB on bank privatization timeline.
  - Advance debt reprofiling operation to reduce present value of public debt and mitigate rollover risk, supported by a World Bank policy-based guarantee and possibly insurance from ATI; new loan to have longer maturity.
- Pledge to consult IMF staff on additional measures and to provide requested information; authorized publication of staff report, letter of intent, MEFP, and technical memorandum of understanding.

### Memorandum of Economic and Financial Policies (MEFP) — opening points
- The MEFP: informs on recent economic developments, reports on performance under the ECF-supported program, and describes authorities’ policies going forward.
- Sets targets for end-December 2019, including a proposed modification of two end-December 2019 indicative targets.
- Recent economic developments: "The economic recovery is underway. Following a sharp deceleration in 2017 due to socio-political tensions, economic activities regained momentum in 2018. This momentum continued in the first half of 2019. Economic growth is projected to slightly accelerate to" (text truncated).

*Sources: Excerpts from the attached IMF document and Togolese authorities’ submissions.*

### 5.3 percent in 2019 from 4.9 percent in 2018. The export-oriented sectors — phosphate, coffee,

### 5.3 percent in 2019 from 4.9 percent in 2018. The export-oriented sectors — phosphate, coffee,

### Macroeconomic performance (2018–mid‑2019)
- Real GDP growth: 5.3 percent in 2019 from 4.9 percent in 2018.
- Export-oriented sectors showing robust performance: phosphate, coffee, cocoa, and cotton.
- Agricultural production and energy generation accelerated in the first half of 2019.
- Credit to the private sector: expanded by about 5 percent in January-June 2019 relative to the same period in 2018.
- Headline inflation: 0.6 percent at end-July 2019 (year-on-year).
- External position: remains at a comfortable level.

### Fiscal consolidation and program implementation (through end‑June 2019)
- Overall fiscal balance: estimated at -0.2 percent of GDP at end-June 2019.
- Revenue collections: on target.
- Overall expenditure: less than programmed, primarily due to backloaded execution of domestically and foreign financed investment projects.
- Subscription rate of government bonds in the regional market: average of 224 percent in the first half of 2019.

- Quantitative performance criteria (QPCs) status:
  - All end-June 2019 and continuous QPCs met.
  - Domestic primary fiscal surplus for H1 2019: 0.9 percent of GDP, outperforming the programmed floor by 2.7 percentage points of GDP.
  - Net domestic financing contained under the ceiling.
  - No contracting of non-concessional external debt; all debt service obligations met.
  - No issuance of guarantees to domestic suppliers/contractors; no pre-financing of public investment.
  - Indicative target for domestic revenue met; no accumulation of domestic arrears.
  - Indicative target for social expenditure not met due to under-execution of investment projects, reporting shortcomings, and a change in the strategic framework for PUDC.

- Structural benchmarks (end‑June 2019):
  - All end-June SBs on revenue administration and public financial management met.
  - Tax Commission measures: 10-15 percent down payment on the value of imports made by inactive agents; prohibition on removal of imported merchandise by agents/owners with outstanding tax arrears.
  - Multi-year economic budget programming document for 2020-2022 prepared and adopted.

### Financial sector reform progress
- Direct sale of the first public bank: not completed by end-June 2019 as agreed in the MEFP of the fourth ECF program review.
- Revised privatization strategy: launch call for tenders by end-August 2019 and finalize by end-December 2019; end-August timeline not met.
- Tenders for the two public banks to be launched before approval of the fifth review of the ECF program by the IMF Board.
- Commitment to complete privatizations and monitor banks' liquidity with BCEAO and the Banking Commission.

### Medium‑term outlook and risks (2019–medium term)
- Growth: expected to approach 5½ percent over the medium term.
- Inflation: expected to be around 2 percent over the medium term.
- Fiscal deficit: expected to remain around 1-2 percent of GDP (within WAEMU convergence criteria).
- Current account deficit: expected to remain in the range of 5 percent of GDP due to lower imports of consumer goods and increased exports.
- Downside risks:
  - National: delays in financial sector reforms posing fiscal risks.
  - Regional: stepped up security risks and terrorism threats.
  - Global: rising protectionism and retreat from multilateralism; sharp increase in risk premium on financial markets; increased global financial vulnerabilities; weaker-than-expected global growth.

### Fiscal policy and targets
- 2019 actions:
  - Continue fiscal consolidation to safeguard 2019 program targets.
  - Public expenditure review measures to achieve year-end spending targets, including centralized procurement, revision of reference prices for major public procurements, cleaning-up government payroll, bundled management of property leases, single-vendor fuel and air ticket purchases on discount basis, large-scale procurement of certain drugs from the Global Fund, removal of certain exemptions, improved collection/management of the road fund, and reduced subsidies for certain entities.
  - Overall budget deficit target for 2019 revised from 2.7 percent of GDP to 2.9 percent of GDP to account for spending initially programmed for 2020 and emergency expenditures agreed during the fourth program review.
- 2020 framework:
  - Overall fiscal deficit target for 2020: 1.9 percent of GDP.
  - Continued consolidation to bring overall fiscal consolidation to about 7.5 percentage points of GDP during the entire ECF program period.
  - Overall fiscal deficit projected to remain below 2 percent of GDP beyond 2020.
  - Debt trajectory: falling below 70 percent from 2020 and below the initial benchmark suggested by the Debt Sustainability Analysis (DSA) as from 2027-28.

### Fiscal management and revenue administration reforms
- Tax expenditures:
  - Declined from 4.3 percent of GDP throughout 2016 (before start of ECF-supported program) to 1.9 percent of GDP in 2018.
  - Contribution: helped increase actual (liquid) tax revenue by about 0.5 percent of GDP in 2018 despite a decrease in gross tax revenues.
  - Plan: assess tax expenditures and append assessment as an annex to the budget law.

- Revenue administration actions:
  - Increase spontaneous tax payments by strengthening voluntary compliance measures to:
    (1) improve service to users (clear instructions, simplified forms, modern procedures, information, assistance, guidance);
    (2) inform taxpayers and enforce obligation to report third-party transactions;
    (3) closely monitor pending disputes through the Appeal Committee;
    (4) regularly monitor time taken to investigate contentious claims to speed up resolution;
    (5) use taxpayers' monthly returns to set up a risk management system based on audits (spot checks).
  - IT improvements to expand online filing and automatically isolate/track incorrect returns; fast-track collection of disputed tax arrears.
  - Finalize action plan for full dematerialization of customs declarations and activation of ASYCUDA World functionality.
  - Merge tax and customs administrations into a single entity (Office Togolais des Recettes, OTR) and implement an action plan based on TADAT evaluation findings:
    - (i) conduct tax compliance gap analysis with technical assistance;
    - (ii) promote tax compliance by monitoring timeliness and rate of responses to taxpayer telephone enquiries;
    - (iii) strengthen control of non-tax filers via improved information systems.
  - Expand online filing: at least half of the large companies (200 companies) by December 2019; start extending online filing to medium-sized companies.
  - Strengthen internal controls across OTR via Audit, Quality Assurance and Anti-Corruption Divisions; intensify routine quality controls and targeted audits; investigate whistleblowing cases and audit staff identified through systematic quality audits.

- Public financial management (PFM) reforms:
  - Focus on introduction of multi-year and program-based budgeting.
  - Operate concurrently with input-based budget in 2020 and fully switch to programme-based budgeting from 2021.
  - Upgrade information system, provide required human resources capacity, and decentralize oversight through focal points in sectoral ministries.
  - Revise and make multi-year public investment programme mandatory.
  - Budget timetable and reporting:
    - Met deadline for submission of draft budget to National Assembly.
    - Began publishing budget execution reports.
    - Commit to submit 2020 Finance Bill to National Assembly in October 2019.
    - Publish quarterly budget execution reports to the National Assembly.
  - Establish legal and institutional framework for Public-Private Partnership (PPP) management, prepare specific PPP legislation (PPP Act), operationalize PPP unit within the Public Debt Directorate.
  - Expand coverage of the Treasury Single Account (TSA), including integration of Treasury bank accounts at BCEAO, autonomous bodies, local authorities, and donor project accounts (in consultation with donors).

### Borrowing policies and debt management
- Debt reduction priority to safeguard long-term fiscal and external sustainability.
- Risk assessments:
  - Togo assessed as presenting a moderate risk of external debt distress and a high risk of overall public debt distress due to high domestic debt.
- Fiscal strategy targets:
  - Bring total public debt below the initial threshold benchmark by 2027-28: 38 percent of GDP at Present Values (PV) terms, that is about 45 percent of GDP in nominal terms.
- Institutional measures:
  - New Debt Management Directorate revamped and being staffed; will be made operational quickly and debt management practices strengthened.
  - Integrate debt service forecasts with budget forecasts to reduce discrepancies.
  - Develop a website to improve debt reporting and transparency.
- Operational improvements:
  - Debt Directorate to maintain regular contact with project coordinators and DGBF; DPPD and DGBF to inform Debt Directorate of disbursement forecast changes.
  - Validate debt database with donors regularly and perform annual reconciliation of all loans.
- Debt reprofiling operation:
  - Objective: reduce PV of public debt stock and mitigate rollover risk by borrowing externally at more favorable terms to repay outstanding domestic/regional debt.
  - Support: World Bank policy-based guarantee and possibly insurance from African Trade Insurance Agency (ATI).
  - Features: new loan with longer maturity to reduce medium-term rollover risk; operation to reduce fiscal crowding out and add resources to regional foreign exchange reserves.
  - Safeguards: select debt instruments to maximize PV reduction and avoid inflated payback premiums; strengthen debt management capacity for new exposure risks; cap size of operation to avoid worsening external debt vulnerability; pay particular attention to potential risks.

### Financial sector policies and stability measures
- Privatization and bank restructuring:
  - Pursue privatization of two public banks to restore financial stability, minimize budget costs, and ensure transparency.
  - Direct sale of the first public bank not completed; moved to open tendering process.
  - Tenders for the two public banks launched in September (slightly behind end‑August schedule); senior management to keep BCEAO and Banking Commission informed.
  - Monitor liquidity situation of banks closely with BCEAO and Banking Commission.

- Financial soundness and capital adequacy:
  - Overall capital adequacy ratio (per new BCEAO regulation aligned to Basel II/III) dropped from 8.4 percent at end-2017 to 2.9 percent at end-December 2018.
  - Excluding the two public banks, capital adequacy ratio is 15.8 percent.
  - Capital restoration calls made for two non-systemic private banks undergoing restructuring after takeover by private strategic investors.

- Non-performing loans (NPLs) and corrective measures:
  - NPL rate as of December 2018: 17.8 percent; concentration in a few banks including the two public banks.
  - Planned measures:
    - Enforce BCEAO instruction on accounting and reporting of NPLs.
    - Finalize full application of revised accounting framework for banks, including write-off of NPLs not recovered after 5 years.
    - Strengthen powers of debt collection agencies.
    - Support Credit Information Bureau (BIC) and provide capacity building for commercial courts.
    - Encourage customers to consent to sharing credit information via communication campaigns.
    - Set up collaborative forum for banks and BIC to provide relevant information.

### Structural reforms and inclusive growth
- Business environment improvements:
  - Togo improved Doing Business ranking from 156th in 2017 to 137th in 2018 (advanced by 19 places).
  - Mechanisms and procedures to facilitate land registration implemented; ongoing land reforms and land management system improvements planned.
  - Accelerate implementation of reforms in the National Development Plan (NDP) and Compact with Africa (CwA) to bolster private investment and promote inclusive growth.
- Governance and anti-corruption:
  - Enforce governance and anti-corruption legal framework and operationalize recently established institutions, including new Commercial Courts.
  - Closely examine legal framework for asset declaration and transposition of the United Nations Convention on Corruption.

*IMF staff report excerpts as provided in the source content.*

### 23.      We will continue the fight against money laundering/terrorist financing (AML/CFT),

### 23. We will continue the fight against money laundering/terrorist financing (AML/CFT)

### AML/CFT commitments and actions
- Commit to continue the fight against money laundering/terrorist financing (AML/CFT) in accordance with the regulatory provisions in force within WAEMU.
- Finalized a multisectoral national risk assessment on money laundering and terrorist financing carried out with the support of the World Bank.
- Stand ready to publish the summary of this assessment and to implement the recommended action plan to address identified vulnerabilities, particularly in preparation for the next GIABA assessment.
- Undertake to adopt all the implementing legislation for the 2018 Anti-Money Laundering/Combating the Financing of Terrorism Act (AML/CFT).
- Undertake to formalize the National Coordination Committee.
- Will implement the recommendations of the 2018 report of the United Nations Counter-Terrorism Executive Directorate (CTED).
- Encourage the strengthening of AML/CFT supervision of banks by the CB-UMOA.

### Program monitoring and data production — framework and adjustments
- Program review will continue based on quantitative performance criteria, indicative targets, and structural benchmarks as in Tables 1 and 2.
- All quantitative performance criteria and structural benchmarks remain unchanged from the MEFP of the fourth ECF program review, except:
  - The end-December 2019 structural benchmark (SB) on the banks has been revised.
  - At end-December 2019, modification proposed for the IT on the domestic primary balance to accommodate election-related spending.
  - Modification proposed on the IT on net domestic financing to accommodate election-related spending and the postponement of the last ECF disbursement to early 2020.
- Performance criteria and indicators are defined in the attached Technical Memorandum of Understanding (TMU), along with relevant adjustors.
- Program will end in early-2020 and the last quantitative PCs will be for the final test date at end-September 2019.

### Institutional capacity and statistical improvements
- Permanent Secretariat for Reform Policies and Financial Programs (SP-PRPF) responsibilities:
  - (i) technical program monitoring and quarterly progress reports;
  - (ii) liaison between national structures, technical and financial partners;
  - (iii) coordination of technical assistance.
- Recognize weaknesses in statistics and will:
  - Strengthen staffing within the National Statistics and Accounting Institute (INSEED).
  - Reduce lags in the production of final national accounts and avoid any delay in their production.
  - Improve GDP estimates by rebasing the GDP according to the 2008 SCN of the accounts for the new base year (2016).
  - Continue to improve data quality and fiscal reporting, particularly the Tableau des Opérations Financières de l’Etat (TOFE).
  - Ensure budget projections for the following year are based on estimates of budget execution of the current year.
- Will make full use of technical assistance from various sources, working closely with IMF technical assistance in: tax and customs administration; public financial management (including program budget and selection of public investments); debt management; generation and publication of statistics.

### Program assurances and policy conditionality
- Confident that the economic policy measures will achieve the objectives of the ECF-supported program.
- Stand ready to take further measures if necessary after consultation with the IMF.
- During the program period, will neither:
  - introduce nor intensify restrictions on payments and transfers for current international transactions;
  - introduce or modify any multiple currency practice without the IMF’s prior approval;
  - conclude bilateral payment agreements incompatible with Article VIII of the IMF’s Articles of Agreement;
  - introduce or intensify import restrictions for balance of payments reasons.

### Key quantitative performance outcomes (selected figures from Table 1 — Billions of CFA Francs)
- Domestic primary fiscal balance (floor): Indicative Targets — End-March: -21.9 (Adjusted), Actual -5.1 (Status: Met); End-June: -38.0 (Adjusted), Actual 47.1 (Status: Met).
- Non-accumulation of arrears on external public debt: Continuous PC — 0.0 (Adjusted) and 0.0 (Actual) (Status: Met) for both end-March and end-June.
- Net domestic financing (ceiling): End-March: 75.0 (Adjusted), Actual 75.0, 35.4 (Status: Met); End-June: 72.4 (Adjusted), Actual 72.4, -13.1 (Status: Met).
- Total fiscal revenue (floor): End-March: 127.2 (Indicative Target) and Actual 133.9 (Status: Met); End-June: 286.1 (Indicative Target) and Actual 303.0 (Status: Met).
- Total domestically financed social spending (floor): End-March: 37.2 (Indicative Target), Actual 49.4 (Status: Met); End-June: 109.3 (Indicative Target), Actual 87.8 (Status: Not met).
- Net domestic arrears accumulation (ceiling) (cumulative): End-March: 0.0 (Indicative Target), Actual 0.0, -2.5 (Status: Met); End-June: 0.0 (Indicative Target), Actual 0.0, -17.9 (Status: Met).
- Memorandum item — Overall primary balance: End-March: -41.5 (Memorandum), Actual -33.0; End-June: -77.2 (Memorandum), Actual -6.5.
- Government contracting or guaranteeing of nominal concessional external debt (memorandum): End-March: 19.6 (Memorandum) Actual 7.6; End-June: 39.2 (Memorandum) Actual 17.0.
- NPV of new non-concessional external debt contracted as a result of debt management operations (maximum, memorandum): 260.3; nominal equivalent cap referenced as CFAF 260.3 billion in the TMU.

### Proposed indicative targets for September and December 2019 (selected figures — Billions of CFA Francs)
- Domestic primary fiscal balance (floor):
  - Indicative Targets: End-September: -3.25; Proposed Indicative Targets: 1.04; End-December: 4.0.
- Net domestic financing (ceiling):
  - Indicative Targets: End-September: 53.3; Proposed Indicative Targets: -22.7; End-December: 75.2.
- Total fiscal revenue (floor): End-September: 445.16; Proposed Indicative Targets: 635.9; End-December: 635.9.
- Total domestically financed social spending (floor): End-September: 164.0; Proposed Indicative Targets: 218.6; End-December: 218.6.
- Memorandum item — Overall primary balance: End-September: -61.9; Proposed Indicative Targets: -7.0; End-December: -13.9.
- Government contracting or guaranteeing of nominal concessional external debt (calculated cumulatively): End-September: 58.8; Proposed Indicative Targets: 78.3; End-December: 78.3.
- NPV adjustor cap for debt-management operations: 260.3 (nominal equivalent in CFA francs).

### Structural benchmarks (selected, deadlines and statuses)
- Revenue administration:
  - Set up a lump sum deposit of 10 to 15 percent on imports made by agents deemed by OTR to be inactive in connection with other taxes. Deadline: End-June 2019. Status: Met.
  - Prohibit customs clearance of imported merchandise by agents and/or owners who have outstanding tax arrears. Deadline: End-June 2019. Status: Met.
- Expenditure management:
  - Develop a document for program-based budget covering 2020-22. Deadline: End-June 2019. Status: Met.
- Financial sector:
  - Submit a revised strategy for the privatization of the first public bank: launch by end-August 2019 a call for tenders and finalize privatization by end-December 2019. Deadline: End-June 2019. Status: Met.
  - Launch tenders for the two public banks. Status: Prior action Met.

### Additional structural benchmarks for the 6th review (selected)
- Formalize and reinforce the Revenue Collection and Receivables Recovery Unit to increase recovery rates:
  - Targets: from 66 percent in 2017 to 70 percent in 2019 for the large taxpayers’ unit; from 48 percent in 2017 to 60 percent in 2019 for the medium-sized taxpayers’ unit. Deadline: End-October 2019.
- Deploy hardware and software for cash registers; formulate strategy for risk-based spot checks; appoint focal points in large and medium-sized taxpayers’ units. Deadline: End-October 2019.
- Make mandatory online submission of declarations and supporting documents for customs clearance for the 30 largest importers or filers. Deadline: End-October 2019.
- Revise and enforce the multi-year public investment program. Deadline: End-October 2019.
- Develop a standard framework of performance indicators for the transition to program budgeting and train stakeholders. Deadline: End-October 2019.
- Close submission of preliminary bidding documents for the privatization of both public banks. Deadline: End-December 2019.

### TMU definitions and adjustors (selected)
- Debt definition follows paragraph 8(a) of the Guidelines on Public Debt Conditionality in Fund Arrangements (IMF Executive Board Decision No. 15688-(14/107), adopted on December 5, 2014).
- Domestic debt: contracted or serviced in CFAF. External debt: contracted or serviced in a currency other than CFAF.
- A debt is considered contracted when a “no objection” opinion by the Supreme Court is issued where required; otherwise when it enters into effect.
- Quantitative ITs for end-December 2019 include:
  - (a) floor on domestic primary fiscal balance;
  - (b) ceiling on net domestic financing;
  - (c) floor on total fiscal revenue;
  - (d) floor on total domestically-financed social spending;
  - (e) ceiling on net domestic arrears accumulation.
- Continuous PCs include:
  - (a) zero ceiling on accumulation of arrears on external public debt;
  - (b) ceiling on government contracting or guaranteeing of nonconcessional external debt;
  - (c) zero ceiling on government guaranteeing of domestic loans to suppliers and contractors;
  - (d) zero ceiling on government guarantees on bank prefinancing for public investments.
- Net domestic financing adjustors:
  - Adjusted downwards by domestic debt retired as a result of debt-management operations; adjustor capped at the nominal equivalent of the net present value of CFAF 260.3 billion after currency conversion.
  - Adjusted upwards to make up for gaps between projected and actual external financing for the program, subject to a cap of CFAF 10 billion.

*Source: Togolese authorities; and IMF staff estimates as presented in the MEFP and attached Technical Memorandum of Understanding.*

### 12.      Net credit from the banking sector to the government is equal to the balance of

### 12.      Net credit from the banking sector to the government is equal to the balance of

### Net credit from the banking sector — definition and components
- Net credit from the banking sector to the government = balance of government claims and debts to national banking institutions in Togo.
- Government claims include:
  - balances in the Togolese Treasury,
  - Treasury deposits in the central bank,
  - Treasury deposits in commercial banks (excluding the deposits of other arms of government, such as deposits from projects financed with external resources and CNSS accounts),
  - blocked accounts.
- Government debts to the banking system include:
  - assistance from the central bank (excluding BCEAO credits to the government tied to IMF financing),
  - assistance from commercial banks (including government securities denominated in CFA francs held by commercial banks),
  - deposits in postal checking accounts.
- Net credit from the banking sector is calculated by the TOFE unit; Treasury bill and bond amounts are determined by the Agence UMOA-Titres. For program purposes, these data take precedence.

### Net domestic nonbank financing — definition and scope
- Net domestic nonbank financing includes:
  - (i) changes in the balance of government securities issued in CFA francs (including on the WAEMU regional financial market) not held by Togolese commercial banks, calculated on the basis of the initial amount underwritten;
  - (ii) changes in the deposit accounts of Treasury correspondents;
  - (iii) changes in various deposit accounts, including trustee accounts (comptes de consignation) in the Treasury and accounts in which fines and sentences are deposited pending distribution;
  - (iv) repayment of other domestic public debt (including bank loans to the economy assumed by the government and securitized arrears) to nonbank entities (including nonresidents);
  - (v) income from privatization.
- Exclusions and clarifications:
  - The assumption or securitization of debts and arrears by the government is not included in the definition of net domestic financing, whereas the repayment of that debt by the government is included.
- Net domestic nonbank financing of the government is calculated by the Togolese Treasury.

### Unidentified financing
- 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).

### Reporting and data sources
- Data are reported in the Government Financial Operations Table (statistical TOFE) prepared monthly by the Directorate of Economy of the Ministry of Economy and Finance.
- Reporting deadlines:
  - Net domestic financing of the government: monthly within eight weeks of the end of the month.
  - Details concerning any domestic borrowing by the government: every month within six weeks of the end of the month. Domestic borrowing data categorized as short term (less than one year) and long term (one year or more). Rule applies to government-guaranteed domestic loans to government suppliers and contractors. Data primarily based on estimates of the Debt unit.
  - Cash management, commitment and procurement plans: reported every month within four weeks of the end of the month.

### Government or government-guaranteed non-concessional external debt — performance criterion
- Continuous performance criterion: government undertakes not to contract or financially guarantee any new nonconcessional external debt at maturities of one year or more.
- Nonconcessional external debt definition: external debt with a grant element of less than 35 percent (calculated using a discount rate of 5 percent).
- Applicability:
  - Applies to debt as defined in paragraph 8(a) of the Guidelines on Public Debt Conditionality in Fund Arrangements and to any commitment contracted or guaranteed for which no value has been received.
  - Does not apply to rescheduling 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.
- Expanded definition of “government”: includes the definition in paragraph 2 plus EPIC, EPA, public scientific and technical institutions, public professional establishments, public health agencies, local authorities, public enterprises, national corporations (public corporations with financial autonomy, in which the government holds at least 50 percent of the capital), and state agencies.

### Adjustor for debt-management operations (nonconcessional external borrowing)
- The performance criterion will be adjusted upwards by the amount of nonconcessional external borrowing used for debt-management operations that improve the overall public debt profile.
- For debt-management operations executed in 2019 or 2020, the adjustor capped at the nominal equivalent of the net present value of CFA francs 260.3 billion after converting the nonconcessional external debt into CFA francs using the prevailing exchange rate at the time of the transaction.
- Definition and limits of debt-management operations:
  - Limited to the exchange of domestic debt for nonconcessional external debt.
  - NPV of domestic debt to be reprofiled: sum of the discounted debt service flows using a discount rate of 5 percent.
  - NPV of external debt to be acquired: calculated in the same manner.
  - Net effect = NPV(domestic debt to be reprofiled) − [net cost of domestic debt repurchase + NPV(external debt to be acquired) + any fees associated with the external debt issuance].
  - Net effect must reduce or leave unchanged the total stock of public debt in NPV terms. If operation increases the stock in NPV terms, it will not be considered a debt-management operation and would constitute non-observance of the performance criterion.
  - Government will consult with IMF staff and provide data on terms, fees, and costs, including costs/fees associated with compensating current domestic bondholders and lenders.

### Government-guaranteed domestic loans to suppliers and contractors
- Continuous performance criterion: government committed not to provide any new financial guarantees for domestic loans to its suppliers or contractors.
- Definition of “government” mirrors that used in the nonconcessional external debt criterion (includes EPIC, EPA, public scientific and technical institutes, etc.).

### Government guarantees on bank pre-financing for public investments
- Continuous performance criterion: government undertakes not to guarantee any new bank pre-financing for public investments.
- Typical arrangement described: private company obtains loan from domestic commercial bank; Ministry of Economy and Finance guarantees loan and signs unconditional and irrevocable substitution of debtor agreement; principal and interest paid automatically from the Treasury account at the BCEAO.
- Definition of “government” same as above.

### Total fiscal revenue (floor) — definition, calculation, and reporting
- Definition:
  - Total fiscal revenue includes tax and nontax revenue, and excludes external grants, the revenue of autonomous agencies, and income from privatization.
  - Data calculated by revenue offices and reported in the Government Financial Operations Table (statistical TOFE) prepared monthly by the Directorate of Economy of the Ministry of Economy and Finance.
  - Revenue is reflected on a cash basis.
- Calculation:
  - Revenue calculated cumulatively from the beginning of the calendar year.
  - Revenue collections at end-December 2019 must be equal to or greater than the amount indicated in Table 1 attached to the MEFP.
  - The revenue floor is an indicative target for the entire duration of the program.
- Reporting deadline:
  - Reported monthly to the IMF within four weeks of the end of the month.

### Domestically-financed social spending (floor) — definition, scope, and reporting
- Definition:
  - Total (current and capital) domestically-financed social spending calculated for each category of current and capital accounts (wages, goods and services, transfers and subsidies, other) and capital accounts financed with domestic resources.
  - Social sectors covered:
    1. Ministry of Education: primary and secondary education, technical and vocational training, and higher education with respect to scholarships and relief allowances (scholarships: article 21 of Decree No. 2011-173/PR of November 30, 2011; relief allowances: article 31 of Decree No. 2011-173/PR of November 30, 2011, and article 2 of Decree No. 2011-174/PR of November 30, 2011);
    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 (Programme d’Urgence de Développement Communautaire – PUDC);
    8. Support Program for Vulnerable Populations (Programme d’Appui aux Populations Vulnérables – PAPV).
  - Total current and capital social expenditure financed with owner equity covers spending financed with domestic resources, including revenue, domestic financing, and general foreign budgetary support, and excludes all social spending financed with project-specific grants or loans.
  - Source of data: SIGFiP, from the Directorate-General of Budget and Finance (Ministry of Economy and Finance), prepared at monthly intervals.
- Calculation and targets:
  - Social spending calculated cumulatively from the beginning of the calendar year.
  - Social spending financed with domestic resources at end-December 2019 must be equal to or greater than the amount indicated in Table 1 attached to the MEFP.
  - Data provided by the Directorate-General of Budget and Finance and the Directorate-General of Economic Studies and Analyzes will take precedence for program purposes.
  - The floor on (current and capital) social expenditure financed with domestic resources is an indicative target for the entire program period.
- Reporting deadline:
  - Data reported every month within eight weeks of the end of the month.

### Net domestic arrears accumulation (ceiling) — definition, calculation, adjustors, and reporting
- Definition:
  - Domestic payment arrears = domestic debt obligations of the government to nonfinancial public and private entities and the domestic debt service (excluding the BCEAO) that have not been paid within 90 days after the contractual due data (taking into account any contractual grace periods).
  - Includes, but not limited to:
    - (i) old domestic financial and commercial arrears (to domestic private-sector suppliers);
    - (ii) old arrears to CNSS (Caisse Nationale de Sécurité Sociale) and CRT (Caisse de Retraite du Togo);
    - (iii) outstanding debts of liquidated companies (TOGOPHARMA, SOTOCO, OTP, IFG, FER, FICAO, and LIMUSCO);
    - (iv) balances of accounts payable (instances de paiements) reported in the Government Financial Operations Table (statistical TOFE) that have not been paid 90 days after the due date.
- Calculation and targets:
  - Net accumulation of domestic arrears calculated cumulatively from the beginning of each calendar year.
  - Amount at end-December 2019 must be less or at most equal to the amount indicated in Table 1 attached to the MEFP.
  - The arrears ceiling is an indicative target for the entire duration of the program after the completion of the fifth review.
- Adjustors:
  - The ceiling on net accumulation of domestic arrears will be adjusted upward by one half of the amount of any shortfall between the actual and the programmed level of external financing for the program.
  - If actual external financing exceeds programmed levels, the ceiling will be adjusted downward by one half of the amount of any excess financing.
- Reporting deadline:
  - Data on net accumulation of domestic arrears reported every month within four weeks of the end of the month.

### Structural benchmarks (selected end-October and end-December 2019 targets)
- Improve tax revenue collection (end-October 2019):
  - Revenue Authority to formalize creation, by Act of the Commissioner-General, and reinforce the risk-analysis role of the Unit for Revenue Collection and the Payables to be recovered.
  - Targets for recovery rates of tax arrears (recovery rate = amount of collected tax arrears at end-October 2019 ÷ amount of recoverable tax arrears at end-October 2019, with numerator from statistics of collected tax arrears and denominator from audited statistics of recoverable tax arrears):
    - Large companies (DGE): increase recovery rate from 66 percent in 2017 to 70 percent in October 2019.
    - Medium-sized companies (DME): increase recovery rate from 48 percent in 2017 to 60 percent in October 2019.
- Reduce non-paying VAT returns (zero or credit) (end-October 2019):
  - Revenue Authority to (i) start deploying hardware and software for establishment of cash registers; (ii) formulate a strategy for selection of risk-based spot checks; (iii) appoint focal points in the DGE/DME to centralize results of spot checks.
- Improve customs duty collection and border procedures (end-October 2019):
  - Customs administration to make mandatory online submission of declarations and attached documents for consumption of imports for the 30 largest importers or registrants by enabling this feature in ASYCUDA World.
  - Authorities to perform analysis of customs IT system capacity and prepare action plan for complete dematerialization of all customs declarations.
- Improve efficiency of investment (end-October 2019):
  - Revise and enforce the multi-year public investment program to ensure coherence with realistic resource envelopes of the medium-term budgetary framework (binding for following year, indicative for two years thereafter).
  - Accelerate implementation of recommendations of the public investment management assessment ("PIMA").
- Budgetary resources optimization and transition to program budgeting (end-October 2019):
  - Develop a standard framework of performance indicators and train stakeholders in ministries and institutions. Initiate reflections to include specific gender-budgeting indicators.
- Privatization of two public banks (end-December 2019):
  - Authorities to close the submission of preliminary bidding documents for privatization of both public banks.

### Debt Sustainability Analysis — key summary points
- Joint Bank-Fund DSA update confirms:
  - Risk of external debt distress: Moderate.
  - Overall risk of debt distress: High.
- Notes:
  - Mechanical results point to a low risk of external debt distress, but judgment was applied given domestic debt vulnerabilities; external debt distress therefore considered moderate.
  - Overall risk of debt distress assessed as high because the PV of total PPG debt-to-GDP ratio breaches the debt distress benchmark through 2022 under the baseline.
  - Policy implications: need for sustained fiscal consolidation, improved debt management, and strong macroeconomic policies to reduce public debt to prudent levels over the medium term.
- Administrative details from the DSA cover page:
  - Togo’s Composite Indicator (CI) is 2.86, corresponding to a medium debt-carrying capacity as confirmed by the April 2019 WEO data and 2017 CPIA.
  - DSA prepared jointly with the World Bank and in collaboration with the Togolese authorities.
  - Prepared by staffs of the International Monetary Fund and the International Development Association, October 4, 2019.

*International Monetary Fund — Chapter text as provided.*

### 1.      The revised baseline macroeconomic assumptions for the present DSA are as follows. Real

### 1tgoea2019003 - 1.      The revised baseline macroeconomic assumptions for the present DSA are as follows. Real

### Baseline macroeconomic assumptions and key projections
- Real GDP growth and inflation are expected to be slightly higher than in the June 2019 forecast over the projection period.
- The primary fiscal surplus remains around 1.0 percent of GDP over the medium term.
- The NPV of public debt is brought comfortably below the benchmark for a country with medium debt-carrying capacity over the medium term.
- The current account balance is about 0.4 percentage point of GDP higher in 2019, essentially due to lower projected imports, and is expected to stabilize around a deficit of 5 percent of GDP over the medium term.
- Text Table 1: Key macroeconomic assumptions (selected entries)
  - Real GDP Growth (percent)
    - DSA Update October 2019: 4.9 5.5
    - DSA June 2019: 4.8 5.4
  - Inflation (average, Y-o-Y percent change)
    - DSA Update October 2019: 0.7 2.0
    - DSA June 2019: 0.7 2.0
  - Total Revenue (percent of GDP) [Total revenue, including grants]
    - DSA Update October 2019: 23.1 25.1
    - DSA June 2019: 23.1 26.8
  - Fiscal Primary Balance (commitment basis, incl. grants, percent of GDP)
    - DSA Update October 2019: 0.9 1.0
    - DSA June 2019: 0.9 1.0
  - Exports of goods and services (percent of GDP)
    - DSA Update October 2019: 32.1 34.1
    - DSA June 2019: 32.2 34.2
  - Current Account Balance (percent of GDP)
    - DSA Update October 2019: -4.4 -4.7
    - DSA June 2019: -4.3 -4.6

### External debt indicators under the baseline
- All Togo’s external debt indicators remain below their indicative policy-relevant thresholds under the baseline scenario.
- PV of public and publicly guaranteed (PPG) external debt:
  - Projected at 16.6 percent of GDP in 2019.
  - Projected to decrease to around 12.3 percent of GDP by 2029.
- PV of PPG external debt relative to exports:
  - Projected at 51.6 percent of GDP in 2019.
  - Projected to decrease to 34.1 percent of GDP by 2029.
- External debt service indicators:
  - External debt service-to-exports ratio projected between 3 to 5 percent.
  - External debt service-to-revenue ratio projected between 4 to 8 percent.
- All external debt indicators remain below respective thresholds under alternative scenarios.
- Improvements in debt-management practices under the Fund-supported program and World Bank technical assistance will add resilience to shocks affecting debt service needs.

### Historical and stress scenarios
- Historical scenario outcomes:
  - PV of debt-to-export ratio breaches its threshold from 2028.
  - PV of debt-to-GDP breaches its threshold from 2023.
  - Debt service-to-revenue ratio breaches the threshold in 2029.
  - Debt service-to-exports ratio remains below the threshold during the projection period.
- Most extreme shock scenario:
  - All external debt indicators remain below their respective thresholds.

### Overall public debt dynamics and vulnerabilities
- Togo’s overall public debt dynamics highlight heightened vulnerabilities, with the debt-to-GDP ratio remaining above the indicative benchmark through 2022.
- Under the baseline:
  - Overall public debt forecasted at 73.1 percent of GDP in 2019.
  - Falling below 70 percent from 2020.
  - By 2039, repayment of arrears coupled with significant fiscal consolidation expected to significantly reduce domestic debt and total public and publicly guaranteed debt.
- Under the most extreme shock scenario:
  - Ratio of PV of overall public debt-to-GDP would briskly rose in 2021 and decline below the indicative benchmark in 2026.
- Under the historical scenario:
  - This ratio would remain above the indicative threshold during the entire projection period.

### Alternative scenarios
- A. Debt Reprofiling
  - Authorities plan a debt reprofiling operation in the second half of 2019; operation expected to take place by end-2019 and supported by a Policy-Based Guarantee (PBG) from the World Bank.
  - ECF arrangement (2nd review) allows a debt reprofiling operation of up to about 8 percent of GDP, the amount that keeps the external debt risk rating unchanged at moderate.
  - Staff assumption for reprofiling scenario:
    - Authorities would repay USD 316 million (5.8 percent of GDP) of domestic debt.
    - Interest rate on the new borrowing assumed lower by about 300 basis points relative to the domestic/regional loans to be repaid.
    - Duration expected to be twice longer.
  - Effects of reprofiling scenario:
    - PV of public debt would decline to 22.8 percent of GDP in 2039 compared with 25.3 percent of GDP in the baseline.
    - PV of PPG external debt would be slightly higher at 14.6 percent of GDP in 2039 compared with 13.6 percent of GDP in the baseline.
    - Under the most extreme shock, PV of PPG external debt-to-GDP would get very close to the threshold but only temporarily.
    - Total debt service-to-revenue ratio would decrease next year and then decline gradually from 45 percent in 2021 to 19 percent by 2029.
  - Risks and safeguards:
    - Potential benefits: lower interest rate, longer duration, reduced medium-term rollover risk, reduced fiscal crowding out, increased regional foreign exchange reserves.
    - Risks: (i) higher external debt ratios; (ii) greater exchange rate risks.
    - Risks manageable given Togo’s low share of external public debt (22 percent of GDP) and Euro denomination of the external commercial loan.
    - Safeguards recommended:
      - Cap size of the operation below a limit that does not lead to deterioration of the external debt distress rating.
      - Conduct operation only for debt management purposes and ensure it leads to a reduction of the present value of debt.
      - Target least favorable domestic/regional loans (interest rate and maturity) and loans without early repayment penalties.
      - Strengthen authorities’ debt management capacity to manage higher exposure to international market risks (exchange rate, interest rate, investor base).
- B. Financial Sector Contingency
  - Weaknesses in the financial sector, including those related to the two state-owned banks, may create fiscal costs.
  - Staff-developed scenario assumes such fiscal costs spread over two years in 2020-21.
  - In this scenario, the planned decrease in public debt is delayed by about one year and future debt service payments are higher, particularly over 2024-26.

### Risk rating and policy implications
- Overall public debt distress risk:
  - Togo remains at a high risk of overall public debt distress.
  - Togo had the largest overall debt-to-GDP ratio in WAEMU in 2018, at 76.2 percent of GDP (73.2 percent excluding debt of state-owned enterprises).
  - In the baseline, ratio of PV of overall public debt-to-GDP stands above the indicative benchmark through 2022 but on a steady declining trend, assuming a continued primary surplus at about 1 percent of GDP and substantial reduction in domestic debt.
  - 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.
- External debt distress rating:
  - Fund and Bank staffs view the risk of external debt distress should be maintained at moderate, unchanged from the rating at the time of the last DSA of June 2019.
  - All PPG external debt sustainability indicators expected to remain below their indicative thresholds throughout the projection period (2019-39) under the baseline, the most extreme stress test, and the debt reprofiling scenario.
  - Judgment applied given vulnerabilities from high domestic debt, which could lead to a reprofiling operation larger than currently envisaged.
  - Reiterates need for sustained fiscal consolidation, improved debt management, and strong macroeconomic policies to reduce public debt over the medium term.

*Source: IMF staff DSA text provided in content unit 1tgoea2019003.*

### 12.      The authorities broadly agreed with staff's assessment of Togo's public debt situation and

### 12.      The authorities broadly agreed with staff's assessment of Togo's public debt situation and

### Authorities' assessment and policy stance
- The authorities broadly agreed with staff's assessment of Togo's public debt situation and recommendations.
- They concurred with staff’s assessment of risk ratings and distress level.
- Given that Togo's current level of debt is still the highest among WAEMU members and the overall risk of debt distress remains high, they recognize that the fiscal consolidation must continue to bring public debt down below the relevant benchmark.
- The authorities are making efforts to improve debt management, including bringing the new debt department to full operation with adequate staffing.

### Public debt coverage and contingent liability design (Text Table 2 and Text Table 3)
- Coverage of public debt: The central government, government-guaranteed debt, non-guaranteed SOE debt.
- Guarantees (to other entities in the public and private sector, including to SOEs): covered (X).
- Non-guaranteed SOE debt: covered (X).
- PPP: 35 percent of PPP stock → 6.8 (percent of GDP).
- Financial market (the default value of 5 percent of GDP is the minimum value): 5 percent of GDP → 5.0.
- Total (2+3+4+5) (in percent of GDP): 11.8.
- Default shock rule: "The default shock of 2% of GDP will be triggered for countries whose government-guaranteed debt is not fully captured under the country's public debt definition (1.). If it is already included in the government debt (1.) and risks associated with SoE's debt not guaranteed by the government is assessed to be negligible, a country team may reduce this to 0%."

CI Score calculation (Text Table 3):
- CPIA: Coefficient (A) 0.4; 10-year average values (B) 3.1; CI Score components (A*B) = (C) 1.24; Contribution of components 41%.
- Real growth rate (in percent): Coefficient 2.7; 10-year average 5.3; component 0.15; Contribution 5%.
- Import coverage of reserves (in percent): Coefficient 4.1; 10-year average 40.2; component 1.65; Contribution 22%.
- Import coverage of reserves^2 (in percent): Coefficient -4.0; 10-year average 16.2; component -0.6; Contribution -22%.
- Remittances (in percent): Coefficient 2.0; 10-year average 4.8; component 0.13; Contribution 5%.
- World economic growth (in percent): Coefficient 13; 10-year average 3.6; component 0.517; Contribution 7%.
- CI Score: 2.89 → 100% → CI rating: Medium.

### External Debt Sustainability Framework — Baseline Scenario (Table 1, selected series)
- External debt (nominal) (in percent of GDP): 2016 20.2; 2017 20.1; 2018 20.5; 2019 22.2; 2020 21.9; 2021 21.5; 2022 21.1; 2023 20.5; 2024 19.8; 2029 19.8; 2039 20.7; 2019 projection 19.8 (multiple entries reflect table formatting).
- Change in external debt: -1.5; 0.0; 0.3; 1.7; -0.2; -0.4; -0.4; -0.6; -0.7; -0.1; 0.2 (selected).
- Identified net debt-creating flows (selected): 15.2; -1.9; 0.3; 1.8; 1.9; 1.2; 0.6; 0.6; 0.4; 0.8; 0.8; 0.8.
- Non-interest current account deficit (in percent of GDP): 9.4; 1.6; 4.6; 5.3; 5.7; 5.3; 4.9; 5.0; 4.8; 5.2; 5.7; 7.4; 5.1 (series across years).
- Exports (in percent of GDP): 35.3; 33.1; 31.3; 32.1; 32.0; 32.5; 33.1; 33.5; 34.0; 35.9; 40.6.
- Imports (in percent of GDP): 53.7; 43.5; 43.6; 44.6; 45.0; 44.9; 45.0; 45.5; 45.8; 48.0; 53.0.
- Net current transfers (negative = inflow): -7.6; -8.3; -7.0; -6.8; -6.6; -6.6; -6.4; -6.4; -6.4; -6.3; -5.9; -7.7; -6.5.
- Net FDI (negative = inflow): 6.8; -2.5; -2.5; -2.7; -3.0; -3.2; -3.5; -3.6; -3.7; -3.8; -3.8; 2.6; -3.5.
- Endogenous debt dynamics: -1.0; -1.0; -1.8; -0.8; -0.9; -0.8; -0.8; -0.7; -0.7; -0.6; -0.6; -0.6 (selected).
- Sustainability indicators (selected): PV of PPG external debt-to-GDP ratio (series shows values around 15.1, 16.6, 16.6, 16.3, 15.9, 15.4, 14.7, 12.3, 13.6); PV of PPG external debt-to-exports ratio (48.2; 51.6; 51.8; 50.1; 48.2; 46.0; 43.3; 34.1; 33.5); PPG debt service-to-exports ratio (4.9; 5.9; 4.9; 3.9; 3.9; 3.6; 3.8; 4.4; 4.8; 3.8; 2.5); PPG debt service-to-revenue ratio (9.3; 10.7; 7.5; 6.3; 6.3; 5.7; 6.1; 7.1; 7.8; 5.8; 4.1).
- Gross external financing need (Billion of U.S. dollars): 0.2; 0.3; 0.5; 0.5; 0.6; 0.6; 0.7; 0.8; 0.9; 1.3; 3.1 (selected).

Key macroeconomic assumptions (selected):
- Real GDP growth (in percent): 5.6; 4.4; 4.9; 5.3; 5.5; 5.5; 5.5; 5.5; 5.5; 5.5; 5.5; 5.7; 5.5.
- GDP deflator in US dollar terms (change in percent): 1.3; 2.9; 6.4; -2.9; 2.6; 3.9; 3.7; 3.5; 3.7; 2.9; 2.9; -0.6; 2.6.
- Effective interest rate (percent): 1.8; 2.0; 1.7; 1.3; 1.3; 1.4; 1.5; 1.6; 1.7; 2.0; 1.5; 1.7.
- Growth of exports of G&S (US dollar terms, in percent): 5.3; 0.6; 5.5; 4.8; 8.1; 11.2; 11.4; 10.6; 11.0; 9.8; 10.8; 4.6; 9.6.
- Growth of imports of G&S (US dollar terms, in percent): -0.7; -12.9; 11.8; 4.5; 9.1; 9.5; 9.5; 10.4; 10.2; 9.6; 10.4; 4.4; 9.2.
- Grant element of new public sector borrowing (in percent): 37.1; 33.2; 34.0; 34.0; 34.0; 34.0; 34.0; 34.0; 34.2 (selected).
- Government revenues (excluding grants, in percent of GDP): 18.7; 18.2; 20.3; 19.9; 20.0; 20.3; 20.5; 20.8; 21.0; 23.4; 24.2; 17.9; 21.3.
- Nominal GDP (Billion of US dollars): values in table indicate growth across years (table formatting preserves series).

Memorandum items (selected):
- PV of external debt (in percent of GDP): 15.1; 16.6; 16.6; 16.3; 15.9; 15.4; 14.7; 12.3; 13.6.
- PV of PPG external debt (in Billion of US dollars): 0.8; 0.9; 1.0; 1.1; 1.1; 1.2; 1.2; 1.6; 4.0.
- (PVt-PVt-1)/GDPt-1 (in percent): 1.9; 1.4; 1.3; 1.1; 0.9; 0.7; 0.8; 1.3.

### Public Sector Debt Sustainability Framework — Baseline Scenario (Table 2, selected series)
- Public sector debt (in percent of GDP): 2016 81.4; 2017 76.0; 2018 76.2; 2019 73.1; 2020 68.9; 2021 64.7; 2022 60.8; 2023 57.0; 2024 53.3; 2029 37.9; 2039 31.5 (selected).
- Change in public sector debt: 9.2; -5.4; 0.2; -3.1; -4.1; -4.2; -3.9; -3.8; -3.7; -3.3; -3.2; -3.0; -2.9; -2.8; 0.5.
- Identified debt-creating flows: 5.5; -5.7; -1.8; -2.8; -3.9; -4.0; -3.7; -3.6; -3.5; -3.2; -3.1; -2.9; -2.8; -2.7; 0.5.
- Primary deficit: 7.2; -1.5; -1.6; 0.4; -1.0; -1.0; -1.0; -1.0; -1.0; -1.0; -1.0; -1.0; -1.0; -1.0; 2.0.
- Revenue and grants (in percent of GDP): 21.6; 21.4; 23.9; 24.0; 23.7; 23.9; 24.2; 24.4; 24.6; 25.2; 25.6; 26.1; 26.5; 26.7; 25.7.
- Primary (noninterest) expenditure (in percent of GDP): 28.7; 19.9; 22.3; 24.4; 22.7; 22.9; 23.2; 23.4; 23.6; 24.2; 24.6; 25.1; 25.5; 25.7; 27.6.
- Automatic debt dynamics: -1.7; -4.2; -1.4; -2.1; -2.9; -3.0; -2.7; -2.6; -2.5; -2.2; -2.1; -1.9; -1.8; -1.7; -1.5.
- Contribution from interest rate/growth differential: -2.2; -2.3; -2.3; -2.4; -2.6; -2.6; -2.4; -2.3; -2.2; -1.7; -1.5; -1.4; -1.3; -1.3; -1.0.
- Sustainability indicators (selected): PV of public debt-to-GDP ratio (71.3; 67.5; 63.5; 59.4; 55.6; 51.9; 48.2; 44.8; 41.6; 38.5; 35.4; 32.5; 25.3); PV of public debt-to-revenue and grants ratio (298.4; 281.6; 268.1; 248.3; 230.0; 212.2; 195.8; 177.9; 162.2; 147.6; 133.6; 121.5; 98.7); Debt service-to-revenue and grants ratio (55.5; 101.7; 57.7; 38.6; 47.3; 50.1; 34.8; 35.6; 35.1; 33.1; 32.0; 27.9; 26.6; 21.8; 12.1).
- Gross financing need: 19.1; 20.3; 13.4; 8.6; 10.2; 11.0; 7.4; 7.7; 7.6; 7.4; 7.2; 6.3; 6.1; 4.8; 5.1.

Key macro-fiscal assumptions mirrored those in the external DSA (Real GDP growth 5.6; 4.4; 4.9; 5.3; 5.5; etc.; average nominal interest rate on external debt: 1.8; 2.1; 1.6; 1.3; 1.3; 1.4; etc.).

### Sensitivity analysis and stress tests (Tables 3–4, Figures 1–8)
- Sensitivity analyses present alternative scenarios, bound tests, and tailored tests for key indicators of public and publicly guaranteed external debt, 2019–29.
- Baseline and scenario values for PV of debt-to-GDP ratio, PV of debt-to-exports ratio, debt service-to-exports ratio, and debt service-to-revenue ratio are provided across 2019–2029.
- Examples of stress-test shocks and outcomes (selected indicators extracted from tables/figures):
  - Alternative scenario A1 (Key variables at their historical averages in 2019-2029) shows much higher values for some debt indicators (series within tables).
  - Bound tests include shocks to Real GDP growth (B1), Primary balance (B2), Exports (B3), Other flows (B4), One-time 30 percent nominal depreciation (B5), and combinations (B6).
  - Tailored tests include Combined contingent liabilities (C1); Natural disaster, Commodity price, and Market Financing tests noted as "n.a." where not applicable.
- Thresholds used in stress tests: PV of debt-to-GDP, PV of debt-to-exports, debt service-to-exports, debt service-to-revenue have defined thresholds (figures/tables indicate thresholds such as 40, 180, 1518, etc., aligned with table formatting).
- Figures illustrate that the most extreme shocks affecting:
  - Debt service-to-revenue ratio: most extreme shock is "Non-debt flows".
  - PV of debt-to-exports ratio: most extreme shock is "Exports".
  - PV of debt-to-GDP ratio: most extreme shock is "Non-debt flows".
  - Debt service-to-exports ratio: most extreme shock is "Exports".
- Debt Reprofiling Scenario (Tables 5–6 and Figures 6–7, selected):
  - External debt (nominal) under debt reprofiling: increases in 2019 to 28.2 (in percent of GDP) and then gradual decline in projections (series shows 28.2; 27.7; 27.0; 26.3; 25.4; 24.4; 21.1; 21.1; 20.7; 24.5 in select years).
  - PV of PPG external debt-to-GDP ratio under reprofiling shows higher values for 2019–2024 (e.g., 22.4; 22.1; 21.5; 20.7; 19.7; 18.6; 14.6).
  - PPG debt service-to-exports and debt service-to-revenue ratios show elevated values in some projection years under reprofiling (selected values provided in tables).
- Scenarios including potential fiscal costs related to the financial sector are presented in figures; these increase PV of Debt-to-Revenue Ratio and Debt Service-to-Revenue Ratio in projected years when applied.

### Key implications and recommendations (derived from source text)
- Fiscal consolidation should continue to bring public debt down below the relevant benchmark given Togo's public debt remains the highest among WAEMU members and risk of debt distress remains high.
- Strengthen debt management: bring the new debt department to full operation with adequate staffing to improve debt management.

*Sources: Statement by Mr. Raghani, Executive Director for Togo, and Mrs. Boukpessi, Advisor to the Executive Director; IMF staff estimates and projections as presented in the provided Text Tables and Figures.*

### 1.   The Togolese authorities would like to thank Staff for the candid and constructive

### Statement by the Togolese authorities on the Fifth Review under the Extended Credit Facility (ECF)

### Summary and request
- The authorities thank Staff for candid and constructive discussions held in Lomé in the context of the Fifth Review under the ECF.
- They request completion of the Fifth Review and continued support from the Fund.
- All program targets for the following and last review will remain unchanged, except:
  - modification of the structural benchmark (SB) on two public banks to allow time for submission of preliminary documents for their privatization;
  - modification of two indicative targets (ITs) at end-December 2019 to accommodate election-related spending and the postponement to early 2020 of the last ECF disbursement.

### Recent developments and program performance
- Real GDP growth:
  - projected to reach 5.3 percent in 2019, up from 4.9 percent in 2018.
  - growth driven by buoyant production in phosphates, coffee, cocoa and cotton, and strong activity in transportation (port and airport).
- Inflation:
  - remained subdued at 0.6 percent at end-July 2019.
- Fiscal balance and public debt:
  - overall fiscal deficit reduced from 9.5 percent of GDP in 2016 and is expected to reach 2.9 percent of GDP in 2019.
  - public debt-to-GDP (excluding state-owned enterprise debt) projected to decrease from 73.6 percent of GDP in 2018 to 70.9 percent by end-December 2019.
- Program performance:
  - All end-June 2019 and continuous quantitative performance criteria (PCs) were met.
  - Total fiscal revenue exceeded the floor under the program; domestic arrears were not accumulated.
  - The IT on priority social spending for end-June 2019 was missed by 0.7 percent of GDP, due mainly to a change in the strategic framework for Programme d’Urgence de Développement Communautaire and under-execution of some investment projects.
  - All end-June structural benchmarks (SBs) were met, except the one related to the revised privatization strategy for one of the two public banks; an open tender initially scheduled for end-August 2019 was launched in September 2019 with publication of the prequalification notice.

### Medium-term outlook and macroeconomic policies
- Outlook:
  - Medium-term economic outlook is favorable, supported by public infrastructure investments, NDP project implementation and increased foreign direct investment.
- Risks:
  - Significant risks include rising trade protectionism, decelerating global growth, regional security threats and climate change.
- Policy focus:
  - Reinforce economy’s resilience to shocks.
  - Increase fiscal sustainability through consolidation to meet WAEMU convergence criteria.
  - Strengthen debt sustainability, address financial vulnerabilities, and improve governance and the business environment.

### Safeguarding fiscal and debt sustainability
- Fiscal stance:
  - 2019 supplementary budget projects an overall deficit of 2.9 percent of GDP (from 2.7 percent at time of fourth review) to reflect spending initially programmed for 2020 and emergency expenditures.
  - 2020 overall fiscal deficit projected at 1.9 percent of GDP; beyond 2020 it should remain below the WAEMU convergence threshold.
- Revenue mobilization and administration reforms (action plan based on TADAT recommendations):
  - expand by December 2019 the online filing system to most large companies;
  - extend online tax-return filing to medium-sized companies;
  - increase incentives for voluntary tax payments;
  - achieve total dematerialization of customs procedures and declarations.
- Tax expenditures:
  - reduced from 4.3 percent of GDP in 2016 to 1.9 percent in 2018.
- Expenditure efficiency and PFM reforms:
  - centralization of procurement, streamlining of the civil service payroll, reduction in exemptions.
  - adoption of the first program-based budget for 2020-22 by the cabinet in June.
  - gradual closure of government accounts in commercial banks and transfer of balances to the Treasury Single Account (TSA), while extending TSA coverage to include other government entities.
- Private sector and PPPs:
  - legal and institutional framework for PPP development established; PPP unit created within the public debt directorate and provided with necessary tools.
- Debt outlook and strategy:
  - Authorities note updated debt sustainability analysis: risk of external debt distress remains moderate; risk of overall public debt distress is high.
  - Public debt-to-GDP ratio projected to continue declining and meet the WAEMU debt convergence criterion of 70 percent of GDP by 2020.
  - Plan to carry out a debt reprofiling operation with adequate safeguards to reduce the present value of the public debt stock and mitigate rollover risks.
  - Commitment to a prudent borrowing strategy and to reinforce public debt directorate capacities given higher international market exposure.

### Strengthening financial stability
- Objective:
  - Position Togo as a sub-regional financial center under the NDP while enhancing financial stability in coordination with the regional banking Commission.
- Main vulnerabilities to address:
  - high level of NPLs, compliance with capital requirements, loan concentration and risk management.
- Bank privatization:
  - Important strides towards finalizing privatization of the two state-owned banks; with an international transaction advisor, an open tender to pre-select investors for the two public banks was launched in September 2019.

### Advancing structural reforms to spur private investment and inclusive growth
- NDP goals:
  - structurally transform the economy, achieve stronger, more sustainable and inclusive growth, create jobs and improve living standards.
- Role of private sector:
  - private sector expected to lead, supported by strengthened government institutions and business-friendly policies.
- Reform priorities:
  - land registration and management, customs procedures, tax administration.
  - reforms under the Compact with Africa initiative to boost private investment.
  - strengthen institutions, governance and the anti-corruption legal framework under HAPLUCIA supervision.
  - implement action plan to address vulnerabilities identified in the national multisectoral money laundering/financing of terrorism risk assessment completed with the World Bank.
- Progress noted:
  - gains in World Bank Doing Business rankings over the last two years.

### Building capacity
- Continued capacity development prioritized in revenue administration, public financial management and statistics.
- Authorities welcome Fund’s tailored assistance and emphasize importance of a resident advisor to help buttress debt management capacity.

### Conclusion
- Authorities reiterate commitment to achieve ECF program objectives:
  - pursue fiscal consolidation;
  - implement reforms to strengthen macroeconomic and financial stability;
  - bring public debt to sustainable levels while raising social spending and promoting more inclusive growth.
- They request the Executive Board’s completion of the fifth review under the ECF arrangement given satisfactory program performance.

*Source: https://www.imf.org/-/media/files/publications/cr/2019/1tgoea2019003.pdf*

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_Source: https://www.imf.org/-/media/files/publications/cr/2019/1tgoea2019003.pdf_