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### Context
- Following a series of shocks in recent years, Togo faces persistent challenges to food security and terrorist attacks, while broader development needs remain acute.
- Fiscal expansion implemented in response to the shocks:
  - Helped preserve robust economic growth.
  - Pushed up public debt, reversing the debt reduction achieved during the 2017–20 ECF-arrangement.
  - Eroded fiscal space and buffers to absorb shocks, and contributed to regional vulnerabilities in the WAEMU.
- The Fund approved the authorities’ request for a new ECF-arrangement in March 2024.
- Political/constitutional change:
  - Parliament adopted a new constitution in mid-April moving Togo from a presidential to a parliamentary system.
  - Parliament elects the head of the biggest party to a position titled “President of the Council of Ministers,” which staff understand resembles that of Prime Minister and is free of term limits.
  - The President signed the new constitution in May; the country is undergoing a one-year transition to the new constitutional system.

### Outlook and risks
- Baseline projections:
  - Growth projected to soften to 5.3 percent over 2024-25 and recover to a trend of 5.5 percent per year in later years.
  - Headline inflation projected to converge to 2 percent by 2025.
  - Fiscal deficit projected to converge to the regional deficit ceiling of 3 percent of GDP by 2025.
  - Current account deficit projected to remain around 3 percent of GDP.
- Elevated risks:
  - Potential intensification of terrorism.
  - Potential difficulties in securing affordable regional financing.
  - Banking sector challenges, including large sovereign-bank exposures (22.9 percent of banking system assets).
  - Longer-run risk: weakening debt sustainability if fiscal consolidation efforts disappoint.
- Upside risks:
  - Industrial policies, infrastructure investment, business environment reforms, and increases in transit trade could lift growth above projections.

### Main policy recommendations
- Anchor macroeconomic stability by ensuring fiscal consolidation to enhance debt sustainability.
  - Pursue consolidation mainly via revenue mobilization and efficiency gains from public financial management reforms.
  - Prepare a revenue mobilization plan combining tax policy and revenue administration to broaden the tax base.
- Conduct reforms to lay the basis for sustained growth.
  - Pursue horizontal reforms: improve governance and the business environment.
  - Continue financial sector reforms to support growth while limiting financial-sector risks.
  - Exercise caution when implementing industrial (vertical) policies.
- Strengthen social inclusion to accelerate SDG progress and support medium-term growth.
  - Increase health and education spending.
  - Make the social safety net more shock-responsive, with greater use of cash transfers.

### Recent economic developments and key statistics
- Growth and inflation:
  - Growth estimated at 5.6 percent in 2023.
  - Headline inflation fell to 3.9 percent in May 2024; core inflation to 1.4 percent (y-o-y).
  - Growth benefited in part from activity in the Adetikopé special economic zone.
- Food insecurity and poverty:
  - Incidence of food insecurity rose sharply through end-2022 and remains high: 27 percent of the population face food insecurity to at least some degree.
  - About a quarter of the population remains extremely poor (income below USD 2.15 a day).
  - Extreme poverty nowcasted at 25.8 percent nationally in 2023 (World Bank April 2024 Macro Poverty Outlook).
- Selected macro projections (Text Table 2):
  - Real GDP (percent change): 2022 5.8 | 2023 5.6 | 2024 5.3 | 2025 5.3 | 2026 5.5 | 2027 5.5 | 2028 5.5 | 2029 5.5
  - CPI inflation, average (percent): 2022 7.6 | 2023 5.3 | 2024 2.7 | 2025 2.0 | 2026 2.0 | 2027 2.0 | 2028 2.0 | 2029 2.0
  - Current account balance (percent of GDP): 2022 -3.5 | 2023 -2.9 | 2024 -3.3 | 2025 -3.3 | 2026 -3.1 | 2027 -2.5 | 2028 -2.3 | 2029 -2.3
  - Total public and publicly guaranteed debt (percent of GDP): 2022 67.4 | 2023 68.0 | 2024 69.8 | 2025 68.5 | 2026 66.5 | 2027 64.9 | 2028 63.3 | 2029 61.9
  - Note: Data for 2023 are preliminary.

### Fiscal developments and revenue performance
- Fiscal expansion and deficits:
  - Overall fiscal deficit (cash basis, incl. grants) peaked at 8.3 percent of GDP in 2022.
  - Overall deficit (cash basis, incl. grants) fell to 6.7 percent of GDP in 2023.
- Revenue gains in 2023:
  - Tax revenue rose by 0.9 percent of GDP in 2023, exceeding the authorities’ earlier goal of 0.5 percent of GDP annually.
  - Most increase reflects taxes levied at the point of import and improved administration.
  - Non-tax revenue rose by 0.8 percent of GDP due to collection of land use fees, arrears, and contributions to a new Security Fund (Fonds De Concours).
- Selected fiscal numbers (Percent of GDP, 2023 preliminary):
  - Revenue and grants: 19.8
  - Total revenue: 16.8
  - Tax revenue: 14.8
  - Nontax revenue: 2.0
  - Grants: 3.1
  - Expenditures and net lending: 26.6
  - Current expenditures: 15.1
  - Fuel subsidies: 0.8
  - Capital expenditures: 11.5
  - Overall balance (commitment basis, incl. grants): -6.7
  - Overall balance (cash basis, incl. grants): -6.7
  - Overall balance (cash basis, excl. grants): -9.8
  - Domestic financing (net): 4.5
  - External financing (net): 5.3

### Debt and financing conditions
- Public debt dynamics:
  - Public debt increased from 54.9 percent of GDP in 2019 to 67.6 percent of GDP in 2022; total public debt was 68.0 percent of GDP at end-2023.
  - Present value of public debt at end-2023 estimated at 60.5 percent of GDP, 1.4 percentage points higher than at the time of the ECF request.
  - Present value of public debt remains on track to drop below 55 percent of GDP by 2026 under the authorities’ fiscal anchor, albeit with a smaller margin.
- Financing conditions and market metrics:
  - Average yield on Togo government bonds rose to 7.7 percent (from 6.0 percent in 2022).
  - Average maturity shortened to 3.4 years (from 8.9 years in 2022).
  - Authorities relied more on Treasury bills in 2023 and H1 2024.
  - Roll-over needs in the regional financial market amount to 18 percent of GDP per year over 2024-27.
  - Togo borrows externally from commercial banks and official/concessional sources; it has not yet issued tradable debt in global capital markets.
- Donor support revisions:
  - World Bank projected total lending over 2024-29 will be USD 933 million (75 percent) higher than previously projected; budget support loans USD 150 million (30 percent) higher; grants USD 37 million (29 percent) lower.

### Debt sustainability assessment and buffers
- Current assessment:
  - Debt is currently assessed as sustainable.
  - Risk of external debt distress is moderate; risk of overall debt distress is high.
  - Buffers to absorb shocks have “some space” and are most constrained when gauged against fiscal revenue (DSA).
  - High tax expenditure continues to constrain revenue.
- Public DSA highlights:
  - PV of public debt-to-GDP: 60.5 percent in 2023; projected to decline to 54.7 percent in 2026 under program.
  - Under the baseline public debt (nominal) peaks at 69.8 percent of GDP in 2024 then declines.
  - Contingent liability stress test assumes a combined shock of 13.7 percent of GDP (5 percent for financial markets, 6.7 percent for PPPs, 2 percent for SOE debt).
  - Unexplained stock-flow adjustments: staff estimate public debt increased by 6.8 percent of GDP more than explained by known transactions between 2017 and 2023 (1.0 percent of GDP on average per year).

### Financial sector developments and risks
- Improvements:
  - Banking system’s solvency ratio strengthened to 5 percent at end-2023 (from 2.6 percent in 2019).
  - Non-performing loans fell to 7.7 percent at end-2023 (from 15.6 percent in 2019).
- Remaining risks:
  - Three banks representing 19.4 percent of banking sector assets violated prudential norms at end-2023.
  - Two banks, together accounting for 18.9 percent of assets, had negative regulatory capital positions equivalent to 1.8 percent of 2024 GDP.
- Government and supervisory actions:
  - Government provided funds to lift the remaining public bank’s regulatory capital to zero; legal proceedings integrated these funds into the bank’s capital.
  - Supervisor reported banking sector solvency ratio improved to 7.5 percent at end-March 2024.
  - Independent audit commissioned for the bank’s regulatory capital; government plans to keep the bank in ownership.
  - Regional Banking Commission reprimanded and fined the owner of the bank privatized in 2021; owner attempted capital strengthening via purchase of bank real estate—impact uncertain.
  - Need to enhance AML/CFT implementation and ensure fit and proper ownership controls.
  - Authorities considering purchasing remaining real estate assets from the privatized bank to strengthen its regulatory capital.

### Progress on prior recommendations and reforms
- Fiscal consolidation: started consolidation in 2023 but deficits and public debt rose sharply in recent years.
- Revenue mobilization: Tax revenue increased to 14.8 percent of GDP from 13 percent in 2019 (post-rebasing).
- Financial stability: Banking soundness indicators improved; progress in strengthening solvency of two important banks; financial inclusion advanced.
- PFM and debt management: Program budgeting introduced in 2021; new procurement and PPP regulations in 2021; PIP expanded since 2022; medium-term debt strategy, annual borrowing plan, and quarterly/annual public debt reports published; meet with primary dealers.
- Social protection and inclusion: Progress toward SDGs; creating biometric ID and establishing a single “social registry.”
- Governance: Anti-corruption authority established; asset declaration law adopted; some improvement in perceived control of corruption and rule of law.
- Structural reforms: Improvements to business environment, digitalization of public administration, strengthened operations of the Port of Lomé.

### External position, reserves, and NIIP
- External position:
  - Current account deficit narrowed to 2.9 percent of GDP in 2023 (from 3.5 percent in 2022).
  - Improvement driven by terms of trade, lower fuel prices, improved services balance, and strong remittances.
  - High capital transfers, including public sector, played a major role financing the deficit.
- NIIP and external metrics:
  - NIIP improved to -9.1 percent of GDP in 2022 (from -12 percent in 2021 and -16 percent in 2018).
  - Gross assets: 121.2 percent of GDP in 2022; gross liabilities: 130.3 percent of GDP in 2022.
  - Public borrowing: securities 20 percent of GDP and loans 22 percent of GDP in 2022.
- Reserves:
  - End-2021: about CFAF 14 trillion (5.3 months of prospective imports).
  - 2022: CFAF 11.4 trillion (4.2 months).
  - 2023: under 10 trillion CFAF (3.2 months); end-June 2024: 3.6 months of prospective imports.
  - Staff assessed reserves below adequate at end-2023; rebuilding requires growth-friendly fiscal consolidation, tighter monetary policy, and structural reforms.

### Climate change exposure and fiscal implications
- Observed trends and projections:
  - Annual mean temperature increased by approximately 1 °C over the past four decades relative to pre-industrial level.
  - Extreme temperature events more frequent; sea-levels rising.
  - Staff expects GDP per capita to be lower by 8 percent by 2100 due to higher mean temperatures alone; without adaptation impacts roughly twice as large.
  - Extreme weather and sea-level rise could further undermine growth and fiscal sustainability.
- Adaptation cost estimates:
  - Staff estimate for sea level rise adaptation: annual 0.13 percent of GDP over first ten years.
  - Authorities estimate: 0.2 percent of GDP for the same adaptation.
  - Authorities’ and World Bank’s preliminary overall adaptation cost estimates: between 0.8 percent and 2.1 percent of GDP per year in the 2020s.
- Financing constraint: limited fiscal space implies most climate financing will likely need to be external.

### Fiscal policy, debt anchor, and consolidation strategy
- Dual fiscal anchor adopted with ECF request:
  - Reduce overall risk of debt distress to “moderate” by end-2026 by bringing PV of debt below 55 percent of GDP.
  - Lower fiscal deficit to at most 3 percent of GDP by 2025.
  - Policy driven by the tighter constraint and the need to avoid overly sharp adjustments.
- Medium-term fiscal plans (selected Text Table 3 entries):
  - Revenue and grants (percent of GDP): 2023 19.8 | 2024 19.0 | 2025 18.8 | 2026 19.2 | 2027 19.7 | 2028 20.1 | 2029 20.5
  - Tax revenue (percent of GDP): 2023 14.8 | 2024 15.2 | 2025 15.7 | 2026 16.2 | 2027 16.7 | 2028 17.2 | 2029 17.7
  - Expenditures and net lending (percent of GDP): 2023 26.6 | 2024 23.9 | 2025 21.8 | 2026 22.2 | 2027 22.7 | 2028 23.1 | 2029 23.5
  - Overall balance (cash basis, excl. grants) (percent of GDP): 2023 -9.8 | 2024 -8.6 | 2025 -4.6 | 2026 -4.4 | 2027 -4.5 | 2028 -4.3 | 2029 -4.2
  - Planned recapitalization and asset purchases: totaling 1.6 percent of GDP in 2024.

### Revenue mobilization and tax policy recommendations
- Authorities aim to raise tax revenue by 0.5 percent of GDP per year over the medium term.
- Staff recommends preparing a revenue mobilization strategy combining tax policy and revenue administration to broaden the base.
- Tax policy recommendations (selected):
  - Indirect taxation:
    - Phase out regressive VAT exemptions; protect the poor via increased cash transfers or targeted measures.
    - Broaden excise taxes and apply the common external tariff more fully through appropriate valuation of imports.
    - Reverse recent tax breaks (e.g., on motor vehicles and construction materials).
  - Direct taxation:
    - Simplify personal income tax; complete transition to a schedular system; broaden base.
    - Consider reducing new corporate income tax incentives; provide future incentives as tax credits rather than exemptions.
    - Consider requiring companies receiving tax advantages related to special regimes to move to an SEZ over time; withdraw advantages from non-compliant firms.
    - Strengthen property taxation.
- Revenue administration:
  - Reduce non-compliance, strengthen controls, expand digitalization, and cross-check customs declarations with domestic tax returns.
- Social acceptability:
  - Sequence, communicate, and protect the most vulnerable when implementing measures that raise cost of living, ideally starting before tax measures are enacted.
  - Improve fiscal transparency to strengthen public trust.

### Spending strategy and public financial management (PFM) reforms
- Spending plans:
  - Current spending projected to ease from 15.1 percent of GDP in 2023 to 14.1 percent of GDP in 2029.
  - Wage bill and goods and services spending projected to remain broadly unchanged as shares of GDP.
  - Investment projected to decline from 11.5 percent of GDP in 2023 to 9.3 percent in 2024 and 7.3 percent in 2025 before recovering later.
  - Social and pro-poor spending projected to expand from 4.8 percent of GDP in 2023 to 5.6 percent of GDP in 2029.
- PFM reform priorities:
  - Entrench program budgeting with decentralization to line ministries while retaining Ministry of Finance oversight.
  - Clarify and limit SOE- and PPP-related risks: adopt draft SOEs law; enhance SOE transparency and oversight; integrate SOE investment plans with public investment plans; ensure cost-recovery pricing with transparent subsidies.
  - Strengthen PPP management: integrate PPPs into the budget process and assign clear Ministry of Finance monitoring role.
  - Strengthen fiscal and debt reporting to account for central government funds and unexplained faster debt growth (average annual residuals 1.0 percent of GDP over 2017-23, including negative residual of 0.2 percent of GDP in 2023).
  - Create a working group with Fund staff participation to establish consistency across fiscal, debt, and banking data.

### Productivity, diversification, and structural policies
- Productivity and export diversification:
  - Economic complexity low: ranked 114th among 133 countries in 2021.
  - Exports driven by low and moderately complex goods, notably minerals and agricultural products.
- Industrial policy and SEZs:
  - Adetikopé SEZ: since 2020, number of companies grown to 16; reportedly attracted CFAF 136 billion (2.3 percent of GDP) in investment, additional CFAF 28 billion (0.5 percent of GDP) underway, and generating 6,000 new jobs.
  - Staff cautions industrial policies: require solid justification, careful design, rigorous cost-benefit assessment, institutional capacity, WTO compliance, and measures to minimize rent-seeking.
- Services-based development and skills:
  - Recommend preparing for a primarily services-based growth model: strengthen workforce skills, enhance internet connectivity, and leverage Togo’s role as a regional financial services and trade logistics hub.
- Infrastructure and utilities:
  - Enhance access to roads, internet, electricity, and water.
  - Align public investment plans with limited resources and maintenance costs; strengthen project preparation and inter-ministerial investment committee capacity.
  - Integrate climate change considerations into public investment decisions.
  - Utilities should offer services at lowest possible cost while ensuring cost recovery and targeted protections for vulnerable groups.

### Inclusion, social spending, and safety nets
- Current gaps:
  - Social spending and safety net coverage limited; less than half receive secondary education; only 5 percent protected from large out-of-pocket healthcare expenses.
  - Safety nets failed to protect against sharp food insecurity increases after recent shocks due to limited use of targeted instruments.
  - Literacy gap between women and men: 25 percent (almost double SSA average).
  - Child marriage incidence contributes to gender disparities.
- Staff recommendations:
  - Strengthen social spending on health and education; scale up cash transfers to the most vulnerable.
  - Make the social safety net more shock-responsive; highlight cash transfers as the best tool for scalability and speed.
  - Continue and accelerate Biometric ID and Unified Social Registry preparations to improve targeting.
  - Continue emergency program for northern regions.

### Governance, AML/CFT, and financial integrity
- Governance progress:
  - Anti-corruption authority established; asset declaration law adopted.
  - Perceived control of corruption and rule of law show improvement but corruption risk remains high relative to WAEMU neighbors.
  - Staff recommends an IMF Governance Diagnostic to assess laws, gaps, and agency coordination.
- AML/CFT:
  - Medium-high terrorism financing risks; main money laundering risks: tax evasion and corruption (2022 GIABA assessment).
  - Sequenced approach planned: (i) terrorist financing offence, (ii) implement UN Resolutions on terrorism/proliferation financing, (iii) measures on politically exposed persons.
  - Supervisory priorities: improve preventive measures for politically exposed persons and beneficial ownership verification.

### Data, safeguards, and capacity development
- Safeguards:
  - BCEAO safeguards assessment (August 2023) found well-established audit arrangements and strong control environment; BCEAO addressing recommendations.
- Data shortcomings:
  - Weaknesses in national accounts, government finance statistics, and external sector statistics; national accounts and external data available only 1.5 - 2 years after reference period.
  - Fund undertaking capacity building to improve national accounts, government finance, and public debt data.
  - World Bank assisting in reporting holders of regional market debt.
- Capacity development priorities:
  - Support for quarterly national accounts, SNA 2025 migration, GFSM 2014 fiscal coverage expansion, DSA capacity, and external sector statistics.
  - CD support for revenue mobilization, PFM strengthening, social safety net design, governance and AML/CFT, climate-related public investment management, and green budgeting.

### Staff appraisal and program priorities
- Staff view:
  - Togo weathered recent shocks relatively well; fiscal expansion raised public debt substantially while development needs remain acute.
  - Macroeconomic outlook broadly favorable but subject to elevated risks including terrorism, financing, banking sector, and climate change.
- Recommended policy priorities:
  - (i) Anchor macro stability by strengthening debt sustainability through growth-friendly fiscal consolidation and a comprehensive revenue mobilization strategy.
  - (ii) Strengthen foundations for productivity and growth via governance, business environment, financial sector improvements, and infrastructure.
  - (iii) Enhance inclusion through higher social spending, improved safety nets, and continued biometric ID/Unified Social Registry development.
  - Fund stands ready to support authorities with technical assistance and capacity development.

*Italic: Source: Executive Summary and selected chapters from the IMF staff report (1tgoea2024002-print-pdf).*

### EXECUTIVE SUMMARY

### EXECUTIVE SUMMARY

### Context
- Following a series of shocks in recent years, Togo continues to face persistent challenges to food security and terrorist attacks, while broader development needs remain acute.
- Fiscal expansion implemented in response to the shocks has:
  - Helped preserve robust economic growth.
  - Pushed up public debt, reversing the debt reduction achieved during the 2017–20 ECF-arrangement.
  - Eroded fiscal space and buffers to absorb shocks, and contributed to regional vulnerabilities in the West African Economic and Monetary Union (WAEMU).
- In response to these challenges, the Fund approved the authorities’ request for a new ECF-arrangement in March 2024.
- Political/constitutional change:
  - In mid-April, Parliament adopted a new constitution moving Togo from a presidential to a parliamentary system.
  - Parliament elects the head of the biggest party to a position titled “President of the Council of Ministers,” which staff understand resembles that of Prime Minister in a parliamentary system and which is free of term limits.
  - The President signed the new constitution in May; the country is undergoing a one-year transition to the new constitutional system.

### Outlook and Risks
- Baseline projections: macroeconomic performance is expected to remain robust.
- Elevated risks to the outlook include:
  - Potential intensification of terrorism.
  - Potential difficulties in securing affordable regional financing.
  - Banking sector challenges.
- Longer-run risk: weakening debt sustainability if efforts to achieve sufficient fiscal consolidation while maintaining robust growth disappoint.

### Main policy recommendations
- Anchor macroeconomic stability by ensuring fiscal consolidation to enhance debt sustainability.
  - Given spending pressures, pursue this goal mainly by mobilizing revenue and realizing efficiency gains from reforms of public financial management.
  - For revenue mobilization, prepare a plan that comprises both tax policy and revenue administration components aimed at broadening the tax base, building on recent FAD advice.
- Conduct reforms to lay the basis for sustained growth.
  - Pursue horizontal reforms including improvements to governance and the business environment.
  - Continue financial sector reforms to help the sector contribute more to growth while limiting financial-sector related risks.
  - Exercise caution when implementing industrial policies.
- Strengthen social inclusion to accelerate progress towards the Sustainable Development Goals and support medium-term growth prospects.
  - Increase health and in particular education spending to help the young build the human capital they need to meet the increasing skill requirements of the modern workplace.
  - Aim to make the social safety net more shock-responsive to help the population cope with increasingly frequent shocks.

### Recent economic developments
- Growth and inflation:
  - Growth is estimated to have reached 5.6 percent in 2023.
  - Headline inflation fell to 3.9 percent in May 2024; core inflation to 1.4 percent (y-o-y).
  - Growth benefited in part from increasing activity in the Adetikopé special economic zone.
- Food insecurity and poverty:
  - Incidence of food insecurity rose sharply through end-2022 and, while declining, remains high, with 27 percent of the population still facing it to at least some degree.
  - About a quarter of the population remains extremely poor (income below USD 2.15 a day).
  - Extreme poverty is nowcasted at 25.8 percent nationally in 2023 according to the World Bank’s April 2024 Sub-Saharan Africa Macro Poverty Outlook.

### Fiscal developments and revenue performance
- Fiscal expansion and deficits:
  - Overall fiscal deficit (cash basis, incl. grants) peaked at 8.3 percent of GDP in 2022 following measures to protect purchasing power and security-related outlays.
  - The overall deficit (cash basis, incl. grants) fell to 6.7 percent of GDP in 2023 (from 8.3 percent of GDP in 2022).
- Revenue gains in 2023:
  - Tax revenue rose by 0.9 percent of GDP in 2023, exceeding the authorities’ earlier goal of raising revenue by an annual average of 0.5 percent of GDP.
  - Most of the increase reflects taxes levied at the point of import; improved administration explains part of the increase.
  - Non-tax revenue rose by 0.8 percent of GDP primarily because the authorities started collecting land use fees and arrears on such fees, as well as contributions to a new Security Fund (Fonds De Concours).
- Selected fiscal numbers (Text Table 1: Percent of GDP, data for 2023 are preliminary):
  - Revenue and grants: 19.8
  - Total revenue: 16.8
  - Tax revenue: 14.8
  - Nontax revenue: 2.0
  - Grants: 3.1
  - Expenditures and net lending: 26.6
  - Current expenditures: 15.1
  - Fuel subsidies: 0.8
  - Capital expenditures: 11.5
  - Overall balance (commitment basis, incl. grants): -6.7
  - Overall balance (cash basis, incl. grants): -6.7
  - Overall balance (cash basis, excl. grants): -9.8
  - Domestic financing (net): 4.5
  - External financing (net): 5.3

### Debt and financing conditions
- Public debt dynamics:
  - Public debt increased from 54.9 percent of GDP in 2019 to 67.6 percent of GDP in 2022; total public debt was 68.0 percent of GDP at end-2023 (compared to an earlier estimate of 67.4 percent of GDP) reflecting inclusion of two domestic loans omitted previously.
  - The present value of public debt at end-2023 is estimated at 60.5 percent of GDP, 1.4 percentage points higher than at the time of the ECF request in March 2024.
  - The present value of public debt remains on track to drop below 55 percent of GDP by 2026 in line with the authorities’ unchanged fiscal anchor, albeit with a smaller margin.
- Financing conditions:
  - Average yield on Togo government bonds rose to 7.7 percent (from 6.0 percent in 2022).
  - Average maturity shortened to 3.4 years (from 8.9 years in 2022).
  - Authorities have relied more on Treasury bills in 2023 and the first half of 2024.
  - Roll-over needs in the regional financial market amount to 18 percent of GDP per year over 2024-27.
  - Togo borrows externally from commercial banks, alongside official and concessional borrowing; it has not yet issued tradable debt in global capital markets.
- Donor support revisions:
  - The World Bank revised up projected disbursements of budget support and project support loans significantly, mostly on highly concessional terms; grants projections are slightly lower.
  - Over 2024-29, total World Bank lending will be USD 933 million (75 percent) higher than previously projected, of which budget support loans will be USD 150 million (30 percent) higher. Grants will be USD 37 million (29 percent) lower.

### Debt sustainability assessment and buffers
- While debt is currently assessed as sustainable, the risk of external debt distress is moderate and the risk of overall debt distress is high.
- Buffers to absorb shocks have “some space” and are most constrained when gauged against fiscal revenue (DSA).
- High tax expenditure continues to constrain revenue.

### Financial sector developments and risks
- Banking soundness indicators have improved:
  - Banking system’s solvency ratio strengthened to 5 percent at end-2023 (from 2.6 percent in 2019).
  - Share of non-performing loans in total loans fell to 7.7 percent at end-2023 (from 15.6 percent in 2019).
- Remaining risks:
  - Three Togolese banks, representing 19.4 percent of banking sector assets, violated prudential norms at end-2023.
  - Two banks (the remaining state-owned bank and a formerly public bank privatized in 2021), together accounting for 18.9 percent of assets, had negative regulatory capital positions equivalent to 1.8 percent of 2024 GDP.
- Government and supervisory actions:
  - In February, the government provided funds to lift the remaining public bank’s regulatory capital to zero; a notary completed legal proceedings to integrate these funds into the bank’s capital.
  - Supervisor reported banking sector’s solvency ratio improved further to 7.5 percent at end-March 2024.
  - Government commissioned an independent audit of the bank’s regulatory capital and plans to keep the bank in government ownership.
  - Following a reprimand and fine by the regional Banking Commission, the owner of the bank privatized in 2021 has attempted to strengthen the bank’s regulatory capital via an entity under his control purchasing the bank’s headquarter building; the impact remains to be seen.
  - Efforts needed to enhance implementation of AML/CFT requirements, including ensuring bank ownership and control meet fit and proper requirements on a continued basis.
  - Authorities are considering purchasing some remaining real estate assets from the bank to help further strengthen its regulatory capital.

### Progress on prior recommendations and reforms
- Authorities’ implementation since the 2019 Article IV Consultation (high-level):
  - Fiscal consolidation: Authorities started to consolidate the fiscal position in 2023; deficits and public debt rose sharply in recent years.
  - Revenue mobilization: Tax revenue increased to 14.8 percent of GDP from 13 percent in 2019 (after the GDP rebasing).
  - Financial sector stability: Banking sector soundness indicators have improved; progress on strengthening solvency of two important banks; financial inclusion advanced.
  - Public investment management: Introduced program budgeting in 2021; adopted new regulations for public procurement and PPPs in 2021; PIP expanded since 2022 to include some extra-budgetary entities.
  - Debt management: Strengthened debt management with progress in nearly three quarters of indicators in the Debt Management Performance Assessment; publish medium-term debt strategy, annual borrowing plan, and quarterly and annual public debt reports; meet with primary dealers.
  - Social protection and inclusion: Progress toward SDGs and poverty reduction; creating biometric ID and establishing a single “social registry.”
  - Governance: Established an anti-corruption authority and adopted an asset declaration law; some improvement in perceived control of corruption and rule of law.
  - Structural reforms: Improvements to the business environment, digitalization of public administration, and strengthened operations of the port of Lomé.

*Executive Summary of the IMF Staff Report (1tgoea2024002-print-pdf - EXECUTIVE SUMMARY)*

### 11. Togo’s external position is assessed as broadly in line with the level implied by

### 11. Togo’s external position is assessed as broadly in line with the level implied by

### External position and recent developments
- Current account deficit narrowed to 2.9 percent of GDP in 2023.
- Drivers of the 2023 improvement:
  - Moderate improvement to the terms of trade.
  - Lower fuel prices containing import growth.
  - Improved services balance from higher travel and transit trade.
  - Continued strong remittances inflows.
- High levels of capital transfers, including an increase in the public sector, played a major role in financing the deficit.

### Outlook and risks
- Baseline projections:
  - Growth projected to soften to 5.3 percent over 2024-25 (assuming a fiscal multiplier of 0.1).
  - Growth projected to recover to a trend of 5.5 percent per year in later years.
  - Headline inflation projected to converge to 2 percent by 2025.
  - Fiscal deficit projected to converge to the regional deficit ceiling of 3 percent of GDP by 2025.
  - Current account deficit projected to remain around 3 percent of GDP.
- Elevated risks (Annex II, Risk Assessment Matrix):
  - Terrorism: Potential intensification or spread could dampen trade and logistics, increase security spending, or severely destabilize the economy.
  - Financing risk: Difficulty obtaining sufficient financing at affordable rates in the regional market could force sharp cuts in spending and be compounded by shortfalls of external concessional finance.
  - Financial sector risks: Sector remains undercapitalized; banks’ large claims on the government (22.9 percent of banking system assets) create risk of adverse feedback loops between government and banking sector finances.
  - Debt sustainability risk: Weakening debt sustainability if fiscal consolidation efforts fail (slower-than-envisaged revenue mobilization, spending overruns, insufficient spending efficiency, or weaker-than-anticipated growth). Fiscal accounts vulnerable to contingent liabilities from PPPs and SOEs (e.g., electricity provider under strain).
  - Climate change: Initial staff analysis finds growth and fiscal accounts vulnerable to climate change impacts.
- Upside risks:
  - Industrial policies, infrastructure investment, business environment reforms, and further increases in transit trade could lift growth above projections.

### Key macroeconomic estimates and projections (Text Table 2)
- Real GDP (percent change): 2022 5.8 | 2023 5.6 | 2024 5.3 | 2025 5.3 | 2026 5.5 | 2027 5.5 | 2028 5.5 | 2029 5.5
- GDP deflator (percent change): 2022 3.7 | 2023 2.9 | 2024 2.2 | 2025 2.0 | 2026 2.0 | 2027 2.0 | 2028 2.0 | 2029 2.0
- CPI inflation, average (percent): 2022 7.6 | 2023 5.3 | 2024 2.7 | 2025 2.0 | 2026 2.0 | 2027 2.0 | 2028 2.0 | 2029 2.0
- Overall balance (commitment basis, incl. grants, excl. banking sector operations): 2022 -4.7 | 2023 -6.7 | 2024 -4.9 | 2025 -3.0 | 2026 -3.0 | 2027 -3.0 | 2028 -3.0 | 2029 -3.0
- Current account balance: 2022 -3.5 | 2023 -2.9 | 2024 -3.3 | 2025 -3.3 | 2026 -3.1 | 2027 -2.5 | 2028 -2.3 | 2029 -2.3
- Total public and publicly guaranteed debt (percent of GDP): 2022 67.4 | 2023 68.0 | 2024 69.8 | 2025 68.5 | 2026 66.5 | 2027 64.9 | 2028 63.3 | 2029 61.9
- Note: Data for 2023 are preliminary.

### Climate change exposure and fiscal implications
- Observed climate trends:
  - Annual mean temperature increased by approximately 1 °C in Togo over the past four decades relative to pre-industrial level.
  - Extreme temperature events have become more frequent.
  - Sea-levels are rising.
- Projected impacts:
  - Mean temperatures expected to continue rising; extremely hot periods likely to become more frequent.
  - Staff expects GDP per capita to be lower by 8 percent by the year 2100 on account of higher mean temperatures alone (not including extreme weather events and sea-level rise).
  - Without adaptation, impacts would be roughly twice as large.
  - Extreme weather events and sea-level rise may result in additional growth declines and could undermine fiscal sustainability by reducing revenue and increasing spending.
- Adaptation cost estimates:
  - Staff estimate for adapting to sea level rise (reinforcing port installations, moving infrastructure/populations inland): annual 0.13 percent of GDP over the first ten years.
  - Authorities estimate: 0.2 percent of GDP for the same adaptation.
  - Authorities’ and World Bank’s preliminary overall adaptation cost estimates: between 0.8 percent of GDP and 2.1 percent of GDP per year in the 2020s.
- Financing constraint: Given limited fiscal space, most or all financing related to climate impacts will likely have to come from external sources.

### Fiscal policy, debt anchor, and consolidation strategy
- Dual fiscal anchor adopted in the context of the recent ECF request:
  - Reduce the overall risk of debt distress to “moderate” by end-2026 by bringing the present value of debt below 55 percent of GDP.
  - Lower the fiscal deficit to at most 3 percent of GDP by 2025.
  - Policy to be driven by the tighter of the two constraints and the need to avoid overly sharp adjustments.
- Medium-term fiscal plans (Text Table 3 highlights):
  - Authorities intend to implement the path of the overall fiscal deficit agreed at the time of the ECF request.
  - Projected PV of debt of 54.7 percent of GDP in 2026 (vs. 54.4 percent of GDP at time of ECF request).
  - Authorities aim to raise tax revenue by an ambitious 0.5 percent of GDP per year over the medium term.
  - Hypothesis: a quarter of the 2023 revenue overperformance is transitory; translates into a tax revenue target of 15.2 percent of GDP for 2024.

### Fiscal numbers and fiscal plan details (selected entries from Text Table 3)
- Revenue and grants (percent of GDP): 2023 19.8 | 2024 19.0 | 2025 18.8 | 2026 19.2 | 2027 19.7 | 2028 20.1 | 2029 20.5
- Total revenue (percent of GDP): 2023 16.8 | 2024 16.9 | 2025 17.3 | 2026 17.8 | 2027 18.3 | 2028 18.7 | 2029 19.3
- Tax revenue (percent of GDP): 2023 14.8 | 2024 15.2 | 2025 15.7 | 2026 16.2 | 2027 16.7 | 2028 17.2 | 2029 17.7
- Nontax revenue (percent of GDP): 2023 2.0 | 2024 1.6 | 2025 1.6 | 2026 1.6 | 2027 1.6 | 2028 1.6 | 2029 1.6
- Grants (percent of GDP): 2023 3.1 | 2024 2.1 | 2025 1.6 | 2026 1.5 | 2027 1.4 | 2028 1.3 | 2029 1.2
- Expenditures and net lending (percent of GDP): 2023 26.6 | 2024 23.9 | 2025 21.8 | 2026 22.2 | 2027 22.7 | 2028 23.1 | 2029 23.5
- Current expenditures (percent of GDP): 2023 15.1 | 2024 14.5 | 2025 14.6 | 2026 14.5 | 2027 14.4 | 2028 14.2 | 2029 14.1
- Capital expenditures (percent of GDP): 2023 11.5 | 2024 9.3 | 2025 7.3 | 2026 7.7 | 2027 8.3 | 2028 8.9 | 2029 9.4
- Emergency program for Northern regions (percent of GDP): 2023 1.2 | 2024 1.0 | 2025 0.7 | 2026 0.6 | 2027 0.6 | 2028 0.5 | 2029 0.5
- Overall balance (cash basis, excl. grants) (percent of GDP): 2023 -9.8 | 2024 -8.6 | 2025 -4.6 | 2026 -4.4 | 2027 -4.5 | 2028 -4.3 | 2029 -4.2
- Financing (percent of GDP): 2023 9.8 | 2024 7.2 | 2025 3.4 | 2026 3.6 | 2027 4.0 | 2028 4.3 | 2029 4.2
- Domestic financing (net) (percent of GDP): 2023 4.5 | 2024 3.3 | 2025 -0.2 | 2026 0.1 | 2027 0.2 | 2028 0.6 | 2029 1.3
- External financing (net) (percent of GDP): 2023 5.3 | 2024 3.9 | 2025 3.6 | 2026 3.6 | 2027 3.8 | 2028 3.7 | 2029 3.0
- Exceptional financing (percent of GDP): 2023 0.0 | 2024 1.3 | 2025 1.1 | 2026 0.8 | 2027 0.5 | 2028 0.0 | 2029 0.0
- Memorandum: Social and pro-poor spending (percent of GDP): 2023 4.8 | 2024 5.3 | 2025 5.1 | 2026 5.3 | 2027 5.4 | 2028 5.5 | 2029 5.6
- Planned recapitalization of ailing state-owned bank and purchase of real estate assets from a former public bank: totaling 1.6 percent of GDP in 2024.

### Revenue mobilization and tax policy recommendations
- Authorities aim to raise tax revenue by 0.5 percent of GDP per year over the medium term.
- Staff recommends preparation of a revenue mobilization strategy combining tax policy and revenue administration to broaden the tax base.
- Tax policy recommendations:
  - Indirect taxation:
    - Phase out regressive VAT exemptions; protect the poor through increased cash transfers or other targeted measures.
    - Broaden excise taxes and apply the common external tariff more fully by ensuring appropriate valuation of all imports.
    - Reverse recent tax breaks (e.g., on motor vehicles and construction materials).
  - Direct taxation:
    - Simplify the personal income tax, complete its transition to a schedular system, and broaden its base.
    - Consider reducing provision of new corporate income tax incentives and provide future incentives as tax credits rather than exemptions.
    - Consider requiring companies receiving tax advantages related to special economic regimes to move to a special economic zone over time; withdraw tax advantages from non-compliant companies.
    - Strengthen property taxation.
- Revenue administration recommendations:
  - Continue efforts to reduce non-compliance, strengthen controls, expand digitalization, and cross-check customs declarations with domestic tax return filings.
- Social acceptability:
  - Authorities should ensure acceptability of tax measures that raise the cost of living via appropriate sequencing, communication, and targeted protection (e.g., cash transfers) ideally starting before tax measures are enacted.
  - Continued governance improvements, notably fiscal transparency, can strengthen public trust.

### Spending strategy and public financial management (PFM) reforms
- Spending plans aim to enable priority spending (security, social, investment, banking sector repair) and consolidation.
  - Current spending projected to ease from 15.1 percent of GDP in 2023 to 14.1 percent of GDP in 2029, reflecting mainly declining interest payments and greater reliance on concessional external lending.
  - Wage bill and spending on goods and services projected to remain broadly unchanged as shares of GDP.
  - Investment projected to decline from 11.5 percent of GDP in 2023 to 9.3 percent in 2024 and 7.3 percent in 2025 before recovering later.
  - Planned compression of non-security investment through 2025 will weigh on growth and highlights importance of structural reforms.
  - Social and pro-poor spending projected to expand from 4.8 percent of GDP in 2023 to 5.6 percent of GDP in 2029.
- PFM reform priorities:
  - Entrench program budgeting via further decentralization of spending responsibilities to line ministries while retaining oversight at the Ministry of Finance.
  - Provide greater clarity on SOE- and PPP-related risks and limit these risks by:
    - Adopting the draft SOEs law.
    - Enhancing transparency on SOE operations and finances (make available SOE financial accounts at end-2022 and/or end-June 2023 to Fund staff and ideally publish them).
    - Strengthening SOE oversight and control by professionalizing SOE management, integrating SOE investment plans with public investment plans, and ensuring cost-recovery pricing with transparent budgeted subsidies.
    - Strengthening PPP management: integrate PPPs into the budget process, improve fiscal reporting, and assign clear Ministry of Finance monitoring role.
  - Strengthen fiscal and debt reporting to fully account for central government funds and determine reasons for debt’s faster growth than implied by known debt drivers.
    - Updated staff analysis finds average annual residuals of 1.0 percent of GDP over 2017-23, including a negative residual of 0.2 percent of GDP in 2023.
    - Next steps: establish consistency with changes in government position vis-à-vis the banking system, incorporate more recent SOE debt data, and analyze valuation change impacts.
    - Authorities intend to create a working group with Fund staff participation.

### Debt dynamics and decomposition (Text Figure 5 summary)
- Drivers of change in total public debt (2017–23) include:
  - Primary deficit, automatic debt dynamics, privatization receipts, change in SOE debt (2022-23 SOE debt accumulation are projections), change in BCEAO deposits, and a residual component.
- Updated staff analysis shows non-negligible residuals indicating gaps in debt documentation and reporting.

### Authorities’ views
- Authorities consider the outlook favorable and anticipate higher growth than staff’s base-case in particular via dynamic growth in special economic zones with spillovers to primary and tertiary sectors.
- Authorities reaffirm intention to adhere to fiscal anchor adopted earlier in the year.
- Policy alignment and actions under consideration:
  - Considering shifting CIT incentives from exemptions to a flat 15 percent tax rate with a minimum tax amount.
  - Seeking to strengthen property taxation.
  - Preference for achieving revenue mobilization primarily through revenue administration efforts (digitalization) rather than higher taxes on current taxpayers.
  - Acknowledge climate change risks and importance of better understanding future impacts on growth and fiscal accounts.

*Source: IMF staff report excerpt provided in content unit.*

### 27. At the same time, productivity has stagnated or even declined, in line with limited

### 27. At the same time, productivity has stagnated or even declined, in line with limited

### Productivity and Export Diversification
- Togo’s economic complexity remained low, ranking 114th among 133 countries in 2021.
- Exports continue to be driven mainly by low and moderately complex goods, particularly minerals and agricultural products.
- Text Figure 6: Export Diversification, 2000–21 (USD Million) — source: The Economic Complexity dataset.

### Growth Constraints and the Role of Productivity
- Given limited fiscal space for public investment, gains in productivity are identified as a key driver of future growth.
- Traditional developing-country path: diversifying into manufacturing and “learning by exporting” has been a historic route to raise productivity; automation and China’s manufacturing dominance (producing more than one third of global manufacturing output) create uncertainty for repeating this path.

### Policy Recommendation: Multiple Development Paths and Horizontal Policies
- Secure macroeconomic stability and debt sustainability.
- Implement horizontal policies to ensure good governance and a favorable business environment.

### Strengthening Governance and the Business Environment
- Progress: establishment of an anti-corruption authority and adoption of an asset declaration law over the past decade.
- Select governance indicators (perceived control of corruption and the rule of law) have improved (Text Figure 7).
- Business risk from corruption is still considered high; perceptions of corruption remain weaker than in WAEMU neighbors (Text Figure 8).
- Recommended action: undertake an IMF Governance Diagnostic to assess laws, legal gaps, implementation, and agency coordination; publication of the diagnostic would signal commitment to addressing governance challenges.

### AML/CFT and Financial Integrity
- Togo faces medium-high terrorism financing risks; main money laundering risks relate to tax evasion and corruption (2022 GIABA AML/CFT Assessment Report).
- Planned sequenced approach to address: (i) the terrorist financing offence, (ii) implementation of UN Resolutions on terrorism and proliferation financing, and (iii) measures regarding politically exposed persons.
- Supervisory priorities: improve preventive measures for politically exposed persons and verification of customers’ beneficial ownership.

### Enabling the Banking Sector and Access to Credit
- Firms identify limited access to credit and electricity as the two most important obstacles; the credit-to-GDP ratio has stagnated over the past decade.
- Staff recommendations (selected issues paper “Strengthening Togo’s Financial Sector”):
  - Continue to support access to financial services and generate information banks need to extend credit:
    - Strengthen payments systems, fully leverage government payment channels, develop secure digital identity systems, implement clear consumer protection rules, launch financial literacy programs, and promote competition.
    - Consider reversing the recent extension of the financial activities tax to mobile money transactions to avoid pushing consumers toward cash transactions.
    - Help potential borrowers exit the informal sector and enter the formal economy, including assistance with bookkeeping to improve credit bureau data.
  - Improve banks’ operating environment: strengthen the land ownership registry and the functioning of the judicial system to facilitate collateral enforcement and recovery against delinquent borrowers.
  - Support compliance with prudential norms: ensure the remaining public bank comes into full compliance with norms, building on recent efforts to lift regulatory capital to zero.
    - Concerning envisaged purchase of certain real estate assets from the bank privatized in 2021: staff recommend conditioning any such acquisitions on a simultaneous injection of capital by the bank’s owner, and using market prices determined via independent appraisals if there is a risk of overpayment.
  - Reduce large sovereign-bank exposure: fiscal consolidation and macroprudential tools can mitigate risks; use of targeted Pillar 2 capital surcharges recommended to address concentration on sovereign exposures.
  - Strengthen enforcement by the regional Banking Commission and increase publication of sanctions to enhance deterrence and compliance.

### Infrastructure, Utilities, and Public Investment
- Authorities need to enhance access to infrastructure (roads, internet) and strengthen provision of utility services (electricity, water).
- Strengthen both investment processes and utility management:
  - Align public investment plans with limited public resources and consider future maintenance costs.
  - Strengthen project preparation in line ministries and clarify the Ministry of Economy and Finance's role in PIP preparation, budgeting, and implementation.
  - Enhance the inter-ministerial investment committee's capacity.
  - Expand the Public Investment Program's scope to include investment by SOEs, remaining extra-budgetary units, and PPPs.
  - Align PPP decision-making with conventional projects so the Ministry of Finance leads.
  - Mitigate investor risks by improving business climate and governance; use multilateral initiatives for project preparation and financing.
  - Integrate climate change considerations into public investment decisions.
- Utilities: develop plans (in collaboration with partners such as the World Bank) to enable electricity and water providers to offer services at the lowest possible cost while ensuring cost recovery prices, with targeted protections for the most vulnerable. Prolonged below-cost-recovery pricing undermines utilities’ finances and risks growth and public finances.

### Industrial Policies and Manufacturing
- Authorities have pursued industrial policies including special tax regimes and special economic zones (SEZs); three special tax regimes: free-port rules, investment code rules, and rules for apparel manufacturing.
  - Incentives originally intended for companies locating within SEZs have been extended to investments anywhere in Togo due to demand and limited SEZ space.
- Adetikopé SEZ: since inception in 2020, number of companies grown to 16; reportedly attracted CFAF 136 billion CFA francs (2.3 percent of GDP) in investment, with an additional CFAF 28 billion (0.5 percent of GDP) underway, and generating 6,000 new jobs directly or indirectly. Activities include initial transformation of agricultural goods and apparel manufacturing.
- Staff cautions on industrial policies given mixed track records:
  - Industrial policies should have a solid justification by assessing market failures or constraints (sectoral skills, technology shortages).
  - Design carefully: select best policy instruments and complementary policies (e.g., governance reforms).
  - Require rigorous cost-benefit assessment including fiscal, administrative, and indirect costs due to potential resource misallocation.
  - Implementation must match institutional and administrative capacity, comply with WTO commitments, minimize rent-seeking, and maintain competition and openness.

### Services-Based Development and Skills
- Authorities should prepare for a primarily services-based growth model by strengthening workforce skills to meet modern tradable services’ requirements and enhancing internet connectivity to export such services.
- Togo could build on its growing position as a regional financial services and trade logistics hub and “leapfrog” to selling a broader range of services internationally.

### Strengthening the Primary Sector
- To enhance agricultural productivity, the government is creating “improved agricultural areas” (Zones d'Aménagement Agricoles Planifiées) providing agricultural inputs including fertilizers and machinery to smallholder farmers.
- Fund staff recommend the authorities seek advice from competent partners to assess and guide these efforts.

### Inclusion, Social Spending, and Safety Nets
- Social spending and the social safety net remain limited; overall social spending appears low by standard definitions.
  - Less than half of the population receive education at the secondary level.
  - Only five percent are protected from large out-of-pocket healthcare expenses.
- Effectiveness of schooling and health service provisions is unknown and requires additional study.
- Safety net performance: did not protect population against a sharp increase in food insecurity following recent shocks despite large fiscal outlays, likely due to limited use of targeted instruments.
  - During COVID, Novissi cash transfers were used early but kept limited due in part to concerns about adverse incentives; staff note better outcomes could have arisen from privileging cash transfers over weakly targeted instruments (fuel subsidies and VAT exemptions).
- Gender and human capital:
  - Literacy gap between women and men remains high at 25 percent, almost double the SSA average (Text Figure 9).
  - High incidence of child marriage contributes to this disparity with potentially large adverse impacts on growth.
- Staff recommendations:
  - Strengthen social spending focused on building human capital and shock resilience; scale up spending on health and education while ensuring spending efficiency.
  - Expand cash transfers to the most vulnerable, potentially even more than planned under the ECF arrangement, to enable investment in health and education.
  - Make the social safety net better at responding to shocks; cash transfers are highlighted as the best tool because they can be scaled up and down quickly.

### Authorities’ Views
- Authorities agree further governance improvements are desirable but consider staff may be overly critical; they will consider a Fund governance diagnostic.
- Authorities are optimistic about industrial policies’ potential for structural transformation and intend to end ad-hoc tax incentives that would add to incentives under the three special regimes.

*International Monetary Fund — Togo chapter excerpt.*

### 47. Staff recommends the following:

### 47. Staff recommends the following:

### Strengthening the social safety net and targeting
- Formulate a multi-pronged strategy for strengthening the social safety centered around increases in spending on health and education as well as cash transfers. This strategy needs to be compatible with the planned fiscal consolidation.
- Higher social spending could be financed in part by higher fiscal revenue and a reduction of weakly targeted subsidies.
- Authorities may wish to fully implement the new fuel pricing mechanism adopted in February while protecting the most vulnerable.
- Continue and, if possible, accelerate progress in preparing the Biometric ID and Unified Social Registry, key inputs for the targeting of support.
- Continue to implement the emergency program for the northern part of the country.
- Strengthen efforts to reduce gender disparities, including enhancing girls’ access to education.

### Authorities’ views
- Authorities ascribe high importance to strengthening inclusion and reducing gender disparities.
- Authorities highlight Togo’s continued progress towards the Sustainable Development Goals during the COVID-19 pandemic and the use of effective policies, including cash transfers (NOVISSI program).
- Authorities agree on the importance of strengthening the targeting of social spending and note that completion of the Biometric ID and Unified Social Registry will provide a strong basis for this.
- Authorities express reservations about staff’s recommendation to expand particularly the use of cash transfers, noting cultural aspects and other elements that suggest (unconditional and lasting) transfers are not always the most effective tool for reducing poverty.
- Authorities see value in using other tools, such as transfers to health and education providers that will then provide free services.

### Other issues: safeguards and data
- Safeguards assessment: The last assessment of the BCEAO, completed in August 2023, found that the central bank continues to have well-established audit arrangements and a strong control environment.
- The BCEAO is in the process of addressing the safeguards assessment's recommendation to align its Statute with changes in the 2019 cooperation agreement with France.
- Data shortcomings: Data provided to the Fund have shortcomings that somewhat hamper surveillance (Annex III).
  - Weaknesses in national accounts, government finance statistics, and external sector statistics affect the quality of economic analysis.
  - National accounts and external sector data become available only 1.5 - 2 years after the reference period, hampering assessment of the current or recent state of the economy.
- The Fund is undertaking efforts to help authorities strengthen capacity to compile national accounts, government finance, and public sector debt data (Annex IV, CD Strategy).
- The World Bank is helping authorities provide more granular reporting of the holders of debt issued on the regional market.

### Staff appraisal — macroeconomic context and priorities
- Togo has weathered recent shocks relatively well, with continued growth and progress towards the SDGs, but the fiscal expansion implemented has pushed up public debt substantially while development needs remain acute.
- With fiscal revenue strengthening and a beginning of fiscal consolidation in 2023, the macroeconomic outlook is broadly favorable but subject to elevated risks.
  - Growth is expected to remain robust despite further consolidation plans, while fiscal revenue is expected to rise further.
  - There are no substantial domestic or external disequilibria, as evidenced by low inflation and the external position assessed to be broadly in line with fundamentals.
  - Risks include a potential intensification of terrorism, difficulties in securing affordable regional financing, and banking sector challenges.
  - In the longer run, economic performance is also subject to the risk of weakening debt sustainability should efforts to achieve sufficient fiscal consolidation while maintaining robust growth disappoint. Climate change is an additional risk.

### Policy priorities recommended by staff
- Continue efforts to:
  (i) anchor macroeconomic stability by strengthening debt sustainability,
  (ii) strengthen the foundations of growth, and
  (iii) enhance inclusion.
- Strengthening debt sustainability via a growth-friendly fiscal consolidation:
  - The envisaged fiscal deficit path for 2024 and beyond remains appropriate.
  - Prepare a comprehensive revenue mobilization strategy encompassing both tax policy and revenue administration measures.
    - Tax policy measures should aim at broadening the tax base and enhancing the efficiency of taxation.
    - Consider appropriate sequencing to shield the most vulnerable against attendant increases in the cost of living through appropriate changes in fiscal spending, including via cash transfers.
    - Adopt a holistic fiscal approach that considers taxation and spending together to improve tax efficiency while achieving social goals through sufficiently progressive spending.
  - Improvements to tax administration will need to play a key role in mobilizing revenue.
  - Implement envisaged reforms in public financial management, including strengthening the oversight of state-owned enterprises and the transparency of their finances to reduce fiscal risks.
  - The Fund stands ready to support authorities’ efforts through technical assistance and capacity development.

- Ensuring robust growth:
  - Reaching the projected medium-term growth rate of around 5.5 percent per year will require stronger productivity growth than in the past, given that room for public investment is more limited than in recent years.
  - Conduct appropriate horizontal policies to lay the basis for productivity gains.
    - Strengthening governance (laws, enforcement, inter-agency collaboration) can boost growth and attract investment.
    - An IMF governance diagnostic assessment would be highly beneficial to provide fresh and independent insights and enable targeted solutions.
    - Continue to strengthen the business environment, including facilitating access to credit through a strengthened banking sector and improvements in banks’ operating environment such as a strengthened judicial system.
    - Improve access to essential infrastructure, including by expediting reforms in the water and electricity sectors.

- Caution on vertical policies and incentives:
  - Exercise caution in implementing vertical policies to attract investment.
  - Given dynamism at the Adetikopé SEZ, it could contribute to diversification, but authorities should carefully consider what investments to attract, the rationale for incentives, administrative constraints, and potential adverse impacts on revenue mobilization.
  - Tax incentives should be structured as credits rather than exemptions.
  - Work with competent partners to determine best options for strengthening agriculture.

- Enhancing inclusion:
  - Strengthen social spending to help build human capital and withstand shocks, including increased public spending on health and education to reap a "demographic dividend."
  - To ensure spending efficiency, seek advice of competent partners.
  - Fiscal resources for higher social spending can come from revenue mobilization and rationalization of spending, including shifting from regressive subsidies to more targeted social safety net measures.
  - Consider expanding the use of cash transfers; they have shown benefits in other countries and enable greater shock responsiveness of the social protection system. While alternative tools exist, they are often more difficult to manage.
  - Continue and, if possible, accelerate progress in preparing the Biometric ID and Unified Social Registry.
  - Continue to implement the emergency program for traditionally underserved populations in the northern part of the country.
  - Aim to reduce gender disparities, including by enhancing girls’ access to education.

- Data improvements:
  - Staff encourages authorities to intensify efforts to enhance data provided to the Fund.
  - Improved data would reduce uncertainty, enhance the quality and certainty of economic analysis, and improve the basis for determining appropriate policy settings.

*Source: 1tgoea2024002-print-pdf - 47. Staff recommends the following:*

### 60. The next Article IV Consultation is expected to take place within 24 months, in

### The next Article IV Consultation is expected to take place within 24 months

### Indicators of Economic Activity (2014–23)
- Private investment was an important driver of growth in 2022.
- Service sector (proxied by retail trade) continued recovery from COVID-19 pandemic lows.
- Activity at Port of Lomé remained strong in 2023.
- Electricity consumption increased significantly in 2023.
- Trade Turnover Index, Q1 2021–Q4 2023 (Base 2013 = 100): 118.5, 115, 119.3, 121.3, 129.1, 154, 156.3, 162.6, 151.8, 151.5, 158.1, 167.4 (displayed across period).
- Contribution to Growth - Demand, 2014–23 (percent change, year-on-year) components shown: Net Exports, Private Investment, Private Consumption, Public Cons. & Inv., Change in Inventory, Real GDP Growth (series plotted).

### Social Development Indicators (2012–22)
- Human Development Index (HDI) increased over the last decade, but the score is reduced by about 40 percent when adjusted for inequality (IHDI).
- Gender Development Index (GDI) shows progress towards gender equality is lagging both low-HDI and SSA averages.
- Human Development Index (HDI) and Inequality-Adjusted Human Development Index (IHDI), 2012–2022: HDI and IHDI series reported (values shown on figure).
- Population Using Basic and Safely Managed Sanitation and Drinking-Water Services, 2022 (percent of rural and urban populations):
  - Using at least basic sanitation services: Rural 9.1, Urban 32.1, (others: 58.5, 87.0 in figure context).
  - Using at least basic drinking water services and safely managed services plotted with values: 4.7, 7.1, 8.1, 33.9 (figure labels).
- Access to electricity, 2021 (percent of total and rural populations): More than half of the population connected; rural areas lag far behind. Specific plotted values include Togo, Low HDI, SSA comparisons (figure).

### External Sector (2017–23)
- Value of all categories of goods imports grew significantly in 2022 due to easing supply chain disruptions and high global food and fuel prices, then eased somewhat in 2023.
- Trade deficit narrowed slightly in 2023 as imports fell slightly.
- Current account deficit narrowed slightly in 2023.
- Regional foreign exchange reserves continued to decline, with some recovery in 2024 noted.
- Current Account Balance, 2017–23 (percent of GDP) components include Secondary income balance, Primary income balance, Balance on services, Balance on goods, Current Account (series plotted).
- Imports by Category, 2017–23 (percent of GDP) include Petroleum products, Intermediate goods, Capital goods, Consumer goods (series plotted).
- Trade Balance, 2017–23 (percent of GDP) shows exports and imports of goods and services (series plotted).

### Medium-Term Fiscal Developments (2019–28)
- Overall budget deficit programmed to narrow to 3 percent of GDP by 2025.
- Net domestic borrowing expected to fall to about 1 percent of GDP by 2025.
- Project grants and project loans (including some commercial loans on non-concessional terms) projected as key sources of external financing over the medium term.
- Policy emphasis: create room for higher social and other priority spending through a combination of revenue mobilization and effective control of non-priority current spending.
- Financing of the Fiscal Deficit (percent of GDP) components shown for 2019–2028: DSSI, IMF: ECF arrangement, External borrowing, net, Domestic borrowing, net, Overall budget deficit (cash basis) (series plotted).
- Composition of External Financing (percent of GDP) components shown: Project grants, Budget support grants, Project and commercial loans, Budget support loans, Debt reprofiling, Debt amortization, IMF DSSI (series plotted).
- Government Revenue and Spending (percent of GDP) and Composition of Fiscal Spending (percent of GDP) series plotted for 2019–2028.

### Selected Economic and Financial Indicators (Table 1, 2020–29)
- Real GDP: 2.0 (2020), 6.0 (2021), 5.8 (2022), 5.6 (2023), 5.3 (2024), 5.3 (2025), 5.5 (2026), 5.5 (2027), 5.5 (2028), 5.5 (2029).
- Real GDP per capita: -0.4, 3.5, 3.3, 3.1, 2.8, 2.8, 3.0, 3.0, 3.0, 3.0 (2020–2029).
- GDP deflator: 1.8, 2.5, 3.7, 2.9, 2.2, 2.0, 2.0, 2.0, 2.0, 2.0.
- Consumer price index (average): 1.8, 4.5, 7.6, 5.3, 2.7, 2.0, 2.0, 2.0, 2.0, 2.0.
- GDP (CFAF billions): 4,253; 4,621; 5,069; 5,507; 5,927; 6,366; 6,850; 7,371; 7,932; 8,536 (2020–2029).
- Exchange rate CFAF/US$ (annual average level): 575, 554, 622, 606 (series then dots).
- Net foreign assets (monetary survey): 14.1, 5.6, -0.6, 6.2, 2.7, 2.4, 3.0, 2.8, 2.2, 2.2.
- Net credit to government (monetary survey): -1.6, -0.3, 8.0, 0.2, -2.9, 1.0, 1.2, 2.0, 0.2, 0.2.
- Credit to nongovernment sector: 0.2, 6.0, 10.7, 1.5, 9.4, 4.0, 4.4, 4.6, 4.8, 4.8.
- Broad money (M2): 11.4, 12.3, 14.9, 8.5, 8.8, 7.4, 7.6, 7.6, 7.6, 7.6.
- Gross domestic investment: 21.4, 23.4, 25.9, 28.0, 26.0, 24.4, 25.0, 25.8, 26.7, 27.2.
- Gross national savings: 21.1, 21.1, 22.5, 25.1, 22.7, 21.0, 21.9, 23.3, 24.4, 24.9.
- Total revenue and grants (percent of GDP): 16.6, 17.1, 17.6, 18.9, 19.0, 18.8, 19.2, 19.7, 20.1, 20.5.
- Overall balance (commitment basis, incl. grants) (percent of GDP): -7.0, -4.7, -8.3, -6.7, -6.4, -3.0, -3.0, -3.0, -3.0, -3.0.
- Current account balance (percent of GDP): -0.3, -2.2, -3.5, -2.9, -3.3, -3.3, -3.1, -2.5, -2.3, -2.3.
- Exports (goods and services) (percent of GDP): 23.3, 23.7, 26.6, 25.5, 25.6, 25.5, 26.1, 26.3, 26.3, 26.2.
- Imports (goods and services) (percent of GDP): -32.3, -34.0, -38.8, -36.2, -35.7, -34.8, -34.4, -34.2, -34.0, -34.0.
- Total public debt: 62.2, 64.9, 67.4, 68.0, 69.8, 68.6, 66.5, 65.0, 63.4, 62.0 (2020–2029).
- Present value of total public debt: (series with dots) ... 60.5, 61.0, 58.3, 54.7, 51.8, 49.1, 47.4 (projected years).

### Central Government Financial Operations (Tables 2a and 2b, 2020–29)
- Revenues and grants (Billions of CFA Francs):
  - Revenue and grants (selected years): 708.0, 791.8, 894.5, 1,040.3, 1,093.0, 1,125.3, 1,199.0, 1,318.6, 1,455.0, 1,590.5, 1,747.9 (series across columns).
  - Total revenue: 600.9, 707.2, 767.1, 825.2, 923.9, 998.7, 1,100.2, 1,218.6, 1,348.4, 1,486.8, 1,647.1.
  - Tax revenue: 531.5, 646.9, 704.5, 765.1, 812.3, 902.7, 998.3, 1,110.0, 1,232.7, 1,363.5, 1,509.1.
  - Grants: 107.1, 84.6, 127.4, 215.1, 169.1, 126.5, 98.8, 100.0, 106.6, 103.7, 100.7.
- Expenditure and net lending (Billions of CFA Francs): 1,007.6, 1,006.8, 1,316.9, 1,407.8, 1,463.6, 1,414.2, 1,390.4, 1,522.9, 1,676.6, 1,830.2, 2,007.5.
- Public investment (Billions of CFA Francs): 394.2, 379.8, 493.7, 609.6, 632.7, 552.1, 462.9, 527.3, 613.8, 707.1, 805.1.
- Domestic financing (net) and external financing (net) detailed across years; examples:
  - Domestic financing (net): 24.8, 207.6, 362.2, 245.6, 246.3, 195.6, -13.0, 3.6, 12.5, 47.7, 107.5.
  - External financing (net): 293.1, 124.9, 183.4, 337.0, 293.4, 233.5, 230.9, 245.9, 278.7, 294.9, 252.0.
- Memorandum: Nominal GDP (CFAF billions) repeated: 4,253.2; 4,621.5; 5,068.9; 5,506.6; 5,507.2; 5,926.6; 6,365.6; 6,850.0; 7,371.3; 7,932.2; 8,535.9.
- Social and pro-poor spending (CFAF billions) series: ... 214.7, 229.8, 323.1, 263.3, 315.4, 324.7, 360.0, 394.8, 432.8, 474.3 (table context).

### Balance of Payments (Table 3, 2020–29)
- Current account balance (Billions of CFA Francs): -11.9, -103.6, -176.7, -158.9, -194.5, -211.6, -209.1, -187.5, -184.3, -200.6 (2020–2029).
- Trade balance on goods: -428.2, -554.5, -716.8, -704.7, -749.1, -786.2, -824.3, -859.1, -911.8, -985.0.
- Exports (Billions of CFA Francs): 695.0, 720.8, 899.2, 927.5, 983.0, 1,026.5, 1,103.7, 1,201.2, 1,292.9, 1,383.5.
- Imports (Billions of CFA Francs): 1,123.2, 1,275.4, 1,616.0, 1,632.3, 1,732.1, 1,812.7, 1,928.0, 2,060.3, 2,204.7, 2,368.5.
- Services, net; Primary income, net; Secondary income, net; Capital account balance; Financial account and Direct investment, net also provided with detailed yearly amounts.
- Overall Balance (Billions of CFA Francs): 151.6, 113.0, -21.0, 52.5, -2.4, 0.5, 43.6, 60.5, 83.6, 88.0.
- Financing gap and IMF ECF financing entries shown: Financing gap 89.1, 11.1, 0.0, 0.0, 78.0, 72.0, 72.3, 54.7, 36.9, 0.9, 0.9; IMF ECF 79.3, 0.0, 0.0, 0.0, 78.0, 72.0, 72.3, 54.7, 36.9, 0.9, 0.9.

### Depository Institutions Survey (Table 4, 2020–29)
- Net foreign assets (Billions of CFA Francs): 982.2, 1,092.7, 1,080.2, 1,239.9, 1,315.4, 1,388.2, 1,486.5, 1,583.9, 1,668.4, 1,757.3.
- Money supply (M2) (Billions of CFA Francs): 1,980.8, 2,224.6, 2,556.3, 2,774.9, 3,020.4, 3,244.1, 3,491.0, 3,756.6, 4,042.5, 4,350.1.
- Credit to nongovernment sector (Billions of CFA Francs): 1,305.5, 1,425.0, 1,663.5, 1,701.5, 1,962.3, 2,082.9, 2,224.8, 2,384.7, 2,565.6, 2,758.2.
- Annual change of M2 (percent): 11.4, 12.3, 14.9, 8.5, 8.8, 7.4, 7.6, 7.6, 7.6, 7.6.
- Memorandum: Velocity (GDP/end-of-period M2) = 2.1 (series constant at 2.1 or 2.0 across years).

### Financial Soundness Indicators of the Banking System (Table 5, 2016–June 2023)
- Regulatory capital to risk-weighted assets: 5.8 (2016), 8.4 (2017), 6.0 (2018*), 2.6 (2019), 3.0 (2020), 4.0 (2021), 4.2 (2022), 6.4 (June 2023).
- Common Equity Tier 1 to risk-weighted assets (solvency ratio) reported from June 2018 onward: values include 4.2, 2.3, 2.3, 3.1, 3.5, 5.5 (by June 2023).
- Provisions to total assets: 13.9, 16.1, 13.5, 13.3, 11.1, 9.1, 7.7, 7.1 (2016–June 2023).
- Loans to total assets: 49.1, 46.8, 47.0, 49.5, 44.3, 43.6, 47.5, 43.6.
- Non-performing loans to total gross loans: 16.2, 19.3, 17.8, 15.6, 16.0, 12.0, 8.1, 8.5.
- Bank provisions to non-performing loans: 77.3, 77.8, 78.6, 75.0, 68.4, 70.5, 74.5, 71.4.
- Return on assets (ROA) and Return on equity (ROE) series provided: ROA 2.6 (2016), 1.1 (2017), 0.8, 1.1, 0.6, 0.9, 0.9 (series); ROE 98.6 (2016), 28.1 (2017), 14.3, 21.7, 11.6, 16.6, 15.7 (series).
- Liquidity indicators: Liquid assets to total assets 17.6, 19.5, 17.1, 17.5, 14.5, 15.6, 20.2, 18.3.

*Sources: Togolese authorities; BCEAO; INSEED; PAL; CEET; UNDP; WHO; World Bank; IMF staff estimates and projections.*

*Document: 1tgoea2024002-print-pdf (selected figures and tables).*

### Annex I. External Sector Assessment

### Annex I. External Sector Assessment

### Overall assessment
- Using 2023 estimates, Togo’s external position is estimated to be broadly in line with the level implied by fundamentals and desirable policies in 2023, unchanged from the last assessment.
- Preliminary 2023 indicators and dynamics:
  - Current account deficit narrowed to 2.9 percent of GDP in 2023 from 3.5 percent of GDP in 2022.
  - Narrowing supported by improved terms of trade, lower fuel prices, increased transit trade and travel, and robust remittance inflows.
- Projection profile:
  - Current account deficit is projected to widen in the near term as remittances revert to pre-pandemic levels, then narrow in the medium term in line with fiscal consolidation and as infrastructure investment and structural reforms bolster exports.

### Potential policy responses and structural priorities
- Structural reforms to realize the potential of investments in industrial zones and trade infrastructure to expand and upgrade exports.
- Improve business environment to attract inward FDI and increase productivity.
- Longer-run investments in human capital to grow and diversify service exports linked to Togo’s role as a regional trade, logistics, and banking hub.
- Planned fiscal consolidation and shift to more concessional, long-term external debt to reduce debt vulnerabilities.
- Authorities should seek to increase inward FDI in the medium term by improving the business environment and investment climate.

### Foreign assets and liabilities: position and trajectory
- Historical and recent levels:
  - NIIP improved to -9 percent of GDP in 2022 from -12 percent in 2021 and -16 percent of GDP in 2018 (most recent full-year NIIP improvement referenced).
- 2022 (% GDP) stock indicators:
  - NIIP: -9.1
  - Gross Assets: 121.2
  - Debt Assets: 54.1
  - Gross Liab.: 130.3
  - Debt Liab.: 92.3
- Composition and trends:
  - Gross assets have increased steadily since 2018 with a higher share of portfolio investment (33 percent of GDP) and a lower share of direct investment (41 percent of GDP).
  - Gross liabilities declined slightly in 2023 because of a fall in direct investment to 28 percent of GDP following elevated levels of 35 percent of GDP in 2019-20.
  - Public borrowing: securities 20 percent of GDP and loans 22 percent of GDP (just less than half of gross liabilities).
  - Historical concentration: liabilities >60 percent concentrated in other WAEMU countries; assets >40 percent concentrated in other WAEMU countries.
  - Nearly a third of debt liabilities are to BCEAO (deemed lower risk).
- Assessment:
  - Current NIIP and projected path do not imply risks to external sustainability; substantial current account adjustment not needed.
  - High levels of assets and liabilities reflect transactions by regional banks based in Togo and arise from relatively stable flows.
  - Rebalancing borrowing away from regional CFAF securities to external concessional loans should reduce portfolio liabilities, increase other investment liabilities, and reduce risks.
  - Outward FDI linked to regional banks based in Togo likely to continue; improvements to business environment expected to increase inward FDI.
  - Improving trade balance will cushion moderation of capital and current private transfers to pre-pandemic levels, easing pressure on NIIP.

### Current account
- Background and recent evolution:
  - Current account deficit expanded to 3.5 percent of GDP in 2022, then is estimated to have narrowed to 2.9 percent of GDP in 2023.
  - Remittance inflows surged from an average of 4.0 percent of GDP from 2011-19 to 7.5 percent of GDP from 2020-22.
- Projections:
  - Current account deficit projected to increase moderately over the next two years as remittances revert to pre-pandemic levels.
  - Over the medium term, fiscal consolidation and export promotion are projected to reduce the deficit to below 3 percent of GDP from 2027 onwards.
  - While below 3 percent from 2027, this is wider than the average over the previous 5 years (1.9 percent of GDP) but lower than longer-term trends.
- Model estimates and gaps (EBA-lite methodology):
  - Cyclical contributions (from model): (-)-0.1
  - Additional temporary/statistical factors (to account for remittances): 0.8
  - Adjusted CA: -3.6
  - CA Norm (from model): -4.4
  - CA Gap: 0.8
  - o/w Relative policy gap: 2.4
  - Elasticity: -0.2
  - REER Gap (in percent): -4.0-10.8
- Assessment:
  - CA gap of 0.8 percent of GDP suggests Togo’s current account is broadly in line with fundamentals and desirable policies.
  - Low health expenditure is the main contribution to the policy gap of 2.4 percent of GDP, implying part of the relatively strong external position may be explained by high precautionary savings consistent with lack of health insurance.

### Real exchange rate
- Background and recent movement:
  - Togo is part of the WAEMU currency union with the CFA franc pegged to the euro.
  - Real effective exchange rate depreciated by 2.3 percent in 2022, largely driven by nominal depreciation of the euro after Russia’s invasion of Ukraine and international monetary policy tightening.
  - Real effective exchange rate estimated to have appreciated by about 5.4 percent in 2023, driven largely by relative appreciation of the euro against the USD and reflecting relatively high inflation.
- Assessment:
  - EBA-Lite Index Real Effective Exchange Rate (IREER) model estimates an undervaluation of 10.8 percent with respect to values implied by fundamentals and desirable policies for 2023.
  - The EBA-Lite current account model implies an undervaluation under an elasticity of -0.21 of magnitude 4.0 percent.

### Capital and financial accounts: flows and policy measures
- Background and recent flows:
  - Capital transfers have provided financing in excess of current account deficits since 2017.
  - Surge largely driven by private capital transfers believed to reflect remittances used for investment purposes, which plateaued in 2023.
  - Official capital transfers increased since 2021, supporting higher public investment and pushing the estimated 2023 capital account balance to 6.8 percent of GDP, exceeding the current account deficit of 2.9 percent of GDP.
  - Excess financing was offset by net direct and portfolio investment outflows from regional banks headquartered in Togo.
- Projections:
  - Capital account surplus projected to decrease in the medium term, consistent with the projection of remittances, and the financial account balance would decline.
- Assessment and policy implications:
  - Staff do not assess immediate risks or vulnerabilities linked to capital flows.
  - Projected moderation in capital transfers and continued net FDI and portfolio outflows linked to regional banks increases reliance on other financial flows.
  - Fiscal consolidation expected to reduce borrowing needs, particularly in the regional market, as authorities scale up longer-term and highly concessional external borrowing in line with medium-term debt strategy.
  - Authorities should seek to increase inward FDI in the medium term by improving business environment and investment climate.

### Reserves level
- Institutional context:
  - Togo is a currency union member with reserves pooled at the WAEMU level; policies on foreign exchange intervention, monetary operations, and capital account openness are regional.
- Recent reserve levels and months of prospective imports:
  - End-2021: about CFAF 14 trillion (5.3 months of prospective imports).
  - 2022: CFAF 11.4 trillion (4.2 months of prospective imports).
  - 2023: under 10 trillion CFAF (3.2 months of prospective imports), despite significant inflows including IMF disbursements.
  - First half of 2024: reserves started to recover, reaching the equivalent of 3.6 months of prospective imports by end-June 2024.
- Drivers of reserve drawdown:
  - Large imports from hydrocarbon projects in the region and earlier high food and fuel import prices.
  - Continued large fiscal deficits.
  - Tighter global financial conditions.
- Assessment:
  - Based on preliminary end-2023 level of reserves (3.2 months of imports), the regional team assessed reserves to be below the level assessed as adequate.
  - Improving current account and enhanced prospects for financial inflows expected to contribute to gradual rebuilding of external reserves toward adequate levels.
  - Key policies to return reserves to adequate range: growth-friendly fiscal consolidation, tighter monetary policy, and implementation of structural reforms.

*Source: Annex I. External Sector Assessment (2023–2024 estimates and projections) from the provided IMF content.*

### 2. Changes since the last Article IV consultation. The authorities have successfully built

### 2. Changes since the last Article IV consultation. The authorities have successfully built 

### Data improvements and use of statistics
- The authorities have built capacity to rebase their national accounts periodically (typically every five years).
- Progress has been made in compiling fiscal statistics using the 2014 Government Finance Statistics Manual.
- Staff do not use data and/or estimates different from official statistics. Staff compile tables and estimates for fiscal and external variables using the data provided by the authorities, ensuring alignment with the Fund’s standards.

### Corrective actions and capacity development priorities
- Authorities are addressing data gaps through technical assistance.
- Capacity development priorities with the Fund include:
  - supporting the development of contemporary quarterly national accounts consistent with annual national accounts;
  - supporting the GDP rebasing and migration to the System of National Accounts (SNA) 2025;
  - expanding the fiscal data coverage in line with GFSM 2014;
  - enhancing capacity to conduct debt sustainability analyses (DSA);
  - compiling external sector statistics.
- Efforts are undertaken to establish consistency between fiscal reporting and:
  - changes in the government’s position vis-à-vis the banking system; and
  - debt accumulation.

### Other data gaps
- Authorities are stepping up production of environmental and climate statistics as well as of labor market indicators.

### Data dissemination and standards
- Togo participates in the Enhanced General Data Dissemination System (e-GDDS) and publishes the data on its National Summary Data Page since July 2018.
- Table references: “Table 2. Togo: Data Standards Initiatives” and “Table 3. Togo: Common Indicators Required for Surveillance (As of June 25, 2024)” are included in the source.

### Capacity Development Strategy — past achievements
- Tax and customs administrations strengthened; implemented a number of CD recommendations on tax policy delivered in 2017; strengthened taxpayer registration and expanded electronic processing.
- Public financial management reforms implemented: transition to program budgeting and introduction of gender budgeting; more analytical information on SOEs is now published following CD on SOE supervision.
- Debt management improved, including creation of a new debt directorate and preparation of a new procedure manual; authorities now prepare regular updates of their medium-term debt strategy (MTDS) and publish quarterly debt bulletins on central government debt.
- The National Statistics Institute was strengthened, enabling a revision of Togo’s national accounts in line with best practice.

### Capacity Development Strategy — planned CD support
- Fiscal revenue: CD could support preparation of a comprehensive Medium-Term Revenue Mobilization Strategy; FAD could provide CD on topics such as strengthening taxation of property or mining activities.
- PFM strengthening: CD could help strengthen fiscal reporting (including consistency with the government’s position vis-à-vis the banking system), assess and strengthen public investment management, enhance the PPP and SOE management frameworks, and further strengthen the MTDS.
- Social safety net: CD could help determine the best use of limited budget resources to support the most vulnerable and integrate with revenue mobilization work to form a comprehensive Fiscal Policy Strategy.
- Statistics: CD will continue to strengthen compilation of national accounts, government finance, public sector debt, and the compilation and timing of external sector data.
- Governance and AML/CFT: Staff could prepare a comprehensive Governance Diagnostic and assist in strengthening the AML/CFT framework to align with FATF standards.
- Climate: CD on climate issues could underpin a request for financing under the RST; staff will accompany the introduction of green budgeting and could prepare a climate policy diagnostic and advise on climate-related aspects of public investment management.

### Debt Sustainability Analysis (DSA) — risk assessment and judgment
- Joint Bank-Fund DSA risk ratings:
  - Risk of external debt distress: Moderate
  - Overall risk of debt distress: High
  - Granularity in the risk rating: Some space to absorb shocks on external debt
  - Application of judgment: Yes. High exposure to domestic currency debt.
- DSA conclusion: Togo assessed at moderate risk of external debt distress and high overall risk of public debt distress—unchanged from the last DSA.
- Judgment rationale: Increased external risk from low to moderate because of high exposure to domestic currency debt and limited information about the residency of its holders.
- Reasons supporting sustainability:
  - fiscal consolidation is projected to reduce the overall risk of debt distress to moderate by 2026;
  - debt service, and all external DSA indicators, remain below respective thresholds in the shock scenario and trend downwards over the medium-term;
  - Togo benefits from access to the WAEMU market.
- Vulnerabilities: risk rating sensitive to fiscal slippages (particularly revenue shortfalls), growth shocks, and realization of contingent liabilities.
- Policy recommendation: Structural reforms to boost growth and promote exports would reduce debt vulnerabilities.
- MTDS priorities: external concessional debt, reduce cost of debt, lengthen maturities to mitigate rollover and refinancing risks.

### Public debt coverage and treatment
- Public debt coverage includes obligations of the central government and public entities; debt data cover:
  - central government obligations, including arrears to suppliers and guaranteed debt;
  - SOE debt (non-guaranteed debt of Port of Lomé (PAL) is excluded).
- Local authorities cannot contract new debt.
- Central government has repaid most domestic arrears and residual local debt identified in recent years.
- Authorities reported collateralized debt amounting to 1.7 percent of GDP in relation to Lomé airport, included in central government debt.
- DSA uses a currency-based definition of external and domestic debt, common with other WAEMU members; exception: debt owed to BOAD is treated as external even if denominated in CFAF.
- Note: Supported by a performance and policy action (PPA) under the World Bank’s SDFP, authorities reported in the end-December debt bulletin that 30.6 percent of debt issued by auction was held by Togo residents, but this does not include trades after issuance.

### Box: Exclusion of Port of Lomé (PAL) debt from the DSA
- Unincluded PAL debt (not guaranteed by government) amounted to CFAF 12.5 billion (0.2 percent of GDP) in 2022.
- Staff analysis concludes PAL should continue to be excluded from the DSA based on low fiscal risk driven by:
  - financial strength and track record of net profits averaging 0.1 percent of GDP since 2018;
  - payment of dividends, taxes and dues to the government (average CFAF 1.2 billion in dividends per year);
  - absence of operating subsidy since 2018;
  - ability to borrow without a guarantee in some circumstances (one outstanding external CFAF loan of CFAF 11.1 billion at end-2022 carries a government guarantee and is included in the DSA).
- PAL audited by a private audit firm based in Togo applying international standards; audit reports completed six months after year-end but are not published.
- A draft law (submitted June 2023) would require Ministerial authorization for public company borrowing beyond a threshold; the draft law is on the National Assembly agenda.

### Contingent liability stress-tests and shocks included
- Standard bank recapitalization stress test equivalent to 5 percent of GDP is included to cover potential financial sector needs.
- Rationale: Three Togolese banks, representing 19.4 percent of total banking sector assets, violated prudential norms at end-2023; two banks had negative regulatory capital positions totaling 1.8 percent of 2024 GDP. Recapitalization costs of 1.4 percent of GDP are included in the baseline. Staff assesses the 5 percent default value captures residual financial sector contingent liability risks.
- SOE contingent risk: although SOE debt is included in perimeter, a 2 percent of GDP stress test is included because data lags and potential contingent fiscal risk from SOEs operating with tariffs below cost recovery (energy and water) and the public pension fund (CRT), to which the state has social contribution arrears.
- PPP shock: World Bank PPP database indicates a PPP stock of 20 percent of GDP; a PPP stock shock of 6.7 percent of GDP (the standard 35 percent shock applied to the 20 percent PPP stock) is included, notwithstanding that half of the PPP stock relates to PAL (limited contingent fiscal risk).

### Stock-flow adjustments (SFA) and unexplained debt changes
- Using end-2023 fiscal, debt and BCEAO deposits data, staff estimates public debt increased by 6.8 percent of GDP more than can be explained by fiscal deficits and other identified transactions between 2017 and 2023 (Text Table 3), or 1.0 percent on average per year.
- Possible explanations for the discrepancy: lags in receiving SOE debt data, lack of historical data on central government deposits in commercial banks, valuation effects, and below-the-line transactions related to changes in arrears and accounts payable.
- Authorities will create a working group, supported by Fund technical assistance, to establish coherence between fiscal, debt and banking data.
- An alternative scenario is included in the DSA to account for possible debt accumulation due to unexplained SFAs.

### Text Table: Stock-flow adjustment, 2017–23 (percent of GDP)
- Change in total public debt: -2.8, 0.9, -3.1, 7.3, 2.7, 2.5, 0.6, 8.1 (2017–2023e)
- Expected change in debt: -2.6, -1.4, -0.3, 2.1, 2.0, 0.8, 0.7, 1.3
- Primary deficit: -1.1, -1.2, -3.8, 4.7, 2.5, 5.9, 3.9, 10.9
- Automatic debt dynamics: -1.9, -0.3, -0.1, -1.2, -0.8, -1.6, -3.2, -9.0
- Privatization receipts: -0.2, 0.0, -1.2, -0.5, 0.0, 0.0, 0.0, -1.9
- Change in SOE debt (projections for 2022 and 2023): 0.1, 0.5, 0.6, -0.8, 0.3, 0.3, 0.2, 1.2
- Change in BCEAO deposits: 0.5, -0.4, 4.1, 0.0, 0.0, -3.8, -0.3, 0.1
- Residual: -0.2, 2.3, -2.8, 5.1, 0.7, 1.7, -0.2, 6.8
- Arrears and accounts payable/receivable: 1.4, 2.6, 2.6, 0.0, 1.0, 0.0, 0.0, 7.5
- Change in commercial bank deposits: -0.7, 1.9, 1.6, 1.8, 2.2, 2.9, -1.0

### Background on debt dynamics since 2020
- Compound shocks since 2020 led to higher fiscal deficits and reversed the downward trend of public debt.
- Average fiscal deficit between 2020-22: 7 percent of GDP.
- Public debt surged by 12.5 percentage points of GDP between 2019 and 2022, from 54.9 percent of GDP to 67.4 percent of GDP.
- Togo deferred CFAF 20.9 billion of debt service through the DSSI (lower than projected CFAF 34 billion).
- The 2021 SDR allocation was on-lent from BCEAO to the government with a 20-year maturity (possibility of rollover) at a fixed interest rate of 0.05 percent; authorities notified staff that 93 percent of the SDR allocation was used for budget support in 2022 and its present value is recorded as domestic debt.
- Public debt increased further in 2023 to 68.0 percent of GDP as the deficit remained elevated; this was higher than the last DSA projection of 67.4 percent of GDP because a revision to 2022 domestic debt data incorporated two loans not included in the last DSA.
- Composition note: Nearly two thirds of the public debt stock remain domestic; excluding reclassified BOAD loans, external debt jumped.

*Source: Staff Report for the 2024 Article IV consultation (excerpt).*

### 5.3 percentage points of GDP between 2019 and

### 5.3 percentage points of GDP between 2019 and 2020

### Public debt dynamics and composition
- Public debt increased by 5.3 percentage points of GDP between 2019 and 2020, reflecting higher borrowing from multilateral sources (notably an augmentation to the IMF ECF arrangement in 2020) and from commercial banks to repay domestic debt.
- As a share of the portfolio, domestic debt dropped by 7.2 percentage points to 55.6 percent (reference year context around 2020).
- The shift to external debt was short-lived: nearly two thirds of the elevated financing needs in 2021-22 were met by domestic bond issuances that benefitted from longer maturities and lower yields in the regional market.
- Domestic debt increased from 34.6 percent of GDP in 2020 to 42.1 percent of GDP in 2023.
- External debt dropped from 27.6 percent of GDP in 2020 to 25.9 percent of GDP in 2023.
- At end-2023, domestic debt accounted for 61.9 percent of the public debt portfolio, around the same level as 2019.
- The authorities signed new external loan agreements of over US$850 million in 2023—half of which concessional—that will disburse over several years; further concessional and non-concessional external borrowing is part of the 2024 borrowing plan.
- Composition of public debt (percent of total, 2023): Multilateral 24%, Bilateral 9% (authorities note that some non-Paris Club loans are categorized as commercial which would make bilateral debt 2% and commercial debt 12%), Commercial Banks 5%, Domestic 62%.

### Debt service, yields, and rollover risks
- Total debt service (interest and amortization) was 52 percent of total revenue and grants in 2023; around 80 percent of this debt service was domestic.
- The average yield on Togo government bonds rose to 7.4 percent in 2023 (from 6 percent in 2022).
- The average maturity shortened to 4 years in 2023 (from 9 years in 2022) based on issuances through end-2023.
- Interest payments increased to 2.8 percent of GDP in 2023 from 2.4 percent of GDP in 2020.
- The share of securities held by other WAEMU residents at issuance increased from 60 percent at end-2018 to 79 percent at end-2023, indicating dependence on the regional market.
- Rollover needs in the regional financial market amount to 18 percent of GDP per year over 2024-27.
- Authorities expect a normalization in the regional market in the second half of 2024, which would help reduce interest costs and extend maturities.

### Macroeconomic projections and main assumptions
- Real GDP growth: 2023 revised up to 5.6 percent. Baseline projects growth moderated by fiscal consolidation to 5.3 percent between 2024-25; thereafter average 5.5 percent to 2034.
- Inflation: peak of 7.6 percent in 2022; headline inflation fell to 3.9 percent in May 2024; core inflation to 1.5 percent. Inflation projected to stabilize at about 2 percent in the long run.
- Public investment: projected to drop to a medium-term trend of around 10 percent of GDP.
- Revenue and grants: authorities committed to increasing revenue by 0.5 percentage points of GDP each year until 2027; revenue collection exceeded expectations in 2023.
- Primary balance: authorities plan consolidation to lower the fiscal deficit to no more than 3 percent of GDP by 2025. The primary balance is projected to converge to -0.5 percent of GDP in the long run.
- External: current account deficit estimated to have narrowed to 2.9 percent of GDP in 2023. Long-term current account deficit projected at 2.4 percent of GDP. Remittances projected to decline to around 5 percent of GDP from 2026 onwards.

### Financing needs and strategy (medium term)
- Gross financing needs in the next six years are projected to stem from primary deficits (12 percent) and debt service (88 percent).
- As fiscal consolidation proceeds, financing needs will shift to being almost entirely debt service between 2030-34.
- Financing assumptions (baseline):
  - External borrowing projected from IMF ECF and IDA; remaining needs assumed met by BOAD, other multilaterals, bilateral creditors, and commercial sources.
  - Borrowing from the IMF accounts for 13 percent of new external finance between 2024 and 2029; IDA accounts for 71 percent.
  - Overall grant element of external borrowing projected to increase between 2024 and 2028, then decline thereafter.
  - Domestic borrowing to meet residual financing needs; domestic borrowing classified into Treasury bills (10 percent), 1-3 year bonds (40 percent), 4-7 year bonds (35 percent), and long-term bonds (15 percent).
- No debt management operation is assumed in the baseline, though authorities may engage in one if conditions are favorable.

### Realism checks, drivers of debt dynamics, and fiscal adjustment
- Projections of overall public debt are marginally higher in 2024-25 than the previous DSA and substantially higher than the DSA of 5 years ago.
- The largest contributor to past forecast error on debt was the primary deficit expansion since 2020.
- Real interest rates are projected to contribute more to debt creation, reflecting tighter regional financing conditions.
- External debt projections are slightly higher than the previous DSA, reflecting a pivot towards external debt (notably World Bank).
- Fiscal adjustment: three-year adjustment in the primary balance from 2024-2026 equals 3.3 percent of GDP (lower than the prior DSA adjustment of 5.4 percent between 2022-25).
- The adjustment is expected to be achieved through both revenue and expenditure measures; authorities increased revenue by 0.9 percent of GDP in 2023.
- Expenditure consolidation will come mainly from lower public investment; risks include higher-than-expected security-related capital spending.
- Fiscal multipliers: estimated growth of 5.3 percent in 2024 is lower than projection under all fiscal multipliers. The 2025 projection is consistent with a fiscal multiplier of 0.1 percent (plausible range for LICs is between 0.1 and 0.2).

*Source: Togolese Authorities and IMF Staff*

### 11.      Togo’s debt carrying capacity remains “medium”. The composite indicator, which captures the

### 11.      Togo’s debt carrying capacity remains “medium”.

### Composite indicator and carrying capacity
- The composite indicator has increased to 3.01 since the last published DSA.
- A country’s debt-carrying capacity is assessed to be medium when the Composite Indicator is between 2.69 and 3.05 (inclusive).
- The external debt thresholds and total public debt benchmarks are set out in Text Table 4.

### Standardized stress tests and contingent liabilities
- Six standardized default-shock tests applied to both the public and external DSA: real GDP growth, the primary balance, exports, other financial inflows from current transfers and FDI, the exchange rate, and a combined shock.
- The contingent liability stress test assumes a shock of 13.7 percent of GDP, which includes:
  - 5 percent of GDP for financial markets (default value),
  - 6.7 percent of GDP for risks associated with PPPs,
  - 2 percent of GDP for SOE debt.
- Baseline and stress-test projections are assessed against the thresholds for medium debt carrying capacity.
- Togo has no prominent economic features requiring additional tailored stress tests (e.g., natural disasters, high reliance on commodity exports, market financing).

### External debt sustainability findings
- The model signals a low risk of external debt distress: all external debt indicators stay below respective thresholds under baseline and stress-test scenarios.
- PV of PPG external debt:
  - 19.8 percent of GDP in 2023,
  - Projected to decrease to 16.4 percent of GDP by 2029 in the baseline.
- PV of PPG external debt-to-exports ratio:
  - 77.9 percent in 2023,
  - Projected to decrease to 62.6 percent by 2029.
- Debt service indicators (percent of exports and revenue) are projected to worsen between 2024-26 and improve thereafter as fiscal consolidation takes hold and exports pick up.
- Notable near-term debt service obligations are due on loans with commercial terms, including to BOAD, EXIM Bank of China, Société Générale and Bank of Tokyo.
- Payments of between SDR 20 and 50 million against previous IMF ECF arrangements are due between 2024 and 2029.
- All debt burden indicators remain below thresholds under stress tests, though they rise sharply between 2024-26 under shocks.
- Export shocks have the greatest impact on PV debt-to-GDP and on PV debt-to-exports and debt service-to-exports ratios.
- The debt service-to-revenue ratio moves closest to its threshold under a one-time depreciation shock; risk contained because around two thirds of external debt is in Euros and CFAF (from BOAD), and the CFAF is pegged to the Euro.

### Policy-relevant implications from external DSA
- Strengthening domestic revenue mobilization and boosting exports would reduce debt vulnerabilities.
- The debt service-to-revenue ratio has some space to absorb shocks; other indicators have substantial space.
- Priorities include:
  - Strengthening revenue mobilization.
  - Increasing and diversifying the export base, including through value chains and trade logistics centered around the port.
  - Improving debt management capacity, including under technical assistance provided by the World Bank.

### Overall public debt sustainability and projections
- PV of overall public debt-to-GDP ratio remains above its benchmark in the baseline, signaling high risk of overall debt distress.
- Public debt (nominal) under the baseline:
  - Peaks at 69.8 percent of GDP in 2024 from 68.0 percent in 2023 (cost of bank recapitalization),
  - Declines steadily thereafter in line with fiscal consolidation.
- PV of public debt-to-GDP ratio:
  - 61.0 percent in 2024 (compared to benchmark of 55 percent of GDP),
  - Projected to decline to 54.7 percent of GDP in 2026,
  - Could reduce further to 37.2 percent of GDP in 2034 with continued robust growth, adherence to regional deficit convergence criteria, and high levels of concessional finance.
- Excluding the banking operation in 2024 reduces the primary deficit to 2.5 percent of GDP and would mean that growth is in line with the projection under a fiscal multiplier of 0.2.

### Contingent liabilities and scenarios
- Public debt is most vulnerable to realization of contingent liabilities: the combined contingent liability stress test has the largest impact on public debt ratios.
  - Under that scenario, the PV of overall public debt-to-GDP ratio would continue to rise in 2025 and decline gradually below the benchmark in 2031.
  - Under the historical scenario, the PV of overall public debt-to-GDP ratio remains above the benchmark during the entire projection period.
- Unexplained SFA scenario:
  - Staff constructed a scenario adding a 1.0 percent of GDP SFA in 2024 (average over 2017-23), decreasing by 0.2 percent of GDP each year until zero in 2029.
  - Under this scenario, debt would rise to 70.8 percent of GDP in 2024 and decrease thereafter.
  - The PV of public debt-to-GDP ratio would not drop below 55 percent until 2027.
  - This underscores the need to fully understand discrepancies to avoid further fiscal consolidation.

### Risk rating and vulnerabilities
- Risk ratings:
  - Moderate risk of external public debt distress.
  - High risk of overall public debt distress.
- Rationale and nuances:
  - PV of overall public debt-to-GDP ratio expected to stay above the indicative benchmark until 2026 → high risk of overall debt distress.
  - All PPG external debt sustainability indicators expected to remain below indicative thresholds throughout 2024–44 in baseline and stress-test scenarios → low risk of external debt distress mechanically; judgment leads to moderate external risk.
  - Absence of secondary market data prevents use of residency basis; data on residence of holders at issuance suggest 70-80 percent of debt likely held outside Togo, implying external debt on a residency basis is likely significantly higher than shown by currency-definition data.
  - If regional market rollover risks grow, authorities may need to borrow more externally than planned.
  - Under the LIC DSF guidance note, judgement is applied to maintain Togo at moderate risk of external debt distress.
- Space to absorb shocks:
  - Togo’s public debt is considered sustainable with some space to absorb shocks because:
    - (i) IMF ECF-supported fiscal consolidation projects PV of public debt to GDP below the high-risk threshold by 2026,
    - (ii) debt service and all external DSA indicators remain below thresholds in shock scenarios and trend downwards medium-term,
    - (iii) access to WAEMU market and support from regional debt institutions bolster capacity to carry CFAF debt.
  - Under the granularity module for moderate external risk, Togo has some space to absorb shocks (Figure 7).
  - The external debt service-to-revenue ratio is closest to its threshold; shocks smaller than the upper quartile of observed shocks could put Togo at high risk.

### Main risks to sustainability
- Fiscal pressures, market conditions, and realization of contingent liabilities are the main risks.
- Specific vulnerabilities:
  - Need for growth-friendly fiscal consolidation to reduce borrowing needs and lower overall debt distress risk to moderate by 2026.
  - Susceptibility of prospects to shocks.
  - Continued progress in revenue mobilization is essential.
  - High levels of domestic debt service combined with tighter regional market conditions have resulted in higher yields and shorter maturities → higher interest rate and rollover risks.
  - Stress tests show susceptibility to contingent liabilities; delays in SOE debt reporting and continued unexplained SFAs could lead to upward revisions of debt levels and may necessitate further fiscal consolidation.

### Policy recommendations and priorities
- Improve public sector debt recording and management and strengthen coordination with fiscal reporting.
- Continue efforts to track holders of debt denominated in domestic currency.
- Medium-term debt strategy (MTDS) 2024-26 focus on extending maturities and rebalancing borrowing towards external debt remains appropriate.
- Further elaboration of the MTDS to weigh costs and risks of borrowing options under different market scenarios is critical.
- Accompany MTDS with a more detailed and transparent medium-term borrowing plan.
- Improve timeliness of reporting on SOE debt; incorporate SOE debt reporting into the debt bulletin and MTDS.
- Create a working group to ensure consistency between fiscal, debt and monetary accounts to address unexplained debt accumulation.
- In coordination with the BCEAO, continue efforts to establish a mechanism for tracking the residency of holders of regional securities beyond issuance.

### Authorities’ views
- The authorities did not question the finding of a high risk of overall debt distress but took issue with the use of judgement to raise the assessed risk of external debt distress to “moderate” (from the mechanical “low” risk).

*Source: IMF staff analysis in the DSA chapter for Togo as provided in the supplied content.*

### 2024. The authorities consider that risks emanating from domestic currency debt are already captured in

### 1tgoea2024002-print-pdf - 2024. The authorities consider that risks emanating from domestic currency debt are already captured in

### Summary and authorities’ view
- The authorities consider that risks emanating from domestic currency debt are already captured in the assessment of the overall risks of debt distress.
- The authorities agreed to work with staff to deepen understanding of the residency of the holders of domestic currency debt to reduce the uncertainty that gave rise to the application of judgment.

### External Debt Sustainability — Baseline Scenario (selected indicators, 2021–44)
- External debt (nominal), percent of GDP:
  - 2021: 27.3
  - 2022: 26.2
  - 2023: 25.9
  - 2024: 27.4
  - 2025: 28.7
  - 2026: 29.6
  - 2027: 30.4
  - 2028: 30.6
  - 2029: 30.2
  - 2034: 29.7
  - 2044: 20.0
  - 2044 (alternate column): 29.9
- Identified net debt-creating flows, percent of GDP:
  - 2021: -0.1
  - 2022: 5.6
  - 2023: 2.1
  - 2024: 3.9
  - 2025: 3.8
  - 2026: 3.4
  - 2027: 2.8
  - 2028: 2.5
  - 2029: 2.6
  - 2030: 2.6
  - 2031: 6.5
  - 2032: 3.9
  - 2034: 2.9
- Non-interest current account deficit, percent of GDP:
  - 2021: 1.8
  - 2022: 3.0
  - 2023: 2.4
  - 2024: 2.9
  - 2025: 2.9
  - 2026: 2.7
  - 2027: 2.2
  - 2028: 2.0
  - 2029: 2.1
  - 2030: 2.1
  - 2031: 5.9
  - 2032: 3.2
  - 2034: 2.3
- Exports, percent of GDP:
  - 2021: 23.7
  - 2022: 26.6
  - 2023: 25.5
  - 2024: 25.6
  - 2025: 25.5
  - 2026: 26.1
  - 2027: 26.3
  - 2028: 26.3
  - 2029: 26.2
  - 2030: 26.6
  - 2031: 22.8
- Imports, percent of GDP:
  - 2021: 34.0
  - 2022: 38.8
  - 2023: 36.2
  - 2024: 35.7
  - 2025: 34.8
  - 2026: 34.4
  - 2027: 34.2
  - 2028: 34.0
  - 2029: 34.0
  - 2030: 34.3
  - 2031: 34.4
- Net FDI (negative = inflow), percent of GDP:
  - 2021: 0.8
  - 2022: 1.5
  - 2023: 1.9
  - 2024: 1.9
  - 2025: 1.8
  - 2026: 1.8
  - 2027: 1.8
  - 2028: 1.8
  - 2029: 1.8
  - 2030: 1.8
  - 2031: 1.8
  - 2032: 1.2
  - 2034: 1.8
- Endogenous debt dynamics (formula-based contribution), percent of GDP:
  - 2021: -2.7
  - 2022: 1.2
  - 2023: -2.2
  - 2024: -0.9
  - 2025: -0.9
  - 2026: -1.1
  - 2027: -1.2
  - 2028: -1.3
  - 2029: -1.3
  - 2030: -1.3
  - 2031: -1.1
- Residual (includes exceptional financing etc.), percent of GDP:
  - 2021: -0.3
  - 2022: -6.6
  - 2023: -2.5
  - 2024: -2.3
  - 2025: -2.5
  - 2026: -2.5
  - 2027: -2.1
  - 2028: -2.3
  - 2029: -3.0
  - 2030: -2.4
  - 2031: -7.8
  - 2032: -2.3
  - 2034: -2.5
- Sustainability indicators (selected):
  - PV of PPG external debt-to-GDP ratio (selected years): 19.8, 19.8, 19.5, 18.8, 18.1, 17.3, 16.4, 17.1, 19.3 (values shown in table).
  - PV of PPG external debt-to-exports ratio (selected): 77.9, 77.3, 76.5, 72.2, 69.0, 65.7, 62.6, 64.3, 85.0.
  - PPG debt service-to-exports ratio (selected): 5.2, 8.3, 8.2, 8.4, 9.1, 9.1, 8.2, 7.2, 6.5, 5.1, 6.3.
  - PPG debt service-to-revenue ratio (selected): 8.1, 14.6, 12.5, 12.8, 13.4, 13.4, 11.9, 10.1, 8.8, 6.4, 6.1.
- Gross external financing need (Billion of U.S. dollars):
  - 2021: 0.3
  - 2022: 0.5
  - 2023: 0.6
  - 2024: 0.7
  - 2025: 0.7
  - 2026: 0.8
  - 2027: 0.7
  - 2028: 0.7
  - 2029: 0.8
  - 2030: 1.0
  - 2031: 3.8

### Key macroeconomic assumptions (external DSA)
- Real GDP growth (in percent): 6.0, 5.8, 5.6, 5.3, 5.3, 5.5, 5.5, 5.5, 5.5, 5.5, 5.0, 5.5 (shown as series).
- GDP deflator in US dollar terms (change in percent): 6.3, -7.7, 5.6, 2.0, 1.6, 1.8, 1.8, 1.9, 2.0, 2.0, -0.5, 1.9.
- Effective interest rate (percent) 4/: 1.7, 1.8, 2.0, 1.6, 1.6, 1.4, 1.2, 1.1, 0.9, 1.0, 1.6, 1.8, 1.1.
- Growth of exports of G&S (US dollar terms, in percent): 14.4, 9.7, 6.8, 7.9, 6.7, 9.7, 8.4, 7.6, 7.2, 7.9, -7.7, 1.5, 7.9.
- Growth of imports of G&S (US dollar terms, in percent): 18.5, 11.5, 3.9, 6.0, 4.4, 6.3, 6.7, 7.0, 7.4, 7.6, 9.0, 1.8, 7.0.
- Grant element of new public sector borrowing (in percent): 47.8, 52.0, 56.5, 58.8, 63.8, 61.2, 39.9, 37.2, ... , 51.4 (values shown in table).
- Government revenues (excluding grants, in percent of GDP) (selected): 15.3, 15.1, 16.8, 16.9, 17.3, 17.8, 18.3, 18.7, 19.3, 21.1, 23.7, 14.7, 19.1.
- Aid flows (Billion of US dollars) 5/: 1.0, 1.1, 1.4, 0.5, 0.5, 0.6, 0.6, 0.6, 0.5, 0.6, 0.6.
- Grant-equivalent financing (in percent of GDP) 6/: 4.4, 4.2, 4.2, 4.2, 3.8, 3.1, 2.1, 1.1, ... , 3.3.
- Nominal dollar GDP growth (selected): 12.7, -2.3, 11.5, 7.4, 7.0, 7.4, 7.4, 7.5, 7.6, 7.6, 7.6, 4.4, 7.5.

### Public Sector Debt — Baseline (selected indicators, 2021–44)
- Public sector debt, percent of GDP:
  - 2021: 64.9
  - 2022: 67.4
  - 2023: 68.0
  - 2024: 69.8
  - 2025: 68.6
  - 2026: 66.5
  - 2027: 65.0
  - 2028: 63.4
  - 2029: 62.0
  - 2034: 51.6
  - 2044: 35.0
  - 2044 (alt): 61.2
- Change in public sector debt, percent of GDP:
  - 2021: 2.7
  - 2022: 2.5
  - 2023: 0.6
  - 2024: 1.8
  - 2025: -1.2
  - 2026: -2.0
  - 2027: -1.5
  - 2028: -1.6
  - 2029: -1.4
  - 2030: -2.0
  - 2031: -1.5
- Identified debt-creating flows, percent of GDP (selected): 1.7, 4.3, 0.8, 1.6, -1.7, -1.8, -2.1, -1.7, -1.6, -2.0, -1.6, 1.7, -1.6.
- Primary deficit, percent of GDP (selected):
  - 2021: 2.5
  - 2022: 5.9
  - 2023: 3.9
  - 2024: 4.0
  - 2025: 0.5
  - 2026: 0.6
  - 2027: 0.8
  - 2028: 1.0
  - 2029: 1.1
  - 2030: 0.4
  - 2031: 0.4
  - 2032: 2.7
  - 2034: 0.9
- Revenue and grants, percent of GDP (selected): 17.1, 17.6, 19.8, 19.0, 18.8, 19.2, 19.7, 20.1, 20.5, 21.9, 24.1, 17.0, 20.4.
- Primary (noninterest) expenditure, percent of GDP (selected): 19.6, 23.5, 23.8, 23.0, 19.3, 19.8, 20.5, 21.0, 21.6, 22.3, 24.5, 19.7, 21.3.
- Automatic debt dynamics (contribution), percent of GDP:
  - 2021: -0.8
  - 2022: -1.6
  - 2023: -3.2
  - 2024: -2.4
  - 2025: -2.2
  - 2026: -2.4
  - 2027: -2.9
  - 2028: -2.7
  - 2029: -2.7
  - 2030: -2.4
  - 2031: -2.0
- PV of public debt-to-GDP ratio (selected): 60.5, 61.0, 58.3, 54.7, 51.8, 49.1, 47.4, 37.3, 24.8 (values shown in table).
- PV of public debt-to-revenue and grants ratio (selected): 304.8, 321.3, 309.3, 284.2, 262.5, 245.1, 231.3, 170.5, 103.0.
- Debt service-to-revenue and grants ratio (selected): 57.4, 57.2, 51.6, 40.0, 46.8, 57.1, 49.7, 48.5, 42.0, 31.6, 11.2.
- Gross financing need (selected): 12.3, 16.0, 14.2, 11.6, 9.3, 11.6, 10.6, 10.6, 10.7, 9.7, 7.3, 3.1.

### Key macro-fiscal assumptions (public DSA)
- Real GDP growth (percent): 6.0, 5.8, 5.6, 5.3, 5.3, 5.5, 5.5, 5.5, 5.5, 5.5, 5.0, 5.5.
- Average nominal interest rate on external debt (percent): 1.6, 1.9, 2.0, 1.6, 1.6, 1.4, 1.2, 1.1, 0.9, 1.0, 1.6, 1.9, 1.1.
- Average real interest rate on domestic debt (percent) (selected): 3.1, 2.0, 3.4, 3.0, 3.4, 3.4, 3.4, 3.4, 3.4, 3.6, 3.9, 3.4, 3.5.
- Inflation rate (GDP deflator, percent) (selected): 2.5, 3.7, 2.9, 2.2, 2.0, 2.0, 2.0, 2.0, 2.0, 2.0, 2.0, 1.3, 2.0.
- Growth of real primary spending (deflated by GDP deflator, percent) (selected): -2.5, 26.8, 6.9, 1.9, -11.8, 8.6, 9.2, 8.0, 8.2, 6.6, 6.6, 8.9, 5.0.
- Primary deficit that stabilizes the debt-to-GDP ratio (percent of GDP) (selected): -0.2, 3.3, 3.4, 2.2, 1.7, 2.6, 2.3, 2.6, 2.5, 2.4, 1.9, 2.2, 2.4.

### Sensitivity Analysis and Stress Tests (selected outcomes)
- Table 3 and Table 4 present sensitivity analysis for public and PPG external debt and for public debt under alternative scenarios, bound tests (real GDP growth, primary balance, exports, other flows, depreciation), and tailored tests (combined contingent liabilities).
- Baseline and scenario values for key indicators (PV of Debt-to-GDP, PV of Debt-to-Exports, Debt Service-to-Exports, Debt Service-to-Revenue, PV of Debt-to-Revenue) are shown for 2024–2034 with thresholds indicated (e.g., Threshold: 40 for PV of Debt-to-Exports Ratio tests).
- Examples of baseline indicator levels (selected from sensitivity tables):
  - PV of Debt-to-GDP Ratio (baseline): 77, 76, 72, 69, 66, 63, 62, 62, 63, 64 (values by year shown in table).
  - Debt Service-to-Exports Ratio (baseline): 89, 98, 76, 55, 55 (selected series in table).
  - PV of Debt-to-Revenue Ratio (baseline): 131, 131, 131, 121, 109, 76, 66, 66 (selected series).
- Stress test most extreme shock examples (from figures):
  - Most extreme shock: One-time depreciation.
  - Most extreme shock: Exports (series shown in figures for 2024–2034).
- Notes: A bold value in the tables indicates a breach of the relevant threshold.

### Drivers of Debt Dynamics and Realism Tools (high-level)
- Figures show decomposition of drivers:
  - Contributions to debt change from real GDP growth, nominal interest rate, price and exchange rate changes, current account + FDI, and residual/unexpected changes.
- Realism tools:
  - Historical program experience and projected fiscal adjustments are depicted (3-year adjustment in primary balance and distribution across programs).
  - Charts compare public and private investment rates (percent of GDP) and contributions to real GDP growth across historical and projected periods.

_Italic: Sources: Country authorities; and staff estimates and projections._

### 2.5 percentage points of GDP in

### 1tgoea2024002-print-pdf - 2.5 percentage points of GDP in

### Fiscal adjustment and possible growth paths
- Charted fiscal adjustment scenarios for 2018–2025 show baseline and multipliers at values: 0.2, 0.4, 0.6, 0.8 (labels: Baseline, Multiplier = 0.2, Multiplier = 0.4, Multiplier = 0.6, Multiplier = 0.8).
- The title element “2.5 percentage points of GDP in” is presented in the context of qualification of categories and fiscal adjustment magnitudes.

### Debt sustainability classification (Qualification of the Moderate Category, 2024–34)
- Threshold rules for PV debt/GDP and PV debt/exports use x = 20 percent and y = 40 percent.
- For debt service/Exports and debt service/revenue thresholds, x = 12 percent and y = 35 percent.
- Categories indicated: Limited space, Some space, Substantial space, (1-X)*Threshold, (1-Y)*&Threshold, Threshold, Baseline.

### Public sector debt: key stock and flow figures (Table 5: 2021–44; In percent of GDP unless otherwise indicated)
- Public sector debt: 2021: 64.9; 2022: 67.4; 2023: 68.0; 2024: 70.8; 2025: 70.4; 2026: 68.9; 2027: 67.8; 2028: 66.3; 2029: 64.8; 2030: 54.3; 2034: 37.4; 2044: 59.0 63.7.  
  (Presented in the source across a wrapped line; preserved exactly.)
- Of which: external debt: 2021: 27.3; 2022: 26.2; 2023: 25.9; 2024: 27.4; 2025: 28.7; 2026: 29.6; 2027: 30.4; 2028: 30.6; 2029: 30.2; 2030: 29.6; 2034: 20.0; 2044: 29.9.  
- Change in public sector debt: 2021: 2.7; 2022: 2.5; 2023: 0.6; 2024: 2.8; 2025: -0.4; 2026: -1.4; 2027: -1.2; 2028: -1.5; 2029: -1.4; 2030: -2.1; 2034: -1.5; 2044: (blank as per source).
- Identified debt-creating flows: 1.7; 4.3; 0.8; 2.6; -0.9; -1.2; -1.7; -1.6; -1.6; -2.1; -1.6; 1.7; -1.4. (Preserved sequence as in source.)
- Primary deficit: 2.5; 5.9; 3.9; 4.0; 0.5; 0.6; 0.8; 1.0; 1.1; 0.4; 0.4; 2.7; 0.9.
- Revenue and grants: 17.1; 17.6; 19.8; 19.0; 18.8; 19.2; 19.7; 20.1; 20.5; 21.9; 24.1; 17.0; 20.4.
- Of which: grants: 1.8; 2.5; 3.1; 2.1; 1.6; 1.5; 1.4; 1.3; 1.2; 0.8; 0.4.
- Primary (noninterest) expenditure: 19.6; 23.5; 23.8; 23.0; 19.3; 19.8; 20.5; 21.0; 21.6; 22.3; 24.5; 19.7; 21.3.
- Automatic debt dynamics: -0.8; -1.6; -3.2; -2.4; -2.2; -2.4; -2.9; -2.8; -2.7; -2.5; -2.0.
- Contribution from interest rate/growth differential: -3.2; -4.1; -2.7; -2.4; -2.2; -2.4; -2.9; -2.8; -2.7; -2.5; -2.0.
  - Of which: contribution from average real interest rate: 0.3; -0.5; 0.9; 1.0; 1.4; 1.2; 0.7; 0.8; 0.8; 0.5; 0.0.
  - Of which: contribution from real GDP growth: -3.5; -3.6; -3.6; -3.4; -3.6; -3.7; -3.6; -3.5; -3.5; -2.9; -2.0.
- Contribution from real exchange rate depreciation: 2.5; 2.5; -0.5; (then ellipsis in source).
- Other identified debt-creating flows: 0.0; 0.0; 0.0; 1.0; 0.8; 0.6; 0.4; 0.2; 0.0; 0.0; 0.0; 0.0; 0.3.
- Residual: 0.9; -1.8; -0.2; 0.2; 0.5; -0.2; 0.5; 0.1; 0.1; 0.0; 0.1; 1.0; 0.2.

### Sustainability indicators and financing metrics (from Table 5)
- PV of public debt-to-GDP ratio (selected entries as shown): ......60.5 62.0 60.1 57.1 54.6 52. 150.240.027.1  (preserved exactly as in source with formatting).
- PV of public debt-to-revenue and grants ratio: ......304.8 326.6 318.8 296.6 276.5 259.7 245.4 182.9 112.8.
- Debt service-to-revenue and grants ratio: 57.4 57.2 51.6 40.0 47.7 58.1 52.4 51. 345.034.813.7  (preserved exactly as in source).
- Gross financing need: 12.3 16.0 14.2 12.6 10.2 12.4 11.6 11.5 10.3 8.0 3.7.

### Key macroeconomic and fiscal assumptions (as listed)
- Real GDP growth (in percent): 6.0 5.8 5.6 5.3 5.3 5.5 5.5 5.5 5.5 5.5 5.0 5.5.
- Average nominal interest rate on external debt (in percent): 1.6 1.9 2.0 1.6 1.6 1.4 1.2 1.1 0.9 1.0 1.6 1.9 1.1.
- Average real interest rate on domestic debt (in percent): 3.1 2.0 3.4 3.0 3.5 3.5 3.5 3.4 3.5 3.7 4.0 3.4 3.5.
- Real exchange rate depreciation (in percent, + indicates depreciation): 9.8 10.2 -2.2 (then ellipsis).
- Inflation rate (GDP deflator, in percent): 2.5 3.7 2.9 2.2 2.0 2.0 2.0 2.0 2.0 2.0 1.3 2.0.
- Growth of real primary spending (deflated by GDP deflator, in percent): -2.5 26.8 6.9 1.9 -11.8 8.6 9.2 8.0 8.2 6.6 6.6 8.9 5.0.
- Primary deficit that stabilizes the debt-to-GDP ratio: -0.2 3.3 3.4 1.2 0.9 2.0 2.0 2.4 2.5 2.5 1.9 2.2 2.1.
- PV of contingent liabilities (not included in public sector debt): 0.00 across listed years.

### Indicators under stock-flow adjustment and stress tests (Figures and notes)
- Figures report indicators of public debt under stock-flow adjustment 2024–34 with baseline and most extreme shock 1/ scenarios.
- Most extreme shock labeled: Combined contingent liabilities; additional labels include Historical scenario, Default, User defined.
- Borrowing assumptions on additional financing needs from stress tests show shares of marginal debt across: External PPG medium and long-term; Domestic medium and long-term; Domestic short-term.
- Terms of marginal debt (domestic and external) include listed metrics: Avg. real interest rate on new borrowing; Avg. maturity (incl. grace period); Avg. grace period; Avg. nominal interest rate on new borrowing in USD.
- Note: “The public DSA allows for domestic financing to cover the additional financing needs generated by the shocks under the stress tests in the public DSA. Default terms of marginal debt are based on baseline 10-year projections.”

### Joint World Bank–IMF program priorities and policy guidance (Work program and coordination)
- Joint assessment of macrocritical challenges: robust growth and progress toward SDGs but elevated fiscal deficits and public debt, security challenges at northern border, development needs, and climate change risks.
- Division of labor agreed:
  - Ensuring growth-friendly fiscal consolidation by raising tax revenue by an ambitious 0.5 percent of GDP per year and strengthening spending efficiency through public financial management and public investment reforms. (Fund lead; Bank contributes analytical work, reform identification, capacity building.)
  - Implementing an inclusive growth strategy:
    - Strengthening social spending and social safety nets, including expanding cash transfers. (Bank lead; IMF contributes.)
    - Strengthening governance and the business environment, potentially preparing an IMF Governance Diagnostic if requested; WB-financed work on public administration, local governance, business environment. (Joint responsibility.)
  - Strengthening the banking sector and resilience; recapitalization of the remaining public bank to zero regulatory capital noted as a first step. (Fund lead.)
  - Understanding and addressing climate change impacts; Bank and Fund engaged in analytical work and capacity building on climate-sensitive public financial management. (Shared responsibility.)
- Information sharing requests: Fund and Bank teams to be kept informed of each other’s progress at least quarterly and in the context of Article IV and program review missions.

### Program timetable highlights (selected)
- Joint World Bank–IMF Work Program includes planned products: Climate Change and Development Report (September–October 2024), Climate Change Institutional Assessment (June–September 2024), Public Finance Review on Agriculture and Rural Connectivity (June–September 2024), Economic Update Report (June–September 2024), Second Sustainable and Inclusive Development Policy Financing (September–November 2024), Togo’s Growth and Jobs Report (October 2024–July 2025), and other projects with provisional timings through 2029 and beyond.
- Fund work program: First Review of the ECF-Arrangement (October 2024; expected delivery December 2024), Second Review (April 2025; June 2025), Third Review (October 2025; December 2025), 2026 Article IV Consultation and Fourth Review (April 2026; June 2026), and subsequent reviews through 2027.

### Relations with the Fund and financial positions (as of dates in source)
- Membership: Joined August 1, 1962; Article VIII.
- Quota: 146.80 SDR Million (100.00 percent of quota).
- IMF's Holdings of Currency (Holdings Rate): 127.13 (86.60).
- Reserve Tranche Position: 19.79 (13.48).
- SDR Department net cumulative allocation: 211.03 (100.00); Holdings 248.89 (117.94).
- Outstanding Purchases and Loans: Extended Arrangements 273.86 (186.55).
- Latest ECF arrangement approved Mar 01, 2024; Expiration Aug 31, 2027; Amount Approved 293.60 (SDR Million); Amount Drawn 51.38 (SDR Million).
- Forthcoming projected payments to Fund (SDR Million): Principal 2024: 10.07; 2025: 39.87; 2026: 49.53; 2027: 47.01; 2028: 36.95. Charges/Interest: 0.00 across listed years. Total equals Principal in each listed year.

*Source: Staff Report for the 2024 Article IV Consultation—Informational Annex (Prepared by the African Department, in Consultation with other Departments).*

### 2.      Togo's economy has demonstrated resilience in recent years amidst multiple shocks,

### 2.      Togo's economy has demonstrated resilience in recent years amidst multiple shocks

### Recent developments
- Economy and growth
  - Economic growth in 2023 estimated at 5.6 percent.
  - Growth driven by increased activity in the Special Economic Zones (SEZs) and the industrial platform, Plateforme Industrielle d’Adétikope (PIA).
- Inflation
  - Headline inflation dropped from 7.5 percent in 2022 to 3.9 percent by May 2024.
- Fiscal outcomes
  - Overall fiscal deficit narrowed from 8.3 percent of GDP in 2022 to 6.7 percent of GDP.
  - Revenues increased substantially, surpassing targets due to enhanced revenue administration, particularly in import taxation and collection of land use fees and contributions to a newly established fund for security spending (Fonds De Concours).
  - Reduction in fuel subsidies contributed to deficit narrowing, despite higher-than-anticipated security spending.
- Public debt and current account
  - Total public debt stood at 68 percent of GDP at end 2023, slightly up from the earlier estimate of 67.4 percent due to the inclusion of two previously omitted domestic loans.
  - The current account deficit narrowed slightly in 2023.
- Financial sector
  - Non-performing loans fell to 7.7 percent of total loans at end of 2023 from 15.6 percent in 2019.
  - Banking soundness indicators have shown marked improvement, with increased solvency ratio.
  - Challenges remain notably from three banks, including the last state-owned bank (SOB) and the recently privatized bank.
  - Government has taken steps to strengthen the regulatory capital of the remaining SOB and commits to further actions to ensure financial sector stability.
  - Ongoing efforts to enhance compliance with AML/CFT requirements and maintain ownership and control standards.

### Outlook and risks
- Authorities’ medium-term expectations
  - Authorities anticipate medium-term growth to exceed staff’s baseline projection of 5.5 percent.
  - Authorities foresee headline inflation aligning with the regional central bank Banque Centrale des Etats de l’Afrique de l’Ouest (BCEAO)’s target of 2 percent by 2025.
  - Authorities anticipate the fiscal deficit to converge to the regional ceiling of 3 percent of GDP by 2025.
  - Public debt-to-GDP ratio projected to gradually decline starting in 2025.
  - Current account deficit expected to stabilize around 3 percent of GDP.
- Key downside risks and uncertainties
  - Intensified terrorism disrupting trade and logistics.
  - Challenges in securing affordable regional financing.
  - Potential shortfalls in external concessional finance.
  - Vulnerability to climate change impacts: floods, droughts, and coastal erosion.

### ECF program context and policy dialogue
- Program status
  - Authorities are implementing a 42-month arrangement under the ECF.
  - ECF supports the Government’s economic and financial policies outlined in the 2020–25 Government Roadmap—Feuille de route gouvernementale and the general policy declaration made by the Prime Minister following a cabinet reshuffle on August 20, 2024.
- Policy dialogue objectives during the Article IV Consultation
  - (i) Bolstering macroeconomic stability through growth-friendly fiscal consolidation.
  - (ii) Laying the foundations for sustained growth.
  - (iii) Promoting social inclusion.
- Authorities’ stance
  - Authorities concur with staff’s recommendations and emphasize the critical role of the ECF program in catalyzing needed financing.

### Fiscal policy and debt sustainability
- Fiscal anchors and targets
  - Commitment to the dual fiscal policy anchor under the ECF program guided by WAEMU’s convergence criteria.
  - Target to gradually bring the fiscal deficit to 3 percent of GDP by 2025.
  - Aim to reduce the risk of debt distress to moderate levels by the end of 2026.
- Revenue strategy
  - Fiscal strategy includes an increase of revenues by an additional 0.5 percent of GDP annually.
  - Plans to develop a medium-term revenue mobilization strategy focusing on:
    - Enhancing revenue administration.
    - Expanding the tax base through digitalization.
    - Improving property tax collection.
    - Phasing out tax exemptions in line with staff’s recommendations.
- Expenditure strategy
  - Plans to contain the wage bill, temporarily lower public investment, and reduce non-priority current spending.
  - Key measures include streamlining goods and services spending and reducing fuel subsidies.
  - Continued prioritization of security, social programs, and initiatives to alleviate poverty.
- Public financial management (PFM) and SOE/PPP reforms
  - Progress in program budgeting and introduction of gender budgeting with IMF technical assistance.
  - Commitment to advance program budgeting with climate and environment-sensitive budgeting.
  - Plans to strengthen the institutional and legal framework for state-owned enterprises (SOEs).
  - Plans to enhance the management framework for public-private partnerships (PPPs) to improve governance, accountability, and efficiency.
  - Build on new regulations for public procurement and PPPs adopted in 2021 to better align projects with national development priorities and enhance public investment management.

### Structural reforms and policies
- Governance and business environment
  - Establishment of an anti-corruption authority and introduction of asset declaration laws.
  - Progress in digitalizing public administration and strengthening operations of the Port of Lomé.
  - Authorities welcome an IMF governance diagnostic to identify and inform reforms addressing critical vulnerabilities.
- AML/CFT regime
  - Progress in line with the 2022 GIABA report, including drafting an AML/CFT law with related implementation decrees.
  - Phased approach to tackle challenges, focusing on terrorist financing, implementation of UN Resolutions on terrorism and proliferation, and measures on politically exposed persons.
- Industrial policy and economic diversification
  - SEZs and targeted tax incentives have attracted investment and created jobs in manufacturing and at the PIA.
  - Authorities plan to eliminate any additional ad-hoc tax incentives and carefully evaluate policies to avoid inefficiencies.
  - Staff recommended shifting towards a services-based economy leveraging Togo’s regional hub position for financial services and trade logistics; authorities place this high on their agenda.
  - Ongoing efforts to strengthen financial services, trade logistics, SEZs, energy and internet infrastructure.
  - Focus on workforce skills development through targeted education and training programs for modern service sectors, including IT and finance.
  - Agricultural development through Zones d’Aménagement Agricole Planifiées (ZAAP) to boost food security, improve producers’ living conditions, and position Togo as a leading exporter of agricultural products, creating synergies with Agri-tech.
- Social inclusion
  - Commitment to strengthen social safety nets and increase social and pro-poor spending as set out in the first pillar of the Government’s Roadmap.
  - A social protection strategy was adopted in June 2024 (Structural Benchmark).
  - Efforts underway to implement a biometric identification system and a registry of eligible individuals to form the foundation for a targeted cash transfer program for the most vulnerable.
  - Authorities acknowledge the value of temporary cash transfers in emergencies (such as Novissi during COVID-19) but are cautious about making them permanent, emphasizing improved access to affordable health and education services for long-term human capital development and poverty reduction.
- Climate policies
  - Climate change considerations will continue to influence key policy decisions given high reliance on agriculture and exposure of coastal cities to rising sea levels.
  - Authorities appreciate the Selected Issues paper on the Impact of Climate Change and commit to building climate adaptation and resilience.
  - Authorities will seek technical assistance from the IMF and other development partners.
  - A request for access under the Resilience and Sustainability Facility (RSF) has been submitted and authorities look forward to its favorable consideration.

### Conclusion and requests
- Authorities’ commitments and requests
  - Steadfast commitment to implementing sound policies to preserve macroeconomic stability and promote sustainable and inclusive economic growth.
  - Efforts aimed at building resilience, strengthening inclusiveness, and accelerating growth.
  - Authorities look forward to Executive Directors’ support in concluding the 2024 Article IV consultations and continued Fund financial support and technical assistance to advance the reform agenda and meet development objectives.

*Source: 1tgoea2024002-print-pdf - 2.      Togo's economy has demonstrated resilience in recent years amidst multiple shocks*

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_Source: https://www.imf.org/-/media/files/publications/cr/2024/english/1tgoea2024002-print-pdf.pdf_