## _030410

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### Recent economic developments
- Date of communication: March 4, 2010.
- Macroeconomic recovery and growth:
  - Since 2007, favorable terms of trade have supported the recovery in economic growth.
  - 2009 growth is estimated to have accelerated to 3.7 percent, increasing per capita income for the first time since 1998.
  - Economic activity was little affected by the global financial crisis due to high world cocoa and oil prices, an abundant harvest, and strong oil extraction.
- Inflation and prices:
  - After rising in 2008, inflation declined with consumer prices falling by 1.6 percent during 2009 as food, energy and transport prices eased.
- Fiscal and external balances:
  - Fiscal policy has been restrained despite large spending needs to overcome the internal conflict, prepare elections, strengthen government services (especially in health and education), increase investment, and clear large arrears to IFIs and other external creditors.
  - The external current account surplus (before official transfers) is estimated to have doubled to 2.1 percent of GDP in 2009.
  - Imputed reserves at the BCEAO increased.

### IMF engagement and program
- IMF support history:
  - The IMF provided Emergency Post-Conflict Assistance in 2007-2008.
  - Since March 2009, authorities have implemented a comprehensive medium-term reform program supported by a three-year arrangement under the Extended Credit Facility (ECF, formerly Poverty Reduction and Growth Facility, PRGF).
- Program objectives and reforms:
  - Program aims: achieve stronger sustained growth, reduce poverty, and restore fiscal and external sustainability, including a restructuring of public external debt.
  - Reforms focus on: removing impediments to growth (particularly in the cocoa and energy sectors), improving the business climate, creating fiscal space for pro-poor expenditures and infrastructure by boosting tax revenues, strengthening and enhancing public financial management, and bolstering the financial system.
- HIPC decision point:
  - The IMF and World Bank Executive Boards determined in March/April 2009 that Côte d’Ivoire qualified for debt relief by reaching the decision point under the enhanced Heavily Indebted Poor Countries (HIPC) Initiative.
  - Final debt relief is conditional on meeting triggers to reach the completion point under the enhanced HIPC Initiative.

### Performance, implementation, and recent reviews
- Program performance:
  - Performance during the first half of 2009 was broadly satisfactory.
  - The government achieved a primary budget surplus and the overall fiscal outcome was substantially in line with fiscal targets, notwithstanding wage and energy sector pressures on the budget.
  - Progress in structural reforms was achieved, though at a pace slower than envisaged; focus was on revenue administration and public expenditure management and transparency.
- Developments in late 2009 and 2010 planning:
  - In the second half of 2009, understandings were reached on a fiscal program and objectives for 2010 to further medium-term goals and strengthen the fiscal position.
  - The IMF Executive Board concluded the first review under the ECF in November 2009.
  - Preliminary data indicate that the program’s fiscal targets for the year as a whole were broadly met, despite unexpected shortfalls in customs revenue and the need for increased support to the electricity sector.
  - Progress in structural reform implementation continued to be slow in the pre-election environment.
- Current IMF assistance:
  - The Fund is assisting the authorities in reviewing the design of their economic program for 2010, which aims to sustain macroeconomic stability, make further progress toward a sustainable fiscal and external position, accelerate and deepen the structural reform agenda, and make further inroads in reducing poverty.

### Public external debt and debt restructuring
- Debt sustainability concerns:
  - Notwithstanding adjustment efforts and financial support from multilateral and bilateral lenders, Côte d’Ivoire’s public external debt remains unsustainable without relief additional to that granted by Paris Club creditors in May 2009.
- Engagement with creditors:
  - Côte d’Ivoire has sought to engage external commercial creditors on a debt restructuring consistent with the Paris Club’s comparability and the enhanced HIPC Initiative requirements.
  - The debt exchange sought with Brady bond holders aims to provide significant debt and debt service relief.
  - A high degree of participation by commercial creditors is described as an essential and critical element in achieving fiscal and external sustainability and supporting strong economic growth.
  - Authorities are committed to reaching debt-restructuring agreements with other private commercial creditors and official non-Paris Club bilateral creditors; discussions are ongoing to achieve terms consistent with the Paris Club’s comparability and HIPC Initiative requirements.

### Key findings and policy implications
- Key findings:
  - 2009 GDP growth estimated at 3.7 percent; consumer prices fell by 1.6 percent in 2009; external current account surplus (before official transfers) estimated at 2.1 percent of GDP in 2009.
  - Primary budget surplus achieved in the first half of 2009; overall fiscal outcomes broadly in line with targets for the year as a whole.
  - Program implementation has delivered progress on revenue administration and public expenditure management and transparency, but structural reform implementation has been slower than planned.
  - Public external debt remains unsustainable without additional relief beyond Paris Club measures of May 2009.
- Policy recommendations and priorities:
  - Sustain macroeconomic stability while pursuing reforms to achieve fiscal and external sustainability.
  - Accelerate and deepen structural reforms, especially to remove impediments in the cocoa and energy sectors and improve the business climate.
  - Boost tax revenues to create fiscal space for pro-poor expenditures and infrastructure.
  - Strengthen public financial management and bolster the financial system.
  - Secure broad participation of commercial creditors (including Brady bond holders) and agreement from other private commercial and official non-Paris Club bilateral creditors on debt restructuring terms consistent with Paris Club comparability and HIPC Initiative requirements.

*IMF communication to members of the international financial community, March 4, 2010.*

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