## _cr08142 ## Source details **Canonical URL:** [_cr08142](https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2008/_cr08142.pdf) ## Other formats - [Markdown version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2008/_cr08142.pdf.md) - [Structured JSON version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2008/_cr08142.pdf.json) --- ### Overview and political context - Côte d’Ivoire progressing toward reunification, sustained peace, and elections; presidential elections expected later in 2008. - Delays in implementing the Ouagadougou Accord but a climate of political dialogue; redeployment of government services in ex-rebel held CNW underway. - Authorities view EPCA as a step toward a PRGF arrangement and HIPC/MDRI relief and request additional EPCA support of SDR 40.65 million (12.5 percent of quota) and an interest rate subsidy. - Continued international community support described as essential. ### Growth outlook and macroeconomic performance - Real GDP growth and per capita: - Real GDP growth: 2004: 1.6; 2005: 1.8; 2006: -0.3; 2007: 1.6; 2008: 2.9; 2009-12 Avg. Proj.: 5.8 - Real per capita GDP growth: 2004: 0.1; 2005: 0.0; 2006: -1.8; 2007: 0.1; 2008: 1.4; 2009-12 Avg. Proj.: 4.3 - Short-term projection and drivers: - GDP growth in 2007 estimated at 1.6 percent and "should reach 3 percent in 2008." - 2008 growth supported by oil/gas output to at least 2006 level, favorable agricultural export prices, reunification, return of private sector confidence; medium-term acceleration to about 6 percent by 2011. - Prices and exchange rates: - Twelve-month consumer price inflation: 1.5 percent at end-2007 (annual averages: 2004: 1.5; 2005: 3.9; 2006: 2.5; 2007: 1.9; 2008: 4.3; 2009-12 Avg. Proj.: 2.7). - End-period CPI expectations: end-period CPI inflation expected to rise to 7 percent in 2008 (MEFP ¶). - Real and nominal effective exchange rates appreciated by 2 percent in 2007; REER at or below estimated ERER. - External current account: - External current account surplus fell from an estimated 3.1 percent of GDP in 2006 to 1.4 percent in 2007 because oil and cocoa export volumes fell and import volumes outpaced real GDP. - Projection: surplus of 1.4 percent of GDP in 2007 expected to turn to a deficit of over 3 percent by 2012, financed by donor assistance and FDI. ### Fiscal performance in 2007 - Overall: - Fiscal developments broadly in line with the program; composition of spending deviated. - All quantitative indicators met except year-end primary basic surplus, which missed target by 0.4 percent of GDP. - Revenues and expenditures: - Revenue collection improved; tax revenue slightly above target largely due to advance tax payments totaling ½ percent of GDP, mostly on cocoa export duties (at a 7 percent rebate), contravening program undertaking. - Non-tax petroleum sector revenue fell short. - Overruns on current spending of 0.8 percent of GDP occurred at the expense of crisis-exit programs and investment (unbudgeted discretionary spending by presidency and prime minister’s office, military wages, frontline bonuses, housing allowances for primary school teachers). - Large part of spending executed through treasury advances, complicating budget monitoring. - Domestic arrears and financing: - Authorities accelerated repayment of domestic arrears by 1.5 percent of GDP (program envisaged 0.5 percent of GDP), facilitated by issuance of two-year WAEMU market bills in September raising the equivalent of 1.2 percent of GDP at 6½ percent interest. - Deposit buildup of 1 percent of GDP for World Bank arrears clearance did not occur because of the accelerated domestic arrears repayment. - WAEMU convergence indicators (selected): - Basic fiscal balance/GDP (≥ 0 percent): 2005: -1.6; 2006: -1.7; 2007: -0.6; 2008: -0.7 - Average consumer price inflation (≤ 3 percent): 2005: 3.9; 2006: 2.5; 2007: 1.9; 2008: 3.8 - Total debt/GDP (≤ 70 percent): 2005: 87.4; 2006: 85.7; 2007: 83.6; 2008: 78.4 - Wages and salaries/fiscal revenue (≤ 35 percent): 2005: 45.0; 2006: 42.1; 2007: 43.6; 2008: 42.5 - Tax revenue/GDP (≥ 17 percent): 2005: 14.5; 2006: 15.5; 2007: 15.7; 2008: 16.0 ### 2008 fiscal program — objectives and composition - Budget framework: - 2008 budget foresees a primary basic surplus of 0.8 percent of GDP; revisions approved by the Council of Ministers in absence of a functioning parliament. - Program incorporates measures to keep revenue/GDP ratio at 19.4 percent. - Revenue measures and specifics: - Revenue effort amounts to 0.3 percent of GDP (adjusted for nonrecurrence of toxic waste compensation and increased oil/gas revenue), mainly from better indirect tax collection and higher contributions from PETROCI. - Authorities intend to increase petroleum pump prices by at least 8 percent by mid-year; automatic petroleum pricing mechanism to begin in mid-2008 (automatic pricing from beginning of July 2008 in TMU) with Specific Petroleum Product Tax (TSPP) set to ensure sufficient tax revenues. - Stepped-up redeployment of tax administrations in CNW to offset any revenue shortfall from advance tax payments in 2007. - Expenditure composition: - Wage bill stabilized at 6.8 percent of GDP (wage bill figures: wages and salaries: 6.5 (2006); 6.4 (2007 Est.); 6.8 (2008 Prog.); 6.8 (CR No 07/312)). - Nonwage recurrent spending reduced to 2006 level. - Increase in electricity tariffs early in the year should help keep electricity subsidies at half their 2007 level. - Investment increases mainly to rehabilitate basic infrastructure; foreign-financed investment expected to double due to World Bank project financing reactivation. - Social spending increases to 5.6 percent of GDP (from 5.4 percent in 2007). - Crisis-exit and related spending: - Spending on crisis-exit programs rises by 1 percent of GDP (large parts postponed from 2007 and recent political accords added costs). - Programs for reinsertion of ex-soldiers and community rehabilitation, redeployment, identification/elections costed at 1.9 percent of GDP (about half government resources, rest donors). - Government terminated frontline bonuses from February 2008, but prepared to pay bonuses claimed to be in arrears (total of 0.7 percent of GDP since 2003); intend to limit amount in 2008 to 0.3 percent of GDP (from 0.4 percent in 2007) and postpone remaining payments beyond 2008. Temporary bonuses to FN soldiers cost up to 0.1 percent of GDP. ### Fiscal tables and key fiscal figures (percent of GDP, as presented) - Total revenue 1/: 18.5 (2006); 18.6 (2007 Est.); 18.6 (2008 Prog.); 19.4 (CR No 07/312) - Of which: oil and gas production revenue: 1.5 (2006); 1.4 (2007 Est.); 1.4 (2008 Prog.); 2.2 (CR No 07/312) - Primary basic expenditure 2/: 18.2 (2006); 17.6 (2007 Est.); 18.0 (2008 Prog.); 18.6 (CR No 07/312) - Crisis-related expenditure: 0.8 (2006); 1.4 (2007 Est.); 0.8 (2008 Prog.); 1.9 (CR No 07/312) - Primary basic balance 3/: 0.3 (2006); 1.0 (2007 Est.); 0.6 (2008 Prog.); 0.8 (CR No 07/312) - Change in domestic arrears (- net cash payments): 0.0 (2006); -0.5 (2007 Est.); -1.5 (2008 Prog.); -0.1 (CR No 07/312) - Net domestic financing 4/: 0.0 (2006); -1.0 (2007 Est.); 0.4 (2008 Prog.); 0.0 (CR No 07/312) - Net external financing 5/: -0.1 (2006); -2.8 (2007 Est.); 0.0 (2008 Prog.); -6.2 (CR No 07/312) - Financing gap (- deficit / + surplus): 0.0 (2006); -2.1 (2007 Est.); 0.0 (2008 Prog.); -4.8 (CR No 07/312) ### External arrears, debt, and program financing - External debt and arrears: - External debt remained unsustainable in 2007; external arrears rose to 25 percent of GDP at year-end (public debt in arrears: 2007 Prog.: 24.3 percent of GDP; outstanding arrears year-end 2007: 2,295 billions of CFAF). - Authorities resumed payments to the World Bank and AfDB and repaid their half (1.1 percent of GDP) of World Bank arrears at end-February 2008. - After repayment, World Bank planned an IDA allocation to clear remaining arrears and provide new budget support (total around US$300 million) in early April. - AfDB arrears clearance operation planned for end-April 2008; AfDB expected to provide a grant covering two-thirds of arrears (totaling US$520 million) through FSF; Côte d’Ivoire to contribute one-third. - Financing composition highlights (selected figures): - Financing gap (Billions of CFAF): -1950 (Prog.), -488 (Est.), -1093 (CR No 07/312); -4.8 (Percent of GDP). - Identified financing total: 147 (Prog.), 381 (Est.), 855 (CR No 07/312), 3.8 (Percent of GDP). - IMF EPCA: 30 (Prog.), 3/ 276 (Est.), 10.3 (Percent of GDP). - World Bank arrears clearance grant (50% of arrears): 117 (Prog.), 0 (Est.), 113 (CR No 07/312), 2.1 (Percent of GDP). - AfDB arrears clearance grant (assuming 67% of arrears): 0 (Prog.), 0 (Est.), 154 (CR No 07/312), 1.5 (Percent of GDP). - Residual gap: 48 (Prog.), 5/ 93 (Est.), 208 (CR No 07/312), 0.9 (Percent of GDP). - HIPC preparatory work: - Preparations for a HIPC-DSA started; preliminary assessment based on projected end-2007 figures shows Côte d’Ivoire would qualify for HIPC relief under the revenue criterion, though with a small margin against the threshold (250 percent of NPV of debt to revenue). ### Financial sector developments and priorities - 2007 dynamics: - Broad money grew by 17 percent and credit to the economy by 19 percent in 2007. - Net foreign assets rose because of favorable balance of payments and foreign banks’ purchases of government paper. - Banking system weaknesses: - Of the 9 banks with inadequate capital at end-2006, three increased capital but one remained below the minimum requirement; none of the undercapitalized banks had formulated a recapitalization plan by end-2007 as intended. - Five banks did not meet the liquidity norm. - Ratio of nonperforming loans to total loans improved to 18 percent at end-December 2007 (from 20 percent at end-2006); banking-sector asset quality table: NPLs/total loans: 2004: 19.3; 2005: 21.3; 2006 Est.: 25.1; Sept-07: 26.2; Dec-07 (note): 17.7. - BNI improved certain prudential ratios but balance sheet remains dominated by public sector deposits and lending. - Priorities and actions for 2008: - Recapitalize the seven (mostly private) banks with insufficient equity. - Start restructuring microfinance in WAEMU context. - Revisit the role of BNI based on external audit; restructure CNCE and reform CNPS while servicing debt to CNPS per restructuring agreement. - BCEAO raised minimum capital requirement for banks from CFAF 1 billion to CFAF 5 billion (effective Jan 1, 2008 for new banks; existing banks have three years to comply). ### Structural reforms, transparency, and sectoral measures - Coffee/cocoa sector: - Reporting on collection and use of quasi-fiscal cocoa levies (½ percent of GDP) improved; large part of levies accumulated in 2006-07 allocated to rural infrastructure and social projects to be awarded through public tender under interministerial committee supervision. - For levies collected during 2001-05, General Prosecutor started an investigation into alleged misuse by semipublic agencies. - EPCA-2 commitments: publish quarterly reports on quasi-fiscal levies and publish budgets and certified accounts of sector agencies; reduce levies from CFAF 46.5/kg to CFAF 41.0/kg in 2008/09; prepare sector strategy by end-July 2008. - Energy sector: - Two Bank-financed audits completed; electricity subsector audit to be ready shortly (expected end-March 2008). - Compliance with EITI procedures advancing; National Council created February 2008 with action plan. - Electricity tariffs increased by 10 percent on average (implemented as prior action in early 2008: effective Feb 1, 2008 for enterprises; March 1, 2008 for low-voltage users except low-income households). - Automatic petroleum product pricing mechanism to be applied from beginning of July 2008 (average increase of at least CFAF 50 per liter; temporary security margin CFAF 15/liter); reduce protection coefficient k from 6 percent to 5 percent before end-June 2008. - Clear cross-debts and claims by end-March 2008 related to 2007 consumption; government to pay monthly for electricity consumption beginning February 2008. - Public expenditure management reforms: - SIGFiP computerized budget execution system in place; measures to adhere to monthly allocations for recurrent and quarterly for investment spending; reduce treasury advances and regularize within two months after quarter; quarterly detailed budget execution statements to Council of Ministers and public within 45 days. - Commitments to prepare a medium-term expenditure framework, revise organic public finance law, adapt budget nomenclature to GFS norms and track pro-poor spending. - Governance and transparency commitments: - Publish MEFP, TMU, and IMF staff report after Board approval; produce quarterly and half-yearly sector reports with 45-day lag for Council of Ministers and public release. ### Program monitoring, data reporting, and conditionality - Monitoring and reporting: - Monthly assessment report on quantitative and structural indicators to be produced within one month of month-end. - Tables to be submitted starting February 15, 2008 (budget quarterly reports within 45 days of quarter-end; energy and coffee/cocoa quarterly tables within 45 days). - BCEAO to report provisional net government position monthly within 30 days and final within 45 days. - Government to consult with IMF staff regarding any new domestic or WAEMU market borrowing exceeding CFAF 30 billion. - Quantitative procedural commitments (selected exact figures preserved): - Time-lagged quarterly reporting to Council of Ministers and public release: 45 days. - Consult with IMF staff on new domestic/WAEMU borrowing > CFAF 30 billion. - Residual financing gap in 2008: about CFAF 90 billion. - Reduction of protection coefficient k from 6 percent to 5 percent before end-June 2008. - Implement automatic petroleum product pricing from beginning of July 2008. - Clear cross-debts and claims by end-March 2008. - CIE tariff increase implemented: 10 percent (effective Feb 1, 2008 for enterprises; Mar 1, 2008 for most low-voltage users). - Reduce quasi-fiscal levies by CFAF 5.5/kg for 2008-09 crop year. - Complete inventory of domestic arrears through end-2007 by end-March 2008 and adopt arrears clearing plan by end-May 2008. ### Risks to the program and mitigants - Identified risks: - A resurgence of political tensions. - Delays in elections and peace-accord implementation. - Renewed overruns in discretionary spending. - Revenue shortfalls and eroding consensus for structural reforms. - Mitigants: - Satisfactory performance so far; commitment to program objectives shared by political parties; increasing international support (World Bank EGRG, AfDB FSF, donor assistance). ### Staff assessment and recommendation - Staff assesses Côte d’Ivoire’s capacity to repay the Fund as adequate and recommends approval of the authorities’ request for a second EPCA purchase. - Rationale: satisfactory program implementation to date, broad-based political commitment, and increasing international support. - Policy priorities emphasized: - Further fiscal consolidation to create fiscal space for urgent social and infrastructure needs. - Improve tax collection (especially in CNW), stabilize the wage bill while confining recruitment to social sectors, and decisively reduce nonwage current spending. - Strengthen public expenditure management: strict adherence to budget procedures and quarterly issuance of budget execution statements. - Accelerate bank recapitalization, ensure prudential compliance, restructure microfinance. - Extend transparency steps in energy and cocoa/coffee sectors (EITI-aligned reporting, publish certified accounts, reduce levies). ### Selected macro, external, and debt indicators (selected snapshots and projections) - Key national income and price indicators (selected series): - GDP at constant prices: 2004: 1.6; 2005: 1.8; 2006 Est.: -0.3; 2007 Prog.: 1.7; 2008 Est.: 1.6; 2009 Prog.: 3.5; 2010 Prog.: 2.9 - Consumer price index (annual average): 2004: 1.5; 2005: 3.9; 2006 Est.: 2.5; 2007 Prog.: 2.0; 2008 Est.: 1.9; 2009 Prog.: 3.0; 2010 Prog.: 4.3 - External sector (selected): - Exports, f.o.b., at current prices: 2004: 8.4; 2005: 11.3; 2006 Est.: 8.0; 2007 Prog.: -2.4; 2008 Est.: -5.0 - Current account balance (including official transfers, percent of GDP): 2004: 1.6; 2005: 0.2; 2006 Est.: 3.1; 2007 Prog.: 2.3; 2008 Est.: 1.4 - Public debt and arrears (selected): - External public debt (percent of GDP): 2004: 72.4; 2005: 73.5; 2006 Est.: 71.8; 2007 Prog.: 71.0; 2008 Est.: 70.1 - Public debt in arrears (percent of GDP): 2004: 19.4; 2005: 25.1; 2006 Est.: 27.7; 2007 Prog.: 24.3; 2008 Est.: 27.4 - Outstanding arrears (year-end, billions of CFAF): 2004: 1,064; 2005: 1,671; 2006: 2,011; 2007: 2,295; 2008 Est./Proj.: 1,992 *Source: _cr08142 - Executive Summary and selected MEFP/TMU/Appendix extracts (IMF).* ### Executive Summary ...................................................................................................... ### _cr08142 - Executive Summary ### Overview and political context - Côte d’Ivoire is progressing on the road to reunification, sustained peace, and elections; presidential elections are expected later in 2008. - Delays in implementing the Ouagadougou Accord occurred, but a climate of political dialogue is evident and the redeployment of government services in the ex-rebel held CNW is under way. - The authorities view EPCA as a step toward a PRGF arrangement and HIPC/MDRI relief. - Continued support of the international community is described as essential. ### Growth outlook and macroeconomic performance - GDP growth in 2007 is estimated at 1.6 percent and "should reach 3 percent in 2008." - Key drivers of the 2007 recovery: upturns in transportation, construction, and trade; growth in real private investment for the first time since 1999; decline in private capital outflows. - Twelve-month consumer price inflation: 1.5 percent at end-2007. - The real and nominal effective exchange rates appreciated by 2 percent in 2007. - External current account surplus fell from an estimated 3.1 percent of GDP in 2006 to 1.4 percent in 2007 because oil and cocoa export volumes fell and import volumes outpaced real GDP. - Selected key indicators (Text Table 1): - Real GDP growth: 2004: 1.6; 2005: 1.8; 2006: -0.3; 2007: 1.6; 2008: 2.9; 2009-12 Avg. Proj.: 5.8 - Real per capita GDP growth: 2004: 0.1; 2005: 0.0; 2006: -1.8; 2007: 0.1; 2008: 1.4; 2009-12 Avg. Proj.: 4.3 - CPI inflation (annual average): 2004: 1.5; 2005: 3.9; 2006: 2.5; 2007: 1.9; 2008: 4.3; 2009-12 Avg. Proj.: 2.7 - Overall budget balance (excluding grants) in percent of GDP: 2004: -2.6; 2005: -2.8; 2006: -2.4; 2007: -1.2; 2008: -1.7; 2009-12 Avg. Proj.: -2.2 - Primary basic balance in percent of GDP: 2004: 0.9; 2005: 0.4; 2006: 0.3; 2007: 0.6; 2008: 0.8; 2009-12 Avg. Proj.: 1.4 - Stock of external and domestic debt in percent of GDP: 2004: 86.0; 2005: 87.4; 2006: 85.7; 2007: 83.6; 2008: 78.4; 2009-12 Avg. Proj.: 67.6 - Of which: in arrears: 2004: 19.4; 2005: 25.1; 2006: 27.7; 2007: 27.4; 2008: 21.3; 2009-12 Avg. Proj.: 16.7 - External current account (incl. official transfers) in percent of GDP: 2004: 1.6; 2005: 0.2; 2006: 3.1; 2007: 1.4; 2008: 1.2; 2009-12 Avg. Proj.: -1.6 ### Fiscal performance in 2007 - Fiscal developments were broadly in line with the program, but the composition of spending deviated. - All quantitative indicators were met except the year-end primary basic surplus, which missed target by 0.4 percent of GDP. - Revenue collection improved; tax revenue slightly above target largely due to advance tax payments totaling ½ percent of GDP, mostly on cocoa export duties (at a 7 percent rebate), which contravened the program undertaking. - Non-tax petroleum sector revenue fell short. - Overruns on current spending of 0.8 percent of GDP occurred at the expense of crisis-exit programs and investment. - Overruns reflected unbudgeted discretionary spending by the presidency and prime minister’s office, military wages, frontline bonuses, and unforeseen housing allowances for primary school teachers. - Large part of spending was executed through treasury advances, complicating budget execution monitoring. - Financing developments: - Authorities accelerated repayment of domestic arrears by 1.5 percent of GDP (compared to 0.5 percent of GDP under the program), facilitated by issuance of two-year WAEMU market bills in September raising the equivalent of 1.2 percent of GDP at 6½ percent interest. - Deposit buildup of 1 percent of GDP for World Bank arrears clearance did not occur because of the accelerated domestic arrears repayment. - WAEMU convergence: Côte d’Ivoire slightly improved its performance on the WAEMU convergence criteria. - WAEMU convergence indicators (Text Table 2 highlights): - Basic fiscal balance/GDP (≥ 0 percent): 2005: -1.6; 2006: -1.7; 2007: -0.6; 2008: -0.7 - Average consumer price inflation (≤ 3 percent): 2005: 3.9; 2006: 2.5; 2007: 1.9; 2008: 3.8 - Total debt/GDP (≤ 70 percent): 2005: 87.4; 2006: 85.7; 2007: 83.6; 2008: 78.4 - Change in domestic arrears, billions of CFAF (≤ 0): 2005: -35.4; 2006: 3.2; 2007: -143.1; 2008: -15.0 - Change in external arrears, billions of CFAF (≤ 0): 2005: 409.2; 2006: 364.2; 2007: 266.6; 2008: -259.1 - Wages and salaries/fiscal revenue (≤ 35 percent): 2005: 45.0; 2006: 42.1; 2007: 43.6; 2008: 42.5 - Capital expenditure domestically financed/fiscal revenue (≥ 20 percent): 2005: 10.7; 2006: 15.1; 2007: 12.8; 2008: 12.9 - External current account balance, excluding grants/GDP (≥ -5 percent): 2005: 0.4; 2006: 3.3; 2007: -0.3; 2008: -0.6 - Tax revenue/GDP (≥ 17 percent): 2005: 14.5; 2006: 15.5; 2007: 15.7; 2008: 16.0 ### External arrears, debt, and program financing - External debt remained unsustainable in 2007; external arrears rose to 25 percent of GDP at year-end. - Authorities resumed payments to the World Bank and AfDB and finished repaying their half (1.1 percent of GDP) of World Bank arrears at end-February 2008. - The authorities have been current on scheduled debt service to the World Bank and AfDB (since July 2007) and to all other multilaterals, except the EIB. - Funding for World Bank arrears clearance came about one-half from own resources and the remainder from placement in January of three-year CFAF notes (at 10 percent interest) with selected local banks, which resold part to foreign investors. - Direct borrowing with local banks was used because of time constraints and temporary liquidity drying up on the WAEMU market as other WAEMU members issued unexpectedly. ### Financial sector developments - Broad money grew by 17 percent and credit to the economy by 19 percent in 2007, reflecting a return of confidence. - Net foreign assets rose because of the favorable balance of payments and the purchase by foreign banks of part of the government paper. - Progress in strengthening the banking system was limited: - Of the 9 banks (out of 18) that had inadequate capital at end-2006, three increased their capital, but one remains below the minimum requirement. - None of the undercapitalized banks had formulated a recapitalization plan by end-2007 as intended. - Five banks did not meet the liquidity norm. - Ratio of nonperforming loans to total loans improved to 18 percent at end-December 2007 (from 20 percent at end-2006). - The state-owned National Investment Bank (BNI) improved certain prudential ratios in 2007, but its balance sheet remains dominated by public sector deposits and lending. - Anti-money laundering: in January 2008 the government appointed the members of the Financial Investigation Unit, which will soon be operational with Fund technical assistance. ### Structural reforms, transparency, and sectoral measures - Progress on structural front: - Reporting on quasi-fiscal cocoa levies improved, and a large part of the accumulated levies was allocated to rural projects. - Energy sector audits are being finalized and reporting on financial flows improved. - Delays: some key fiscal measures were implemented with delay or postponed to 2008. - Key 2008 program elements: - Continue fiscal consolidation and create fiscal space for urgent needs by: - improving tax administration, especially in the CNW zones; - stabilizing the wage bill while confining recruitment to the social sectors; - decisively reducing nonwage current spending. - Improve public expenditure management by adhering to budget procedures and issuing quarterly budget execution statements to the Council of Ministers and the public. - Strengthen the financial sector by recapitalizing underfunded banks, enhancing bank compliance with prudential norms, and restructuring microfinance. - Improve transparency and efficiency in: - Energy sector: report in line with EITI procedures, implement electricity reform, and ensure adequate pricing of petroleum products. - Cocoa/coffee sector: publish quarterly reports on quasi-fiscal levies and their use for investment, and publish budgets and certified accounts of sector agencies. - For both energy and cocoa/coffee sectors, formulate reform strategies with support from the World Bank and other donors. ### Risks to the program - Identified risks include: - A resurgence of political tensions. - Delays in elections. - Renewed overruns in discretionary spending. - Risk mitigants noted: - Satisfactory performance so far. - Commitment to program objectives shared by all political parties. - Increasing international support. *Source: _cr08142 - Executive Summary (IMF).* ### 7. Progress on structural measures under EPCA was mixed (MEFP ¶11 and ### _cr08142 - 7. Progress on structural measures under EPCA was mixed (MEFP ¶11 and ### Progress on structural indicators under EPCA - Of the four structural indicators only two were (fully or partially) implemented, albeit with delay. - The indicator related to issuance to the Council of Ministers of budget execution statements through September was done in early December. - The indicator on not resorting to advance discounted payments of cocoa export duties was not observed because of liquidity difficulties of the treasury. ### Transparency and sectoral structural measures (energy and cocoa/coffee) - Reporting on the collection and use of quasi-fiscal cocoa levies (½ percent of GDP) improved. - A large part of levies accumulated in 2006-07 was allocated to rural infrastructure and social projects, to be awarded through public tender and supervised by an interministerial committee in consultation with World Bank staff. - For levies collected during 2001-05, the General Prosecutor started an investigation into alleged misuse of funds by the sector’s semipublic agencies. - In the energy sector: - Two Bank-financed audits were completed and the third, for the electricity sub-sector, should be ready shortly. - Compliance with EITI procedures is advancing. - Regular reporting of the sector’s physical and financial flows to the Council of Ministers has raised awareness of transparency issues. - The increase in electricity tariffs (by 10 percent on average) to bring them closer to energy prices in the region and reduce the budgetary subsidies (0.4 percent of GDP in 2007) was delayed by several months because of social tensions and food price increases, but implemented as a prior action in early 2008. ### Program objectives and financing request (overview) - The program for 2008 remains focused on building the foundations for sustained recovery and poverty reduction. - It emphasizes: improving public resource management; creating fiscal space for social and basic infrastructure needs; laying the basis for deeper structural reforms. - Authorities request further EPCA in an amount of 12.5 percent of quota as envisaged at the time of EPCA-1; they also request continued subsidization of the interest rate on EPCA (LOI, ¶4), subject to resource availability. - Staff view: EPCA-supported program could help pave the way for a PRGF arrangement and a HIPC decision point, once conditions are in place. These conditions could, in staff’s view, be met late in the third quarter of 2008 at the earliest. ### Growth outlook - Real GDP growth should reach 3 percent in 2008 and is expected to accelerate gradually to 6 percent by 2011. - In 2008: - Growth helped by increase in oil/gas output to at least the 2006 level, favorable prices for agricultural exports, reunification, and return of private sector confidence. - End-period CPI inflation is expected to rise to 7 percent (reflecting higher food import prices). - Medium term: growth should return to pre-crisis rates of 5−6 percent, driven by political normalization, structural reforms in energy, cocoa/coffee and financial sectors, increased public investment, and private investment/GDP ratio returning to pre-crisis levels. ### Fiscal program for 2008: objectives and composition - Budget for 2008 (adopted in late December and revised in February) foresees a primary basic surplus of 0.8 percent of GDP. - Revisions approved by the Council of Ministers, in the absence of a functioning parliament. - Revenue and related measures: - Program incorporates measures to keep the revenue/GDP ratio at 19.4 percent. - Adjusted for nonrecurrence of toxic waste damage compensation and increased oil/gas revenue, the revenue effort amounts to 0.3 percent of GDP, mainly from better indirect tax collection and significantly higher contributions from the national oil company (PETROCI). - Authorities intend to increase petroleum pump prices (unchanged since 2005) by at least 8 percent by mid-year. - Offset any revenue shortfall from advance tax payments in 2007 by stepping up redeployment of tax administrations in the CNW. - Expenditure and composition: - Wage bill stabilized at 6.8 percent of GDP (by restraining salary envelopes to 2007 budgeted amounts, while allowing significant recruitment of teachers and health workers). - Nonwage recurrent spending reduced to the 2006 level. - Increase in electricity tariffs early in the year should help keep subsidies to the electricity sector at half their level in 2007. - Investment increases mainly to rehabilitate basic infrastructure. - Public works on transfer of political capital to Yamoussoukro to be kept just below the 2007 level. - Foreign-financed investment should double, largely because of reactivation of World Bank project financing. - Social spending increases to 5.6 percent of GDP (from 5.4 percent in 2007) for rehabilitation of schools and health centers and recruitment and non-wage allowances of social sector workers. - Crisis-exit and related spending: - Spending on crisis-exit programs rises by 1 percent of GDP because large parts were postponed from 2007 and recent political accords added costs. - Programs for reinsertion of ex-soldiers and community rehabilitation, redeployment, and identification/elections costed at 1.9 percent of GDP, of which about half is from government resources and the rest from donors. - Government terminated frontline bonuses from February 2008, but prepared to pay bonuses claimed to be in arrears by the military (a total of 0.7 percent of GDP since 2003). Authorities intend to limit the amount in 2008 to 0.3 percent of GDP (from 0.4 percent in 2007) and postpone remaining payments beyond 2008. - Temporary bonuses to FN soldiers who meet eligibility criteria cost up to 0.1 percent of GDP. - Budget has a large government contribution to cost of identification and the technical operator, as donor funding has not been found. ### Fiscal tables and key fiscal figures (percent of GDP, as presented) - Total revenue 1/: 18.5 (2006); 18.6 (2007 Est.); 18.6 (2008 Prog.); 19.4 (CR No 07/312) - Of which: oil and gas production revenue: 1.5 (2006); 1.4 (2007 Est.); 1.4 (2008 Prog.); 2.2 (CR No 07/312) - Primary basic expenditure 2/: 18.2 (2006); 17.6 (2007 Est.); 18.0 (2008 Prog.); 18.6 (CR No 07/312) - Of which: wages and salaries: 6.5 (2006); 6.4 (2007 Est.); 6.8 (2008 Prog.); 6.8 (CR No 07/312) - Other current expenditure: 8.5 (2006); 8.2 (2007 Est.); 8.3 (2008 Prog.); 7.9 (CR No 07/312) - Crisis-related expenditure: 0.8 (2006); 1.4 (2007 Est.); 0.8 (2008 Prog.); 1.9 (CR No 07/312) - Domestically financed capital spending: 2.3 (2006); 2.0 (2007 Est.); 2.0 (2008 Prog.); 2.1 (CR No 07/312) - Primary basic balance 3/: 0.3 (2006); 1.0 (2007 Est.); 0.6 (2008 Prog.); 0.8 (CR No 07/312) - Change in domestic arrears (- net cash payments): 0.0 (2006); -0.5 (2007 Est.); -1.5 (2008 Prog.); -0.1 (CR No 07/312) - Net domestic financing 4/: 0.0 (2006); -1.0 (2007 Est.); 0.4 (2008 Prog.); 0.0 (CR No 07/312) - Net external financing 5/: -0.1 (2006); -2.8 (2007 Est.); 0.0 (2008 Prog.); -6.2 (CR No 07/312) - Crisis-related program loans and grants, other grants, and other flows (net) 6/: -0.2 (2006); 1.2 (2007 Est.); 0.6 (2008 Prog.); 0.7 (CR No 07/312) - Financing gap (- deficit / + surplus): 0.0 (2006); -2.1 (2007 Est.); 0.0 (2008 Prog.); -4.8 (CR No 07/312) - Sources: Ivoirien authorities; and IMF staff estimates and projections. - Notes: 1/ Excluding toxic-waste-related revenue. 2/ Total expenditure net of scheduled interest, foreign-financed capital expenditure and toxic-waste-related spending. 4/ Net domestic bank and non-bank financing (scheduled amortization) less domestic interest due. 6/ Including toxic waste damage revenue minus spending. 3/ Total revenue (excluding grants) less primary basic expenditure. 5/ Gross external financing minus project/program loans and external debt service due plus net change in. ### Structural fiscal reforms and public expenditure management - Revenue-area reforms: - Review of exemptions. - Better control of tax collection on consumption of petroleum products. - Regular external audits of state-owned companies, like PETROCI and the Autonomous Port of Abidjan. - Public expenditure management measures: - Strict adherence to budget allocations. - More transparent budget execution. - Reining in treasury advances. - Specific commitments: - Draw up an inventory of domestic arrears and adopt a consolidation plan by May 2008 (delayed from last September) while avoiding new arrears. - Box 1 highlights (Public Expenditure Management: Issues and Reforms): - SIGFiP computerized budget execution system installed in 1999; being devolved to local government levels (currently to about half of Côte d’Ivoire’s 76 départements). - Weaknesses: budget preparation calendar disruptions, extensive use of treasury advances, mismatch between ASTER and SIGFiP payments, differing budget codes, slow regularization of treasury advances. - EPCA-1 measures partly implemented: - Normal budget preparation calendar adhered to for 2008 budget. - Normal budget execution procedures reinstated with 2007 budget adopted in June, but treasury advances reduced less than envisaged and regularization was slow. - A budget execution report through September was issued to the Council of Ministers in December 2007. - Further steps envisaged by EPCA-2: - Adhere to monthly budget allocations for recurrent and quarterly for investment spending. - Further reduce treasury advances and regularize them within two months after the end of each quarter. - Continue issuing detailed budget execution statements each quarter. - Return to timely preparation of annual government accounts and draft budget execution laws and to regular reporting by the audit chamber of the supreme court. - Envisaged medium-term reforms: - Prepare a medium-term expenditure framework. - Revise the organic public finance law. - Adapt the budget nomenclature to GFS norms and for tracking pro-poor spending. ### External arrears, debt treatment, and program financing - Authorities expect completion of arrears clearance with the World Bank and AfDB in about a month and plan to normalize relations with other creditors. - After Côte d’Ivoire repaid half of its arrears to the World Bank at end-February, the Bank plans to proceed, following a bridge loan from an external partner, with an IDA allocation to clear the other half of arrears and provide new budget support (for a total of around US$300 million) in early April. - An arrears clearance operation with the AfDB is planned for end-April 2008; AfDB expected to provide a grant covering two-thirds of Côte d’Ivoire’s arrears (totaling US$520 million) through its Fragile States Facility (FSF); Côte d’Ivoire will contribute one-third. - Proposals to clear arrears with the EIB (US$60 million) are under consideration; could involve deferral until cleared by a grant under the 10th FED. - Preparations for a HIPC-DSA have started; a November 2007 Bank/Fund mission reconciled 2006 debt data in preparation for the HIPC-DSA; preliminary assessment based on projected end-2007 figures shows Côte d’Ivoire would qualify for HIPC relief under the revenue criterion, though with a small margin against the threshold (250 percent of NPV of debt to revenue). - Financing composition and coverage of financing gap (2008, percent of GDP and CFAF table highlights): - Financing gap (- deficit / + surplus): -1950 (Billions of CFAF; Prog.), -488 (Est.), -1093 (CR No 07/312), -4.8 (Percent of GDP). - Amortization of WAEMU and domestic debt 1/: -121 (Prog.), -215 (Est.), -169 (CR No 07/312), -379 (Millions of US$), -1.7 (Percent of GDP). - New WAEMU/domestic financing effort: 752 (Prog.), 301 (Est.), 332 (CR No 07/312), 981 (Millions of US$), 1.3 (Percent of GDP). - World Bank pre-arrears clearance grant for crisis-related programs: 170 (Prog.), 214 (Est.), 80 (CR No 07/312), 0.2 (Percent of GDP). - Other donor financing of crisis-related programs: 68 (Prog.), 188 (Est.), 118 (CR No 07/312), 0.8 (Percent of GDP). - Identified financing total: 147 (Prog.), 381 (Est.), 855 (CR No 07/312), 3.8 (Percent of GDP). - IMF EPCA: 30 (Prog.), 3/ 276 (Est.), 10.3 (Percent of GDP). - World Bank arrears clearance grant (50% of arrears): 117 (Prog.), 0 (Est.), 113 (CR No 07/312), 2.1 (Percent of GDP). - AfDB arrears clearance grant (assuming 67% of arrears): 0 (Prog.), 0 (Est.), 154 (CR No 07/312), 1.5 (Percent of GDP). - Residual gap (funding to be sought from other donors and WAEMU/domestic market): 48 (Prog.), 5/ 93 (Est.), 208 (CR No 07/312), 0.9 (Percent of GDP). - Notes: 1/ Including WAEMU bonds bought by non-Ivoiriens and amortization on loans from Petroci. 3/ Financing received; recorded above the line in this column. 4/ Financing postponed to 2008. 5/ Financing received; recorded above the line in this column, under new WAEMU/domestic financing effort. 2/ Includes one purchase of 12.5 percent of quota in 2007; assumes a second purchase in 2008 upon approval of EPCA-2. ### Financial sector priorities - Emphasize recapitalization of banks, strengthening microfinance institutions, and reforming several public financial institutions. - Priority actions: - Recapitalize the seven (mostly private) banks with insufficient equity. - In the WAEMU context, start restructuring microfinance. - Revisit the role of the BNI, based on forthcoming external audit. - Government intends to restructure the postal savings fund (CNCE) and reform the social security fund (CNPS) while servicing its debt to the latter based on the new debt restructuring agreement. - Regional context: adherence to WAEMU institutional reform aimed at strengthening independence of regional supervisory institutions is crucial. ### External sector projections and competitiveness - External current account surplus projected to fall further in 2008 and then turn gradually into deficit. - Surplus of 1.4 percent of GDP in 2007 is expected to turn to a deficit of over 3 percent by 2012, financed by increasing donor assistance and foreign direct investment. - Competitiveness: - Despite a 2 percent appreciation in 2007, the REER is at or below the estimated ERER. - Authorities agree improvements in business climate and physical infrastructure are needed to enhance competitiveness and attract private investment inflows. - Trade policy: - Signing of an Economic Partnership Agreement (EPA) between EU and ECOWAS was delayed, but authorities initialed a bilateral interim agreement to keep duty-free access to EU markets while negotiations continue. ### Energy sector structural reforms (further measures) - 2008 measures include: - More complete reporting on financial flows in oil/gas production, refineries, and electricity to the Council of Ministers. - Preparing reports on oil/gas extraction and revenue in line with EITI procedures. - Full application of the automatic petroleum pricing mechanism starting in mid-2008. - Mutual respect of payment obligations in the electricity sector. - By May 2008 the authorities plan to adopt an action plan based on recent audits to improve sector management, with Bank support. *Source: _cr08142 - 7. Progress on structural measures under EPCA was mixed (MEFP ¶11 and, PDF content).* ### 25. Measures in the cocoa/coffee and cotton sectors focus on further enhancing ### 25. Measures in the cocoa/coffee and cotton sectors focus on further enhancing ### Cocoa/coffee and cotton sector measures - Sectors are key for growth and poverty reduction and have important fiscal implications. - Under EPCA-2 the authorities intend to: - publish quarterly reports on the collection and use for rural investment of quasi-fiscal levies (MEFP ¶32-33); - publish the budgets and certified accounts of the sector agencies (MEFP ¶32-33); - further reduce levies from CFAF 46.5 per kilo to 41.0 in 2008/09 to enhance producer incentives (MEFP ¶32-33). - In the cotton sector, restructuring to improve competitiveness is underway. ### PRSP process (H) - The PRSP process is proceeding to completion in the third quarter of 2008. - The reactivated PRSP supervisory committee is building on the 2002 Interim PRSP. - A nation-wide household survey and broad consultations will be held in the first half of 2008 with donor support (MEFP ¶38). ### Program issues (I) - The program’s quantitative and structural indicators cover 2008 (MEFP Tables 1-2). - Prior actions and structural indicators under EPCA aim to ensure adequate budget execution and avoid subsidies and tax revenue losses in the energy sector. - Measures to strengthen government control over budget outcomes include: - redefined ceilings on nonconcessional external borrowing (TMU ¶14); - introduced ceilings on net domestic financing, including paper issued on the WAEMU market (TMU ¶17); - strengthened monitoring of domestic unpaid payment orders and arrears (TMU ¶12-13). - Other steps to improve public financial management are referenced (MEFP ¶28-29). ### Staff appraisal — progress and concerns (IV) - Progress: - Côte d’Ivoire has made progress toward reunification, peace, elections, and economic recovery; a climate of political dialogue has taken hold and the Ouagadougou Accord roadmap is generally being implemented, though with delays (¶28). - Performance on the 2007 program: - Overall satisfactory, though concerns about spending composition and delays in certain measures (¶29). - Fiscal targets were missed by relatively small margins, with overruns on non-productive spending at the expense of basic infrastructure and crisis-related spending. - Widespread use of treasury advances and insufficient dissemination of budget execution statements need to be addressed. - Overall fiscal restraint, the modest primary surplus, and efforts to mobilize domestic financing to reduce domestic arrears and make payments to the World Bank and AfDB are commended. - Progress on structural measures occurred, but several were implemented with delays; some (e.g., on petroleum pricing and bank recapitalization) were postponed to 2008. - Policy priorities going forward (¶30): - Fiscal policy: - aim at further consolidation through a modest primary basic surplus and create fiscal space to address urgent social, infrastructural, and other post-conflict needs; - improve tax collection, especially in the CNW; - stabilize the wage bill while confining recruitment to the social sectors; - strictly control nonwage recurrent spending. - Public expenditure management: - strict adherence to budget procedures, respect of budget allocations, and quarterly issuance of budget execution statements. - Financial sector: - accelerate recapitalization of underfunded banks; - ensure banks comply with prudential norms; - restructure microfinance. - Energy sector: - extend 2007 transparency steps, notably through comprehensive reporting following EITI procedures; - enhance electricity performance by setting tariffs at cost-covering levels, ending government subsidies, and avoiding cross arrears; - fully apply the petroleum pricing mechanism to enhance efficiency and safeguard tax revenue. - Cocoa/coffee sector: - increase transparency through regular publication of reports on collection and use of quasi-fiscal levies for rural investment and of budgets and certified accounts of sector agencies; - closely monitor the use of all levies and reduce them further to improve living conditions of farmers. ### Macroeconomic and debt considerations - The authorities’ policies under EPCA have helped strengthen the currency union, and competitiveness is broadly adequate (¶31). - Implementation of the 2008 macroeconomic policies should contribute to domestic stability and external stability of the WAEMU. - The REER is estimated to be close to its equilibrium, but further efforts to enhance the business climate are needed if imports grow rapidly and oil production declines (¶31). - Debt relief is needed for fiscal and external sustainability: the last LIC-DSA showed debt distress; the preliminary HIPC-DSA calculation suggests Côte d’Ivoire would qualify for debt relief under the enhanced HIPC Initiative (¶32). ### PRSP completion recommendation - The start of the PRSP process is welcome; authorities should complete the PRSP as early as possible using broad-based consultations and household surveys to assess the needs of the population (¶33). *Source: IMF staff report excerpt (paragraph references as in source).* ### 34. Staff assesses as adequate Côte d’Ivoire’s capacity to repay the Fund. While ### _cr08142 - 34. Staff assesses as adequate Côte d’Ivoire’s capacity to repay the Fund. While ### Staff assessment and recommendation - Staff assesses as adequate Côte d’Ivoire’s capacity to repay the Fund. - Staff recommends approval of the authorities’ request for a second EPCA purchase. - Rationale cited: satisfactory program implementation so far, broad-based commitment of key political actors to program objectives, and increasing support from the international community. ### Risks to program implementation - Possible renewed political tensions. - Delays in implementing the peace accord. - Discretionary spending overruns before the elections. - Revenue shortfalls. - Eroding consensus to implement structural reforms. ### Key national income and price indicators (selected, annual percentage changes unless otherwise indicated) - GDP at constant prices: 2004: 1.6; 2005: 1.8; 2006 Est.: -0.3; 2007 Prog.: 1.7; 2008 Est.: 1.6; 2009 Prog.: 3.5; 2010 Prog.: 2.9 - GDP deflator: 2004: 0.6; 2005: 4.2; 2006 Est.: 5.0; 2007 Prog.: 1.7; 2008 Est.: 2.1; 2009 Prog.: 3.9; 2010 Prog.: 4.7 - Consumer price index (annual average): 2004: 1.5; 2005: 3.9; 2006 Est.: 2.5; 2007 Prog.: 2.0; 2008 Est.: 1.9; 2009 Prog.: 3.0; 2010 Prog.: 4.3 - Consumer price index (end of period): 2004: 4.4; 2005: 2.5; 2006 Est.: 2.0; 2007 Prog.: 2.9; 2008 Est.: 1.5; 2009 Prog.: 3.0; 2010 Prog.: 6.8 ### External sector (CFA francs basis, selected) - Exports, f.o.b., at current prices: 2004: 8.4; 2005: 11.3; 2006 Est.: 8.0; 2007 Prog.: -2.4; 2008 Est.: -5.0; 2009 Prog.: 3.0; 2010 Prog.: 12.8 - Imports, f.o.b., at current prices: 2004: 21.9; 2005: 22.9; 2006 Est.: -1.7; 2007 Prog.: 0.9; 2008 Est.: 0.1; 2009 Prog.: 6.2; 2010 Prog.: 17.8 - Current account balance (including official transfers, percent of GDP): 2004: 1.6; 2005: 0.2; 2006 Est.: 3.1; 2007 Prog.: 2.3; 2008 Est.: 1.4; 2009 Prog.: 1.1; 2010 Prog.: 1.2 - Overall balance (percent of GDP): 2004: -3.6; 2005: -4.0; 2006 Est.: -2.7; 2007 Prog.: -1.8; 2008 Est.: -2.1; 2009 Prog.: -1.6; 2010 Prog.: -0.8 - Gross official reserves (months of imports of goods and services): 2004: 3.1; 2005: 2.5; 2006 Est.: 2.9; 2007 Prog.: 3.1; 2008 Est.: 3.1 ### Central government fiscal indicators (selected; percent of GDP and CFAF billions) - Total revenue and grants (percent of GDP): 2004: 18.4; 2005: 18.2; 2006 Est.: 19.1; 2007 Prog.: 20.8; 2008 Est.: 19.8; 2009 Prog.: 21.0; 2010 Prog.: 20.7 - Total revenue (percent of GDP): 2004: 17.5; 2005: 17.1; 2006 Est.: 18.5; 2007 Prog.: 19.5; 2008 Est.: 19.4; 2009 Prog.: 19.6; 2010 Prog.: 19.4 - Total expenditure (percent of GDP): 2004: 20.1; 2005: 19.9; 2006 Est.: 20.9; 2007 Prog.: 20.5; 2008 Est.: 20.7; 2009 Prog.: 20.8; 2010 Prog.: 21.1 - Overall balance, including grants (percent of GDP): 2004: -1.7; 2005: -1.7; 2006 Est.: -1.8; 2007 Prog.: 0.3; 2008 Est.: -0.8; 2009 Prog.: 0.2; 2010 Prog.: -0.4 - Primary basic balance (percent of GDP): 2004: 0.9; 2005: 0.4; 2006 Est.: 0.3; 2007 Prog.: 1.0; 2008 Est.: 0.6; 2009 Prog.: 1.3; 2010 Prog.: 0.8 - Table 3a (billions of CFA francs, selected): Total revenue and grants: 2004: 1,507.5; 2005: 1,566.0; 2006 Est.: 1,727.5; 2007 Prog.: 1,978.1; 2008 Est.: 1,861.3; 2009 Prog.: 2,090.2 ### Public debt, arrears, and debt-service metrics (selected) - External public debt (percent of GDP): 2004: 72.4; 2005: 73.5; 2006 Est.: 71.8; 2007 Prog.: 71.0; 2008 Est.: 70.1; 2009 Prog.: 66.3; 2010 Prog.: 66.8 - Public debt in arrears (percent of GDP): 2004: 19.4; 2005: 25.1; 2006 Est.: 27.7; 2007 Prog.: 24.3; 2008 Est.: 27.4; 2009 Prog.: 0.0; 2010 Prog.: 21.3 - Outstanding arrears (year-end, billions of CFAF): 2004: 1,064; 2005: 1,671; 2006: 2,011; 2007: 2,295; 2008 Est./Proj.: 1,992 - Public external debt-service due (CFAF billions): 2004: 520; 2005: 447; 2006: 397; 2007: 377; 2008: 333; 2009: 364; 2010: 364 - Public external debt service as percent of exports of goods and services: 2004: 13.1; 2005: 10.2; 2006: 8.4; 2007: 8.2; 2008: 8.3; 2009: 7.7; 2010: 7.2 - Table 8 (debt-service scheduled, selected years, billions of CFAF): 2004 total: 510.2 (Principal 367.0; Interest 143.2); 2006 total: 395.9 (Principal 276.0; Interest 120.0); 2008 proj. total: 359.4 (Principal 262.5; Interest 96.9) ### External financing and EPCA resources (selected) - External financing requirements (Table 6, billions of CFAF): 2006: -31.9; 2007 Est.: 4.5; 2008 Proj.: 7.9; 2009 Proj.: -209.0; 2010 Proj.: -724.0 - Financing gap: 2008 Proj. financing gap: 0.0 (Table 3a line "Financing gap (+ deficit / – surplus) 0.00 0.00 0.0 194.8 0.0 487.6" indicates prospective financing needs) - Expected sources of financing (Table 3a / Table 6, selected): IMF EPCA: 2007 Est.: 30.0; 2008 Proj.: 27.3 (Table 3a notes: The purchase of 12.5 percent of quota in 2007 upon approval of EPCA-1 recorded under financing in 2007 Est.; prospective purchase of 12.5 of quota in 2008 upon approval of EPCA-2 is recorded below the line in the 2008 column.) - Table 6 expected sources of financing (billions of CFAF, 2008 Proj.): IMF EPCA 27.3; World Bank arrears clearance grant (50% of arrears) 112.8; World Bank budget support operations 60.2; AfDB arrears clearance grant (67% of arrears) 154.0; AfDB budget support 27.2; EU financing for partial EIB arrears clearance and debt service 13.6; Funding to be sought from other donors and WAEMU/domestic market 92.6 ### Balance of payments and reserves (selected) - Trade balance (billions of CFAF): 2004: 1,360.1; 2005: 1,260.1; 2006: 1,621.8; 2007 Est.: 1,403.7; 2008 Proj.: 1,449.9 - Exports, f.o.b. (billions of CFAF): 2004: 3,539.9; 2005: 3,939.6; 2006: 4,256.5; 2007 Est.: 4,041.8; 2008 Proj.: 4,557.7 - Imports, f.o.b. (billions of CFAF): 2004: -2,179.8; 2005: -2,679.5; 2006: -2,634.7; 2007 Est.: -2,638.2; 2008 Proj.: -3,107.8 - Overall balance (billions of CFAF): 2004: -297.5; 2005: -347.0; 2006: -246.4; 2007 Est.: -195.6; 2008 Proj.: -83.8 - Official net reserves (increase -) (billions of CFAF): 2004: -209.1; 2005: 0.0; 2006: -158.2; 2007 Est.: -74.5; 2008 Proj.: -141.2 ### Monetary and banking sector (selected) - Money and quasi-money (M2) (percent changes of beginning-of-period broad money): 2004: 9.5; 2005: 7.4; 2006 Est.: 10.3; 2007 Prog.: 4.8; 2008 Est.: 17.2; 2009 Prog.: 7.6; 2010 Prog.: 7.6 - Net foreign assets (changes in levels, billions of CFAF): 2004: 641.8; 2005: 704.0; 2006: 821.8; 2007 Est.: 892.9; 2008 Proj.: 930.3 - Broad money (levels, billions of CFAF): 2004: 1,937.3; 2005: 2,081.0; 2006: 2,294.8; 2007 Est.: 2,689.2; 2008 Proj.: 2,892.4 - Banking-sector asset quality (Table 11, percent, end of period): Nonperforming loans (NPLs)/total loans: 2004: 19.3; 2005: 21.3; 2006: 25.1; Sept-07: 26.2; Dec-07 (note): 17.7 - Provisioning rate (percent): 2004: 70.1; 2005: 68.5; 2006: 65.4; Sept-07: 60.5; Dec-07 (note): 83.9 - Capital adequacy (risk-weighted capital to assets ratio): 2004: 13.0; 2005: 12.5; 2006: 15.7; Sept-07: 17.0; Dec-07 (note): 12.1 ### Medium-term scenario highlights (2007–12, selected projections) - Real GDP growth: 2007 Prog.: 3.5; 2008 Est.: 2.9; 2009 Prog.: 5.1; 2010 Prog.: 5.6; 2011 Prog.: 6.2; 2012 Prog.: 6.3 - Real GDP per capita growth: 2007 Prog.: 0.2; 2008 Est.: 2.0; 2009 Prog.: 1.4; 2010 Prog.: 3.6; 2011 Prog.: 4.1; 2012 Prog.: 4.7 - Gross investment (percent of GDP): 2007 Prog.: 12.2; 2008 Est.: 10.4; 2009 Prog.: 13.8; 2010 Prog.: 15.0; 2011 Prog.: 16.0; 2012 Prog.: 17.4 - External public debt (percent of GDP, medium-term): 2007 Prog.: 66.8; 2008 Est.: 61.2; 2009 Prog.: 57.0; 2010 Prog.: 52.7; 2011 Prog.: 50.1; 2012 Prog.: 50.1 - Assumptions (selected): Crude oil spot price (US$/barrel) 2007 Prog.: 63.87; 2008 Est.: 71.16; 2009 Prog.: 8.89; 2010 Prog.: 5.59; cocoa beans world market price (US$/kg) 2007 Prog.: 1.96; 2008 Est.: 1.59; 2009 Prog.: 2.20 ### Crisis-exit and election-related public spending (selected, Table 3c; billions of CFAF) - General crisis-exit efforts total (2007 Prog.): 136.7; (2008 Est./Proj.): 75.6; 2008 total projection: 190.9 - DDR, reinsertion and community rehabilitation (RRC) total (2007 Prog.): 33.0; (2008 Est.): 9.5; (2008 Proj.): 18.9 - Elections (2007 Prog.): 29.0; (2008 Est.): 8.0; (2008 Proj.): 36.0 ### Capacity to repay the Fund (Table 9 highlights) - Fund obligations based on existing and prospective credit (in millions of SDRs): 2006: 39.1 (principal); 2007: 30.6 (principal); 2008: 28.1 (principal) - Total obligations based on existing and prospective credit (in millions of SDRs): 2006: 41.0; 2007: 33.1; 2008: 32.5 - Total obligations in billions of CFAF (based on existing and prospective credit): 2006: 31.5; 2007: 24.2; 2008: 21.8 - Total obligations in percent of government revenue (based on existing and prospective credit): 2006: 1.9; 2007: 1.3; 2008: 1.1 - Outstanding Fund credit (in millions of SDRs) 2006: 99.7; 2007: 109.8; 2008 Prog.: 122.3 *Sources: Ivoirien authorities; IMF staff estimates and projections.* ### Appendix I – Letter of Intent ### Appendix I – Letter of Intent ### Overview and political context - Letter dated: Abidjan, March 20, 2008. - Reference milestones: - Ouagadougou Accord signed March 4, 2007. - Free, democratic, transparent elections scheduled for end-June 2008. - IMF Emergency Post-Conflict Assistance (EPCA) approved by the IMF Executive Board last August. - Main government objectives: - Complete reunification of the country and redeployment of government administration, notably establishment of prefectural authorities in the central, northern, and western (CNW) zones. - Implement the national community reinsertion and rehabilitation program (PNR/RC) and army unification. - Resume population identification in preparation for elections (revival of public hearings, "audiences foraines"). - Combat fraud, permissiveness, and corruption and strengthen rule of law and the judicial system. ### 2008 program request and financing - Request to the IMF: - Additional assistance under the EPCA of a further SDR 40.65 million, or the equivalent of 12.5 percent of our quota. - Request for an interest rate subsidy. - Transparency and publication: - Authorities intend to release publicly this letter, the attached MEFP, the attached TMU, and the IMF staff report relating to the EPCA request following IMF Executive Board approval. ### 2008 budget strategy and priorities - Budget promulgation and execution: - 2008 budget promulgated on December 28, 2007 and implemented as of January 4, 2008. - Fiscal priorities: - Improve revenue mobilization through greater efficiency of revenue collection agencies and rapid reestablishment in the CNW zones. - Combat fraud and corruption. - Prioritize health, education, and rehabilitation of basic infrastructures including CNW regional administrations. - Reduce nonessential expenditures, including sovereignty spending and front-line bonuses, to free resources for social and investment expenditure. - Support crisis-exit programs with appropriate budget allocations, accounting for external partners’ contributions. - Structural measures to be advanced in 2008: - Adoption by mid-2008 of action plans for coffee/cocoa, cotton and energy. - Adoption by the third quarter of 2008 for public financial management. ### Recent economic developments (2007) - Growth and sectoral performance: - Growth in 2007 reached 1 ½ percent. - Fall in oil production in 2007 to 17.5 million barrels, compared with 22.2 million in 2006 (technical problems in the Baobab field). - Recovery in telecommunications, transport, trade, construction and public works, and agro-food. - Strong growth in private investment for the first time since 1999 after a cumulative decline of over 30 percent in real terms since 1999. - Prices and exchange rates: - Inflation amounted to 1.9 percent as an annual average, compared to 2.5 percent in 2006. - Significant increases in prices for rice, milk, cooking oil, and flour due mainly to surge in world food prices; government suspended import duties on wheat and consulted private sector to mitigate effects. - Nominal and real effective exchange rates rose in 2007 as the dollar fell against the euro. - External balances: - Current account surplus reached 1.4 percent of GDP in 2007, compared with 3 percent in 2006. - Overall balance of payments deficit estimated at 1.3 percent of GDP compared with 2.6 percent in 2006; financed by accumulation of external arrears despite resumption of payment of current debt service to the World Bank and AfDB. - Capital account deficit improved slightly due to inflows of private capital but remains wide owing to almost complete lack of external financing. ### 2007 program implementation and fiscal performance - Budget execution and corrective actions: - Third-quarter pressures increased wage expenditures and operating costs; corrective measures in final quarter included freeze on nonessential recurrent expenditures and shift toward capital expenditures, plus carry-over into 2008 of part of wage bonuses. - Fiscal outcomes: - Generated a basic primary basic surplus of 0.6 percent of GDP, compared to 1 percent in the program. - Revenue yield slightly below program objective; favorable performance of taxes on incomes and wages, single export duties (DUS), and VAT partly offset shortfalls in petroleum product revenues. - Objective for DUS duties on cocoa met, but government used an advance collection of CFAF 60 billion, or ½ percent of GDP, at a financial cost of 7 percent. - Total overruns of 0.8 percent of GDP (operating expenditures by national institutions including sovereignty expenditures and front-line bonuses) were almost balanced by below-target post-crisis spending. - One-third of revenues received for toxic waste damage compensation (0.3 percent of GDP) used to compensate victims and implement prevention projects; remainder retained for 2008 and 2009 expenditures. - Debt service and arrears clearance: - Since July 2007, Côte d’Ivoire has stayed current on current debt obligations to the World Bank and the AfDB and almost all other multilateral creditors. - Government repaid a substantial amount of arrears to domestic suppliers (including subsidies for private schools), in an amount 1 percent of GDP higher than anticipated. - Amounts raised through issuance of government securities totaled the equivalent to 2 percent of GDP in 2007; these were insufficient to pay the World Bank as expected, prompting a private placement of CFAF-denominated obligations at relatively high interest rates in early 2008. - Combined with own revenues, these resources allowed full settlement of arrears to the World Bank in January and February 2008. ### Structural reforms and governance measures - Public financial management and fiscal transparency: - Return to normal budget execution procedures and regular reporting of budget execution statements and physical and financial flows in key sectors (coffee/cocoa and oil). - Budget execution statements breaking down expenditures for the first three quarters of 2007 were submitted to the Council of Ministers somewhat later than expected. - Government to carry out studies and audits and adopt action plans for public financial management, coffee/cocoa, cotton, and energy sector reforms. - Government Procurement Code operational to ensure transparency and competition in contract management. - Tax and customs administration: - Extended use of the standardized invoice, accelerated repayment of VAT credits, decreased VAT credit stock using new procedure introduced in 2006. - Improved control of transit flows and introduced new version of customs computer system (SYDAM-World). - Public sector wage and retirement policy: - Retirement criteria for teachers and all civil servants changed; rule requiring retirement after 30 years of service removed. - Increase in the retirement age from 55 to 60 years planned for 2008 to be phased in: increase from 55 to 57 years with decision in the fourth quarter of 2008 to become effective January 2009; and from 57 to 60 years from January 2011. - Banking and microfinance sector measures: - Nonperforming loans ratio fell from 26 percent in 2004 to 21.0 percent at end-2006 and 17.7 percent at end-2007. - Since March 2007, two banks resumed activity in the CNW zones. - Recapitalization progress made for four of nine banks not compliant with capital adequacy at end-2006; six banks remain under close supervision by the WAMU Banking Commission. - BCEAO raised minimum capital requirement for banks from CFAF 1 billion to CFAF 5 billion; applies as of January 1, 2008 for new banks, with existing banks having three years to comply. - Some prudential ratios for the Banque nationale d’investissement (BNI) improved in 2007 after securitization and sale at a discount of various claims on the government; public sector represents 67 percent of deposits and 69 percent of loans as of end-September 2007. - National Microfinance Strategy (SNM) drawn up to address high level of nonperforming loans in the microfinance sector since 2002. ### Forward-looking program outlook - Program objectives for 2008: - Consolidate progress on transparency of public resource management. - Implement action plans and deeper reforms in key sectors (coffee/cocoa, cotton, energy, and public financial management). - Use 2008 program (supported by EPCA) as basis to start discussions for a future three-year PRGF-supported program and to reach the decision point under the enhanced HIPC Initiative in the third quarter of 2008. - Adopt Poverty Reduction Strategy Paper (PRSP) before end-September 2008. - Monitoring and consultations: - Government will consult the IMF on implementation of the program and submit required information to monitor program implementation in accordance with IMF policy. *Source: Appendix I – Letter of Intent (Abidjan, March 20, 2008).* ### 14. Progress was made in improving transparency and governance in the coffee/ ### 14. Progress was made in improving transparency and governance in the coffee/ ### Coffee/Cocoa sector — transparency and governance progress - The Coffee/Cocoa Sector Project and Program Review and Monitoring Committee (the Coffee/Cocoa Committee) reported to the Council of Ministers on the amounts and usage of the quasi-fiscal levies, as well as the half-yearly budget execution statements of the various bodies involved (Regulatory Authority for Coffee and Cocoa - ARCC, Prudential Reserve - FRC, Cocoa and Coffee Marketing Exchange - BCC, and Coffee and Cocoa Producers' Development Fund - FDPCC). - The Committee’s terms of reference were expanded to include management of: - the FDPCC-investment fund and the Prudential Reserve, - the Rural Investment Fund (FIMR) and other investment funds (cocoa bags (sacherie)), - as of December 2007, the coffee sector recovery fund (Fonds de relance caféière). - The Committee is now tasked with checking that all the operations financed by these funds comply with the Public Procurement Code. - The total amount of quasi-fiscal levies was cut by CFAF 2.65/kg since the 2007-08 crop year. - Terms of reference were approved for a study to base a strategy for the sector; the study will be launched in March 2008. ### Energy sector — transparency, audits, and operational issues - World Bank–financed audits completed: - oil and gas extraction, - refining and storage of petroleum products. - Electricity subsector audit started; report expected by end-March 2008. - Government actions: - Confirmed commitment to the Extractive Industries Transparency Initiative (EITI) and launched the nation-wide process by creating the National Council in February 2008, which has formulated its action plan and bylaws. - Improved transparency of physical and financial flows with detailed quarterly reports to the Council of Ministers. - Implemented the March 2007 compensation protocol between the electricity company (CIE) and the government to offset cross-debts and claims relating to gas and electricity consumption at end-2006; however, new cross-arrears accumulated during 2007. - Tariff and operational constraints: - Increase in average electricity rates planned for end-August 2007 was postponed. - Fraud and delays in investments for network expansion and maintenance led to significant technical and nontechnical losses; network yield fell from 86 percent in 2000 to 76 percent in 2007. ### IV. Program for 2008 — growth and macro framework - Growth projection: - The rate of economic growth should be close to 3 percent in 2008, twice the rate of growth in 2007, helped by the dynamic performance of the secondary sector, improvement of export prices, and a slight pickup in oil and gas production. - Fiscal policy aims: - Continue fiscal consolidation while responding to post-conflict needs under a fairly moderate outlook for external financing. - Program largely reflects the 2008 Budget adopted end-December 2007, with adjustments approved by the Council of Ministers due to developments related to the Ouagadougou Supplementary Accords and tighter financing constraints. ### Fiscal balance, revenues, and tax measures for 2008 - Fiscal target: - The 2008 budget framework provides for a primary basic surplus of 0.8 percent of GDP. - Revenue target: - Revenue under the fiscal program for 2008 should rise to 19.4 percent of GDP in 2008, a tax effort of ⅓ percent of GDP (excluding revenues from toxic waste damage compensation, and excluding oil and gas revenues). - Tax collection focus and specific measures: - Mobilize tax revenue in the CNW zones by reopening all customs posts and main tax centers in Q1 2008; impact for 2008 estimated at 0.2 percent of GDP. - Improve VAT collection and expand its base, accelerate VAT credit reimbursement procedures so validated amount awaiting reimbursements will not exceed CFAF 7 billion during 2008 (compared to CFAF 9 billion at end-2007). - Implement automatic mechanism for petroleum product prices with review beginning in early July 2008; increase in pump prices at that date—the first since 2005—is expected to ensure petroleum products' contribution to tax revenue will be at least 1.2 percent of GDP (compared to the average for 2005-2007, which was 1 percent of GDP). - Ensure greater revenue contribution from national oil company PETROCI, with revenue impact amounting to 0.2 percent of GDP in 2008. ### Expenditure, wages, hiring, and social spending - Primary basic spending: - Will amount to 18.6 percent of GDP in 2008 (as against 18.0 percent in 2007), redirected toward post-crisis expenditure, basic infrastructure, and social expenditure. - Wage bill: - Stabilized as a share of GDP at CFAF 687 billion (6 ¾ percent of GDP). - Includes full-year impact of teacher housing allowances and allowances granted to health workers (CFAF 19 billion) and integration into the army and national police of some military personnel from the Forces Nouvelles (CFAF 12.5 billion). - Government intends to strictly limit hiring of new civil servants to 10,009 in 2008; postponement to 2009 of hiring estimated at 4,241 implies net hiring of civil servants will be 5,768 in 2008. - Government intends to strictly limit wage costs of public institutions to CFAF 33 billion (the level reached in 2006). - Social spending: - Fiscal program aims to increase social spending (education, health, and other “pro-poor” expenditure per the TMU) to 5.6 percent of GDP in 2008, compared with 5.4 percent in 2007. - Controls and cuts: - Operating outlays by national institutions (“sovereignty spending”) limited to CFAF 48.6 billion (as against CFAF 69.1 billion in 2007). - Gas subsidies to the electricity sector reduced to CFAF 20 billion (accompanied by an increase in rates). - Payments of front-line bonuses limited to CFAF 37 billion as against CFAF 40 billion in 2007; Treasury to pay at soldier regroupment sites based on verified pay lists reconciled with past bonus payments. - Government will halt all practices of compensating expenditures through tax revenues, improve supervision of revenue allocations through the SIR to fuel expenses of the Defense and Security Forces, and avoid recourse to advances against tax revenues. ### Post-crisis expenditures and programs (1.9 percent of GDP) - Post-crisis-expenditures will total 1.9 percent of GDP, with 0.9 percent of GDP to be assumed by external partners. - Components and programs: - National community reintegration and rehabilitation program (PNR/RC) for demobilized ex-combatants; World Bank financing a similar broader program. - Unification of the army under the Integrated Command Center (CCI), including reintegration of part of the FN and re-founding of the army. - Civic service (service civique) retraining program designed to reach 40,000 people, half of them in 2008. - Redeployment of government administration and rehabilitation of public buildings: after redeployment of 18,900 civil servants (including 12,000 teachers) in 2005-07, government aims to redeploy remaining 5,600 by August 2008. - Competitive examinations for 5,000 volunteers in CNW zones; reinstallation and incentive bonuses to be paid, of which CFAF 4 billion remain to be paid in 2008. - Identification for identity cards and preparation of electoral registers continuing with identification awarded to a technical operator to be carried out during H1 2008; elections coordinated by the Independent Electoral Commission (CEI). - Emergency intervention program financed mainly by external partners focusing on micro-projects, food aid, delivery of agricultural inputs, and rehabilitation of basic infrastructure. ### Investment expenditure and capital projects - Investment expenditure will rise to 3.1 percent of GDP in 2008 compared with 2.6 percent in 2007. - Priority: restoration of administrative services, social sectors, and basic infrastructure. - Transfer of political capital to Yamoussoukro slowed; amount allocated CFAF 15 billion (compared with CFAF 25 billion estimated for 2007). ### Financial sector reform - Banking system: - Continue to support WAMU Banking Commission efforts to ensure Ivoirien banks comply with prudential ratios and implement its recommendations. - Seven undercapitalized banks—four were called for a hearing at the Banking Commission in December 2007—asked to present realistic recapitalization plans by end-March 2008. - External financial and operational audit of the BNI and a strategic study on BNI’s role in financing the economy underway; results scheduled by mid-2008. - Microfinance: - Start restructuring of the microfinance sector based on the National Microfinance Strategy (SNM). - New legal framework adopted by WAEMU authorities to partially transfer supervisory responsibility from the Microfinance Directorate to the BCEAO; integration into legal and regulatory system in 2008. - Public savings institutions: - Audit of information system and accounts of the Postal Savings Fund (Caisse Nationale des Caisses d’Épargne - CNCE) conducted by end-2007 to reestablish financial equilibrium and end government subsidies. - Actuarial assessment and reform proposals for the CNPS pension arm (structural deficit) were drawn up; government intends to settle its debt with the CNPS per restructuring agreement signed in December 2007. ### Governance, transparency, and structural reforms — commitments and program preparation - Government commitment: - Put good governance in management of public resources at the center of economic program and structural reforms. - Combat fraud, corruption, and lawlessness; strengthen rule of law; restore economic and regulatory environment conducive to economic activity. - Program preparation: - Actions described will help prepare a program that could be supported by the PRGF. - Structural indicators under the EPCA program are described in Table 2; program includes reform measures across a range of areas. ### Budget reforms and public finance management actions for 2008 - Public finance management: - Adopt before end-Q3 2008 a medium-term plan for overall public finance management reform based on PEMFAR findings (mission in Nov 2007). - Tax administration and revenue protection measures: - Improve inspection of petroleum product exports to Mali and Burkina Faso and imports from outside ECOWAS arriving by land from those countries. - Complete independent audit of release for consumption of petroleum products to distributors in Vridi and Yamoussoukro and related tax revenues by end-March 2008; approve action plan before mid-May 2008 and implement by end-May 2008. - IMF technical assistance mission began in early March 2008 to assess customs administration; similar assistance requested for tax administration. - By end-June 2008, with IMF technical assistance, review full set of tax exemptions to identify recommendations for phasing them out. - Increase number of audit missions by the Inspection Générale des Finances (IGF) and the Directorate of Equity Investments and Privatization (DPP) to monitor régies financières and sociétés d’Etat. - Launch external financial and accounting audits of PETROCI and Port Autonome d’Abidjan by end-May 2008. - Use of public finance systems and transparency measures: - Establish monthly allocations for operating spending and quarterly allocations for investment spending for most budget items, and ensure strict observance. - Produce quarterly budget execution statements and report them to the Council of Ministers with a maximum time lag of 45 days, and release them to the public; harmonize SIGFiP and ASTER classifications from mid-May 2008 onward. - Reduce use of treasury advances to CFAF 120 billion, or 15 percent of outlays (excluding wages, externally financed expenditure, debt service and revenue-collecting agencies); regularize expenditures through advances every quarter with a time lag of two months. - Conduct independent semiannual audits of expenditures associated with post-conflict-related programs; first audit focusing on 2007 to be completed by end-July 2008. - Review time lags in the expenditure cycle (DAAF, Financial Control) observed in H1 2008 by mid-July 2008 to accelerate expenditure execution. - Strengthen steering role of the Treasury Cash-Flow Committee; regularly update monthly cash management plans. - Complete before end-March 2008 an inventory of domestic arrears through end-2007 and adopt—in consultation with the private sector—an arrears clearing plan, including securitization, by end-May 2008. - Avoid new domestic arrears (payment orders unpaid for over 90 days) and restrict the “float” stock to CFAF 190 billion, as laid down in the TMU. - Submit by end-June 2008 draft budget review laws to the Court of Audit (Chambre des comptes) for fiscal 2005 and 2006, and by end-September 2008 for fiscal 2007. ### Pension fund reform - Government intends to set in motion reform of the government employee pension fund (Caisse Générale de Retraite des Agents de l’Etat— CGRAE) to resolve its structural deficit (½ percent of GDP in 2007). - Financial, operational, legal and organizational audit has begun, as has an actuarial study and review of the legislative and regulatory framework of civil and military pensions; these three studies will be completed by end-April 2008. *Source: _cr08142 - 14. Progress was made in improving transparency and governance in the coffee/* ### 31. The government is determined to continue its efforts to enhance transparency ### _cr08142 - 31. The government is determined to continue its efforts to enhance transparency ### Oil, gas, electricity — transparency and sector reform - Expand Oil Committee terms of reference to include monitoring of audits and implementation of their recommendations. - Quarterly obligations: - Continue to provide the Council of Ministers every quarter, with a time lag of 45 days—and to release to the public—an analytical report (including a set of consistent tables as described in the TMU) on: - (i) the physical, financial, and tax flows of the crude oil and gas subsector; - (ii) the production, export, release for consumption, and taxation of petroleum products; - (iii) the production, costs, and financial flows in the electricity subsector. - Audits and action plan: - Before end-May 2008 prepare and start to implement an action plan to improve the management of the sector based on the recommendations of the operational, financial, and technical audits of the three subsectors carried out in 2007 and early 2008, in consultation with World Bank staff. - EITI compliance: - Continue to move forward to comply with the validation framework of the Extractive Industries Transparency Initiative (EITI). - Following the establishment of the National Council tasked with implementing the EITI, reports conforming to the EITI standards and procedures on physical and financial flows from the extractive industries will be produced and published by end-September 2008 for 2006, and by end-December 2008 for 2007. - Petroleum product pricing: - Implement the automatic petroleum product price setting mechanism and bring pump prices closer to international prices (entailing an average increase of at least CFAF 50 per liter) from the beginning of July 2008. - Pricing mechanism is based on import parity prices (IPP) and incorporates a temporary security margin of CFAF 15/liter. - At the time the mechanism is implemented the Specific Petroleum Product Tax (TSPP) for each product will be set so as to ensure sufficient tax revenues. - Reduce the “protection coefficient k” in the price structure for 2008 from 6 percent to 5 percent before end-June 2008. - Electricity sector liabilities and payments: - Clear by end-March 2008 the cross-debts and claims of the government and the electricity sector linked to consumption of gas and electricity during the year 2007. - Government will pay monthly (beginning in February 2008) for electricity consumption by the public administrations throughout the country. - The CIE will regularly pay the government the revenues corresponding to the government’s share of its gas consumption. - Electricity tariffs and losses: - Continue improving the financial viability of the electricity sector. - An increase of 10 percent in domestic electricity prices has been implemented, effective February 1, 2008, for enterprises; and it will be effective from March 1, 2008, for low-voltage users (except low-income households). - Government will carry on talks with export recipient countries to seek agreement on prices that better reflect world energy costs. - Sector operators will strive to limit technical and nontechnical losses (essentially due to fraud); CIE technical control measures to combat fraud will be expanded and continued in 2008. ### Coffee/cocoa and cotton sector reforms - Objectives: raise producer incomes, improve marketing, ensure effective monitoring by government, Coffee/Cocoa Committee, and sector agencies. - Planned 2008 actions: - By end-July 2008 prepare and adopt a new overall strategy for the sector with the help of external partners, based on existing audits and studies; strategy will consider solutions that allow higher producer prices and reduce the oligopsony power of exporters. - Provide each quarter to the Council of Ministers with a time lag of 45 days, and release to the public, an analytical report on the collection and use of the quasi-fiscal levies and the balances of bank accounts of the investment funds (FIMR, FDPCC-investment, Réserve de prudence, Sacherie and Relance caféière). - Submit to the Council of Ministers every half year (with a time lag of 45 days) information on the collection of quasi-fiscal levies for the operation of the ARCC, FRC, BCC, and FDPCC, and their budget execution statements. - Ensure publication of the FY 2008 budgets by end-March 2008 and of statements of the certified accounts of the four agencies by end-March 2008 for fiscal 2006 and by end-August 2008 for fiscal 2007. - Reduce the quasi-fiscal levies by CFAF 5.5/kg for the 2008-09 crop year. - Cotton sector: - Restructuring strategy supported by the EU to clear arrears and strengthen CIDT. - Policy for the sector will be adopted by end-June 2008 and an action plan for recovery will be implemented. ### Trade, judiciary, and institutional reforms - Trade policy: - Continue efforts to establish a common external tariff (CET) with the ECOWAS countries to promote freedom of movement of goods and regional integration. - Seek entry into an Economic Partnership Agreement (EPA) with appropriate phasing of the dismantling of tariffs on 80 percent of the products imported from the EU to maintain preferential access to the European market and enhance competitiveness. - Judiciary reform: - Prepare a reform plan with support of external partners to improve efficiency and fairness of the judiciary, training of judges, and public access to justice. ### Social sector and PRSP development - Social context: - Incidence of poverty reached 43 percent in 2006, according to World Bank estimates. - Côte d'Ivoire's ranking on the United Nations Human Development Index dropped to 163 out of 177 countries. - Education and health priorities: - Resume transfers of budget allocations to all the deconcentrated budget execution units in the CNW zones as soon as administrative services are restored. - Continue rehabilitating schools and other teaching and research establishments; complete redeploying teachers; reintegrate child soldiers into the education system; provide basic educational supplies; recruit volunteer teachers who pass the civil service employment entrance examination; develop longer-term programs to increase enrollment and use schools as cornerstone for peace. - Continue rehabilitating health care facilities, prioritizing clinics and maternity homes, and nurse training centers; vaccination programs and family education campaigns have resumed. - Follow-up on redeployment of 1,290 new senior health officials in 2007; continue to fill the shortage of health workers (estimated at 2,500 at end-2007) as new graduates become available; 700 will be hired in 2008. - National Health Development Plan (PNDS) prepared, setting targets related to the Millennium Development Goals (MDG). - PRSP timeline and process: - Poverty Reduction Strategy Paper (PRSP) will be completed at the latest by end-September 2008. - Workshop to launch PRSP completion process held in December 2007. - PRSP to be prepared under supervision of a PRSP Supervision Committee reporting to the Prime Minister and chaired by the Minister in charge of Planning and Development. - Household living standards survey and consultations to be held throughout the country from January through June 2008. - An interim report on work accomplished will be produced in March 2008. - Resources for PRSP preparation are being mobilized from donors, in particular the EU, the AfDB and UNDP. ### Program financing, external debt, and arrears clearance - Normalization with external partners and budgetary support: - At end-February 2008, Côte d’Ivoire finished clearing half of its arrears to the World Bank; the other half should be cleared by the World Bank in the form of an Economic Governance and Recovery Grant (EGRG), by means of a bridge loan. - Agreement with AfDB to clear arrears by end-April 2008 under Fragile States Facility (FSF) with AfDB contributing two-thirds and Côte d’Ivoire one-third. - Government will stay current with payments to other multilateral creditors and start talks with EIB to reach agreement on clearing arrears. - Continue discussions with the Paris Club, other official bilateral creditors, and London Group creditors to reconcile figures on the debt with a view to further restructuring under enhanced HIPC and MDRI mechanisms. - Residual financing gap: - Taking account of the primary basic surplus, the net external financing identified, and financing resources on the WAEMU financial market already included in the budget, the residual financing gap in 2008 amounts to about CFAF 90 billion. - To cover this gap, the government intends to resort further to the WAEMU financial market. - Borrowing and market discipline: - Throughout the program, the government will not enter into external borrowing on nonconcessional terms, as specified in the TMU (Table 1). - Undertakes to issue securities through auction or tender offers, and to consult with IMF staff regarding any new borrowing on the domestic market or WAEMU market that exceeds CFAF 30 billion. - Undertakes not to introduce or tighten restrictions on payments and transfers for current international transactions, introduce multiple exchange rate practices, enter into bilateral payments agreements inconsistent with Article VIII of the Fund's Articles of Agreement, or impose/tighten import restrictions for balance of payments purposes. ### Capacity building, technical assistance, and program monitoring - Technical assistance and capacity building priorities for IMF support in 2008: - (i) strengthen the customs and tax administrations; - (ii) reassess the petroleum product taxation system; - (iii) review tax exemptions; - (iv) implement public finance management reforms, following the PEMFAR mission of November 2007 with World Bank, IMF, AfDB, and EU support. - Program monitoring and institutional coordination: - Implementation of the 2008 program will be monitored through prior actions, quantitative and structural indicators (Tables 1 and 2). - Definitions of indicators, adjustment factors for supplementary budget support and for oil and gas revenues, and data to be reported are set forth in the TMU. - Strengthened interministerial committees and coordination: - Program under general supervision of the Technical Steering Committee for the Post-Conflict Program, coordinating the Oil, Coffee/Cocoa, PRSP, Interministerial Primary Commodities, and TOFE Committees. - Reactivate the Steering Committee for Economic and Structural Reforms under the Prime Minister's office in anticipation of a future PRGF-supported program. - Strengthen monitoring of external support and supervision of new external indebtedness for all public administrations and enterprises. - Government will distribute the MEFP widely to the Council of Ministers, the administrations, and the general public. - Specific monitoring and limits (selected quantitative and procedural commitments; exact figures preserved as in source): - Time-lagged quarterly reporting to Council of Ministers and public release: 45 days. - Consult with IMF staff regarding any new borrowing on the domestic market or WAEMU market that exceeds CFAF 30 billion. - Residual financing gap in 2008: about CFAF 90 billion. - Reduction of the “protection coefficient k” from 6 percent to 5 percent before end-June 2008. - Implement automatic petroleum product pricing from the beginning of July 2008. - Clear cross-debts and claims by end-March 2008 related to 2007 consumption. - CIE tariff increase implemented: 10 percent (effective February 1, 2008 for enterprises; March 1, 2008 for low-voltage users except low-income households). - Health workforce shortfall estimated at 2,500 at end-2007; hire 700 in 2008. - Redeployed senior health officials in 2007: 1,290. - PRSP completion by end-September 2008. - Publication of FY 2008 budgets by end-March 2008; certified accounts of four agencies by end-March 2008 for fiscal 2006 and by end-August 2008 for fiscal 2007. - Reduce quasi-fiscal levies by CFAF 5.5/kg for the 2008-09 crop year. *Source: Côte d’Ivoire MEFP extract as provided in the content unit.* ### Box 1. Côte d'Ivoire: Structural Fiscal Measures, 2007 Program ### Box 1. Côte d'Ivoire: Structural Fiscal Measures, 2007 Program ### Budget - Measures: - Establish the timetable for preparation of the 2008 budget and send the budget guideline letter to the ministries. - Regularize in SIGFiP advances made before the 2007 budget was put in place. Produce an overall expenditure execution statement as at June 30, 2007. - Increase the retirement age from 55 to 60 and eliminate the rule of mandatory retirement after 30 years of service for teachers in primary and secondary schools. - Deadlines: - Mid-August 2007 - 30 September 2007 - September 2007 - Status: - Done. - Done. - Partially done (rule of 30 years service removed, increase of retirement age in progress) ### Tax measures - Measures: - With IMF technical assistance, examine exemptions from customs duties, VAT, and income taxes, with a view to streamlining them. - Rigorously implement action plans in the areas of tax and customs administration with a view to combating evasion, corruption, and fraud (report at end-2007). - Conduct an audit of the distribution system for consumption of petroleum products to distributors in Vridi and Yamoussoukro and adopt the recommendations for improving tax collection. - Deadlines: - December 31, 2007 - 2007 - October 2007 - Status: - Postponed to June 2008 - In progress. - Deadlines postponed to end-March 2008 for the audit and end-May 2008 for implementation of the recommendations ### Public Expenditure Management - Measures: - Conduct half-yearly independent audits of expenditures under the national DDR and community rehabilitation programs, CNPRA, identification, and elections. - Deadlines: - First audit by December 31, 2007 (for first half 2007) - Status: - Postponed to end-July 2008. ### Domestic Arrears - Measures: - Draw up an inventory of the residual stock of domestic arrears at end-2006 (suppliers, subsidies, and transfers) and adopt a plan for clearing them (including by securitization) over the 2007-09 period, taking the social impact into account. - Implement the plan for clearing CFAF 50 billion in arrears from the end-2006 level (see Table 1), including a net reduction of CFAF 10 billion in arrears with SODECI. - Deadlines: - September 30, 2007 - End-2007 - Status: - Deadline for inventory postponed to end-March 2008 for arrears at end-2007; clearing plan to end-May 2008 - Carried out for the total. Not done for SODECI. *Source: _cr08142 - Box 1. Côte d'Ivoire: Structural Fiscal Measures, 2007 Program* ### 15. A loan is considered concessional if its grant element is at least 35 percent, the ### _cr08142 - 15. A loan is considered concessional if its grant element is at least 35 percent, the ### Concessional loan definition and discount rates - A loan is considered concessional if its grant element is at least 35 percent. - Net present value (NPV) calculation: - For loans with a maturity of at least 15 years: NPV is calculated using a discount rate based on the average of the OECD’s Commercial Interest Reference Rates (CIRRs) over the last 10 years. - For loans with a maturity of less than 15 years: NPV is based on the average of the OECD’s CIRRs of the preceding 6-month period (February 15 to August 14 or August 15 to February 14). - Margins for differing repayment periods added to both the 10-year and 6-month averages: - 0.75 percentage point for repayment periods of less than 15 years - 1 percentage point for 15 to 19 years - 1.15 percentage points for 20 to 29 years - 1.25 percentage points for 30 years or more ### Government undertaking on nonconcessional external borrowing - The government undertakes not to contract or guarantee nonconcessional external loans under the conditions defined in paragraphs 14–15, with the exception of loans constituting rescheduling of maturities. ### Domestic and WAEMU market borrowing (coverage and ceiling) - Definition: Domestic borrowing by the central government includes issuance of all debt instruments in CFAF issued to domestic creditors and the WAEMU financial market, borrowing from the BCEAO (including drawings from the IMF), and contraction of any other liability in CFAF towards these creditors. - Ceiling specification: - The ceiling applies to net amounts of domestic or WAEMU borrowing defined as the gross amount of domestic/WAEMU borrowing less amortizations during the period under consideration. - This ceiling includes a margin of 25 billion CFAF over the net cumulative flows projected for each period. - Exemptions: The ceiling does not apply to new agreements on restructuring of domestic debt and of securitization of domestic arrears, or to new project loans from the West African Development Bank (BOAD). - Adjustment rule: If external budget support or external assistance for crisis-related programs is less than the programmed amounts, the ceiling on domestic/WAEMU borrowing will be adjusted upwards by the difference, up to a maximum of CFAF 30 billion. - For any borrowing in excess of CFAF 30 billion, the government will undertake to issue securities through public offering or auctions through the Central Bank of West African States, in consultation with Fund staff. ### Memorandum item: Net bank credit to government (definition and December 31, 2007 balances) - Definition: Net bank credit to government is the difference between government debts and government claims with the central bank and commercial banks. Coverage is determined by the BCEAO and is the same as that shown in the net government position (NGP). Government refers to the central government of Côte d'Ivoire and does not include local governments, the central bank, or any other public body with a separate legal personality. - Amount of credit outstanding totaled CFAF 430.7 billion at December 31, 2007, broken down as follows (CFAF billions): - Net bank credit to government 430.7 - Claims of the BCEAO 164.1 - Of which: statutory advances 164.1 - Plus counterpart to use of Fund resources 92.0 - Plus claims of commercial banks 423.9 - Plus private sector deposits with the national savings bank fund (CNCE) 16.9 - Less deposits at the BCEAO 60.7 - Less cash holdings of the Treasury 1.6 - Less deposits at commercial banks 193.8 - Less guaranteed bonds 10.1 ### Structural indicators and prior actions - The program consists of the structural indicators and prior actions set out in Table 2 of the MEFP. ### Program monitoring and data reporting requirements - Monthly assessment report: - A monthly assessment report on the monitoring of the quantitative structural indicators will be produced by the authorities within one month of each month-end. - Immediate notification: - The authorities will inform Fund staff immediately if they sign or guarantee any new foreign borrowing contracts, as well as the terms of such contracts. - Data on the amount outstanding, the accumulation, and repayment of the external payment arrears will be submitted monthly within six months from the end of each month. - Tables to be prepared and submitted starting on February 15, 2008, in cooperation with Fund staff: - (a) Budget: - A quarterly report (within 45 days following the end of each quarter) showing the budget execution position (revenues and expenditures), presenting expenditures classified by type, function, and administration/type at the various stages of the expenditure process (allocation, commitment, payment order, and allocation of charge). - The payment stage will be included from end-March 2008. - (b) Energy Sector: Quarterly tables (within 45 days following the end of each quarter): - Table 1: Summary of crude oil and gas production and Tables 1(a)-(d): Crude oil and gas production by field; include actual oil and gas prices; swap conditions; physical hydrocarbon production quantities and their values before and after swap; tax and nontax revenues for the government; and revenues for PETROCI and the private sector. - Table 2: Volumes, prices, and financial flows; clearly indicate the conditions for sharing between the government, PETROCI, and the private operators, and the resulting financial flows, in particular for the government and PETROCI. - Table 3: Activities of the Société ivoirienne de raffinage (SIR); show (i) the refining sector’s purchases of crude oil by supplier, including purchases originating in Côte d’Ivoire; and (ii) production, consumption, and imports of petroleum products. - Table 4: Activities of the SIR – Transfers to storage facilities and exports. - Table 5: Petroleum products – Government/marketing agent activities, a comparison between supply and sales of the marketing agents. - Table 6: Release for consumption of petroleum products by tax type. - Table 7: Structure of prices of petroleum products, including imported and domestic butane; include the release for consumption by petroleum product for the current month and the cumulative total for the current year. - Table 8: Summary of the electricity sector, including sector purchases of gas by supplier (including the government); electricity production; prices applicable by voltage and by consumer group; electricity sector revenues; and the sector’s cross arrears and unpaid amounts. - Table 9: Financial flows of the electricity sector asset management company (Société de Gestion du Patrimoine du Secteur Electricité, SOGEPE), both on payment order and cash basis. - (c) Coffee/Cocoa Sector: - Quarterly information (within 45 days following the end of each quarter) on the collection and usage of quasi-fiscal levies and the bank account balances for the FDPCC (investment fund), the FRC (prudential reserve), the Rural Investment Fund, and the coffee sector recovery fund. - Half-yearly information (within 45 days following the end of each semester): on the collection of quasi-fiscal levies and half-yearly budget execution statements for the operations of the ARCC, the FRC, the BCC, and the FDPCC. - BCEAO reporting: - The BCEAO will report provisional data on the net government position to Fund staff each month within 30 days of the end of the period under review and will provide final data within 45 days. - Information will include the complete, itemized listing of public sector liabilities and assets with (i) the BCEAO; (ii) the banking sector; and (iii) the BNI. This will cover: - the balance of amount received in compensation for toxic wastes; - detailed information on all accounts relating to the issuance and payment of interest and amortization of government securities issued on the WAEMU financial market; - the statements of the Rural Investment Fund; and - the balance of the quasi-fiscal levies from cocoa bags (sacherie). - Government reporting: - The government will report the information specified in Table 2a monthly within 45 days of month-end unless otherwise indicated. - It will report the information specified in Table 2b quarterly, within one month of the end of the quarter. *Source: _cr08142 - 15.* ### 25. More generally, the authorities will report to the Fund staff any information ### _cr08142 - 25. More generally, the authorities will report to the Fund staff any information ### Program monitoring and reporting requirement - "More generally, the authorities will report to the Fund staff any information needed to effectively monitor the program." ### Social and reunification spending (Table 1: Côte d'Ivoire: Social and Reunification Spending, 2005-2008) - Amounts (billions of CFA francs) by sector and line items for 2005, 2006, 2008 (Est.), and 2008 (Est. Q3) as presented: - Budget code (SIGFiP) and years shown: 2005, 2006, 2008 (Est.), 2008 (Est. Q3). - Education (22) - Total series entries include: 369.63; 382.84; 407.92; 288.94; 415.14; 459.4 - Current: 352.13; 360.93; 386.82; 275.53; 388.74; 434.1 - Wages and salaries: 261.32; 265.02; 274.12; 204.92; 277.93; 308.2 - Utilities: 3.9; 4.0; 6.9; 3.6; 6.1; 7.5 - Central administration: 4.9; 5.4; 6.9; 3.7; 8.1; 7.6 - Educational Establishments: 81.9; 86.6; 99.0; 63.3; 96.6; 110.8 - Transfers to private schools: 29.6; 29.4; 32.6; 24.1; 32.4; 40.4 - School kits: 2.3; 2.2; 2.1; 0.4; 2.1; 2.0 - Scholarships: 15.6; 15.6; 15.5; 14.1; 15.5; 16.3 - Transfers to national public establishments: 16.0; 23.0; 26.9; 15.3; 26.8; 27.9 - Public schools: 18.5; 16.3; 21.8; 9.4; 19.8; 24.2 - Investment: 17.6; 21.8; 21.1; 13.4; 26.4; 25.3 - Administration: 0.0; 0.0; 0.0; 0.0; 0.0; 0.0 - Buildings and equipment: 17.6; 21.8; 21.1; 5.5; 25.1; 25.3 - Of which: external loans: 1.3; 0.1; 1.1; 0.0; 0.1; 2.4 - Non-regularized treasury advances: 8.0; 1.3 - Health (24) - Total series entries include: 70.0; 77.1; 95.3; 52.8; 88.6; 103.7 - Current: 61.4; 66.3; 78.4; 47.4; 73.3; 88.0 - Wages and salaries: 34.8; 36.6; 44.1; 29.2; 40; 51.0 - Utilities: 2.9; 2.9; 3.8; 1.6; 3.5; 4.1 - Central administration: 3.0; 3.1; 3.4; 1.4; 3.2; 3.8 - Health units: 20.7; 23.6; 27.1; 15.2; 26.6; 29.1 - Primary and secondary: 4.4; 4.5; 6.0; 1.5; 5.4; 7.7 - Tertiary: 7.5; 9.0; 9.3; 6.4; 9.3; 9.7 - Fourth level: 8.6; 10.0; 11.5; 7.0; 11.5; 11.3 - Other: 0.3; 0.2; 0.4; 0.3; 0.4; 0.4 - Investment: 8.7; 10.8; 17.0; 5.4; 15.3; 15.7 - Administration (investment): 0.9; 0.7; 1.2; 0.1; 0.9; 1.0 - Buildings and equipment: 7.8; 10.1; 15.8; 5.3; 13.9; 14.7 - Of which: external loans: 0.0; 0.0; 0.0; 0.0; 0.0; 0.0 - Non-regularized treasury advances: 0.1; 0.5 - Total (aggregate shown): 439.74; 459.95; 503.23; 341.85; 503.75; 563.1 - Table header: "Table 1: Côte d'Ivoire: Social and Reunification Spending, 2005-2008" ### Data provision requirements for government program monitoring (Table 2a: Priority I — Essential data) - Frequency and format conventions: - 1/ Prepared and forwarded monthly (M) within 30 days of the end of the month. Electronic transmission to IMF HQ and IMF Office in Abidjan. - 2/ FI: Data file, electronic transmission to IMF HQ and IMF Office in Abidjan. FX: hard copy, transmission to IMF Office in Abidjan (for faxing to IMF staff). - 3/ Data on quarterly quantitative indicators specified in MEFP, Table 1. - I. BUDGET (selected lines) - TOFE and tableaux de bord (M; FI; X) - Tax revenue estimate (M) - Nontax revenue summary (M) - Personnel expenditure (M) - Subsidies, transfers, and targeted social expenditure (M) - Other operating expenditure (M) - Capital expenditure by type of financing (M) - Expenditure related to the crisis, elections, CNPRA, etc. (M) - Statement of budget execution by type, function, administration/type (showing each stage of expenditure process) (M) - Treasury operations – Postal checking and savings bank (CECP) (M) - Committed expenditures; Of which: payment order (DENO) (M) - Cash-flow monitoring (M FI DTCP X): - Cash-flow plan - Treasury advances and their adjustment - Table to track Treasury balances outstanding - Other detailed tables on balances outstanding (PGT, TPA, TGE, ACDP, etc.) - II. DEBT/FINANCING - II.A. External debt (M DTCP X; FI and FX) - Stock of external debt, amounts payable, and arrears (by creditor) - Detailed statement of public debt (by creditor) (stock, service due, service paid on arrears/maturities, arrears) - Bridge table from "Stock of external debt and arrears" to TOFE - Statement of drawings on loans and grants (by creditor) - External debt agreements signed during current year - II.b. Domestic debt (MDTCP X; FI and FX) - Stock of domestic debt, amounts payable, and arrears (by creditor) - Table for monitoring domestic debt - Table for monitoring amounts payable (by payer and age) due date - Comprehensive statement of domestic debt - Detailed statement of domestic debt under agreements - Bridge table from the "Comprehensive statement"/"Monitoring table" (budget framework) to TOFE - New debt issues / new securities (by type, original creditor) - III. Monetary/financial sector (M FI and FX; BCEAO X) - Monetary statistics (statismon of the BCEAO, commercial banks, NGP) - Summary tables on bank prudential ratios - IV. Real sector (M FI and FX; DGE) - Consumer, producer price indices - V. Coffee/cocoa sector (M FI and FX; DGE) - Levies on coffee/cocoa - Single export duty (DUS) (including advance payments) - Parafiscal levies (by structure and by fund: ARCC, BCC, FRC, FDPCC) - Uses of levies (by fund: FDPCC; FRC, Rural Investment Fund) - Bank account balances (by fund) - Half-yearly closing of accounts (by agency) - VI. Energy Sector (Q; Most recent versions of quantitative tables 1–9 for the energy sector, as specified in ¶21 of the TMU) - Oil and gas production projection and estimated values 2008-2010 (by field, swap, share government, PETROCI, companies) - Projection of 2008–10 refining capacity - Energy balance sheets: crude oil (production, import, export); refined products (production (re-) export, release for consumption, other consumption) - Forecast and actual production, consumption, export, revenue, expenditure, taxes (VAT) of the electricity - VII. Balance of payments (M FI BCEAO) - Foreign trade by product (E, M: value, price, volume) ### Data provision requirements for government program monitoring (Table 2b: Priority II — Significant data, Quarterly) - Frequency and format conventions: - Preparation and monthly (M) or quarterly (Q) transmission within one month of the end of the quarter. Electronic transmission to IMF HQ and IMF Office in Abidjan. - FI: Data file, electronic transmission to IMF HQ and IMF Office in Abidjan. FX: hard copy, transmission to IMF Office in Abidjan (for faxing to IMF staff). - I. BUDGET (selected quarterly items) - Changes in staff levels for wage bill; breakdown of staff by category, ministries: breakdown of contract expenses (Q; FI and FX) - Budget execution statement (SIGFiP) (breakdown by heading) (Q; FI and FX) - Summary report on Customs/DGI revenues (Q; FI) - Oil production revenues (BIC, royalties, dividends); PETROCI revenues 2005–07, updated forecasts for 2008–10 (Q; FI; DGH) - II. DEBT/FINANCING (Q; FI) - New financing: projects, budgetary support, programs (DDR, CNPRA, elections, etc.) (by creditor, received/committed, and to be sought) - Actual and estimated current year external debt servicing (monthly) - Quarterly estimates for future years (quarterly at beginning of year) - Responsible: DGB/DTCP - III. REAL SECTOR (Q; FI and FX; DGE/INS) - Production of main agricultural products - Production, export volumes, export prices, producer prices, estimate, projection (coffee/cocoa) - Revised and actual macroeconomic framework, projections - Economic indicators (by industry, sector); National Statistics Institute, BCEAO surveys - IV. Balance of payments (Q; FI; BCEAO) - Actual and projected 2008–10 ### IMF institutional and financial status (Informational Annex extracts) - Membership: Joined March 11, 1963; Article VIII - General Resources Account (SDR million; Percent Quota) - Quota: 325.20 100.0 - Fund holdings of currency: 365.13 112.28 - Reserve position in Fund: 0.73 0.23 - SDR Department (SDR million; Percent Allocation) - Net cumulative allocation: 37.83 100.00 - Holdings: 0.96 2.54 - Outstanding Purchases and Loans (SDR million; Percent Quota) - PRGF arrangements: 69.12 21.26 - Post-Conflict Emergency Assistance: 40.65 12.50 - Latest Financial Arrangements (type, dates, amounts in SDR million) - PRGF 3/29/2002–3/28/2005 Amount Approved: 292.68 Amount Drawn: 58.54 - PRGF 3/17/1998–3/16/2001 Amount Approved: 285.84 Amount Drawn: 123.86 - PRGF 3/11/1994–6/13/1997 Amount Approved: 333.48 Amount Drawn: 333.48 - Projected Payments to Fund (SDR million; based on existing use of resources and present holdings of SDRs): - Principal forthcoming by year: 2008: 28.14; 2009: 11.71; 2010: 16.79; 2011: 32.03; 2012: 21.10 - Charges/Interest forthcoming by year: 2008: 3. 28; 2009: 3.10; 2010: 3.04; 2011: 2.43; 2012: 1.50 - Total row as printed: 31. 42 14.80 19.83 34.47 22.59 - HIPC Initiative (implementation data as presented) - Decision point date: Mar. 1998 - Assistance committed by all creditors (US$ million): 345.00 - Of which: IMF assistance (US$ million): 22.50 - SDR equivalent in millions: 16.70 - Completion point date: -- - Disbursement of IMF assistance (SDR million): Assistance disbursed to the member: -- ; Interim assistance: -- ; Completion point balance: -- - Additional disbursement of interest income: -- - Total disbursements: -- - Safeguards assessment of BCEAO - Most recent safeguards assessment completed on November 4, 2005. - Assessment findings: progress in strengthening safeguards since 2002; BCEAO now publishes a full set of audited financial statements; improvements toward IFRS; internal audit charter in place; improved risk management mechanisms; follow-up on audit recommendations strengthened. - Continuous monitoring notes: vulnerabilities remain in internal control systems and legal structure; progress in (i) multi-year external audit program, (ii) establishing an audit committee, (iii) expanding disclosures on financial positions of WAEMU countries with the Fund in notes to annual financial statements, (iv) strengthening internal audit effectiveness. - Exchange arrangements - Member of WAEMU; CFA franc pegged to the euro at the rate of €1 = CFAF 655.957. - Article IV Consultation - On the standard 12-month Article IV consultation cycle. The Executive Board completed the 2007 consultation on August 3, 2007. - Technical assistance (selected entries) - AFRITAC West: Missions and diagnostics in 2006–2008 covering Microfinance; Public Debt Management (January 2007; August and September 2007); Public Expenditure Management (February 2007; February 2008); Public Finance Statistics (February 2007); Tax administration (August 2007); National Accounts (August 2007); Customs administration (August 2007). - Headquarters support: Fiscal Affairs (March 2000; December 2001; February/March 2008; March 2008); Monetary and Capital Markets (October–December 2007 Regional FSAP). - Resident Representative - A Fund resident representative was posted in Abidjan in January 2007 after an interruption of one and a half years. ### World Bank engagement (selected points from Appendix) - Pre-September 2002 strategy objectives included: sound macroeconomic management; increased private sector development and investment; more efficient expenditure targeting in health, education, basic infrastructure; strengthen institutional and human capacity; environmental sustainability; improved governance and public expenditure management. - Post-arrears lending and grants: - Economic Recovery Credit (ERC) approved June 11, 2002: US$200 million (18-month period), first tranche disbursed US$100 million; ERC closed December 31, 2003 and remaining tranches canceled. - At end-June 2007, World Bank arrears estimated about US$504 million. - Post-Conflict Fund grants totaling about US$2 million for six initiatives: DDR support US$100,000 (half spent), "Communication to Strengthen Social Cohesion" US$270,000; "Community Reintegration Pilot Project 1" US$538,690; "Community Reintegration Pilot Project 2" US$737,500; "Reintegration of Children Associated with the Armed Groups and Forces" US$298,000; "Rapid Social Assessment" US$160,000. - Additional LICUS package approved as part of a US$6 million package: - First executed grant: US$1.9 million for post-conflict planning and governance, including energy sector audits. - Second grant: US$2.25 million to be executed by the Prime Minister’s Office for national identification process. - Third component: US$2.25 million to finance pilot youth employment initiatives. *Source: IMF informational annex and data tables as presented in the provided content unit.* ### 4. During the discussions at the World Bank–IMF Spring Meetings in April 2007, the ### _cr08142 - 4. During the discussions at the World Bank–IMF Spring Meetings in April 2007, the ### World Bank re-engagement, PCAP grant, and MOU (July 2007) - Agreement for the government of Côte d’Ivoire to begin paying current debt service to the Bank in July 2007 to enable the Bank to aim to approve a pre-arrears clearance grant (Post-Conflict Assistance Project (PCAP)) pending full clearance of Bank arrears over the next 8–9 months. - Bank Board approved the PCAP grant of US$120 million on July 17, 2007, effective August 8, 2007, to support job creation, the identification process, and community recovery. - Memorandum of Understanding (MOU) signed July 16, 2007, outlining steps to clear arrears, including: - (i) the Ivoirien government paying 50 percent of its IBRD and IDA arrears in one or several transfers to the World Bank (the last to be made no later than February 29, 2008); - (ii) the Bank preparing an exceptional IDA operation to clear the remaining IBRD and IDA arrears; - (iii) the Bank resuming its country assistance program once arrears are cleared. ### Economic Governance and Economic Recovery Grant (EGRG) and Interim Strategy Note (ISN) - Bank preparing a US$287 million EGRG comprising: - (i) US$252 million for direct reimbursement of a bridge loan extended to clear arrears; and - (ii) US$35 million for direct budget support. - EGRG objectives: encourage resumption of sustainable economic growth and poverty reduction by supporting Government efforts to improve governance, transparency, and efficiency in PEM, particularly in the energy, coffee/cocoa, and financial sectors. - EGRG is part of the Bank Interim Strategy Note (ISN) for Côte d’Ivoire being prepared for 2008–09. ISN Emergency and Recovery timeframe support will include a blend of trust funding and IDA lending and nonlending activities. - ISN proposed focus areas: - (i) stabilization and peace-building; - (ii) assisting war-affected populations; and - (iii) kick-starting economic recovery and reform. - Both the EGRG and ISN tentatively scheduled for a joint review by the Bank’s Board on February 12, 2008. ### Coordination with IMF and other partners; PEMFAR and joint missions - World Bank arrears clearance taking place within a macroeconomic fiscal framework supported and coordinated with an IMF-supported program. - A joint Bank-IMF mission visited Côte d’Ivoire in September 2007 to discuss the EGRG operation and start a PEM and Financial Accountability Review (PEMFAR). - Preliminary agreement with the government on main elements of the proposed EGRG structural reform program, arrears clearance implementation, and preparation of the new PEMFAR in collaboration with AfDB, EU, and IMF. ### Bank re-engagement priorities discussed October 2007 - Finalization of the last of three audits in the energy sector and continuing efforts to build a credible track record on transparency and governance. - Implementation of the PCAP grant in support of the Ouagadougou Peace Accord (identification process and elections). - Progress on arrears clearance, the PRSP process, debt reconciliation, and improvements in macroeconomic performance to work towards debt relief under HIPC. - Upon full arrears clearance, reactivation of the Bank portfolio (comprising US$104 million and operations in education, rural development, transport and distance learning) and financing two new operations: - governance and institution building: US$15 million; - HIV/AIDS: US$20 million. - Exploration of an emergency urban reconstruction program of US$90 million to support water management and road maintenance. - Conditional provision of a follow-up emergency credit to the EGRG after: an adequate economic framework implemented for a reasonable period under the IMF’s EPCA, full clearance of Bank arrears, and basic measures to strengthen governance and transparency in energy, cocoa/coffee, financial sectors and PEM. - Building country capacity for needs assessment, resource mobilization, and program support, leading to a donor consultative group meeting. - Bank to lead a multi-donor assessment mission (MAM) for reconstruction financing needs once satisfactory progress on DDR and security is made; LICUS-financed activities will inform the MAM. - Analytical work undertaken and planned: - completed: post-conflict poverty diagnostic (limited survey in Abidjan region), informal policy notes on oil and gas, cotton, cocoa, and finance sector; audits focusing on energy sector; country social assessment; - planned: governance assessment, rapid decentralization study, PEMFAR, poverty diagnostic, cocoa review (supported by LICUS funds), sources of growth and competitiveness study, informal ESW in agricultural, rural and environment sectors (investment climate survey, rubber, agricultural cash crops, forestry). ### IFC and MIGA involvement - IFC portfolio as of February 28, 2007: US$ 77 million, invested mostly in oil and gas and electricity generation. - IFC kept committed portfolio during crisis; Special Operations Unit worked with clients. With return to stability and arrears clearance expected early in 2008, IFC is considering new investments and ready to heighten involvement. - MIGA portfolio: one project in support of agribusiness and manufacturing (rehabilitation and expansion of three cocoa plantations). Remaining gross exposure: US$10.6 million. MIGA had not received guarantee requests for Côte d’Ivoire as of the first quarter of FY08. ### Côte d’Ivoire: Debt Service to the World Bank (US$ millions) - 2004: - IBRD: 91.5 - IDA: 25.9 - Total: 117.4 - 2005: - IBRD: 116.5 - IDA: 34.2 - Total: 150.7 - 2006: - IBRD: 103.0 - IDA: 43.3 - Total: 146.3 - 2007: - IBRD: 91.1 - IDA: 59.2 - Total: 150.3 - Source: World Bank Controller’s debt-service projections. ### IMF–World Bank collaboration: division of labor - Broad agreement on core reform program: - (i) improving public expenditure management and tax policy; - (ii) enhancing governance and transparency in the energy and cocoa/coffee sectors; - (iii) strengthening the financial sector. - Bank leads on crisis-related programs, post-conflict reconstruction needs, sectoral reforms, and poverty reduction. - IMF leads on macroeconomic and financial issues: fiscal, monetary, and banking supervision policies. - Table 1 summary (areas and lead institution): - Budget area: - Public expenditure management: IMF/World Bank - Post-conflict programs: EU/World Bank; AfDB, other donors - Tax policy: IMF - Fiscal transparency issues: energy, cocoa/coffee sector: IMF/World Bank - Sectoral reforms: - Energy sector: World Bank (lead), IMF (other) - Cocoa/coffee/cotton sector: World Bank (lead), EU (other) - Trade: World Bank/IMF (lead), EU (other) - Financial sector: - FSAP-FSSA: World Bank/IMF - Restructuring of public financial institutions: World Bank (lead), IMF (other) - Other: - Monetary policy: IMF - Social sectors: poverty reduction strategy: World Bank/AfDB (lead), IMF, other donors (others) - Debt: IMF/World Bank - Judicial reform: AfDB, EU ### African Development Bank Group: portfolio, arrears, and projected reimbursements - Bank Group portfolio: Of a total of 49 operations (not including four private sector projects totaling UA33 million) approved since start of intervention in Côte d’Ivoire for a net commitment of UA1,030 million, current project portfolio comprises one active operation financed with a UA3.7 million grant (National Good Governance and Capacity Building Programme (PNBGRC)). - PNBGRC objectives: - contribute to improving operation of the legal system; - strengthen structures and institutions involved in the decentralization process; - support public resources management capacity; - strengthen PNBGRC coordination structure. - Portfolio management: disbursements suspended starting February 1, 2003. As of February 2007, total amount cancelled: UA65.7 million. AfDB continued grant-financed operations implementation (irrigation development plan formulation studies, road toll and weighbridge study plan, Agneby plan). - Status of arrears to AfDB Group: arrears stood at UA365 million at end-2007. Private sector arrears: UA1.62 million as of April 30, 2007. No arrears on subscription to AfDB capital. Projected Côte d’Ivoire Reimbursements in UA millions (per window and totals) - ADB Charges: - 2008: 20.66 - 2009: 12.85 - 2010: 9.51 - 2011: 6.76 - TOTAL: 49.78 - ADB Principal: - 2008: 37.09 - 2009: 26.06 - 2010: 20.04 - 2011: 16.05 - TOTAL: 99.25 - ADB TOTAL: - 2008: 57.75 - 2009: 38.92 - 2010: 29.55 - 2011: 22.82 - TOTAL: 149.03 - ADF Charges: - 2008: 1.56 - 2009: 1.55 - 2010: 1.54 - 2011: 1.53 - TOTAL: 6.19 - ADF Principal: - 2008: 0.57 - 2009: 0.96 - 2010: 1.41 - 2011: 1.48 - TOTAL: 4.42 - ADF TOTAL: - 2008: 2.13 - 2009: 2.51 - 2010: 2.95 - 2011: 3.01 - TOTAL: 10.61 - OVERALL TOTAL: - 2008: 59.88 - 2009: 41.43 - 2010: 32.50 - 2011: 25.83 - TOTAL: 159.64 ### AfDB steps and arrears-clearance scheme (April 2007 agreement) - AfDB suspended disbursements on loans and approved no operations under AfDB IX and X after arrears began building in February 2003; maintained dialogue and cancelled balances of 10 operations totalling UA65.7 million as of February 2007. - Agreement on arrears clearance modalities reached April 28, 2007 (see IMF MEFP May 2007 framework). Key elements: - Move cut-off date from end-December 2003 to end-April 2007, effective clearance of arrears in April 2008. - Start payment of maturities falling due between May 2007 and April 2008 no later than September 2007 and in full by April 2008. - By April 2008, Côte d’Ivoire to pay one-third of arrears outstanding as of April 2007; the rest to be paid by the PCCF and donors. - Côte d’Ivoire had already paid the debt service due for April 30, 2007, through December 31, 2007. *Source: World Bank Controller’s debt-service projections.* ### 6. Objective and Strategy. The strategy consists in identifying and implementing a new ### 6. Objective and Strategy ### Strategy for arrears settlement and Bank cooperation - Objective: identify and implement a new solution for arrears settlement that will enable the AfDB to resume full cooperation with Côte d’Ivoire. - Two pillars of the strategy: - (i) continuation of dialogue on fulfilling the criteria for accessing the Bank’s post-conflict arrears facility (PCCF); - (ii) participation in the reconstruction effort and building of institutional capacities. - Implementation steps, subject to approval of a specific proposal to the Boards in the first half of 2008 and satisfactory implementation of the IMF’s EPCA: - (i) presentation of a Country Strategy Paper to the Board on the proposed use of the ADF XI allocation; - (ii) start of the appraisal of new operations under post-conflict reconstruction programme; - (iii) restructuring of the portfolio for the resumption of disbursements on ongoing operations. - The strategy will be updated in accordance with principles to be adopted under the new Bank facility for fragile countries currently nearing finalization. ### Key statistical issues (overview) - General assessment: data adequate for surveillance purposes and authorities have generally provided required statistical indicators to the Fund on a timely basis, but weaknesses remain in national accounts, balance of payments, public finance, and reconciliation of fiscal and monetary data. - GDDS participation: Côte d’Ivoire has participated in the General Data Dissemination System (GDDS) since May 2000; metadata on the Data Standards Bulletin Board have not been updated since June 2001. ### Real sector statistics - National accounts: - Published comprehensive national accounts data for 1987–95 using 1986 as the base year. - New set covering 1996–2006 aligned with the 1993 System of National Accounts using 1996 as the base year. - Technical assistance (TA) on national accounts provided by AFRITAC West in August 2007, including review of implicit deflators. - Prices: - A harmonized consumer price index (CPI) (base 1996) adopted by all WAEMU members. - Labor/wages: - There are no regular publications on wages and employment. ### Public finance statistics - Reporting: - Ministry of Finance has reported data up to 2006 for publication in the Government Finance Statistics Yearbook. - Authorities do not provide monthly or quarterly fiscal data for publication, but the Ministry has generally made available to the IMF African Department detailed monthly government finance data. - Coverage and reconciliation shortcomings: - Documentation on coverage of general government units and public enterprises is lacking. - Little progress to date in reconciling fiscal and monetary data despite government commitment. - Deficiencies in recording of expenditures undermine sound fiscal reporting. ### Monetary and financial statistics - Preparation and release: - Monetary data prepared by the national agency of the BCEAO and officially released by BCEAO headquarters. - Common and country-specific problems: - Some problems common to all eight WAEMU member countries; others specific to Côte d’Ivoire’s bank and nonbank financing of central government and public sector operations. - Timeliness and reporting improvements: - Improvement in timeliness of depository corporations and interest rate data. - Authorities now report monetary data to IMF STA regularly; lag reduced from about six months to four or less. - BCEAO improved estimates of currency in circulation by addressing backlog of unsorted banknotes at national agencies. - 2005 revisions: - In 2005 BCEAO made substantial revisions to estimates of banknotes in circulation in member states due to cross-border banknote movement; revised method based on updated sorting coefficients applied retroactively from December 2003. - Sorting coefficients used to evaluate amounts of currency issued by each country, used to estimate currency in circulation and adjust net foreign assets of each member country. - International cooperation and standards: - Monetary and financial statistics mission visited BCEAO headquarters in May 2001. - STA participated in BCEAO-sponsored seminar in April 2003; discussed adoption of the Monetary and Financial Statistics Manual. - Standardized Report Forms: - In August 2006 BCEAO reported to STA monetary data for June 2006 for all member countries using Standardized Report Forms (1SR-central bank, 2SR-other depository corporations, and 5SR-monetary aggregates). - BCEAO provided a revised 1SR and indicated that 2SR is being revised in response to STA comments. ### Balance of payments statistics - Responsibility and compilation: - Since December 1998 responsibility for compiling and disseminating balance of payments statistics assigned to BCEAO by legislation adopted by all WAEMU member countries. - National agency of BCEAO in Abidjan completes and disseminates balance of payments statement; BCEAO headquarters delineates methodology and calculates international reserves managed on behalf of participating countries. - Methodology and timeliness: - Full transition to BPM5, improved sourcing methods, and staff training have significantly improved data consistency. - BCEAO national agency disseminates balance of payments statistics with a seven months lag, longer than GDDS recommendation. - Annual international investment position data disseminated. - External sector data reported regularly to STA for publication. - Trade and services coverage: - Customs computer system allows satisfactory monitoring of trade data. - Coverage of services and transfers (especially worker remittances) needs improvement. - Financial account gaps: - Foreign assets of the private nonbanking sector not adequately covered. - Reporting of private capital flows, especially foreign direct investment, is unsatisfactory. - Insufficient information on private debt stocks and debt service flows. - New BCEAO compilation system: - Allows commercial banks to report data on payments involving nonresidents. - Balance of payments compilers receive payment statements every 10 days; used for data quality controls and early information to BCEAO authorities rather than annual BOP compilation. ### Table of Common Indicators Required for Surveillance (As of March 12, 2008) — selected entries and frequencies - Exchange Rates - Date of latest observation: Current - Date received: Current - Frequency of Data: M - Frequency of Reporting: M - Frequency of Publication: M - International Reserve Assets and Reserve Liabilities of the Monetary Authorities - Date of latest observation: 10/07 - Date received: 12/07 - Frequency of Data: M - Frequency of Reporting: M - Frequency of Publication: M - Reserve/Base Money - Date of latest observation: 10/07 - Date received: 12/07 - Frequency: M (data, reporting, publication) - Broad Money - Date of latest observation: 10/07 - Date received: 12/07 - Frequency: M (data, reporting, publication) - Central Bank Balance Sheet - Date of latest observation: 10/07 - Date received: 12/07 - Frequency: M (data, reporting, publication) - Consolidated Balance Sheet of the Banking System - Date of latest observation: 10/07 - Date received: 12/07 - Frequency: M (data, reporting, publication) - Interest Rates - Date of latest observation: 01/08 - Date received: 02/08 - Frequency of Data: I - Frequency of Reporting: M - Frequency of Publication: M - Consumer Price Index - Date of latest observation: 11/07 - Date received: 12/07 - Frequency: M (data, reporting, publication) - Revenue, Expenditure, Balance and Composition of Financing – General Government - Date of latest observation: 10/07 - Date received: 01/08 - Frequency: M (data, reporting, publication) - Stocks of Central Government and Central Government-Guaranteed Debt - Date of latest observation: 11/07 - Date received: 12/07 - Frequency: M (data, reporting, publication) - External Current Account Balance - Date of latest observation: 12/06 - Date received: 06/07 - Frequency: A (data, reporting, publication) - Exports and Imports of Goods and Services - Date of latest observation: 09/07 - Date received: 11/07 - Frequency: A (data, reporting, publication) - GDP/GNP - Date of latest observation: 2006 - Date received: 02/07 - Frequency of Data: A - Frequency of Reporting: M - Frequency of Publication: M - Gross External Debt - Date of latest observation: 11/07 - Date received: 12/07 - Frequency: M (data, reporting, publication) Notes from the table: - 1 Includes reserve assets pledged or otherwise encumbered as well as net derivative positions. - 2 Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes and bonds. - 3 Foreign, domestic bank, and domestic nonbank financing. - 4 The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments. - 5 Including currency and maturity composition. - 6 Daily (D), weekly (W), monthly (M), quarterly (Q), annually (A), irregular (I); and not available (NA). ### Statement by the IMF Staff Representative (April 4, 2008) — key updates - 1. Supplement updates developments since issuance of the Staff Report on March 21, 2008; thrust of the staff appraisal remains unchanged. - 2. Food and necessities prices increased rapidly in recent months; seasonally adjusted food CPI rose by 4 percent between December and February. - Several household staples (rice, sugar, flour, milk, cooking oil) rose by between 10 and over 50 percent in the first quarter. - Overall inflation (12-month CPI) accelerated from 1.5 percent at end-December 2007 to 3 percent at end-February 2008. - 3. Government measures (short-term and structural): - Short-term tax measures effective April 1 for three-months: - (i) reduction in VAT on milk, refined palm oil, canned tomatoes, sugar, and cement from 18 percent to 9 percent; - (ii) suspension of import duties on the same items and on flour, rice, and fish. - Suspension of import duties on wheat introduced last September remains in force. - Structural measures: - (i) better monitoring of prices and concertation with the private sector to ensure orderly adjustment and fight speculation; - (ii) steps to reduce racketeering by the military at roadblocks; - (iii) measures to increase the supply of locally produced foodstuffs. - Authorities indicated revenue impact estimated at 0.06 percent of GDP will be offset by expenditure cuts. - 4. Growth and fiscal developments in first two months of the year: very preliminary data show a pick-up in activity in sectors including industry, electricity, and construction; fiscal outcome shows revenue broadly on target and strong across-the-board expenditure restraint, enabling repayment of arrears to the World Bank. - 5. On April 1, the World Bank board approved the Economic Governance and Recovery Grant for the clearance of the remaining one-half of Côte d’Ivoire’s arrears to the Bank (some US$270 million) and new budget support (US$35 million). The clearance and disbursement have been completed. - 6. Remaining elements of prior actions implemented (MEFP, Table 2). Government adopted revisions to the 2008 budget in conformity with the program for 2008 and adopted detailed budget execution statements for 2007. Communications to the Council of Ministers have been made completely public, including through web posting. ### Press release excerpt - Press Release No. 08/73, April 7, 2008: "IMF Approves US$66.2 Million in Emergency Post-Conflict Assistance for Côte d’Ivoire" - Text in source ends with: "The Executive Board of the International Monetary Fund (IMF) approved a credit of SDR" *Source: _cr08142 - 6. Objective and Strategy (PDF chapter/section).* ### 40.6 million (about US$66.2 million) in Emergency Post-Conflict Assistance (EPCA) for ### _cr08142 - 40.6 million (about US$66.2 million) in Emergency Post-Conflict Assistance (EPCA) for ### EPCA assistance and purpose - The IMF approved 40.6 million (about US$66.2 million) in Emergency Post-Conflict Assistance (EPCA) for Côte d'Ivoire to continue efforts begun under an initial EPCA-supported program. - EPCA objective: promote strengthening of administrative and institutional capacity necessary to sustain economic recovery and enable a higher level of financial assistance. - EPCA is presented as part of a concerted international effort to provide financial assistance to Côte d'Ivoire. ### Executive Board remarks (Mr. John Lipsky, First Deputy Managing Director and Acting Chair) - Political and security context: - “Côte d’Ivoire is progressing on its way to effective reunification and sustained peace.” - Delays in implementing the Ouagadougou Accord, but a climate of political dialogue and an improved security situation. - Projected growth in real per capita income in 2008 is expected to benefit growth throughout the subregion. - 2007 fiscal and structural assessment: - Fiscal developments in 2007 were close to overall program targets, though overruns on non-productive spending occurred at the expense of infrastructure and crisis-exit programs. - Authorities took significant steps to make payments to the World Bank and the African Development Bank and to reduce domestic arrears. - Progress on structural front: improved reporting on quasi-fiscal cocoa levies; a large part of the levies was allocated to rural projects; energy sector audits are being finalized; reporting on financial flows improved. - Some key fiscal measures were implemented with delay or postponed to 2008, notably energy pricing. - Progress in strengthening the banking system was slow. - Policy priorities for 2008 (as stated): - Continuing fiscal consolidation to create fiscal space for social, basic infrastructure, and other post-conflict needs. - Dependence on steps to improve tax administration across the country, stabilize the wage bill while confining recruitment to the social sectors, and decisively reduce nonwage current spending. - Improvements in public expenditure management: adhere to budget procedures, issue quarterly budget execution statements to the council of ministers and make them public. - Further improvements in transparency and efficiency in the coffee/cocoa and energy sectors, including electricity sector reform and adequate pricing of petroleum products. - External support and medium-term prospects: - Continued international community support remains essential. - Early completion of the Poverty Reduction Strategy Paper (PRSP) using broad-based consultations will facilitate support. - A solid track record under EPCA could pave the way for a PRGF arrangement and a HIPC Decision Point. ### Statement by Lauren W. Rutayisire, Executive Director for Côte d’Ivoire (April 4, 2008) - Appreciation for IMF staff discussions and support; endorsement of report publication. - Recognition of Managing Director’s trip and meetings that highlighted challenges and opportunities. - EPCA implementation since August 2007: - Macroeconomic performance described as “strong,” with GDP growth showing resilience and improvements in financial management and structural sectors. - All quantitative indicators for 2007 were met, except the year-end primary basic surplus recorded at 0.6 percent against the 1 percent target. - In 2008, renewal of a normal budget cycle expected to end treasury advances, resume budget procedures, and improve public expenditure management. - Payments toward clearance of arrears: World Bank clearance completed at end-February 2008; African Development Bank expected in April 2008. - Request for additional assistance: - Authorities requested an additional assistance under EPCA of SDR 40.65 million, or the equivalent of 12.5 percent of their quota, to build on gains and foster results toward peace, reconciliation, economic growth, and improved social conditions. ### Economic developments under EPCA and near-term outlook - Growth and sector performance: - GDP growth: end-year rate of 1.7 percent in 2007 after weakening in 2006. - Growth drivers in 2007: telecommunications, transport, trade, construction and public works, and agro-food; private investment growth turned positive for the first time since 2002 conflict. - Declines: agricultural exports affected by reduced rainfall; sharp fall in oil production due to technical problems. - Inflation and food prices: - Annual average inflation of 1.9 percent in 2007. - Price increases for essential products (rice, milk, cooking oil, flour) in recent months linked to international food prices. - Authorities suspended import duties on wheat and enhanced supply of essential foodstuffs to mitigate consumer impact. - 2008 projection and program aims: - Program projects economic growth at 3 percent for 2008. - Program aims: consolidate resilience, improve climate via political stability, improve financial management, and enhance governance and transparency in key sectors to support post-conflict reconstruction. ### Fiscal policy and public finances - 2007 fiscal performance: - Fiscal situation described as satisfactory; all fiscal indicators in line with the program. - Composition of spending: overruns on current spending; corrective measures designed at year-end 2007 expected to yield results in 2008. - 2008 budget framework and targets: - 2008 budget targets a primary basic surplus of 0.8 percent of GDP. - Primary basic spending in 2008 will amount to 18.6 percent of GDP, allocated primarily to post-crisis expenditures, basic infrastructure, and social needs. - Revenue expected to rise to 19.4 percent of GDP in 2008 due to tax mobilization in ex-rebel regions (CNW), improved VAT collection, increased contribution of petroleum products to tax revenue, and greater contribution from some state-owned enterprises. - Revenue administration and measures: - 2007 revenue collection improved via tax and customs reforms, including extension of the “standardized invoice” and anti-fraud/corruption measures; VAT and corporate tax performance above target. - Expenditure management and priorities: - Government efforts to control spending amid pressures; emphasis on keeping wage bill under control with focus on health and education. - Resumption of the budget cycle expected to allow tighter control over operating outlays and subsidies (including electricity sector). - Military spending policy: no further frontline bonuses to soldiers (except some arrears); priority to army unification, reinsertion of ex-combatants, redeployment of government services, emergency programs, and election preparation. ### Monetary policy and financial sector issues - Exchange rates: - Continuous fall of the dollar against the Euro caused nominal and real effective exchange rates to rise slightly in 2007. - Banking sector indicators and actions: - Non-performing loans improved from 20 percent at end-2006 to 18 percent at end-2007. - Reopening of additional bank agencies in CNW zones expected to enhance dynamism and competition. - Under WAEMU Banking Commission supervision, recapitalization progress for four of nine banks that did not comply with capital adequacy requirements at end-2006. - Government intends to work with Banque Nationale d’Investissement and other partially publicly owned institutions to improve their situation and increase access for SMEs and non-banked populations. - Credit to private sector emphasized as crucial for reconstruction. ### Structural reforms and governance - Transparency and sector governance: - Progress reported on transparency over budget execution, albeit with delays. - Governance and transparency improved in cocoa/coffee and oil sectors. - Two committees of senior officials and stakeholders oversee activities and financial flows in these sectors and draft periodical notes for the Cabinet. - Government reduced the levy on cocoa as planned under the program. - World Bank–financed audit of the oil sector completed; government to draw appropriate policies. - Côte d’Ivoire has joined the EITI and compliance with its procedures is advancing. - Energy and commodity pricing reforms: - Electricity tariffs increased by 10 percent on average while protecting vulnerable segments. - Authorities intend to implement the automatic petroleum product price setting mechanism and bring pump prices closer to international prices from the beginning of July 2008. - These policies intended to save resources and address financing needs. - Governance commitment: - Authorities reaffirm determination to place good governance at the center of public affairs and economic program, notably in public resource management and structural reforms. ### HIPC, poverty, and social priorities - Poverty impact of conflict: - World Bank estimates: incidence of poverty reached 43 percent in 2006, compared to around 33 percent before the conflict. - PRSP and timeline: - The Poverty Reduction Strategy Paper (PRSP) is scheduled to be completed at the latest by end-September 2008. - Social and inclusion priorities: - Program prioritizes social needs, basic infrastructure, reintegration of ex-combatants, and employment creation, with emphasis on youth opportunities and poverty reduction. ### Conclusion and authorities’ requests - Authorities’ commitments and objectives: - Continued commitment to peace, reconciliation, stronger sustained growth, poverty reduction, economic diversification, and youth employment. - Aim to complete remaining activities of the Ouagadougou Peace Accord, leading to elections, national reconciliation, and complete economic rehabilitation. - External debt and HIPC/MDRI expectations: - Authorities consider external debt issue a major concern and expect that their track record under 2007–2008 programs and pre-conflict governance history will support eligibility for HIPC/MDRI initiatives. - Expectation to conclude a PRGF and reach the HIPC decision point as soon as possible, taking into account performance under EPCA and arrears clearance efforts. - Request reiterated: Board support for additional EPCA assistance to accompany political and economic management efforts. *IMF staff report content as provided in the source document.* --- _Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2008/_cr08142.pdf_