## _cr08370 ## Source details **Canonical URL:** [_cr08370](https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2008/_cr08370.pdf) ## Other formats - [Markdown version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2008/_cr08370.pdf.md) - [Structured JSON version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2008/_cr08370.pdf.json) --- ### Executive summary — overview and recent developments - After more than a decade with limited external assistance, Togo has regularized relations with IDA, the IMF, AfDB, and the European Union and made significant political and economic reforms. - 2007 parliamentary elections: October 14, 2007. - Donor reengagement: Roundtable meeting in Brussels, September 18–19, 2008; donors pledged stepped-up assistance to implement the I-PRSP and forthcoming PRSP. - Shocks: recent surge in food and fuel prices and heavy flooding in the summer that destroyed roads and bridges along the main traffic artery from the Port of Lomé to the north. - Poverty and social key figures: - Human Development Index: 0.512 for 2007-2008. - Poverty (% below poverty line): 62. - Adult literacy rate (%): 53. - Female literacy rate (%): 38. - Primary completion rate (%): 66. - Female primary enrollment (%): 92. - Under-five mortality (per 1,000): 75. - Life expectancy at birth (years): 55. - Child malnutrition (%; 2000): 25.1. - HIV prevalence (%; 2005): 3.2. - Regional poverty: Overall about 62 percent (survey 2006); Rural about 74 percent; Urban about 37 percent; Lomé area about 25 percent; Northern region of Savanes: over 90 percent. ### PRGF, IDA status, and re-engagement - IMF: - PRGF arrangement approved April 21, 2008 (three-year). - Program aims include: bring public debt to a sustainable level; facilitate resumption of external assistance; increase resources for infrastructure, health, and education; strengthen fiscal governance; restructure fragile banks; and reform the business environment and state-owned enterprises. - Performance: all performance criteria for the first review met. - Total financing under the three-year arrangement augmented from SDR66.1 million to SDR84.4 million. - World Bank/IDA: - Togo is an IDA-only country with GNI per capita of US$360 in 2007. - Interim Strategy Note presented to the IDA Board on May 29, 2008. - Arrears to IDA cleared in May 2008 through a bridge loan provided by a bilateral creditor; proceeds of a grant under a Development Policy Operation (DPO) were used to repay the bridge loan. ### Economic impact and near-term outlook - Real GDP growth: - Projected 2008: ¾ percent. - Inflation: - Expected to reach 9 percent in 2008. - Current account deficit: - Projected to widen from 6½ percent of GDP in 2007 to 11 percent of GDP in 2008. - 2009 outlook: - Modest economic recovery expected driven by higher investment and resumption of regional transport. - Inflation projected to ease significantly in 2009 as local food prices decline from recent peak. ### Policy track record and governance developments - Long-term context: - Per capita income declined by an average of one percent a year since the early 1980s. - Long-lasting socio-political crisis and withdrawal of donor support damaged economy, infrastructure, and institutions. - 2006–2007 reform program and SMP performance: - Fiscal revenues rose from 15¾ percent of GDP in 2005 to 17 percent in 2007. - Primary fiscal position for 2007 was broadly balanced (2006 primary deficit was 1 percent of GDP). - Under the SMP, all quantitative targets were comfortably met. - PRGF-supported program (2008): - 2008 budget targets a broadly balanced primary position and resource reallocation toward education, health, infrastructure, and restructuring of state-owned banks and enterprises. - First-half 2008: revenues higher than projected; spending restrained; large primary fiscal surplus and substantial accumulation of government deposits; wage and pension arrears reduced. - All relevant performance criteria for the first review met; preliminary data through end-September 2008 indicate implementation broadly on track. - Governance strengthening measures (selected): - Phasing out payment orders without budget line identification. - New mechanism for monthly monitoring of budget execution fully operational. - New General Inspectorate of Finance established for ex-post inspections. - External audit of large domestic arrears completed; authorities finalizing arrears-clearing strategy. - Action plan for public procurement reforms adopted. - Strategy prepared to strengthen fragile state-owned banks; largest bank placed under new management and oversight. - Electricity utility: Board established; new statutes harmonized with WAEMU corporate law; new general manager appointed. ### I-PRSP strategic axes and medium-term policy objectives - I-PRSP strategic axes: - Strengthening political and economic governance. - Promoting economic recovery and sustainable development (reform SOEs and financial institutions; improve business environment; strengthen regional integration and trade; revive agriculture; rehabilitate infrastructure). - Developing social sectors, human resources and employment (improve access and quality of basic education and health services). - Selected medium-term policy objectives: - Bring public debt to a sustainable level via gradual fiscal adjustment, regularization of domestic arrears, and comprehensive external debt relief. - Reengage with development partners to increase financial and technical assistance. - Increase resources for health, education, agriculture, and infrastructure by reallocating domestic spending and using expected external assistance. - Strengthen fiscal governance to raise revenues and make spending more efficient and transparent. - Restructure state-owned banks and initiate growth-oriented structural reforms, especially in cotton and phosphate sectors. - PRSP timing: - I-PRSP adopted March 2008; full PRSP planned for completion in the first half of 2009. ### Medium-term macroeconomic framework — selected indicator series (Table 1, 2007–27) - GDP at constant prices (percent change): - 2007: 1.9 - 2008: 0.8 - 2009: 3.0 - 2010: 4.0 - 2008-27 (avg.): 3.5 - GDP at current prices (percent change): - 2007: 3.2 - 2008: 5.5 - 2009: 4.1 - 2010: 6.0 - 2008-27 (avg.): 5.6 - GDP deflator: - 2007: 1.3 - 2008: 4.8 - 2009: 1.2 - 2010: 2.0 - 2008-27 (avg.): 2.1 - Consumer prices (yearly average): - 2007: 1.0 - 2008: 9.1 - 2009: 1.9 - 2010: 2.5 - 2008-27 (avg.): 2.8 - Export volume: - 2007: 7.3 - 2008: 1.4 - 2009: 12.6 - 2010: 10.8 - 2008-27 (avg.): 6.5 - Import volume: - 2007: 12.8 - 2008: 12.0 - 2009: 8.6 - 2010: 5.1 - 2008-27 (avg.): 5.7 - Terms of trade (U.S. dollar basis): - 2007: 6.7 - 2008: 5.0 - 2009: 0.3 - 2010: -2.0 - 2008-27 (avg.): -0.1 - Central government finance (percent of GDP): - Total revenue (including grants): - 2007: 18.7; 2008: 18.4; 2009: 21.1; 2010: 21.9; 2008-27 (avg.): 22.2 - Tax and nontax revenue: - 2007: 17.0; 2008: 16.6; 2009: 17.3; 2010: 17.6; 2008-27 (avg.): 18.0 - Total expenditure: - 2007: 20.6; 2008: 21.3; 2009: 23.7; 2010: 23.9; 2008-27 (avg.): 23.4 - Overall balance (including grants): - 2007: -1.9; 2008: -2.9; 2009: -2.6; 2010: -2.0; 2008-27 (avg.): -1.2 - Domestic primary balance1/: - 2007: 0.2; 2008: -0.6; 2009: 0.0; 2010: 0.6; 2008-27 (avg.): 0.9 - External current account balance (including grants): - 2007: -6.4 - 2008: -10.9 - 2009: -9.2 - 2010: -7.1 - 2008-27 (avg.): -5.1 - Exports of goods and services (percent of GDP): - 2007: 41.9; 2008: 40.4; 2009: 43.6; 2010: 44.9; 2008-27 (avg.): 46.9 - Imports of goods and services (percent of GDP): - 2007: 62.5; 2008: 67.5; 2009: 70.6; 2010: 70.0; 2008-27 (avg.): 68.9 - Net present value of external debt2/ (percent of exports): - 2007: 190.6; 2008: 170.9; 2009: 151.9; 2010: 135.9; 2008-27 (avg.): 89.3 - Notes: - 1/ Excludes interest payments, foreign-financed investment, and grants. - 2/ In percent of exports of goods and non-factor services before traditional debt relief. ### Debt reconciliation, structure, and arrears (end-2007, selected figures) - DRA prepared jointly by Togolese authorities, IDA and IMF staffs drawing on data as of end-2007; reconciliation completed in March 2008. - Public and publicly-guaranteed external debt (including arrears) nominal: US$2.2 billion. - Corresponding NPV: US$1.8 billion, about 72 percent of GDP, 191 percent of exports, and 396 percent of fiscal revenues. - Creditor composition (end-2007): - Multilateral creditors: around 51.1 percent of total nominal debt; IDA alone: 34.6 percent of total nominal. - Paris Club: 43.7 percent of total nominal debt; France the largest creditor. - Non-Paris Club bilateral creditors (China, Kuwait, Saudi Arabia): 4 percent of total external debt. - Commercial creditors: 1.5 percent of total. - Arrears (end-2007): US$851 million (about 39 percent of external debt). - Multilateral arrears: US$200 million. - Bilateral arrears: US$636 million. - Commercial arrears: US$15 million. - Most of these arrears have since been cleared. - Table 2 (selected lines, end-2007, US$ million): - Total nominal debt stock: 2,208.2; Arrears stock: 851.2; NPV of debt before traditional debt relief: 1,804.5; NPV of debt after traditional debt relief: 1,410.8. - Multilateral nominal stock: 1,127.5 (51.1 percent); multilateral arrears: 199.8 (23.5 percent of arrears); multilateral NPV before traditional relief: 784.3 (43.5 percent); multilateral NPV after traditional relief: 784.3 (55.6 percent). - IDA nominal stock: 764.8 (34.6 percent); IDA arrears: 129.1 (15.2 percent); IDA NPV before traditional relief: 511.7 (28.4 percent); IDA NPV after traditional relief: 511.7 (36.3 percent). - Bilateral nominal stock: 1,048.1 (47.5 percent); bilateral arrears: 636.0 (74.7 percent); bilateral NPV before traditional relief: 988.8 (54.8 percent); bilateral NPV after traditional relief: 595.4 (42.2 percent). - Paris Club nominal stock: 964.3 (43.7 percent); Paris Club arrears: 634.9 (74.6 percent); Paris Club NPV before traditional relief: 922.7 (51.1 percent); Paris Club NPV after traditional relief: 511.2 (36.2 percent). - Commercial nominal stock: 32.6 (1.5 percent); commercial arrears: 15.4 (1.8 percent); commercial NPV before traditional relief: 31.4 (1.7 percent); commercial NPV after traditional relief: 31.2 (2.2 percent). ### HIPC eligibility, required relief, and common reduction factor - The DRA confirms Togo qualifies for debt relief under the HIPC Initiative’s fiscal window based on end-2007 data. - After traditional debt relief, Togo’s NPV of debt estimated at US$1,411 million at end-2007 (equivalent to 309 percent of fiscal revenues). - Required debt relief to reach the 250 percent HIPC threshold: US$270 million (end-2007 NPV terms). - Common reduction factor estimated at 19 percent. - Proportional burden sharing (NPV terms): - Multilateral assistance: US$150 million. - Bilateral and commercial assistance: US$120 million. ### Delivery to date and creditor commitments (selected) - 47 percent of HIPC relief delivered through multilateral arrears clearance and cancellation of loans by China. - IDA and AfDB delivered their full shares via arrears clearance operations in May and July 2008, respectively. - Creditors amounting to around 90 percent of total HIPC debt relief in NPV terms have indicated willingness to provide HIPC relief to Togo. ### Table 3 key statistics (end-2007, NPV terms) - Total debt outstanding (end-2007, A): 1,411. - Post-HIPC (B): 1,141. - Reduction of the NPV of Debt due to HIPC (A-B): 270. - Total (as percent of revenue): 309 (end-2007) and 250 (post-HIPC); reduction: 59. - Multilateral: 784 (A); 634 (B); 150 (A-B). - Bilateral: 595 (A); 481 (B); 114 (A-B). - Paris Club: 511 (A); 413 (B); 98 (A-B). - Other Official Bilateral: 84 (A); 68 (B); 16 (A-B). - Commercial: 31 (A); 25 (B); 6 (A-B). - Memorandum items: - Common reduction factor (percent): 19. - Revenue (2007 central government revenues excluding grants): 456. - Revenue/GDP (3 year average): 17. - Exports/GDP (3 year average): 42. ### Illustrative creditor-delivery scenarios and modalities (assumed decision point end-November 2008 and completion point end-October 2010) - IDA: - Assistance: approximately US$98 million in NPV terms, provided through the grant element imbedded in its concessional arrears clearance operation; no interim relief from IDA. - Over the assumed HIPC interim period (2009-2010), debt service to IDA: around US$26 million annually. - IMF: - Assistance: US$0.3 million in NPV terms. - Interim assistance: about US$0.1 million in NPV terms to cover part of PRGF interest obligations until the completion point (presently assumed October 2010). - AfDB: - Assistance of US$17.3 million in NPV terms delivered through concessional arrears clearance. - Other multilaterals: - Expected to deliver US$35 million in NPV terms through concessional arrears clearance, concessional rescheduling and/or debt service reduction. - Paris Club: - Assumed to provide US$98 million in NPV terms through a Cologne flow operation (90 percent NPV reduction) after the decision point; this tops up the Naples flow operation (67 percent NPV reduction) delivered in June 2008. - Remaining HIPC assistance projected to be delivered through a stock of debt operation at the completion point. - Non-Paris Club bilateral and commercial creditors: - China already delivered its share via loan cancellation in 2007. - Togo has agreed to seek comparable treatment for other creditors. ### Arrears clearance (Box 1) — summary - Togo has cleared or reached understandings on the clearance of 96 percent of its external arrears. - IDA arrears (US$146 million) cleared in May 2008 via a bridge loan repaid with proceeds of an exceptional IDA allocation (grant terms). - AfDB arrears (US24 million) cleared in July 2008 under the Fragile States Facility (99 percent financed from FSF grant resources). - EU intends to clear arrears up to the decision point and provide grants to clear EIB arrears in two tranches in 2008 and 2009. - Paris Club Naples terms (June 2008): immediate cancellation of US$347 million of pre-1 January 1983 debt; remaining balance US$392 million rescheduled or deferred; moratorium on debt service between 1 April 2008 and 31 March 2011 conditional on satisfactory PRGF implementation. ### MDRI and beyond-HIPC debt relief (preliminary estimates) - Upon HIPC completion point, Togo qualifies for MDRI relief from IDA and AfDF. - MDRI coverage: - IDA: all debt outstanding and disbursed before end-2003 and still outstanding at the beginning of the quarter following the completion point. - AfDF: cancellation of all debt outstanding and disbursed before end-2004 and still outstanding on the day following the completion point. - Preliminary estimates (assuming completion point October 2010): - MDRI debt relief: US$753 million nominal; US$404 million in NPV terms. - Of this nominal amount: US$618 million from IDA; US$135 million from AfDF. - IMF: Togo repaid its MDRI-eligible debt to the IMF in early 2008 and is not eligible for MDRI relief from the IMF. - Beyond-HIPC: EU’s specific LDC Initiative and some Paris Club creditors expected to provide beyond-HIPC relief, possibly canceling up to 100 percent of claims; additional Paris Club assistance could amount to US$488.5 million nominal (US$425.5 million NPV). ### Impact of HIPC and MDRI on debt ratios (selected outcomes) - Application of traditional debt relief and HIPC debt relief: - NPV of external public debt declines to 211.1 percent of revenues by 2010, from 395.6 percent in 2007. - Delivery of MDRI and additional bilateral debt relief beyond HIPC: - NPV of debt-to-revenue ratio would decline to 65.0 percent in 2010 with MDRI and additional bilateral beyond-HIPC relief. - Debt service ratios after completion point (2011–2027): - Debt service-to-exports and debt service-to-revenue would remain below 4 percent and 7 percent, respectively. - Represents a reduction of 40 percent over 2011–2027 and a reduction of over 70 percent in 2011, respectively, compared to projection including only HIPC assistance. - Assumption: MDRI and bilateral beyond-HIPC have no impact on Togo’s new borrowing over the projection period. ### Sensitivity analyses and downside scenarios (after full HIPC delivery) - Simulations under four scenarios test vulnerability after unconditional delivery of HIPC assistance: - Scenario 1 — Permanently lower GDP growth: - Real GDP assumed to grow 2.5 percentage points less than baseline (baseline average real growth 3.5 percent 2008-2027). - NPV of debt-to-revenue ratio would decline up to 137.4 percent by 2027, compared to 87.2 percent under baseline. - Scenario 2 — Lower export growth: - Average export growth falls by 2.5 percentage points relative to baseline. - NPV of debt-to-exports reaches 53.5 percent in 2027 vs. 34.9 percent baseline; debt service-to-export ratio 60 percent higher than baseline. - Scenario 3 — Substitution of grants with loans: - Half of all project grants substituted with concessional borrowing (about 2 percent of GDP per year). - Debt indicators decline substantially less vs. baseline; in 2027 debt service-to-exports and debt service-to-revenue around 60 percent higher than baseline; NPV of debt-to-revenue almost double baseline. - Scenario 4 — Combination of shocks (Scenarios 1–3 combined): - NPV of debt-to-revenue would decline until 2017 but increase thereafter, reaching 235.7 percent by 2027, just below HIPC threshold; all debt burden indicators deteriorate substantially vs. baseline. ### Triggers for the floating completion point and program conditionality (Box 2) - Completion point triggers include: - PRSP: Prepare a full PRSP through a participatory process and implement satisfactorily its recommended actions for at least one year, evidenced by an Annual Progress Report. - Macroeconomic stability: Maintain satisfactory performance under a PRGF-supported program. - Public financial management: - Adopt a mechanism to track public expenditures for poverty reduction via a functional expenditure classification and publish at least two quarterly reports covering at least two consecutive quarters preceding the completion point. - Appoint judges for the Cour des Comptes and provide workspace, equipment, materials; submit draft Loi de règlement and draft General Treasury Balance to Cour des Comptes and Parliament for at least one fiscal year preceding the completion point. - Adopt a decree creating the Procurement Regulatory Authority in conformity with WAEMU Procurement Directives, nominate managerial staff and provide budget; publish monthly summaries of all signed contracts (including sole source and concessions) for at least six months immediately preceding the completion point. - Governance (phosphates sector): Implement regular public reporting of payments to, and revenues received by, the government for the phosphates sector in line with this aspect of the EITI criteria, with a recent annual report during at least the year immediately preceding the year of completion point. - Debt management: Consolidate external and domestic debt data under a single unit and publish an annual report on a government website providing accurate and complete data on external and domestic public debt for at least one year immediately preceding completion point. - Social sectors: - Adopt medium-term National Health Development Plan and medium-term Health Sector Human Resources Development and Management Plan after costing. - Start implementation of national education sector plan as evidenced by completing training of at least 500 new teachers and remedial training of at least 4,000 existing teachers. ### Monitoring use of HIPC resources and public financial management (PFM) - Debt relief should be accompanied by a program ensuring effective use of domestic and external resources reflecting PRSP priorities. - Requirements: - Strengthen programming, management, control and monitoring of expenditures. - Improve service delivery in key sectors. - Cost PRSP priorities and develop a medium-term expenditure framework. - Progress and shortcomings: - Progress: closure of off-budget bank accounts; unification of cash management under Treasury; near elimination of exceptional payment authorizations without ex-ante authorization; monthly budget execution monitoring; strengthened tax and customs administration. - Further efforts needed: improve quality and composition of public spending; streamline expenditure circuit; strengthen ex-post control over budget execution; restore regular budget preparation timetable (important during 2008); implement new procurement code and procedures and enhance transparency. - Supporting activities: PEMFAR in FY09; IMF technical assistance mission September 2008 to define strategy to strengthen public accounting. - Implementation of expenditure tracking: - Government plans to introduce a functional classification by end-2008 to track poverty reduction expenditures for implementation in the 2009 budget. ### Medium-term expenditure priorities (Box 3) - Education: - Increase primary school completion rate and reduce primary school repetition. - Training of teachers. - Health: - Increase health personnel in regional health facilities. - Increase availability of drugs and materials. - Agriculture and food security: - Expand income-generating activities at community level to increase food production and supply. - Expand availability of quality services to producers (advice, education, training, R&D). - Infrastructure: - Expand supply and access to electricity through cooperation with neighboring countries on generation capacity and purchase/sale of electricity. - Expand and improve port and road infrastructure. ### Debt management capacity — institutional assessment and recommendations (Annex I) - Institutional setup: - Debt Department (DD), part of Treasury Department, main unit responsible for debt management; created in 2000. - DD responsibilities: keep external debt database; monitor overall public debt; forecast external debt service; prepare payment invoices for external debt; advisory role in negotiating/contracting loans in some cases. - Legal and operational constraints: - Legal framework lacks important implementation decrees and not always respected; line ministers have negotiated and signed loans without delegation authority. - Debt management operations have been reactive; no formal Debt Management Strategy (DMS) historically. - Incomplete debt records, particularly for state-owned enterprise debt. - DD provides forecasts of debt service to Budget Department, but only loans still serviced were included in the budget (approximately one fifth of total payments due). - Staffing and analytical capacity: - Current DD staff experienced in current tasks but not adequately trained for advanced debt management analytics; analytical unit staffed only with advisor to director. - Priority actions / Recommendations: - Fully implement WAEMU regulation on external debt management to strengthen legal framework and give MEF clear mandate. - Create institutional framework ensuring coordination among all entities participating in debt management. - Hire and train DD staff to improve analytical capacity (debt management strategy and debt sustainability analyses). - Monitor and record domestic and external debt in an integrated and accurate electronic database; produce monthly reports on debt service, debt outstanding and arrears. - Assign DD staff to check accuracy of data entries, risk monitoring and compliance. - Design a debt management strategy including terms of re-engagement with international creditors. ### External DSA conclusions, dynamics, and vulnerabilities (highlights) - External debt (nominal) series (percent of GDP): 77.1, 84.7, 88.2, 59.9, 58.6, 57.0, 54.0, 50.7, 47.3, 33.9, 25.0. - PV of external debt (percent of exports): e.g., 170.4, 106.0, 99.7, 96.5, 90.9, 84.4, 77.8, 53.2, 36.7 (series shown in tables). - PV of PPG external debt in percent of government revenues: 421.2, 256.3, 247.2, 241.2, 221.2, 206.8, 191.7, 128.9, 87.0. - Debt service-to-exports ratio (percent): 34.9, 29.0, 26.9, 5.0, 3.8, 3.5, 5.8, 6.7, 7.3, 5.1, 3.2. - Public sector debt (percent of GDP): 101.4, 106.1, 106.8, 80.2, 83.6, 73.9, 67.5, 61.9, 56.7, 36.5, 25.1. - Key macro assumptions and projections (selected exact series): - Real GDP growth (percent): 1.2, 3.9, 1.9, 1.1, 2.5, 0.8, 3.0, 4.0, 4.0, 4.0, 4.0, 3.3, 3.5, 4.0, 3.6, 4.0, 3.6. - Government revenues (excluding grants, percent of GDP): 15.7, 16.9, 17.0, 16.6, 17.3, 17.6, 18.2, 18.2, 18.2, 18.2, 18.2. - Grant-equivalent financing (percent of external financing): 63.6, 72.3, 76.0, 81.0, 81.2, 80.9, 81.8, 81.0, 81.2. - Nominal GDP (Billions of US dollars): 2.1, 2.2, 2.5, 3.0, 3.1, 3.3, 3.6, 3.8, 4.0, 5.3, 9.3 (series reported across projections). - DSA policy-relevant implications: - Debt reduction in projections driven in part by exceptional financing and debt relief episodes. - Debt indicators remain sensitive to macro shocks: slower real GDP growth or lower export growth materially raise PV debt-to-GDP, PV debt-to-exports, and debt service ratios. - A one-time 30 percent nominal depreciation in 2009 causes substantial increases in debt ratios (B6). - Reliance on grant-equivalent financing is high; gross financing needs remain non-negligible (around 3.8–4.2 percent of GDP in projection years). - Debt service burden relative to revenues and exports shows episodic spikes and remains a key vulnerability (e.g., PPG debt service-to-revenue ratio reaches 31.1 percent at times). ### Decision point and Board actions requested (summary) - Executive Directors asked to decide whether Togo qualifies for assistance under the HIPC Initiative and to approve the decision point. - Decision point expected November 2008. - Total Enhanced HIPC assistance estimated at US$270 million in NPV terms. - US$98 million NPV provided by IDA through DPO in support of arrears clearance. - US$0.3 million NPV to be provided by IMF (interim assistance proposal). - Directors asked whether the IMF should provide interim assistance between decision and completion points in line with existing guidelines. - Floating completion point: HIPC floating completion point to be reached when triggers in Box 2 have been met. - Debt relief provided unconditionally only when: - completion point triggers met, and - satisfactory assurances of other creditors’ participation under enhanced HIPC Initiative received. _Italic: Source — IMF staff report (excerpt from content unit _cr08370)._ ### Executive Summary ...................................................................................................... ### Executive Summary ### Overview and recent developments - After more than a decade with limited external assistance, the Republic of Togo (hereafter Togo) has made significant progress on political and economic reforms, and has regularized its relations with key development partners, including IDA, the IMF, the African Development Bank (AfDB), and the European Union. - Economic performance has been improving though the country has been strongly affected by the recent surge in food and fuel prices as well as heavy flooding in the summer. - The 2007 parliamentary elections (October 14, 2007) marked a milestone in political reform and paved the way for donor reengagement. In September 2008, a new Prime Minister was appointed and the cabinet was reshuffled. During a Roundtable meeting in Brussels on September 18 and 19, 2008, donors pledged to step up their assistance significantly to help Togo implement its I-PRSP and forthcoming PRSP and address urgent spending priorities. - Flooding destroyed roads and bridges along the main traffic artery from the Port of Lomé to the north, paralyzing trade and transport and disrupting exports of goods and services. - Togo has been severely affected by global food and fuel price shocks, reflecting high fuel imports in transport, industry, and power sectors; surging food prices have eroded real incomes for urban dwellers. ### PRGF, IDA status, and re-engagement - IMF: Following a successful Staff-Monitored Program (SMP), the IMF Executive Board approved on April 21, 2008, a three-year PRGF arrangement, the first since the mid-1990s. The PRGF-supported program is anchored in Togo’s I-PRSP and aims to: - bring public debt to a sustainable level; - facilitate the resumption of external assistance; - increase resources for infrastructure, health, and education; - strengthen fiscal governance; - restructure fragile banks; and - reform the business environment and state-owned enterprises. - Performance under the PRGF arrangement has been good, with all performance criteria for the first review met. Total financing available under the three-year arrangement was augmented from SDR66.1 million to SDR84.4 million to help Togo mitigate the impact of global price shocks and recent flooding. - World Bank/IDA: Togo is an IDA-only country with a gross national income (GNI) per capita of US$360 in 2007. An Interim Strategy Note presented to the IDA Board on May 29, 2008, details a support program aligned with the I-PRSP. In May 2008, arrears to IDA were cleared through a bridge loan provided by a bilateral creditor; Togo then used the proceeds of a grant under a Development Policy Operation (DPO) to repay the bridge loan. ### Poverty and social indicators (key figures) - Human Development Index: 0.512 for 2007-2008. - Poverty (% below poverty line): 62 - Adult literacy rate (%): 53 - Female literacy rate (%): 38 - Primary completion rate (%): 66 - Female primary enrollment (%): 92 - Under-five mortality (per 1,000): 75 - Life expectancy at birth (years): 55 - Child malnutrition (%; 2000): 25.1 - HIV prevalence (%; 2005): 3.2 - Poverty distribution and regional variation: - Overall poverty: about 62 percent (survey 2006). - Rural poverty: about 74 percent. - Urban poverty: about 37 percent. - Lomé area poverty: about 25 percent. - Northern region of Savanes: over 90 percent. - Progress toward MDGs: notable improvements in net primary enrollment, primary completion rates, and youth literacy between 1990 and 2005; however, goals such as halving extreme poverty and hunger, access to improved water and sanitation, and reducing maternal and infant mortality remain unlikely to be met by 2015 on current trends. ### HIPC eligibility and decision point findings - The Debt Relief Analysis (DRA) confirms that Togo would qualify for debt relief under the fiscal window of the enhanced Heavily Indebted Poor Countries (HIPC) Initiative. - Public and publicly-guaranteed external debt in nominal terms was estimated at US$2.2 billion as of end-December 2007. - After applying traditional debt relief mechanisms, Togo’s NPV of debt-to-revenue ratio at end-2007 is estimated at 309 percent, which is above the HIPC Initiative threshold of 250 percent. - Togo has fulfilled other requirements to qualify for HIPC debt relief: - adopted an interim PRSP (I-PRSP) in March 2008; - established a satisfactory track record of policy performance under IMF- and IDA-supported programs; - understandings reached between IMF and IDA staffs and the Togolese authorities on appropriate completion point triggers (with a recent modification to the health trigger and minor editorial refinements regarding the Court of Accounts, procurement and governance). - The IMF and IDA Executive Boards broadly supported the preliminary triggers during discussions in September 2008 (meetings on September 22 and 23, 2008). ### Size and composition of debt relief and MDRI effects - Possible HIPC debt relief is estimated at US$270 million in NPV terms. - Achieving an NPV of debt-to-revenue ratio of 250 percent requires total HIPC debt relief of US$270 million in NPV terms, implying a common reduction factor of 19 percent. - Because Togo was not servicing its debt to most creditors in the recent past, HIPC relief has been partly provided in the form of arrears clearance and will not immediately create additional fiscal space; however, arrears resolution gives Togo access to additional development assistance to help progress toward the MDGs. - Upon reaching the HIPC completion point, Togo will also qualify for relief under the Multilateral Debt Relief Initiative (MDRI), which is estimated to reduce debt service on debt to IDA and the AfDB by approximately US$404 million (in NPV terms). - Sensitivity analysis: after full delivery of HIPC Initiative assistance, Togo’s debt ratios remain below HIPC Initiative thresholds even under worsening economic conditions. ### Process, structure of the paper, and next steps - The paper is organized into sections covering background and eligibility; medium-term strategy and prospects (including PRSP process and macroeconomic framework); a summary of the DRA and possible HIPC, MDRI and additional bilateral and multilateral assistance; discussion of floating completion point triggers and monitoring of HIPC resource use; and issues for Executive Directors. - The paper builds on the preliminary HIPC document discussed by the IMF and IDA Executive Boards in September 2008 and incorporates updates: recent political and economic developments; PRSP process and reform program; updated macroeconomic framework; change in the floating completion point trigger in the health sector and minor editorial refinements; and annexes with a Debt Sustainability Analysis and an assessment of debt management capacity. *Executive Summary — IMF/IDA joint paper on the eligibility and qualification of the Republic of Togo for the Enhanced HIPC Initiative* ### 12. The combined impact of these shocks has brought economic growth to a near ### _cr08370 - 12. The combined impact of these shocks has brought economic growth to a near ### Economic impact and near-term outlook - Real GDP growth is projected to be just ¾ percent in 2008. - Inflation is expected to reach 9 percent, driven by higher food and fuel prices. - The current account deficit is projected to widen from 6½ percent of GDP in 2007 to 11 percent of GDP in 2008. - A modest economic recovery is expected for 2009, driven by higher investment and the resumption of regional transport. - Inflation is projected to ease significantly in 2009 as local food prices are expected to decline from their recent peak. ### Policy track record and governance developments - Decadal context and constraints: - Per capita income declined by an average of one percent a year since the early 1980s. - Long-lasting socio-political crisis and withdrawal of donor support damaged the economy, infrastructure, and institutions. - Traditional export sectors suffered from adverse terms of trade and mismanagement of state-owned enterprises. - Governance problems and banking sector difficulties inhibited private investment. - Heavy external debt burden and weak fiscal management led to rapid accumulation of arrears. - 2006–2007 reform program and SMP performance: - 2006: ambitious economic reform program launched, initially supported by an IMF Staff-Monitored Program (SMP). - Under the SMP, all quantitative targets were comfortably met and progress was made on governance-related structural reforms. - Fiscal revenues rose from 15¾ percent of GDP in 2005 to 17 percent in 2007, helped by tax and customs administrative reforms and arrears recovery. - Primary fiscal position for 2007 was broadly balanced, compared to a 2006 primary deficit of 1 percent of GDP, allowing a net reduction in domestic arrears. - PRGF-supported program (2008): - 2008 budget targets a broadly balanced primary position and resource reallocation toward education, health, infrastructure, and restructuring of state-owned banks and enterprises. - First-half 2008 revenues were higher than projected; spending was restrained, resulting in a large primary fiscal surplus and substantial accumulation of government deposits; wage and pension arrears were reduced. - All relevant performance criteria for the first review under the PRGF-supported program were met. - Preliminary data through end-September 2008 indicate program implementation has remained broadly on track. - Governance strengthening measures: - Phasing out payment orders without budget line identification. - New mechanism for monthly monitoring of budget execution fully operational. - New General Inspectorate of Finance established for ex-post inspections. - External audit of large domestic arrears completed; authorities finalizing a strategy for clearing these arrears. - Action plan for public procurement reforms adopted. - Audits and reforms in the cotton sector, clearance of cotton company arrears to farmers, strengthened internal controls and cost savings. - Strategy prepared to strengthen fragile state-owned banks; largest bank placed under new management and oversight. - Electricity utility: Board of Directors established, new statutes harmonized with WAEMU corporate law, new general manager appointed. ### Medium-term strategy and prospects (I-PRSP and macro framework) - Key challenges identified: - Poor governance and low administrative capacity following sociopolitical conflict. - Excessive external public debt and domestic arrears. - Undercapitalized state-owned banks with the highest nonperforming loan ratio in the WAEMU area. - Severe region-wide energy crisis with frequent power outages. - Loss-making state-owned cotton and phosphate enterprises after decades of mismanagement. - Poor business environment and deteriorated social conditions. - I-PRSP strategic axes: - Strengthening political and economic governance, focusing on institutional reform and fiscal governance. - Promoting economic recovery and sustainable development: reform SOEs and financial institutions, improve business environment, strengthen regional integration and trade, revive agricultural production, rehabilitate infrastructure, improve natural resources and environment management. - Developing social sectors, human resources and employment: improve access to and quality of basic education and health services. - Medium-term policy objectives (selected): - Bring public debt to a sustainable level via gradual fiscal adjustment, regularization of domestic arrears, and comprehensive external debt relief. - Reengage with development partners to increase financial and technical assistance. - Increase resources for health, education, agriculture, and infrastructure by reallocating domestic spending and effectively using expected external assistance. - Strengthen fiscal governance to raise revenues and make spending more efficient and transparent. - Restructure state-owned banks to strengthen financial position and reduce macroeconomic risks. - Initiate growth-oriented structural reforms to improve business environment and reform public enterprises, especially cotton and phosphate sectors. - PRSP process and timing: - I-PRSP prepared in two phases and adopted in March 2008; inclusive process with government and civil society. - Donors engaged in the second phase (beginning August 2006); emphasis on public financial management and governance of key public enterprises and banks. - Full PRSP planned for completion in the first half of 2009. - Macroeconomic medium-term outlook and assumptions: - I-PRSP medium-term framework envisages real GDP growth of almost 4 percent. - Initial recovery drivers: donor-financed public investment, improved business confidence, growing regional trade, rebound in cotton and phosphate production. - Medium-term growth to be sustained by higher FDI (e.g. banking, telecoms, phosphate, port), improved financial intermediation, and upgrades to public infrastructure, especially electricity. - Fiscal policy: domestic primary surplus of about 1 percent of GDP, comprehensive external debt relief, and higher foreign aid to yield a broadly sustainable fiscal position and improved debt outlook that avoids renewed arrears. - Authorities plan to raise revenues to about 18 percent of GDP over the medium run while holding domestic spending broadly constant in relation to GDP. - Spending in priority areas to increase via: (i) reallocating domestic spending away from non priority sectors (particularly untargeted subsidies and transfers); (ii) bringing external assistance (US$12 per capita in the period 2004-06, according to the World Development Indicators database) to the regional average (US$43 per capita); and (iii) using resources freed up after the completion point by HIPC and MDRI debt relief. - Wage bill projected to rise modestly after a decade-long salary freeze but should remain in line with WAEMU convergence criteria (the wage bill should be less than or equal to 35 percent of fiscal revenues). - Inflation: expected to be contained over the medium term, anchored in the WAEMU currency union and fiscal prudence, but could be erratic with unfavorable weather or further world food and oil price volatility. - External conditions: first-round impact of the global financial crisis expected to be limited as lower oil prices are projected to offset weaker export demand; current account deficit projected to remain high as imports increase with foreign aid absorption and FDI pick-up; exports expected to increase largely on account of expected recovery of phosphate sector; long-term export growth constrained by limited competitiveness and poor business environment. - Risks: - Prolonged global downturn caused by the financial crisis could depress export demand, remittances, and FDI. - Capacity constraints from decades of conflict and donor disengagement may limit reform implementation. - Reform fatigue or political tensions could slow reforms; fragile banks and weakened public enterprises could jeopardize macro stability and growth. - Other shocks: terms of trade deterioration, euro appreciation, worsening regional energy crisis, bad weather affecting agriculture, loss of confidence causing capital outflows. - Delays in rebuilding transport infrastructure destroyed by recent flooding could hinder recovery. ### Key medium- to long-term macroeconomic indicators (selected figures from Table 1, 2007-27) - GDP at constant prices: - 2007: 1.9 - 2008: 0.8 - 2009: 3.0 - 2010: 4.0 - 2008-27 (avg.): 3.5 - GDP at current prices: - 2007: 3.2 - 2008: 5.5 - 2009: 4.1 - 2010: 6.0 - 2008-27 (avg.): 5.6 - GDP deflator: - 2007: 1.3 - 2008: 4.8 - 2009: 1.2 - 2010: 2.0 - 2008-27 (avg.): 2.1 - Consumer prices (yearly average): - 2007: 1.0 - 2008: 9.1 - 2009: 1.9 - 2010: 2.5 - 2008-27 (avg.): 2.8 - Export volume: - 2007: 7.3 - 2008: 1.4 - 2009: 12.6 - 2010: 10.8 - 2008-27 (avg.): 6.5 - Import volume: - 2007: 12.8 - 2008: 12.0 - 2009: 8.6 - 2010: 5.1 - 2008-27 (avg.): 5.7 - Terms of trade (U.S. dollar basis): - 2007: 6.7 - 2008: 5.0 - 2009: 0.3 - 2010: -2.0 - 2008-27 (avg.): -0.1 - Central government finance (in percent of GDP): - Total revenue (including grants): 2007: 18.7; 2008: 18.4; 2009: 21.1; 2010: 21.9; 2008-27 (avg.): 22.2 - of which: Tax and nontax revenue: 2007: 17.0; 2008: 16.6; 2009: 17.3; 2010: 17.6; 2008-27 (avg.): 18.0 - Total expenditure: 2007: 20.6; 2008: 21.3; 2009: 23.7; 2010: 23.9; 2008-27 (avg.): 23.4 - Overall balance (including grants): 2007: -1.9; 2008: -2.9; 2009: -2.6; 2010: -2.0; 2008-27 (avg.): -1.2 - Domestic primary balance 1/: 2007: 0.2; 2008: -0.6; 2009: 0.0; 2010: 0.6; 2008-27 (avg.): 0.9 - External current account balance (including grants): - 2007: -6.4 - 2008: -10.9 - 2009: -9.2 - 2010: -7.1 - 2008-27 (avg.): -5.1 - Exports of goods and services (percent of GDP): - 2007: 41.9 - 2008: 40.4 - 2009: 43.6 - 2010: 44.9 - 2008-27 (avg.): 46.9 - Imports of goods and services (percent of GDP): - 2007: 62.5 - 2008: 67.5 - 2009: 70.6 - 2010: 70.0 - 2008-27 (avg.): 68.9 - Net present value of external debt 2/ (percent of exports): - 2007: 190.6 - 2008: 170.9 - 2009: 151.9 - 2010: 135.9 - 2008-27 (avg.): 89.3 Notes: - 1/ Excludes interest payments, foreign-financed investment, and grants. - 2/ In percent of exports of goods and non-factor services before traditional debt relief. ### Debt analysis and HIPC/MDRI context - Debt reconciliation: - DRA prepared jointly by Togolese authorities, IDA and IMF staffs drawing on data as of end-2007. - Reconciliation completed jointly by IMF, IDA and authorities in March 2008. - All multilateral and 90 percent of bilateral and commercial debt were reconciled. - Structure of external debt (end-2007, before traditional debt relief): - Public and publicly-guaranteed external debt (including arrears) estimated at US$2.2 billion in nominal terms. - Corresponding NPV (US$1.8 billion) equals about 72 percent of GDP, 191 percent of exports, and 396 percent of fiscal revenues. - Multilateral creditors accounted for around half of total nominal debt; IDA alone constituted more than one third of total external debt. - Multilateral creditors with substantial claims: AfDF (6.7 percent of total external debt), BOAD (3.4 percent), EU/EIB (2.4 percent), IsDB (1.8 percent), IFAD (1.2 percent), OFID (0.6 percent). - BADEA, FEGECE and the IMF held minor claims (0.2 percent combined). - Among bilateral and commercial creditors, Paris Club accounted for almost 44 percent of total nominal debt at end-2007; France was the largest creditor. - Non-Paris Club bilateral creditors included China, Kuwait and Saudi Arabia, together representing 4 percent of total external debt. - About 1.5 percent of debt was held by 11 commercial creditors (CBAO Senegal the major one). - Arrears: - About 39 percent of external debt was in arrears at end-2007; external arrears stood at US$851 million. - Composition of arrears: US$200 million to multilateral creditors; US$636 million to bilateral creditors; US$15 million to commercial creditors. - Most of these arrears have since been cleared. - Table 2 (selected summary lines, end-2007): - Total nominal debt stock: 2,208.2 (US$ million); Arrears stock: 851.2 (US$ million); NPV of debt before traditional debt relief: 1,804.5 (US$ million); NPV of debt after traditional debt relief: 1,410.8 (US$ million). - Multilateral nominal stock: 1,127.5 (US$ million) (51.1 percent of total); multilateral arrears: 199.8 (US$ million) (23.5 percent of arrears); multilateral NPV before traditional relief: 784.3 (US$ million) (43.5 percent of total NPV); multilateral NPV after traditional relief: 784.3 (US$ million) (55.6 percent). - IDA nominal stock: 764.8 (US$ million) (34.6 percent of total); IDA arrears: 129.1 (US$ million) (15.2 percent); IDA NPV before traditional relief: 511.7 (US$ million) (28.4 percent); IDA NPV after traditional relief: 511.7 (US$ million) (36.3 percent). - Bilateral nominal stock: 1,048.1 (US$ million) (47.5 percent of total); bilateral arrears: 636.0 (US$ million) (74.7 percent); bilateral NPV before traditional relief: 988.8 (US$ million) (54.8 percent); bilateral NPV after traditional relief: 595.4 (US$ million) (42.2 percent). - Paris Club nominal stock: 964.3 (US$ million) (43.7 percent of total); Paris Club arrears: 634.9 (US$ million) (74.6 percent of arrears); Paris Club NPV before traditional relief: 922.7 (US$ million) (51.1 percent); Paris Club NPV after traditional relief: 511.2 (US$ million) (36.2 percent). - Commercial nominal stock: 32.6 (US$ million) (1.5 percent of total); commercial arrears: 15.4 (US$ million) (1.8 percent); commercial NPV before traditional relief: 31.4 (US$ million) (1.7 percent); commercial NPV after traditional relief: 31.2 (US$ million) (2.2 percent). - HIPC/MDRI context: - The DRA is based on the HIPC Initiative’s methodology. The underlying macroeconomic framework was revised in the context of the first PRGF review (completed on September 22, 2008) and updated with more recent global economic assumptions. *Source: IMF staff report (excerpt from content unit _cr08370).* ### 30. Togo qualifies for debt relief under the HIPC Initiative’s fiscal window based on ### 30. Togo qualifies for debt relief under the HIPC Initiative’s fiscal window based on ### HIPC qualification and required relief - Togo qualifies for debt relief under the HIPC Initiative’s fiscal window based on end-2007 data; the common reduction factor is estimated at 19 percent. - After full application of traditional debt relief mechanisms, Togo’s NPV of debt is estimated at US$1,411 million at end-2007, equivalent to 309 percent of fiscal revenues. - The required debt relief needed to bring this ratio down to the 250 percent HIPC threshold is estimated at US$270 million in end-2007 NPV terms. - Based on proportional burden sharing, multilateral assistance would amount to US$150 million, and bilateral and commercial assistance to US$120 million (both in NPV terms). ### Delivery to date and creditor commitments - So far, 47 percent of HIPC relief has been delivered through multilateral arrears clearance and the cancellation of loans by China. - IDA and AfDB have already delivered their full share of HIPC assistance through arrears clearance operations in May and July 2008, respectively. - Overall, creditors amounting to around 90 percent of total HIPC debt relief to be provided in NPV terms have indicated their willingness to provide debt relief under the HIPC initiative to Togo. ### Table 3 key statistics (end-2007, NPV terms) - Total debt outstanding (end-2007, A): 1,411 - Post-HIPC (B): 1,141 - Reduction of the NPV of Debt due to HIPC (A-B): 270 - Total (as percent of revenue): 309 (end-2007) and 250 (post-HIPC); reduction: 59 - Multilateral: 784 (A); 634 (B); 150 (A-B) - Bilateral: 595 (A); 481 (B); 114 (A-B) - Paris Club: 511 (A); 413 (B); 98 (A-B) - Other Official Bilateral: 84 (A); 68 (B); 16 (A-B) - Commercial: 31 (A); 25 (B); 6 (A-B) - Memorandum items: - Common reduction factor (percent): 19 - Revenue (2007 central government revenues excluding grants): 456 - Revenue/GDP (3 year average): 17 - Exports/GDP (3 year average): 42 ### Illustrative scenarios on delivery (assumes decision point by end-November 2008 and completion point by end-October 2010) - IDA: - Assistance would amount to approximately US$98 million in NPV terms and has been provided through the grant element imbedded in its concessional arrears clearance operation. - As such, there will be no interim relief from IDA. - Over the assumed HIPC interim period (2009-2010), debt service to IDA would be around US$26 million annually. - IMF: - Assistance would total US$0.3 million in NPV terms. - Interim assistance of about US$0.1 million in NPV terms will be applied to cover a portion of PRGF interest obligations until the completion point (presently assumed in October 2010). - AfDB: - Assistance of US$17.3 million in NPV terms has been delivered through its concessional arrears clearance operation. - Other multilaterals: - Expected to deliver assistance amounting to US$35 million in NPV terms through concessional arrears clearance, concessional rescheduling and/or debt service reduction. - Paris Club: - Assumed to provide US$98 million in NPV terms through a Cologne flow operation (i.e., a 90 percent NPV reduction) after the decision point, topping up the Naples flow operation (i.e., a 67 percent NPV reduction) delivered in June 2008. - Remaining HIPC assistance projected to be delivered through a stock of debt operation at the completion point. - Non-Paris Club bilateral and commercial creditors: - China has already delivered its share of HIPC relief in 2007 through loan cancellation. - Togo has agreed to seek comparable treatment for other creditors. ### Arrears clearance (Box 1) — summary of operations and status - A large share of Togo’s official external debt (in NPV terms) was in arrears as of end-2007; most arrears have been or are expected to be cleared through concessional arrears clearance operations. - Togo has so far cleared or reached understandings on the clearance of 96 percent of its external arrears. - IDA: - Arrears to IDA (US$146 million) were cleared in May 2008 through a bridge loan provided by a bilateral donor; proceeds of an exceptional allocation of IDA resources (grant terms) were used to repay the bridge loan. - AfDB: - Arrears to the AfDB Group (US24 million) were cleared in July 2008 under the Fragile States Facility; 99 percent of the cost was financed from FSF grant resources, with bilateral donor assistance for the remainder. - European Union and other multilaterals: - EU intends to clear all arrears until the date of the decision point and to provide grants to clear arrears to the European Investment Bank in two tranches in 2008 and 2009. - IFAD has proposed an arrears rescheduling with a moratorium period without debt service. - Remaining multilaterals (OFID and FEGECE) are expected to clear arrears in the context of the HIPC Initiative on terms consistent with Togo’s limited repayment capacity. - Paris Club: - Agreement in June 2008 on Naples terms led to immediate cancellation of US$347 million of debt contracted prior to the 1st January 1983 cut-off date, leaving a balance debt of US$392 million which is rescheduled or deferred. - Agreement includes a moratorium with no debt service payments between 1st April 2008 and 31 March 2011, provided Togo continues to satisfactorily implement the PRGF-supported program. - Deferral until after March 2011 of repayment of arrears accumulated on short term and post cutoff date debts, maturities falling due for those debts, and all moratorium interest on rescheduled and deferred amounts. ### MDRI and bilateral debt relief beyond HIPC - Upon reaching its HIPC completion point, Togo will qualify for MDRI debt relief from IDA and AfDF. - MDRI relief from IDA: includes all debt outstanding and disbursed before end-2003 and still outstanding at the beginning of the quarter following the completion point. - MDRI relief from AfDF: includes cancellation of all debt outstanding and disbursed before end-2004 and still outstanding on the day following the completion point. - Preliminary estimates assuming completion point in October 2010: - MDRI debt relief could amount to US$753 million in nominal terms (US$404 million in NPV terms). - Of this amount, US$618 million (nominal) would be provided by IDA and US$135 million (nominal) by the AfDF. - IMF: - Togo repaid its MDRI-eligible debt to the IMF in early 2008 and would not be eligible for MDRI debt relief from the IMF. - Beyond-HIPC: - Togo could benefit from EU’s specific LDC Initiative and some Paris Club creditors are expected to provide beyond-HIPC relief, canceling up to 100 percent of their claims after completion point. - Additional assistance from the Paris Club could amount to US$488.5 million in nominal terms (US$425.5 million in NPV terms). ### Impact of HIPC and MDRI on debt ratios - Application of traditional debt relief and HIPC debt relief: - NPV of external public debt declines to 211.1 percent of revenues by 2010, from 395.6 percent in 2007. - Delivery of MDRI and additional bilateral debt relief beyond HIPC: - NPV of debt-to-revenue ratio would decline to 65.0 percent in 2010 with MDRI and additional bilateral debt relief beyond HIPC. - Debt service ratios after completion point (2011–2027): - Debt service-to-exports and debt service-to-revenue would remain below 4 percent and 7 percent, respectively. - This represents a reduction of 40 percent over the period 2011 to 2027 and a reduction of over 70 percent in 2011, respectively, compared to a projection including only HIPC assistance. - Assumption: - MDRI and bilateral debt relief beyond HIPC have no impact on Togo’s new borrowing over the projection period. ### Sensitivity analysis and scenarios (after unconditional delivery of HIPC assistance) - General: - Simulations under four scenarios test vulnerability of Togo’s external debt after unconditional delivery of HIPC Initiative assistance. - Togo’s external debt situation would deteriorate under all scenarios, but would remain on a downward path over the projection period, except under the scenario with a combination of shocks. - Scenario 1 — Permanently lower GDP growth and fiscal revenues: - Real GDP is assumed to grow by 2.5 percentage points less than in the baseline (baseline assumes average real growth of 3.5 percent 2008-2027), bringing real GDP growth to the historical average. - NPV of debt-to-revenue ratio would gradually decline up to 137.4 percent by 2027, compared to 87.2 percent under the baseline scenario. - Scenario 2 — Lower export growth: - Average growth rate of exports falls by 2.5 percentage points relative to the baseline. - NPV of debt-to-exports declines gradually, reaching 53.5 percent in 2027 compared to 34.9 percent in the baseline. - Debt service-to-export ratio would be 60 percent higher than in the baseline scenario. - Scenario 3 — Substitution of grants with loans: - Half of all project grants are substituted with new (concessional) borrowing (about 2 percent of GDP per year). - Debt indicators decline substantially less relative to the baseline. - In 2027, debt service-to-exports and debt service-to-revenue would be around 60 percent higher than in the baseline. - NPV of debt-to-revenue would be almost double the value in the baseline scenario. - Scenario 4 — Combination of shocks (Scenarios 1–3 combined): - NPV of debt-to-revenue ratio would decline gradually until 2017, but increase thereafter, reaching 235.7 percent by 2027, just below the HIPC threshold. - All debt burden indicators would deteriorate substantially compared to the baseline. ### Triggers for the floating completion point and program conditionality - IMF and IDA staffs have reached understandings with Togolese authorities on completion point triggers. - Triggers include standard triggers on macroeconomic stability and implementing a full PRSP, plus four areas critical for ensuring the effectiveness of debt relief. - Public financial management triggers: - Continue building institutions supporting governance and transparency, especially in procurement, monitoring of budget execution and auditing. - Implement a functional expenditure classification to monitor and publish poverty-reducing spending. - Strengthen public procurement by creating a procurement regulatory agency and enhancing transparency of awarded contracts; procurement code updating expected in early 2009 to align with WAEMU Directives. - Make the Court of Accounts (Cour des Comptes) operational to ensure external auditing and annual certification of public accounts. - Governance triggers: - Sustain efforts to improve transparency in the phosphate sector; an external financial and strategic audit is under preparation. - Regular public reporting on payment flows between the government and the enterprise, at least annually. - Debt management triggers: - Consolidate external and domestic debt data under a single unit charged with all public debt management tasks. - Regular publication of public debt data to support debt sustainability and strengthen relations with creditors and investors. *Source: IMF and World Bank staff estimates and projections, as presented in the provided IMF chapter.* ### 43. In the social sectors, the objective is to strengthen health and education services. ### 43. In the social sectors, the objective is to strengthen health and education services. ### Social sectors: objectives and measures - Objective: strengthen health and education services. - Health sector goals: - Improve health sector programs. - Improve development and management of human resources in the sector through costing and adoption of: - the medium-term National Health Development Plan; and - the medium-term Health Sector Human Resources Development and Management Plan. - Both Plans are to be consistent with the PRSP sectoral objectives. - Education sector goals: - Improve education quality, particularly through teacher recruitment and provision of teacher training. - Start implementation of the national education sector plan as evidenced by: - completing the training of at least 500 new teachers; and - completing the remedial training of at least 4,000 existing teachers. ### Triggers for the Floating Completion Point (Box 2) - PRSP - Prepare a full PRSP through a participatory process and implement satisfactorily its recommended actions for at least one year, as evidenced by an Annual Progress Report submitted by the Government to IDA and the IMF. - Macroeconomic stability - Maintain macroeconomic stability as evidenced by satisfactory performance under a PRGF-supported program. - Public financial management - Adopt a mechanism to track public expenditures for poverty reduction on the basis of a functional expenditure classification and publish at least two quarterly reports on these expenditures covering a period of at least two consecutive quarters preceding the completion point. - Appoint the judges for the Cour des Comptes and provide them with work space, equipment, and materials; and submit the draft of the Loi de règlement and draft General Treasury Balance (Balance Générale du Trésor) to the Cour des Comptes and Parliament for at least one fiscal year preceding the completion point. - Adopt a decree creating the Procurement Regulatory Authority in conformity with the WAEMU Procurement Directives, nominate its managerial staff, and provide them with an adequate budget; and publish monthly in a public procurement gazette or on a government website a summary of all signed contracts, including sole source contracts and public concessions, for at least six months immediately preceding the completion point. - Governance - Implement regular public reporting of payments to, and revenues received by, the government for the phosphates sector in line with this aspect of the EITI criteria, with a recent annual report during at least the year immediately preceding the year in which the completion point is reached. - Debt Management - Consolidate external and domestic debt data under a single unit charged with all public debt management tasks. - Publish an annual report on a government website providing accurate and complete data on external and domestic public debt, including information on debt stocks, actual debt service, and new loans within six months after the end of the year, for at least one year immediately preceding the completion point. - Social sectors - Adopt the medium-term National Health Development Plan and the medium-term Health Sector Human Resources Development and Management Plan after costing of the Plans has been completed. - Start implementation of the national education sector plan as evidenced by completing the training of at least 500 new teachers and the remedial training of at least 4,000 existing teachers. ### Monitoring public spending following provision of HIPC assistance - Debt relief under the HIPC Initiative and beyond HIPC (including MDRI) should be accompanied by a program that ensures the effective use of domestic and external resources and reflects the expenditure priorities of the PRSP. - Requirements to support effective use of resources: - Strengthen the programming, management, control and monitoring of expenditures. - Improve service delivery in key sectors. - Cost PRSP priorities and develop a medium-term expenditure framework to efficiently allocate public resources for meeting PRS objectives. ### Progress and shortcomings in public financial management (PFM) - Progress with technical assistance from IMF, IDA and other donors: - Closure of bank accounts used for off-budget operations. - Unification of cash management under the Treasury. - Near elimination of the use of exceptional payment authorizations without ex-ante authorization in the Finance Law. - Greater involvement of financial control staff in review of expenditures processed through normal budget processing channels. - Monthly monitoring of budget execution has been established. - Strengthened tax and customs administration has enabled a significant increase in revenues. - Further efforts needed; government developing a medium-term PFM reform strategy. Key challenges include: - Improving the quality and composition of public spending. - Streamlining the expenditure circuit. - Strengthening the ex-post system of control over budget execution. - Restoration of the regular budget preparation timetable is important during 2008. - Implementation of a new procurement code and associated procedures is critical, as is greater transparency of procurement process outcomes. - Supporting activities and monitoring: - A Public Expenditure Management and Financial Accountability Review (PEMFAR) being conducted in FY09 by the World Bank and other development partners will support reform efforts. - IMF technical assistance mission undertaken in September 2008 aimed at defining a strategy to strengthen the public accounting system. - Progress is being monitored by IDA and IMF staffs under respective support programs (development policy operations and the PRGF), and selected actions are among the proposed completion point triggers. ### Implementation of expenditure tracking and calendar - A basic monitoring mechanism for tracking expenditures is being implemented. - Government plans to introduce a functional classification by end-2008 to track poverty reduction expenditures, for implementation in the 2009 budget. - The government intends to use this mechanism (a proposed completion point trigger) to track its total budget outlays against its medium-term expenditure priorities, as defined by its I-PRSP and successor PRSP. ### Medium-term expenditure priorities (Box 3) - Education - Increasing primary school completion rate and reducing primary school repetition. - Training of teachers. - Health - Increasing health personnel in the country’s regional health facilities. - Increase in availability of drugs and other materials. - Agriculture and food security - Expand income generating activities at the community level, including those that increase food production and/or facilitate the supply of food products to markets and the population. - Expanding availability of quality services to producers—advice, agricultural education and training, and research and development for improving the supply of agricultural inputs. - Infrastructure - Expand supply of, and hence access to, electricity, through intensified cooperation with neighboring countries in the area of investment in new generation capacity, and purchase and sale of electricity. - Expand and improve port and road infrastructure. *Source: _cr08370 - 43. In the social sectors, the objective is to strengthen health and education services.* ### 48. This paper assesses Togo’s qualification for assistance under the Enhanced ### _cr08370 - 48. This paper assesses Togo’s qualification for assistance under the Enhanced ### Qualification and decision point - Executive Directors are asked to decide: Do Directors agree that Togo qualifies for assistance under the HIPC Initiative and do they approve the decision point? - The decision point is expected to be reached in November 2008 (decision-point timing referenced in tables and notes). ### Amount and delivery of assistance - Total amount of assistance under the Enhanced HIPC Initiative is estimated at US$270 million in NPV terms. - Of this amount: - US$98 million in NPV terms has been provided by IDA through its recent DPO in support of Togo’s arrears clearance. - US$0.3 million in NPV terms would be provided by the IMF (interim assistance proposal described). - Directors are asked: Do IMF Directors agree that the IMF should provide interim assistance between the decision and completion points in line with existing guidelines? ### Floating completion point and conditionality for unconditional relief - Directors are asked: Do Directors agree that the HIPC floating completion point will be reached when the triggers in Box 2 have been met? - Debt relief will be provided unconditionally only when: - the completion point triggers have been met, and - satisfactory assurances of other creditors’ participation under the enhanced HIPC Initiative for Togo have been received. ### Debt stock composition and potential HIPC costs (end-2007) - Nominal stock of external debt at end-2007: $2.208 billion. - Composition by creditor group (percent of nominal stock, end-2007): - Paris Club: 43.7% - IDA: 35% - Other Multilateral: 10% - AfDF: 7% - Other Official Bilateral: 4% - Commercial: 1.5% - IMF: 0.1% - Potential costs of the Enhanced HIPC Initiative (Total Estimated HIPC Enhanced Assistance: $270 million, end-2007 NPV terms) — share by creditor group: - IDA: 36% - Paris Club: 36% - Other Multilateral: 13% - AfDF: 6% - Other Official Bilateral: 6% - Commercial: 2% - IMF: 0.1% ### External debt indicators and projections (selected milestones and ratios) - Charts and tables provide projections for 2007-2027 under alternative treatments: - NPV of Debt to Revenues series presented for scenarios: before traditional debt relief and multilateral arrears clearance; after HIPC Assistance; after HIPC assistance and MDRI; after MDRI and additional bilateral debt relief beyond HIPC. - Debt service to Revenues series presented for 2008-2026 under the same sequence of treatments. - Table highlights (external debt service, selected years, in millions of U.S. dollars): - Total debt service (Before traditional debt relief and multilateral arrears clearance): 2007: 96.0; 2008: 97.2; 2009: 94.5; 2010: 95.2; (series continues through 2027). - Debt service-to-revenue ratio (Before traditional debt relief and multilateral arrears clearance): 2007: 19.5; 2008: 17.9; 2009: 16.1; 2010: 14.7; (series continues). - Impact of HIPC and MDRI on debt service (selected summary lines): - After HIPC assistance (III): Total debt service in 2008: 55.7; 2009: 48.7; 2010: 49.3; 2011: 82.7; (series continues). - After HIPC and MDRI assistance (IV): Total debt service in 2011: 71.3; subsequent years shown through 2027. - Reduction in debt service as a result of HIPC Initiative assistance (reported in Table A3): selected entries include 52.1, 48.8, 33.1, 6.8, -11.8, -24.8, ... (series continues as presented). ### Sensitivity analysis and downside scenarios (2007-27) - Figure 3 and accompanying tables present sensitivity scenarios and impacts on NPV of Debt to Revenues and Debt Service to Revenues: - Baseline scenario. - Permanently lower growth. - Permanently lower export growth. - Less concessional new borrowing. - Combination of shocks (compound shock). - Table A6 (sensitivity analysis) provides scenario-specific NPV of debt-to-GDP, NPV of debt-to-exports, and NPV of debt-to-revenue ratios across 2007-2027 for the scenarios listed above (full series of values provided in the source tables). ### Discount and exchange rate assumptions (as of end-December 2007) - Sample entries from Table A1 (Discount Rate (In percent per annum) / Exchange Rate (Currency per U.S. dollar), end-December 2007): - Canadian Dollar: 5.42 / 0.99 - CFA Franc: 5.35 / 445.59 - Euro: 5.35 / 0.68 - U.S. Dollar: 5.64 / 1.00 - Paris Club cutoff date: January 1, 1983. ### Detailed debt stock and NPV by creditor group (as of December 31, 2007) - Table A2 (selected aggregated figures, US$ million): - Total nominal debt stock: 2,208.2 (100.0 percent of total). - Arrears stock: 851.2 (100.0 percent of arrears stock). - NPV of Debt: 1,804.5 (100.0 percent). - NPV of Debt after adjustments: 1,410.8 (100.0 percent). - Multilateral subtotal (nominal stock): 1,127.5 (51.1 percent of total); IDA nominal stock: 764.8 (34.6 percent); AfDF nominal stock: 148.9 (6.7 percent). - Bilateral and Commercial subtotal (nominal stock): 1,080.7 (48.9 percent); Paris Club nominal stock: 964.3 (43.7 percent). - Commercial creditors nominal stock: 32.6 (1.5 percent). ### IMF and World Bank delivery schedules and modalities (selected) - Table A7 (World Bank Group possible delivery of assistance under Enhanced HIPC, 2008-2044): - Enhanced HIPC assistance of USD 98 million in end-2007 NPV terms has been fully delivered in May 2008 through the clearance of Togo's arrears to IDA on grant terms (USD 146 million). - Decision point expected November 2008 but no delivery of interim assistance will be provided by the World Bank Group. - Table A8 (Possible delivery of IMF assistance under Enhanced HIPC Initiative, 2008-2018; amounts in millions of U.S. dollars): - I. Pre-MDRI debt relief (HIPC only): HIPC-eligible debt service due on IMF obligations series shown (interest and principal breakdown across years). - Interim assistance mechanics: - First delivery of interim assistance of 20 percent of commitment to be deposited into Togo's Umbrella account at the expected decision point end-November 2008 to cover PRGF interest obligations over the next 12 months; second interim assistance assumed in November 2009. - Completion point disbursement and completion point assistance lines shown. - Notes: Total IMF assistance under the enhanced HIPC Initiative is US$ 0.312 million in NPV terms calculated on the basis of data available at the decision point (Table note). - HIPC assistance expected to cover PRGF interest obligations falling due between December 2008 and September 2010 as there are no principal obligations falling due to the Fund until October 2013. ### Creditor participation and modalities (status and commitments) - Table A11: Togo: Status of Creditor Participation under the Enhanced HIPC Initiative (selected entries): - IDA: 98 (36.3) — IDA assistance has been fully provided through its concessional arrears clearance operation. - AfDB Group: 176.4 — AfDB assistance has been fully delivered through its concessional arrears clearance operation under the Fragile States Facility. - IMF: 0 (0.1) — The IMF will extend interim assistance immediately following approval of the decision point by the Boards of IDA and the IMF—provided necessary financing assurances are in place—in the form of debt-service reduction. Interim HIPC assistance of about US$0.1 million will be applied to cover over half of PRGF interim obligations until the completion point (presently assumed October 2010). - China: 114 — China has already delivered its share of HIPC relief through some loans' cancellation in 2007. - EU/EIB: 93.4 — HIPC assistance will be delivered through a combination of concessional arrears clearance and, if needed, debt service reduction; EIB Board approved general modalities for arrears clearance. - Total multilateral: 150 56 - Total bilateral and commercial: 120 44 - TOTAL: 270 100 - Memorandum item: Estimated satisfactory assurances: 92 - Paris Club creditors: interim assistance will be delivered through a Cologne flow during the interim period; modalities and percent coverage by creditor vary by Paris Club creditor (Paris Club delivery modalities summarized in Table A9). ### Key operational assumptions and timetable references - Interim relief under the enhanced HIPC Initiative is assumed from December 2008 to October 2010, with full delivery of assistance in November 2010 in several modelling scenarios and tables. - MDRI assistance applies to the World Bank, the IMF and the AfDB and is assumed to start after the assumed completion point (October/November 2010 in the projections), with the assumption that MDRI has no impact on Togo's new borrowing over the projection period (noted in tables). - Several tables assume hypothetical stock-of-debt operations on Naples terms and comparable treatment by other official bilateral and commercial creditors as required for baseline and post-traditional relief calculations. *Sources: Togolese authorities; IDA and IMF staff estimates and projections; Tables and figures contained in the document.* ### Annex I. Togo: Debt Management Capacity ### Annex I. Togo: Debt Management Capacity ### Overview - Debt management operations involve different entities, including the Ministry of Economy and Finance (MEF), the Department for the Execution and Oversight of the Development Plan and the benefiting line ministries. - Operations are characterized by complex formal procedures which have been bypassed by informal channels in the past. - The Debt Department (DD), which forms part of the Treasury Department, is the main unit responsible for debt management. ### Institutional responsibilities - DD responsibilities include: - keeping the external debt database, - monitoring overall public debt, - forecasting external debt service, - preparing payment invoices for external debt. - The DD is also involved in an advisory capacity in the process of negotiating and contracting loans in some but not all cases. - The DD was created in 2000, when the responsibility for debt management was transferred from the National Investment Company (Société Nationale d’Investissement). ### Legal framework - The legal framework for debt management lacks important implementation decrees and is not always respected in practice. - Line ministers have, for instance, negotiated and signed loans without formal delegation authority. - Togo agreed in July 2007 to implement the WAEMU regulation on external debt management, which contains specific requirements for the legal framework surrounding government debt management. ### Operational constraints and strategy - Debt management operations function within an extremely constrained environment; debt management is reactive rather than active. - Core functions consist of debt data management, which itself suffers from coordination constraints. - Togo has never developed a formal Debt Management Strategy (DMS); historically an informal strategy prioritized debt service payments to creditors that remained engaged with the country. - As part of reaching decision point under the HIPC initiative (and as part of implementing the WAEMU regulation), the Togolese authorities expect to develop a strategy to ensure the sustainability of future borrowing. ### Debt recording and coordination weaknesses - Different entities manage external debt, domestic debt, and state-owned enterprise debt, producing lack of coordination and information exchange. - Incomplete debt records result for both domestic and external borrowing. - Debt recording of debt contracted by state-owned enterprises was especially weak; the DD did not have any information on the debt of these entities before requesting it for the debt reconciliation undertaken in the context of the HIPC Initiative. - The DD provides forecasts of debt service due to the Budget Department, although only the loans that were still serviced were included in the budget (approximately one fifth of the total payments due). ### Staffing and analytical capacity - Current DD staff is experienced and has adequate knowledge of their current tasks. - DD staff is not adequately trained in the analytic requirements of more advanced debt management operations, with the analytical unit staffed only with the advisor to the director. ### Priority actions / Recommendations - Full implementation of the WAEMU regulation on external debt management would substantially strengthen Togo’s legal framework and give the MEF a clear mandate for undertaking all debt related transactions. - As the Treasury Department is being reformed, the DD should give priority to: - creating an institutional framework that ensures appropriate coordination among all entities that participate in the debt management process; - hiring and training staff for the DD, in order to improve analytical capacity, for instance in the preparation of a debt management strategy and debt sustainability analyses; - monitoring and recording of domestic and external debt in order to have an integrated and accurate electronic database, and producing a monthly report on debt service, debt outstanding and arrears; - assigning DD staff to check the accuracy of data entries, risk monitoring and compliance; - designing a debt management strategy which includes the terms of re-engagement with the international creditors. *Annex I. Togo: Debt Management Capacity — IMF staff report content* ### conclusions of the external DSA and underscores the vulnerability of Togo’s debt prospects. ### _cr08370 - conclusions of the external DSA and underscores the vulnerability of Togo’s debt prospects. ### External debt levels, flows, and dynamics (selected figures) - External debt (nominal) series (in percent of GDP): 77.1, 84.7, 88.2, 59.9, 58.6, 57.0, 54.0, 50.7, 47.3, 33.9, 25.0. - o/w public and publicly guaranteed (PPG) external debt (in percent of GDP): 77.1, 84.7, 88.2, 59.5, 57.9, 56.1, 52.9, 49.4, 45.9, 31.8, 22.8. - Change in external debt (in percent of GDP): -16.2, 7.6, 3.5, -28.4, -1.3, -1.6, -3.0, -3.3, -3.3, -1.8, -1.0. - Identified net debt-creating flows (in percent of GDP): -4.7, -0.7, -5.7, 7.8, 3.7, 0.4, -0.8, -0.9, -1.0, -1.1, -1.3. - Non-interest current account deficit (in percent of GDP): 3.3, 4.7, 4.5, 4.1, 2.2, 10.4, 8.8, 6.7, 4.4, 4.1, 4.0, 3.6, 3.5, 3.6. - Deficit in balance of goods and services (in percent of GDP): 16.9, 19.5, 20.5, 27.0, 26.9, 25.0, 23.3, 22.6, 22.0, 20.8, 21.4. - Exports (in percent of GDP): 40.3, 42.3, 41.9, 40.4, 43.6, 44.9, 45.5, 46.1, 46.7, 47.9, 49.3. - Imports (in percent of GDP): 57.2, 61.8, 62.5, 67.5, 70.6, 70.0, 68.9, 68.8, 68.8, 68.8, 70.7. - Net current transfers (negative = inflow, in percent of GDP): -12.4, -14.7, -15.9, -10.8, 3.3, -16.8, -18.4, -18.5, -18.1, -17.7, -17.3, -16.9, -17.4, -16.9. - o/w official transfers (in percent of GDP): -1.2, -1.4, -1.7, -1.8, -3.8, -4.3, -4.3, -4.3, -4.3, -4.3, -4.4. - Net FDI (negative = inflow, in percent of GDP): -2.2, -3.4, -2.5, -2.9, 1.1, -2.5, -3.8, -4.5, -4.0, -4.0, -4.0, -4.0, -4.1, -4.0. - Endogenous debt dynamics (in percent of GDP): -5.8, -1.9, -7.7, -0.1, -1.3, -1.8, -1.2, -1.0, -1.0, -0.6, -0.6. - Contribution from nominal interest rate (in percent of GDP): 2.0, 1.9, 1.9, 0.4, 0.4, 0.4, 1.0, 1.0, 0.9, 0.6, 0.3. - Contribution from real GDP growth (in percent of GDP): -1.0, -2.9, -1.5, -0.6, -1.7, -2.2, -2.1, -2.0, -1.9, -1.2, -1.0. - Contribution from price and exchange rate changes includes large negative contributions (e.g., -6.8, -0.9, -8.1 ...). - Residual (3-4) (in percent of GDP): -11.6, 8.3, 9.2, -36.2, -5.0, -2.0, -2.2, -2.4, -2.3, -0.8, 0.3. - o/w exceptional financing (in percent of GDP): 0.0, 0.0, 0.0, -33.6, -3.5, -22.1, -0.6, -0.5, -0.6, -0.5, -0.7. - PV of external debt (in percent of GDP and of exports): e.g., PV of external debt (in percent of GDP) series includes 71.5, 42.9, 43.5, 43.3, 41.4, 39.0, 36.4, 25.5, 18.1; In percent of exports: 170.4, 106.0, 99.7, 96.5, 90.9, 84.4, 77.8, 53.2, 36.7. - PV of PPG external debt (in percent of GDP and of exports): PV of PPG external debt (in percent of GDP) series includes 71.5, 42.5, 42.9, 42.5, 40.3, 37.6, 34.9, 23.5, 15.8; In percent of exports: 170.4, 105.2, 98.2, 94.5, 88.4, 81.6, 74.6, 48.9, 32.1. - PV of PPG external debt in percent of government revenues: 421.2, 256.3, 247.2, 241.2, 221.2, 206.8, 191.7, 128.9, 87.0. - Debt service-to-exports ratio (in percent): 34.9, 29.0, 26.9, 5.0, 3.8, 3.5, 5.8, 6.7, 7.3, 5.1, 3.2. - PPG debt service-to-exports ratio (in percent): 9.3, 8.4, 8.5, 5.0, 3.8, 3.5, 5.8, 6.7, 7.3, 5.1, 3.2. - PPG debt service-to-revenue ratio (in percent): 23.8, 21.1, 21.0, 12.1, 9.5, 8.9, 14.5, 17.0, 18.9, 13.5, 8.6. - Total gross financing need (Billions of U.S. dollars): 0.3, 0.3, 0.3, 0.3, 0.2, 0.1, 0.1, 0.2, 0.2, 0.2, 0.3. - Non-interest current account deficit that stabilizes debt ratio (in percent of GDP): 19.5, -2.9, 0.9, 38.8, 10.1, 8.3, 7.4, 7.4, 7.3, 5.4, 4.4. ### Key macroeconomic assumptions and projections (exact reported series) - Real GDP growth (in percent): 1.2, 3.9, 1.9, 1.1, 2.5, 0.8, 3.0, 4.0, 4.0, 4.0, 4.0, 3.3, 3.5, 4.0, 3.6, 4.0, 3.6. - GDP deflator in US dollar terms (change in percent): 7.8, 1.2, 10.6, 3.7, 8.4, 18.0, 2.2, 2.4, 2.4, 2.4, 2.0, 4.9, 2.0, 2.9, 2.1. - Effective interest rate (percent) 5/: 2.3, 2.6, 2.5, 2.1, 0.5, 0.6, 0.7, 0.7, 1.8, 2.0, 2.0, 1.3, 1.7, 1.4, 1.6. - Growth of exports of G&S (US dollar terms, in percent): 6.6, 10.3, 11.8, 10.2, 12.6, 14.6, 13.6, 9.7, 8.0, 7.9, 7.5, 10.2, 5.6, 10.0, 6.1. - Growth of imports of G&S (US dollar terms, in percent): 10.8, 13.7, 13.9, 9.4, 11.5, 28.4, 10.1, 5.6, 4.9, 6.4, 6.1, 10.2, 5.6, 10.0, 5.9. - Grant element of new public sector borrowing (in percent): 32.9, 32.9, 32.7, 32.8, 32.6, 32.2, 32.7, 34.8, 33.1, 33.8 (series reported across projections). - Government revenues (excluding grants, in percent of GDP): 15.7, 16.9, 17.0, 16.6, 17.3, 17.6, 18.2, 18.2, 18.2, 18.2, 18.2. - Aid flows (in Billions of US dollars) 7/: 0.0, 0.0, 0.0, 0.1, 0.2, 0.2, 0.2, 0.2, 0.2, 0.3, 0.6. - o/w Grants (in Billions of US dollars): 0.0, 0.0, 0.0, 0.1, 0.1, 0.2, 0.2, 0.2, 0.2, 0.2, 0.4. - o/w Concessional loans (in Billions of US dollars): 0.0, 0.0, 0.0, 0.0, 0.0, 0.1, 0.1, 0.1, 0.1, 0.1, 0.1. - Grant-equivalent financing (in percent of GDP) 8/: 3.7, 5.5, 5.9, 5.2, 5.2, 5.2, 5.2, 5.3, 5.3. - Grant-equivalent financing (in percent of external financing) 8/: 63.6, 72.3, 76.0, 81.0, 81.2, 80.9, 81.8, 81.0, 81.2. - Nominal GDP (Billions of US dollars): 2.1, 2.2, 2.5, 3.0, 3.1, 3.3, 3.6, 3.8, 4.0, 5.3, 9.3. - Nominal dollar GDP growth (in percent): 9.1, 5.2, 12.7, 18.9, 5.3, 6.5, 6.5, 6.5, 6.1, 8.3, 5.6, 7.0, 5.7. - PV of PPG external debt (in Billions of US dollars): 1.8, 1.3, 1.3, 1.4, 1.4, 1.4, 1.4, 1.2, 1.5. - (PVt-PVt-1)/GDPt-1 (in percent): -20.9, 2.6, 2.4, 0.4, -0.2, -0.6, -2.7, -0.2, 0.3, 0.0. ### Public sector debt indicators and dynamics (selected figures) - Public sector debt (in percent of GDP): 101.4, 106.1, 106.8, 80.2, 83.6, 73.9, 67.5, 61.9, 56.7, 36.5, 25.1. - o/w foreign-currency denominated (in percent of GDP): 80.9, 80.5, 82.1, 59.0, 57.8, 55.9, 52.8, 49.3, 45.8, 31.7, 22.7. - Change in public sector debt (in percent of GDP): 14.9, 4.8, 0.7, -26.6, 3.4, -9.7, -6.4, -5.5, -5.2, -2.8, -1.1. - Identified debt-creating flows (in percent of GDP): series showing large negative outflows such as -8.6, -10.8, -29.8, -3.5, -23.9, -3.0, -2.8, -2.4, -1.4, -1.3. - Primary deficit (in percent of GDP, series including): 1.5, 1.9, -0.2, -0.1, 2.3, 1.3, 1.2, 0.2, -0.8, -0.7, -0.6, 0.1, 0.1, 0.2, 0.1. - Revenue and grants (in percent of GDP): 16.9, 18.3, 18.7, 19.2, 21.8, 22.6, 22.8, 22.8, 22.8, 22.8, 22.9. - of which: grants (in percent of GDP): 1.2, 1.4, 1.7, 2.7, 4.5, 5.0, 4.6, 4.6, 4.6, 4.6, 4.7. - Primary (noninterest) expenditure (in percent of GDP): 18.4, 20.2, 18.5, 20.6, 23.1, 22.8, 22.0, 22.1, 22.2, 22.9, 23.1. - Automatic debt dynamics (in percent of GDP): e.g., -10.4, -10.6, -8.7, -2.5, -2.8, -2.2, -2.1, -1.8, -1.5, -1.6. - Contribution from interest rate/growth differential (in percent of GDP): -2.3, -2.6, -4.4, -2.3, -2.6, -2.0, -1.9, -1.8, -1.5, -1.5. - of which: contribution from average real interest rate: 1.6, -0.6, -3.6, 0.1, 0.6, 0.9, 0.7, 0.6, -0.2, -0.5. - of which: contribution from real GDP growth: -1.0, -3.8, -2.0, -0.8, -2.3, -3.2, -2.8, -2.6, -2.4, -1.3, -1.0. - Contribution from real exchange rate depreciation (in percent of GDP): -8.1, -8.0, -4.3, -0.2, -0.2, -0.2, -0.2, 0.0. - Other identified debt-creating flows (in percent of GDP): 0.0, -0.1, 0.0, -22.4, -2.2, -21.3, 0.0, 0.0, 0.0, 0.0, 0.0. - Debt relief (HIPC and other) (in percent of GDP): 0.0, 0.0, 0.0, -4.1, -2.2, -2.2, 0.0, 0.0, 0.0, 0.0, 0.0. - Other (e.g., bank recapitalization) (in percent of GDP): 0.0, 0.0, 0.0, -18.3, 0.0, -19.1, 0.0, 0.0, 0.0, 0.0, 0.0. - Residual, including asset changes (in percent of GDP): 13.3, 11.5, 3.2, 6.9, 14.2, -3.3, -2.7, -2.8, -1.4, 0.3. - PV of public sector debt (in percent of GDP): 20.5, 25.7, 91.2, 63.3, 68.5, 60.3, 54.9, 50.3, 45.8, 28.1, 18.2. - o/w foreign-currency denominated (in percent of GDP): 66.6, 42.2, 42.8, 42.4, 40.2, 37.6, 34.8, 23.4, 15.8. - Gross financing need (in percent of GDP) 2/: 7.8, 13.5, 11.1, 4.0, 3.9, 3.8, 3.9, 4.1, 4.1, 3.9, 4.2. - PV of public sector debt-to-revenue and grants ratio (in percent): 121.2, 140.4, 488.5, 329.1, 313.7, 267.2, 240.6, 220.7, 200.7, 123.6, 79.3. - PV of public sector debt-to-revenue ratio (in percent): 130.3, 151.9, 537.5, 381.7, 395.0, 342.5, 301.7, 276.1, 251.6, 154.7, 99.8. - o/w external (in percent): 392.2, 254.1, 246.7, 240.7, 220.8, 206.4, 191.3, 128.6, 86.8. - Debt service-to-revenue and grants ratio (in percent) 4/: 23.6, 24.0, 24.3, 23.6, 18.6, 22.5, 24.8, 22.0, 22.2, 14.8, 8.0. - Debt service-to-revenue ratio (in percent) 4/: 25.4, 26.0, 26.7, 27.4, 23.4, 28.8, 31.1, 27.5, 27.8, 18.5, 10.1. - Primary deficit that stabilizes the debt-to-GDP ratio (in percent of GDP): -13.4, -2.8, -0.8, 28.0, -2.1, 9.9, 5.6, 4.8, 4.6, 2.9, 1.3. ### Sensitivity analyses and scenario outcomes (highlights) - Baseline PV of PPG external debt (indicator snapshots, percent of GDP): 43 (2008), 43 (2009), 42 (2010), 40 (2011), 38 (2012), 35 (2013), declining to 16 (2028). - Alternative Scenario A3 (full delivery of HIPC, MDRI and beyond HIPC debt relief) produces large reductions in external debt indicators: e.g., PV of PPG external debt drops to 12 (2010–2013) and remains around 11–13 in subsequent years. - Stress test B5 (Combination of B1-B4 using one-half standard deviation shocks) yields much higher ratios for PV debt-to-GDP and PV debt-to-exports, with PV of debt-to-GDP rising to 79 (2018) and even higher under other indicators. - Sensitivity for PV of debt-to-revenue and debt service ratios show large variability across scenarios and bound tests (tables and figures indicate scenarios where ratios reach very high levels, and scenarios where debt indicators fall sharply with complete HIPC/MDRI delivery). ### Policy-relevant implications and vulnerabilities (derived from reported projections) - Debt reduction in projections is driven in part by exceptional financing and debt relief episodes (e.g., exceptional financing entries of -33.6, -22.1 in residual/exceptional financing). - Debt indicators remain sensitive to macro shocks: - Slower real GDP growth or lower export growth significantly raises PV debt-to-GDP, PV debt-to-exports, and debt service ratios (as shown in B1, B2, and combination stress tests). - A one-time 30 percent nominal depreciation in 2009 causes substantial increases in debt ratios across multiple indicators (B6 results). - Grant-equivalent financing constitutes a large share of external financing in projections (e.g., Grant-equivalent financing (in percent of external financing): 63.6 to 81.8 across projection years), indicating reliance on concessional and grant resources to stabilize debt metrics. - Gross financing needs remain non-negligible in projections (e.g., Gross financing need around 3.8–4.2 percent of GDP in projection years), implying continued rollover and financing requirements even under baseline assumptions. - Debt service burden relative to revenues and exports shows episodic spikes and remains a key vulnerability (e.g., PPG debt service-to-revenue ratio at times reaches 31.1 percent). ### Key numerical thresholds and memorandum items (selected) - Memorandum: Nominal GDP (Billions of US dollars) reaches 9.3 in projection series. - PV of public sector debt-to-revenue ratio peaks at values such as 537.5 and remains elevated under adverse scenarios. - Grant element assumed on residual financing (memorandum item): 20 (applied across stress scenarios except A2). *Source: Staff simulations and projections as presented in the external DSA tables and figures.* --- _Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2008/_cr08370.pdf_