## _cr09133 ## Source details **Canonical URL:** [_cr09133](https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2009/_cr09133.pdf) ## Other formats - [Markdown version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2009/_cr09133.pdf.md) - [Structured JSON version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2009/_cr09133.pdf.json) --- ### Political context and program objectives - Côte d’Ivoire: progress toward reunification, peace and elections; presidential elections postponed to late 2009 because of delays in voter enrollment. - Authorities adopted a medium-term economic program and request IMF support under the PRGF and the HIPC Initiative. - Program objectives: - create fiscal space for pro-growth and pro-poor spending; - re-establish debt sustainability; - enhance public finance management; - pursue civil service reform; - improve transparency and efficiency in the energy and cocoa/coffee sectors; - pursue financial sector reform. - Policies draw on the recently adopted Poverty Reduction Strategy. ### Recent macroeconomic developments and outlook - Growth and output: - Real GDP growth: 2006: 0.7; 2007: 1.6; 2008: 2.3 (picked up to 2.3 percent in 2008 from 1.6 percent in 2007); 2009 (Proj.): 3.7; 2010 (Proj.): 3.7; 2011 (Proj.): 4.2; 2012 (Proj.): 4.7; 2013 (Proj.): 5.3; 2014 (Proj.): 5.8. - Growth drivers in 2008: construction, food production, telecommunications; oil output declined. Export agriculture stagnated; coffee and cotton output declined. - Inflation: - CPI inflation rose to 9 percent at year-end 2008; peaked at 10 percent in August 2008. - HCPI average 2008: 6.3 percent; WAEMU HCPI ceiling: 3 percent. - Inflation targeted to fall to 3 percent by end-2009 and to 3 percent (program objective). - External accounts and exchange rate: - External current account (excluding official transfers) improved to a surplus of 1 percent of GDP in 2008 from a deficit of 1.5 percent a year earlier. - Current account including official transfers: 2006: 2.8 percent of GDP; 2007: -0.7; 2008: 1.2; 2009 (Prov.): 2.4. - Current account excluding official transfers: 2006: 3.0 percent of GDP; 2007: -1.5; 2008: -0.6; 2009 (Prov.): 1.0. - Monetary and credit: - Broad money (M2, billions CFAF): 2005: 2,081.0; 2006: 2,294.8; 2007: 2,835.5; 2008 (Prov.): 3,044.4; 2009 (Proj.): 3,225.7. - Credit to the economy (billions CFAF): 2005: 1,189.4; 2006: 1,290.5; 2007: 1,520.4; 2008 (Prov.): 1,700.8; 2009 (Proj.): 1,788.6. ### Fiscal performance through end-2008 and corrective actions - Fiscal outcomes and deviations: - Extrabudgetary spending on transfer of the capital and other large public works: 0.7 percent of GDP in 2008—mandated by the Presidency and paid in kind through oil shipments. - Program target for the primary basic surplus missed by 0.4 percent of GDP. - Authorities accumulated new domestic arrears of 1 percent of GDP in 2008 (text notes accumulation of 1 percent; elsewhere table shows change in domestic arrears: 2008 EPCA-2 Est.: -0.1). - Total payments of arrears and debt service to World Bank and AfDB since mid-2007 amounted to 3 percent of GDP; net repayments (after program disbursements) to 2.7 percent of GDP. - Corrective and transparency measures: - Prime Ministerial instruction (November): channel all oil revenue through the Treasury; all spending for large public works through the budget; interministerial committee to monitor large public works with quarterly reports included in budget execution statements. - General Finance Inspectorate to finalize report on past spending on large public works by end-March 2009. - 2008 supplementary budget regularized CFAF 82 billion of large-project expenditure. - Corrective measures since September: tax measures and expenditure cuts; social spending protected; basic infrastructure projects reduced. ### Policy responses to commodity price shocks and global downturn - Food and fuel shocks (mid-2007 to mid-2008): - Government food tax measures (April 2008): - VAT reduction from 18 to 9 percent on basic food items (milk, palm oil, canned tomatoes, sugar) and cement; - suspension of import duties for basic food items (as before plus rice, wheat flour, fish) and cement; - maintaining 2007 suspension of import taxes on wheat. - Tax reductions introduced April 2008 and ended, except for ordinary rice, in January 2009. Budget cost: 0.5 percent of GDP. - Fuel measures: - Pump prices left unchanged at onset, causing large revenue losses in first half 2008; pump prices raised by 25 percent on average in July 2008; reduced by 10 percent in November 2008. - Staff recommendations and implementation: - Cautioned against universal subsidies; recommended WAEMU harmonization, replace food tax reductions with targeted subsidies, introduce automatic petroleum pricing mechanism. - Authorities implemented WAEMU harmonization steps and introduced automatic petroleum pricing mechanism; better targeted programs for vulnerable groups introduced in early 2009 with additional allocation in revised 2009 budget. - Commodity price shock fiscal/external impact estimate: - A 33 percent drop in oil and cocoa prices from their average 2008 levels (assuming 2008 volumes) is estimated to worsen the fiscal balance by 1.1 percent of GDP and the external current account by 2.3 percent of GDP for 2009. ### Program performance under EPCAs and structural reforms - Under two successive EPCA programs since mid-2007: - Revenue performance close to target due to strong collection efforts on nonoil revenue and favorable oil revenue in 2008. - Total primary spending broadly on target; ‘sovereignty’ spending contained; social spending targets met. - Reduced stock of domestic arrears and cleared multilateral arrears (World Bank in early 2008; AfDB in early March 2009). - Structural measures implemented with some delays. - Results achieved with little external support despite adverse conditions. ### Structural reforms, PFM, and public finance action plan - PFM assessment (PEMFAR) findings: PFM system below average for comparable countries; high financial risks in expenditure execution and reporting. - Government adopted a PFM action plan in March 2009. Key objectives and measures (deadlines preserved as in source): - Harmonize PFM legal framework with WAEMU Directives (end-2009). - Improve budget preparation and incorporate PRSP objectives (end-2009); implement medium-term expenditure framework. - Improve budget execution, integrate donor project spending in SIGFIP, establish SIGFIP–ASTER interface, adopt domestic arrears clearance plan (from early 2009 onward). - Increase transparency in public procurement (second half of 2009), amend Procurement Code to comply with WAEMU directives. - Improve quarterly reporting of budget execution and publish on internet (ongoing). - Rationalize administrative budget control and make Accounts Chamber operational (from end-2009). - Public finance measures adopted: - Audit of crisis-exit spending launched (to be finalized before end-June 2009). - Submission of 2005–07 budget execution laws to Accounts Chamber. - Public financial management action plan based on PEMFAR. ### Energy and coffee/cocoa sector reforms - Energy sector: - Quarterly reports on physical and financial flows published. - Electricity tariffs increased by 10 percent to reduce subsector deficit. - Financial audit of PETROCI completed; progress toward EITI-compliant reports for 2006 and 2007. - Automatic petroleum pricing mechanism adopted by interministerial order end-February 2009, effective April 1, 2009; includes a margin of 3 percent to replace the “k” factor. - Coffee/cocoa sector: - New steering committee (CGFCC) to manage 2008–09 crop season and develop new strategy. - Total levies for 2008–09 crop season set at CFAF 31.3/kg (down from CFAF 46.5/kg in 2007–08). - Plan to reduce indirect taxation of cocoa stepwise from current level of over 32 percent of the CIF price to 22 percent by 2011. ### Financial sector restructuring and banking indicators - Banking sector actions: - Two of five/six banks with negative net worth at end-June 2008 formulated recapitalization plans approved by Banking Commission and became positive equity. - One bank under Interim Administration; two banks to be taken over by government via conversion of illiquid deposits into share capital. - Government plans to partially recapitalize two small banks at cost of 0.2 percent of GDP by converting deposits into capital. - Financial soundness: - NPLs/total loans: 2005: 21.0; 2006: 20.0; Nov-08: 21.5; noted reduction in NPLs ratio from 21.5 to 17.7 percent of total since end-2007 (text). - Risk-weighted capital to assets ratio: Nov-08: 9.5. - Provisioning rate: Nov-08: 89.8. - Liquid assets/total assets: Nov-08: 41.9. ### Medium-term macro framework and fiscal targets (2009–11) - Broad objectives: - raise average 2009–11 growth to 4.2 percent; - reduce inflation to 3 percent; - keep overall budget deficit at around 2 percent, consistent with debt sustainability after HIPC and MDRI relief. - Main macro objectives: - 2009 growth projected at 3.7 percent. - Alternative scenario: growth 1 percentage point lower in medium term if commodity prices permanently 20 percent lower than baseline. - Key fiscal aggregates (percent of GDP and levels preserved as in source tables): - Total revenue: 2009 Est.: 18.4 (table entries show 18.4 then 19.4 and 19.7 in projections); elsewhere revenue expected to increase to 19.0 percent of GDP compared to 18.9 percent in 2008. - Primary basic balance (percent of GDP): 2007: 0.6; 2008 EPCA-2 Est.: 0.8; 2009 Est.: 0.3; 2010 Proj.: 0.9; 2011 Proj.: 1.2. - Primary basic expenditure (percent of GDP): 2007: 17.8; 2008 EPCA-2 Est.: 18.6; 2009 Est.: 18.5; 2010 Proj.: 18.2; 2011 Proj.: 18.2. - Crisis-related expenditure (percent of GDP): 2008 EPCA-2 Est.: 1.9; 2009 Est.: 1.2; 2010 Proj.: 1.4; 2011 Proj.: 0.3. - Change in domestic arrears (percent of GDP): 2007: -1.7; 2008 EPCA-2 Est.: -0.1; 2009 Est.: 1.0; 2010 Proj.: -0.5; 2011 Proj.: -0.7. - Net domestic financing (incl. interest, PETROCI) (percent of GDP): 2007: 0.5; 2008 EPCA-2 Est.: 0.9; 2009 Est.: 0.3; 2010 Proj.: -0.3; 2011 Proj.: -0.5. - External debt service payments incl. arrears clearance (WB, AfDB) (percent of GDP): 2008 EPCA-2 Est.: -6.2; 2009 Est.: -2.9. - Expenditure priorities and measures for 2009: - Wage bill to be kept at 6.8 percent of GDP by limiting new recruitment to education and health. - Reduce subsidies to electricity sector by 0.2 percent of GDP. - Pro-poor spending increases by 0.8 percent of GDP to reach 7.7 percent of GDP in 2009. - Crisis-related expenditure will amount to 1.4 percent of GDP in 2009, of which 0.3 percent financed externally. ### Investment reorientation, procurement, and PFM safeguards - Limit spending on large public works in 2009 to 0.4 percent of GDP and focus on renovation of a state-owned hotel. - Convert framework agreements for ongoing projects into regular public contracts with renegotiated prices/specifications and subject all new projects to tender per Public Procurement Code. - Measures to limit treasury advances and extrabudgetary spending, including quantitative ceilings; low ceiling on treasury advances to be phased out progressively. - Action plan for PFM with Fund and World Bank technical assistance. ### Civil service, social security, and social spending - Civil service reform measures for 2009 include census of government employees, introduction of integrated civil service/payroll system, start of CGRAE pension reform; government intends to adopt reform program by end-June 2009. - Social spending allocations (billions of CFAF, pro-poor spending table): - Education: 2007: 345.0; 2008 Est.: 496.9; 2009 Budget: 536.6. - Health: 2007: 88.8; 2008 Est.: 98.3; 2009 Budget: 118.8. - Total pro-poor spending: 2007: 563.8; 2008 Est.: 726.8; 2009 Budget: 838.8. - Box 1 revenue measures for 2009: restoration of tax/customs administration in CNW zones, strengthened VAT controls, petroleum sector tax administration improvements, better fraud control, review of exemption regimes before June 2009 with streamlining from January 1, 2010. ### External arrears, debt sustainability, and financing needs - Arrears clearance: - Arrears with World Bank cleared April 2008. - Arrears with AfDB cleared early March 2009 under AfDB Fragile States Facility (FSF) with bridge loan; one-third of April 2007 stock paid, AfDB cancelled two-thirds and disbursed new budget support. - EU (FED-X) expected grant for one-third share in EIB arrears; EIB agreed in principle on restructuring remainder. - Authorities initiated discussions with Paris Club and London Club creditors on restructuring arrears and maturities totaling over 25 percent of GDP (four-fifths in arrears). - Paris Club provided financing assurances for the program on March 10, 2009. - External public debt: - Public external debt estimated at US$14.3 billion (65 percent of GDP) at end-2007. - DRA for preliminary HIPC document (end-2007 data) shows NPV debt-to-revenue ratio at 327 percent, above 250 percent threshold (qualification for HIPC relief under “fiscal window”). - Financing gaps and identified financing (2009–11): - Financing gaps during 2009–11 total 31.4 percent of GDP, expected mostly filled by debt restructuring and some budget support. - 2009 gap reflects regularization of reschedulable arrears (10 percent of GDP) and nonreschedulable post-cutoff-date Paris Club arrears (9 percent). - Budget support expected equivalent to 1.5 percent of GDP from World Bank’s second Economic Governance and Recovery Grant and AfDB. - Text Table 2 (percent of GDP) identified financing items include: - IMF EPCA: 0.3 (2009), 0.3 (2010). - World Bank arrears clearance grant and budget support: 1.6 (2009), 1.2 (2010), 1.0 (2011). - AfDB arrears clearance grant and budget support: 1.7 (2009), 0.0 (2010), 2.2 (2011). - Arrears restructuring: 18.9 (2009) and 0.0 thereafter in table. - Post-cut off date Paris Club: 8.8 (2009). - Possible IMF PRGF (90 percent of quota) noted: 0.8 (2009), 0.5 (2010), 0.4 (2011). - Consolidated financing table (billions CFAF) highlights: - IMF PRGF: 85.5 (billions CFAF) in identified assumptions; program grants (World Bank, AfDB, EU) 351.8 (billions CFAF). - Arrears restructuring: 2,102.7 (billions CFAF). - Residual financing gap in consolidated table: 0.0 under assumptions. ### Program design, IMF access, and disbursement schedule - PRGF access proposed at 115 percent of quota (SDR 373.98 million), including 25 percent for immediate repurchase of EPCA. - Justification for access above norms: high BOP needs; catalytic role of Fund; less than 7 percent of total financing need from Fund; strength of fiscal policies and structural reform program; small drawings under prior PRGFs. - PRGF disbursement schedule (SDR millions and timing): - 159.348 — March 27, 2009 — Executive Board approval; of which 81.300 to repurchase EPCA credit. - 35.772 — September 15, 2009 — first review (June 2009 criteria). - 35.772 — March 15, 2010 — second review (Dec 2009 criteria). - 35.772 — September 15, 2010 — third review (June 2010 criteria). - 35.772 — March 15, 2011 — fourth review (Dec 2010 criteria). - 35.772 — September 15, 2011 — fifth review (June 2011 criteria). - 35.772 — March 1, 2012 — sixth review (Dec 2011 criteria). - PRGF facility terms: annual interest rate 0.5 percent; repayable over 10 years with a 5 ½-year grace period on principal. - Executive Board approval (Press Release No. 09/96; March 25, 2009): three-year SDR 373.98 million arrangement; immediate drawing SDR 159.348 million (about US$241.1 million). ### Program monitoring, quantitative performance criteria, and TMU specifics - Program monitored through quantitative performance criteria and indicative targets, and structural benchmarks; review-based structural conditionality considered at first review. - Quantitative performance criteria (set as cumulative change from January 1, 2009) include: - floor on overall fiscal balance (including grants); - ceiling on net domestic financing; - zero ceiling on new nonconcessional external borrowing; - zero ceiling on accumulation of new external arrears; - zero ceiling on accumulation of new domestic arrears; - zero ceiling on extrabudgetary spending. - Indicative targets include floor on primary basic fiscal balance; ceiling on treasury advances; floor on pro-poor spending; floor on cash repayment of government domestic balances outstanding; floor on total government revenue; ceiling on government wage bill. - Petroleum/gas revenue assumptions for 2009 in TMU: - average crude oil price of US$50.0 per barrel; - volume of 17.9 million barrels; - average exchange rate of CFAF 500.0 = US$1. - Balances outstanding (stock at end-December 2008): CFAF 272.2 billion (Treasury balances outstanding: 248.1; arrears to CI-Telecom, CIE, SODECI: 24.1). - Program commitments: - cash reduction of CFAF 60 billion in stock of balances outstanding at end-2008 (quantitative indicator); - not accumulate new domestic payment arrears from January 1, 2009 (performance criterion). - Treasury advances: cumulative amount will not exceed cumulative quarterly ceilings representing 10 percent of quarterly budget allocations (indicative target). - Extrabudgetary spending: government will not undertake any extrabudgetary spending (continuous performance criterion). - ceilings on net domestic financing include a margin of CFAF 25 billion over projected net cumulative flows. ### Risks to the program and mitigation - Key risks: - Spending overruns related to presidential elections and crisis-exit programs. - Revenue shortfalls from global financial crisis possibly leading to curtailing pro-poor spending and domestic arrears. - Fragile domestic consensus on structural reforms; risk of stalled governance progress. - Decline in oil and cocoa prices could worsen growth outlook and lower revenue. - Mitigation: - Fiscal policy should respond flexibly to shocks. - Structural reforms envisaged to strengthen competitiveness, transparency, and governance. - Safeguards: channel all oil revenue through the budget; execute all large public works within budget and Procurement Code; adhere to budget execution procedures and significantly reduce treasury advances. ### Data reporting, statistics, and institutional arrangements for monitoring - BCEAO reporting obligations: - provisional data on NGP to IMF within 30 days of period-end; final data within 45 days. - include itemized listing of public sector liabilities/assets with BCEAO, BNI, and banking sector. - Authorities’ reporting: - monthly Table 2a data within 45 days (budget TOFE, energy and coffee/cocoa sector tables, cash-flow monitoring, domestic/external debt and arrears). - quarterly Table 2b data within one month (breakdown of wage bill, budget execution, oil production revenues, energy sector forecasts, real sector indicators). - Quarterly assessment report on monitoring quantitative criteria, indicative targets, and structural benchmarks within one and a half months of each quarter-end. - Capacity and statistical issues: - Statistical weaknesses noted in national accounts, balance of payments, public finance reconciliation; participation in GDDS since May 2000. - Recent improvements in monetary and BOP compilation; BCEAO national agency compiles BOP with seven months lag. ### Staff appraisal and recommendation - Overall performance under two EPCAs broadly satisfactory, except for extrabudgetary spending and delays in some structural measures. - Progress toward peace and reunification provided ground for upcoming elections; economic recovery continues amid global downturn. - Staff recommends approval of a three-year PRGF arrangement given track record under EPCAs and program ownership. *Source: _cr09133 (IMF staff report: Executive Summary, MEFP, TMU, annexes, and related tables/boxes).* ### Executive Summary ...................................................................................................... ### _cr09133 - Executive Summary ### Political context and program objectives - Côte d’Ivoire is making progress toward reunification, peace and elections; the political situation remains difficult but is stable. - Presidential elections were postponed to late 2009 because of delays in voter enrollment. - The authorities have adopted a medium-term economic program and request IMF support under the PRGF and the HIPC Initiative. - Program objectives include: - create fiscal space for pro-growth and pro-poor spending; - re-establish debt sustainability; - enhance public finance management; - pursue civil service reform; - improve transparency and efficiency in the energy and cocoa/coffee sectors; - pursue financial sector reform. - These policies draw on the recently adopted Poverty Reduction Strategy. ### Recent macroeconomic developments and outlook - Growth and output: - Real GDP growth picked up to 2.3 percent in 2008. - Growth drivers: construction, food production, and telecommunications; oil output declined. - Export agriculture stagnated; coffee and cotton output declined. - The economy has been resilient to the global downturn, but indicators show slowdown in mining investment and non-traditional exports. - Inflation: - CPI inflation rose to 9 percent at year-end 2008. - CPI inflation peaked at 10 percent in August 2008. - Since April 2008 retail food price surges were tempered by VAT and import duty reductions on essential items; as food and oil prices decline, inflation is slowing. - External accounts and exchange rate: - External current account (excluding official transfers) improved to a surplus of 1 percent of GDP from a deficit of 1.5 percent a year earlier, helped by high export prices for crude oil and agricultural commodities earlier in the year and persistently high cocoa prices. - The real effective exchange rate appreciated mainly due to temporary increase in CPI inflation. - Fiscal performance and arrears: - Overall performance under two successive EPCA-supported programs has been broadly satisfactory, except for important fiscal slippages and delays in structural measures. - Fiscal slippage occurred through extrabudgetary spending on large public works; authorities took remedial measures to partly offset this spending and put in place safeguards while ensuring full transparency of investment spending and oil revenue. - The authorities cleared arrears to the World Bank (in early 2008) and AfDB (in early 2009). - Total payments of arrears and debt service to World Bank and AfDB since mid-2007 amounted to 3 percent of GDP and net repayments (after program disbursements) to 2.7 percent of GDP. - Monetary and credit developments: - Broad money developments were driven in part by some net foreign asset accumulation and credit to the private sector. ### Policy responses to commodity price shocks and global downturn - Food and fuel price shocks (mid-2007 to mid-2008) raised inflation and prompted public protests; the shocks were overall slightly negative for the fiscal balance in 2008 and slightly positive for the external current account. - Government measures in April 2008: - Food tax measures: - VAT reduction from 18 to 9 percent on basic food items (milk, palm oil, canned tomatoes, sugar) and cement; - suspension of import duties for basic food items (as before plus rice, wheat flour, fish) and cement; - maintaining the 2007 suspension of import taxes on wheat. - The tax reductions were introduced in April 2008 and ended, except for ordinary rice, in January 2009. - The budget cost was 0.5 percent of GDP. - Food-related structural measures: - reducing racketeering at roadblocks; - increasing supply of locally-produced food; - agreeing with producers and retailers on “indicative prices” to avoid excessive increases in trading margins while safeguarding profit margins; - stimulating local rice production through suspension of a special tax. - Fuel price measures: - domestic pump prices were left unchanged at the onset of the shock, causing large revenue losses in the first half of 2008; - pump prices were raised by 25 percent on average in July 2008; - prices were reduced by 10 percent in November 2008 in line with falling world prices. - Staff recommendations and implementation: - Staff cautioned against universal subsidies and recommended harmonizing responses at the WAEMU level, replacing food tax reductions with better targeted subsidies, and introducing an automatic petroleum pricing mechanism. - The authorities implemented steps to harmonize at the WAEMU level and to introduce the automatic petroleum pricing mechanism; in early 2009 they introduced better targeted programs for vulnerable groups with an additional allocation in the revised 2009 budget. ### Program performance under EPCAs and structural reforms - Under two successive EPCA programs since mid-2007: - Revenue performance was close to target due to strong collection efforts on nonoil revenue and favorable oil revenue in 2008 (which partly offset revenue shortfalls from temporary tax exemptions on food). - Total primary spending was broadly on target; ‘sovereignty’ spending was contained; social spending targets were met. - The authorities reduced the stock of domestic arrears and cleared multilateral arrears as noted above. - A range of structural measures was implemented, albeit with delays. - These results were achieved with little external support and despite adverse socio-political and global economic conditions. ### Risks to the program and mitigation concerns - Key risks: - Spending overruns related to the presidential elections and implementation of crisis-exit programs. - Revenue shortfalls as a result of the global financial crisis, which could lead to curtailing pro-poor spending and to domestic arrears. - A fragile domestic consensus to pursue structural reforms and the risk that modest progress on governance may stall. - A decline in oil and cocoa prices could worsen the growth outlook and lower government revenue. - Commodity price impact estimates: - The sharp drop in commodity prices projected for 2009 is estimated to worsen the fiscal balance by 1.1 percent of GDP and the external current account by 2.3 percent of GDP (estimates reflect a 33 percent drop in oil and cocoa prices from their average 2008 levels, assuming 2008 volumes). *Source: _cr09133 - Executive Summary (IMF).* ### 6. Fiscal performance through end-2008 was close to targets after the authorities ### 6. Fiscal performance through end-2008 was close to targets after the authorities ### Fiscal outcomes through end-2008 - Extrabudgetary spending on the transfer of the capital and other large public works (grands travaux) amounted to 0.7 percent of GDP—mandated by the Presidency and paid for in kind through oil shipments. - Corrective measures since September included tax measures and expenditure cuts; social spending was protected, but basic infrastructure projects suffered. - The program target for the primary basic surplus was missed by 0.4 percent of GDP. - The authorities accumulated new domestic arrears of 1 percent of GDP in 2008. - Government resorted to relatively expensive borrowing from cocoa and other companies, in part against future tax proceeds, and delayed AfDB arrears clearance to 2009. ### Transparency and corrective measures for large public works - Prime Ministerial instruction (November) stipulates: - all oil revenue will be channeled through the Treasury and will no longer be used to pay directly for any public works; - all spending for the large public works will go through the budget; - the large public works will be monitored by an interministerial committee, which will validate the execution of the works through quarterly reports that are included in the budget execution statements. - The General Finance Inspectorate is preparing a report on past spending on these works to be finalized by end-March 2009. ### Financing complications and liquidity conditions - World Bank budget support (0.4 percent of GDP) did not materialize as planned in the third quarter of 2008. - Liquidity on the WAEMU financial market proved tight and the government did not raise the expected amounts. - Government resorted to advance discounted payments of the cocoa export tax from exporters and borrowing from enterprises at annual interest costs of over 20 percent. - Net domestic financing actions in 2008 included prefinancing crisis-exit programs pending donor disbursements. - Change in domestic arrears: in 2008 the table shows "-0.1" (in percent of GDP) for EPCA-2 Est.; elsewhere text notes accumulation of new domestic arrears of 1 percent of GDP. ### Structural conditionality and public finance governance (EPCA/MEFP compliance) - Most structural indicators under the EPCA were observed, although some with delays. - Government discontinued the use of treasury advances but later resorted to advance discounted payments of the cocoa export tax and borrowing from enterprises. - Quarterly budget execution statements were improved and posted on the internet. - A domestic arrears clearance plan for the inventoried stock at end-2007 was adopted with a few months delay. - Pump prices: increased by 25 percent on average in July and reduced by 10 percent in November; automatic petroleum pricing mechanism implementation postponed to early 2009. ### Progress on public finance, energy, and cocoa/coffee sector reforms - Public finance: - Steps to improve financial control and procurement. - Initiated audit of crisis-exit spending. - Submitted the 2005–07 budget execution laws to the Accounts Chamber of the Supreme Court. - Adopted a public financial management action plan, based on PEMFAR findings. - Energy sector: - Continued publishing quarterly reports on physical and financial flows. - Increased electricity tariffs by 10 percent to reduce the deficit of the subsector. - Offset cross-debts accumulated in 2007–08. - Completed the financial audit of the state oil company (PETROCI). - Made progress in preparing EITI-compliant reports for 2006 and 2007. - Coffee/cocoa sector: - Established a new steering committee (CGFCC) to manage the 2008–09 crop season and develop a new strategy. - Reform gained momentum, with publication of quarterly reports on physical and financial flows. ### Banking sector restructuring and financial soundness - Two of the five banks with negative net worth at end-June 2008 formulated recapitalization plans approved by the Banking Commission. - One bank is under Interim Administration. - The remaining two banks are being taken over by the government through conversion of illiquid deposits into share capital. - High credit growth reduced the nonperforming loans ratio from 21.5 to 17.7 percent of the total since end-2007. ### Program objectives (2009–11) and macroeconomic framework - Broad objectives: - create fiscal space for pro-growth and pro-poor spending; - establish debt sustainability and make progress toward WAEMU convergence criteria; - advance reforms in public financial management, civil service, energy and cocoa/coffee sectors, and private sector development including financial sector reform. - Main macroeconomic objectives: - raise average 2009–11 growth to 4.2 percent; - reduce inflation to 3 percent; - keep the overall budget deficit at around 2 percent, consistent with debt sustainability after HIPC and MDRI debt relief. - Growth projections: - 2009 growth projected at 3.7 percent. - Alternative scenario: growth would be 1 percentage point lower in the medium term if commodity prices were permanently 20 percent lower than in the baseline. ### Fiscal policies for 2009 - Revised 2009 budget targets an overall deficit of 1.3 percent of GDP. - Revenue and expenditure targets and key allocations (percent of GDP): - Total revenue: 18.4 (2009 Est. in table) moving to 19.4 (2010) and 19.7 (2011) as projections. - Primary basic balance: 0.6 (2007), 0.8 (2008 EPCA-2 Est.), 0.3 (2009 Est.), 0.9 (2010 Proj.), 1.2 (2011 Proj.), 1.2 (2011 Proj. repeat). - Primary basic expenditure: 17.8 (2007), 18.6 (2008 EPCA-2 Est.), 18.5 (2009 Est.), 18.2 (2010 Proj.), 18.2 (2011 Proj.), 18.5 (2011 Proj. repeat). - Crisis-related expenditure: 0.8 (2007), 1.9 (2008 EPCA-2 Est.), 1.2 (2009 Est.), 1.4 (2010 Proj.), 0.3 (2011 Proj.), 0.1 (2011 Proj. repeat). - Change in domestic arrears: -1.7 (2007), -0.1 (2008 EPCA-2 Est.), 1.0 (2009 Est.), -0.5 (2010 Proj.), -0.7 (2011 Proj.), -0.6 (2011 Proj. repeat). - Net domestic financing (incl. interest, PETROCI): 0.5 (2007), 0.9 (2008 EPCA-2 Est.), 0.3 (2009 Est.), -0.3 (2010 Proj.), -0.5 (2011 Proj.), -0.6 (2011 Proj. repeat). - External debt service payments incl. arrears clearance (WB, AfDB): 0.0 (2007), -6.2 (2008 EPCA-2 Est.), -2.9 (2009 Est.), -25.6 (2010 Proj.), -3.3 (2011 Proj.), -3.0 (2011 Proj. repeat). - Crisis-related grants and program grants: 0.6 (2007), 0.7 (2008 EPCA-2 Est.), 1.3 (2009 Est.), 0.3 (2010 Proj.), 0.2 (2011 Proj.), 0.1 (2011 Proj. repeat). - Revenue stabilization and tax measures: - Fiscal program aims to stabilize revenue at 19 percent of GDP with strong tax administration efforts. - Tax measures include ½ percent of GDP higher taxes on petroleum products. - Discontinued tax exemptions for food, except for ordinary rice. - Mechanisms to ensure all oil shipments monitored through monthly reports and all oil proceeds received by the treasury. - Expenditure priorities: - Wage bill to be kept at 6.8 percent of GDP by limiting new recruitment to education and health despite concessions. - Reduce subsidies to the electricity sector by 0.2 percent of GDP. - Pro-poor spending increases by 0.8 percent of GDP to reach 7.7 percent of GDP in 2009. - Crisis-related expenditure will increase to 1.4 percent of GDP, of which 0.3 percent will be financed from external resources. ### Investment reorientation, procurement, and PFM reforms - Limit spending on large public works in 2009 to 0.4 percent of GDP and focus on renovation of a state-owned hotel. - Convert framework agreements for ongoing projects (attributed without tender) into regular public contracts with renegotiated prices and specifications. - Subject all projects not yet started and all new projects to tender in accordance with the Public Procurement Code. - Program includes measures to limit the use of treasury advances and avoid extrabudgetary spending, including quantitative ceilings; the low ceiling on treasury advances will be phased out progressively. - Public finance action plan based on PEMFAR, with technical assistance from Fund and World Bank. ### Civil service and social security reform - Government intends to adopt, by end-June 2009, a program of civil service reform; 2009 measures include: - census of government employees; - introduction of an integrated civil service/payroll system; - start of reform of the civil service pension fund (CGRAE). ### Financial sector, microfinance, and public financial institutions - Program aims include: - strengthen bank supervision; - put microfinance on a sound basis; - restructure public financial institutions. - Government plans to partially recapitalize two small banks at a cost of 0.2 percent of GDP by converting deposits into capital. - Transfer supervisory responsibilities for large microfinance institutions to the Banking Commission. - National Microfinance Strategy to consolidate the sector characterized by high NPLs and negative net worth. - Reforms of public financial institutions: convert CNCE into a commercial bank; restructure BNI; overhaul CNPS and CGRAE to ensure long-run equilibrium. ### Energy and commodity-sector reforms - Key energy program elements: - reduce fuel costs and revise level and structure of electricity tariffs to improve financial viability; - continue regular publication of reports on financial and fiscal flows in the sector; - regularly prepare EITI-compliant reports and apply the automatic petroleum product pricing mechanism, revised in line with FAD recommendations. - Coffee/cocoa sector reform: - indirect taxation of cocoa to be reduced stepwise from current level of over 32 percent of the CIF price to 22 percent by 2011. - streamline and make institutional structure more transparent with World Bank support. ### External arrears, debt sustainability, and program financing - Arrears clearance: - Arrears with the World Bank were cleared in April 2008. - Arrears with the AfDB were cleared in early March 2009 under the AfDB’s Fragile States Facility (FSF). - With a bridge loan, Côte d’Ivoire paid one-third of the April 2007 stock of arrears; AfDB cancelled two-thirds and disbursed new budget support. - EU (FED-X) expected to provide a grant for its one-third share in EIB arrears; EIB agreed in principle on restructuring the remainder. - Authorities initiated discussions with Paris Club and London Club creditors on restructuring arrears and maturities during 2009–11 (totaling over 25 percent of GDP, of which four-fifths in arrears). - Paris Club provided financing assurances for the program on March 10, 2009. - External debt and HIPC: - Public external debt estimated at US$14.3 billion (65 percent of GDP) at end-2007. - DRA for preliminary HIPC document (based on end-2007 data) shows NPV of debt-to-revenue ratio at 327 percent, above the 250 percent threshold, indicating qualification for HIPC relief under the “fiscal window.” - Financing gaps and identified financing (2009–11): - Financing gaps during 2009–11 total 31.4 percent of GDP, expected to be mostly filled by debt restructuring and some budget support. - The financing gap in 2009 reflects mainly regularization of reschedulable arrears (10 percent of GDP) and nonreschedulable arrears on post-cutoff date (PCOD) debt to the Paris Club (9 percent). - Budget support expected equivalent to 1.5 percent of GDP from World Bank’s second Economic Governance and Recovery Grant and the AfDB. - Residual financing gap in 2010–11 after PRGF disbursements (up to 1/4 percent of GDP) would be filled by net domestic/WAEMU borrowing. - Text Table 2 key identified financing items (in percent of GDP): - IMF EPCA: 0.3 (2009 identified financing) and 0.3 (2010 identified financing) as shown. - World Bank arrears clearance grant and budget support: 1.6 (2009), 1.2 (2010), 1.0 (2011). - AfDB arrears clearance grant and budget support: 1.7 (2009), 0.0 (2010), 2.2 (2011). - EU financing for partial EIB arrears clearance: 0.1 (2009), 0.0 (2010), 0.3 (2011). - Arrears restructuring: 18.9 (2009) and 0.0 thereafter in the table. - Of which, post-cut off date Paris club: 8.8 (2009), 0.0 (2010), 0.0 (2011). - Current maturities restructuring: 2.0 (2009), 1.9 (2010), 1.8 (2011). - Residual financing gap (-): 0.0 (2009), 0.0 (2010), -0.8 (2011), -0.6 (2011 repeat), -0.6 (later entry). - possible IMF PRGF (90 percent of quota): 0.8 (2009), 0.5 (2010), 0.4 (2011) as noted. ### Program design and IMF access - PRGF access proposed at 115 percent of quota, including 25 percent for immediate repurchase of EPCA. - Access above the norm for fourth-time PRGF/ESAF users (45 percent of quota) justified by: - high balance of payments needs; - large efforts expected from other external partners and catalytic role of the Fund (providing less than 7 percent of total financing need); - strength of fiscal policies and structural reform program; - very small drawings under the 1998 (second) and 2002 (third) PRGF arrangements (43 and 20 percent of committed resources, respectively). - Côte d’Ivoire has a strong track record of repayment to the Fund through the BCEAO, whose international reserves are at five months of imports. *Source: IMF staff report text (MEFP and related tables and boxes) provided in the content unit.* ### 29. The program will be monitored through quantitative performance criteria and ### 29. The program will be monitored through quantitative performance criteria and ### Program monitoring - The program will be monitored through quantitative performance criteria and indicative targets, and structural benchmarks (MEFP Tables 3 and 4). - A fuller move to review-based structural conditionality will be considered at the first program review. - Structural conditionality focuses on public finance management in support of fiscal consolidation. ### Program risks and mitigation - Track record and commitment: - The track record under two EPCAs and the broad based commitment to the program by all political parties in Côte d’Ivoire provide a reasonable basis for successful program implementation. - Identified risks: - Expenditure overruns related to the presidential elections and crisis-exit programs could lead to curtailing pro-poor spending and to new domestic arrears. - Large public works, if insufficiently kept in check, would absorb the fiscal space created by the program and may deter donor support. - Governance problems, notably in public finance management, and the coffee/cocoa and energy sectors (including oil/gas extraction) could hinder program implementation, notwithstanding the deep and broad set of actions undertaken. - Further delays in elections may prolong uncertainty and reduce donor assistance, investment, and growth. - Exogenous shocks, in particular a decline in cocoa and oil prices and production, could lower government revenue. - Mitigation: - Fiscal policy should respond flexibly to shocks. - Envisaged structural reforms would help strengthen competitiveness. ### Staff appraisal — overall assessment - Overall performance: - Côte d’Ivoire’s overall performance under two successive EPCAs was broadly satisfactory, except for important fiscal slippages and delays in structural measures. - Progress toward peace and reunification has created solid ground for the upcoming elections. - Economic recovery continues, as growth gradually recovers to pre-crisis levels. - The government achieved primary basic surpluses and made significant payments to multilaterals. - Structural reforms advanced in a range of areas and sectors, but more slowly than planned. - Progress was achieved in a difficult post-conflict environment, with little external support and against the backdrop of the global financial crisis. ### Fiscal performance — findings and concerns - Fiscal performance was broadly satisfactory, except for the extrabudgetary spending in 2008. - The overall fiscal outcome was close to the targets in both programs. - Authorities’ positive actions: - Consistent efforts to mobilize nonoil revenue. - Restraint of ‘sovereignty’ spending. - Increase in social expenditure. - Improvements in overall fiscal transparency. - Staff concerns: - Incident of extrabudgetary expenditure. - Uneven performance in shifting spending toward social and post-crisis needs. - Insufficient progress in reducing domestic arrears. ### Policy recommendations and priorities - Public resource management: - Continued fiscal consolidation is critical for long-term fiscal and debt sustainability. - The authorities plan to maintain modest primary basic surpluses in the medium term. - Within those targets, the composition of expenditure is to be improved to provide room for higher pro-growth and pro-poor expenditure. - Adhere strictly to safeguards to avoid extrabudgetary expenditure and enhance transparency of public works spending. - Channel all oil revenue through the budget and treasury. - Execute all spending on large public works within budget envelopes, through normal procedures, and in conformity with the Public Procurement Code. - Adhere strictly to all budget execution procedures and significantly reduce the practice of treasury advances. - Protect spending critical for poverty reduction, social reconciliation, and peace. - Advance the ambitious reform program for public finance management and the civil service to support fiscal sustainability and donor confidence. - Sectoral structural reforms to accelerate: - Cocoa/coffee sector: - Implement vigorously the institutional reform. - Continue reducing overall taxation of farmers, while taking tax administration measures to offset revenue losses. - Energy sector: - Fully implement the automatic petroleum pricing mechanism. - Improve transparency in conformity with EITI procedures. - Improve the financial viability of the electricity sector. - Financial sector: - Seek an orderly resolution for problem banks while minimizing recourse to public funds. - Support the Banking Commission in ensuring banks’ compliance with prudential norms and the needed restructuring of public financial institutions. ### External financing, debt, and donor coordination - Côte d’Ivoire’s external public debt is unsustainable. - Cooperation of donors and creditors in arrears clearance, debt relief, and program and project financing is critical for implementing reforms and closing the financing gaps in 2009 and beyond. - Coordinated efforts by the authorities and the development partners are critical to the program’s success. ### Risk outlook — summary - Risks to the program are substantial but manageable. - Strong ownership of the program by the current government and a new government after the upcoming elections is critical for program success. - Governance risks can be reduced by structural reforms that lead to greater transparency and accountability. - Risks of exogenous shocks can be addressed by appropriate macroeconomic policies. *Source: _cr09133 - 29. The program will be monitored through quantitative performance criteria and* ### 37. On balance, given Côte d’Ivoire’s track record of programs supported by two ### _cr09133 - 37. On balance, given Côte d’Ivoire’s track record of programs supported by two ### Staff recommendation - On balance, given Côte d’Ivoire’s track record of programs supported by two EPCAs, the staff recommends approval of the authorities’ request for a three-year PRGF arrangement. ### Competitiveness and export performance (1985–2008 highlights) - Real effective exchange rate: "The real effective exchange rate has appreciated recently..." - Export sector: "the export sector has expanded, though export volumes have been volatile." - Export concentration: "relatively concentrated export structure (of mainly natural resources)." - Export reliance and performance: reliance on commodities whose demand and average price increases have been modest. - Nonprice competitiveness: "Côte d'Ivoire is outperformed on nonprice (structural) competitiveness by both the WAEMU and the average SSA country." - Export structure change (1996 vs. 2008, percent of total exports of goods): cocoa and coffee shares illustrated (figure referenced in the source). ### Macroeconomic projections and real sector (Table 1; Table 8 baseline) - GDP at constant prices (real GDP growth, annual percentage change): - 2006: 0.7 - 2007: 1.6 - 2008: 2.9 - 2009 (Prov.): 2.3 - 2010 (Proj.): 3.7 - 2011 (Proj.): 4.2 - 2012 (Proj.): 4.7 - 2013 (Proj.): 5.3 - 2014 (Proj.): 5.8 - GDP deflator (annual percentage change): 2006: 4.5; 2007: 2.7; 2008: 4.7; 2009: 8.1; 2010: 0.6; 2011: 2.7; 2012: 3.0; 2013: 3.1; 2014: 3.0 - Consumer price index (annual average): 2006: 2.5; 2007: 1.9; 2008: 4.3; 2009: 6.3; 2010: 5.9; 2011: 3.2; 2012: 2.9; 2013: 2.7; 2014: 2.5 - Export volume growth (annual percent): 2006: 6.0; 2007: -8.4; 2008: 1.6; 2009: -7.8; 2010: 6.1; 2011: 4.5; 2012: 5.3; 2013: 7.4; 2014: 7.3 ### Central government financial operations (Tables 3a, 3b — levels and percent of GDP) - Total revenue and grants (billions of CFA francs): - 2006: 1,727.5 - 2007: 1,871.2 - 2008: 2,090.2 - 2009 (Prov.): 2,156.2 - 2010 (Proj.): 2,161.8 - 2011 (Proj.): 2,380.0 - 2012 (Proj.): 2,603.1 - 2013 (Proj.): 2,898.5 - 2014 (Proj.): 3,229.8 - Total revenue (excluding grants, billions CFAF): 2006: 1,672.1; 2007: 1,817.6; 2008: 1,960.5; 2009 (Prov.): 1,976.8; 2010 (Proj.): 2,080.9; 2011: 2,271.1; 2012: 2,480.6; 2013: 2,734.4; 2014: 3,047.5 - Tax revenue (billions CFAF): 2006: 1,399.8; 2007: 1,468.1; 2008: 1,618.8; 2009 (Prov.): 1,638.0; 2010 (Proj.): 1,771.6; 2011: 1,951.6; 2012: 2,132.4; 2013: 2,354.3; 2014: 2,614.0 - Total expenditure (billions CFAF): 2006: 1,889.8; 2007: 1,944.9; 2008: 2,131.2; 2009 (Prov.): 2,217.2; 2010 (Proj.): 2,299.7; 2011: 2,572.8; 2012: 2,884.0; 2013: 3,273.9; 2014: 3,717.3 - Current expenditure (billions CFAF): 2006: 1,588.4; 2007: 1,666.8; 2008: 1,805.0; 2009 (Prov.): 1,879.9; 2010 (Proj.): 1,953.1; 2011: 2,030.8; 2012: 2,171.7; 2013: 2,331.0; 2014: 2,558.3 - Interest due (billions CFAF): 2006: 162.1; 2007: 166.2; 2008: 133.5; 2009 (Prov.): 188.1; 2010 (Proj.): 220.4; 2011: 219.2; 2012: 219.4; 2013: 214.5; 2014: 226.2 - Capital expenditure (billions CFAF): 2006: 279.4; 2007: 249.3; 2008: 311.2; 2009 (Prov.): 319.6; 2010 (Proj.): 327.5; 2011: 527.1; 2012: 697.4; 2013: 928.0; 2014: 1,142.8 - Overall balance, including grants (payment order basis, percent of GDP): 2006: -1.8; 2007: -0.8; 2008: -0.4; 2009 (Prov.): -0.6; 2010 (Proj.): -1.3; 2011: -1.6; 2012: -2.2; 2013: -2.8; 2014: -3.3 - Primary basic balance (percent of GDP): 2006: 0.3; 2007: 0.6; 2008: 0.8; 2009 (Prov.): 0.3; 2010 (Proj.): 0.9; 2011: 1.2; 2012: 1.2; 2013: 1.2; 2014: 1.2 ### Financing, arrears, and identified/possible financing (Table 3a, 3b) - Financing gap (residual gap, billions CFAF) in 2009 projections: 92.6 (lines show residual gap 92.6 then 0.0 then 85.5 then 71.1 then 73.9 then 479.9 then 437.4 across the table context) - Identified financing 2008 (billions CFAF): 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 - Possible financing 2009-11 (billions CFAF): Program grants (World Bank, AfDB, EU) 351.8; World Bank budget support 112.1; AfDB arrears clearance grant 171.4; AfDB budget support 68.3; Arrears restructuring 2,102.7; EIB 34.2; Paris Club restructuring 1,688.6; London Club rescheduling 379.8; Current maturities restructuring 221.3 - Of which IMF-PRGF (residual gap contribution, billions CFAF): 85.5; 53.7; 53.6; 26.8; 0.0 in various projection rows (table indicates assumption of IMF-PRGF amounts under identified financing) ### External sector and balance of payments (Table 4; Table 10) - Trade balance (billions CFAF): 2006: 1,593.3; 2007: 1,219.4; 2008: 1,449.9; 2009 (Prov.): 1,468.1; 2010 (Proj.): 1,330.1; 2011: 1,190.9; 2012: 1,077.7; 2013: 961.1; 2014: 866.5 - Exports f.o.b. (billions CFAF): 2006: 4,307.2; 2007: 4,062.2; 2008: 4,557.7; 2009 (Prov.): 4,400.0; 2010 (Proj.): 3,687.0; 2011: 3,908.7; 2012: 4,190.2; 2013: 4,549.5; 2014: 4,947.8 - Cocoa exports (thousand tons): 2006: 1,226; 2007: 1,111; 2008: 1,302; 2009 (Prov.): 1,124; 2010 (Proj.): 1,141; 2011: 1,158; 2012: 1,193; 2013: 1,229; 2014: 1,265 - Current account balance including official transfers (percent of GDP): 2006: 2.8; 2007: -0.7; 2008: 1.2; 2009 (Prov.): 2.4; 2010 (Proj.): 0.4; 2011: -1.6; 2012: -3.3; 2013: -4.8; 2014: -5.8 - Current account excluding official transfers (percent of GDP): 2006: 3.0; 2007: -1.5; 2008: -0.6; 2009 (Prov.): 1.0; 2010 (Proj.): -0.1; 2011: -2.3; 2012: -4.1; 2013: -5.8; 2014: -6.8 - Gross official reserves (months of imports of goods and services): 2006: 2.8; 2007: 3.4; 2008: 3.1; 2009 (Prov.): 3.4; 2010 (Proj.): 3.9; 2011: 3.6; 2012: 3.2; 2013: 2.9; 2014: 2.8 ### External debt, debt service, and arrears (Tables 6, 7) - External public debt (percent of GDP): 2006: 71.4; 2007: 64.8; 2008: 66.8; 2009 (Prov.): 60.7; 2010 (Proj.): 53.7; 2011: 51.3; 2012: 49.4; 2013: 48.6; 2014: 48.1 - Outstanding arrears (year-end, billions CFAF): 2006: 2,011; 2007: 2,050; 2008: 1,992; 2009 (Prov.): 2,369; 2010–2018 projections: 0.00 - Public external debt-service due before rescheduling (CFAF billions): 2006: 396; 2007: 384; 2008: 364; 2009 (Prov.): 426; 2010 (Proj.): 380; 2011: 310; 2012: 319; 2013: 312; 2014: 265 - Debt service (scheduled, billions CFAF) 2006–08 and projections: - 2006 total: 276.5 principal + 120.0 interest = 396.5 - 2007 total: 279.4 + 104.2 = 383.5 - 2008 total: 302.6 + 123.6 = 426.3 - 2009 (Prov.) total: 288.3 + 91.3 = 379.5 - 2010–2014 projected totals listed across Table 7 (preserve entries as presented) - Debt composition (end-period, billions CFAF; outstanding and arrears): - Total debt outstanding, including arrears: 6,483.8 (2006); 6,149.2 (2007); 6,369.1 (2008); 5,871.5 (2009 Prov.); 6,002.6 (2010); 6,216.1 (2011); 6,621.5 (2012); 7,147.9 (2013) - Multilateral, official bilateral (Paris Club), commercial, and London Club breakdowns provided in Table 6 with associated arrears figures. ### Monetary accounts and banking sector indicators (Tables 5a, 5b, 9) - Broad money (M2, billions CFAF): 2005: 2,081.0; 2006: 2,294.8; 2007: 2,835.5; 2008 (Prov.): 3,044.4; 2009 (Proj.): 3,225.7 - Net foreign assets (billions CFAF): 2005: 704.0; 2006: 821.8; 2007: 1,036.6; 2008 (Prov.): 1,076.5; 2009 (Proj.): 1,065.9 - Credit to the economy (billions CFAF): 2005: 1,189.4; 2006: 1,290.5; 2007: 1,520.4; 2008 (Prov.): 1,700.8; 2009 (Proj.): 1,788.6 - Banking sector financial soundness indicators (end period, percent): - Risk-weighted capital to assets ratio: 2001: 13.0; 2002: 12.5; 2003: 15.7; 2004: 17.0; 2005: 13.7; 2006: 12.4; Nov-08: 9.5 - NPLs/total loans: 2001: 19.3; 2002: 21.3; 2003: 25.1; 2004: 26.2; 2005: 21.0; 2006: 20.0; Nov-08: 21.5 - Provisioning rate: 2001: 70.1; 2002: 68.5; 2003: 65.4; 2004: 60.5; 2005: 79.0; 2006: 83.7; Nov-08: 89.8 - Liquid assets/total assets: 2001: 35.8; 2002: 42.9; 2003: 43.5; 2004: 44.9; 2005: 43.2; 2006: 44.7; Nov-08: 41.9 ### Medium-term scenarios and downside risks (Table 8) - Baseline scenario (selected indicators, percent of GDP or annual changes): - Real GDP growth (annual): 2007: 1.6; 2008: 2.9; 2009: 2.3; 2010: 3.7; 2011: 4.2; 2012: 4.7; 2013: 5.3 - Current account incl. official transfers (percent of GDP): 2007: 2.8; 2008: -0.7; 2009: 1.2; 2010: 2.4; 2011: 0.4; 2012: -1.6; 2013: -3.3 - External public debt (percent of GDP): 2007: 70.1; 2008: 66.8; 2009: 64.4; 2010: 53.7; 2011: 51.3; 2012: 49.4; 2013: 48.1 - Downside scenario assumptions: - Compared to the baseline, the alternative scenario assumes for 2010 and beyond: (i) 1.5 percentage points of GDP lower average private investment, half of which being a decline in foreign direct investment; and (ii) 20 percent lower cocoa prices. - Downside scenario projected impacts (selected): - Real GDP growth under downside scenario (percent): projections indicate lower growth paths relative to baseline (table entries provide series for 2010–13). ### External financing requirements and gap (Table 10) - External financing requirements (billions CFAF): 2006: 6.4; 2007: -127.8; 2008: -216.1; 2009: -2,864.0 (table shows major negative swing in 2009 reflecting arrears/rescheduling context) - Available financing components (2006–09, billions CFAF): Project financing 12.2 (2006); 22.5 (2007); 38.9 (2008); 43.5 (2009 Prov.) - Net change in external arrears (principal and interest): 2006: 364.2; 2007: 266.6; 2008: -259.1; 2009: 25.3; 2009 (projection elsewhere) shows large accumulation -2,368.7 consistent with arrears restructuring entries - Expected sources of financing (Table 10 summary): - IMF PRGF: 85.5 (billions CFAF) - Program grants (World Bank, AfDB, EU): 351.8 - Arrears restructuring: 2,102.7 - Current maturities restructuring: 221.3 - Residual gap: 0.0 in the consolidated financing table (subject to assumptions on financing and restructuring) ### Indicators of capacity to repay the Fund (Table 11) - Outstanding Fund credit (in millions of SDRs; selected years): 2007: 109.8; 2008: 122.3; 2009 (Proj.): 224.4; 2010 (Proj.): 284.2; 2011 (Proj.): 344.1; 2012 (Proj.): 374.0; 2013 (Proj.): 374.0; 2014 (Proj.): 358.1; 2015 (Proj.): 315.4; 2016 (Proj.): 258.5; 2017 (Proj.): 187.3; 2018 (Proj.): 112.5 - Total obligations based on existing and prospective credit (in millions of SDRs): 2009: 94.5; 2010: 13.2; 2011: 13.5; 2012: 7.9; 2013: 2.1; 2014: 18.0; 2015: 44.5; 2016: 58.6; 2017: 72.6; 2018: 75.8 - Net use of Fund credit (millions of SDRs): net use items and disbursements/repa​yments series provided; assumptions include prospective PRGF of SDR 373.98 million (115 percent of quota) in seven disbursements (Table note). ### Proposed PRGF disbursements and review schedule (Table 12) - Proposed schedule of disbursements and timing of reviews under PRGF Arrangement (SDR millions), 2009–12: - 159.348 — March 27, 2009 — Executive Board approval of the three-year arrangement under the PRGF, of which 81.300 will be used to repurchase EPCA credit. - 35.772 — September 15, 2009 — Observance of performance criteria for June 2009 and completion of the first review under the PRGF arrangement. - 35.772 — March 15, 2010 — Observance of performance criteria for December 2009 and completion of the second review under the PRGF arrangement. - 35.772 — September 15, 2010 — Observance of performance criteria for June 2010 and completion of the third review under the PRGF arrangement. - 35.772 — March 15, 2011 — Observance of performance criteria for December 2010 and completion of the fourth review under the PRGF arrangement. - 35.772 — September 15, 2011 — Observance of performance criteria for June 2011 and completion of the fifth review under the PRGF arrangement. - 35.772 — March 1, 2012 — Observance of performance criteria for December 2011 and completion of the sixth review under the PRGF arrangement. *Sources: Ivoirien authorities; IMF staff estimates and projections; IMF World Economic Outlook; World Bank databases; UN COMTRADE database; BCEAO; IMF staff calculations.* ### Annex 1. Public Finance Management (PFM) Measures in the Government Action Plan, 2009 ### Annex 1. Public Finance Management (PFM) Measures in the Government Action Plan, 2009 ### PFM assessment and context - The PEMFAR, undertaken jointly by World Bank, AfDB, EC, and IMF between November 2007 and mid-2008, concluded that Côte d’Ivoire’s public finance system was overall below the average for comparable countries, with high financial risks in the areas of expenditure execution (lack of controls at the commitment, validation, and payment stages) and reporting. - Based on the 2008 PEMFAR, the government adopted a PFM action plan in March 2009. ### PFM objectives and measures under program supported by PRGF (F) and World Bank DPO (B) - Objective 1: Harmonize the PFM legal framework with WAEMU Directives (end-2009) — F/B - Moving forward in the negotiation and implementation of WAEMU PFM directives, with the aim of harmonizing PFM within the WAEMU and complying with international best practices, notably in the areas of decentralization. - Defining the calendar for implementation of the new WAEMU directives and the modalities of the transition process and accompanying measures. - Objective 2: Improve budget preparation and incorporate PRSP objectives (end 2009) — F/B, B/F, B/F - Incorporation of a new functional classification (in line with 2001 GFS) and poverty reduction spending in the budget classification. - Implementation of a medium-term expenditure framework, consistent with the PRSP. - Increase shares of education, health and agricultural sectors in total spending. - Objective 3: Improve budget execution (from end-2009 onward); Reduce domestic arrears (from early 2009 onward) — B, F, F, F/B - Improve capacity to use SIGFIP at decentralized levels. - Establish interface between budget execution (SIGFIP) and accounting (ASTER) systems. - Adopt domestic arrears clearance plan. - Integrate donor-funded project/program spending in SIGFIP and ensure consistency (“bridge table”) between budget execution reports (CGAF) and TOFE report. - Progressively reduce the practice of treasury advances and limit them to a restrictive list specified by ministerial decree. - Objective 4: Increase transparency in public procurement (second half of 2009) — B - Amend the Ivoirien Procurement Code to be fully compliant with the WAEMU directives (No. 04/2005/CM and No.05/2005/CM); establishing procedures for the award, implementation and payment of public contracts and their control. - Create operational entity (National Observatory in Public Procurement) separate from ex ante control and execution; widen use of SIGMAP to all contracting authorities. - Ensure access of general public to internal control reports on public procurement; creation, adoption and dissemination of code of ethics on public procurement. - Objective 5: Improve budget execution reporting (ongoing) — F/B - Improve quarterly reporting of budget execution to the Council of Ministers and publish it on the internet, including poverty reduction spending, tracking of HIPC and donor-funded project/program spending, and spending on treasury advances. - Objective 6: Rationalize administrative budget control (from end-2009) — B - Annual certification of conformity by the accounts chamber (Chambre des comptes) of the draft budget execution laws (Loi de règlements) within 10 months after the end of the fiscal year and publication of posting of the BEL. - Making the accounts chamber operational and transform it into an Accounts Court (Cour des comptes) in line with WAEMU directives. ### Fiscal and macroeconomic context (selected developments) - The government is overcoming a sociopolitical and military crisis since September 2002 and faces challenges of consolidating peace, unifying and rebuilding the country, re-invigorating the economy, and reducing poverty that affects almost one-half of the population. - The government adopted the Poverty Reduction Strategy Paper (PRSP) in February 2009 after wide-ranging consultations; a household income survey found that almost half of the population live below the poverty line. - Key macro numbers and trends: - GDP growth in 2008 reached 2.3 percent. - Growth average for the period 2005–07 was 1.4 percent. - Inflation as measured by the Harmonized Consumer Price Index (HCPI) accelerated to 6.3 percent on average in 2008. - WAEMU HCPI ceiling is 3 percent. - HCPI average in 2005–07 was 2.8 percent. - Compared to end-December 2007, the HCPI increased by 9 percent. - Incidence of poverty rose from 38.4 percent in 2002 to 48.9 percent in 2008. - In 2008 the overall balance of payments showed a surplus of 0.1 percent of GDP. ### EPCA program implementation and 2008 fiscal outcomes - Budget execution through end-September 2008 led to nonobservance of three quantitative indicators. - Primary basic balance at end-September 2008 was 0.2 percent of GDP, short of the target, adjusted for the windfall in oil revenues, of 0.8 percent of GDP. - Revenue and expenditure performance: - Non-oil fiscal revenue performance was good despite shortfalls related to tax reductions on some food items and higher world petroleum product prices. - Expenditures exceeded the target; social expenditures, crisis-exit spending and reconstruction investment fell short. - Expenditure overruns mostly occurred on subsidies to the electricity sector and unbudgeted capital expenditures for large public construction projects (grands travaux; 0.7 percent of GDP), in particular: - transfer of the capital city to Yamoussoukro, - renovation of the Hôtel Ivoire, - extension of the Abidjan port (Port Autonome d’Abidjan) on Boulay Island. - These activities were primarily financed by the windfall oil revenue and were executed outside the budget and paid for through direct oil shipments to the contractor. - Corrective measures taken since September 2008 (and outcomes): - Strengthened collection of direct taxes. - Temporary increase, for the 2008–09 crop season, in cocoa registration duties, from 5 to 10 percent of the c.i.f. value. - Reduction in current and investment spending (other than large construction projects) of CFAF 20 and 30 billion, respectively, and the halt of spending commitments in mid-November. - Safeguarding of social spending by accelerating transfers to local governments and private schools. - Social spending achieved: CFAF 572.3 billion compared to CFAF 563.1 billion programmed. - Revenue and expenditure shocks that reduced fiscal outturns: - Decline in oil revenues. - Weaker-than-expected cocoa exports during the last quarter of 2008. - Revenue losses related to the reduction in taxes on certain food items (½ percent of GDP). - Larger-than-planned subsidy to the electricity sector (0.2 percent of GDP). - Result: primary basic surplus reduced to 0.3 percent of GDP compared with 0.8 percent of GDP in the program. ### Financing requests and program objectives - Government request in support of the 2009 program: - Assistance in the amount of SDR 373.98 million from the IMF under the PRGF, i.e., 115 percent of our quota. - Of which an amount of SDR 81.3 million, or 25 percent of quota, is to allow Côte d’Ivoire to repay IMF lending under EPCA. - Requesting access to interim assistance equivalent to US$7.5 million under the HIPC Initiative. - Program aims for 2009: - Improve mobilization of resources and refocus expenditure in favor of poverty reduction and crisis-exit programs. - Redouble efforts to collect taxes and duties throughout the national territory and incorporate the full range of public resources into the budget. - Continue greater frugality by reducing ‘sovereignty’ spending and limiting other nonessential outlays while enhancing pro-poor spending, in particular, social and basic infrastructure spending. - Build on good governance achievements and undertake in-depth structural reforms covering civil service, social security system, financial sector, and measures to improve the business climate. - Comply with Extractive Industries Transparency Initiative procedures in the coffee/cocoa and energy sectors. *Content derived from: Annex 1. Public Finance Management (PFM) Measures in the Government Action Plan, 2009; Letter of Intent and Memorandum of Economic and Financial Policies (MEFP), March 13, 2009.* ### 10. The cash-flow pressures were exacerbated by expenditures for the large ### _cr09133 - 10. The cash-flow pressures were exacerbated by expenditures for the large ### Cash-flow pressures, arrears, and crisis-exit financing - Cash-flow pressures were exacerbated by expenditures for large construction projects, which were higher than initially planned, and by insufficient new financing raised abroad and on the WAEMU financial market. - The government was unable to raise anticipated amounts on the WAEMU market as it tightened. - There were delays in donor disbursements for crisis-exit programs, and in budget support from the World Bank, initially scheduled for the third quarter of 2008. - The government financed the crisis-exit program from its own resources in an amount of 1 percent of GDP. - As a result: - The Government had to postpone the payment of arrears to the AfDB. - The government incurred domestic arrears such that net reduction in arrears was 1.2 percent of GDP lower than the program objective. ### Extrabudgetary spending for large construction projects — corrective actions - Regularization and limits: - The government regularized the 2008 expenditure through adoption of a 2008 supplementary budget. - The expenditure was limited to the specified amount: CFAF 82 billion. - Investigations and reporting: - An investigative report (évaluation contradictoire) on large public construction projects executed at end-2008 was initiated under the aegis of the General Finance Inspectorate (IGF) with assistance of appropriate expertise. - The assessment will include the cost of works executed and related government payment obligations, and must be completed before end-March 2009. - Reports on execution of these works at end-2008 for the Council of Ministers were initiated, to be finalized before end-March 2009. - Institutional change: - For future budgets, a new transparent framework for the execution of large public construction projects was put in place (see ¶26 and ¶34). ### Structural reforms implemented in 2008 — public finances and governance - Progress noted despite delays and partial implementation of two structural indicators. - Public finance improvements: - Reduced use of treasury advances, compliance with monthly budget allocations, and monitoring of processing times for documents in SIGFIP. - Recourse to costly financing from enterprises due to cash-flow pressures stopped since January 2009. - Improvements in quarterly reports to the Council of Ministers on budget execution, including, since June 2008, status of payments and their publication, including on the internet. - An audit of crisis-exit expenditures financed by own resources during 2006–08 was launched at the beginning of March 2009, to be finalized before end-June 2009. - Submission to the Accounts Chamber of the preliminary draft budget execution laws (Lois de Réglements) for 2005 and 2006 (in September 2008) and for 2007 (in February 2009). - Adoption of a public finance reform plan in February 2009, based on findings of the PEMFAR technical assistance mission, and the start of its implementation. - Adoption of a roadmap for strengthening public procurement, separating regulatory, executive, and control functions. ### Domestic financing and relations with the private sector - Arrears clearance plan: - In consultation with suppliers, in November 2008 the Government adopted a plan to clear arrears outstanding at end-2007 during 2008–10, and began implementation, including securitization of some CFAF 41.6 billion of claims. - With cash payments made in 2008 or programmed for 2009–10, the whole end-2007 stock will be regularized under the plan. - Cash management and market coordination: - Reactivation of the Treasury Committee and strengthened coordination with the Monitoring Committee of Government Securities and Financing (COSTEIF). ### Banking sector reforms and related measures - Bank recapitalizations and administration: - Two of the six banks posting negative equity at end-June 2008 completed recapitalization and now have positive equity. - One bank has begun its recapitalization program; another was placed under temporary administration. - For two remaining banks, no investors could be found; the government decided to increase its participation by converting deposits into capital (with no cash payments) and submit these cases, in March 2009, to the Banking Commission for approval. - National Investment Bank (BNI): - Financial and operational audit finalized in November 2008. - Audit revised downward the level of equity at end 2007 and identified weak compliance with prudential ratios. - Equity fell once again below the threshold of solvency as a result of a sale, at a discount, of claims on the government to a foreign investor in 2008. - Microfinance and social security: - National Microfinance Strategy adopted in October 2008. - Draft amendments to the Social Security Code prepared following an actuarial study of the CNPS to restore financial equilibrium and introduce a supplementary pension plan. - CNCE actions: - Following audit in July 2008, plan to write off its bad debt assets was endorsed. - A request for a banking license was resubmitted to the Banking Commission in November 2008. - A schedule for repayment of its debt to the government (nivellement décadaire) was concluded with the government in November 2008. ### Coffee/cocoa sector transparency and reforms - Reporting and social projects: - Quarterly reports on physical and financial flows are submitted to the Council of Ministers and published. - At end-2007, the Rural Investment Fund (Fonds d’Investissement en Milieu Rural; FIMR) began to implement social projects; at end-2008, CFAF 11.6 billion of these projects had been completed. - Institutional and legal actions: - Attorney General took steps to clarify past management; main decision makers in the sector were put under detention orders. - In September 2008 old sector entities were stripped of functions in favor of a temporary Management Committee (CGFCC) mandated to manage the 2008–09 crop season and develop a new strategy. - Levies: - Total levies for the 2008–09 crop season set at CFAF 31.3/kg (down from CFAF 46.5/kg in 2007–08), including CFAF 12.5/kg for the FIMR and CFAF 5/kg in a special account for investment; remainder for operating costs. ### Energy sector transparency and reforms - Transparency actions in 2008: - Quarterly reports to the Council of Ministers on physical and financial flows and their publication. - Preparation of EITI reports for 2006 and 2007 (expected for end-April and end-September 2009, respectively). - Completion of external audit of PETROCI in February 2009. - Petroleum product measures: - Reduction of the ‘k’ factor from 6 to 5 percent in May 2008. - Increase in pump prices by 25 percent on average in July 2008; average reductions of 10 percent in November 2008 and 7.5 percent in January 2009. - Automatic petroleum pricing mechanism adoption by interministerial order at end-February 2009, to become effective beginning April 1, 2009; mechanism includes a margin of 3 percent to replace the “k” factor. - Electricity: - Average increase of 10 percent in electricity tariffs (for enterprises) in early 2008, and a 10 percent increase for households (excluding low-consumption households, which account for 40 percent of total household consumption) at end-2008. - Start of negotiations with gas operators to revise indexation of gas prices to world prices. - Compensation of cross-debts and claims between the Government and the electricity company (CIE) for 2007 (in March 2008) and for 2008 (in February 2009). ### Other structural reforms - Government employee pension fund (CGRAE): - Organizational, legal, operational, and financial audit, review of legislative and regulatory framework, and actuarial study completed in March 2008, proposing rehabilitation plans. - Retirement age for civil servants increased from 55 to 57 years effective from January 1, 2009. - Autonomous Port of Abidjan (PAA): - Financial audit launched in August 2008 and completed in February 2009. ### Medium-term program (2009–11) objectives and targets - Main objectives: - Accelerate reconstruction and growth, fight poverty, and make progress toward the MDGs in a reunified country and durable peace; aligned with the PRSP. - Program aims: - Reduce macroeconomic and financial imbalances and attain debt sustainability. - Expedite structural reforms and create an institutional environment supportive of the private sector. - Improve public resource management to create fiscal space for social services and basic infrastructure and ensure greater transparency. - Restructure the coffee/cocoa and energy sectors; reform the civil service for greater efficiency; reform social security for financial rebalancing; strengthen the financial system; promote good governance and strengthen the rule of law. - Macroeconomic objectives for 2009–11: - Average real GDP growth above 4.2 percent per year. - Reduction in inflation to below 3 percent from 6.3 percent estimated for 2008. - Keep overall budget deficit at around 2 percent of GDP (and a primary basic surplus of 1 percent of GDP or greater). - External current account deficit (excluding official transfers) not greater than 5 percent of GDP. - Investment rate expected to climb from 10.1 percent of GDP in 2008 to 14.9 percent of GDP in 2011. ### 2009 program specifics - Targets for 2009: - Achieve real GDP growth of 3.7 percent. - Reduce HCPI inflation to 3 percent. - Stabilize the overall budget deficit (including grants, but excluding the reduction of external arrears) at 1.2 percent of GDP. - The government will seek to fulfill the completion point triggers under the HIPC Initiative as soon as possible. ### Fiscal policy and 2009 budget measures - 2009 fiscal framework: - Pursues fiscal consolidation while addressing crisis-exit needs and normalizing financial relations with external partners. - 2009 Budget (adopted at end-2008) targets a primary basic surplus of about 1 percent of GDP to progress toward debt sustainability and reduce domestic arrears. - A revised Budget for 2009 was adopted in early March 2009 in line with the program’s fiscal framework (prior action). - Revenue and tax measures: - Revenues expected to increase to 19.0 percent of GDP compared to 18.9 percent in 2008, despite a decline in oil/gas revenues. - Tax administration measures include resumption of tax and customs duty collection in CNW zones, strengthened customs and tax administration (especially hydrocarbons and transit), efforts against tax fraud and evasion, better control and harmonization of exemption regimes, and systematic collection of public enterprise dividends. - Government intends to strictly apply the automatic pricing mechanism for pump prices of petroleum products, with excise taxes (TSPP) ensuring an adequate contribution to total revenue (1.7 percent of GDP). - Reduction of the profit tax (BIC) rate from 27 to 25 percent effective from 2009. - For the 2009/10 crop season, cocoa registration duties reduced to their 2007/08 level of 5 percent; single export duty (DUS) on cocoa lowered from CFAF 220/kg to CFAF 210/kg beginning with the 2009/10 crop season. - Temporary tax suspensions on foodstuffs ended as of January 1, 2009, except rice consumed by vulnerable social groups. - Better targeted and more effective social measures budgeted for an amount of CFAF 5.6 billion (¶29). - Expenditure orientation: - Primary expenditures (excluding interest and externally financed expenditures) will be contained at 18.2 percent of GDP with re-orientation toward pro-poor spending. - “Pro-poor” spending allocation will increase to 7.7 percent of GDP from 6.9 percent in 2008, of which 6.0 percent of GDP will be for education and health (5.7 percent in 2008). ### Box 1 — Revenue measures for 2009 (high-level points) - Taxes (DGI): - Restoration of effective functioning of tax and customs administrations in CNW zones and recovery of various taxes. - Wider application and control of standardized VAT invoice; creation of new control units. - Improved tax administration of petroleum sector with a new sous-direction in the DGI and strengthened verification of “cost-oil”. - Setting up or increasing withholding taxes at source for certain agents, notably in agriculture. - Better organization of anti-fraud efforts through strengthened coordination between DGI and DGD and start-up of the risk management unit. - Customs (DGD): - Better customs verification of oil/gas exports and petroleum product flows; specify measurement methods and technical documentation; color-mark petroleum products subject to special tax regimes. - Strengthen efforts to combat fraud/evasion using risk analysis and operational transit management and border surveillance. - Improved verification of values by subjecting all containers disembarked at the Autonomous Port of Abidjan to risk analysis for selection for scanner inspection. - More effective control over exemptions by integrating authorization with customs clearance and generating data on foregone revenues; review of exemption regimes with IMF assistance before June 2009, with streamlining from January 1, 2010. - Other measures: - Recognition of government debts to the refinery (SIR) in the form of operating deficit, gaz deficit, and fuel deliveries to the army; elimination in 2009 of these deficits by applying petroleum product pricing mechanism and budgeting for subsidies or operating expenses; consolidation of debt vis-à-vis SIR. - Improved collection of social security contributions, particularly employer contributions. - Systematic collection of dividends from public enterprises, notably the Autonomous Port of Abidjan and PETROCI. *Source: _cr09133 - 10. The cash-flow pressures were exacerbated by expenditures for the large* ### 28. Within current expenditures (excluding interest), the wage bill will be ### _cr09133 - 28. Within current expenditures (excluding interest), the wage bill will be ### Wage bill and current expenditures - Government will limit the increase in the wage bill to reduce the ratio of the wage bill to tax revenues to 42.1 percent (compared with 43.4 percent in 2008) and will continue to move towards the WAEMU norm. - The wage bill reflects the full-year impact of emoluments given in July 2008, new regulations for teachers and health sector employees and certain judiciary officers, as well as new recruits. - Government intends to limit the wage bill of government bodies to the level of the 2008 Budget by strictly respecting monthly budget allocations. - Net recruitment limits for 2009: - Total net recruitment: 7317 staff. - Education: 5579 (including volunteers in the CNW zones who meet qualification requirements). - Other sectors: 1734 (corresponding to candidate civil servants completing high-level public administration schools). - New recruitment for the health sector: 1666 staff, with a budget impact only in 2010. ### Reorienting the budget toward pro-poor spending (operating expense reductions and reallocations) - Sovereign spending limited to CFAF 9.5 billion; spending on travel, fuel, and utilities limited to CFAF 58.7 billion. - Subsidies to the electricity sector limited to CFAF 25 billion, based on: - Better price for gas purchases negotiated with gas producers, - Revision of the electricity tariff structure and, as needed, an increase in tariffs (¶39). - Payment and arrears measures: - Quarterly payment mechanism for electricity bills of government agencies; CIE required to pay its gas bills regularly. - Government will pay water bills quarterly and reduce its arrears to the water sector by CFAF 8.7 billion in 2009. - Social service and local government transfers: - Increased budget allocations for transfers to private schools and reduction of remaining arrears. - Increased allocations for investment transfers to local governments; ensure effective transfer of funds, particularly in the CNW zones. - Ensure regular transfers to the Road Maintenance Fund (Fonds d’Entretien Routier; FER) of at least 12.5 percent of TSPP receipts. - Social programs: - Revised 2009 Budget includes CFAF 10 billion for social programs targeted at vulnerable groups, of which CFAF 5.6 billion will be used for a pilot project with World Bank technical assistance (post-conflict assistance project (PAPC)). ### Crisis-exit program and related expenditures - Crisis-exit expenditures will amount to 1.4 percent of GDP, of which 0.3 percent of GDP will be contributed by external partners. - Program components (based on the APO roadmap and supplementary agreements): - (i) elections; - (ii) restructuring and re-establishment of defense and security forces; - (iii) restoration of government authority and redeployment of the civil service; - (iv) consolidation of national reconciliation, peace, security, and freedom of movement of persons and goods; - (v) Special Emergency Program (Programme Spécial d’Urgence; PSU). - Adjusted budget allocations to finance demobilization costs from the 4th supplementary APO agreement of end-2008. ### Capital expenditures and investment priorities - Capital expenditures will stabilize at 3.0 percent of GDP in 2009, with increased share to social services and rehabilitation of basic infrastructure. - Investment financed from own resources: CFAF 235.8 billion, primarily for rehabilitation of basic infrastructure, including WAEMU Regional Economic Program projects (e.g., construction of 300 wells in the Eastern and Western regions). - CFAF 10 billion envisaged for start of construction of a third bridge in Abidjan; half of financing from external loans (Islamic Development Bank, OPEC Fund, BOAD and BIDC). - Large public construction projects: - Pace slowed pending evaluation of scale and phasing. - 2009 budget allocation for large construction projects: CFAF 40 billion (including advances of CFAF 15.6 billion made in 2008). - Focus on renovation of the Hôtel Ivoire and the Autonomous Port of Abidjan. - All works based on contracts conforming to the public procurement code (¶34). ### Governance and structural reforms in public finance - Action plan for public financial management adopted February 2009; measures to: - Improve tax and public expenditure management systems to harmonize with WAEMU directives. - Strengthen controls and systematically publish reports on budget execution and use of other public resources (including coffee-cocoa sector). - Prevent non-accumulation of new arrears and ensure transparent repayment of debts to suppliers (“restes à payer”) per arrears clearance plan for 2008-11. - Cover evaluated and verified VAT credit arrears via a clearance plan, including securitization. - Specific reforms (Box 2 – Revenue): - Budgetization and fiscalization of quasi-fiscal levies on coffee/cocoa for investment beginning with the 2010 budget; traceability improvements and inclusion in Council of Ministers reports at end-June 2009 and end-December 2009. - Finalize detailed inventory of quasi-fiscal and administrative fees charged by ministries before end-September 2009. - Annual publication of summary of certified accounts of PETROCI. - Prepare annual report on financial performance of enterprises in Government’s portfolio and publish after Council adoption. - Specific reforms (Box 2 – Expenditure): - Strict limitation and monitoring of treasury advances; no recourse to extrabudgetary expenditures (Table 4 and Technical Memorandum of Understanding ¶14–15). - Further decentralization of SIGFIP and improve SIGFIP–ASTER interface (2009–10). - Timely submission of preliminary draft budget execution law to the Audit Chamber for certification (by end-October 2009 for the 2008 accounts). - Phasing in medium-term expenditure frameworks starting with social ministries (education and health) for 2009–11 (end-October 2009). - Develop integrated career and payroll management system for military and police (end-2009). ### Transparency of large public construction projects (Prime Minister’s Instruction of November 13, 2009) - For CFAF 40 billion of large public construction projects in 2009, framework agreements to be regularized as public procurement contracts with specifications and prices determined by BNETD in consultation with contractor before mid-March 2009; contracts will be published. - Existing framework agreements with assigned contractors (total CFAF 818 billion over several years, excluding CFAF 235 billion already executed at end-2008 or foreseen in 2009) to be amended after BNETD technical studies; government commits to renegotiate to reduce scale of works; convert into public procurement contracts and publish costs set by BNETD. - Works related to transfer of the capital without specific contracts and not yet executed (total CFAF 529 billion over several years: CFAF 261 billion for contracts with initial assignment revoked; CFAF 268 billion for works not yet started) and any future projects to be carried out through public tender per Public Procurement Code. - Expenditure execution to be done in SIGFIP and covered in budget execution statements; subject to IGF control. - Operational and financial control of all investment projects to be assured by an Interministerial Oversight Committee under Prime Minister, with monthly financial reports; all payments made directly by the Treasury. ### Civil service reform program and measures (2009–11) - Government to adopt a civil service reform program by end-June 2009 to create a slimmer, more efficient administration while maintaining qualified and motivated staff and reducing wage bill weight on revenues; external partner support sought. - Box 3 measures for 2009: - Prepare civil service reform program before end-2009 based on organizational studies of ministries, including appointment of secretary-generals. - Increase retirement age from 55 to 57 for all civil servants effective January 1, 2009, and further increase in stages to 60 years for all civil servants from 2011. - Census of civil servants and elimination of ghost workers before end-October 2009. - Set up integrated government personnel management system (excluding military and police; “fichier unique de référence”) to be operational at start of 2010. - Validate actuarial, legal, and institutional studies for CGRAE; prepare plan by end-2009 to restructure CGRAE (including institutional strengthening and introduction of a fully funded pension plan). - Limit deficit of CGRAE borne by the budget in 2009 to CFAF 56.5 billion (compared to CFAF 54.3 billion in 2008), notably by reducing operating costs of the management system. ### Monetary policy and financial sector reform - Fiscal policy to conform with regional monetary policy; government to participate in regional liquidity management per WAEMU rules and plan issuance of securities on regional financial and money markets according to budget financing needs. - Government will approach BCEAO to seek restructuring of arrears on consolidated statutory overdraft. - Plan to adopt amendments of the WAMU Treaty and Banking Law for ratification before end-June 2009. - Support WAMU Banking Commission efforts to ensure banks meet prudential ratios; in FSAP context (mission planned for May 2009), government will seek to recapitalize and/or restructure banks in distress. - Strengthen surveillance over microfinance institutions; largest monitored by Banking Commission once revised Banking Law in effect; initiate restructuring per National Microfinance Strategy (SNM). - Anti-money laundering (LBC) framework in place; national law combating financing of terrorism scheduled for mid-2009; CENTIF operational to monitor compliance and provide education and training. - Box 4 measures in 2009: - Develop action plan for restructuring of BNI based on Banking Commission recommendations and financial/operational audit before end-April 2009, and adopt it before end-June 2009. - For CNCE, limit implicit government subsidy related to the “10-day settlements” (nivellements décadaires) to CFAF 10 billion in 2009. - Public financial institutions: - Prepare BNI action plan to restore solvency and prudential compliance; submit to Banking Commission; abstain from direct or indirect subsidy to BNI in the meantime. - Seek private investors to recapitalize two banks where government is majority shareholder by Banking Commission deadline. - Launch CNPS reform using actuarial study findings to reduce pension branch deficit from 2009. - Require written authorization of Minister of Finance for sale of government debt owed to a public entity (government share >50 percent) to a third party at a discount >10 percent. ### Sectoral reforms: Energy and coffee/cocoa - Energy sector (¶39 and Box 5): - Pursue transparency and reform to enhance efficiency and government revenue, with World Bank assistance. - Hydrocarbon subsector: review legal and regulatory framework per international standards; strengthen capacity to negotiate and monitor contracts; develop action plan to improve government revenue based on financial audit. - Côte d'Ivoire adhered to EITI; commit to comply with EITI validation framework via EITI National Council and produce 2008 report before end-2009. - Electricity subsector: adopt and implement restructuring strategy (Letter on Electricity Sector Policy of January 2009 and 2008 audit) to restore financial equilibrium, strengthen public-private partnerships, increase supply, and improve subregional interconnections. - Petroleum product prices: commit to apply automatic pricing mechanism and improve it based on distribution audit and IMF technical assistance. - Box 5 measures in 2009: - Submit to Council of Ministers quarterly reports within 45 days—and publish—on physical, financial, and tax flows in crude oil/gas subsector; production, export, and release for consumption and taxation of petroleum products; production, costs, and financial flows in electricity subsector. - Revise petroleum product price structure per distribution audit and IMF technical assistance (revision of cross-subsidies for transport and butane, quasi-fiscal levies for national security reserve, distribution margins, and protective margin for refineries) by end-September 2009. - To limit electricity sector deficit: renegotiate gas purchase prices with gas producers, renegotiate export price of electricity, and revise tariff structure before end-June 2009; increase tariffs before end-2009 if necessary. - Coffee/cocoa sector reforms (¶40 and Box 6): - Prepare, with World Bank assistance, a strategy comprising a new institutional, regulatory, and legal framework to raise farmers’ incomes and ensure decline in coffee/cocoa taxation benefits farmers. - Strengthen marketing capacity of farmers’ cooperatives (investments in rural areas) and competition among buyers (mandatory publication of domestic prices and international market quotations); preserve efficient PMEX and COOPEX. - Box 6 measures in 2009: - Submit to Council of Ministers quarterly analytical reports within 45 days—and publish—on collection and use of coffee/cocoa levies and balances in sector entities’ bank accounts, as well as realized F.O.B. export and farmgate prices. - Adopt roadmap to prepare and implement new coffee/cocoa strategy, including new institutional and regulatory framework by end-2009. - With aim of gradually lowering total cocoa taxation to 22 percent of the C.I.F. price in 2011: - Reduce registration duty for 2009/10 crop season from 10 to 5 percent; - Reduce single export duty (DUS) from CFAF 220/kg to CFAF 210/kg; - Reduce other quasi-fiscal levies by at least CFAF 5/kg; - Prepare transformation of these levies to a single ad valorem tax before the 2010/11 crop season. *Source: _cr09133 - 28. Within current expenditures (excluding interest), the wage bill will be* ### 41. The government intends to improve the business environment by implementing ### _cr09133 - 41. The government intends to improve the business environment by implementing ### Measures to improve the business climate in 2009 (Box 7) - Adopt the law on mandatory enforcement (exéquatur) of decisions of Arbitration Boards, thereby expediting the resolution of business disputes and helping to unclog the courts (by end-2009). - Creation of commercial courts (tribunaux de commerce) (by decree, by end-2009); and training of judiciary staff in commercial matters (2009). - Preparation of a reform plan to enhance the efficiency and fairness of the judicial system; and publication of judicial decisions (by end-2009). - Reform of the Law on Competition (Loi sur la concurrence), notably to combat noncompetitive practices (before end-2009). - Accelerate administrative procedures for processing the reimbursement of VAT credits to enterprises, such that the outstanding stock of verified VAT credits awaiting reimbursement does not exceed CFAF 10 billion during 2009 (compared with CFAF 28.4 billion at end-2008). ### Public enterprises reform - By end-2009 the government will: - Devise a strategy for its portfolio with a view to restructuring or privatizing public enterprises. - Step up supervision and monitoring via regular independent audits of the main public enterprises and preparation of an annual report on their financial situation by the Directorate of Participations and Privatization (DPP) and the General Finance Inspectorate (IGF). - Control transfers of social contributions to the CNPS. - Strengthen staff and technical capacities of the IGF and of the DPP. ### Regional integration and foreign trade policy - Continue participation in WAEMU and ECOWAS and in world trade through the WTO. - Support extension of the WAEMU Common External Tariff and the rules of origin to all ECOWAS countries. - Promote freedom of movement of persons and goods within the subregion. - Continue to support signing of a regional Economic Partnership Agreement (EPA) with the EU and formulate accompanying programs to secure the “development and financing mechanisms” component. ### Social sector policies and PRSP monitoring - Commitment to reverse social deterioration caused by the crisis; focus priority sectors: education, health, security, basic infrastructure. - Develop medium-term expenditure frameworks starting with education and health. - Increase budget allocations: - Education: from 4.7 percent of GDP in 2008 to 4.9 percent of GDP in 2009. - Health: from 0.9 percent of GDP in 2008 to 1.1 percent of GDP in 2009. - Education initiatives: - National Plan for the Development of Education and Training (PNDEF) based on RESEN to enhance access, quality, and retention. - Increase numbers of teachers and classes (at a rate exceeding the growth in the school age population) to reduce class size from 55 today; consider extension of training capacity. - Health initiatives: - Second National Health Development Plan (PNDS) for 2009–11 to improve access, effectiveness, and efficiency. - Progressive rehabilitation and construction of infrastructure for all health care centers and improved accessibility of essential drugs in line with PRSP program. - PRSP monitoring: - PRSP Supervisory Committee created by Prime Ministerial decree in March 2009 to implement national poverty reduction strategies and prepare and publish regular reports. ### Statistics and capacity-building - Adopt and implement the Master Plan for Statistics 2008–10 to ensure regular development of economic and financial data. - For 2009, produce new statistics for the informal sector, social accounting, livestock and industrial fisheries. - Strengthen administrative capacity in areas affected by the crisis with assistance to: - Strengthen tax and customs administration. - Review tax exemptions. - Help implement action plan for public financial management reforms. - Improve national accounts with a view to constructing a social accounting matrix. ### External debt, arrears clearance, and financing needs (2009–11) - Clearance of arrears completed: World Bank (February 2008); AfDB (early March 2009) with Fragile States Facility grant and bridge loan assistance. - Agreement in principle reached on clearance of arrears to the EIB. - Paris Club arrears at end-2008: CFAF 1,689 billion total, including: - CFAF 732 billion pre-cutoff-date debt (eligible for Paris Club rescheduling). - CFAF 957 billion post-cutoff-date debt (not eligible for Paris Club treatment). - Government intends to request exceptional treatment from the Paris Club for large post-cutoff-date arrears. - Current maturities on pre-cutoff-date debt totaling CFAF 207 billion for 2009–11; government hopes for Cologne terms treatment. - “Brady” (London Club) debt: arrears at end-2008 estimated at CFAF 380 billion; stock of principal CFAF 974 billion; government discussing debt relief. - HIPC debt sustainability analysis carried out on end-2007 data; government hopes to reach the decision point under the HIPC Initiative no later than end-March 2009. - Financing gaps after accounting for primary basic surpluses, identified external project financing, and net financing on the WAEMU financial market: - CFAF 2,761 billion in 2009. - CFAF 364 billion in 2010. - CFAF 373 billion in 2011. - Plan to fill gaps with debt restructurings and cancellations from Paris Club and London Club creditors, and assistance from multilateral institutions (IMF, World Bank, AfDB, EU) and bilateral partners. ### Program monitoring, controls, and commitments - Program monitored through semi-annual IMF Executive Board reviews based on quantitative indicators and structural benchmarks defined in the TMU. - Quantitative indicators for end-June and end-December each year are performance criteria. - Quantitative indicators for end-March and end-September are benchmarks. - First program year: January-December 2009. - First review based on end-June 2009 performance criteria, scheduled to be completed by end-September 2009. - Second review based on end-December 2009 performance criteria, scheduled to be completed by end-March 2010. - Institutional arrangements: - Steering Committee for Economic and Structural Reforms (under Prime Minister), created March 2009, to monitor implementation for 2009–11. - Technical Unit for Monitoring the Economic and Financial Program to support day-to-day monitoring. - Coordination with Coffee/Cocoa Sector Management Committee, Interministerial Commodities Committee, PRSP Committee, and Treasury Committee. - Borrowing and payments commitments: - Refrain from external borrowing on non-concessional terms other than as specified in the TMU for the program duration. - Any new domestic borrowing to be issued by auction through the BCEAO or via competitive tendering on domestic or WAEMU markets and consult IMF staff. - Undertake not to introduce or intensify restrictions on payments and transfers for current international transactions, not to introduce multiple currency practices, not to conclude bilateral payments agreements inconsistent with Article VIII of the Fund’s Articles of Agreement, and not to impose or intensify import restrictions for balance of payments purposes. - Authorities, in consultation with IMF staff, undertake to adopt any new financial or structural measures necessary for program success. ### Key quantitative indicators and fiscal targets (selected figures from tables) - Outstanding stock of verified VAT credits awaiting reimbursement: - Target does not exceed CFAF 10 billion during 2009 (compared with CFAF 28.4 billion at end-2008). - Paris Club arrears at end-2008: CFAF 1,689 billion (CFAF 732 billion pre-cutoff-date; CFAF 957 billion post-cutoff-date). - Brady (London Club) arrears at end-2008: CFAF 380 billion; stock of principal CFAF 974 billion. - Financing gaps for program period 2009–11: - CFAF 2,761 billion in 2009. - CFAF 364 billion in 2010. - CFAF 373 billion in 2011. - Budget allocation targets for social sectors: - Education: 4.9 percent of GDP in 2009 (from 4.7 percent in 2008). - Health: 1.1 percent of GDP in 2009 (from 0.9 percent in 2008). ### Structural conditionality and prior actions (selected entries) - Prior Actions accomplished: - Adoption of the 2008 Budget in conformity with program objectives (Done). - Increase weighted average electricity rates by 10 percent (Done: on February 1, 2008 for enterprises; on March 1, 2008 for low-voltage users except low-income households). - Reporting to IMF staff on the 2007 budget execution (Done in late March 2008). - Structural Benchmarks (examples with deadlines): - Completion of inventory of service charges/fees by ministries for streamlining and budgetization — End-June 2009 (SBM). - Rationalization of exemptions for adoption in the 2010 budget — End-September 2009 (SBM). - Implementation of automatic transit module of SYDAM (SYDONIA) between Port of Abidjan and three main border posts — End-September 2009 (SBM). - Adoption of the 2010 budget with budgetization and fiscalization of all quasi-fiscal levies for investment in the coffee/cocoa sector — End-November 2009 (SBM). - Publication within 45 days of the end of each quarter budget execution statements, including pro-poor spending — Each quarter (SBM). - Submission of draft budget execution law (Loi de règlements) for 2008 to the Accounts Chamber — End-October 2009 (SBM). - Formulation of medium-term expenditure frameworks for education and health ministries — End-October 2009 (SBM). *Source: _cr09133 - 41. The government intends to improve the business environment by implementing* ### 1. This Technical Memorandum of Understanding describes the quantitative program ### Technical Memorandum of Understanding: Quantitative Program Indicators ### Overview and Scope - Describes the quantitative program indicators agreed between the Ivoirien authorities and IMF staff to monitor the program supported by the Poverty Reduction and Growth Facility (PRGF). - "Government" is defined as the central government of Côte d’Ivoire, including the National Social Security Fund (Caisse Nationale de Prévoyance Sociale, CNPS) and the Civil Service Pension Fund (Caisse Générale de Retraite des Agents de l’Etat, CGRAE), and Treasury operations for public companies in liquidation; excludes local governments, the Central Bank of West African States (BCEAO), and government-owned entities with separate legal status. - Performance criteria are set for June 30, 2009 and December 31, 2009; indicative targets for March 31, 2009 and September 30, 2009. - Performance criteria and indicative targets are calculated as cumulative change from January 1, 2009 (Table 3 of the MEFP). ### I. Quantitative Program Indicators (major headings and definitions) - Performance criteria include: - a floor on the overall fiscal balance (including grants); - a ceiling for net domestic financing, including issuance of securities on the WAEMU financial market; - a zero ceiling on new nonconcessional external borrowing (notwithstanding ¶16); - a zero ceiling for the accumulation of new external arrears; - a zero ceiling for the accumulation of new domestic arrears; - a zero ceiling on extrabudgetary spending. - Indicative targets include: - a floor on the primary basic fiscal balance; - a ceiling on expenditures by treasury advance; - a floor on “pro-poor” spending; - a floor on the cash repayment of government domestic balances outstanding (“restes a payer”, excluding securitization); - a floor on total government revenue; - a ceiling on the government wage bill. ### A. Overall fiscal balance (including grants) — performance criterion - Definition: difference between government budget revenue (including grants) and total expenditure plus net lending (on a payment order basis); includes crisis-exit spending (PNRRC, redeployment of public administration, identification process and elections, and the civil service). - Adjustors: - Floor adjusted downward (upward) for an excess (shortfall) of program loans relative to the programmed amount. - Floor adjusted downward by the program-grants shortfall relative to the programmed amount up to a cumulative maximum of CFAF 40 billion. - Floor adjusted downward for higher-than-programmed program loans; adjusted upward for program loan shortfalls in excess of CFAF 40 billion. - Petroleum/gas revenue treatment: - Excess petroleum/gas extraction revenues (including PETROCI dividends) above programmed amount: used to offset revenue shortfalls and/or be allocated to “pro-poor” spending up to a maximum cumulative amount of CFAF 50 billion. - Floor on the overall fiscal balance adjusted upward by remaining excess not used for offsets or “pro-poor” spending. - Remainder used to reduce government domestic debt, including “balances outstanding”. - Petroleum/gas revenue assumptions for 2009: - average crude oil price of US$50.0 per barrel; - volume of 17.9 million barrels; - average exchange rate of CFAF 500.0 = US$1. ### B. Basic primary balance — indicative target - Definition: difference between government budgetary revenue (excluding grants) and total expenditure plus net lending (on a payment order basis), excluding interest payments and externally-financed capital expenditure; includes crisis-exit spending. Net lending includes government stakes in banks under restructuring. ### C. Government revenue — indicative target - Definition: revenue collected by the Tax Administration (Direction Générale des Impôts, DGI), the Directorate-General of the Treasury and Public Accounting (Direction Générale du Trésor et de la Comptabilité Publique, DGTCP), the Customs Administration (Direction Générale des Douanes, DGD), the CNPS, the CGRAE; and other nontax revenue as defined in the fiscal reporting table (TOFE). - Tax receipts include all tax payments and excess/surplus embedded in the petroleum product price structure. ### D. Government wage bill — indicative target - Definition: all expenditures (on a commitment basis) on pay, bonuses, and allowances paid to government employees, military personnel (excluding front premia), and other law and order personnel; includes expenditures on special contracts and other temporary or permanent government jobs. ### E. External payment arrears — performance criterion - Definition: sum of external payments due but unpaid on outstanding external debt contracted or guaranteed by the government, excluding those subject to rescheduling or restructuring with Paris Club, London Club, or other creditors. - Accumulation of external payment arrears = gross maturities due on external debt service (principal and interest) minus amount actually paid during the period. ### F. Balances outstanding and domestic payment arrears — quantitative indicators and performance criterion - "Balances outstanding" (amounts payable) = domestic payment arrears + domestic floating debt; represent overdue government obligations: expenditures committed, validated, subject to payment order, but not paid. - Domestic payment arrears: balances outstanding with payment delay exceeding administrative regulation time frame of 90 days. - Floating debt: balances outstanding with payment delay not exceeding 90 days. - Balances outstanding are broken down by payer/type and by maturity and overdue period (< 90 days, 90–365 days, > 1 year). - Illustration: stock of balances outstanding totaled CFAF 272.2 billion at end-December 2008, comprising: - Treasury balances outstanding: 248.1 - Treasury debt (PGT; TPA; TGE; ACDP; PGFDS): 196.4 - Arrears on EPN subsidies (excluding CNPS, CGRAE): 40.5 - Arrears to local governments (General Councils, Municipalities, and Districts): 11.2 - Adjustment for orders validated by the Financial Comptroller (PEC comptable): 0.0 - Arrears to CI-Telecom, CIE, SODECI for current consumption: 24.1 - Of which : SODECI (water) 10.8 - Compensation agreement for gas and electricity consumption: 0.0 - Total balances outstanding central government: 272.2 - Of which: floating debt (<90 days) 160.2 - Guideline: stock of floating debt will not exceed three months’ worth of current operating expenditure (excluding utilities) as well as investment and crisis-exit expenditure financed from own resources. Illustration for 2008: - All such expenses amounted to CFAF 720 billion; - Three months’ worth of expenses was CFAF 180 billion. - Program commitments for 2009: - (i) undertake a cash reduction of CFAF 60 billion in the stock of balances outstanding at end-2008 (quantitative indicator); - (ii) not accumulate new domestic payment arrears in the current fiscal exercise from January 1, 2009 (performance criterion). - Any excess external budget support (program loans) above programmed amount, not used to finance downward adjustment in overall fiscal balance as specified in ¶4, will be used to reduce government domestic debt, including balances outstanding. - Any excess petroleum/gas extraction revenues above programmed amount, not used as specified in ¶5, will also be used to reduce government domestic debt. - "Expenditures committed and subject to payment order" (ECPO) defined as expenditures committed but not yet validated; ECPO stock to be continuously monitored by the Directorate-General of Budget and Finances (DGBF) and monthly reported in the TOFE. ### G. Treasury advances (indicative target) and extrabudgetary spending (continuous performance criterion) - Treasury advances: spending paid by the Treasury outside normal execution and control procedures, not subject to prior commitment and authorization; exclude régies d’avances as set by ministerial decree. - Cumulative amount of expenditures by treasury advance will not exceed cumulative quarterly ceilings representing 10 percent of quarterly budget allocations (excluding externally-financed expenditures, wages, subsidies and transfers, and debt service) (indicative target). - Nominative and restrictive list of expenditures eligible as treasury advances as defined by ministerial decree no. 178/MEF/CAB-01 of March 13, 2009. - Extrabudgetary spending: expenses not subject to normal or simplified budget execution procedures, or not a Treasury advance authorized by the relevant text, or for which corresponding budget allocation does not exist or is insufficient. - Government will not undertake any extrabudgetary spending (continuous performance criterion). ### H. New nonconcessional external borrowing — performance criterion - "External debt" meaning per point 9 of IMF Executive Board Guidelines on performance criteria concerning external debt. - Quantitative indicators apply to all nonconcessional external debt irrespective of maturity, contracted or guaranteed by government; also to commitments contracted or guaranteed for which no value has been received. - Exclusions: - normal import-related commercial loans with maturity < one year; - rescheduling agreements; - BOAD loans up to equivalent of CFAF 25 billion or BIDC loans up to equivalent of CFAF 20 billion; - drawings on the Fund; - CFAF-denominated government securities (or CFAF-denominated government debt) initially purchased (or contracted) by WAEMU residents. - Concessional loan definition: grant element at least 35 percent; NPV calculated using discount rate based on average of OECD CIRRs over last ten years for loans with maturity ≥ 15 years. For maturity < 15 years, NPV based on average CIRRs of preceding 6-month period (February 15 to August 14 or August 15 to February 14). Margins added: 0.75 percentage point for <15 years, 1 percentage point for 15–19 years, 1.15 percentage points for 20–29 years, 1.25 percentage points for 30 years or more. - Government undertakes not to contract or guarantee nonconcessional external loans under conditions defined in ¶16–17, except loans constituting rescheduling of maturities (performance criterion). ### I. Domestic and WAEMU market borrowing - Domestic borrowing by central government defined as issuance of all debt instruments in CFAF to domestic creditors and WAEMU financial market, borrowing from BCEAO (including drawings from the IMF), and contraction of any other CFAF liabilities toward these creditors. - Ceiling on net domestic financing applies to net amounts of domestic/WAEMU borrowing defined as gross domestic/WAEMU borrowing less amortization during the period; ceiling includes a margin of CFAF 25 billion over the net cumulative flow projected for each period. - Ceiling does not apply to new agreements on restructuring domestic debt or securitization of domestic arrears, nor to new BOAD and BIDC project loans (see ¶16). - In event of program grants and program loans shortfalls relative to programmed amounts, ceiling on net domestic financing will be adjusted upward accordingly up to a cumulative maximum of CFAF 40 billion. - For any new borrowing over and above a cumulative amount of CFAF 30 billion over the year 2009, the government undertakes not to issue government securities except by auction through the BCEAO or public auction on domestic or WAEMU markets registered with CREPMF, in consultation with Fund staff. ### J. External financing (definitions) - Project grants: non-reimbursable amounts of money or goods from a donor aimed at financing a specific project. - Program grants: non-reimbursable amounts of money or goods from a donor not aimed at financing a certain project. - Project loans: non-reimbursable amounts of money or goods received from a donor at an interest rate to finance a specific project. - [Note: the source text repeats "project loans" twice with conflicting wording; text preserved as in source.] ### II. Memorandum item: Net bank credit to the government - Definition: difference between government debts and government claims with the central bank and commercial banks; coverage used by BCEAO and same as net government position (NGP). Government definition as above. - Illustration: stock totaled CFAF 399.0 billion on December 31, 2008, broken down as follows (CFAF billion): - Net banking system claims on the government 399.0 - Claims of BCEAO 164.1 - Of which: Statutory advances 164.1 - Plus counterpart to uses of Fund resources 95.6 - Plus claims of commercial banks 329.5 - Plus private sector deposits with postal checking and savings bank (CNCE) 17.9 - Less deposits at the BCEAO 22.7 - Less cash holdings of the Treasury (encaissés du Trésor) 0.9 - Less deposits at commercial banks 174.1 - Less guaranteed bonds 10.4 ### III. Structural benchmarks - The program includes structural benchmarks (see MEFP, Table 4). ### IV. Program monitoring and data reporting - Quarterly assessment report on monitoring of quantitative performance criteria, indicative targets, and structural benchmarks to be produced by the authorities within one and a half months of each quarter-end. - Authorities will report to Fund staff immediately if they sign or guarantee any new foreign borrowing contracts, and report terms of such contracts. - Data on contract, amount outstanding, accumulation, and repayment of external payment arrears to be reported monthly within six weeks from the end of each month. - Authorities, based on data already reported to the IMF, will prepare in cooperation with Fund staff a set of consistent tables on the budget and the energy sector and coffee/cocoa sector and send them monthly or quarterly to the IMF starting on February 15, 2009, as follows: - Budget: quarterly report within 45 days following end of each quarter showing budget execution (revenues and expenditures), with expenditure classified by type, function, and administration/type, at stages of expenditure process (budget allocation, commitment, payment order, payment). - Energy Sector: quarterly tables within 45 days after quarter-end: - Table 1 and Tables 1(a)-(d): Summary and production by field — prices, swap conditions, physical hydrocarbon production quantities, values before and after swap, tax and nontax revenues for government, revenues for PETROCI and private sector. - Table 2: Volumes, prices, and financial flows — sharing conditions among government, PETROCI, and private operators; resulting financial flows. - Table 3: Activities of Société Ivoirienne de Raffinage (SIR) — purchases of crude oil by supplier (including Côte d’Ivoire origin), production, consumption, and imports of petroleum products. - Table 4: SIR – Transfers to storage facilities and exports. - Table 5: Petroleum products – Government/marketing agent activities; comparison between supply and sales of marketing agents. - Table 6: Release for consumption of petroleum products by tax type. - Table 7: Petroleum product pricing structure, including imported and domestic butane; release for consumption by product for current month and cumulative total for current year. - Table 8: Summary of the electricity sector — purchases of gas by supplier (including government), electricity production, prices by voltage and consumer group, electricity sector revenues, sector’s cross arrears and unpaid amounts. - Table 9: Financial flows of electricity sector asset management company (SOGEPE), on payment order and cash basis. - Coffee/Cocoa Sector: - Quarterly information within 45 days of quarter-end on collection and use of quasi-fiscal levies and bank account balances for CGFCC, FDPCC Investment Fund, FRC (prudential reserve), Fonds d’Investissement en Milieu Rural (FIMR), the Sacherie and the coffee sector recovery fund. - Quarterly information within 45 days of quarter-end on budget execution statements for FIMR projects. - Quarterly information on international prices (c.i.f.), export registration prices (c.i.f.), indicative purchase prices, and farmgate prices. *Technical Memorandum of Understanding: Quantitative Program Indicators (IMF staff and Ivoirien authorities).* ### 26. The BCEAO will report provisional data on the net government position (NGP) to the ### _cr09133 - 26. The BCEAO will report provisional data on the net government position (NGP) to the ### Data reporting obligations (timing, content, and scope) - The BCEAO will report provisional data on the net government position (NGP) to the IMF within 30 days of the end of the period under review and will provide final data within 45 days of the end of the period in question. - The information to be provided will include the complete, itemized listing of public sector liabilities and assets with: - (i) the BCEAO; - (ii) the Banque Nationale d’Investissement (BNI); and - (iii) the banking sector (including the BNI). - Specific items to be included: - the balance of amount received in compensation for toxic waste; - detailed information on all accounts relating to the issuance and payment of interest and amortization on government securities issued on the WAEMU financial market; - the statements of the FIMR; and - the balances of the accounts for the quasi-fiscal levies of the coffee/cocoa sector. - The government will report the information specified in Table 2a on a monthly basis, within 45 days of month-end unless otherwise indicated. - The government will report the information specified in Table 2b quarterly, within one month of quarter-end. - More generally, the government will report to the IMF any information needed for effective program monitoring. ### Pro-poor spending (Table 1): sectoral allocations and aggregates (2007–09) - Units: (Billions of CFA francs) - Agriculture and rural development: - 2007: 20.7 - 2008 Est.: 26.5 - 2009 Budget: 45.1 - Subitems: - General administration: 5.8 / 9.2 / 8.5 - Agriculture promotion and development program: 5.1 / 3.4 / 9.5 - Training and formation of supervisory staff: 7.8 / 8.3 / 8.4 - Water system works: 1.3 / 2.2 / 3.7 - Other: 0.7 / 3.3 / 14.9 - Fishing and husbandry: - 2007: 5.3 - 2008 Est.: 6.1 - 2009 Budget: 6.7 - Subitems: - General administration: 3.6 / 3.7 / 3.7 - Milk production and livestock farming: 1.5 / 1.9 / 2.5 - Fishing and aquaculture: 0.1 / 0.4 / 0.6 - Education: - 2007: 345.0 - 2008 Est.: 496.9 - 2009 Budget: 536.6 - Subitems: - General administration: 17.8 / 18.7 / 18.5 - Pre-schooling and primary education: 273.7 / 313.5 / 329.3 - Literacy: 0.3 / 0.2 / 0.2 - Secondary education and vocational training: 53.2 / 67.8 / 84.8 - University and research: 9?6.8 / 103.8 (note: formatting as in source) - Health: - 2007: 88.8 - 2008 Est.: 98.3 - 2009 Budget: 118.8 - Subitems: - General administration: 36.6 / 45.6 / 52.2 - Primary health system: 24.7 / 23.8 / 31.7 - Preventive healthcare (enlarged vaccination program): 1.6 / 1.2 / 1.5 - Disease-fighting programs: 0.6 / 1.1 / 2.0 - Infant health and nutrition: 0.2 / 0.3 / 0.6 - HIV / Aids: 3.4 / 4.3 / 5.3 - Health centers and specialized programs: 21.6 / 22.0 / 25.5 - Water: - 2007: 16.0 - 2008 Est.: 15.3 - 2009 Budget: 19.5 - Subitems: - Access to drinking water and de-contamination: 6.4 / 5.0 / 7.0 - Environmental protection spending: 9.6 / 10.4 / 12.5 - Energy: - 2007: 1.2 - 2008 Est.: 9.6 - 2009 Budget: 9.3 - Roads: - 2007: 40.0 - 2008 Est.: 20.3 - 2009 Budget: 33.1 - Social spending: - 2007: 3.2 - 2008 Est.: 9.2 - 2009 Budget: 12.6 - Subitems: - General administration: 0.2 / 6.4 / 7.8 - Training for women: 0.6 / 0.3 / 0.5 - Orphanages, day nurseries, and social centers: 0.9 / 0.6 / 1.5 - Training and formation of support personnel: 1.5 / 1.2 / 1.7 - Indigent and victims of war or disaster: 0.7 / 1.1 - Decentralization: - 2007: 31.1 - 2008 Est.: 30.1 - 2009 Budget: 32.3 - Reconstruction: - 2007: 10.4 - 2008 Est.: 5.2 - Other poverty-fighting spending: - 2007: 12.7 - 2008 Est.: 4.1 - 2009 Budget: 19.5 - Totals and financing: - Total: 563.8 / 726.8 / 838.8 - of which: Treasury - financed707.1 794.6 - of which: foreign-financed19.7 44.2 - Note: "See detailed list of pro-poor spending produced in the SIFBUD /SIGFIP system." (footnote 1/) ### Data provision for program monitoring — Monthly (Table 2a, Priority I: Essential data) - Frequency and transmission: - Prepared and forwarded monthly (M) within 30 days of the end of the month. Electronic transmission to IMF HQ and IMF Office in Abidjan. - Formats: FI = file, electronic transmission; FX = hard copy. - Key monthly reporting items (selected): - I. BUDGET: - TOFE and tableaux de bord; Tax revenue estimate; Nontax revenue summary; CNPS: contributions, benefits; CGRAE: contributions, benefits; Personnel expenditure; Grants and transfers, and targeted social expenditure; Other operating expenditure; Capital expenditure by type of financing; Expenditure related to the crisis, elections, CNPRA, etc.; Statement of budget execution by nature, function, administration/nature (showing each stage of expenditure). - Treasury operations – CECP; Committed expenditures w/o payment order (DENO). - Most recent versions of quantitative tables for energy sector, per para. 21 of TMU. - Financial statement of the electricity sector CIE (claims and cash flow); stock of unpaid invoices (gas, ...). - Cash-flow monitoring: - Cash-flow plan; Treasury advances and their settlement; Table to track Treasury balances outstanding; Other detailed tables on balances outstanding (PGT, TPA, TGE, ACDP, etc.). - II. DEBT/FINANCING: - External debt: Stock of external debt 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. - Domestic debt: Stock of domestic debt and arrears (by creditor); Table for monitoring domestic debt; Comprehensive statement of domestic debt; Detailed statement of domestic debt under agreements; Bridge table from the "Comprehensive statement"/"Monitoring table" to TOFE; New debt issues / new securities (by type, original creditor). - III. Monetary/financial sector: - Monetary statistics (of the BCEAO, commercial banks, NGP); Summary tables on financial viability indicators. - IV. Real sector: - Consumer, producer price indices. - V. Coffee/cocoa sector: - Levies on coffee/cocoa; Single Export Duty (DUS) (advance payments); Para-fiscal levies (by structure and by fund: ARCC, BCC, FRC, FDPCC); Uses of levies (by fund: FDPCC-Investment; FRC-Reserve Fund, Rural Investment Fund); Bank account balances (by fund); Half-yearly closing of accounts (by structure). - VI. Balance of payments: - Foreign trade by product (E, M: value, price, volume). ### Data provision for program monitoring — Quarterly (Table 2b, Priority II: Important data) - Frequency and transmission: - Preparation and monthly (M) or quarterly (Q) transmission within one month of the end of the quarter. - Formats: FI = file, electronic transmission; FX = hard copy. - Key quarterly reporting items (selected): - I. BUDGET: - Changes in staff levels for wage bill; breakdown of staff by category, ministry (Q FX DGB); - Breakdown of contract expenses; - Budget execution statement (SIGFiP) (breakdown by heading); - Summary report on Customs/DGI revenues; - Oil production revenues (BIC, royalties, dividends); PETROCI revenues (Q FI DGH) — 2007-08, updated forecasts for 2009-11. - II. DEBT/FINANCING: - New financing: projects, budgetary support, programs (DDR, CNPRA, elections, etc.) (by creditor); - Forecast and actual external debt service for current year (monthly). DGB/DTCP; - Quarterly forecasts for future years (quarterly, at start of year). - III. Energy sector: - Projection of oil/gas production and estimated values 2009-11 (by field, swap, sharing: government, PETROCI, Monitoring Cttee); - Projection of refining capacity 2009-11; - Energy balance sheets: crude oil (production, imports, exports); refined products (production, (re)exports); - Forecast and actual electricity sector production, consumption, exports, revenues, expenditures, and taxes (VAT). - IV. Real sector: - Production of main agricultural products; Production, export, export prices, producer prices, estimate, projection (coffee/cocoa); Revised and actual macroeconomic framework, projections; Economic indicators (industry, sector); INS, BCEAO surveys. - V. Balance of payments: - Actual and projected 2009-11. ### Additional institutional and operational context (selected items from the document) - The BCEAO is the common central bank of WAEMU; the CFA franc is pegged to the euro at the rate of €1 = CFAF 655.957. - Safeguards assessment: - Most recent safeguards assessment of the BCEAO was completed on November 4, 2005. - Assessment findings: progress in strengthening safeguards since 2002; publication of a full set of audited financial statements; movement toward IFRS; internal audit charter; improved risk management; strengthened follow-up on audit recommendations. - Continuous monitoring noted remaining vulnerabilities in internal control systems and legal structure, and progress in: adopting a multi-year audit program; establishing an audit committee; expanding disclosures on financial positions of WAEMU countries with the Fund in notes to annual financial statements; strengthening internal audit effectiveness. - Fund relations and financial position (selected figures, as of February 28, 2009): - Quota: 325.20 SDR million (100.00 percent quota). - Fund holdings of currency: 405.74 (124.76 percent quota). - Reserve position in Fund: 0.76 (0.23 percent). - SDR Department net cumulative allocation: 37.83 (100.00 percent); holdings: 0.58 (1.54 percent). - Outstanding Purchases and Loans: - PRGF arrangements: 40.98 (12.60 percent quota); - Post-Conflict Emergency Assistance: 81.30 (25.00 percent quota). - Latest PRGF arrangements (dates and amounts provided in the document). - Projected Payments to Fund (SDR million; based on existing use of resources and present holdings of SDRs): - Principal forthcoming: 2009: 11.71; 2010: 16.79; 2011: 42.20; 2012: 41.42; 2013: 10.16 - Charges/Interest: 1.31 / 1.62 / 1.34 / 0.69 / 0.26 (listed across forthcoming years) - Total forthcoming: 13.02 / 18.41 / 43.53 / 42.11 / 10.43 - HIPC Initiative: - Decision point date: March 1998. - Assistance committed by all creditors (US$ million): 345.00. - IMF assistance in US$ million: 22.50; SDR equivalent in millions: 16.70. - Completion point: -- ; Disbursements: -- (as presented in the document). *Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2009/_cr09133.pdf* ### 1. DPO––Economic Governance and ### 1. DPO––Economic Governance and Recovery Grant II ### Donor-supported projects and work program timelines - DPO––Economic Governance and Recovery Grant II: September 2008; March 2009. - Emergency Electricity Rehabilitation Project: October 2008; February 2009; May 2009. - Emergency SME Revitalization and Governance Project: June 2009. - Economic and Sector Work: - Post-Conflict Environmental Assessment: March 2009. - Education Country Status Report: March 2009. - Health Country Status Report: July 2009. - Technical assistance / other analytical work: - PEMFAR follow-up. - Economic and Poverty Monitoring. - PSIA impact of possible new electricity tariff structures: Q2 2009. - Competition in cocoa marketing and improving farmers’ incomes: Q3 2009. - Review of agricultural export crop subsectors: Q3 2009. - Private Sector Development Reengagement Dialogue/TA: December 08 – June 09. ### World Bank and IMF work programs (next 12 months) - World Bank work program highlights: - New PRGF arrangement: February 4–11, 2009; March 2009 (SR and Board). - First review under PRGF and Article IV consultation: August 2009; September 2009 (SR and Board). - Second review under PRGF: February 2010; March 2009 (SR and Board). - World Bank technical assistance: - Tax/customs administration follow-up: 2009. - Public financial management follow-up: Q2 2009; 2009. - PEMFAR: Q2 2009; 2009. - Microfinance supervision, AFRITAC West; Anti-money laundering/FT framework: Q2 2009; 2009. - IMF work program: - Statistics: public finance, real sector, and BoP, AFRITAC-West: 2009. ### Coordination requests and joint products - Fund requests to Bank: - Periodic updates on budget implications of electricity sector and financial sector reform: Ongoing. - Bank request to Fund: - Regular updates on macro-economic and fiscal projections: Ongoing. - Agreed joint Bank-Fund products and missions (next 12 months): - JSAN on full PRSP: March 2009 (Board). - HIPC Decision Point document including LIC DSA: March 2009 (SR, Board). - FSAP and assistance with Financial Sector Strategy: May 2009; August 2009. ### African Development Bank Group operations and portfolio status - Total operations approved since start of intervention: 49 operations for a net commitment of UA1.030 million (note: footnote excludes four private sector projects totaling UA33 million). - Current active projects (portfolio): - National Good Governance and Capacity Building Program (PNBGRC): UA3.7 million ADF grant. Purpose: (i) improve functioning of the legal system; (ii) strengthen decentralization structures; (iii) support public resources management capacity. Activities include creation of a Geographical Information System (GIS) in 11 communes; support to the Accounts Chamber; training of magistrates and other judiciary staff. Project expected to be finalized in 2009. - Institutional Support to the national Crisis-Exit Program: UA20.0 million ADF grant. As of end-December 2008, 56 percent of project funds were disbursed. Completed activities include launching tender for equipment for students and teachers from the Center, North and West (CNW) zone; purchasing equipment for health centers; earmarking health centres to be rehabilitated; elaborating an action plan for capacity building to assist women who are victims of domestic violence. - Portfolio management actions: - Disbursements suspended starting February 1, 2003; Cancellation of balances of 10 operations resulted in UA65.7 million cancelled as of February 2007. - No further cancellations in 2008 pending resumption of cooperation in early 2009. - Portfolio restructuring envisaged in second quarter of 2009 following renewal of full cooperation since March 2009. - AfDB continued implementing grant-financed operations and completed studies for irrigation development plan, road toll and weighbridge study plan, and the Agneby plan. ### Arrears status, clearance, and AfDB reengagement strategy - Arrears (as of cut-off date end-April 2007): UA352.25 million. - Fragile State Facility (FSF) burden-sharing: maximum of 1/3 of arrears borne by the country; minimum of 2/3 under the Arrears Clearance Window of the FSF. - Agreed arrears clearance modalities (April 28, 2007): - Move cut-off date from end-December 2003 to end-April 2007. - Effective arrears clearance in April 2008. - Payment of maturities falling due between May 2007 and April 2008 no later than September 2007 and in full by April 2008. - By that date, Côte d’Ivoire to pay 1/3 of arrears outstanding as of cut-off date of April 2007. - Government actions: - Stayed current with maturities between end-April 2007. - Cleared its share in arrears with the AfDB in early March 2009. - Sanctions lifted: March 6, 2009, following clearance of arrears. - AfDB reengagement strategy for 2009–10: focus on strengthening governance through capacity building and developing economic infrastructure to reinforce regional integration. AfDB reengagement strategy approved by its Board of Directors on March 6, 2009. ### Projected reimbursements by Côte d'Ivoire to AfDB (in UA millions) at end-December 2008 (Figures subject to exchange rate fluctuations) - ADB Charges: - 2009: 18.07 - 2010: 10.59 - 2011: 7.64 - 2012: 6.27 - TOTAL (Charges): 42.57 - ADB Principal: - 2009: 27.50 - 2010: 21.24 - 2011: 17.06 - 2012: 13.65 - TOTAL (Principal): 79.45 - ADB TOTAL (Charges + Principal) by year: - 2009: 45.57 - 2010: 31.82 - 2011: 24.70 - 2012: 19.92 - TOTAL (ADB TOTAL): 122.01 - ADF Charges: - 2009: 1.56 - 2010: 1.55 - 2011: 1.54 - 2012: 1.53 - TOTAL (Charges): 6.18 - ADF Principal: - 2009: 0.98 - 2010: 1.43 - 2011: 1.50 - 2012: 2.03 - TOTAL (Principal): 5.94 - ADF TOTAL (Charges + Principal) by year: - 2009: 2.53 - 2010: 2.98 - 2011: 3.05 - 2012: 3.57 - TOTAL (ADF TOTAL): 12.12 - OVERALL TOTAL by year: - 2009: 48.10 - 2010: 34.80 - 2011: 27.75 - 2012: 23.49 - TOTAL (OVERALL TOTAL): 134.14 ### Statistical issues and data quality - General: - Statistical coverage generally adequate for surveillance but weaknesses exist in national accounts, balance of payments, public finance, and reconciling fiscal and monetary data. - Côte d’Ivoire has participated in the General Data Dissemination System (GDDS) since May 2000; metadata on the Data Standards Bulletin Board not updated since June 2001. - Real sector statistics: - Published national accounts data: 1987–95 (base year 1986); new set 1996–2006 aligned with 1993 System of National Accounts (base year 1996). - Technical assistance on national accounts by AFRITAC West in August 2007 and August 2008, including review of implicit deflators. - Harmonized consumer price index (CPI) base 1996 adopted by all WAEMU members. - No regular publications on wages and employment. - Public finance statistics: - Ministry of Finance reported data up to 2007 for Government Finance Statistics Yearbook. - Authorities do not provide monthly or quarterly fiscal data for publication, but detailed monthly government finance data have been made available to IMF African Department. - Documentation on coverage of general government units and public enterprises lacking. - Deficiencies in recording of expenditures undermine sound fiscal reporting. - Monetary and financial statistics: - Monetary data prepared by national agency of BCEAO and released by BCEAO headquarters. - Improvements: timeliness of depository corporations and interest rate data; lag reduced from about six months to four or less in reporting to IMF STA. - BCEAO improved estimates of currency in circulation by addressing backlog of unsorted banknotes; 2005 revisions applied retroactively from December 2003 based on updated sorting coefficients. - Monetary and financial statistics mission to BCEAO headquarters: May 2001; STA participation in BCEAO seminar: April 2003. - Balance of payments: - Since December 1998 responsibility for BOP compilation assigned to BCEAO by WAEMU legislation. - National BCEAO agency in Abidjan completes and disseminates BOP statement; BCEAO headquarters delineates methodology and calculates international reserves. - Full transition to BPM5 and improved sourcing methods have significantly improved data consistency. - BCEAO national agency disseminates BOP statistics with a seven months lag. - Trade data: customs computer system satisfactory; coverage of services and transfers (especially worker remittances) needs improvement. - Financial accounts: foreign assets of private nonbanking sector not adequately covered; reporting of private capital flows, especially FDI, unsatisfactory; insufficient information on private debt stocks and debt service flows. - New BCEAO compilation system allows commercial banks to report payments involving nonresidents; payment statements received every 10 days for quality controls, not for annual BOP compilation. ### Table of common indicators required for surveillance (As of March 12, 2009) - Exchange Rates: - Date of latest observation: Current. - Date received: Current. - Frequency of Data/Reporting/Publication: M / M / M. - International Reserve Assets and Reserve Liabilities of the Monetary Authorities: - Date of latest observation: 12/08. - Date received: 02/09. - Frequency of Data/Reporting/Publication: M / M / M. - Reserve/Base Money: - Date of latest observation: 12/08. - Date received: 02/09. - Frequency: M / M / M. - Broad Money: - Date of latest observation: 12/08. - Date received: 02/09. - Frequency: M / M / M. - Central Bank Balance Sheet: - Date of latest observation: 12/08. - Date received: 02/09. - Frequency: M / M / M. - Consolidated Balance Sheet of the Banking System: - Date of latest observation: 12/08. - Date received: 02/09. - Frequency: M / M / M. - Interest Rates: - Date of latest observation: 03/09. - Date received: 03/09. - Frequency of Data: I; Frequency of Reporting: M; Frequency of Publication: M. - Consumer Price Index: - Date of latest observation: 12/08. - Date received: 02/09. - Frequency: M / M / M. - Revenue, Expenditure, Balance and Composition of Financing – General Government: - Date of latest observation: 12/08. - Date received: 02/09. - Frequency: M / M / M. - Stocks of Central Government and Central Government-Guaranteed Debt: - Date of latest observation: 12/08. - Date received: 02/09. - Frequency: M / M / M. - External Current Account Balance: - Date of latest observation: 12/08. - Date received: 02/09. - Frequency: A / A / A. - Exports and Imports of Goods and Services: - Date of latest observation: 12/08. - Date received: 02/09. - Frequency: A / A / A. - GDP/GNP: - Date of latest observation: 2008. - Date received: 02/09. - Frequency: A / M / M. - Gross External Debt: - Date of latest observation: 12/08. - Date received: 02/09. - Frequency: M / M / M. ### IMF Press Release — PRGF arrangement (Press Release No. 09/96; March 25, 2009) - Executive Board approval: - Approved a three-year, SDR 373.98 million (about US$565.7 million) arrangement under the Poverty Reduction and Growth Facility (PRGF) for Côte d'Ivoire. - Enables immediate drawing of SDR 159.348 million (about US$241.1 million). - Statement highlights (Mr. Lipsky, First Deputy Managing Director and Acting Chair): - Commended Ivoirien authorities for progress toward peace and broadly satisfactory performance under two Emergency Post-Conflict Assistance programs since 2007. - Noted economic recovery continuing but slowed by global downturn; fiscal developments in 2008 broadly satisfactory except for large public works spending executed outside the budget. - Authorities have taken steps to limit extrabudgetary spending, including a revision of budgetary procedures, and initiated reforms in cocoa/coffee and energy sectors improving transparency, pricing, and taxation. - Program aims: consolidate macroeconomic stability, increase growth, reduce poverty. - Planned further fiscal consolidation and improved public resource management critical for higher spending on basic infrastructure, poverty reduction, and other post-conflict needs. - Comprehensive structural reforms in coffee/cocoa, energy, and financial sectors to support private sector development while safeguarding public resources. - Achievement of medium-term poverty reduction objectives hinges on public finance reforms, strict budget execution procedures, transparency of public works spending, and observance of the Public Procurement Code. - Emphasized continued, well-coordinated international community support as critical. - PRGF facility terms: - PRGF loans carry an annual interest rate of 0.5 percent and are repayable over 10 years with a 5 ½-year grace period on principal payments. *Content derived from IMF staff report and related annexes in _cr09133 - 1. DPO––Economic Governance and Recovery Grant II (as provided).* ### 2008. Real GDP growth picked up to 2.3 percent in 2008 from 1.6 percent in 2007, driven ### _cr09133 - 2008. Real GDP growth picked up to 2.3 percent in 2008 from 1.6 percent in 2007, driven ### Recent economic developments - Real GDP growth picked up to 2.3 percent in 2008 from 1.6 percent in 2007, driven by construction, food production, and telecommunications. - Inflation reached 9 percent by year-end 2008 due to higher prices for imported food and adjustments in domestic oil prices; inflation slowed thereafter as food and oil prices declined. - Output growth was reported as 2.3 percent in 2008 against 1.7 percent in 2007 in the Executive Director’s statement. - The external current account showed a surplus of 1 percent of GDP in 2008, compared with a 1.5 percent of GDP deficit in 2007, driven by favorable terms of trade and higher prices for crude oil and other commodities in the first half of 2008. ### Fiscal performance under EPCA - Fiscal performance under the IMF’s Emergency Post-Conflict Assistance (EPCA) since mid-2007 was broadly satisfactory, except for extrabudgetary spending of 0.7 percent of GDP for large-scale public works. - Corrective actions in the last quarter limited the deviation from the 2008 program objective for the primary fiscal surplus to 0.4 percent of GDP, but rehabilitation investment suffered. - Non-oil revenue collection performed well due to reforms in tax and customs administrations, offsetting revenue loss from the CNW zones. - Remedial measures addressed extra-budgetary spending: reduction of non-essential current spending and establishment of a new framework to foresee public works and enhance transparency. - Authorities committed to fully communicate expenditures on large public works and to take appropriate measures to ensure they are within the budget. ### External sector and debt - The external current account improved in 2008, aided by favorable cocoa and crude oil prices, which more than offset an increase in food imports. - Current account balance (including official transfers) by year: 2006: 2.8 percent of GDP; 2007: -0.7 percent of GDP; 2008: 1.2 percent of GDP; 2009 (EPCA-2 Prov. Proj.): 2.4 percent of GDP. - Current account balance (excluding official transfers) by year: 2006: 3.0 percent of GDP; 2007: -1.5 percent of GDP; 2008: -0.6 percent of GDP; 2009 (EPCA-2 Prov. Proj.): 1.0 percent of GDP. - External public debt: 2006: 71.4 percent of GDP; 2007: 64.8 percent of GDP; 2008: 66.8 percent of GDP; 2009: 60.7 percent of GDP; project: 53.7 percent of GDP. - Public external debt-service due before rescheduling (CFAF billions): 2006: 396; 2007: 384; 2008: 364; 2009: 426; projected: 380. - Public debt in arrears (percent of GDP): 2006: 26.6; 2007: 24.1; 2008: 21.3; 2009: 25.3; projected: 2.0. ### PRGF-supported medium-term program objectives (2009–11) - An annual real GDP growth of about 4.2 percent on average. - A reduction of inflation to 3 percent per year, in line with WAEMU targets. - An overall budget deficit of about 2 percent of GDP, consistent with debt sustainability after prospective debt relief. - Structural program focus: meeting the completion point triggers under the Heavily Indebted Poor Countries (HIPC) Initiative. ### Medium-term policy measures to achieve objectives - Further fiscal consolidation with a view to improving tax revenue through strong tax administration efforts to offset reduction in oil and cocoa revenues. - Improvement of the composition of expenditure by giving priority to pro-poor and crisis-exit spending and restraining the wage bill. - Reorientation of investment towards rehabilitation of basic infrastructure and post-conflict recovery, while reassessing the scale and phasing of large public works. - Structural reforms to improve governance and transparency, including an ambitious Public Finance Management action plan and a civil service reform plan. - Reform of the coffee/cocoa sector to enhance supply and quality through lower taxation and an overhaul of the institutional framework. - Reform of the energy sector to enhance governance and efficiency, with special focus on improving the financial viability of the electricity sector. - Restructuring of public financial institutions and strengthening banking supervision. ### Key quantitative indicators (selected, exact values as reported) - GDP at constant prices: 2006: 0.7; 2007: 1.6; 2008: 2.9 2.3; 2009: 3.7 (table formatting preserved in source). - GDP deflator: 2006: 4.5; 2007: 2.7; 2008: 4.7 8.1; 2009: 0.6. - Consumer price index (annual average): 2006: 2.5; 2007: 1.9; 2008: 4.3 6.3; 2009: 5.9. - Consumer price index (end of period): 2006: 2.0; 2007: 1.5; 2008: 6.8 9.0; 2009: 3.4. - Exports, f.o.b., at current prices: 2006: 9.3; 2007: -5.7; 2008: 12.8 8.3; 2009: -16.2. - Imports, f.o.b., at current prices: 2006: 1.3; 2007: 4.7; 2008: 17.8 3.1; 2009: -19.6. - Export volume: 2006: 6.0; 2007: -8.4; 2008: 1.6 -7.8; 2009: 6.1. - Import volume: 2006: 3.9; 2007: 5.1; 2008: 4.0 -4.6; 2009: 4.5. - Terms of trade (deterioration –): 2006: 5.8; 2007: 3.3; 2008: -2.1 8.7; 2009: 2.7. - Total revenue and grants (percent of GDP): 2006: 10.3; 2007: 10.7; 2008: 11.7 15.2; 2009: 0.3. - Total expenditure (percent of GDP): 2006: 10.3; 2007: 3.1; 2008: 9.6 14.0; 2009: 3.7. - Money and quasi-money (M2) growth: 2006: 10.3; 2007: 23.6; 2008: 7.6 7.4; 2009: 6.0. - Net foreign assets (percent change): 2006: 5.7; 2007: 9.4; 2008: 1.4 1.4; 2009: -0.3. - Total revenue and grants (percent of GDP, levels): 2006: 19.0; 2007: 19.7; 2008: 20.7 20.6; 2009: 19.8. - Total expenditure (percent of GDP, levels): 2006: 20.8; 2007: 20.5; 2008: 21.1 21.1; 2009: 21.0. - Overall balance, incl. grants, payment order basis (percent of GDP): 2006: -1.8; 2007: -0.8; 2008: -0.4 -0.6; 2009: -1.3. - Primary basic balance (percent of GDP): 2006: 0.3; 2007: 0.6; 2008: 0.8 0.3; 2009: 0.9. - Gross investment (percent of GDP): 2006: 9.3; 2007: 8.7; 2008: 10.4 10.1; 2009: 11.3. - Gross domestic saving (percent of GDP): 2006: 19.6; 2007: 14.6; 2008: 16.8 17.9; 2009: 18.1. - Nominal GDP (CFAF billions): 2006: 9,081; 2007: 9,487; 2008: 10,103 10,485; 2009: 10,925. - Nominal GDP at market prices (US$ billions): 2006: 17.4; 2007: 19.8; 2008: 22.7 23.5; 2009: 21.9. - Population (million): 2006: 19.6; 2007: 20.2; 2008: 19.0 20.8; 2009: 21.4. - Nominal GDP per capita (CFAF thousands): 2006: 464; 2007: 471; 2008: 531 505; 2009: 511. - Nominal GDP per capita (US$): 2006: 888; 2007: 983; 2008: 1,190 1,132; 2009: 1,026. - Real GDP per capita growth (percent): 2006: -2.3; 2007: -1.4; 2008: 1.4 -0.7; 2009: 0.7. ### Governance and structural reform progress - Authorities implemented reforms in public financial management, banking and finance, cocoa/coffee, and energy sectors amid a fragile environment. - Public financial management improvements included restoring regular budget operations, ending recourse to treasury advances, and stopping costly financing from enterprises since January (year as in source). - Authorities completed all six prior actions for the 2009 PRGF. *Sources: Ivoirien authorities; and IMF staff estimates and projections.* ### 2009. Financial control also has been improved. Budget is executed in a more transparent ### _cr09133 - 2009. Financial control also has been improved. Budget is executed in a more transparent ### Public financial management and budget transparency - Budget execution is carried out through the automated system of SIGFIP and information is released to the public via internet. - An audit of the domestically financed crisis-exit spending for the period 2006-08 was launched. - A roadmap for strengthening public procurement was adopted to separate the regulatory, executive, and control functions. - A public finance reform plan was adopted in February 2009, based on the findings of the PEMFAR technical assistance mission. - My authorities will start implementing an ambitious PFM action plan designed with the assistance of the World Bank. ### Financial sector restructuring and inclusion - Progress made in building strong banks: of six institutions posting negative equity at end-June 2008: - Two turned to positive equity after completing their recapitalization. - One is still recapitalizing. - For the others, the government has taken temporary measures to make them viable to potential private investors. - Audits of BNI and CNCE were completed in 2008 and a plan to address weaknesses is under implementation. - A National Microfinance Strategy was adopted in October 2008 to help increase credit opportunities for non-banked populations. - Structural reforms include strengthening bank supervision, enhancement of the microfinance sector, and restructuring of public financial institutions. ### Cocoa/coffee and energy sector governance and pricing - Quarterly reports on physical and financial flows continue to be published for cocoa/coffee and energy sectors. - Gradual reduction in quasi-fiscal levies continued; total levies for the 2008–09 crop season set at CFAF 31.3/kg (down from CFAF 46.5/kg in 2007–08), part of which will be entitled for infrastructure investment in rural areas. - A decree established a committee to develop a new comprehensive strategy for the cocoa/coffee sector. - Electricity tariffs were increased by 10 percent to reduce the deficit of the sub-sector. - The financial audit of the state oil company (PETROCI) was completed; EITI-compliant reports for 2006 and 2007 are being drafted. - An automatic petroleum pricing mechanism was adopted at end-February 2009 and will become effective beginning April 1, 2009. ### Clearing external arrears and debt servicing - Arrears to the World Bank were cleared in early 2008; arrears to the African Development Bank were cleared in early 2009. - Total payments of arrears and debt service to the two institutions since mid-2007 amount to 3 percent of GDP. - The government emphasizes fiscal consolidation, debt sustainability, addressing crisis-exit needs, and reduction of domestic arrears. ### Peace consolidation and social sector rehabilitation - Progress on peace process steps: demobilization of ex-combatants, reunification of the two armies, redeployment of government services and civil servants. - Identification and voter registration are being conducted preceding presidential elections; 5.5 million voters have already been registered on an estimated voting population of 8 million. - Presidential elections are expected no later than end-2009, with consensus on conducting thorough registration to ensure fair elections. - Rehabilitation of basic services in education, health and village water supply infrastructures is underway; many government services are working again in rebels-controlled CNW zones where emergency operations are conducted. ### Medium-term macroeconomic framework and fiscal targets (2009–11) - Main objectives over the 2009-11 period: - average real GDP growth above 4.2 percent per year; - inflation below 3 percent; - overall budget deficit at around 2 percent of GDP (and a primary basic surplus of 1 percent of GDP or greater); - external current account deficit (excluding official transfers) not greater than 5 percent of GDP. - Investment rate projected to increase from 10.1 percent of GDP in 2008 to 14.9 percent of GDP in 2011. - Revenue measures and expectations: - Strengthening customs control of oil and petroleum product flows; - Effective resumption of tax and customs duty collection in the CNW zones; - Stepped up efforts against tax fraud and evasion; - Better control and harmonization of exemption regimes; - Systematic collection of public enterprise dividends. - With these policies, revenues expected to increase to 19.0 percent of GDP compared to 18.9 percent in 2008. - Expenditure priorities: - Contain the wage bill and non-priority spending; - Reduce subsidies to the electricity sector; - Priority given to the social sectors. ### Structural reforms to support private-sector led recovery - Civil service reform measures for 2009: - A census of government employees; - Introduction of an integrated civil service/payroll system; - Start of the reform of the civil service pension fund (CGRAE). - Measures to improve the business climate: - Reform of the Law on Competition to combat noncompetitive practices; - Preparation of a reform plan to enhance the efficiency and fairness of the judicial system; - Creation of commercial courts and training of judiciary staff in business matters; - Adoption of the law on mandatory enforcement of decisions of Arbitration Boards to expedite resolution of business disputes. ### Poverty reduction strategy, social spending, and HIPC - Poverty rate climbed to 48.9 percent in 2008 compared with 38.4 percent in 2002 and 33.6 percent in 1998. - The PRS targets four principal outcomes: (i) re-establishment of the foundations of the Republic; (ii) transformation of Côte d’Ivoire into an emerging economy; (iii) social well-being for all; and (iv) a dynamic actor on the regional and international scene. - A Supervisory Committee was set up to monitor PRS implementation and prepare and publish regular reports. - Pro-poor budget allocations: - Budget allocation for pro-poor spending will increase from 6.9 percent of GDP in 2008 to 7.7 percent, of which 6.0 percent will be for education and health. - Sector plans: - National Plan for the Development of Education and Training (PNDEF) to achieve universal education by 2015. - National Health Development Plan (PNDS) for 2009–11 to improve access to health care and enhance effectiveness and efficiency. - HIPC process: - Government will implement PRS while giving special attention to the implementation of the triggers set forth for the HIPC floating completion point. - Authorities seek quick and bold assistance under the Enhanced HIPC initiative and request assistance from the donor community. ### Conclusion and requests to the international community - Since August 2007, two EPCA programs were successfully implemented amid institutional fragility and external shocks. - Authorities have met EPCA performance criteria and taken steps to correct weaknesses in public financial management and clear arrears with development partners. - Authorities recognize the need to foster growth, reduce poverty, and address the debt issue sustainably. - Request to the Board: - Support for a three-year arrangement under the Poverty Reduction and Growth Facility for the period 2009–11; - Benefit of the decision point debt relief under the Enhanced HIPC Initiative. *Source: _cr09133 - 2009. Financial control also has been improved. Budget is executed in a more transparent* --- _Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2009/_cr09133.pdf_