## _cr0933 - Executive Summary ## Source details **Canonical URL:** [_cr0933 - Executive Summary](https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2009/_cr0933.pdf) ## Other formats - [Markdown version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2009/_cr0933.pdf.md) - [Structured JSON version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2009/_cr0933.pdf.json) --- ### Executive summary — key findings - After more than a decade of civil strife and economic hardship, Côte d’Ivoire is in the process of economic recovery and political normalization. - The March 2007 Ouagadougou Political Accord (OPA) provides a roadmap for reunification, national reconciliation, demobilization, and presidential elections; the latter, originally scheduled for November 30, 2008, have been postponed with a new date to be set by end-December 2008. - Economic activity is improving despite the adverse effects of the volatility in food and fuel prices, but the speed of recovery is subject to risks related to the global environment and domestic policy implementation. - Public and publicly-guaranteed external debt as of end-December 2007: US$14.3 billion (US$12.8 billion in NPV terms after assuming full application of traditional debt relief mechanisms). - Preliminary Debt Relief Analysis (DRA) shows Côte d’Ivoire meets the HIPC Initiative indebtedness criterion under the fiscal window based on end-2007 data. - Possible HIPC debt relief (end-2007 NPV terms): US$3,004.9 million, based on a common reduction factor of 23.6 percent. - As of the assessment, about 55 percent of estimated HIPC debt relief already received due to: - debt restructurings with Paris Club (1998 and 2002) and London Club (1998) creditors where relief in excess of traditional mechanisms was obtained and counted as HIPC debt relief; - the NPV reduction embedded in the concessional arrears clearance operation undertaken by IDA (April 2008) and expected to be undertaken by the AfDB Group (early-December 2008), counted as HIPC debt relief. - Possible timetable: - Decision point could be reached in early 2009, subject to strengthened implementation of the IMF-supported program through end-2008, a poverty reduction strategy in place, and agreement on completion point triggers. - Before approval of a PRGF arrangement, outstanding arrears with multilateral creditors must be cleared or an agreement reached to clear them during the program period. - On reaching the HIPC completion point, MDRI nominal reductions at the projected completion point (nominal terms): - IDA: US$1,732.1 million; - AfDF: US$311.6 million; - IMF: US$9.3 million. *Source: IMF staff preliminary assessment of Côte d’Ivoire’s eligibility for assistance under the enhanced HIPC Initiative (executive summary and selected sections).* ### Introduction — purpose and basis of assessment - Purpose: Preliminary assessment of Côte d’Ivoire’s eligibility for assistance under the enhanced HIPC Initiative, based on joint IDA/IMF staff missions (November 2007 and May 2008) and a preliminary DRA reconciling external debt data as of end-2007. - Country status: - PRGF-eligible, IDA-only country; included among ring-fenced countries grandfathered by the Boards in April 2006. - DRA indicates NPV-of-debt-to-revenue ratio at end-2007 above the HIPC threshold after application of traditional relief. - Historical notes: - Decision point under original HIPC Initiative reached in 1998; preliminary enhanced HIPC document discussed by Boards in March 2002 but decision point not considered due to interruption of PRGF-supported program. - Debt restructurings in 1998 and 2002 produced excess relief later credited as HIPC relief. ### Background and eligibility — PRGF and IDA status - IMF support: Emergency Post-Conflict Assistance (EPCA) since August 2007; second EPCA approved April 2008. - Progress under EPCA included: - maintaining modest primary basic surpluses while creating fiscal space for urgent social and infrastructure needs; - improving public expenditure management; - increasing transparency in the cocoa/coffee and energy sectors. - Extra-budgetary spending of 0.7 percent of GDP (mainly for transfer of the capital city) required offsetting transparency measures implemented in the last quarter. - With satisfactory performance under EPCA-2 through end-2008, commitment to a new program and financing assurances, Côte d’Ivoire could move to a PRGF arrangement with the IMF by early 2009. - IDA-only status: gross national income per capita US$960 in 2007 (World Bank Atlas methodology). - Joint Interim Strategy Note (ISN) (IDA Board discussed April 1, 2008) objectives for FY08-FY09: - support implementation of the Ouagadougou Accord; - assist war-affected populations through community rehabilitation and basic social services; - strengthen economic recovery via governance reforms, transparency, capacity building, and closing basic infrastructure gaps. ### Country background, political developments, and security - Political instability since 1993, civil war September 2002–January 2003, major economic and social setbacks. - Crisis effects: - disruption of agriculture; halt of intra-regional trade through Côte d’Ivoire; illicit traffic in natural resources; fall in domestic and foreign investment. - Socioeconomic deterioration indicators: - real per capita GDP fell by a cumulative 15 percent during 2000-06; - World Bank poverty diagnostic: poverty incidence may have increased from 38.2 percent in 2002 to 43.2 percent in 2006; - UN Human Development Index ranking from 154th (out of 174) in 1999 to 166th (out of 177) in 2007; - gross primary school enrollment stagnated at about 70 percent since late 1990s; - under-5 mortality rose from 175 to 195 per thousand; - life expectancy at birth declined from 49 in 1995 to 47 in 2006. - OPA (March 2007) progress: identification hearings and redeployment of public administration in the CNW zone. - Security footprint: around 8,000 UN troops and 3,000 French troops present; risks remain for elections. ### Debt relief analysis — summary figures and implications - PPG external debt prior to traditional relief (end-December 2007 nominal): US$14.3 billion; NPV after traditional relief: US$12,759.3 million (alternative table figure). - Creditor composition (nominal): 27.8 percent multilateral; 50.2 percent Paris Club; 21.5 percent commercial. Largest individual creditors: France (31.6 percent), World Bank Group (17.7 percent), AfDB Group (7.0 percent). - Arrears (end-December 2007): US$5.2 billion (≈ one-third of PPG external debt), including World Bank Group US$508.1 million and AfDB Group US$536.3 million. - Possible HIPC Initiative debt relief (end-2007 NPV terms): US$3,004.9 million, common reduction factor 23.6 percent. - HIPC burden-sharing (NPV terms, illustrative): - Multilateral assistance: US$694.3 million; - Bilateral and commercial assistance: US$2,310.5 million. - Creditor-specific illustrative shares and notes: - World Bank Group share (NPV): US$402.3 million; US$270.5 million already provided through arrears clearance. - IMF assistance total (NPV): US$37.7 million (US$22.6 million interim; US$15.1 million after completion). - AfDB Group expected share: US$199.5 million (expected to be delivered through arrears clearance). - Paris Club and non-Paris Club bilaterals/commercial creditors combined large shares (Paris Club assumed US$1,280.6 million NPV via Cologne terms; non-Paris Club/commercial US$1,030.0 million). - HIPC and MDRI impact: - With unconditional HIPC delivery, projected NPV of debt-to-revenue ratio falls from 250 percent (end-2007 assumed) to approximately 52 percent by 2027 under baseline assumptions. - MDRI nominal relief (assuming completion point December 2011): total US$2,053 million nominal: - IDA: US$1,732.1 million; - AfDF: US$311.6 million; - IMF: US$9.3 million. - Arrears clearance strategy: - World Bank Group arrears cleared April 2008 via bridge loan repaid with proceeds of Economic Governance and Recovery Grant; IDA resources on grant terms. - AfDB Group arrears expected cleared early-December 2008 under Fragile States Facility: two-thirds grant, one-third financed by Côte d’Ivoire; AfDB to disburse new budget support thereafter. - Grant element in multilateral arrears clearance counted toward HIPC contribution; estimated US$270.5 million of HIPC debt relief delivered via World Bank Group arrears clearance. ### Timeline, conditions and next steps - Conditions for decision point (staffs’ recommendation): - satisfactory track record of policy implementation under EPCA through end-2008; - poverty reduction strategy in place (Interim-PRSP, PRSP preparation status report, full PRSP, or PRSP APR; full PRSP well advanced); - agreement on appropriate completion point triggers to be included in decision point document; - clearance of outstanding arrears with multilateral creditors or agreement to clear them during the PRGF program period (before PRGF arrangement approval). - Proposed decision/completion point timetable in illustrative scenario: decision point early 2009; completion point by end-December 2011. ### Proposed floating completion point triggers (selected) - PRSP: preparation of a full PRSP through a participatory process and satisfactory implementation for at least one year, evidenced by an Annual Progress Report to IDA and IMF. - Macroeconomic stability: satisfactory performance under a PRGF-supported program. - Public Financial Management: - quarterly publication of budget execution statements within six weeks after quarter-end for at least the four quarters immediately preceding completion point; - certification de conformité of draft Loi de règlements within 10 months after fiscal year-end for at least one year preceding completion point; - public procurement regulatory entity operational and quarterly publication of all signed procurement and concessions contracts for at least six months preceding completion point. - Social sectors: - trained personnel-supervised birth deliveries to 65 percent on average nationwide (from 56 percent in 2006) during at least the year before completion point; - 90 percent of public primary students to have received three textbooks (French, mathematics, civic education) during the school year immediately preceding completion point. - Debt management and governance: - quarterly publication on Treasury website of external and domestic public and publicly-guaranteed debt data within six weeks after quarter-end for at least four quarters preceding completion point; - regular public reporting of extractive industries payments and revenues in line with EITI criteria, with a recent annual report in the year preceding completion point; - annual publication, within seven months of fiscal year-end, of certified PETROCI financial statements in accordance with international standards for at least the year preceding completion point. - Cocoa/coffee sector: - reduction in overall indirect taxation of cocoa to no more than 22 percent of CIF price, promulgation of budget law and official communication to exporters no more than five months before the marketing season; adoption and satisfactory implementation of new institutional/regulatory framework for at least six months preceding completion point; - completion and publication of an audit of investment levies and incorporation of investment/ARCC/quasi-fiscal levies into budget for at least one fiscal year preceding completion point. ### Monitoring public spending and intended use of HIPC savings - Objective: ensure effective use of public spending for pro-poor growth. - Commitments and capacity building: authorities committed to strengthening programming, management and control of public expenditures; technical assistance from IDA, IMF, AfDB and donors planned. - Intended use of HIPC savings (Box 4 — possible medium-term expenditure priorities): - Education: Education for All program free of charge (textbooks, school kits), rehabilitation/new construction and equipment of primary and secondary school classes. - Health: provision of essential generic drugs in district/general hospitals; strengthen Extended Vaccination Program (PEV); rehabilitation/new construction/equipment of maternities, health centers and hospitals. - Water supply and sanitation: improve access to safe drinking water and sanitation for poor urban groups and rural households. - Feeder and rural roads: reconstruction and maintenance; provide road access to food production zones. - Rural development and food security: develop food production (especially rice); construct treatment and storage infrastructure for cereals (including rice). - Rural electrification: nationwide improvement in rural electrification network. - Monitoring and transparency: - quarterly publication of detailed budget execution statements to monitor HIPC resource use; - strengthening external audit function for validation of budget execution reports; - institutionalize monitoring and evaluation mechanisms within PRSP for oversight of resource allocation, notably HIPC savings. ### Macroeconomic developments and outlook - 2008 projections: - Output growth projected at 2.9 percent (driven by increased oil output, improving investment climate, reunification). - Twelve-month CPI inflation projected to climb to 9 percent at end-2008 (6 percent on annual average basis). - Medium term: - After catch-up growth during 2009-13, real GDP growth should stabilize at 5 percent (prudent projection, below 1994-99 average 6.6 percent and 1960–80 boom years 6 percent). - Short-term growth contingent on consolidation of peace process, successful elections, restoration of investor confidence. - Box 1 macro assumptions underpinning DRA (selected): - Real GDP growth average about 5 percent during 2009-27; real output growth reaching 6 percent by 2012-13; long-run stabilization at 5 percent. - CPI inflation returning to 3 percent in medium term after temporary 2008 jump. - Government plans continued primary basic surpluses of around 1 percent of GDP in medium term. - Fiscal revenues (excluding grants) projected to stabilize at about 20½ percent of GDP by 2013 (from 19.2 percent during 2006-08). - Government expenditures projected to increase to 24 percent of GDP by 2012 (from 21 percent during 2006-08). - Wage bill stabilizing at 6½ percent of GDP from 2012; capital spending stabilizing at 7 percent of GDP in 2013 (from 2.9 percent in 2007). - External grants expected at 1 percent of GDP; project loans rising from ½ percent of GDP in 2007 to 2.3 percent in 2012. ### Fiscal policy, revenues, arrears, and budget execution - Fiscal consolidation generated fiscal space while reducing arrears; modest primary basic surplus in 2007 and similar outcome foreseen for 2008. - Revenue performance: - Revenue-to-GDP ratio (corrected for one-time toxic waste compensation): 17.0 percent (2005) to 19.2 percent (2007). - 2008 revenue target 19.4 percent of GDP, expected to be exceeded by ½ percent of GDP due to favorable oil prices. - Policy responses to 2008 food and fuel shocks: - April 2008: suspension/reduction of taxes on rice, wheat, sugar, edible oil; implicit subsidies budgetary impact estimated at ½ percent of GDP, expected offset by higher oil tax revenues. - July 2008: petroleum product prices increased by 25 percent on average to align with international levels. - Early November 2008: pump prices reduced by 10 percent in line with falling world oil prices since September. - Arrears clearance and figures: - Domestic arrears declined from 5.4 percent of GDP (end-2006) to 3.5 percent of GDP (end-2007). - Plan to clear remaining domestic arrears expected to be adopted by end-November 2008 for implementation during 2008-10. - Government repaid one-half of its World Bank Group arrears (1.1 percent of GDP) in early 2008. - Government expected to complete AfDB Group arrears clearance by early December 2008: one-third of end-April 2007 arrears (0.8 percent of GDP) plus arrears accumulated since early 2008 (0.6 percent of GDP). ### Governance, public financial management, and sector reforms - Governance deterioration during conflict: over 50 percent of public expenditures in 2006 executed outside regular budget via discretionary treasury advances; off-budget oil revenue; quasi-fiscal cocoa levies misused; procurement lacked transparency. - Reforms and transparency improvements since 2006: - Reduced treasury advances (notably since early 2008); stopped advanced payments at a discount of cocoa export taxes. - Quarterly budget execution statements published since second half of 2007 (including on the internet). - Timely budget preparation resumed; final draft budget execution laws for 2003–2006 submitted to Chamber of Accounts. - New Procurement Code effective in 2006. - Energy sector governance actions: - Three World Bank-financed audits in 2007 (oil/gas exploration and production, refining, electricity); need for clear regulatory framework and PETROCI reporting standards identified. - “Petroleum Committee” provides quarterly reports to Council of Ministers since early 2007. - Côte d’Ivoire candidate for EITI (May 2008); external audit of PETROCI completed November 2008. - Cocoa/coffee sector: - Sector accounts for one quarter of exports and public revenues; 700,000 smallholder families (4 million people) depend on it. - Since 2006, regular reporting to Council of Ministers on quasi-fiscal levies and their use; large part of investment levies allocated to rural infrastructure and social projects under inter-ministerial committee supervision. - PFM reform commitments (based on PEMFAR completed June 2008) include improvements in budget preparation, execution (SIGFIP), dissemination, external controls (Chamber of Accounts), and procurement institutionality. ### Social sector progress and reforms - Basic services redeployment and rehabilitation under way; 2007/08 academic year proceeded normally nationwide with increased enrollments due to redeployed teachers and administrators. - Health sector actions: - Mission identified urgent CNW needs; 2,417 health officials redeployed; approximately 1,700 additional health officials recruited in 2007 and 2008. - Rehabilitation of facilities and resumption of vaccination programs with multilateral assistance. ### Growth risks, scenarios, and sensitivity analysis - Near-term growth risks: - External: global slowdown could depress commodity prices and reduce FDI and capital inflows needed for reconstruction. - Internal: continued political instability or further election postponement could weaken domestic consensus for fiscal and structural reforms. - Sensitivity scenarios (post-HIPC assistance): - Scenario 1 — Lower cocoa prices: 30 percent reduction in cocoa prices from 2009 onwards yields gradual but limited deterioration in NPV-of-debt-to-revenue and debt-service-to-exports ratios versus baseline. - Scenario 2 — Lower real GDP growth: uniform shock lowering real GDP growth by 2 percentage points from 2009 onward; results include NPV-of-debt-to-revenues declining from 190.2 percent in 2009 to 80.5 percent in 2018 (less than baseline), then increasing from 2019 to reach 112.6 percent by 2027 — demonstrating vulnerability to sustained growth shocks. ### Key statistics and selected indicators (as presented) - Output and inflation: - Output growth (2008 projection): 2.9 percent. - Twelve-month CPI inflation (end-2008): 9 percent; annual average: 6 percent. - Revenue and fiscal balances: - Revenue-to-GDP ratio: 17.0 percent (2005); 19.2 percent (2007). - 2008 revenue target: 19.4 percent, expected to be exceeded by ½ percent of GDP. - Extra-budgetary spending (mid-2008): 0.7 percent of GDP. - Domestic arrears: 5.4 percent of GDP (end-2006); 3.5 percent of GDP (end-2007). - Repayment to World Bank Group in early 2008: one-half of arrears or 1.1 percent of GDP. - Expected AfDB clearance by early December 2008: one-third of end-April 2007 arrears or 0.8 percent of GDP plus arrears accumulated since early 2008, or 0.6 percent of GDP. - Growth projections: - Medium-term stabilized real GDP growth: 5 percent (post-2009-13 catch-up). - Historical reference growth rates: 6.6 percent per year (1994-99 average); 6 percent per year (1960–80 boom years). - Debt and HIPC metrics (selected): - Total nominal debt stock (Table A1): 14,293.5 (US$ million). - Arrears stock (Table A1): 5,154.2 (US$ million). - NPV of debt (Table A1 total): 12,282.8 (US$ million); alternative NPV column: 12,759.3 (US$ million). - Reduction required to meet HIPC fiscal-window threshold: US$3,004.9 million (NPV terms); common reduction factor: 23.6 percent. - Revenue (2007, adjusted for toxic waste compensation): 3,902 (US$ million). - Exports-to-GDP (three-year average 2005-2007): 44.8 percent / 45 percent (tables). - Fiscal revenues-to-GDP (three-year average 2005-2007): 18.9 percent / 19 percent (tables). ### Annex highlights — debt restructuring history and projections - Brady restructuring (March 31, 1998): - Reduction of 75.86 percent in NPV terms; total restructured debt US$2.4 billion (FLIRBs US$1,484 million; PDI US$917 million; DB US$71 million). - Brady bonds defaulted in September 2000; arrears reached US$668 million at end-2007. - Paris Club history: - First Paris Club relief May 4, 1983 (cut-off July 1, 1983); eight additional treatments since then, last four remain active. - 1994 London terms cancellation 50 percent; 1998 Lyon terms 80 percent; 2002 Lyon terms 80 percent. - 1998 Lyon-terms agreement covered about US$1.4 billion in debt service; 2002 Lyon-terms agreement treated US$1.8 billion of arrears; creditors agreed to top-up reduction to 90 percent (Cologne terms) upon decision point under enhanced HIPC Initiative. - External debt service projections and impacts (selected Table A4 series in US$ million and percent ratios): - Before traditional relief (total debt service examples): 2008: 893.3; 2009: 806.4; 2010: 704.7; 2011: 688.1. - After traditional relief and arrears clearance: example 2012: 1,365.8 (US$ million). - After HIPC assistance: example 2012: 701.9 (US$ million). - After HIPC and MDRI: example 2017: 969.9 (US$ million); 2027: 568.2 (US$ million). - Debt service-to-exports and debt service-to-revenue ratios vary materially by scenario and over time (tables provide year-by-year series). - NPV of external debt scenarios (Table A5 highlights, US$ million): - Before traditional relief (2007): 12,282.8 total NPV. - After traditional relief and multilateral arrears clearance (2007): 11,152.8 total NPV. - After unconditional enhanced HIPC assistance (2007): 9,754.4 total NPV. - After conditional enhanced HIPC and MDRI (2007): 10,284.8 total NPV. - Sensitivity analyses show vulnerability to commodity price and growth shocks with notable deterioration in NPV-to-exports and NPV-to-revenue ratios under adverse scenarios. *Source: IMF staff report content as provided in the source PDF.* ### Executive Summary ...................................................................................................... ### _cr0933 - Executive Summary ### Executive summary — key findings - After more than a decade of civil strife and economic hardship, Côte d’Ivoire is in the process of economic recovery and political normalization. - The March 2007 Ouagadougou Political Accord (OPA) provides a roadmap for reunification, national reconciliation, demobilization, and presidential elections; the latter, originally scheduled for November 30, 2008, have been postponed with a new date to be set by end-December 2008. - Economic activity is improving despite the adverse effects of the volatility in food and fuel prices, but the speed of recovery is subject to risks related to the global environment and domestic policy implementation. - Côte d’Ivoire’s public and publicly-guaranteed external debt was estimated at US$14.3 billion as of end-December 2007 (US$12.8 billion in NPV terms after assuming full application of traditional debt relief mechanisms). - A preliminary Debt Relief Analysis (DRA) shows that Côte d’Ivoire meets the HIPC Initiative indebtedness criterion under the fiscal window based on end-2007 data. - Possible HIPC debt relief is estimated at US$3,004.9 million in NPV terms, based on a common reduction factor of 23.6 percent. - As of now, Côte d’Ivoire has already received about 55 percent of its estimated HIPC debt relief due to: - debt restructurings with Paris Club creditors (in 1998 and 2002) and London Club creditors (in 1998) where debt relief in excess of traditional mechanisms was obtained and counted as HIPC debt relief; - the NPV reduction embedded in the concessional arrears clearance operation undertaken by IDA (in April 2008) and expected to be undertaken by the AfDB Group (in early-December 2008), which has been counted as HIPC debt relief. - Côte d’Ivoire could reach the decision point in early 2009, subject to: - strengthened implementation of the IMF-supported program through end-2008; - having in place a poverty reduction strategy; - agreement on appropriate completion point triggers to be included in the decision point document. - Before approval of a PRGF arrangement, Côte d’Ivoire would also need to have cleared outstanding arrears with multilateral creditors or have reached an agreement to clear them during the program period. - Upon reaching the HIPC completion point, Côte d’Ivoire will qualify for relief under the Multilateral Debt Relief Initiative (MDRI). MDRI nominal reductions at the projected completion point are: - IDA: US$1,732.1 million; - African Development Fund (AfDF): US$311.6 million; - IMF: US$9.3 million. ### Introduction — purpose and basis of assessment - The paper presents a preliminary assessment of Côte d’Ivoire’s eligibility for assistance under the enhanced HIPC Initiative. - Assessment based on joint IDA/IMF staff missions to Abidjan in November 2007 and May 2008 and a preliminary DRA reconciling external debt data as of end-2007. - Côte d’Ivoire is potentially eligible for HIPC debt relief and is a PRGF-eligible IDA-only country included in the list of ring-fenced countries grandfathered by the Boards in April 2006. - The DRA indicates that after application of traditional debt relief, Côte d’Ivoire’s NPV of debt-to-revenue ratio at end-2007 is above the HIPC Initiative threshold. - Historical context: - Côte d’Ivoire reached the decision point under the original HIPC Initiative in 1998. - Preliminary document under the enhanced HIPC Initiative was discussed by the Boards in March 2002, but the decision point was not considered due to interruption of the PRGF-supported program. - Debt restructurings in 1998 and 2002 with Paris Club and London Club creditors produced excess relief counted as HIPC debt relief. ### Background and eligibility — PRGF and IDA status - Reform program supported by the IMF’s Emergency Post-Conflict Assistance (EPCA) since August 2007; a second EPCA approved in April 2008. - Progress under EPCA included: - maintaining modest primary basic surpluses while creating fiscal space to address urgent social and infrastructure needs; - improving public expenditure management; - increasing transparency in the cocoa/coffee and energy sectors. - Extra-budgetary spending of 0.7 percent of GDP, mainly for the transfer of the capital city, required the government to take offsetting and transparency measures, being implemented in the last quarter. - Provided satisfactory performance under EPCA-2 through end-2008, strong commitment to a new program, and financing assurances, Côte d’Ivoire could move to a PRGF arrangement with the IMF by early 2009. - Côte d’Ivoire is an IDA-only country with a gross national income per capita of US$960 in 2007 (World Bank Atlas methodology). - A Joint Interim Strategy Note (ISN) discussed by the IDA Board on April 1, 2008, sets out Bank Group support for FY08-FY09 with objectives: - supporting implementation of the Ouagadougou Accord; - assisting war-affected populations through community rehabilitation and basic social services; - strengthening economic recovery via governance reforms, transparency, capacity building, and closing basic infrastructure gaps. ### Country background and political developments - Political instability since the death of the first president in 1993 led to civil strife and a brief civil war during September 2002-January 2003, setting back the country and the WAEMU region economically and socially. - Crisis effects included: - disruption of agriculture in many parts of the country; - halt of intra-regional trade through Côte d’Ivoire; - flourishing illicit traffic in natural resources; - drastic fall in domestic and foreign investment with some enterprises relocating. - Socioeconomic deterioration: - real per capita GDP fell by a cumulative 15 percent during 2000-06; - World Bank poverty diagnostic estimates poverty incidence may have increased from 38.2 percent in 2002 to 43.2 percent in 2006; - UN Human Development Index ranking declined from 154th (out of 174) in 1999 to 166th (out of 177) in 2007; - gross primary school enrollment stagnated at about 70 percent since the late 1990s; - mortality rates of children under 5 increased from 175 to 195 per thousand; - life expectancy at birth declined from 49 in 1995 to 47 in 2006. - The March 2007 OPA provides a roadmap for reunification, national reconciliation, demobilization and elections; presidential elections postponed to 2009 with a new date to be set by end-December 2008. - Progress under the OPA included identification hearings and redeployment of the public administration in the Center-North-West (CNW) zone. - Security situation improved; military roadblocks and racketeering significantly reduced in recent months. - Continued presence of around 8,000 UN troops and 3,000 French troops should help improve security for the elections, although risks remain. ### Debt relief analysis — summary figures and implications - Public and publicly-guaranteed external debt as of end-December 2007: US$14.3 billion (US$12.8 billion in NPV terms after assuming full application of traditional debt relief mechanisms). - Possible HIPC Initiative debt relief: US$3,004.9 million (end-2007 NPV terms), based on a common reduction factor of 23.6 percent. - As of the time of the assessment, about 55 percent of the estimated HIPC debt relief had already been received by Côte d’Ivoire because of: - excess debt relief from Paris Club (1998, 2002) and London Club (1998) restructurings counted as HIPC debt relief; - the NPV reduction embedded in IDA’s April 2008 concessional arrears clearance and the expected AfDB Group operation in early-December 2008 counted as HIPC debt relief. - MDRI nominal reductions at projected completion point: - IDA: US$1,732.1 million; - IMF: US$9.3 million; - AfDF: US$311.6 million. - Resolution of arrears with multilateral and bilateral creditors would provide access to additional development assistance to help progress toward the MDGs. ### Timeline, conditions and next steps - Côte d’Ivoire could reach the HIPC decision point in early 2009 if: - implementation of the IMF-supported program is strengthened through end-2008; - a poverty reduction strategy is in place (which could be an Interim-PRSP, PRSP preparation status report, full PRSP, or PRSP APR; Côte d’Ivoire is well advanced in preparing a full PRSP); - appropriate completion point triggers are agreed for inclusion in the decision point document. - Before approval of a PRGF arrangement, outstanding arrears with multilateral creditors must be cleared or an agreement reached to clear them during the program period. *Source: IMF staff preliminary assessment of Côte d’Ivoire’s eligibility for assistance under the enhanced HIPC Initiative (executive summary and selected sections).* ### 11. Performance under the EPCA-supported programs has been broadly ### 11. Performance under the EPCA-supported programs has been broadly ### Performance overview - Performance under the EPCA-supported programs has been broadly satisfactory, except for extra-budgetary spending in 2008. - With improved political stability: - the economy has picked up; - fiscal outcomes have been close to their targets despite spending pressures in a post-crisis environment; - the government has made significant efforts to clear arrears; - there has been good progress on structural measures. ### Macroeconomic developments and outlook - 2008: - Output growth in 2008 is projected at 2.9 percent, driven by an increase in oil output, an improving investment climate, and the reunification of the country. - Twelve-month CPI inflation is projected to climb to 9 percent at end-2008 (6 percent on annual average basis), reflecting sharp increases in international food and energy prices. - Medium term: - After a catch-up period of somewhat higher growth in the period 2009-13, real GDP growth should stabilize at 5 percent. - This 5 percent growth projection is described as a prudent projection, well below averages of the 1994-99 pre-crisis period (6.6 percent per year) and of the 1960–80 boom years (6 percent a year). - Short-term growth is expected to be strong, assuming consolidation of the peace process, successful elections, and restoration of local investor confidence. ### Fiscal policy, revenues, and arrears - Fiscal consolidation outcomes: - Fiscal consolidation has generated fiscal space while reducing external and domestic arrears. - Significant revenue collection efforts and overall expenditure restraint resulted in a modest primary basic surplus in 2007 and a similar outcome is foreseen for 2008. - Revenue performance: - Revenue-to-GDP ratio (corrected for the one-time toxic waste damage compensation received in 2007) rose from 17.0 percent in 2005 to 19.2 percent in 2007. - The target of 19.4 percent in 2008 is expected to be exceeded by ½ percent of GDP, thanks to favorable oil prices. - Policy responses to food and fuel price shocks in 2008: - In April 2008, the government suspended or reduced taxes on essential food items (rice, wheat, sugar, edible oil); the budgetary impact of these implicit subsidies is estimated at ½ percent of GDP and is expected to be offset by higher oil tax revenues. - In July 2008, petroleum product prices were increased by 25 percent on average to bring them closer to international levels and safeguard revenue. - In early November 2008 pump prices were reduced by 10 percent in line with falling world oil prices since September. - Arrears clearance: - The stock of domestic arrears declined from 5.4 percent of GDP at end-2006 to 3.5 percent of GDP at end-2007. - A plan for clearing the remaining domestic arrears was expected to be adopted by end-November 2008 for implementation during 2008-10. - The government repaid its share in arrears clearance to the World Bank Group in early 2008 (one-half of arrears or 1.1 percent of GDP). - The government is expected to complete arrears clearance to the AfDB Group by early December 2008 (one-third of end-April 2007 arrears or 0.8 percent of GDP plus arrears accumulated since early 2008, or 0.6 percent of GDP). ### Budget execution and extra-budgetary spending - Normalization of budget execution procedures since early 2007 helped restrain discretionary spending by the Presidency and the Prime Minister’s office. - Extra-budgetary spending in mid-2008 caused overall spending overruns and put fiscal program targets at risk: - Extra-budgetary spending totaled 0.7 percent of GDP and was for large construction works in the new capital city. - Combined pressures (wage-bill pressures from teachers, health workers, military/police, and higher subsidies for the ailing electricity sector) caused treasury tensions, lower social and rehabilitation spending, and accumulation of domestic arrears at end-September 2008. - Policy actions taken: - Authorities cut non-priority spending and obtained additional contributions from the state-owned oil company. - An executive order by the Prime Minister was issued to avoid such extra-budgetary spending in the future and enhance transparency of spending on the works for the new capital, including through regular audits and reports to the Council of Ministers. ### Governance developments - Deterioration and recovery: - Prolonged political instability and conflict resulted in deterioration in governance and transparency; the standard budget cycle was disrupted and public financial management processes suffered. - Over 50 percent of public expenditures in 2006 was executed outside regular budget procedures using discretionary treasury advances; some oil revenue stayed off-budget; quasi-fiscal levies on cocoa were not used as intended; procurement lacked transparency. - Reforms and transparency improvements since 2006: - Reduced practice of treasury advances (most importantly since early 2008) and stopped advanced payments at a discount of cocoa export taxes. - Since second half of 2007, budget execution statements published each quarter (including on the internet). - Timely preparation and adoption of the budget resumed; final draft budget execution laws for 2003–2006 submitted in steps to the Chamber of Accounts. - A new Procurement Code became effective in 2006, eliminating discriminatory procedures, increasing competition, and establishing a regulatory framework to fight corruption and fraud in public procurement. - Energy sector governance: - In 2007 the government launched three audits (financed by the World Bank) in oil/gas exploration, development and production, oil refining, and electricity. - Audit findings indicate the need to: (i) introduce a clear and attractive regulatory and contractual framework to maximize benefits from hydrocarbon resources while minimizing social and environmental impacts; and (ii) adopt industry reporting standards for PETROCI’s financial reports. - Since early 2007, the “Petroleum Committee” has provided quarterly reports to the Council of Ministers on physical, financial and tax flows in the sector. - Côte d’Ivoire became a candidate country for the Extractive Industries Transparency Initiative (EITI) in May 2008, following creation of the EITI National Committee. - The external financial audit of PETROCI was completed in November 2008. - Cocoa/coffee sector governance: - Producer incentives and governance have improved in the last two years, but significant challenges remain. - The sector accounts for one quarter of exports and public revenues; 700,000 small holder families (4 million people) depend on it. - Since 2006, the government has regularly reported to the Council of Ministers on quasi-fiscal levies and their use. - A large part of investment levies since early 2006 have been allocated to rural infrastructure and social projects under supervision of an inter-ministerial committee. ### Progress with social reforms - Basic service provision: - Government efforts to redeploy public services nationwide and rehabilitate education, health, and village water supply infrastructures have started. - The 2007/08 academic year proceeded normally throughout the country; with redeployed teachers and administrators, enrollment rates increased nationwide at all educational levels. - Health sector: - A mission assessing requirements in the CNW zones identified urgent needs that the government began addressing. - 2,417 health officials redeployed; approximately 1,700 additional health officials recruited in 2007 and 2008. - Rehabilitation of health care facilities is in progress and vaccination programs have resumed with multilateral agency assistance. ### Reform agenda and policy priorities - Government medium-term objectives in draft PRSP: - (i) maintain macroeconomic stability; - (ii) promote rapid economic growth; - (iii) make progress toward the MDGs. - The draft PRSP includes restoring peace and security, promoting national reconciliation and full reunification; restoring basic infrastructure and social services; improving governance and transparency in budget and cocoa/coffee and energy sectors; and fully normalizing financial relations with creditors. - Fiscal policy focus: further fiscal consolidation to achieve debt sustainability, while creating fiscal space for poverty-reducing spending through revenue mobilization, cuts in non-priority spending and strengthened PFM. - Revenue mobilization and PFM reforms: - Measures include: (i) improving tax and customs administration, especially in the CNW zones and regarding transit trade; (ii) enhancing revenue contributions from oil/gas and petroleum product taxation; (iii) reducing tax exemptions; (iv) ensuring public enterprises transfer to the treasury all social contributions on wages. - Commitments to implement a medium-term PFM reform program based on the PEMFAR (completed in June 2008) include: - on budget preparation and transparency: enhance budget nomenclature and classification, consolidate public entities in the global budget, prepare an MTEF; - on budget execution: shorten lags in approvals and processing through the Integrated Public Finance Management (SIGFIP) system; - on dissemination: make budget allocation and execution information more easily available to the public; - on external controls: enhance the Chamber of Accounts’ functioning and reduce delays in its reviews of budget execution laws; - on procurement: separate procurement regulatory and execution functions and enhance public information on procurement contracts and processes. - Sector strategies: - Cocoa/coffee: with World Bank support, prepare a new comprehensive strategy; two committees (formed September 2008) reviewing past reforms and audits and the role of four sector agencies; plans for external audits of the four agencies; further reduce and incorporate into the budget all cocoa quasi-fiscal levies; increase transparency and competition in marketing to improve farmers’ share of world price. - Cotton: short-run objectives to clear arrears, finance inputs (seeds and fertilizers), stabilize producer prices, and reorganize main companies; liquidation procedure for Compagnie cotonnière de Côte d'Ivoire underway; privatization of Compagnie Ivoirienne pour le Développement des Textiles should be completed; longer-run strategy includes mechanization, research, seed selection and regional partnerships. - Financial sector: support WAEMU Banking Commission compliance with prudential regulations; restructure microfinance sector per the National Microfinance Strategy; reform BNI and CNCE; prepare a Financial Sector Strategy drawing on 2007 regional FSAP recommendations and a country-specific FSAP planned for early 2009. - Energy sector: develop strategy to strengthen efficiency and management and improve transparency of physical and financial flows; petroleum sector intentions: (i) maximize petroleum revenue generation over time, including by attracting new investors; (ii) improve monitoring of and negotiating capacity for petroleum contracts; (iii) manage social and environmental aspects from increased production; meet remaining EITI validation indicators, including publication and distribution of regular EITI Reports starting with the 2006 report in early 2009; electricity sector: adopt a letter of sector policy in 2008 outlining reforms to improve long-term efficiency and restore financial viability, taking into account electricity sub-sector audit recommendations. - Health and education: update and implement sectoral plans; finalize a National Health Development Plan with five-year focus; school restoration plan prepared in 2007 to mobilize donor funding; comprehensive education sector review launched with donor support; expected comprehensive education sector program by end-2009 to enable access to Education for All Fast-Track Initiative resources. ### Key statistics and indicators (selected, as presented) - Output and inflation: - Output growth (2008 projection): 2.9 percent. - Twelve-month CPI inflation (end-2008): 9 percent; annual average: 6 percent. - Revenue and fiscal balances: - Revenue-to-GDP ratio: 17.0 percent (2005); 19.2 percent (2007). - 2008 revenue target: 19.4 percent, expected to be exceeded by ½ percent of GDP. - Extra-budgetary spending (mid-2008): 0.7 percent of GDP. - Domestic arrears: 5.4 percent of GDP (end-2006); 3.5 percent of GDP (end-2007). - Repayment to World Bank Group in early 2008: one-half of arrears or 1.1 percent of GDP. - Expected AfDB clearance by early December 2008: one-third of end-April 2007 arrears or 0.8 percent of GDP plus arrears accumulated since early 2008, or 0.6 percent of GDP. - Growth projections: - Medium-term stabilized real GDP growth: 5 percent (post-2009-13 catch-up). - Historical reference growth rates: 6.6 percent per year (1994-99 average); 6 percent per year (1960–80 boom years). *Source: Ivoirien authorities; and IMF staff estimates and projections.* ### 30. Growth prospects in the near term are subject to several downside external and ### _cr0933 - 30. Growth prospects in the near term are subject to several downside external and ### Near-term growth risks - External risks: - The global economic slowdown could further depress commodity prices and adversely affect foreign direct investment and other capital inflows necessary to rebuild the economy. - A further drop in oil and cocoa prices (currently still at their pre-financial crisis levels in CFAF terms) would reduce government revenue and the fiscal space for reconstruction spending. - Internal risks: - Continued political instability—and further postponement of the elections—could weaken domestic consensus for sound fiscal policies and structural reforms, and thereby growth prospects. ### Box 1 — Key macroeconomic assumptions underlying the DRA - Real GDP growth: - Projected to average about 5 percent over the period 2009-27. - Real output growth should reach 6 percent by 2012-13 (from 2.9 percent in 2008) as capacity utilization in industry returns to normal and private investment recovers, while oil output plateaus in 2011. - Over the longer term, real output growth is expected to stabilize at 5 percent. - Scenario contingent on stabilization of security and political situation, and progress in structural reforms. - CPI inflation: - Projected to return to 3 percent in the medium term following the temporary jump in 2008 related to international food and fuel price increases. - Fiscal policy: - Government plans continued primary basic surpluses of around 1 percent of GDP in the medium term. - Fiscal revenues (excluding grants) projected to stabilize at about 20½ percent of GDP by 2013, from 19.2 percent during 2006-08. - Government expenditures projected to increase to 24 percent of GDP by 2012, from 21percent during 2006-08. - Wage bill would stabilize at 6½ percent of GDP from 2012, dropping close to the WAEMU criterion of 35 percent of revenue. - Capital spending would stabilize at 7 percent of GDP in 2013 (from 2.9 percent in 2007). - External financing: - External grants (mainly for projects) expected to stay at 1 percent of GDP over the period. - Project loans expected to increase from ½ percent of GDP in 2007 to 2.3 percent in 2012 and stabilize thereafter. - Residual external financing need assumed covered by multilateral and bilateral creditors (average grant element of 47 and 35 percent, respectively), and any residual by domestic/WAEMU financing. - External current account: - Expected to increase from 1½ percent of GDP in 2007-08 to a peak of 6 percent in 2012 and stabilize at about 5½ percent thereafter. - Exports (goods and nonfactor services) expected to increase on average by about 6.7 percent annually in volume terms over the projected horizon, with a temporary slowdown around 2010-11 as oil production peaks. - Import volumes expected to grow faster by an average of 5.3 percent during 2009-13, and to stabilize at 5 percent thereafter. ### Government’s Poverty Reduction Strategy (PRSP) — key points - Full PRSP expected to be completed in December 2008, drawing on the 2002 I-PRSP. - Ten regional consultations held to assess poverty perceptions and crisis impacts; a technical workshop planned to validate the draft PRSP. - A household budget survey launched in May 2008; results reflected in the PRSP. - Broad objectives of the post-conflict program: - (i) Implementing key elements of the Ouagadougou Accord to restore peace, security, reconciliation and reunification. - (ii) Restoring basic infrastructure and social services. - (iii) Implementing measures to improve governance and transparency in public expenditure management, and in the energy and cocoa/coffee sectors. ### Debt reconciliation and structure - Preliminary DRA prepared jointly by authorities and Bank and IMF staffs using data as of end-December 2007. - Reconciliation covering almost 100 percent of multilateral, bilateral and commercial debt completed in May 2008. - PPG external debt prior to traditional debt relief: - Estimated at US$14.3 billion in nominal terms at end-December 2007. - Creditor composition: 27.8 percent multilateral, 50.2 percent Paris Club, 21.5 percent commercial. - Largest individual creditors: France (31.6 percent), the World Bank Group (17.7 percent), AfDB Group (7.0 percent). - Arrears: - Arrears on PPG external debt at end-December 2007 amounted to US$5.2 billion (approximately one-third of all PPG external debt). - Included arrears to the World Bank Group (US$508.1 million) and the AfDB Group (US$536.3 million). - Arrears to the World Bank Group subsequently cleared; AfDB Group arrears expected to be cleared in early-December 2008. ### Arrears clearance strategy and treatment - World Bank Group arrears cleared in April 2008 through a bridge loan provided by a bilateral donor; Côte d’Ivoire repaid the bridge loan with proceeds of a development policy operation (Economic Governance and Recovery Grant). IDA resources provided on grant terms. - AfDB Group arrears expected to be cleared in early-December 2008 under the Fragile States Facility (FSF): two-thirds of arrears provided as grants by AfDB Group, remaining one-third financed by Côte d’Ivoire; AfDB Group would disburse new budget support under the FSF shortly after. - Remaining multilateral arrears (e.g., proposals to clear US$61.7 million to the EIB and EU under consideration). - Arrears to BOAD (US$2.0 million) and FAGACE (US$0.8 million) at end-December 2007; BOAD arrears subsequently cleared in March 2008. - Grant element in multilateral arrears clearance counted toward their contribution to HIPC Initiative debt reduction. - Estimated US$270.5 million of HIPC debt relief delivered through clearance of World Bank Group arrears. - Bilateral and commercial arrears to be regularized in HIPC/rescheduling discussions; any relief beyond traditional mechanisms credited toward HIPC shares. ### Possible HIPC Initiative assistance and calculations - Côte d’Ivoire’s debt in NPV terms after full application of traditional debt relief: estimated US$12,759.3 million as of end-2007. - Equivalent to 327.0 percent of government revenue (excluding one-off toxic waste damage compensation). - Country qualifies for HIPC debt relief under the “fiscal window” (NPV-of-debt-to-revenue ratio greater than 250 percent) and meets sub-criteria: - Export-to-GDP ratio: 44.8 percent (above 30 percent threshold). - Fiscal revenues-to-GDP ratio: 18.9 percent (above 15 percent threshold). - Reduction required: - To lower NPV-of-debt-to-revenue from 327 percent to 250 percent requires HIPC debt relief of US$3,004.9 million in NPV terms. - Implies a common reduction factor of 23.6 percent. - Based on proportional burden sharing: multilateral assistance US$694.3 million (NPV terms); bilateral and commercial assistance US$2,310.5 million (NPV terms). ### Box 2 — Revenue corrected for toxic waste damage compensation - 2007 government revenues adjusted for compensation of CFAF 95 billion (1 percent of GDP) received in Q1 2007 from a waste handling/shipping company. - Compensation included in 2007 fiscal accounts alongside related remedial expenses; spending for victims and clean-up began in 2006 and will continue through 2009. - Revenue base for HIPC calculations should exclude the toxic waste compensation as it does not increase capacity to service debt. - Including this one-off revenue would reduce the NPV-of-debt-to-revenue ratio by 12 percentage points and HIPC relief by over US$ 400 million. ### Illustrative HIPC delivery scenarios and creditor shares - Assumed HIPC decision point in early 2009 and completion point by end-December 2011. - World Bank Group: - Share of HIPC debt relief estimated at US$402.3 million in NPV terms; US$270.5 million already provided through clearance of IDA and IBRD arrears. - Interim relief to be provided entirely on IBRD debt outstanding; interim assistance funded by donor contributions to HIPC window or directly to IDA; assistance would cover 50 percent of debt service owed to IBRD during the interim (subject to one-third ceiling). - Total nominal HIPC debt relief provided by the World Bank Group during interim and after completion point estimated at US$155.8 million. - IMF: - Assistance would total US$37.7 million in NPV terms: US$22.6 million during the interim period and US$15.1 million after completion point. - Interim assistance in the form of reduction of debt service (subject to ceiling of 60 percent of total HIPC debt relief in NPV terms to be provided by the IMF). - AfDB Group: - Share of US$199.5 million in HIPC assistance expected to be fully delivered through arrears clearance. - Other multilaterals: - Total US$54.8 million in NPV terms; EIB/EU to provide HIPC relief through arrears clearance; other multilaterals assumed to clear arrears on non-concessional terms and provide HIPC assistance via reduction in future debt service payments. - Paris Club bilaterals and non-Paris Club official bilaterals/commercial creditors: - Paris Club bilateral creditors assumed to provide US$1,280.6 million (NPV terms) via flow treatment on Cologne terms (90 percent NPV reduction on eligible debt-after decision point, remaining assistance at completion point through stock-of-debt operation). - Comparable treatment assumed for non-Paris Club official bilateral and commercial creditors delivering US$1,030.0 million (NPV terms). - Past relief in 1998 and 2002 by official bilateral and commercial creditors that went beyond traditional mechanisms is credited in HIPC calculations. ### Expected impact of HIPC and MDRI on debt ratios - Baseline assumptions include annual economic growth of 5 percent (see Box 1) and continuation of sound macroeconomic policies. - With unconditional delivery of HIPC Initiative assistance: - Côte d’Ivoire’s NPV of debt to revenue ratio expected to decline from 250 percent as of end-2007 (assuming unconditional HIPC assistance) to approximately 52 percent by 2027. - Ratio would consistently remain below the threshold level through the projection period. - Debt service to exports ratio expected to increase immediately after completion point due to additional debt service on rescheduled/refinanced debt with relatively short maturities, then decline a few years later. - MDRI: - On reaching HIPC completion point, Côte d’Ivoire would qualify for MDRI debt relief from IDA, IMF and AfDF covering debt disbursed before end-2003/2004 and still outstanding at completion point. - Assuming completion point in December 2011, preliminary estimates indicate MDRI relief could amount to US$2,053 million in nominal terms: - IDA: US$1,732.1 million - AfDF: US$311.6 million - IMF: US$9.3 million - After completion point, Côte d’Ivoire’s NPV of debt-to-revenue ratio would fall significantly, remaining below 55 percent post 2019 (based on end-2007 SDR/US$ exchange rate). ### Sensitivity analysis and scenarios - Two sensitivity scenarios tested post-HIPC assistance: - Scenario 1 — Lower cocoa prices: - Assumes a 30 percent reduction in cocoa prices from 2009 onwards. - Results in a gradual but limited deterioration in the NPV of debt-to-revenue and debt service-to-exports ratio compared with the baseline. - Scenario 2 — Lower real GDP growth: - Assumes a uniform shock lowering real GDP growth by 2 percentage points from 2009 onward. - Results: NPV of debt-to-revenues declines from 190.2 percent in 2009 to 80.5 percent in 2018 (although less than in the baseline), then starts to increase from 2019, reaching 112.6 percent by 2027. *Italicized: IMF staff report content as provided in the source PDF.* ### 51. Provided performance under the EPCA through end-2008 is satisfactory, Côte ### _cr0933 - 51. Provided performance under the EPCA through end-2008 is satisfactory, Côte ### Summary of eligibility and timing for HIPC assistance - Provided performance under the EPCA through end-2008 is satisfactory, Côte d’Ivoire could reach the HIPC decision point in early 2009, at the same time as presentation to the IMF Board of a three-year PRGF arrangement. - There are uncertainties around policy implementation which could delay the decision point and the start of a PRGF arrangement. - Issues for Directors (questions posed for discussion): - Eligibility: Do Directors agree that Côte d’Ivoire is eligible for assistance under the enhanced HIPC Initiative? Do Directors agree that Côte d’Ivoire’ revenues should be corrected for toxic waste damage compensation for the purpose of HIPC calculations? - Timing of the decision point: Do Directors agree with the staffs’ recommendation that Côte d’Ivoire could reach its decision point by early 2009 provided that it: (i) has a satisfactory track record of policy implementation under its EPCA-supported program; (ii) has in place a poverty reduction strategy; (iii) agrees on appropriate completion point triggers; and (iv) in the context of a new PRGF arrangement, clears its outstanding arrears with multilateral creditors or reaches an agreement to clear them during the program period? - Floating completion point: What are Directors’ views on staffs’ recommendations on possible triggers against which satisfactory performance would be measured for the floating completion point? ### Proposed triggers for the floating completion point (Box 3) - PRSP - Preparation of a full PRSP through a participatory process and its satisfactory implementation for at least one year, as evidenced by an Annual Progress Report submitted by the government to IDA and the IMF. - Macroeconomic stability - Maintenance of macroeconomic stability as evidenced by satisfactory performance under a PRGF-supported program. - Public Financial Management - Quarterly publication of budget execution statements (including revenue; expenditure by type, function, and administration/type and by different stages of budget execution; and the identification of poverty-reducing spending) within six weeks after the end of each quarter, for at least the four quarters immediately preceding the completion point. - Certification of conformity (certification de conformité) by the competent authority of the draft Loi de règlements of a given fiscal year, within 10 months after the end of that fiscal year, for at least one year immediately preceding the completion point. - Public procurement regulatory entity operational (separate from control entities) and quarterly publication in the public procurement bulletin of all signed procurement and concessions contracts (including those from the parastatals), for at least six months immediately preceding the completion point. - Social Sectors - Increase in trained personnel-supervised birth deliveries to 65 percent on average nationwide (from 56 percent in 2006) during at least the year immediately preceding the completion point. - 90 percent of students enrolled in all public primary schools to have received three textbooks covering French, mathematics, and civic education, during at least the school year immediately preceding the completion point. - Debt Management - Publication on the Treasury website, on a quarterly basis within six weeks after the end of each quarter, of data on external and domestic public and publicly-guaranteed debt (debt stocks, current debt service obligations, actual debt service payments and loan disbursements) for at least four quarters immediately preceding the completion point. - Governance - Regular public reporting of payments to, and revenues received by, the government for the extractive industries (mining, oil and gas) in line with the EITI criteria, with a recent annual report during at least the year immediately preceding the completion point. - Annual publication, within seven months of the end of the fiscal year, of the certified financial statements, in accordance with international standards, of PETROCI for at least the year immediately preceding the completion point. - A reduction in overall indirect taxation of the cocoa sector to no more than 22 percent of the CIF price, as evidenced by: (i) promulgation of a budget law, and (ii) an official communication issued to exporters no more than five months before the start of the upcoming cocoa marketing season; adoption by the government of a new institutional and regulatory framework for the cocoa/coffee sector and satisfactory implementation of the functions under government responsibility for at least six months immediately preceding the completion point, based on its new strategy for development of the sector. - Completion and publication of an audit of the investment levies managed by the "Management Committee for the cocoa/coffee sector " or any institution as may replace it for at least the calendar year immediately preceding the completion point and incorporation in the budget of all investment, ARCC, and other agencies’ quasi-fiscal levies for at least one fiscal year immediately preceding the completion point. ### Monitoring public spending following provision of HIPC assistance - Objective: Securing the effective use of public spending for pro-poor growth is a key objective of the HIPC Initiative. - Commitments and capacity building - The authorities are committed to strengthen efforts to improve the programming, management and control of public expenditures and to improve service delivery in key sectors. - Technical assistance provided or planned by IDA, the IMF, the AfDB Group and other donors will be important to strengthen budget management capacity. - Intended use of HIPC savings - The Government intends to use HIPC related savings to fund activities indicated in Box 4 and monitor the use closely along with all budget expenditures. - Resources from HIPC assistance would focus largely on health, education, water supply and sanitation, food production, and rural infrastructure. - Other areas such as major infrastructure programs and DDR would be financed by other external resources. - Monitoring and transparency measures - Quarterly publication of detailed budget execution statements would provide a tool to monitor and publicly disseminate the use of resources made available by the HIPC Initiative. - Measures are being taken to strengthen the external audit function which will provide external validation of budget execution reports. - The Government intends to institutionalize monitoring and evaluation mechanisms in the context of the PRSP, which will have an important role in providing oversight in the allocation of resources for poverty reduction, notably savings from debt relief. ### Possible medium-term expenditure priorities for use of HIPC savings (Box 4) - Education - Strengthening of the Education for All program free of charge (textbooks, school kits, and other teaching materials) - Rehabilitation, new construction and full equipment of primary and secondary school classes - Health - Provision of essential drugs (generic) in all district and general hospitals - Strengthening of the Extended Vaccination Program (PEV) - Rehabilitation, new construction and full equipment of maternities, health centers and hospitals - Water supply and sanitation - Improvements in access to safe drinking water and provision of sanitation systems for poor urban groups and rural households - Feeder and other rural roads - Reconstruction and maintenance of rural roads and provision of road access to food production zones - Rural development and food security - Development of food production, especially rice - Construction of treatment and storage infrastructure for food production, especially of cereals (including rice) - Rural electrification - Nationwide improvement in the rural electrification network ### Annex summary: recent debt rescheduling agreements (Paris Club and London Club highlights) - Paris Club history - The Paris Club first granted debt relief to Côte d’Ivoire on May 4, 1983 when the cut-off date was set at July 1, 1983. - Since then there have been eight additional debt treatments of which the last four remain active. - Cancellation of consolidated maturities took place under each of the last three agreements: (i) on March 23, 1994, under London terms (50 percent); (ii) on April 24, 1998, under Lyon terms (80 percent); and (iii) on April 10, 2002, under Lyon terms (80 percent). - 1998 Lyon-terms agreement - It covered some US$l.4 billion in debt service falling due from April 1, 1998 to March 31, 2001. - ODA arrears and current maturities were rescheduled over 40 years, with 16 years grace, and interest rate at least as favorable as the original concessional terms. - Pre-cutoff date non-ODA debt arrears and current maturities were rescheduled either under the debt-reduction option (cancellation of 80 percent and the remainder rescheduled at market interest rates with 23 years maturity and six years grace) or under the debt-service-reduction option (reduced interest rates, 40 years maturity, eight years grace). - 2002 Lyon-terms agreement - It treated US$1.8 billion of arrears outstanding at end-March 2002 and maturities falling due from April 1, 2002 to December 31, 2004. - Pre-cut off date ODA credits were to be rescheduled over 40 years, with 16 years grace, at interest rates at least as favorable as the original concessional rates. - Pre-cutoff date non-ODA credits after cancellation of 80 percent (taking into account previous Paris Club cancellations) were rescheduled at market interest rates with 23 years maturity and 6 years grace. - The agreement resulted in cancellation of half the consolidated amount. - Creditors further agreed to top-up the reduction rate to 90 percent (Cologne terms) as soon as Côte d'Ivoire would reach the decision point under the enhanced HIPC Initiative. - The interruption of the PRGF program in September 2002 led to the suspension of the Agreed Minutes. *Source: _cr0933 - 51. Provided performance under the EPCA through end-2008 is satisfactory, Côte* ### 5. Following two conventional restructuring agreements in 1985 and 1986, on ### _cr0933 - 5. Following two conventional restructuring agreements in 1985 and 1986, on ### Brady restructuring and arrears history - On March 31, 1998, Côte d’Ivoire signed a Brady agreement calling for a reduction of 75.86 percent in NPV terms and refinancing the remainder by issuing Brady bonds in US$ and French francs. - Total restructured debt under the 1998 Brady agreement: US$2.4 billion. - US$1,484 million in Front Loaded Interest Reduction Bonds (FLIRBs) with 20 years maturity and 10 years grace (equivalent at March 31, 1998 exchange rates). - US$917 million in Past Due Interest Bonds (PDI) with 20 years maturity and no grace period. - US$71 million in Discount Bonds (DB) with a 50 percent discount and a 30 year balloon maturity. - These Brady bonds fell into default in September 2000; at end-2007, arrears had reached US$668 million. - On March 24, 2006, Côte d'Ivoire entered a tolling agreement with the London Club acknowledging amounts outstanding and waiving statute of limitation benefits and defenses under New York State law governing the Brady bonds. ### Composition of external debt as of December 31, 2007 (nominal stock: $14.3 billion) - Paris Club: 50% - Commercial: 22% - World Bank: 18% - AfDB Group: 7% - Other Multilateral: 2% - Other Official Bilateral: 1% - IMF: 1% ### Potential costs of the HIPC Initiative by creditor group (Total Estimated HIPC Enhanced Assistance: $3005 million, end-2007 NPV terms) - Paris Club: 43% - Commercial: 34% - World Bank: 13% - AfDB Group: 7% - Other Multilateral: 2% - IMF: 1% - Other Official Bilateral: 1% ### Key debt stock and NPV figures as of December 31, 2007 (Table A1 summary) - Total nominal debt stock: 14,293.5 (US$ million) - Arrears stock: 5,154.2 (US$ million) - NPV of debt (total): 12,282.8 (US$ million) - NPV of debt in Table A1 alternative column: 12,759.3 (US$ million) - Multilateral nominal: 3,973.1 (US$ million); NPV of multilateral: 2,948.2 (US$ million) - World Bank nominal: 2,523.1 (US$ million); NPV: 1,708.2 (US$ million) - AfDB Group nominal: 1,001.1 (US$ million); NPV: 847.2 (US$ million) - IMF nominal: 173.5 (US$ million); NPV: 160.1 (US$ million) - Paris Club nominal (subset of bilateral): 7,169.7 (US$ million); Paris Club arrears stock: 3,364.6 (US$ million); Paris Club NPV of debt: 6,352.8 (US$ million) - Commercial nominal: 3,073.6 (US$ million); commercial arrears stock: 674.9 (US$ million); commercial NPV of debt: 2,927.1 / 4,302.2 (US$ million) (table lists multiple NPV columns) ### HIPC burden-sharing and assistance (Table A2) - Total NPV debt outstanding end-2007 (A): 12,759 (US$ million) - Post-HIPC NPV (B): 9,754 (US$ million) - Reduction to HIPC (A-B): 3,005 (US$ million) - Reduction as percent of revenue: 327 (percent) before / 250 (percent) after / 77 (percent) reduction (table rows show "as percent of revenue 32725077") - By creditor group (NPV terms): - Multilateral: reduction 694 (US$ million) - Bilateral: reduction 1,297.4 (US$ million) - Paris Club: reduction 1,281 (US$ million) - Other Official Bilateral: reduction 715 (US$ million) to 417 (post-HIPC?) — table rows indicate values under "of which" formatting - Commercial: reduction 1,013.2 (US$ million) - Memorandum items: - Common reduction factor (percent): 23.6 - Revenue (2007 government revenue without grant and adjusted for the toxic waste compensation): 3,902 (US$ million) - Exports to GDP: 45 (percent) (Three-year average of exports and GDP (2005-2007)) - Fiscal Revenues to GDP: 19 (percent) (Three-year average of fiscal revenues and GDP (2005-2007)) ### Discount and exchange rate assumptions as of end-December 2007 (Table A3) - Discount rates (percent per annum) and exchange rates (currency per U.S. dollar) samples shown: - CFA Franc: Discount 5.35445 ; Exchange Rate 5.59 - Swiss Franc: Discount 3.961 ; Exchange Rate 1.13 - Chinese Yuan: Discount 5.277 ; Exchange Rate 7.30 - Euro: Discount 5.350 ; Exchange Rate 0.68 - U.S. Dollar: Discount 5.641 ; Exchange Rate 1.00 - Japanese Yen: Discount 2.471 ; Exchange Rate 114.00 - Paris Club cutoff date: July 1, 1983 ### External debt service projections and impacts of relief, 2008–2027 (Table A4 key points) - Before traditional debt relief and before arrears clearance: Total debt service 2008: 893.3; 2009: 806.4; 2010: 704.7; 2011: 688.1; 2012: 713.2; 2017: 661.1; 2027: 726.7 (values in US$ million, exact series presented in table) - Debt service to exports ratio before relief: 2008: 9.6; 2009: 8.4; 2010: 6.9; 2011: 6.9; 2012: 6.7; 2017: 3.4; 2027: 3.6 (percent) - Debt service to revenue ratio before relief: 2008: 18.9; 2009: 18.9; 2010: 14.8; 2011: 13.1; 2012: 12.3; 2017: 4.1; 2027: 5.2 (percent) - After traditional debt relief and multilateral arrears clearance: Total debt service examples: 2008: 998.9; 2012: 1,365.8; 2017: 975.4; 2027: 806.0 (US$ million) - Debt service to exports ratio in this scenario: 2008: 10.8; 2012: 12.8; 2017: 3.9; 2027: 4.0 (percent) - Debt service to revenue ratio: 2008: 21.2; 2012: 23.6; 2017: 18.4; 2027: 5.7 (percent) - After HIPC assistance: Total debt service examples: 2008: 375.7; 2009: 608.6; 2012: 701.9; 2017: 1,009.0; 2027: 664.0 (US$ million) - Debt service to exports ratio after HIPC assistance: 2008: 4.0; 2009: 6.3; 2012: 7.4; 2017: 9.4; 2027: 3.3 (percent) - Debt service to revenue ratio after HIPC assistance: 2008: 8.0; 2009: 14.2; 2012: 15.8; 2017: 17.4; 2027: 4.7 (percent) - Reduction in debt service as a result of HIPC Initiative assistance (US$ million): listed series includes 301.4, 54.9, 107.8, 356.8, -159.7, 139.6, 147.4, 92.8, 142.0 (table provides annual reductions) - After HIPC and MDRI assistance: Total debt service examples: 2008: 375.7; 2009: 608.6; 2012: 701.9; 2017: 969.9; 2027: 568.2 (US$ million) - Debt service to exports ratio after HIPC and MDRI: 2008: 4.0; 2009: 6.3; 2012: 7.4; 2017: 9.1; 2027: 2.8 (percent) - Debt service to revenue ratio after HIPC and MDRI assistance: 2008: 8.0; 2009: 14.2; 2012: 15.8; 2017: 16.8; 2027: 4.0 (percent) - Reduction in debt service as a result of MDRI assistance: series includes 0.0, 0.0, 0.0, 0.0, 39.0, 91.2, 101.3, 72.4, 36.9, 95.8 (US$ million) as shown in table - Memorandum items (projections used in Table A4): - Exports of goods and nonfactor services examples: 2008: 9,291.5; 2009: 9,652.3; 2010: 10,203.6; 2017: 26,283.4; 2018-2027 average: 20,354.5 (US$ million) - Government revenues examples: 2008: 4,719.4; 2009: 4,271.6; 2010: 4,759.0; 2017: 13,528.8; 2018-2027 average: 6,305.2; 2009-2018 etc., as in table (US$ million) ### Net Present Value of external debt scenarios, 2007–2027 (Table A5 highlights) - I. Before traditional debt-relief and before arrears clearance: - NPV of total debt 2007: 12,282.8; 2017: 11,673.3; 2027: 16,692.2 (US$ million) - NPV of outstanding debt 2007: 12,282.8; 2017: 7,881.8; 2027: 10,438.9 (US$ million) - II. After traditional debt relief and multilateral arrears clearance: - NPV of total debt 2007: 11,152.8; 2017: 6,833.8; 2027: 8,643.4 (US$ million) - III. After conditional delivery of enhanced HIPC assistance: - NPV of total debt 2007: 11,244.1; 2017: 7,824.7; 2027: 8,232.6 (US$ million) - IV. After unconditional delivery of enhanced HIPC assistance: - NPV of total debt 2007: 9,754.4; 2017: 5,735.1; 2027: 7,358.8 (US$ million) - V. After conditional delivery of enhanced HIPC and MDRI assistance: - NPV of total debt 2007: 10,284.8; 2017: 6,666.9; 2027: 6,691.0 (US$ million) ### External debt indicators and trajectories (Table A6 and Table A7 key metrics) - I. Before traditional debt-relief (selected indicators) - NPV of debt-to-GDP ratio: 2007: 62.0; 2017: 27.1; 2027: 17.4 (percent) - NPV of debt-to-exports ratio: 2007: 153.7; 2017: 80.7; 2027: 63.5 (percent) - NPV of debt-to-revenue ratio: 2007: 314.8; 2017: 130.0; 2027: 208.0 (table lists averages and series) - Debt service-to-exports ratio (selected): 2008: 9.6; 2017: 3.4; 2027: 3.6 (percent) - Debt service-to-revenue ratio (selected): 2008: 18.9; 2017: 4.1; 2027: 5.2 (percent) - II. After traditional debt relief and multilateral arrears clearance (selected): - NPV of debt-to-GDP ratio: 2007: 56.3; 2017: 15.9; 2027: 11.4 (percent) - NPV of debt-to-exports ratio: 2007: 139.6; 2017: 47.3; 2027: 41.6 (percent) - Debt service-to-exports ratio: 2008: 8.8; 2017: 5.9; 2027: 3.8 (percent) - Debt service-to-revenue ratio: 2008: 21.2; 2017: 10.0; 2027: 5.7 (percent) - III. After conditional delivery of enhanced HIPC assistance (selected): - NPV of debt-to-GDP ratio: 2007: 56.7; 2017: 12.7; 2027: 10.8 (percent) - NPV of debt-to-exports ratio: 2007: 140.7; 2017: 37.7; 2027: 39.4 (percent) - Debt service-to-exports ratio: 2008: 3.3; 2017: 6.9; 2027: 3.1 (percent) - Debt service-to-revenue ratio: 2008: 8.0; 2017: 11.8; 2027: 4.7 (percent) - IV. After unconditional delivery of enhanced HIPC assistance (selected): - NPV of debt-to-GDP ratio: 2007: 49.2; 2017: 12.6; 2027: 10.8 (percent) - NPV of debt-to-exports ratio: 2007: 122.1; 2017: 37.6; 2027: 39.4 (percent) - Debt service-to-exports and to-revenue ratios similar to conditional delivery entries (table shows series) - V. After conditional delivery of enhanced HIPC and MDRI assistance (selected): - NPV of debt-to-GDP ratio: 2007: 51.9; 2017: 10.2; 2027: 10.3 (percent) - NPV of debt-to-exports ratio: 2007: 128.7; 2017: 30.5; 2027: 37.4 (percent) - Debt service-to-exports ratio: 2008: 3.3; 2017: 6.3; 2027: 2.6 (percent) - Debt service-to-revenue ratio: 2008: 8.0; 2017: 10.8; 2027: 4.0 (percent) ### Sensitivity analysis (Table A7 highlights) - Baseline scenario (post-HIPC unconditional in table): - NPV of debt-to-GDP ratio 2007: 49.2; 2017: 12.6; 2027: 10.8 (percent) - NPV of debt-to-exports ratio 2007: 122.1; 2017: 37.6; 2027: 39.4 (percent) - Shock scenarios from 2009: - Cocoa prices path at -30 percent compared to baseline price: - NPV of debt-to-GDP ratio 2009: 37.6 ; 2017: 13.8 ; 2027: 13.1 (percent) - NPV of debt-to-exports ratio 2009: 85.3 ; 2017: 43.0 ; 2027: 50.2 (percent) - Real GDP growth 2 point lower (homogeneous shock among sectors): - NPV of debt-to-GDP ratio 2009: 37.3 ; 2017: 17.4 ; 2027: 24.4 (percent) - NPV of debt-to-exports ratio 2009: 83.1 ; 2017: 45.2 ; 2027: 69.9 (percent) - NPV of debt-to-revenue ratio 2009: 190.2 ; 2017: 81.6 ; 2027: 112.6 (percent) - Debt service-to-exports and debt service-to-revenue ratios rise materially under the lower GDP growth shock (see table series for exact annual values). ### Possible delivery schedules of bilateral/multilateral relief and institution-specific assistance - World Bank Group (Table A8): Debt service before and after HIPC assistance presented annually 2009–2027 with cumulative figures; example entries: - World Bank debt service before HIPC assistance (selected): 2009: 128.2; 2010: 75.5; 2011: 68.6; 2017: 84.8; 2027: 84.4 (US$ million) - World Bank debt service after HIPC assistance (selected): 2009: 93.6; 2010: 64.7; 2012: 33.8; 2017: 84.8; cumulative and savings series are provided. - Savings on debt service to the World Bank examples: 2009: 34.6; 2010: 10.8; 2012: 33.8; cumulative savings in table. - IMF (Table A9): Possible delivery of IMF assistance under enhanced HIPC and MDRI, 2009–2019 (US$/SDR exchange basis as of November 6, 2008) - Total IMF assistance under enhanced HIPC Initiative: US$ 37.71 million in NPV terms (calculated on decision point data, excluding interest earned on Umbrella account and on committed but undisbursed amounts). - HIPC-eligible debt service due on IMF obligations (annual series): 2009 Apr-Dec: 18.7; 2010: 18.8; 2011: 18.7; 2012: 9.9; 2013: 1.2; 2014: 24.9; 2015: 48.5; 2016: 48.2; 2017: 48.0; 2018: 47.7; 2019: 23.8 (US$ million) - Principal and interest breakdown provided; interim assistance deposits into member's Umbrella Account and completion point disbursements listed: - Interim assistance: 7.5 (US$ million) per interim delivery in table rows - Completion point assistance: 15.1 (US$ million) - Completion point interest: 2.9 (US$ million) - IMF assistance drawdown schedule (annual partial flows) and estimated interest earnings on Umbrella Account provided in table. - Post-MDRI stock delivery examples: from MDRI-II Trust 8.1 (US$ million); from HIPC Umbrella Account 0.6 (US$ million); delivery of remaining HIPC assistance for post-MDRI cutoff date debt: 17.4 (US$ million) - Debt service due to the IMF after HIPC and MDRI debt relief series provided in table; memorandum items include total debt service due in selected years and share of total debt service covered by IMF assistance. ### Cross-cutting observations based on tables and figures - The application of traditional debt relief, HIPC assistance, and MDRI materially reduces projected NPV of debt and debt-service ratios compared to the baseline without relief, but the timing and conditionality of relief significantly affect short- and medium-term debt-service burdens (tables show year-by-year series). - Sensitivity analyses show vulnerability to commodity price shocks (cocoa -30 percent) and lower real GDP growth (2 percentage points), with notable increases in NPV-to-exports and NPV-to-revenue ratios under adverse shocks. *Sources: Ivorien authorities; IMF and World Bank staff estimates and projections (as presented in the supplied content).* --- _Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2009/_cr0933.pdf_