Press Release No. 09/317

Press Release No. 09/317
September 22, 2009

A mission from the International Monetary Fund (IMF), led by Mr. Marshall Mills, visited Lomé September 9-22, 2009 to conduct the third review under the government’s economic program supported by an arrangement under the Poverty Reduction and Growth Facility (PRGF)¹. The mission met with the Prime Minister, Mr. Gilbert Houngbo; the Minister of Finance, Mr. Adji O. Ayassor; the National Director of the Central Bank (BCEAO), Mr. Komlan V. Adjahoto; other senior officials; parliamentarians; and representatives of the private sector. The mission held discussions with members of the donor community and coordinated with an overlapping World Bank mission.

At the end of the mission, Mr. Marshall Mills, Mission Chief for Togo, issued the following statement in Lomé on September 22, 2009:

“Togo has continued its strong implementation of its economic program supported by the IMF’s Poverty Reduction and Growth Facility, despite the difficulties posed by the global recession. All key budget targets have been met, and good progress has been made in implementing structural measures in the government’s program. Thanks to disciplined budget execution, the government has maintained sound public finances in spite of economic pressures, including avoiding any new domestic arrears.

“The global recession has adversely affected the near term prospects for the Togolese economy, including the outlook for trade services, foreign direct investment and some exports. As a result, the economy is projected to grow by only about 2½ percent in 2009 and 2010. This level of growth represents a slow recovery from growth of less than 2 percent in 2007 and 2008. It is also below Togo’s growth potential of 4 percent. At the same time, Togo’s inflation rate has declined as a result of lower world prices, especially for oil, and good domestic food production.

“Thanks to its strengthened public finances, Togo now has some fiscal space to mitigate the impact of the global recession. To help offset the impact of the global recession, a moderate loosening of fiscal policy would be appropriate, provided it is temporary, affordable, and devoted to high quality spending. The increased spending would go to infrastructure investments, social sectors, and an increase in the amount of domestic arrears to be cleared in cash. These measures are reflected in the execution of the 2009 budget and in the draft 2010 budget under preparation. To achieve these goals, the government intends to strengthen its capacity to manage scaled-up investment spending.

“In the medium term, continued commitment to sound public finances and economic reforms remain critical to achieving strong growth and poverty reduction. Sustainable public debt will require some retrenchment after the short-term fiscal stimulus in 2010. Public spending should continue to shift to priority sectors (health, education, and infrastructure) identified in the authorities’ poverty reduction strategy. The authorities’ commitment to completing structural reforms—in sectors such as banking, phosphate, and telecommunications—will also support medium-term growth.

“It is expected that the IMF Executive Board will discuss the third review under the PRGF in December 2009. The mission would like to thank the authorities for their hospitality and close cooperation.”

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¹ The PRGF is the IMF's concessional facility for low-income countries. PRGF-supported programs are based on country-owned poverty reduction strategies adopted in a participatory process involving civil society and development partners and articulated in the country's Poverty Reduction Strategy Paper. This is intended to ensure that PRGF-supported programs are consistent with a comprehensive framework for macroeconomic, structural, and social policies to foster growth and reduce poverty. PRGF loans carry an annual interest rate of 0.5 percent and are repayable over 10 years with a 5½-year grace period on principal payments