Press Release: IMF Approves Second Annual Loan for Togo Under the ESAF

December 20, 1995

The International Monetary Fund (IMF) has approved the second annual loan for Togo under the enhanced structural adjustment facility (ESAF)1 equivalent to SDR 21.7 million (about $32 million), to support the Government's 1995-96 economic reform program. The loan will be disbursed in two equal semiannual installments.


Following a period of severe social disruptions and a sharp downturn in economic activity, Togo adopted a comprehensive adjustment strategy in mid-1994 aimed at restoring sustained economic growth and achieving financial viability over the medium term. The strategy, which centered on the devaluation of the CFA franc and relied on the pursuit of supporting fiscal and credit policies, led to a resurgence of economic activity. Real GDP growth was nearly 14 percent in 1994, following a contraction of 22 percent over the previous three years, and is projected to grow by 8.3 percent this year, due largely to the buoyant performance of the mining and manufacturing sectors. After an initial surge in prices caused by the devaluation, inflationary pressures subsided in late 1994, and inflation has been running at an annual rate of 6.5 percent during the first nine months of 1995. The authorities made significant progress in implementing the structural reforms envisaged under the program, notably in the fiscal area, preparing for the privatization of public enterprises and mixed companies, and economic liberalization. The authorities also instituted a number of social safety net measures to protect the most vulnerable groups in society.

The Medium-term Strategy and the Program for 1995-96

Building on the progress achieved so far, Togo's adjustment efforts for 1995-98 aim at achieving an annual real GDP growth rate of 6.5 percent, while reducing inflation, and further strengthening public finances and the balance of payments. To these ends, government revenue has to be raised in a enduring way, and wage policy will have to be prudent. The fiscal effort will be supported by a cautious credit stance and a flexible interest rate policy at the regional level. Ongoing structural reforms will be reinforced to sustain high GDP growth through efficiency gains and a greater involvement of the private sector.

Within this medium-term strategy, the program for 1995-96, supported by the second annual ESAF loan, has as its main objectives to achieve real economic growth of about 6.5 percent and to reduce the annual average rate of inflation to 5 percent. To attain these objectives, the authorities will seek to increase the ratio of revenue to GDP by about four percentage points in 1996, to above 16 1/2 percent, while restraining the level of expenditure and improving its structure, thereby permitting a reduction in external and domestic arrears. Monetary and credit targets under the program have been set within a regional framework, consistent with the objective of containing inflation and maintaining adequate external reserves to ensure the stability of the CFA franc.

Structural Reforms

The program includes comprehensive structural measures that aim at accelerating the restructuring of public enterprises and furthering private sector involvement. These include the sale of the Government's participation in nine companies in which it has a majority or substantial participation; the restructuring of the export crop marketing company OPAT; and the sale of 40 percent of the Government's share in the phosphate mining company OTP. In the regulatory area, the authorities plan to eliminate a number of price controls.

Addressing Social Costs

The Government's strategy in the social and environmental areas aims at reducing poverty, and improving the management of natural resources and the urban environment. To these ends, the program contains measures that are targeted at protecting the most vulnerable groups of the population, with a view to promoting job creation, and strengthening health and education services.

The Challenge Ahead

Despite welcome gains, Togo's economic and financial situation remains fragile, and further significant improvements are required in order to attain a sustainable position and fully utilize the potential of the economy. The rate of disbursement of external financing remains subject to some uncertainty and the Government should, therefore, stand ready to take such additional measures as required to ensure rigorous implementation of the economic program.

Togo joined the IMF on August 1, 1962 and its quota2 is SDR 54.3 million (about $81 million). Its outstanding use of IMF credit currently totals SDR 61 million (about $90 million).

Togo: Selected Economic Indicators, 1993-98

  1993 1994* 1995** 1996** 1997** 1998**

(percent change)
Real GDP –15.5 13.9 8.3 6.8 6.5 6.5
Consumer prices
    (annual average)
–3.6 35.3 6.8 5.0 4.3 3.0
(percent of GDP)
Primary fiscal balance,
    (deficit –)
–10.0 –5.9 –1.6 1.0 2.2 3.1
External current account balance,
    excluding grants (deficit –)
–8.8 –8.2 –7.4 –7.8 –7.9 –6.8

Sources: Togolese authorities; and IMF staff estimates and projections.

1. The ESAF is a concessional IMF lending facility for assisting low-income members that are undertaking economic reform programs to strengthen their balance of payments and improve their growth prospects. ESAF loans carry an interest rate of 0.5 percent and are repayable over 10 years with a 5 1/2-year grace period.

2. A member's quota in the IMF determines, in particular, the amount of its subscription, its voting weight, its access to IMF financing, and its allocation of SDRs.


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