Public Information Notice: IMF Concludes 2002 Article IV Consultation with Togo

December 8, 2003

Public Information Notices (PINs) are issued, (i) at the request of a member country, following the conclusion of the Article IV consultation for countries seeking to make known the views of the IMF to the public. This action is intended to strengthen IMF surveillance over the economic policies of member countries by increasing the transparency of the IMF's assessment of these policies; and (ii) following policy discussions in the Executive Board at the decision of the Board. The staff report (use the free Adobe Acrobat Reader to view this pdf file) for the 2002 Article IV consultation with Togo is also available.

On May 17, 2002, the Executive Board of the International Monetary Fund (IMF) concluded the 2002 Article IV consultation with Togo.1


Togo's macroeconomic situation remained difficult in 2001, owing to political uncertainty, falling cotton prices, and continued problems in phosphate production and slower than anticipated growth in the service sector. Nevertheless, the economy recovered somewhat in 2001, achieving a real GDP growth rate of 2.7 percent, compared with a contraction of 1.9 percent in 2000. This recovery was driven by solid growth in cash crop production reflecting favorable climatic conditions and higher international cocoa prices. Cement production expanded, but there was a major contraction in phosphate output, caused by a decline of the production capacity of the Togolese phosphate company (OTP) and by a further deterioration of its financial situation. The external current account deficit (including official transfers) widened to 15.9 percent of GDP from about 14 percent in 2000, as the improvement in the terms of trade were more than offset by a larger volume of imports (mostly linked to activities in the export processing zone) and deterioration in the service balance. Average annual rate of inflation picked up to 3.9 percent, reflecting mainly higher transportation costs.

In the fiscal area, government revenue collection was hampered by continued problems in tax collection from key public enterprises and a shortfall in petroleum excise tax as the automatic adjustment mechanism was not implemented as envisaged. Declining revenues were somewhat matched by some cuts in current expenditure. However, substantial expenditure pressures emerged in the last quarter of 2001, notably extrabudgetary spending, including travel abroad. While the overall deficit, on a payment order basis and including grants, was limited to 2.0 percent of GDP, there was a substantial accumulation of domestic and external payments arrears (about 3.5 percent of GDP). The overall deficit, on a cash basis, was thus limited to 1.5 percent of GDP. With limited domestic and external financing, further arrears were accumulated on amortization payments.

Performance under the staff-monitored program (SMP) was mixed, as the political situation remained unsettled. While significant progress was made in implementing structural reforms to privatize the state banks, most of the quantitative benchmarks under the SMP were not met, in particular on net credit to the government and the nonaccumulation of new domestic and external payments arrears. Nevertheless, the SMP played a positive role in stabilizing the economy and advancing structural reforms in 2001.

Togo's near-term economic prospects will depend on continued adherence to prudent macroeconomic policies, acceleration of structural reforms to foster an environment favorable to private sector development, and the rapid normalization of relations with external donors, which will be a condition for the resumption of their financial support. If the authorities implement their own economic program in 2002 and if the political situation is resolved, the rate of real economic growth is expected to pick up to 3.0 percent in 2002, and inflation to be brought down to about 2 percent. The projected improvement in economic growth would be attributable to increased production of cotton, cocoa, and foodstuff. Moreover, the implementation of the present rehabilitation plan for OTP could also allow production to increase starting in 2002.

Executive Board Assessment

Executive Directors observed that Togo's economic situation, which has deteriorated in recent years, remained difficult in 2001 owing mainly to political uncertainty, falling cotton prices, and continued problems in phosphate production. Although real GDP growth recovered somewhat, fiscal and external imbalances persisted and inflation edged up. Directors expressed concern over the poor fiscal performance, which has resulted in a substantial accumulation of domestic and external arrears, including arrears to multilateral financial institutions. They were disappointed that most quantitative benchmarks under the SMP were not met, but noted that progress was made on the structural front.

Directors considered that stabilization of the public finances, privatization of public enterprises, and normalization of relations with external creditors will be critical for achieving sustained growth and poverty reduction over the medium term. Most Directors therefore welcomed the authorities' economic program for 2002, which is aimed at stabilizing the public finances and completing key structural reforms. Directors urged the authorities to improve economic management and to take the steps needed to overcome the current political impasse so as to facilitate full implementation of the economic program and to regain access to external financing.

Directors stressed that a prudent fiscal stance will be a prerequisite for macroeconomic stabilization in 2002. Given the financing constraints, they urged the authorities to strengthen tax administration and broaden the tax base. In particular, they noted that further actions are needed to combat tax evasion and to limit tax exemptions, that public enterprises need to discharge their tax obligations, and that petroleum product prices should be adjusted in a timely fashion.

Directors considered that the main challenge in 2002 will be to limit expenditures to available budgetary resources. They stressed that improvements in treasury cash management are needed to make the budget a more effective instrument of economic management. They welcomed the authorities' plans to hold high-level monthly meetings to review revenue and expenditure developments, and to take into account the need to fund priority social spending when making budgetary allocations.

Directors noted Togo's uncertain medium-term prospects, and regarded a stepping up of the momentum of structural reforms as critical for restoring confidence, achieving higher economic growth rates, and reducing poverty. They were encouraged by the authorities' determination to deepen structural reforms in key areas, and urged them to complete the privatization of state banks as soon as possible. Directors also urged the authorities to regularize relations with external creditors so as to facilitate a quick resumption of budgetary assistance. They stressed that every effort should be made to meet current debt-service obligations to multilateral creditors and to achieve a phased reduction of accumulated payments arrears.

Directors welcomed the agreement reached with a private firm to rehabilitate the phosphate company under new management before its full privatization, and the agreement reached with commercial banks to reschedule the OTP's debt. They noted that successful rehabilitation of the phosphate sector will help restore production to full capacity, increase phosphate exports, strengthen the banking system, and provide tax resources to the budget.

In view of the macroeconomic importance of the cotton sector for poverty alleviation in rural areas, Directors considered that fundamental reforms in this sector should be a key medium-term priority. They endorsed the measures under active consideration to limit the potential deficit of SOTOCO (the cotton company) for the 2001/02 crop season. The recommendations of a diagnostic study, which will be prepared with World Bank assistance, should help address the short-term problems of this sector. Over the medium term, Directors saw a need for additional measures to address structural issues and to reinforce the role of cotton producers. Directors urged the authorities to begin discussions with development partners on the terms of reference for the complementary studies, so as to lay the groundwork for future financial support from the European Union and bilateral donors. Some Directors suggested that the impact of trade subsidies in large cotton-producing countries is also contributing to the problems of the cotton sector in Togo.

Directors welcomed Togo's continued participation in regional economic and trade integration initiatives, as well as the steps taken by the authorities to strengthen the framework for implementing anti-money-laundering measures and for combating the financing of terrorism. They noted that Togo's external competitiveness remains adequate in the context of the regional currency arrangement.

Directors observed that major efforts will be required to rebuild Togo's institutional and administrative capacity. Moreover, external assistance will be necessary to address the identified weaknesses of the treasury information system and to upgrade the computer system, purchase needed software, and train staff. Directors welcomed the progress made by the authorities on the exercise initiated in 2001 to consolidate and reconcile debt data with most Paris Club creditors, and urged the authorities to complete the reconciliation of debt with the remaining creditors.

Directors noted that, despite some progress, Togo's statistical information system remained weak, particularly with regard to external sector and public finance statistics. They urged the authorities to press ahead with efforts to improve the compilation of economic and social statistics, and considered that Togo's participation in the General Data Dissemination System would help establish a framework for broad-based improvements in the country's statistical systems. Directors also welcomed the progress made in preparing an Interim Poverty Reduction Strategy Paper.

    Togo: Selected Economic Indicators






(Annual percentage change, unless otherwise indicated)


Output and prices


Real GDP





CPI (end of period)






Government budget


Revenue and grants





Total expenditure





Current expenditure





Capital expenditure








Broad money (M2)





Velocity (GDP/average M2)






      (In percent of GDP, unless otherwise indicated)

Government budget


Revenue and grants





Total expenditure





Primary balance





Overall balance 1/






External sector


Current account 2/





External public debt





Debt-service ratio 3/






Exchange rate (CFAF/$)





Nominal GDP (In billions of CFAF)






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

1/ On a payment order basis and excluding grants.


2/ Excluding official grants.


3/ In percent of goods and services.


1 Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board. At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities.


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