Cote d'Ivoire: Sustaining Its Economic Transformation

IMF News, June 30, 2018

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The IMF completed its annual health check of the Ivoirien economy.
Political normalization and good implementation of reforms have contributed to the country’s strong economic performance since 2012.
Going forward, bold structural reforms are needed to sustain the pace of development and ensure that the benefits are shared by all.

Strong economic performance since 2012 reflected:
- recovery following political normalization,
- improved business environment,
- sound program of reforms,
- supportive fiscal policy.
Growth averaged about 9 percent annually, but:
- decline in poverty has been modest,
- underemployment remains high.
Government objectives to address inclusiveness:
- upgrade public infrastructure,
- further improve the business climate,
- expand coverage and targeting of social safety nets.

Sustaining robust and inclusive private sector-driven growth amid fiscal consolidation is a key policy challenge.
Bold structural reforms are needed to foster more private sector-led growth as supportive factors may taper over the medium-term, including due to fiscal consolidation.
Actions to improve the business climate are gaining momentum, including in agriculture.
Progress noted:
- reduced processing time for building permits,
- introduced electronic payment of taxes,
- established a credit bureau.
Scope for improvement:
- improve credit access through stronger legal rights for borrowers and creditors,
- deepen credit information on borrowers to catch up with sub-Saharan African frontier market countries.

Half of the Ivoirien workforce is employed in agriculture, and the majority are from rural areas.
About 60 percent of families headed by an agriculture employee are poor.
Women account for 40 percent of agricultural workers.
More than half of all agricultural workers are unschooled.
Agriculture contributed one-fourth of the growth in 2017.
Government actions to boost inclusive growth in agriculture:
- improve market access for crops by upgrading transportation infrastructure,
- extend electricity provision,
- develop strategies to enhance value-added from cocoa and cashews,
- improve business and regulatory environment for agriculture.

Côte d’Ivoire’s frontier market status and favorable international capital market conditions have expanded financing options, but debt needs to be firmly anchored on a sustainable path.
Sound policies and commitment to reforms helped secure good terms on Eurobonds issued in 2017 and 2018.
External public debt is projected to reach nearly 30 percent of GDP in 2018 and is currently assessed to be sustainable in the medium-term.
Risks from increased reliance on international market financing:
- higher rollover risks,
- reduced policy space to buffer future shocks.
Fiscal targets and regional importance:
- Government committed to reduce the budget deficit to the West African Economic and Monetary Union (WAEMU) ceiling of 3 percent of GDP by 2019.
- Côte d’Ivoire’s fiscal consolidation is critically important for regional macroeconomic and monetary stability.

Building fiscal space for priority infrastructure investment and social safety nets requires additional revenue mobilization and prioritization of public expenditure.
To facilitate public consultation and improve implementation, the government set up a committee that includes private sector representatives to work on fiscal reforms.

Building on past structural fiscal reforms, the government is improving revenue administration and public financial management by:
- upgrading information-sharing protocols across revenue collecting agencies,
- instituting electronic payment of taxes,
- improving tracking of imports,
- advancing human resources management and risk analysis.
Measures to improve spending efficiency:
- restructuring public enterprises,
- modernizing the system of government tenders for acquiring goods and services from private companies,
- improving fiscal risk management,
- upgrading cash management and treasury operations.

New prudential rules aligned with the 2018 Basel II/III principles have been introduced to reinforce banking sector oversight and market discipline.
Reforms include:
- higher minimum capital adequacy requirements,
- stricter loan concentration requirements.
Further action needed:
- stringent application of prudential rules for the few remaining noncompliant banks to further improve the soundness of the banking system.

International Monetary Fund