Press Release No. 22/210

IMF Executive Board Concludes 2022 Article IV Consultation with Côte d’Ivoire

June 17, 2022

• The Ivorian economy proved resilient to the COVID-19 pandemic, thanks to the authorities’ effective policy response, and recovered strongly in 2021 with growth estimated at 7% from 2% in 2020.
• The impact of the war in Ukraine and regional security challenges are expected to weigh on the macroeconomic outlook in 2022.
• The medium-term growth outlook remains robust. A resolute implementation of reforms under the 2021-25 National Development Plan (NDP) would boost medium-term growth.

Washington, DC : The Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Côte d’Ivoire and endorsed the staff appraisal without a meeting on a lapse-of-time basis. [1]

Supported by solid macroeconomic stability, the Ivorian economy proved resilient to the COVID-19 pandemic thanks to the authorities’ effective policy response. COVID-related fatalities remain at low levels by international standards. Vaccination efforts continue and about 70 percent of the target population has already received a first dose.

The economy recovered strongly in 2021 , with growth estimated at 7 percent (from 2 percent in 2020), while annual inflation rose to 4.2 percent due to external and supply shocks. The overall fiscal deficit reached 5.1 percent of GDP, lower than anticipated, mainly due to improvements in customs collection and tax administration which offset higher security spending.

The deterioration in the external environment linked to the war in Ukraine and regional security challenges are expected to weigh on the macroeconomic outlook in 2022. IMF staff forecasts growth to slow down to 6 percent this year due to subdued global demand, worsened terms of trade, and increased uncertainty, while inflation is expected to increase further to about 5½ percent. The Ivorian authorities took several temporary measures to contain the impact of the war in Ukraine, such as introducing price ceilings on several food items.

However, the near term is dominated by negative risks, stemming mainly from the global repercussions of the war in Ukraine, tighter monetary policy in advanced countries and the associated increase in borrowing cost, as well as new COVID-19 variants’ outbreaks and continued instability in some neighboring countries. The medium-term growth projections remain robust with the country facing also upside risks, notably related to the discovery of substantial oil and gas reserves. A resolute implementation of reforms under the 2021-25 National Development Plan (NDP) would boost medium-term growth.

Executive Board Assessment [2]

A swift and well-designed policy response, underpinned by strong macroeconomic policies over the past decade, helped contain the economic cost of the COVID-19 pandemic. The war in Ukraine has nonetheless clouded Côte d’Ivoire’s outlook. The recent measures to contain its impact on inflation and the economy should remain temporary and become increasingly targeted to the most vulnerable if the shock proves persistent. The authorities need to find the right balance between accommodating urgent spending pressures, which also include higher security spending, and preserving fiscal space to cope with future shocks.

The current circumstances could warrant a slightly higher-than-budgeted deficit this year. However, converging to the WAEMU target deficit of 3 percent of GDP in 2024 remains feasible. The debt sustainability analysis continues to point to a moderate risk of debt distress, but with very limited space to absorb future shocks amid worsening market conditions, highlighting the authorities’ need to accelerate efforts to mobilize domestic revenue.

Pursuing fiscal reforms remains critical for Côte d’Ivoire to make room to finance priority spending and support inclusive growth. While the better-than-anticipated 2021 fiscal outturn is in part due to ongoing improvements in tax administration reforms and customs collection, especially on account of digitalization, tax revenue remains well below the WAEMU tax convergence target of 20 percent of GDP. Continuing ongoing efforts to improve tax administration as well as to rationalize tax exemptions are critical to finance government spending for investment, social convergence, and services in underserved regions. Redesigning and simplifying the personal income tax regime would also improve its progressivity.

The new social program of the government can continue enhancing human capital. While the country made significant progress in broadening access to education over recent years, further efforts aimed at improving the quality of basic education and professional training systems would help easing skills mismatch in the labor market. Despite notable progress, ensuring equitable access to health care remains a priority.

Sustaining efforts to improve the business climate, strengthen public services, and tackle climate change challenges are key to boost inclusive and sustainable growth. The authorities need to accelerate reforms to tackle infrastructure bottlenecks, regulatory framework deficiencies, enhance the protection of land tenure and property rights, and streamline bureaucracy. A swift implementation of the 2021-25 NDP reforms would help, and a strong involvement of the private sector is key to ensure efforts are focused where they are needed the most, as well as to contain fiscal costs. Further improvements in governance and the fight against corruption will also contribute to attract private investment. The authorities are committed to adopting sound climate adaptation and mitigation policies, including on sustainable farming and forest preservation.

Deepening financial inclusion and access to finance remain crucial for unlocking the private sector’s potential. Tackling deficiencies in insolvency procedures, improving the credit infrastructure, and a prompt restructuring of undercapitalized public banks, would improve the capacity of the banking sector to support growth.

It is expected that the next Article IV consultation for Cote d'Ivoire be held on the standard
12-month cycle.