Press Release: IMF Approves Three-Year Arrangement Under the ESAF for Cote d'Ivoire
IMF News, March 17, 1998
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Bibliographic details
- Published: March 17, 1998
Arrangement details
- The IMF approved a three-year arrangement under the Enhanced Structural Adjustment Facility (ESAF) in an amount equivalent to SDR 285.8 million (about US$384 million) to support Côte d’Ivoire’s economic program for 1998-2000.
- The first annual arrangement is equivalent to SDR 123.9 million (about US$167 million) and is available in two semiannual installments.
- The first installment, in an amount of SDR 83.370 million (about US$112 million), will be available on March 25, 1998.
- The IMF also considered Côte d’Ivoire’s eligibility under the Initiative for the Highly Indebted Poor Countries.
Background and recent performance (under prior ESAF arrangement)
- Performance under the three-year ESAF arrangement that expired in June 1997 was broadly satisfactory.
- Progress reported: removing distortions, reducing financial imbalances, containing inflation, improving competitiveness, revitalizing the private sector, and boosting growth.
- Key historical figures:
- Real GDP growth: 6.8 percent in 1996; 6 percent in 1997.
- Inflation (consumer prices, end of period): 3.5 percent in 1996; 5.2 percent in 1997.
- External current account deficit (percent of GDP): 4.8 percent in 1996; 4.5 percent in 1997.
- Remaining vulnerabilities and constraints noted: fragile fiscal situation with cash-flow difficulties and weaknesses in expenditure control; private sector development below expectations; need for further liberalization of the cocoa and coffee sectors; governance issues requiring forceful action to ensure transparency and sound management of public resources.
Medium-term strategy and 1998 program objectives (1998–2000)
- Three key policy components:
- Prudent fiscal policy to bring the budget close to balance by 2000 and achieve a surplus thereafter.
- Structural reforms to promote private sector development and investment, including foreign direct and portfolio investment.
- Ambitious social development agenda to reduce poverty through well-targeted and efficient public spending on education and health.
- Basic macroeconomic objectives for 1998-2000:
- Achieve real GDP growth of about 6 percent a year, allowing per capita income to rise by more than 2 percent annually.
- Maintain an inflation rate of about 3 percent a year, consistent with the exchange rate peg (of the CFA franc vis-à-vis the French franc).
- Lower the external current account deficit to 2 percent of GDP by 2000.
- 1998 program targets (supported by the first annual ESAF loan):
- Achieve a real GDP growth rate of 6 percent.
- Limit inflation to 3 percent.
- Narrow the external current account deficit to 4.1 percent of GDP.
- Fiscal policy specifics:
- Reduce the overall deficit to 1.5 percent of GDP in 1998, from 2 percent in 1997.
- Revenue-side measures: improve efficiency in customs and tax administration, reduce fraud, broaden the tax base.
- Expenditure-side measures: pursue prudent policy while adequately providing for basic health and education services and infrastructure maintenance.
- Monetary policy: conducted at the regional level, to remain consistent with the fixed exchange rate regime and to aim for a further improvement of the CFA franc zone’s net foreign assets position.
Structural reforms
- Authorities accelerating implementation of unfinished structural reform agenda, particularly:
- Trade and price liberalization (pursued in the context of regional arrangements).
- Coffee marketing to be fully liberalized in October 1998.
- Cocoa marketing to be fully liberalized in October 1999.
- Privatization to be accelerated with the sale of 15 enterprises in 1998.
Social policy and poverty reduction
- Strategy: sustained high economic growth plus social policies and measures targeted to the most vulnerable groups.
- Government actions:
- Comprehensive poverty reduction action plan adopted in June 1997 with specific measures targeting the poor.
- Continued redirection of public spending in favor of education, health, and infrastructure maintenance.
- Establishment of a steering committee to supervise actions under the poverty plan and to establish a system to monitor poverty indicators.
Challenges ahead
- Poverty reduction remains a major challenge given the strong deterioration in living standards during the economic decline from the mid-1980s to the early 1990s.
- Need for further fiscal consolidation to achieve financial viability over the medium term and to increase public saving.
- Crucial actions required:
- Strengthen government revenue performance and expenditure controls.
- Ensure transparency and sound management of public resources.
- Carry out the next phase of structural reforms with strong resolve to foster private sector confidence.
- Ensure good governance and strengthen the judicial system.
IMF membership and outstanding use
- Côte d’Ivoire joined the IMF on March 11, 1963.
- Quota: SDR 238.2 million (about US$320 million).
- Outstanding use of IMF financing currently totals SDR 333 million (about US$448 million).
Selected economic indicators (as presented)
- Real GDP: 6.8 (1996); 6.0 (1997); 5.8 (1998**).
- Real per capita GDP: 3.1 (1996); 2.3 (1997); 2.1 (1998**).
- Consumer prices (end of period): 3.5 (1996); 5.2 (1997); 3.0 (1998); 2.5 (1999).
- Overall fiscal balance (deficit -): -2.1 (1996); -2.0 (1997); -1.5 (1998); -0.8 (1999); -0.3 (2000**).
- External current account balance, excluding official transfers (deficit -): -4.8 (1996); -4.5 (1997); -4.1 (1998); -3.2 (1999).
- Source of indicators: Côte d’Ivoire authorities, and IMF staff estimates and projections.
- Note: * Estimates; **Program.
Source: Press Release No. 98/5, March 17, 1998, IMF EXTERNAL RELATIONS DEPARTMENT.