Statement by an IMF Mission to Togo

Press Release No. 10/349
September 21, 2010

A mission from the International Monetary Fund (IMF), led by Mr. Marshall Mills visited Lomé from September 8 to 21, 2010 to hold discussions on the fifth review of the program being implemented by Togo under the Extended Credit Facility (ECF). The mission met with President Faure Gnassingbé, the Minister of Economy and Finance, Mr. Adji Otèth Ayassor, other Ministers, and other senior officials of the country. The mission also had fruitful discussions with parliamentarians as well as with representatives of civil society, trade unions, donors, the private sector, and the media.

At the end of the mission, Mr. Mills issued the following statement:

“Growth is rising, albeit modestly, in a context of macroeconomic stability. Average inflation reached 2.1 percent at the end of June 2010, and indicators point to real economic growth of around 3.4 percent in 2010, up somewhat from 2009. Growth remains moderate, owing in part to persistent weaknesses in the international economic environment. The current account deficit is expected to remain high in 2010 as exports continue to lag and imports rise with higher public investment spending. The monetary situation has improved, driven by the healthy growth of deposits, credit to the economy, and foreign assets of the banking system.

“Fiscal policy continues to be supportive of growth. The overall budget deficit should reach around 2.9 percent of gross domestic product (GDP), around the same level as 2009. The current fiscal stance favoring higher levels of public investment remains appropriate in view of international conditions and investment needs accumulated over many years of underinvestment. The authorities are pursuing implementation of the necessary reforms to mobilize fiscal revenue, rigorously respect spending ceilings, and raise capital expenditure using external assistance to complement their domestic efforts.

“These priorities are further reflected in the 2011 draft budget, which is in the final stages of preparation. Fund staff considers the proposed budget framework appropriate.

“Bolstered by significant revenue mobilization efforts, the overall fiscal deficit is projected at 2.8 percent of GDP in 2011. Growth is expected to continue to strengthen in 2011, reaching 3.7 percent. With a view to maintaining medium-term debt sustainability, the authorities need to ensure that their public investment targets are compatible with sustainable debt levels, which should be outlined in a medium-term debt strategy.

“Implementation of the government’s ECF-supported economic and financial program has been broadly satisfactory. Overall, budget execution was generally in line with program objectives, and good progress was made on structural reforms, despite delays in some areas. The authorities intend to step up the arrears clearance process by holding discussions with the private sector to analyze the reasons for delays in the signature of agreements with claimants. The authorities also plan to ask Parliament to adopt the law on privatization in a special session, which would make it possible to move forward with the privatization of public banks. The government remains convinced that their privatization is a particularly necessary step towards reducing the fiscal risks associated with banking activities. The mission welcomed plans to introduce an automatic petroleum product pricing mechanism with a smoothing mechanism to minimize risks for the central government budget, which should increasingly favor poverty-reducing expenditure.

“Along with the banking sector, reforms in the phosphate, electricity, and telecommunications sectors continue to be important for boosting growth, while public financial management reforms are important to support good governance. The mission urged the government to continue to implement and accelerate the implementation of its structural reform program.

“The mission reviewed progress toward the completion point triggers under the Heavily Indebted Poor Countries (HIPC) Initiative. On a preliminary basis, the review concluded that Togo is on track to reach the completion point in December 2010. The fifth program review under the ECF, scheduled to take place in December 2010, will provide an opportunity for the IMF Executive Board to assess whether Togo satisfies the conditions for achieving the completion point. The Executive Board of the World Bank will also conduct a similar assessment around the same time.

“The mission thanks the authorities for their gracious hospitality as well as for the high quality of the technical discussions held.”



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