IMF Executive Board Completes Seventh ECF Review for Côte d'Ivoire

By International Monetary Fund (IMF)
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ABIDJAN, Côte d'Ivoire, June 5, 2015/African Press Organization (APO)/ -- The Executive Board of the International Monetary Fund (IMF) today completed the seventh review under the Extended Credit Facility Arrangement (ECF) for Côte d'Ivoire. The completion of the review enables the immediate release of the equivalent of SDR 48.78 million (about US$68.36 million), bringing total disbursements under the arrangement to the equivalent of SDR471.54 million (about US$660.84 million). The decision was taken without a formal Board meeting [1].

In completing the review, the Executive Board also approved the authorities' request for the modification of the performance criteria on the primary basic balance and net domestic financing as of end-June 2015 as well as indicative targets consistent with the framework of the economic and financial program.

The Executive Board approved the ECF arrangement for Côte d'Ivoire on November 4, 2011 (see Press Release No. 11/399).

The authorities are to be commended for continued strong macroeconomic performance under the Fund-supported program. Over 2012–14, the growth in real GDP per capita has reached 20 percent. All performance criteria and all but one indicative targets for end-2014 were met. Significant progress has been made toward improving the business climate and the tax administration, and some inroads have been made towards public bank restructuring.

Sustaining high growth rates will require further reforms to improve the business climate. This calls for further efforts including the creation of additional commercial courts in the country and of a commercial court of appeal, the reduction of domestic payments delays, and the improvement of relations between tax payers and tax collection agencies through enhanced transparency in tax control procedures. This also calls for implementing the financial sector development strategy to foster access to credit by SMEs.

Staff considers that the fiscal stance for 2015 remains appropriate despite emerging budgetary pressures. It welcomes the proposed adjustments to the 2015 budget, which include additional revenues and spending cuts containing the deterioration of the basic primary and of the overall deficit to 0.3 percent of GDP. Despite the adjustments, the budget remains broadly growth-friendly and pro-poor, with significant increases in public investment and poverty-reduction expenditures. Staff calls on the authorities to stick to these fiscal objectives despite budget pressures and the electoral context. It emphasizes the need to control increases in current spending over the medium term and to take forceful actions to put the energy sector on a more solid financial footing to limit corresponding fiscal risks.

The recent discovery of extra-budgetary spending is worrisome. Staff notes the assurances provided by the authorities that they do not have knowledge of any further extra-budgetary spending other than the amounts reported in this review. It welcomes the April 23, 2015 Communication by the Council of Ministers reaffirming that extra-budgetary spending should be avoided. It calls on the government to remain vigilant and to strictly respect its commitment to forcefully apply the provisions of the 1998 decree aimed at avoiding extra-budgetary spending, including through disciplinary, civil, and penal sanctions. Furthermore, staff, welcomes the authorities' initiative to launch audits of extra-budgetary spending undertaken before 2011.

While welcoming actions taken to improve PFM and public debt management, further steps are urgently needed. In particular, staff urges the authorities to broaden the budget's scope to ensure that it covers all governmental activities and to avoid that public entities borrow to execute expenditures that should normally be included in the budget. Moreover, the sizable amount of public spending undertaken through exceptional spending procedures, notably treasury advances, should be further reduced. Staff calls on the government to pay close attention to the accumulation of debt by public sector entities. The implementation of the long-delayed restructuring of the public debt directorate into front-, middle-, and back-office and the setting up of a centralized database covering public enterprises' and government guaranteed debt are steps needed to strengthen debt management. Furthermore, the deepening of the regional fixed-income market and the development of a secondary market are crucial to limiting foreign exchange risk on public borrowing in the future.

Staff supports the authorities' commitment to address weaknesses in the national accounts statistics. Staff urges them to strengthen staffing and capacity at the INS, address information gaps, review the compilation of national account statistics, and correct weaknesses identified in the final accounts for 2012. More broadly, Côte d'Ivoire should upgrade and disseminate its economic data to facilitate monitoring by private investors and credit rating agencies.