IMF Executive Board Concludes 2019 Article IV Consultation with Togo

June 27, 2019

On June 26, 2019, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation [1] with Togo. The Board also completed the Fourth Review of Togo’s economic performance under a three-year program supported by the IMF’s Extended Credit Facility (ECF) arrangement; a related press release was issued separately.

Despite bold reforms implemented in recent years, a climate of uncertainty related to socio-political tensions and underdeveloped institutions have prevented Togo from fully unlocking its substantial growth potential. Following a sharp deceleration in 2017 due to socio-political tensions, economic growth is estimated to have accelerated to 4.9 percent in 2018 and is expected to approach 5½ percent over the medium term. Headline inflation stood at 2 percent in March 2019 (year-on-year) and is expected to remain below the 3-percent WAEMU convergence criteria in the medium term. The current account deficit was markedly smaller in 2017-18 relative to previous years and is projected to remain in the range of 4-5 percent of GDP. Togo reached the WAEMU fiscal deficit criterion in 2017 and 2018, two years ahead of the timeline agreed by Member States. Debt is declining relative to the level at program approval but remains the highest among the WAEMU countries. Togo’s ability to raise funds in the regional bond market has improved.

Executive Board Assessment [2]

Executive Directors agreed with the thrust of the staff appraisal and commended Togo’s broadly satisfactory performance under their economic program supported by an Extended Credit Facility. They welcomed the economic recovery since 2018 and the progress achieved on structural reforms. Nonetheless, Directors noted that risks remain tilted to the downside. Uncertainty remains high ahead of the Presidential elections scheduled for the first half of 2020; and, at the regional level, security risks have recently intensified.

Directors commended the authorities for achieving early compliance with the WAEMU convergence criterion. They emphasized the importance of safeguarding the hard‑won fiscal consolidation and pursuing debt reduction. At the same time, Directors noted the authorities’ need for some urgent expenditure in 2019‑20 to accommodate unforeseen events that could jeopardize social and economic stability. Directors supported safeguard measures to limit budgetary risks related to this spending. They welcomed the authorities’ commitment that, despite the loosening of the fiscal deficit relative to previous projections, it will remain consistent with the WAEMU deficit criterion.

Directors commended progress on public financial management while encouraging the authorities to boost permanent revenue. They welcomed the arrears clearance efforts, the new methodological guide on cost‑benefit analysis of public investment, the comprehensive expenditure review, and the move to program‑based budgeting. However, Directors noted that revenue outturn partly relied on exceptional and non‑permanent sources. They encouraged the authorities to take corrective measures to bolster permanent revenue, including by reducing tax exemptions, to preserve the fiscal consolidation and create fiscal space for much‑needed social and infrastructure spending.

Directors emphasized the importance of undertaking further efforts to support financial sector stability. They expressed concern about the delays in finalizing reforms related to the two public banks and recommended completion of the privatization process. Directors emphasized the need to address the elevated non‑performing loans and inadequate capital buffers, and to improve the effectiveness of the AML/CFT framework.

Directors underscored the importance of accelerating structural reforms as key to fostering robust and inclusive growth. They supported the authorities’ efforts to promote Togo as a major logistical hub, a dynamic financial center, and a strong manufacturing base under the National Development Plan and the Compact with Africa. To that end, Directors encouraged the authorities to take steps to build on the recent improvement in the business environment. They also stressed the importance of addressing governance challenges and implementing anti‑corruption measures, and advancing gender and income equality reforms. Directors also noted the importance of taking into account capacity absorption in the provision of Fund technical assistance.


Table 1. Togo: Selected Economic Indicators, 2018-24

2018

2019

2020

2021

2022

2023

2024

Est.

Projections

National income, prices, and exchange rates

(Percentage change)

Real GDP

4.9

5.1

5.3

5.4

5.4

5.4

5.4

Consumer price index (average)

0.9

1.4

2.0

2.0

2.0

2.0

2.0

Monetary survey

(Percentage change of beginning-of-period broad money)

Net foreign assets

0.5

1.7

1.7

1.7

1.6

1.5

1.5

Net credit to government

2.7

-1.3

1.2

0.0

0.1

0.0

0.0

Credit to nongovernment sector

3.1

5.6

7.5

8.3

8.2

8.3

8.6

Broad money (M2)

9.0

9.2

9.3

9.3

9.3

9.3

9.4

Investment and savings

(Percent of GDP)

Gross domestic investment

26.8

31.1

32.0

32.9

33.6

34.2

34.8

Government

6.8

10.1

9.5

9.5

10.2

10.7

11.4

Nongovernment

20.0

21.0

22.5

23.4

23.4

23.4

23.4

Gross national savings

21.9

25.2

26.7

27.9

28.9

29.6

30.3

Current account balance

-4.9

-5.9

-5.3

-5.0

-4.7

-4.5

-4.5

Government budget

Total revenue and grants

23.9

24.0

24.4

24.8

25.4

26.0

26.7

Tax revenue

16.5

17.6

17.7

18.1

18.6

19.1

19.6

Total expenditure and net lending

24.7

26.6

26.5

26.3

26.9

27.2

27.7

Domestic primary balance

2.4

1.6

2.5

2.7

2.7

2.8

2.8

Overall balance (commitment basis, incl. grants)

-0.8

-2.7

-2.1

-1.5

-1.4

-1.2

-1.0

Debt

External public debt1

20.5

22.2

21.8

21.4

21.0

20.4

19.7

Total public debt2

76.2

72.2

68.4

64.2

60.3

56.5

52.8

Total public debt (excluding SOEs)3

73.6

70.1

66.6

62.7

59.1

55.5

52.0

Sources: Togolese authorities and IMF staff estimates and projections.

1 Includes state-owned enterprises’ external debt.

2 Includes domestic arrears and state-owned enterprises’ debt.

3 Includes domestic arrears.



[1] Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.

[2] At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summings up can be found here: http://www.imf.org/external/np/sec/misc/qualifiers.htm .

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