Press Release No. 24/235

IMF Executive Board Completes the Second Reviews of the EFF/ECF Arrangements and the First Review of the RSF Arrangement for Côte d’Ivoire

June 24, 2024

Washington, DC: The Executive Board of the International Monetary Fund (IMF) completed the Second Reviews of the Extended Fund Facility and Extended Credit Facility Arrangements and the First Review of the Resilience and Sustainability Facility Arrangement for Côte d’Ivoire on June 25, 2024, and endorsed the staff appraisal without a meeting on a lapse-of time basis.[1]

The EFF/ECF-supported program approved in May 2023 in the amount of SDR 2,601.6 million (equivalent to 400 percent of quota or about US$3.5 billion), has helped to safeguard macroeconomic stability, as well as a moderate risk rating of debt distress, while growing challenges from climate change are being addressed under the recently approved RSF arrangement for a total amount of SDR975.6 million (equivalent to 150 percent of quota or about US$1.3 billion). The authorities’ ongoing commitment to reforms under both programs should support Côte d’Ivoire’s transformation towards upper middle-income status over the medium-term and enhance its resilience to climate change. Program implementation has been strong thus far, with all end-December performance criteria and end-December and end-May structural benchmarks met. The completion of the reviews allows for an immediate disbursement of about US$ 570 million under the multi-year Fund arrangements.

Côte d’Ivoire’s economy remains resilient against a still difficult global backdrop. Notwithstanding lower than expected cocoa production, the medium-term outlook remains favorable and has been boosted by still strong consumption and investment demand, as well as new activity in the oil exploration and production sector. Risks have become more balanced, reflected in increased interest from foreign investors along with ratings and outlook upgrades by ratings agencies. For 2024, growth is projected to be 6.5 percent, while inflation is expected to return to within the BCEAO 1 to 3 percent CPI inflation target range by end-2024. The 2024 current account deficit is projected to narrow to 5.7 percent of GDP, and the fiscal deficit is expected to consolidate further to 4 percent of GDP.

The authorities remain firmly committed to boosting tax revenue into the medium term, and to implementing the medium-term revenue strategy (MTRS) approved in May 2024. Sustained effort is expected by the authorities to increase tax revenue to GDP by 0.5 percent of GDP, each year between 2024 and 2026 through new, high quality and permanent tax policy and tax administration measures. This will be buttressed by the authorities’ efforts to incorporate into the budget revenues which are being collected by line ministries but not recorded in the fiscal accounts.

Important structural reforms are underway, to deliver business climate improvements and increase the involvement of the private sector in the country’s development. To this end, enhancements in the transparency and accountability of public enterprises, further strengthening governance and financial integrity (particularly the AML/CFT framework), along with investment in human capital, broader financial inclusion, and climate resilience, to support higher productivity growth will be instrumental.

Executive Board Assessment

In completing the Second Reviews under the EFF/ECF Arrangements and the First Review of the RSF Arrangement for Côte d’Ivoire, Executive Directors endorsed the staff’s appraisal as follows:

Côte d’Ivoire’s economic resilience has been maintained despite a series of consecutive global shocks. Notwithstanding a still difficult external environment, the Ivorian economy has continued to exhibit robust growth and interest from foreign investors has remained strong. This highlights the dividends from the authorities’ resolve to sustain important economic reforms. In particular, efforts to boost domestic revenue mobilization are bearing fruit. Further tax policy and administration reforms should be underpinned by the recently adopted MTRS. Moreover, continuing to advance governance and public financial management reforms, along with other structural reforms to induce higher levels of financial inclusion and climate resilience will support rebuilding fiscal buffers, and enhancements to the business environment. All these reform areas remain critical to unlocking the necessary financing for the country’s economic transformation.

The authorities’ economic program remains on track and appropriately focused. With all performance criteria and SBs for the second reviews having been met, the authorities’ track record remains strong. New program commitments on revenue mobilization will support continued increases in tax revenue to close the gap relative to other frontier and emerging market economy peers. Similarly, new PFM and data dissemination structural benchmarks will help boost transparency on fiscal accounts and the conduct of fiscal policy, all of which can help secure public buy-in for the important reforms under the authorities’ Fund-supported programs.

Sustaining a revenue-based fiscal consolidation in 2024 and 2025 will also strengthen the country’s moderate rating of debt distress, and support convergence to the 3 percent of GDP WAEMU deficit target. The authorities’ steadfast commitment to implementing high-quality policy and administrative measures to sustain tax revenue increases of ½ percent of GDP in each of 2024 and 2025 is welcome. Revenue measures already in train in the 2024 budget remain sufficient to reach the revenue floor under the program. Moreover, the authorities should continue to include off-budget revenues from services and fees collected by line ministries into the TOFE. However, these revenues, along with any windfall from more favorable cocoa export prices should not weaken the resolve to reforms. Reprioritizing capital and non-priority expenditure will be essential to safeguard the deficit target, should unanticipated spending pressures arise from deterioration in the regional security situation. Moreover, the authorities’ efforts to continue to streamline non-priority expenditure is welcome.

Adoption of a comprehensive MTRS is a significant reform, which provides an overall vision for tax policy and administration reforms to ensure that domestic revenue mobilization is self-sustaining and commands broad public support. The authorities’ MTRS plan is appropriately focused on wide-ranging enhancements in the tax system to boost its transparency, fairness and consequently efficacy in terms of achieving sufficient levels of domestic revenue mobilization to support the country’s long-run sustainable and equitable growth and economic transformation objectives. Full implementation of the strategy and a concerted effort at monitoring reform implementation and communicating with the public on the merits and progress on the difficult reforms envisioned under the MTRS will be critical to maintain reform momentum over the coming years—especially on rationalizing tax exemptions and expenditures. Importantly, the MTRS also provides an opportunity to induce higher levels of public confidence in the tax authorities’ role in the country’s development, while also building a culture of tax compliance.

The debt management operation has been instrumental in ensuring that debt sustainability risks remain within the moderate rating of debt distress. Nevertheless, keeping debt at a level consistent with a moderate rating of debt distress will need to remain a priority. Aligning new investment financing with overall debt carrying capacity remains critical. Staff welcomes the authorities’ continued commitment to prudent management of the debt portfolio, along with their efforts to strategically mitigate the effects of higher financing costs, through debt management operations and a focus on concessional financing.

Maintaining momentum on structural reforms under the program will be critical to support the objectives of the national development plan. Efforts towards higher and more inclusive growth will be underpinned by efforts to promote private sector-led growth, including by strengthening governance, financial inclusion, and reducing the cost of doing business. The authorities should carefully monitor potential budgetary risks arising from the electricity sector and accelerate plans to reduce payment arrears to domestic suppliers, including through potential further tariff adjustments. Efforts should also continue to address deficiencies in the AML/CFT framework to help boost transparency and further attract private investment.

[1] The Executive Board takes decisions under its lapse-of-time procedure when the Board agrees that a proposal can be considered without convening formal discussions.