The ECF-supported program has proved an appropriate anchor for Côte d’Ivoire’s efforts towards achieving the ambitious goals set in its National Development Plan 2012–15. Our Ivorian authorities would like to thank the Board, Management and Staff for their support, which has been instrumental in the dramatic changes that the country underwent over the past years. The fruitful discussions recently held with Staff in Abidjan are further signs of the excellent cooperation between Côte d’Ivoire and the Fund, and the authorities broadly share the thrust of the report put forward.
As end-2014 marks an important milestone, it is worth emphasizing some key achievements recorded since the conclusion of the program in 2011. The authorities’ strong resolve and sound policymaking have resulted in strong economic growth starting in 2012, and is projected to reach 8 percent in 2014. The macroeconomic framework has improved significantly. Fiscal policy has favored growth-enhancing public investments, clearing arrears to strengthen the private sector’s balance sheets and improving the delivery of key basic services to the populations. The authorities have also implemented major structural reforms in key economic sectors, including the cocoa-coffee sector, energy, the financial sector and the business environment. All these reform efforts have been accompanied by considerable progress in the area of domestic peace and security and in the overall political environment. The positive outlook has helped Côte d’Ivoire successfully tap the international bond market in July 2014 with a 10-year $750 million Eurobond, which was more than six times oversubscribed and secured a historically favorable yield of 5.625 percent at issue.
Yet, the Ivorian authorities are cognizant of the challenges still facing the economy and the country as a whole. For the remainder of 2014 and 2015, they are committed to address key bottlenecks to growth and to continue to lay the foundations for a thriving private sector capable of creating large job opportunities. The government’s 2015 budget has been built on these grounds while taking account of the need to maintain the fiscal stance in a context of presidential elections and to preserve long-term debt sustainability. The authorities also intend to pursue their successful efforts of ring-fencing against Ebola. The ECF arrangement continues to serve the country well at this juncture. In particular, an augmentation in access will bolster the authorities’ effort that has preserved Côte d’Ivoire from the Ebola crisis to date. The Ivorian authorities have therefore requested the extension of the current ECF program on the basis of their recent performance and as an appropriate anchor for their policies planned for 2015 and ahead. We would value the Board’s support in this regard.
Recent Developments and Program Performance
The Ivorian authorities have kept up the momentum and continue to make progress in implementing reforms. As a result, program performance continues to be strong as shown by the observance of all end-June performance criteria and indicative targets and the completion of all structural benchmarks, albeit with minor delays. The authorities request a waiver for the nonobservance of the continuous performance criterion on the ceiling on new nonconcessional external debt, which occurred in July with the issuance of the US$750 million Eurobond. The bond that moderately exceeded the US$500 million program ceiling was subscribed at US$ 4.8 billion. With such a success, the authorities saw scope to raise more than planned. They liaised with staff and both parties agreed to use the excess to clear domestic arrears. Furthermore, as assessed by staff, the excess proceeds do not impact Côte d’Ivoire’s risk of debt distress and rather help improve the maturity structure of domestic debt.
Key macroeconomic indicators have shown buoyancy over the period under review, though staff and the authorities slightly diverge on growth projections. Staff project real GDP to grow by 8 percent both in 2014 and 2015 against 9 percent and 10 percent from the authorities’ side. The harmonization of methodologies agreed upon should help address this issue. Growth will be driven in 2014-15 by the dynamism of all sectors, in particular cocoa, energy, construction, services and commerce. Low food prices have kept inflation subdued. Owing to high revenue, the end-June fiscal stance was strong, better than programmed, and the primary basic balance displayed a surplus against a deficit projected under the program. Pro-poor spending also performed well, exceeding program target. The authorities are working expeditiously to address issues at the custom administration with the view to further enhance revenue collection and hence the fiscal balance. The external position has benefitted from falling oil price and high cocoa price.
As regards structural reforms, the authorities have made progress on many fronts and are committed to continue their efforts in 2015 and ahead. In the fiscal sector, the transposition of the directives on public finances initiated by the West African Economic and Monetary Union (WAEMU) in national laws is in its final stage. A clear strategy and an action plan have been adopted to put in place a Treasury single account. Likewise, notable improvements have been brought to the public procurement sector, bringing the amount of public procurement granted on a non-competitive basis to 5.8 percent of the value of contracts against 65 percent for the first semester of 2013. The restructuring of public banks has reached an important milestone with the closing down on September 30th of the Banque de Financement de l’Agriculture (BFA) and the other banks are proceeding with the options adopted by the government. The authorities have also brought major improvements to the business climate. Notable improvements include simplified procedures for incorporating companies, streamlined regulations, settlements of business lawsuits in a commercial tribunal, and lower business registration fees. As a result, the number of business start-ups and private investment has continued to increase and for the second consecutive year, Côte d’Ivoire is ranked among the world’s ten countries that stand out as having improved the most in performance on the Doing Business indicators – as indicated by the 2015 Doing Business Report.
Policies in 2015 and the Medium-Term
The authorities’ medium-term policies are meant to contribute to the achievement of the overarching goal of the economic transformation of Côte d’Ivoire envisaged in the National Development Plan (NDP). The progress made in the implementation of the NDP 2012–15, which is under review, should serve as a basis for the preparation of the successor NDP 2016-20. Policies for 2015 are consistent with this framework, and will evolve around stepped up efforts to further enhance macroeconomic stability and accelerate reforms. These include pursuing a fiscal policy geared towards growth while preserving debt sustainability, proceeding with the restructuring of public banks and taking steps in the overall financial sector reform and addressing the remaining bottlenecks related to the business climate.
Gearing fiscal policy towards growth while preserving debt sustainability. The authorities’ 2015 fiscal stance will be characterized by an increase of the overall deficit to 3.4 percent of GDP from 2.3 percent in 2014. This reflects the financing of key growth-enhancing public investments. While having recourse to debt, the authorities are mindful that the fiscal potential is yet to be realized. In this regard, the government has initiated a commission to study tax policy reform. The aim is to raise the revenue to GDP ratio to support the country’s ambitious infrastructure program and to generate high and sustained growth for the years to come. In the meantime, measures for 2015 include the inception of tax collection centers for medium-sized enterprises, developing the tax bases of excise taxes on tobacco and beverages, modernizing tax management by introducing online tax returns, and simplifying business tax systems.
The authorities are of the view that their efforts in financing public investments need to be supplemented by the appropriate external level of external resources if they are to sustain the growth momentum, crowd in the private sector investment and help create jobs especially for the youths. It is in this regard and given the scarcity of concessional resources that they are requesting an increase in the program ceiling on new nonconcessional external debt in 2015. The new window would accommodate the planned 2015 Eurobond and projects in the energy, infrastructure and transport sectors. These have been discussed in detail with Staff who supports the requests, assessing that the new window will not deteriorate Côte d’Ivoire’s risk of external debt distress and that the projects would have considerable benefits to the economy.
Going forward, our authorities would like to reaffirm their commitment to preserve the hard-won achievement regarding debt sustainability. In this vein, the authorities take good note of the fact that the new DSA while factoring in the government’s planned new nonconcessional borrowing concludes that Côte d’Ivoire remains at a moderate risk of debt distress. The authorities will closely monitor debt developments according to their Medium-Term Debt Strategy (MDTS). Moreover, they will continue their efforts to enhance debt management capacity as well as the institutional framework.
Stepping up financial sector reforms. The closing down of the BFA marked an important step in the government’s strategy to divest from the banking sector. This process will be accelerated in the period ahead. The privatization committee has made considerable progress in negotiating with entities interested in acquiring the government’s shares in public banks and the authorities expect to close the deals in 2015. In the same vein, the restructuring options chosen for a few of these banks should enter the implementation phase. As regards the broader reform of the financial sector, after conducting the necessary studies, which was a lengthy process, the authorities have adopted the financial sector development strategy. They are now putting in place the organizational structure including all relevant participants to implement the strategy with the support of partners such as the World Bank and the Fund. In this process, the national effort will also reap the benefits of the reforms initiated by the BCEAO for the whole WAEMU financial sector.
Leveraging the improved business climate to create jobs. Making the private sector the main engine of growth remains a major goal on the Ivorian authorities’ agenda. To this end, they are pursuing the reforms to further improve the business climate with the aim of ranking Côte d’Ivoire among the leading African countries in this area. Additional measures for 2015 have been identified accordingly, ranging from introducing online incorporation of companies to reducing red tape in import/export procedures. Furthermore, the government is supplementing these actions with initiatives to facilitate the physical settlement of businesses for increased job creation. In this line, it has embarked on a vast program of rehabilitation of industrial zones and the creation of new ones for a total cost of CFAF 75 billion. This effort goes hand in hand with the provision of economic infrastructures notably telecommunications, energy, roads and port facilities. The overarching goal is to diversify the industrial base for job creation, including by promoting SMEs.
Over the past years, Côte d’Ivoire has made considerable progress in enhancing macroeconomic stability and implementing structural reforms to engineer sustained and broad-based growth. In an environment of improved security, the authorities have continued to record a strong performance under the ECF-supported program. The recent period has kept up with this momentum of high growth, backed by buoyant public investment, and important structural reforms that are crowding in increasing private investment, including FDI.
Going forward, the Ivorian authorities are fully aware of the challenges still facing their development agenda. Fostering domestic revenue mobilization to realize the fiscal potential, ensuring the smooth financing of major growth-enhancing infrastructure projects without jeopardizing the hard-won debt sustainability, making growth more inclusive by creating jobs remain among the top challenges. The authorities are committed to take on these endeavors, with the support of the Fund and development partners.