Togo: IMF Executive Board Completes the Fifth Review Under the Ecf Arrangement and Approves Us$34.6 Million Disbursement to Togo

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On October 25, 2019, the Executive Board of the International Monetary Fund (IMF) completed the fifth review of Togo's economic performance under a program supported by an Extended Credit Facility (ECF) arrangement. [1] The completion of the review enables the disbursement of SDR 25.17 million (about US$34.6 million), bringing total disbursements under the arrangement to SDR 151.02 million (about US$207.8 million).

Togo's three-year arrangement for SDR 176.16 million (about US$242.4 million, 120 percent of Togo's quota), was approved on May 5, 2017 (see Press Release No.17/151 ). The program aims to reduce the overall fiscal deficit substantially to ensure long-term debt and external sustainability; refocus policies on inclusive growth through targeted social spending and sustainably-financed infrastructure spending; and resolve the financial weaknesses in the two public banks.

Economic growth is projected to accelerate to 5.3 percent in 2019 and to hover around 5½ percent over the medium term. Togo has complied with the WAEMU deficit criteria since 2017; the overall fiscal deficit is projected at 2.9 percent of GDP in 2019 and 1.9 percent of GDP in 2020. Debt has declined and is expected to fall below 70 percent of GDP from 2020. Discussions on the debt reprofiling operation and the related guarantees are underway and awaiting decisions.

Following the Executive Board discussion, Mr. Mitsuhiro Furusawa, Deputy Managing Director and Acting Chair, made the following statement:

"Togo's performance under the ECF-supported program has been broadly satisfactory. The economic recovery seems to be taking hold, structural reforms are progressing, and the fiscal consolidation continues. Nonetheless, there are downside risks related to the global economic environment, regional security conditions, and the potential impact of the electoral cycle on domestic economic activity.

"The authorities remain determined to pursue fiscal consolidation and debt reduction. Given high debt levels, revenue mobilization efforts and spending prioritization should continue, while addressing the persistent underperformance on social spending to enhance economic inclusiveness and to reduce poverty. In case the authorities consider conducting the debt reprofiling operation, it should lead to a reduction of the NPV of public debt, and safeguard measures should be put in place to address any related risks.

"It is important to address the weaknesses in the two public banks transparently. A successful privatization of these two banks would safeguard financial stability and minimize costs to the State budget. Broader financial sector developments should also be monitored, and corrective actions should be taken as needed, including in terms of the high non-performing loans.

"Structural reforms are progressing on tax policy, revenue administration, and public expenditure management. Significant progress has also been made in the improvement of the business environment, which is expected to boost domestic and foreign private investment. It is essential to strengthen the AML/CFT framework, fully implement the recently adopted legal framework on governance and anti-corruption and ensure that the related institutions become fully operational."

[1] The ECF is a lending arrangement that provides sustained program engagement over the medium to long term in case of protracted balance of payments problems.

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