Cote d'Ivoire: IMF Executive Board Concludes 2021 Article IV Consultation With Côte d'Ivoire

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Washington, DC — On July 21, 2021, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV 2021 consultation with Côte d'Ivoire. [1]

Côte d'Ivoire has demonstrated strong resilience to the pandemic. [KA1] [RLA2] While economic growth is expected to have dropped by some 4½ percent compared to the pre-COVID-19 forecast, it is still estimated at 2 percent in 2020, ranking among sub-Saharan Africa's (SSA) best performing frontier market economies. Economic performance and resilience were underpinned by strong pre-crisis fundamentals, a rapid policy response, a relatively lower dependency on sectors that have been typically hit the hardest elsewhere, as well as the support of the international community including the IMF.

The economy is set to return to a strong growth trend, contingent on a receding of the pandemic. The rebound in activity that started in the second half of 2020 remains strong, and growth in 2021 is projected at 6 percent, driven by a recovery in exports and investment, as pandemic headwinds abate and despite short-term electricity shortages. Inflation is temporarily on the rise, also driven by pandemic-induced supply disruptions and the energy shortages. The authorities are continuing their economic and social support policies and stepping up efforts to secure and administer vaccines [KA3] . Continuing capital deepening anchored on an ambitious draft National Development Plan, robust domestic consumption, and the continuation of the ongoing reform agenda are expected to keep growth around 6-6½ percent over 2021-26, despite a gradual fiscal consolidation.

The fiscal deficit reached 5.6 percent of GDP in 2020, as the authorities appropriately increased spending to support firms and households affected by the pandemic. Public debt including debt guarantees rose to 49.8 percent of GDP. The current account deficit is expected to have widened to 3.5 percent of GDP in 2020, mainly reflecting reduced global demand.

Risks remain tilted to the downside. The pandemic could prove harder to contain due to new variants or a protracted vaccine rollout, thus muting the global recovery. A sharp rise in global risk premia could complicate access to international markets. Domestically, possible prolongation of energy shortages and delays in reforms could reduce confidence, dampen private investment, while debt metrics could weaken if revenue mobilization continues to underperform. The security situation at the Northern border could deteriorate. On the upside, implementation of a strong reform agenda to be defined under the umbrella of the incoming National Development Plan would further boost growth and investment.

Executive Board Assessment [2]

Executive Directors agreed with the thrust of the staff appraisal. They welcomed the strong resilience of the Ivoirian economy, owing to the authorities' prompt response to the COVID-19 pandemic, a decade of sound macroeconomic policies, as well as the support of the international community including the IMF. Growth is expected to pick up in 2021 and the medium-term outlook is favorable, subject to uncertainty and external risks. Directors underscored the importance of continued supportive policies until the recovery is well entrenched, while preserving debt sustainability and fostering economic transformation.

Directors acknowledged the need to relax the fiscal stance in 2021 to accommodate additional investment and security spending. They recommended that the authorities return to the WAEMU fiscal deficit target as soon as feasible. Directors highlighted the urgency of significantly boosting domestic resource mobilization to create fiscal space for productive and social spending, by rationalizing tax expenditures, broadening the tax base, and strengthening tax administration. They also encouraged continued efforts to strengthen public financial management, promote digitalization, and improve fiscal transparency. Further efforts are also needed to enhance social safety nets through proactive social policies.

Directors noted the resilience of the financial sector, aided by the actions of the regional central bank. They emphasized the need to maintain financial stability, especially when supportive measures are withdrawn. This calls for continued strong financial sector supervision and a swift restructuring of public banks.

Directors welcomed the preparation of a new ambitious New National Development Plan, aimed at promoting inclusive growth, structural transformation, and private sector development. They underscored the importance of promoting good governance and improving the business environment, including by swiftly adopting the national strategy to fight corruption. Other priorities include measures to promote financial inclusion, increase the effectiveness of labor markets to support the formalization of the economy, and enhance resilience to climate change.

Directors agreed that Côte d'Ivoire's capacity to repay the Fund remains adequate. Noting the moderate risk of debt distress with limited space to absorb shocks, they stressed the need to rebuild fiscal buffers, pursue a prudent debt strategy, and advance reforms to deepen regional financial markets.

It is expected that the next Article IV consultation with Côte d'Ivoire will be held on the standard 12-month cycle.

Côte d'Ivoire: Selected Economic Indicators (2018-22)

Population (2020): 26.9 million

Gini Index (2015): 41.5

Per capita GDP (2020): 2278 USD

Life Expectancy (years): 58

Share of population below the poverty line (2018): 39.5%

Literacy rate: 47.2%

2018

2019

2020

2021

2022

Proj.

Output

Real GDP Growth (%)

6.9

6.2

2.0

6.0

6.5

Prices

Inflation (in %)

0.4

0.8

2.4

2.5

2.2

Central government finances

Revenue and grants (% GDP)

14.8

15.0

15.0

14.7

15.3

Expenditure (% GDP)

17.7

17.3

20.6

20.3

19.9

Fiscal balance (% GDP)

-2.9

-2.3

-5.6

-5.6

-4.7

Public debt 1/ (% GDP)

36.0

38.8

47.7

49.4

50.5

Money and Credit

Broad money (% change)

13.5

11.0

21.4

7.9

8.2

Balance of payments

Current account (% GDP)

-3.9

-2.3

-3.5

-4.3

-4.2

FDI (% GDP)

0.8

1.3

1.0

1.1

1.2

WAEMU reserves (in months of imports)

4.3

4.6

...

...

...

External debt 1/ (% GDP)

23.2

25.5

30.0

31.2

30.9

Exchange rate

Real effective exchange rate (% change)

2.2

-4.0

5.2

...

...

Sources: Ivoirian authorities, IMF staff estimates and World Bank

1/ Does not include debt guarantees.

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