LOME, Togo, December 17, 2013/African Press Organization (APO)/ – The Executive Board of the International Monetary Fund (IMF) on December 6, 2013 concluded the Article IV consultation with Togo.1
Togo has made significant progress in macroeconomic stability, but challenges remain in accelerating economic reforms and reducing poverty.
Real economic growth accelerated from almost 4½ in 2010-11 to 5¾ in 2012-13, reflecting dynamism in agriculture, mining, construction and public works, particularly in transportation infrastructure. Growth has been accompanied by a widening of the current account deficit, financed mainly through foreign direct investment. Inflation has been low, on average slightly below 2½ percent during 2012-13.
Under election-related pressures, fiscal policy deteriorated in 2012 and early 2013, with the approval of expansionary budgets that led to financing shortfalls. In mid-2013 the authorities took strong corrective measures, including by adopting a revised budget. These measures have placed Togo on a path of fiscal consolidation, anchored by an improvement in the primary domestic fiscal balance that could lead to a gradual reduction of debt.
On the fiscal policy front, challenges remain in achieving greater prioritization of public investment projects, reducing fuel subsidies, and containing the public wage bill, in order to create the needed fiscal space for higher social and infrastructure spending. More generally, there is need to formulate annual budgets in the context of medium-term budget policies and improve public debt management to ensure continued debt sustainability.
Progress in structural reforms has recently accelerated with a re-energized program of public financial management reform, and the project to establish a revenue authority by merging tax and customs administrations. The proposed revenue authority could be leveraged to modernize revenue administration efficiency and increase revenue by bringing appropriate structures, operations, and management processes to modern international standards.
Poverty declined during 2006-2011. However, growth has not been inclusive as income distribution worsened. Poverty in rural areas has actually increased, while it declined, across all income levels, in the capital area where most economic growth is concentrated. Internal migration contributed to poverty reduction.
Sustainable growth is hampered by major obstacles. Chief among these are infrastructure bottlenecks, particularly in the electricity and transport sectors, high telecommunication costs, and a generally weak business environment.
Togo’s financial sector has deepened and its aggregate financial indicators are sound. Two state-owned banks have been privatized, new banks are expanding operations, and the microfinance sector has grown rapidly. The authorities’ objective remains to divest from the banking sector. However, individual banks face difficult situations and the authorities have taken initial steps to stem asset deterioration. The supervision framework of the micro-finance sector needs to be improved, licensing regulations enforced and pyramid-like schemes closed.
Executive Board Assessment2
Directors commended the authorities’ actions to control the fiscal deficit and to set Togo on a sustainable debt path. They emphasized the importance of improving debt management and seeking financing on terms consistent with debt sustainability. To free budget space for social and infrastructure expenditure, Directors encouraged a progressive reduction in poorly-targeted fuel subsidies and lower growth of public sector wages. They noted that improvements in the financing and management of projects will be necessary to support a scaling-up of public investment. Directors also recommended the swift implementation of long-planned fiscal reforms, including the establishment of a single treasury account and a new revenue authority, which should enhance revenue administration and mobilization.
Directors took note of the progress made in promoting financial development. Nonetheless, they underscored the need to intensify financial sector oversight and resolve problem banks. Specifically, they called for stronger supervision of microfinance institutions and further restructuring of public banks.
Directors agreed that structural reforms remain critical to improve competitiveness and reduce poverty. In this context, they encouraged the authorities to address bottlenecks in the energy sector, reform public enterprises, and make further efforts to improve the business environment. More effective poverty reduction policies and renewed attention to agricultural productivity and employment should also remain top policy priorities.
Directors welcomed the authorities’ intention to remain in close engagement with the Fund, including through a possible Fund-supported program and continued technical assistance in key reform areas.
Togo: Selected Economic Indicators, 2010–13
2010 2011 2012 2013 2014
Est. Proj. Proj.
(Annual percentage change)
Income and Prices
GDP at constant prices
4.1 4.8 5.9 5.6 6.1
Consumer price index (average)
1.4 3.6 2.6 2.2 2.4
Real effective exchange rate (minus = depreciation)
-6.0 0.7 -4.0 … …
Money and credit
Net foreign assets 1
3.0 4.4 -2.1 -3.1 -2.4
Broad money (M2)
16.3 15.9 8.9 15.9 9.5
Credit to nongovernment sector 1
10.3 20.5 11.6 10.0 6.6
Credit to government 1
4.3 -5.6 3.7 2.0 0.7
(Percent of GDP)
Investment and Saving
Gross domestic investment
18.9 18.6 19.1 20.3 21.1
Gross national saving
12.6 9.6 7.3 9.7 10.2
Current account balance
-6.3 -9.1 -11.8 -10.6 -10.9
-14.3 -15.4 -15.7 -16.2 -16.3
Central government finance
Total revenue and grants
20.4 20.4 19.8 22.7 23.0
Expenditure and net lending
22.5 23.8 26.4 28.1 27.6
Domestic primary balance 2
1.7 -1.6 -2.0 -0.7 0.0
Overall balance (cash basis, incl. grants & change in arrears)
-4.3 -3.5 -7.2 -6.3 -5.3
Sources: Togolese authorities; IMF staff estimates and projections.
1 Change in percent of beginning-of-period broad money.
2 Total revenue minus current primary expenditure, domestically-financed capital expenditure, and net lending.
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
International Monetary Fund (IMF)