The Executive Board of the International Monetary Fund (IMF) has approved a 42-month arrangement of US$390 million under the Extended Credit Facility (ECF) for Togo. The arrangement provide an immediate disbursement of US$68.3 million.
Togo continues to face headwinds, following a series of shocks in recent years. The ECF-arrangement will help accelerate poverty reduction, maintain macroeconomic stability, and catalyse further external financing, benefitting Togo and thereby contribute to the macroeconomic and external stability in the West African Economic and Monetary Union (WAEMU).
According to the IMF, the Togolese authorities’ strong reform programme aims to help maintain macroeconomic stability and accelerate poverty reduction by making growth more inclusive while strengthening debt sustainability, and conducting structural reforms to support growth and limit fiscal and financial sector risks.
The country’s fiscal deficits and debt have increased, reversing the debt reduction achieved during the 2017–20 ECF-arrangement, eroding fiscal space and buffers to absorb shocks, and contributing to regional vulnerabilities.
The authorities’ key policies include a strengthening of social spending and the social safety net, a growth-friendly fiscal consolidation thanks in part to ambitious fiscal revenue mobilisation, structural reforms to support growth by enhancing the business environment, and banking sector reform including recapitalisation of the remaining state-owned bank.
At the conclusion of the Executive Board’s discussion, IMF Deputy Managing Director, Mr. Kenji Okamura remarked that Togolese authorities intend to make growth more inclusive by strengthening social spending and social safety nets as well as enhancing the living conditions of populations in the north of the country, thereby complementing the military response to terrorism with a civilian response.
In this context, he said, “it will be important to substitute generalised fuel subsidies with more targeted and cost-effective measures to protect the vulnerable, including through cash transfers”.
Okamura emphasised that the authorities should continue their efforts at growth-friendly fiscal consolidation to create space for spending on Togo’s development needs while strengthening debt sustainability.
“In this context, the impressive start of fiscal consolidation in 2023 is praiseworthy. The Government’s intention to raise tax revenue by an ambitious 0.5 percent of GDP per year is also welcome. For these efforts to succeed, broadening the tax base by streamlining tax expenditures will be critical,” he said. “The provision of budget resources for the bank’s recapitalisation to zero regulatory capital is a welcome first step.”
