Economic activity is starting to stabilize, and inflation was 0.9 percent in September; the significant fiscal effort continued in the first half of 2018 and public debt is declining.
“The mission reached staff level agreement with the authorities on economic and financial policies that could support the approval of the third review of the ECF-supported program. Performance under the program has been broadly satisfactory. All quantitative performance criteria and three out of five structural benchmarks were met. The third review of the program is tentatively scheduled to be considered by the IMF Executive Board in December 2018.
“Overall economic activity is showing signs of incipient stabilization despite continuing weaknesses in some sectors. After a deceleration in 2017 due to socio-political tensions, economic growth is projected to accelerate to 4.7 percent in 2018. Inflation was 0.9 percent (year-on-year) in September 2018.
The significant fiscal effort continued in the first half of 2018; the overall fiscal balance stood at a surplus of 0.7 percent of GDP during this period. Revenue collection recovered during the first half of 2018 but somewhat softened in the third quarter; expenditure outturn was lower than projected.
Accordingly, public debt is projected to decline by about 5 percentage points of GDP during 2017-18. Moreover, the government’s ability to raise funds in the regional bond market seems to have improved. Risks related to socio-political tensions have abated.
“Structural fiscal reforms are progressing. The revenue administration took measures to reduce revenue shortfalls. The procurement, commitment, and cash management plans were updated monthly to improve expenditure management and help prevent arrears.
The authorities took steps to strengthen the Treasury Single Account (TSA) to improve treasury management and reduce financing cost. Going forward, the control of import valuation by the customs administration will be tightened; the cross-check between tax and customs offices will be enhanced to tackle evasion; and some tax policy measures will be implemented to ensure long-term permanency of revenue.
Meanwhile, the VAT refund system will be accelerated with a view to ameliorate the business environment. Public investment projects will be prioritized based on a cost-effectiveness analysis. Arrears will be gradually cleared, and new accumulation will be avoided. Program-based budgeting will be rolled out. Land registration will be facilitated.
“The mission welcomes the government’s recent decision to revisit its strategy in the financial sector. Instead of a merger and restructuring, the current context seems opportune to revert to the previous strategy to privatize the two publicly-owned banks. This strategy will help ensure the long-term viability of these banks and avoid burdening government finances.
The government will take all necessary measures to avoid risks related to the privatization, including the bidding process for one of the two banks and the situation of the personnel during the transition.
“The mission met with President Faure Gnassingbé, and held discussions with Mr. Sani Yaya (Minister of Economy and Finance), Mr. Kossi Assimaidou (Minister of Development Planning), Mr. Kossi Ténou (National Director of the Central Bank BCEAO), Ms. Sena Elda Kpotsra (General Secretary of the WAMU Banking Commission), and other senior officials, as well as representatives of the private sector and development partners. The IMF mission wishes to express its gratitude to the authorities and interlocutors for the constructive discussions and warm hospitality during its visit to Togo.”
- Countries: Africa