• Economic activity expanded at a moderate pace in the first half of 2017, accompanied by a low inflation.
• Performance under the ECF-supported program has been good, with all quantitative performance criteria met and structural reforms continuing to be gradually implemented.
• Lingering tensions could take a toll on the macroeconomic situation.

An International Monetary Fund (IMF) team led by Ivohasina Razafimahefa visited Lomé during October 23-30, 2017 to conduct discussions on the first review of the program supported by an Extended Credit Facility (ECF) which was approved in May this year.

At the conclusion of this visit, Mr. Razafimahefa issued the following statement:

“Economic activity expanded at a moderate pace in the first half of 2017, accompanied by a low inflation. End-year economic growth is expected to be slightly below 5 percent. Headline year-on-year inflation rate through July was -2.5 percent, driven primarily by lower food prices; the core inflation rate, excluding food prices, was 0.6 percent. Fiscal consolidation has begun with the aim of reducing debt to a safer level. Expenditure has been curtailed significantly. The primary fiscal balance registered a surplus of 1.4 percent of GDP during January-June 2017.

“Despite broadly positive medium-term outlook, supported by the expected boost in productivity from recent infrastructure upgrading and external concessional financing, Togo’s economy faces risks. In particular, lingering tensions could affect consumer and investor sentiment and, thus, take a toll on macroeconomic performance.

“The authorities are making strong efforts to align the draft 2018 budget with the authorities’ economic reform agenda supported under the ECF arrangement. The authorities target further fiscal consolidation with a projected domestic primary fiscal deficit of 0.2 percent of GDP. This consolidation will be achieved through both an increase of revenue and a reduction of domestically financed investment. The mission encouraged the authorities to pursue their consolidation efforts to bring debt below the threshold of heightened risk of public sector debt. These efforts will help create fiscal space for additional social spending which are critical for poverty reduction. The mission also reiterated the need to further improve the business climate and encourage private investments.

“The mission reached staff level agreement with the authorities on economic and financial policies that could support approval of the first review of their three-year program under the ECF. The country's economic program has remained broadly on track, with all quantitative performance criteria under the program met and structural reforms continuing to be gradually implemented. In particular, the non-orthodox financing of public investment—which had led to a rapid debt accumulation in recent years—was halted. The first review under the ECF is tentatively scheduled to be considered by the IMF Executive Board in December 2017.

“The mission met with President Faure Gnassingbé, and held discussions with Minister Sani Yaya (Minister of Economy and Finance), Kossi Assimaidou (Minister of Development Planning), Kossi Ténou (National Director of the regional central bank BCEAO), other senior government officials, as well as representatives of the private sector and development partners. The IMF team wishes to express its gratitude to the authorities for their hospitality and all interlocutors for the collaborative discussions.”