IMF Completes First ECF Review for Togo

• The IMF Executive Board completed today the first review under the ECF-arrangement for Togo, allowing the authorities to draw the equivalent of about US$57.4 million (SDR 44.0 million). The Executive Board approved the 42-month ECF-arrangement in March 2024.
• Togo's growth performance has remained robust, and inflation is moderating. The medium-term outlook is broadly favorable, with continued robust growth but also elevated risks.
• Togo has continued to advance its reform agenda, and the program is on track. Policy priorities are to (i) make growth more inclusive while strengthening debt sustainability, and (ii) implement structural reforms to support growth and limit financial sector and associated fiscal risks.

Washington, DC: The Executive Board of the International Monetary Fund (IMF) completed the first review of the ECF -arrangement for Togo. The Board's decision enables the immediate disbursement of SDR 44.0 million (about US$ 58.7 million), which will be used for budget support. The ECF-arrangement provides overall financing of SDR 293.60 million (about US$ 390 million).

The IMF approved the ECF-arrangement on March 1^st, 2024 (see Press Release No. 24/64 ) to help the authorities address the legacies of the shocks seen since 2020, notably the COVID-pandemic and the increase in global food and fuel prices. The Togolese authorities were able to lessen these shocks' impacts on the Togolese economy and population. However, this resulted in an increase in fiscal deficits and debt. The IMF-supported government program aims to (i) make growth more inclusive while strengthening debt sustainability, and (ii) implement structural reforms to support growth and limit financial sector and associated fiscal risks.

The medium-term outlook is broadly favorable, with continued robust growth. Economic growth reached an estimated 5.6 percent in 2023 and is projected at 5.3 percent in 2024-25 and around 5.5 percent per year thereafter according to IMF staff projections, barring major adverse shocks. Headline inflation eased to 3.3 percent in October 2024 and core inflation (which excludes the prices of food and transport) to 2.2 percent (annual averages).

However, the outlook is subject to high risks. In particular, terrorist attacks in the country's North continues unabated and appears to be intensifying, putting pressure on spending. The authorities are contending with the challenging trade-offs between fiscal consolidation to lower the debt burden and the need to maintain robust growth in the context of limited fiscal space.

Implementation of the program is on track. The authorities have met all end-June quantitative performance criteria, and prospects for meeting the quantitative targets for the rest of the year are favorable. The authorities also have met two out of the four due structural benchmarks, and there are prospects for the authorities to deliver at a later stage on the limited elements that have led to the missing of two benchmarks. Further, prospects for meeting the two end-December benchmarks are good. Finally, the authorities have made good progress on the reform of the remaining state-owned bank.

At the conclusion of the Executive Board's discussion, Mr. Bo Li, Deputy Managing Director, and Acting Chair, made the following statement:

"The Togolese authorities have shown strong implementation of the program supported under the Extended Credit Facility (ECF). The authorities have met all quantitative targets despite security challenges and tight financing conditions, and they have progressed on structural reforms to strengthen revenue mobilization, inclusion, and public financial management.

"Togo's outlook is subject to elevated risks, broadly as at the program request in March 2024, while security conditions have deteriorated. In line with this, the design of the program as conceived at the outset remains broadly appropriate, and the authorities should continue to implement the program with determination to place the country on the path of strong and sustainable growth.

"In the area of fiscal policies, the authorities should continue to aim to address debt vulnerabilities in a context of regional vulnerabilities while supporting growth and enhancing inclusion. For this, it will be important to implement the agreed fiscal anchor by limiting fiscal deficits to 3 percent of GDP from 2025 onwards, continue to raise tax revenue while making taxation more efficient, and implement structural reforms to enhance the efficiency of spending and make the social safety net more effective and efficient.

"It will also be essential to continue efforts to strengthen governance. The authorities' recent request for an IMF Governance Diagnostic is welcome, as is their commitment to strengthening beneficial ownership declarations for companies benefiting from public procurement contracts. On the financial sector, the authorities should continue the reform of the remaining public bank by bringing the bank's capital in line with regulatory requirements and reforming its operations to ensure its stability and profitability. Efforts to strengthen the AML/CFT framework will also be important.