IMF augments disbursement to address the impact of covid-19

03/04/2020
IMF augments disbursement to address the impact of covid-19

Mitsuhiro Furusawa

The Executive Board of the International Monetary Fund (IMF) completed the sixth and final review of Togo’s economic performance under a program supported by an Extended Credit Facility (ECF) arrangement. [1] The completion of the review enables the disbursement of SDR 96.63 million (about US$131.3 million), bringing total disbursements under the arrangement to SDR 247.65 million (about US$ 336.4 million).

Togo’s three-year arrangement of SDR 176.16 million (about US$239.3 million, 120 percent of Togo’s quota) was approved on May 5, 2017. In completing the sixth review, the Executive Board also approved the authorities’ request for an augmentation of access under the ECF arrangement of 48.7 percent of Togo’s quota (SDR 71.49 million or about US$97.1 million) to address the urgent financing need stemming from the authorities’ efforts and plans to control the spread of COVID-19 and mitigate its economic impacts.

Togo made significant progress during 2017-19 under the Fund-supported program in several areas, while reforms remain incomplete in a key sector. Economic recovery was firming up but has recently been hindered by the COVID-19 pandemic. Growth projections for 2020 have been significantly revised downwards. The fiscal deficit and the balance of payment financing gap are expected to widen substantially due to revenue loss, higher healthcare spending, and weaker exports.

Following the Executive Board discussion, Mitsuhiro Furusawa, Deputy Managing Director and Acting Chair, made the following statement:

“Togo’s performance under the ECF-supported program has been broadly satisfactory. While the economic recovery was firming up, it has recently been hindered by the COVID-19 pandemic. The macroeconomic outlook is subject to a high degree of uncertainty.

“The authorities are taking immediate actions to address the human and economic implications of the COVID-19 pandemic while safeguarding the hard-won fiscal achievements. During 2017-19, Togo has been complying with the WAEMU convergence criterion of a fiscal deficit not exceeding 3 percent of GDP. For 2020, the fiscal deficit and the balance of payments financing gap are forecast to widen due to additional healthcare spending and other impacts of COVID-19 on the economy. Nonetheless, public debt is still projected to remain on a downward path.

“Structural reforms are progressing on revenue administration and public financial management. Progress has been made on collection of tax arrears, online submission of customs declarations, and steps toward program-based budgeting. It will be important to implement recommendations from a recent Tax Administration Diagnostic Assessment Tool, address remaining deficiencies in essential customs functions, and bolster voluntary compliance to ensure strong permanent revenue. Following up on key recommendations from the 2016 and 2019 Public Investment Management Assessments is also essential. In addition, pursuing a prudent borrowing policy and strengthening debt management capacity are necessary to safeguard debt sustainability.

“Togo is amongst the best performers in the improvement of the business environment in recent years. It will be important to pursue such reforms, including strengthening governance, and to implement the measures outlined in the National Development Plan to support strong and inclusive growth. Completing the delayed reforms of the two state-owned banks is paramount to safeguarding financial stability and preventing risks to the state budget.”

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