On May 25, 2016, the Executive Board of the International Monetary Fund (IMF) concluded the 2016 Article IV consultation¹ with Côte d’Ivoire.

Côte d’Ivoire’s economic performance over the past 4 years has been impressive. Nevertheless, challenges remain. Political normalization, together with supportive fiscal policy and structural reforms to improve the business climate enabled a strong pickup in economic activity. Growth has been accompanied by a modest decline in poverty, but other human development indicators have been slow to improve.

Economic activity remained buoyant in 2015. Real GDP grew by an estimated 8.6 percent driven by strong investment and private consumption. Inflation remained subdued, reflecting ample domestic food production and imported consumer products. The 2015 fiscal deficit was below the 3.7 percent target at 3 percent, owing to stronger revenues and an under execution of externally-financed capital spending. Credit continued to grow at a rapid pace, while banking sector soundness indicators weakened.

The medium-term outlook is favorable. However, the outlook is subject to downside risks. Economic activity is projected to remain strong at 8.5 percent in 2016, and 7.4 percent per year on average in 2017–20. The overall fiscal deficit is projected to widen to close to 4 percent of GDP from 3 percent of GDP in 2015, on the back of higher public investment and security outlays, as well as interest payments. The external current account deficit is likely to deteriorate to about 3 percent of GDP on average from 1.7 percent of GDP in 2015, driven by strong domestic demand, in particular investment, in support of structural transformation. Key risks to the outlook include tighter and more volatile global financial conditions, protracted global sluggishness, a further deterioration in the financial situation of the national refinery company, further terrorist attacks in the region, as well as macro-financial risks stemming from potential contingent liabilities in the public sector and vulnerabilities in the financial sector.

The authorities’ 2016–20 National Development Plan (NDP) aims at achieving strong and inclusive growth. To support the structural transformation envisaged under the NDP, the private sector would play a large role, benefitting from strong public infrastructure investment and further structural reforms to improve the business climate. Success will depend on the pace at which structural bottlenecks are addressed and productivity-enhancing reforms are carried out.

Executive Board Assessment²

Executive Directors commended the authorities for the impressive economic performance over the last four years, underpinned by growth-friendly fiscal consolidation, productivity enhancing reforms, and a favorable global and socio-political environment. However, Directors noted that challenges remain and poverty is still relatively high despite some progress made. They emphasized the need for continued commitment to sound macroeconomic policies and ambitious structural reforms to safeguard the favorable economic performance and cement the path for sustainable and inclusive growth. Against this background, Directors welcomed the authorities’ 2016–2020 National Development Plan, which aims at halving poverty and fostering structural transformation.

Directors stressed that building fiscal buffers is necessary to preserve fiscal sustainability. They called for a reduction in the overall fiscal deficit consistent with the WAEMU convergence criteria, which would provide the needed space to cope with fiscal risks while addressing infrastructure investment needs. To this end, Directors stressed the importance of higher revenue mobilization, including by reducing tax exemptions, broadening the tax base, improving tax administration, and restraining expenditure growth. They also recommended a more measured scaling up of public investment in line with implementation capacity.

Directors underscored the need for continued efforts to strengthen public financial management to better control and manage contingent liabilities, including those stemming from public private partnerships. They encouraged further progress toward reducing the recourse to exceptional spending procedures and implementing a single treasury account.

Directors emphasized the importance of prudent debt policy and management. They highlighted that the pace of new government borrowing, particularly non-concessional borrowing, should take into account the risks associated with the realization of contingent liabilities, and the need to avoid an additional concentration of maturities in the mid-2020’s. Directors encouraged continued efforts to diversify and broaden the financing base.

Directors saw need for further action to strengthen the resilience of the banking sector and foster financial inclusion. Given the rapid increase in credit and associated decline in bank solvency, they called for a buildup of bank capital buffers. They advised a rapid resolution of the troubled public banks. Directors encouraged the authorities to modernize the regulatory framework in order to take advantage of opportunities to foster financial inclusion through new information and communication technologies.

Directors welcomed the authorities’ commitment to intensify structural reforms. They agreed that priority should be given to enhancing productivity by addressing gaps in infrastructure and human capital, and improving the business climate. Directors also called for further efforts to improve the production and dissemination of quality economic data, and supported technical assistance by the Fund and other development partners. Directors noted that continued engagement with the Fund would help support Côte d’Ivoire’s ambitious development agenda and address challenges ahead.