Togo's economic reform programme is making solid progress, according to the IMF's latest assessment in January 2011. Most targets and benchmarks under the three-year extended credit facility (ECF) have been met to date, especially in the fiscal sphere, although some wider structural reforms, in particular bank privatisation, have encountered delays. As a consequence, the IMF agreed in December to extend the ECF by four months until August 2011. A successor programme will probably follow, given the need to sustain reform momentum into the medium term.

Fiscal performance in 2010 was very close to target. Revenue rose to 19.6% of GDP, according to the latest IMF estimate, compared with 18.5% of GDP in 2009, helped by an increase in grants and non-tax revenue, although tax revenue fell slightly to 15% of GDP because of tax cuts. Spending rose to 22.4% of GDP, compared with 21.3% of GDP in 2009, because of an increase in capital expenditure on infrastructure projects. The result was a budget deficit (on a commitments basis) of 2.8% of GDP in 2010, the same as in 2009, thereby providing a modest fiscal stimulus. The deficit on a cash basis was much higher, at 5.8% of GDP, owing to the clearance of domestic debt arrears worth 3% of GDP, which provided a timely stimulus to business. Foreign and domestic borrowing financed the main deficit and exceptional donor financing covered arrears clearance.

However, domestic arrears clearance has advanced more slowly than expected. Repayment should have been completed by March 2010, according to the ECF, but by August 2010-a year after the programme started-only 65% of the outstanding sums (and 37% of creditors) had been repaid. The main problem is that many creditors (especially small creditors) have not come forward, because of both the scheme's complexity and their refusal to accept a 20% reduction. Moreover, some of the debts are very old and owed to creditors who have left the country or died. The government now says that the scheme will continue until the end of 2011, but claims made after that will not be met.

Despite missing the arrears target, Togo complied with other fiscal benchmarks such as rationalising Treasury accounts, reducing delays in the spending chain and overhauling the pension fund. In addition, the authorities adopted a new fuel pricing mechanism in December 2010 (the target date), which will relieve pressure on the budget by linking domestic prices to world prices, albeit with a built-in stabiliser to smooth fluctuations and cushion the effect of price rises on consumers. Fuel prices dropped a little in January as the new scheme started up, but this may prove temporary given global oil price trends.

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