Togo: Staff Report for 2013 Article IV Consultation

KEY ISSUESContext. After several postponements, the July legislative elections—which were,peacefully conducted—gave an absolute majority to the incumbent party. The newgovernment has thus a strong mandate to implement growth-promoting policies andmeet the public's expectations of improved living standards. Growth is accelerating,fuelled by private foreign and public infrastructure investments.Article IV discussions. Fiscal deficits have increased in recent years, constraining theroom for fiscal maneuver and raising sustainability concerns. Although growth haspicked up over the past few years, it has not been inclusive. The main medium-termchallenge is to move to higher, sustainable, and inclusive growth. The government hasan important role to play in raising the growth potential by providing criticalinfrastructure, improving the business environment, and deepening the financial sector.Key staff recommendations. These include:Resetting fiscal policy to ensure fiscal sustainability. Reverse the fiscaldeterioration and implement fiscal adjustment to increase the primary balanceprogressively in order to lower the debt burden.Enhancing revenue and public financial management. Enhance revenuecollection, leveraging the proposed new revenue authority. Improve treasuryoperations and debt management. Address the country's social and developmentneeds by reducing the cost of running the government and improving thetargeting and efficiency of public expenditure.Addressing financial sector vulnerabilities. Take prompt corrective action toaddress emerging weaknesses which could undermine financial sector stability.Addressing growth bottlenecks and focus on inequality. Ensure that growth isbroad-based and sustainable, and its dividends are widely shared.Exchange restrictions and regime. Togo, a member of the WAEMU, accepted theobligations under Article VIII, Sections 2, 3 and 4 of the Fund's Articles of Agreement asof June 1, 1996, and maintains an exchange system free of restrictions on the makingof payments and transfers for current international transactions. The WAEMU'sexchange regime is a conventional peg to the euro.