DOCUMENT OF INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION Not For Public Use Report No. AW-38a CURRENT ECONOMIC SITUATION AND PROSPECTS OF THE IVORY COAST September 8, 1972 Western Africa Department This report was prepared for official use only by the Bank Group. It may not be published, quoted or cited without Bank Group authorization. The Bank Group does not accept responsibility for the accuracy or completeness of the report. Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized
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DOCUMENT OF INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION
Not For Public Use
Report No. AW-38a
CURRENT ECONOMIC SITUATION
AND PROSPECTS
OF THE
IVORY COAST
September 8, 1972
Western Africa Department
This report was prepared for official use only by the Bank Group. It may not be published, quoted or cited without Bank Group authorization. The Bank Group does not accept responsibility for the accuracy or completeness of the report.
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ClTR.~NCY EQUIVALEN'rs
Currency Unit: ~FA Fra."lc (CFAF)
Before August 11, 196~: US$ l.nn = CFAF 2lt6. n5 CFAF 1,000 = US:j, h.tl)
This report is based on the findings of a mission which visited the Ivory Coast from January to March 1972. The mission consisted of:
Cornelis J.A. Jansen Gerrit M. de Wit Rolf H. Glaeser Franz SchmithUsen
I1ission Chief General Economist (Pl1WA) General Economist Forestry Expert (Consultant)
l·Ir. Schzr:it.t.ftsen prepared a working paper on forestrJ' policies in Ivor:· Coast.
..
TABLE OF CONTENTS
BASIC DATA
MAP
SUMMARY AND CONCLUSIONS
I.
II.
III.
IV.
v.
INTRODUCTION . ..................................... . RECENT ECONOMIC DEVELOPMENTS ....................... A. B. c.
GDP Growth and the Terms of Trade . ............ . The Financial Picture •••••••••••••••••••••••••• Balance of Payments . .......................... .
MAJOR SECTORAL DEVELOPMENTS ........................ A. B. c. D. E. F. G.
Ag,riculture .•......•••.....•.••.••.••.•••••...• ....................................... . ..................................... . Forestry Industry Mining Transport
. ....................................... . . .................................... . Distribution ••••••••••••••••••••••••••••••••••• Tourism •.•••••..•••••••...•••••••••.••.•••.••••
PUBUC FINANCE . ................................... . A. B.
PROSPECTS . ........................................ . A. B. c. D. E.
Growth of GDP •••••••••••••••••••••••••••••••••• Balance of Payment Prospects ••••••••••••••••••• Prospects for Development Financing •••••••••••• Debt Management •••••••••••••••••••••••••••••••• Conclusion •••••••••••••••••••••••••••••••••••••
APPENDICES
A. GDP Projections 1971-74.
B. Balance of Payments Projections 1972-74.
C. Statistical Appendix.
Page No.
1
3
3 7 8
11
11 13 16 18 18 20 21
23
23 26
33
33 34 36 39 41
Table No.
1
2
3
4
5
6
7
8
9
10
11
12
13
LIST OF TABLES IN THE TEXT
Title
GDP Growth Rates, 1965-71
Cocoa and Caffee Prices, January 1969-72
Estimated Development of the Terms of Trade, 1965 - September 1971
Effect of Exchange Rate Changes
Rice Development Program, 1972-77
Railroad Traffic, 1969-71
Trends in Public Finance, 1965-72
Effect of Cocoa Price Decline
Estimated Effect in 1972 of Austerity Measures
Calculation of the Tax Burden on Coffee and Cocoa Producers
Balance of Payments Prospects: Mission Projections
Financing of Public Investment: Mission Projections
Debt Service Ratios: Mission Projections
Page No.
3
4
5
9
12
19
24
25
27
30
35
37
40
11 BASIC DATA - IVOH:C CCAST
2 2 AREA.: 323, 750 km POPULATION: 5.3 million (I971)
Rate of growth 3.5% per annum (including immigration)
DENSITY: 16 per km
POPULATION CHARACTl<illSTICS: Cnde Birth Rate (per 1,000) Crude Death Rate (per 1,000) 25 Infant mortality (per 1,000 live l)tl
calorie intake 2400/day
m.rp at ,-,arket prices GDP at market prices Gress Investment Gross Savings
OUTPUT, LABOR FORCE AND PRODIJCTIVITY IN l) 71
Ae;riculture Industry Ser1rices
Total/Average
Current Receipts Current Expenditures Current Surplus/Deficit Capital Expenditures
External Assistance
PRICES And CREDIT:
1970 1971
(-)
net NFS
(net) (net)
D:'.sbursernents Amortization
All other items
337 22
GNP Ter capita US$)
291 (1971)
Value added (Us$ million) X
/,4J 342 '192
364 2815
?6 2G9
97
2b 22 so
lOCJ
23.0 11'.2 4.6
13.2
6.1
12'?.7 136.2 lhl.5
(millions US $1
196'i/ 44J.i:'o
-361:l.5 75.5
--.:)1."9 -29.fJ 3(.5
-15.5 1.2
26.3 (L6.~) (20.5) -11.6
-2&.0 -ll.f' 33.~
-U,J
Increase in official reserves 37.2 3J.6 International liquidity -
-7.6
Central Bank (end of year) 71.4 11L.o Total official holdings
(end of year) 120.2
HEALTH Population per Population per nosnJ:Lac~
rate enrollment
rate of ~owth (%)
20,2GO (1969) 755 (1969)
1971 7:3
(1969) (1969)
Labor Force millions J6
Valu~ added ne~ ~rk8r (US$) % of nationa average
1.2 71 40
100
Central Government (US$ mln) % of GDP % of GDP average
l;t(,l:i-70
2.4
Coffee Cocoa Timber Other
Toto.l
25.0 17.3
4.1
h.: u.6
-0.9
318 2131
71
20.1 l'/,(i
65.5 79.1 92./
111.4
2.3 9.4
4.s
EXTERNAL DJ;;BT o;~ DECEMBER 31, b'7l:
DEBT SERVICE RATIO (1971):
IBRD/IDA lli'NDING, DECEHBER 31, 1;171 ($ mln)
19.8 16.'1
3.1 3 < ·-
3.4
20o7 17.2 20.2
($ mln)
lh5 121 llb U7
IBRD IDA
Outstanding and Disbursed Undisbursed
Outstanding incl. Undisbursed
A§!ust 11, 1969 - August lL, 1'/71 U 1.00 - CFAF 217.71 CFAF 1 1 000 = US$3.60
After December 2:1 1 1'/11 USPl.OO- CFAF 25'>.79 CFAF 1 1 000 = US$3.:11
L.6 5 .. ]
30 25 24 21
lCO
A number of data are (provisional) Average rate of exchange: 1 US$ = CFAF
especially those for most. recent :rears.
10"
ATLANTIC OCEAN
\ i. \ /". . ~... ......
I
. I (r·
r· ,.-·
)
I
LIBERIA
.. pl7l
IVORY L~
,/ N 1 G E R
MALl
..
COAST
l,n~e:rQa 'liCfrut,~ bound-a_-rie s_
Paverl rott4$
E~rth- roails
Jl!J.ilw.;ty_s .... , 1tiY5J':S
ta:k-e,;- BJlTIU!!l1 ·uin£:4~ 1 Rai:n£all(Aver~gs i:n mm'S)
lt~-:ur:naUotfd aitpo:rt
Oth~r aJrP<>~~~ Area of dense fu,(e;t.t
) ""'\UPPER~.~ VOlT A
·-, l. r ".· ·~.-.. ~
L,
to 40 60
40
lrililu
.. .. ____ _
100 1~0
60 •p
SUMMARY AND CONCLUSIONS
i. The purpose of this report is to update the analysis and conclu-sions in the previous economic report on Ivory Coast. The main conclusions of the report were that terms of trade in early 1970's would worsen and traditional export industries (coffee, cocoa and timber) would cease to be a driving force in the development of the economy. As a result, economic growth, which had been spectacular during the 1960's, would decline to a modest level. The corollary would be a drop in the public savings rate and increased reliance on external finance. Although the report generally endorsed the Government's development strategy, it was felt that, in view of the expected difficult financial conditions, the Government would have to pare its rapidly increasing investment program, according to priorities outlined in the development plan, and reduce relionce on hard-term credits. Thanks to the country's favorable natural resources, the Government's efforts at diversification of the economy, and the dynamism of the private sector, the prospects of the economy remained good in the longer term. After the middle of the decade, many projects now being implemented would start contributing to production, resulting in a renewed acceleration of growth. However, in the next few years, growth would probably be rather low. The present report confirms most of these conclusions.
1. Recent Economic Growth- OVerall Developments
ii. As the following figures show, economic growth in 1970 and 1971 has indeed slowed down considerably. Per capita growth (in real terms) was halved in 1970 and, according to the mission's tentative calculations, became slightly negative in 1971.
GDP Growth (%2 1965]67-1968]70 1970 1971
~ow~ at current prices 12.4 12.5 7.5
Growth at constant prices 7.4 5.5 3.0
Per capita growth at constant prices 3.8 1.9 -0.5
iii. Main factors in the decline of growth were the sharp drop in the world market price for cocoa (about 50 percent between the end of 1969 and the end of 1971) and, after years of stability, a sizeable increase in import prices. As a result, Ivory Coast's terms of trade declined, according to a rough calculation by the mission, by seven percent in 1970 and by at least ten percent in 1971. At the same time, the combined volume of coffee, cocoa and timber exports stagnated.
iv. In view of the important role of these three major export items and of foreign trade in general in the Ivory Coast economy, a more serious recession might have occurred. However, there were important factors which
- ii -
kept total expenditures in the Ivory Coast economy at a high level. First, the prices paid to coffee and cocoa producers were raised in 1970 (by 11 and 6 percent) and the Government maintained both prices at the higher level in spite of the drop in cocoa prices. The impact of the cocoa price decline thus did not affect the income of the farmers. A second factor making for a high level of total expenditures was the upsurge of public investment from 10 percent of GDP in 1968-70 to 13 percent in 1971. These factors largely insulated the economy in 1970 and 1971 against the effects of worsening terms of trade.
v. Ivory Coast has been able to finance the high overall expenditure level of recent years mainly because disbursements of project aid, which had contracted in previous years, increased dramatically. External aid disbursements rose from CFAF 15 billion on average during 1968-70 to CFAF 27 billion in 1971. The last figure is equivalent to six percent of GDP which indicates that in comparison with other countries, external aid is at a very high level. However, the figure includes a CFAF 6 billion ($22 million) Eurodollar loan. In 1971, only a small part of this loan was used for investment; the rest was kept in reserves. Without this loan, there would have been a sharp decline in reserves.
vi. Increasing debt service and the need to maintain a minimum level of external reserves will make it increasingly difficult for Ivory Coast to continue shielding the domestic economy against the effects of the decline in the terms of trade. The need to reduce the inflow of external capital by stepping up domestic resource mobilization is more pressing than ever. The scope for doing this is ample. The outflow of private resources from Ivory Coast is unusually large -- eight to nine percent of GDP -- and has thus far exceeded the total gross inflow of funds into the public sector. A reduction of the private resource outflow by even 2 percent of GDP could lead to a significant increase in domestic resources available for public investment and to reduction in the need for external finance.
vii. The huge outflow of private resources is closely linked to the large foreign element in the Ivory Coast economy and as such it cannot be fully eliminated in the near future. However, certain of the financing habits of Ivory Coasts enterprises are likely to be responsive to the interest level. The present low interest rate structure (official discount rate is 3.5 percent, as against 6 percent in France) is an incentive to the large firms as well as public enterprises to borrow domestically and maintain their liquid balances as much as possible in foreign exchange. A higher interest rate also might induce foreign individuals to delay their usual remittances abroad. Even if such private funds would remain only temporarily as time deposits and savings accounts in Ivory Coast, available funds for the domestic economy would be increased. Some evidence that a higher interest rate would have this effect is the fact that many of the subscribers to the bond issues of the Caisse Autonome d'Amortissement (CAA) are expatriates. Since these seven percent bond issues are tax-free, their effective interest rate may be estimated at 11-13 percent. In 1971, CAA made its third bond issue; as in the two previous issues, the amount was CFAF 500 million ($2 million). Recently, certain private enterprises have been offering part of
- iii -
their shares to Ivorians, so far these offerings have found favorable response although the market appears to be thin. A further attempt at domestic resource mobilization is the Fond National d'Investissement (FNI) which receives ten percent of taxable corporate profits for public or private investment. FNI's receipts in 1970-71 averaged CFAF 2 billion ($8 million),
2. Recent Economic Growth - Major Sectors
Agriculture
viii. In 1971, implementation of the agricultural development program made good progress. The aims of the program are diversification of production, improved regional economic balance, and increased self-sufficiency in food crops.
ix. Favorable weather during the current campaign (1971-72) is leading to a bumper crop of cocoa. Oversupply in world-markets led to a 50 percent drop in cocoa prices; and prices are likely to remain depressed for the next few years, unless an international cocoa agreement is established. Meanwhile, planting with high yielding hybrids is proceeding, and the target of the development plan for 1975 (250,000 tons) is likely to be reached or exceeded. Coffee production remains well in excess of the quota under the International Coffee Agreement and stocks are still large. However, prices have been fairly good and may remain so in the near future.
x. Agricultural diversification efforts are beginning to show results in palm oil and pineapple production. Cotton production, however, has been declining for the third consecutive year owing to drought, lack of labor, and competition of other crops. In 1971, further' investments were undertaken in coconut palm plantations. Preparatory work continued on rubber projects. A large investment ($64 million) is being made in a sugar project which would enable the country to be self-sufficient in that good.
xi. Urbanization is leading to a rapid increase in rice consumption; the plan's estimate of a 5.5 percent increase in annual demand is perhaps low. Several of the projects in the rice development program are located in the North, the most backward part of the country. In 1971, financing was secured for several projects in the rice program.
Forestry
xii. Next to coffee and cocoa, timber production has been a major factor in the economy's growth. However, the most valuable species are becoming scarce and a decline in value added by this sector will soon set in unless remedial measures are taken. The mission's suggestions are discussed in a separate working paper. Briefly, they include:
(i) a comprehensive forest inventory in 1973-74, in time for the new development plan;
- iv -
(ii) improved demarcation of state forests to prevent losses due to land clearing for shifting cultivation;
(iii) encouragement of the use of secondary species by technological and market research and appropriate taxation;
(iv) economic evaluation of the reforestation program;
(v) encouragement of domestic processing of timber by extending long term concessions and fiscal incentives to processing firms. The mission believes that compulsory processing of a fixed percentage of production might lead to uneconomic results;
(vi) encouragement of Ivorization by favoring in official concession policies, firms with Ivorian participation in capital and management and with training programs for Ivorians. However, the issue of permits for areas to which established firms are already holding permits should be avoided;
(vii) revision of forestry taxes. Present tax rates appear to encourage exploitation of the most valuable species and the best quality trees of each particular species. Reform of forestry taxes should be based on the principle that taxes per cu.m. should be equal to the value of the standing timber. Application of this principle would lead to a flexible tax rate which would vary according to location and quality. Ideally, the tax would not leave any rent income to concessionaries thus removing the basis for sub-contracting which in recent years has played havoc with the regular supply in raw material of domestic processing firms.
Industry
xiii. Industrial production rose by about 13 percent in 1971. Among new factories which started production are a large new textile factory at Bouake, a polyurethane factory, and several smaller enterprises. No firm decision has as yet been taken regarding a few major projects aimed at export markets such as the Bangolo iron ore mine and pelletizing plant, the paper pulp project, and the rubber ti.re factory.
xiv. The Government is revising its investment promotion law with a view to making the benefits accorded under the law dependent on the condition and requirements of the specific industry; meanwhile, it appears that several of the firms which are now enjoying tax exemption under the investment promotion law will experience serious financial difficulties when the period of tax exemption (ten years) has expired. Concern is therefore rising that the investment law is encouraging the establishment of some permanently uncompetitive industries. There should be a review of the criteria used in industrial project appraisal. The value-added criterion, which now seems to have overriding importance, should probably be supplemented by other calculations such
•
'
- v -
as the rate of return calculated at international prices or the effective rate of protection crit~rion.
Transport
xv. With the stagnation in the timber industry. the overall increase in freight traffic is tapering off. However, passenger traffic is expected to grow by about 4 percent and the passenger-car fleet, by 7 percent a year. The Government continues to invest heavily in roads. Although certain improvements and extensions of the existing network are necessary, financial stringency may lead the Government to curtail road investment in favor of investments in directly productive sectors.
xvi. There are indications that road freight traffic is insufficiently taxed, making this method of transport preferable to rail shipment. A current study on this subject is expected to indicate whether an increase in the taxing of road users is desirable.
Distribution
xvii. In an attempt to increase Ivorian participation in the retail network and to improve retail services to lower income classes and rural areas, the Government has started the establishment of a chain of retail stores run by Ivorians. OVer a hundred stores began operation in the last year. Graduates of a commercial school established by the Government are preferred as store keepers.
Tourism
xviii. Government and the private sector continue to invest in hotel fa-cilities in Abidjan and on a small stretch of beach (Assini) east of Abidjan. The Government believes that there is considerable potential for tourism development and feels that it should take the lead in this field even if all investments are not inwediately financially successful. Although rising, the number of international visitors is still small (42,000 in 1970 and probably over 50,000 in 1971) and only a small proportion of them are holiday visitors.
3. Public Finance
xix. Public finance is showing the full impact of declining GDP growth and rising public investment. Although budgetary savings in 1971 were maintained at about 5 percent of GDP, savings of the Caisse de Stabilisation came down sharply because of declining cocoa prices. As a result, total public savings dropped, from 10 percent of GDP in 1968-70 to 7.5 percent in 1971. Since at the same time public investment continued its remarkable upsurge, the Government became increasingly dependent on foreign aid for the financing of its investment program. The most telling indication of the change in public finance is therefore the dwindling proportion of public investment financed from public savings: 36 percent of public investment in 1971 as compared to 74 percent in 1968-70. The widening financial gap in the public
- vi -
sector is being covered by sharply increased aid disbursements and a drawdown of reserves.
xx. The loss in public savings caused by the decline in cocoa prices is particularly noteworthy. On the basis of 1968-70 cocoa prices, export earnings from cocoa would have been CFAF 9 billion, higher than they actually were in 1971, and CFAF 13 billion higher in 1972. This is the equivalent of 27 percent of public investment during those years. The rapid although not unexpected decline of cocoa prices thus played a large role in the deterioration of public finance. This comparison of the decline in earnings from cocoa exports and public investment is fully justified, since the Government has thus far kept the producer price constant. Any drop in world market prices therefore directly reduces the net financial result of the Caisse de Stabilisation and hence public savings. The decline in public savings forced the Government to keep public investment in 1972 well below the 1971 level: CFAF 49 billion versus CFAF 58 billion, a decline of 16 percent.
xxi. The most important recent developments in the field of public fi-nance are the Government's public statements at the beginning of 1972 with regard to the serious nature of the financial situation and its announcements of austerity measures with regard to public spending. Measures taken thus far are mainly concerned with some of the fringe benefits (transportation, travel allowances, living allowances) of higher public servants. The total estimated effect of these measures in 1972 is a saving of CFAF 3.5 billion, about 5 percent of current expenditure. Although it may be tactically correct to start eliminating wasteful expenditures, the root of the galloping growth of current expenditure is the rapid overall increase in personnel expenditures. In spite of the austerity measures, the 1972 budget provides again for a 13 percent increase in personnel expenditures. In the 1960's, the number of government employees increased by 7.5 percent a year, which is probably much more than the Government's administrative requirements. Obviously, the Government is under strong pressure to provide employment to many people, particularly the graduates of secondary schools and universities. It will, therefore, be difficult to contain personnel expenditures.
xxii. In the revenue field, the Government has introduced in the 1972 budget a number of minor tax measures aimed at greater efficiency and equitability. Convinced that tax rates are already high, the Government feels that any further increase might be counter-productive and believes that revenue growth should stem mainly from growth of the tax base and improved enforcement of tax laws. Direct tax collection appears to be particularly deficient. In view of the current deterioration of the terms of trade, it may be difficult to envisage general tax increases now. The Government may wish to explore the scope for some increase in import duties.
xxiii. Meanwhile, a special inquiry is needed to determine whether the coffee and cocoa producer prices should be reduced in the interest of in~re~sin~ public s~vings. The tax burden!/ on coffee (export tax plus levy
!/ Taxes as percentage of producer price plus taxes.
•
- vii -
by the Caisse de Stabilisation) is currently about 50 percent. Although this is a high proportion, farmers apparently find incentive to exceed the quotas under the International Coffee Agreement by more than one third. Since the price on non-quota sales is only about half the quota price, a reduction in production following a drop in the producer price would entail a smaller than proportional reduction in farmers' earnings. At the same time, the profits of the Caisse de Stabilisation would rise considerably since the production decline would reduce the highly unprofitable non-quota sales while profits on other sales would rise by the full amount of the drop in the producer price.
xxiv. The tax burden on cocoa is presently only 20 percent. The Govern-ment has set the cocoa producer price at an attractive level, which is part of the reason for the fast increase in production in recent years. Other factors were favorable weather conditions and probably also increased unrecorded imports from neighboring countries. If cocoa production is responsive to price changes, a reduction in the producer price may lead to a relatively larger decrease in export earnings. At the same time, however, total levies by the Caisse are bound to increase substantially. In view of the considerable amount of planting of high-yielding cocoa trees, it may be possible to reduce the cocoa producer price somewhat and yet maintain a satisfactory growth of producer income and export earnings.
xxv. Since the coffee and cocoa producer prices determine the income of a large part of the population, including workers with wages below the national average, a decision on these prices has wide social implications which the mission cannot evaluate. Thus far, the Government intends to maintain the producer price and although lower producer prices could lead to higher public savings, this decision may well be justified on social and economic grounds.
4. Prospects
xxvi. According to mission projections, economic growth during 1972-74 is likely to remain well below past levels -- somewhat over 5 percent in real terms, or about 2 percent per capita. This compares with per capita growth of almost 4 percent in the past. This prediction does not mean that the Ivory Coast·is about to lose its dynamism. On the contrary, development possibilities in many areas remain excellent and the intense investment activity of Government and the private sector indicates that these possibilities are being recognized and exploited. The great number of projects which are currently under preparation in agriculture, industry, mining, services (tourism) are likely to lead to another period of rapid growth after 1975. However, it will take some time before production from these projects has gathered momentum. Meanwhile, growth will be at a lower level since traditional growth factors -- the coffee, cocoa, and timber sectors -- have lost importance.
xxvii. These prospects of slower economic growth will make the financing of public investment more difficult. The public investment program for 1972-74 amounts to CFAF 72 billion per year, of which CFAF 58 billion represents
- viii -
the "noyau garanti" (hard core). Implementation of the full progru would mean an increase of public investment to 14 percent of GDP, as compared to 13 percent in 1971 and 10 percent in 1968-70. As shown in the following table, the mission believes that financing of the total program will not be feasible but that the hard core might be executed, albeit at the expense of a substantial drawdown of reserves or through mobilization of private domestic resources.
FINANCING OF PUBLIC INVESTMENT 1972-74: MISSION PROJECTIONS
(annual average)
Budgetary savings
Caisse de Stabilisation and other public savings
Total Public Savings
Debt service
Public savings available for investment
Foreign aid disbursements
Use of reserves and mobilization of private domestic resources
Total public investment ("hard core")
Net public inflow
in CFAF billion 1968-70 1972-74
18 24
19 12
37 36
9 18
28 18
19 35
-9 5
38 58
10 17
in % of Public investment
19 6 8-70 -;.::,.;.19""""'7_,.2-7 4
47 41
50 21
97 62
24 31
74 31
50 60
-24 9
100 100
26 29
xxviii. These projections are based on the following assumptions:
(i) that Government will increase both current revenue and current expenditures at the same rate as GDP and thus maintain a high level of budgetary savings. This implies implementation of further austerity measures in the future.
(ii) that Government will maintain the cocoa and coffee producer prices at the present level. If producer prices were lowered, savings by the Caisse de Stabilisation could rise substantially.
- ix -
(iii) that the Government will improve its control over public enterprises and, as a result, will achieve considerable savings by these enterprises.
Although the assumptions under (i) and (iii) are quite favorable, public savings available for investment would decline drastically during 1972-74 because of the increase in public debt service. According to our calculations, public savings during 1972-74 would finance only 31 percent of public investment (hard core) compared to 74 percent during 1968-70 -- a startling contrast.
xxix. The increase in debt service payments follows after years of rapid increase in outstanding external debt. The increase in debt from the beginning of 1971 to the present has been particularly large: $161 million, or a 38 percent increase. The debt service ratio for 1972-74 is estimated at 9 percent, which is not too high. The essential point, however, is the high rate of increase; during 1968-70, the ratio was only 6 percent.
xxx. The increase in debt service is partly due to a hardening of the terms of external assistance. The grant element in loan commitment 1/ obtained by Ivory Coast in 1969 was 27 percent as compared to 43 percent for all of Africa and 32 percent for all of the less developed world. In 1971, the grant element in loan commitments obtained by Ivory Coast further declined to 22 percent. Obviously, the grant element is only a partial yardstick of borrowing terms. More important, but also more difficult to assess, are the price and the quality of the goods and services supplied under the loan. Certain of the supplier and contractor financing obtained in 1971, although nominally on acceptable terms, may in reality have contributed excessively to the financial burden of the public sector. This appears to be the case for the supplier credits for low-cost housing. Low-cost housing cannot be expected to repay the heavy charges of supplier credits without direct or indirect government subsidy; in view of the almost unlimited demand for low-cost housing, this type of financing could set a dangerous precedent.
xxxi. The rapid increase in external indebtedness is to some extent a reflection of the rapid increase in the Ivory Coast's absorptive capacity, itself a pre-condition for rapid economic growth. Many of the investments undertaken by the Government appear to be fully in line with the growth requirements of the country. However, in some cases, the terms and conditions of loans appear inconsistent with the economic characteristics or the financial viability of the project. Examples of the last sort of transaction are certain investments in tourism and the financing of the $64 million sugar project at Ferkessedogou.
1/ For the definition of this term, see para. 94 of the main text.
- :X: -
5. Conclusion
xxxii. The Ivory Coast Government is currently implementing an ambitious but essentially sound development plan deserving the support of substantial external financing. The plan is meant as a step towards the eventual solution of some of the economy's key problems -- diversification and expansion of agriculture and industry; improvement in the economic balance be ween regions; and greater participation of Ivorians in the work force ani the management of economy. Although the plan does not come to grips wiih the increasingly important problems of unemployment and income disparities, the Government is attempting to improve its policies in these areas. In some of its actual investment decisions, the Government has deviated from the priorities of the plan. However, a new procedure, in which the Min1.stries of Finance and Planning jointly prepare the rolling three year implementation program, is expected to establish a closer link between economic planning and budgeting. A further useful step is that under the new procedure, the three year program will also include provisions for the current expenditures resulting from investment projects.
xxxiii. Years of project preparation by the Government, with the assistance of foreign aid donors and private interests, have started to pay off in the form of greatly increased public and private investment. However, most of the production increases resulting from these diversification efforts -- in plantation agriculture and in industry -- will only occur in the second half of the decade. Meanwhile, the impetus to growth provided by traditional export products has greatly diminished because of unfavorable demand prospects for coffee and cocoa, and a declining resource base for timber. The result is likely to be lower than usual economic growth during the next few years.
xxxiv. The slowdown in economic growth, which has occurred since 1970, is leading to slower revenue growth and to a drop in total public savings. The sharp drop of cocoa prices has particularly hurt public savings in 1971 and is continuing to do so this year. The shortfall in public savings due to the decline in the cocoa prices is equivalent to 16 percent of public investment in 1971 and, according to the mission's estimates, 27 percent in 1972. Meanwhile, debt service has risen sharply; in 1972, half of expected public savings will be absorbed by debt service.
xxxv. The tight financial situation in the 19_72 budget moved the Government to introduce austerity policies with regard to public spending, but, in spite of these measures, it was necessary to reduce total budgeted public investment by 16 percent below the 1971 level. It therefore seems necessary to make adjustments, particularly in administrative expenditures. 'Educa~ tion expenditures have also been rising very rapidly and even though the needs in this sector are large, economy measures may be in order.
xxxvi. In spite of the shortfall in domestic resources, the Government is maintaining an impressive fiscal performance. Compared with other developing countries, Ivory Coast has a high level of tax revenues -- 20 percent of GDP plus sizeable quasi-fiscal revenues -- and a high public savings-- 10 percent of GDP in 1968-70 and 7.5 percent in 1971. The austerity
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measures show the Government's determination to maintain this performance, in spite of more difficult economic circumstances.
xxxvii. Even if the Government's efforts at resource mobilization are successful, the implementation of the development plan will require a large increase in foreign aid disbursements. For 1972-74, the mission has estimated the need for aid disbursements (grant and loan funds) at $140 million per year as compared to about $70 million in 1970 and $100 million in 1971.
xxxviii. With these large aid requirements, the terms of aid are becoming increasingly important. To prevent an excessive increase in debt service, the Government should refrain from undue reliance on all forms of commercial credits -- supplier credits, contractor financing or short and mediumterm borrowing on capital markets abroad. This caution with regard to commercial credits should extend to the financing needs of all of the public sector, and not of the central Government alone. The last economic report suggested, on the basis of tentative debt service projections, an upper limit for commercial credits of $20 million a year. If anything, the justification for this limitation has only been strengthened by economic developments since that report.
xxxix. With the same concern of keeping down the prospective debt service burden, foreign aid donors should also be prepared to soften the terms of their aid by providing a mixture of conventional and concessionary financing. In view of its favorable level of external reserves, satisfactory growth prospects for exports and for the whole economy, and a still not excessive debt service burden, Ivory Coast should be able to service additional debt on conventional terms. However, the rapid increase in aid requirements could soon lead to debt service difficulties, and a certain amount of concessionary financing i8 therefore desirable.
xxxx. At the same time, aid donors should be prepared to finance a relatively high proportion of project cost, including part of local expenditures of projects with low import content. In the mission's estimate, about 40 percent of public investment during 1972-74 would be financed from public savings. However, a sizeable proportion of public investment consists of projects which are not likely to attract foreign financing such as administrative buildings and certain investments in social infrastructure. According to the mission's rough estimate, external project financing should therefore on the average finance at least 70 percent of project cost to avoid serious financial difficulties for the Government.
I. INTRODUCTION
1. The previous economic report 1/ analyzed economic developments during the 1960's and prospects for the-1970's. The report concluded that the economic growth rate, which had been very favorable by international standards throughout the last decade, had strongly benefited during 1965-70 from improvement in the terms of trade. This improvement had also led to a favorable financial situation; in spite of sharply increased current expenditures the Government could continue to finance a large share of public investment out of public savings. The mission felt that growth prospects for the Ivory Coast economy were by and large still favorable, and that the Second Five Year Plan (1971-1975), oriented towards further diversification of the economy, was in line with the priorities of economic development. However, in view of a likely deterioration of the terms of trade, the financial situation was to become much less favorable. As a result the mission foresaw a drastic dec~ine in public savings as a proportion of total public investment, and a far too rapid growth of external debt if the Government would nevertheless attempt to keep public investment at a high level. The decline of public savings would result from a slowdown in revenue growth and the tendency of current. expenditures, particularly those for personnel, to grow more rapidly than GDP. As a result of a scissors movement -- fast growth of current expenditures, slow growth of revenues -- public savings could drop drastically. From 1965-70, Ivory Coast vas able to finance over 60 percent of public investment. During 1971-75 the proportion might drop to 26 percent, far below the local currency component of public investment.
2. Such large reliance on external assistance would unavoidably lead to a further rapid increase in external debt. Since 1965, debt outstanding (including undisbursed debts) had increased annually by about 30 percent. Since the starting level was low, debt service was not yet a serious problem. However, the financial situation forecast for the Second Plan and beyond indicated debt servicing problems by the end of the decade.
3. The mission pointed out that the Government had sufficient means to avoid such a situation. Public savings could be increased by higher taxes, lower current expenditures, and better control over the finances of public enterprises. The Government should be able to increase public savings during the Second Plan from the projected level of 6 percent of GDP to 7.5 percent. To keep debt service at a manageable level, the report moreover recommended that the Government keep commercial credits (suppliers' credits, contractor financing, medium-term bond issues) within tight limits. The mission proposed a ceiling of US$20 million.
4. In the present report we shall analyze:
(a) general economic developments since the last mission;
1/ Report AW-28a: Current Economic Situation and Prospects of the Ivory Coast (Summary and three volumes); November 9, 1971.
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(b) the situation of public finance with special emphasis on measures to strengthen public savings and limit the growth of external debt;
(c) the prospects for economic growth and public investment during the period of the Government's rolling three-year program for public investment, the Lot-Programme, 1972-74.
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II. ECON(I(lC DEVELOPMENTS IN 1970 AND 1971
A. GOP Growth and the Terms of Trade
5. Economic grcT.Ith slowed down sharply in the early 1970's as shown by the following figures:
Table 1: GDP GROWTH RATES, 1965-71
rowth rates 1970
growth at current prices 12.4 12.5 7.4
growth at constant prices 7.4 5.5 3.0
per capita growth at constant prices 3.8 1. 9 -0.5
Source: Mission computations.
6. In 1970, the growth rate was still high, in spite of a sharp de-cline in timber exports (overstocking in European markets) and a ~enty percent drop of cocoa prices. However, the effect of these declines was more than offset by higher coffee prices and high volumes of coffee and cocoa output. Furthermore, a high level of public investment led to a boom in construction and strong demand for goods and services. On balance, 1970 was a good year for the economy, although per capita growth in real terms was much smaller than in the 1960's.
7. In 1971 there has been a further slowdown. Since national accounts for that year are not yet available, the mission has made tentative GDP and sector estimates (Appendix A) which show a decline in GDP growth to 7.4 percent in current prices and to about 3 percent in constant prices. Per capita GDP in real terms may have slightly declined in 1971 or at best stayed at the same level. The reason for the slowdown in economic growth in 1971 is the stagnation of the value of agricultural production caused by the deterioration in the world market price for cocoa. While cocoa prices have been falling since early 1970, coffee prices have increased somewhat and continue to be rather high. Coffee and cocoa prices have developed as follows:
Cocoa
Coffee
Index: Cocoa
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Table 2: COCOA AND COFFEE PRICES. JANUARY 1969-72 (CFAF/kg; cif Le Havre)
1969 1970 1971 Jan. July Jan. July Jan.
249 249 288 181 173
(quota price) 177 171 250 260 244
Jan 1969 • 100 100 100 116 73 69
Coffee (quota price) 100 97 141 147 138
Source: CSSPPA and mission computations.
1972 July Jan.
157 135
2.:'10 234
63 54 1/:.1 132
8. Other products also showed a price increase in 1970 and a decline in 1971, particularly timber, 1/ bananas, and pineapple products (Appendix,Table 3.4). Overall, the export price index 2/ showed an average increase of 7 percent in 1971, but a decrease of 4 percent during January to September 1971. The decline has almost certainly continued during the remainder of 1971 since cocoa prices have further decreased.
9. Import prices have increased by roughly 16 percent in 1970 (the year following the 12.5 percent devaluation of the CPA franc) and probably by at least 6 percent in 1971. The following table summarizes the development of import and export prices and the terms of trade index since 1965:
11 For timber, this relates to the average unit value realized. This is greatly influenced by the mix of species exported. No data are available showing price movements for a constant export mix.
11 The methodology for this tentative calculation was explained in the 1971 Economic Report (Vol. I, Annex I). The IMF export price index for Fran~e. used here as a substitute for the import price index for Ivory Coast, increased by 6 percent during the first nine months of 1971.
1.
2.
3.
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Table 3: ESTIMATED DEVELOPMENT OF THE TERMS OF TRADE, 1965 - SEPTEMBER 1971
1965 1966 1967 1968 1969
Export Price Index 100 113 119 130 142
Import Price Index 100 101 100 98 105
Index: Terms of Trade (1 :2) 100 112 119 133 135
Source: Tentative mission computations.
Sept. 1970 1971
153 148
122 129
125 115
10. The domestic impact of this deterioration of the terms of trade --an 8 percent drop during the first 9 months of 1971 -- was lessened by a number of compensatory factors:
(a) Although cocoa prices fell sharply by 22 percent in 1971, cocoa export value remained almost unchanged because deliveries by farmers and, to some extent, smuggling from neighboring countries increased in the same proportion, from 186,000 to 226,000 metric tons. This increase was much sharper than anticipated, exceeding by far the forecast in the Five Year Plan. Since the producer price was raised in September 1970 and kept unchanged since then, producer incomes increased sharply in 1971 (by about one quarter).
(b) Coffee prices on quota sales kept up very well (see paragraph 7). Although production dropped from 274,000 to 240,000 metric tons in 1971, it still exceeded the ICA quota, so that the decline in output had to be valued at the low free-market price (about CFAF 103 per kg. as compared to the average price on quota sales of CFAF 234 per kg.). Producer incomes in 1971 dropped by about ten percent.
(c) Timber production, recovering from the 1970 slump increased by ten percent in 1971. Other agricultural production increased by roughly five percent, mainly because of increased output of pineapple products and palmoil.
(d) The impact of declining cocoa prices on farmers' incomes and general economic activity was cushioned by the pricing policy of the Caisse de Stabilisation (CSSPPA). The fall in cocoa export prices has not affected farmers' incomes in 1971;
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on the contrary, they must have risen as a result of the increase in the producer price from CFAF 80 per kg for the crop year 1969/70 to CFAF 85 per kilogram for 1970/71 and 71/72, and the higher volume of sales. The cocoa price decline has caused an overall operating loss of the Caisse during 1971/72 of CFAF 2. 8 billion 1/ and a fall in its reserves which S"~e largely kept abroad.- The decline of coffee farmers' inco.les, due to the fall of output in 1971 , was almost entirely co1pensated by the increase in the producer price from CFAF 95 ·•er kg in 1969/70 to CFAF 105 per kg in 1970/71 and 1971/72. Farmers' incomes may have increased slightly (four-five percent) over the high 1970 level. This has forestalled mora serious repercussions of the decline of cocoa prices and volume of coffee sales on the economy as a whole.
(e) Public investment, which remained high, also contributed t.o a strong demand for domestic goods and services. Partly lS
a result of this, production in the secondary sector increased substantially. Output of textiles, beverages, motor vehicles, construction material, and plam oil increased markedly. New plants began production. Tentative estimates suggest an increase of the value added of the secondary sector by 15 percent. 2/ The output of the tertiary sector (excluding services connected with coffee and cocoa production) appears to have grown in 1971 by about 9 percent, as it had in 1970.
11. Summing up, the Ivory Coast economy has shown considerable resi-lience in 1971 against the impact of unfavorable external conditions. Economic growth slowed down in the primary sector, but continued at a high rate in the rest of the economy. The relative overall stability was due, in the first place, to the fact that prices and volume of sales for cocoa moved in opposite directions. Timber and a few minor export items performed rather well and, as a result, total export value slightly increased. These developments are evidence of a growing diversification of production which should increasingly insulate the economy against world market influence. In the second place, total demand for goods and services remained high due to an increase in producer prices for coffee and cocoa and to a high level of public investment. Ivory Coast was able to finance the resulting high expenditure level in 1971 with the help of a drawdown in external reserves and a sharp increase in external debt.
ll Estimate provided by the Caisse de Stabilisation.
2/ It is difficult to make these estimates for 1971 since producUon statistics of industry are published with considerable delay.
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B. The Financial Picture
12. Last year's economic report showed certain characteristics of the savings-investment process in Ivory Coast. The economy usually has an over-all resource surplus, whereas the public sector has a resource deficit. However, transfer of after-tax resources to the public sector is small. Most of the private resource surplus leaves the country as profit and income transfers. Income transfers are made by expatriate Europeans and foreign enterprises but also by the large number of non-Ivorian Africans. The dimensions of this outflow are huge by any standard: an estimated 8 - 9 percent of GDP in 1968-70. This high share is a direct reflection of the large foreign participation in the economy of the Ivory Coast. Thus far, only a small part of this private resource surplus is being mobilized for public investment. As absorptive capacity of the public sector grew, the Government increasingly relied on outside resources for the financing of public investment. Thus, the phenomenon of private outflows and simultaneous public inflow is continuing and even becoming more pronounced. The public resource gap, which still \vas modest in 1968-70 (on average CFAF 3.4 billion, 0.9 percent of GDP) increased substantially in 1971 (CFAF 28.6 billion, 6.5 percent of GDP).
13. Apart from efforts to maintain and further increase public savings (chapter IV), Ivory Coast could reduce its dependence on outside resources by the establishment of a domestic financial market which both public and private borrowers could tap. Even a small shift in resource flows could drastically reduce the Government's dependence on external funds. Unfortunately, data on savings and investment in the private sector are weak, and it is possible that private investment is somewhat underestimated. In particular. private housing construction throughout the country may well be underestimated in the national accounts. Nevertheless. there is sufficient sttltistical evidence to confirm a l<'·rge outflow of private savings. The desirability of reduced private capital export is obvious since it will lead to greater ability to contribute domestic funds to otherwise externally financed projects and less external debt service.
14. The Government has taken a few measures aimed at increased domestic resources mobilization. First, the Caisse Autonome d'Amortissement (CAA) continues to issue tax-free bonds which carry an effective interest of 11-13 percent a year. These issues are still small, CFAF 500 million, at one year intervals. Subscription to the third issue closed in February 1972. For all issues, the nominal interest rate was 7 percent with redemption in 10 years. The number of svbscribers (about 1,000) again included a number of expatriates, indicating that this financially important segment of the population is sensitive to attractive interest rates. As soon as the uncertainty about the international monetary situation has disappeared, the authorities may wish to consider the scope for larger and more frequent issues. Recognizing the Government's long-term Ivorization goal, a few foreign-owned enterprises have been offering part of their share capital to citizens of the Ivory Coast. It appears that these shares were acquired by a relatively small group. Since the volume of private savings available for these transactions is apparently still very limited, one device which might be considered is Government acquisition of shares from foreign companies in a trust fund for later sale to
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Ivory Coast citizens. This would help lay the basis for widespread ownership of industry among Ivorians.
15. Second, private savings for domestic investment are mobilized by the Fonds National d'Investissement (FNI), which levies 10 percent of taxable profits. This levy can either be redeemed against proof of re-investment by the enterprise, be invested in bonds of the Societe Nationale de Financement or be converted into a Government bond maturing after 40 years and yielding only 2.5 percent. FNI's receipts (recouvrements du tresor) amounted to CFAF 2.3 billion in 1970 and CFAF 1.5 billion in 1971.
16. Third, private savings are deposited with the Caisse Nationale d'Epargne. The total amount of these savings deposits has remained small (CFAF 1.2 billion). The 3.5 percent interest rate paid on savings deposits, is below the average rate of inflation, and thus amounts to a negative yield for saving in real terms. Obviously, the rate should be raised if the Government wants to encourage the habit of regularly depositing in saving accounts.
17. The overall interest rate structure has remained virtually unchanged in the last year. The rediscount rate of the central bank remains at 3.5 percent. Loan charges by the commercial banks usually vary from 6 percent to 9 percent for non-rediscountable credits. Interest rates paid by the banks on deposits are low; the maximum is 4.5 percent for a time deposit of over CFAF 5 million.
18. The last economic report raised the question whether Ivory Coast's low interest rate speeds up the outflow of private funds (thus reducing national savings) and encourages capital intensive production. Admittedly, the outflow of funds is bound to continue in view of the large number of expatriate and immigrant workers and foreign investments. However, lower interest rates would tend to speed up and increase the outflow. On the other hand, higher interest rates could influence internationally-based companies to keep larger volumes of liquidity in Ivory Coast. Owing to the world-wide decline in interest rates, the gap between interest rates in Ivory Coast and abroad is much smaller now than in the last two or three years. However, in order to maximize national savings it may be necessary to lift the interest structure above that of the developed world, so that funds in the Ivory Coast would receive a premium. Since the availability of domestic finance is an increasingly important factor in Ivory Coast's economic development, the Government has started a study of the appropriate interest level. The results of this study are not yet available.
C. Balance of Payments
19. The current account of the balance of payments deteriorated during 1970, due mostly to an unusually large jump in imports of 25 percent and the decline in timber exports. The trade surplus declined from CFAF 29 billion to CFAF 1S billion and, for the first time in three years, the current account was in deficit (CFAF 6 billion). However, capital inflows and grant
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aid more than covered this deficit and net foreign reserves rose during the year by CFAF 8.5 billion.
20. Full balance of payments statistics for 1971 are not yet available. According to preliminary estimates, exports and imports increased little {6 and 7 percent, respectively) and the trade surplus.remained at about the same level. Loan disbursements continued to grow extremely fast {from CFAF 12.5 billion in 1969 to at least double that amount in 1971). Partly this is due to the $22 million Eurodollar loan in 1971. Grant aid also increased, although much less rapidly. Central Bank reserves dropped in 1971 by $15 million to $90 million, largely because of speculative movements of funds during the currency realignments at the end of the year. Indications are that reserves have recovered in the first months of 1972.
21. In the recent currency realignment, Ivory Coast came out in the mid-dle. Parity with France, the Franc zone, the U.K., and Spain {which together account for half of external trade) remained unchanged. The CFAF franc appreciated by 8.6 percent in terms of US dollars {14 percent of external trade) but depreciated by 3 to 6 percent in terms of Belgian francs, guilders, marks, yen, etc. The net result is that the weighted value of the CFA franc as used in Ivory Coast's external trade remained about what it was before the currency realignments.
Table 4: EFFECT OF EXCHANGE RATE CHANGES
{weighted according to the pattern of external trade in 1970)
New exchange rate Percent of total of CFA franc with external trade of each currency in
Ivory Coast /1 percent of old rate:
France 38.9 100.0 Franc Zone 7.8 100.0 United Kingdom 3.1 100.0 Spain 1.6 100.0
/1 Based on data in Directory of Trade (IMF). 72 Rough average.
Source: Tentative mission computations.
Relative impact of exchange
rate change {percent)
38.9 7.8 3.1 1.6
2.2 4.0
10.9 8.9
15.5
2.2
5.1
100.2
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22. The table shows that the weighted new rate of the CFA franc is 0.2 percent above the old rate. This does not mean that the competitive position of Ivory Coast was not affected by the currency realignment. Many developing countries, following the example of the dollar, devalued in terms of gold or maintained fluctuating exchange rates. This was the case for most Latin American, Asian, and other African developing countries. Vis-a-vis these countries, the CFA franc area has revalued by 8.6 percent. Ivory Coast producers of tradeable goods (export products and import competing products) have thus moved to a weaker competitive position than their competitors in countries which did not revalue.
23. Moreover, the calculation presented in Table 4 is probably of limited applicability in the case of primary exports. It does not appear that the dollar prices of coffee, cocoa, and most other primary products important to Ivory Coast have changed as a result of the devaluation of the dollar. The exporting members of the International Coffee Agreement demanded a 4 US cents per pound price increase for coffee, but no change was made. 1/ With the dollar price for most products essentially unaffected by the dollar devaluation, export values in terms of CFA francs have declined by 7.9 percent as a result of the dollar devaluation. If Government wishes to maintain producer prices and trade margins at their present level, public revenue (in this case, the levies of the Caisse de Stabilisation) will drop by some CFAF 6 billion a year from an already low level because of loss in CFA francs on coffee and cocoa exports alone.
1/ Petroleum exporting countries, which are in a strong bargaining position, did obtain price adjustments. Exporters under the International Sugar Agreement also received higher prices.
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III. MAJOR SECTORAL DEVELOPMENTS
A. Agriculture
24. Geod progress was made in 1971 with the implementation of the agricultural development program. The aims of the program are diversification of production, improved regional economic balance, and increased selfsufficiency in food crops. Weather conditions during the 1970/71 campaign were somewhat less favorable than during 1969/70 resulting in a stagnation in cocoa output, despite an increase in harvested areas. However, weather during the current crop year has been very good and a bumper crop is expected. Since most harvesting is done between October and December, this means that for calendar year 1971, the Ivory Coast cocoa crop reached an all-time high: purchases under the CSSPPA regime amounted to 226,000 m.t. (186,000 m.t. in 1970- see Appendix A). Similar large harvests in other major producer countries have led to an oversupply and prices have fallen sharply as indicated earlier. Supply is likely to continue at this or higher levels because producers are expanding the cultivated area and introducing high yielding varieties. During the plan period, world market prices may at best remain at the present low level unless negotiations on an international cocoa agreement are successful. The earlier mentioned increase of the producer price in September 1970 caused an estimated decline of the receipts of the Caisse de Stabilisation of CFAF 1.1 billion and an equivalent increase of cocoa farmers income in 1971.
25. Coffee production during the 1970/71 campaign fell to 240,000 m.t. (1969/70: 280,000 m.t.). The decline is not only attributable to weather conditions but also to other factors, such as harvesting of smaller areas and labor availability. Stocks are still large and the output decline has not been a limiting factor for exports. The mission has not been able to obtain complete data on the coffee market, especially a reconciliation of data on production, exports, local consumption, and stocks. Exports fell somewhat from 195,000 m.t. in 1970 to 185,000 m.t. in 1971 of which 160,000 m.t. to quota countries (at an average price of CFAF 244/kg) and 25,000 m.t. to non-quota areas (at an average price of CFAF 120/kg). Since this is far less than production and because domestic consumption should not exceed about 10,000 m.t., this cannot be reconciled with the reported reduction in stocks from 162,000 m.t. on September 30, 1970 to 142,000 m.t. on September 30, 1971. Due to the higher producer price since September 1970, coffee farmers income rose by CFAF 1.2 billion in 1971 at the expense of revenues of the Caisse de Stabilisation.
26. Production of pineapples expanded markedly; pineapple canning capacity also increased. New oil palm plantations have begun production as a result of the Government's diversification efforts. Production will further increase in line with existing expansion plans. Banana exports dropped in 1971; marketing constraints are likely to restrict future production growth.
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Cotton production declined for the third consecutive year in 1971 to 29,000 m.t. (1969: 42,000 m.t.) because of unfavorable weather conditions and competing labor requirements of other crops. The Government anticipates an output of 40,000 to 45,000 m.t. in 1972. Increased coconut production is limited as most new plantings will not come into production before 1975.
27. Statistical information on food crop production remains deficient. Rice output in 1971 appears to have increased by 20 percent to 380"000 m.t. of paddy largely due to extension of the cultivated area. Since there are no reports of major food shortages and food imports remain stable as a proportion of GDP, the impression is that food crop production includtng vegetables continues to increase at least at the rate of population growth (3.5 percent).
28. The Government continues its and export crops, especially palm oil, of cocoa hybrids is ahead of schedule. good progress in the implementation of Year Development Plan.
diversification policy for tndustrial coconut, and rubber. New plantings OVerall, the Government ha:q made
the agricultural program of the Five
29. The Government has initiated a large rice development program which should increase production by 170,000 m.t. by 1977. The increase in output will be domestically consumed. The program consists mostly of land development, construction of small dams, training, etc. The following financing schedule is envisaged:
Table 5: RICE DEVELOPMENT PROGRAM 1972-77
(CFAF billion)
Foreign funds
FED project 3.1 reo project 1.7 German project 3.1 Bas Fonds project I 1.2 Bas Fonds project II 1.2 Project outside
the plan
Total 10.3
Local funds
1.0 0.3 0.3 0.3 0.3
0.6
2.8
Total
4.1 2.0 3.4 1.5 1.5
0,6
13.1
Expected production
50.000 t. 20,000 t. 10,000 t.
) 80,000 t. )
10.000 t.
170,000 t.
Source: Ministry of Agriculture, Ministry of Economics and FinancE•.
Most of the financing has been secured. ICO financing will be fron1 a special loan from the diversification fund. The German Government has ind:l.cated its
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willingness to provide grant aid; the project content still has to be discussed. The Bas Fonds Project I will be partly financed by Caisse Centrale; no financing is as yet available for the second part which would consist of 7,500 ha. The project outside the plan is to be financed from public funds.
30. Early 1972, the Government signed an agreement with a U.S. con-tractor for the construction of 6,000 ha. sugar plantation and a 60,000 ton sugar factory at Ferkessedougou in the north at a cost of CFAF 16.4 billion ($63.7 million). The project is to be entirely financed by foreign loans (Export-Import Bank of Washington) 33 percent; a U.S. private bank, 67 percent (interest rate 5-1/4 to 7 percent and repayable during 7 to 16 years). The amount of the loan covers all of the fixed investment as well as the working capital needs of the project. The financial return of the project would be negative at present domestic sugar prices. 1/ In addition, the Government will lose some revenue because of the loss of import duties and taxes on sugar. On the other hand, the project is located in a densely populated area in the north, which has little other productive possibilities; the wage bill will be CFAF 540 million ($2.1 million) per year at present wage rates.
B. Forestry
31. The current situation and prospects of the forestry sector are more fully discussed in a separate working paper. Forestry production has been a dynamic growth factor during the last decade due mainly to large reserves, strong overseas demand, a favorable infrastructure (road network, Abidjan harbor), availability of labor, and a liberal Government policy. Timber is one of Ivory Coast's principal export goods accounting for about one-fourth of total exports. Recently, however, it has become clear that the more highly valued species are becoming scarce. The opening up of the untapped or only lightly exploited forests in the hinterland of the new San Pedro port will allow forestry production to remain at a high level until 1975. Beyond 1975, a decline will set in unless the Government puts into effect a number of policies aimed at rational exploitation and increased domestic value added of forestry production. As such, the mission would recommend the following points for consideration by the Government:
(a) Forest Inventory 1973-74. At present, there is no adequate information about the location, size, and composition of forests. Because of annual exploitation of 250,000 hectares the forest area has greatly decreased since the last inventory
1/ At present, prices are determined by the OCAM sugar agreement. They are based on CFAF 42/kg of granulated sugar and CFAF 62/kg for sugar cubes, CIF Abidjan, net of taxes.
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in 1966. A new inventory during 1973-74 would pro•Tide u;1dated information about potential forestry resources :f.o:r the nl:~ five year development plan, 1976-80.
(b) Demarcation of state forests. National forest res~rves Are suffering enormous losses each year because of the clear1.ng of forests for shifting cultivation. The annual loss is estimated at 750,000 cu.m. on immediately utilizable timoer~ about 20 percent of the annual commercial exploitation. Forestry would benefit from increased efforts to control fo;·est exploitation and prevent unauthorized intrusion. Howeve ·, for the time being, providing full protection of the for :st will remain one imposs:f.ble task. Moreover, rural people still adhere to the traditional concept that forests are ovmed by the tribal community rather than by the State. The best approach, therefore) may be to establish economic incentiv~s for rational exploitation by villagers. The Government coul, do this by allotting specific forest areas for exploitation by villagers and by providing them with means (Including te,,hnical advice) for rational felling and marketing of timber. TI1e Government has not yet decided to move in this direction.
(c) Utilization of secondary species. Availability of the tnr.1st highly valued species has rapidly declined and under preaent conditions, forest production is bound to drop progressively. To maintain a high level of exploitation, the Govat~ment should encourage the utilization of secondary species by promoting research on their utilization. The EEC program fo•r: promoting sales of secondary species by the associated A:rican countries will perhaps be useful. More important, howev~r, the utilization of secondary species should be encourage0 by appropriate fiscal measures; this will be discussed unde::· item (h).
(d) Reforestation. The Government's reforestation program C(Vers 3000 hectares a year. This program :f.s efficiently adtnin: ate red by SODEFOR, an autonomous government organization. Since tropical hardwood reaches maturity only after 30-50 years, the eco-· nomic rate of return of replanting inevitably tends to bt; low even though the initial investment in replanting is smaU compared with the standing value of the fully grown timber. '111e mission recommends that the Government study the economic justification of reforestation, taking into account cert~in favorable elements such as the economic benefits of thinning (which if properly implemented can be considerable) and the eco}ogical impact (erosion and water shed control, scenic attract:f.m).
•
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(e) Domestic processing. At present, only 25-30 percent of total wood production is processed locally; the rest is exported as logs. Although this percentage is about the same as that of other timber exporters in francophone Africa, there is obvious scope for increased domestic processing. However, at present, the processing industry encounters serious difficulties, which appear mainly due to the lack of regular supplies of raw material (logs), but perhaps also to uneconomic plant size. The mission feels that the Government should attempt to increase the volume of domestic processing through an appropriate concession policy and through changes in the fiscal regime. The concession policy should be geared to provide long-term (15 years) concessions covering extensive forest areas to firms intending to set up large processing units. In addition, the Government can stimulate domestic processing by increasing export taxes on unprocessed wood (logs). The Government is giving assistance through the Divo Forest Center to the large number of small, indigenous sawmills who are supplying the domestic market. The Center attempts to encourage domestic use of secondary species.
(f) Ivorization. Forest industries are largely owned and operated by foreigners. The Government could encourage domestic management and ownership by favoring, in its concession policy, firms with Ivory Coast's capital and management and training programs for natives. In its wish to promote entrepreneurship among Ivory Coast citizens, the Government has issued, since 1968, numerous exploitation permits to natives, sometimes for areas for which established firms already were holding permits. Several firms which had established logging roads and processing plants were seriously harmed by this procedure. The Government is reorganizing the administration of the forestry sector and has taken steps to prevent the double issue of exploitation permits.
(g) Regional planning of exploitation. In order to promote more rational exploitation including orderly planning of infrastructure needs, regional forest inventories should be undertaken over areas of about 300,000 hectares each. It should be possible to carry out about three of these regional inventories each year so that the entire country could be inventoried in about seven years. It is likely that foreign technical assistance will be available to carry out such a program.
(h) Taxation. Total government revenue from taxes on timber was about CFAF 6.4 billion in 1971, about one-fifth of the value of timber exports •. Present tax rates have uneconomic effects since they appear to encourage exploitation of certain highly valued species and the best quality trees of each particular species.
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Moreover, the tax rate does not take into account transportation costs, which may vary considerably according to the distance between the logging area and the port of export. A reform of timber taxes appears desirable; it should be based on the principle that taxes per cu.m. be equal to the value of the standing timber. In other words, the Government as the owner of the standing timber should normally not allow felling at a price below its actual value. The Government can appropriate the value of the t:lmber through taxation, or in the case of short-term logging permits, by auctioning off the exploitation permits. Implementation of this basic taxation principle should lead to appropriate variations in taxes according to quality (species) and location. Obviously, serious study as well as strengthening of forestry administration will be needed to put such a reform into effect. It should be noted that appropriate taxing of the total standing value of the timber should end the sub-contracting of concessions which in recent years has played havoc with the regular supply in raw material of domestic processing firms.
c. Industry
32. Judging from fragmentary data 1/, industrial output in 1971 has continued to grow rapidly -- 18 percent in current prices and perhaps 12-13 percent in constant prices. Although growth has taken place primarily in food processing and textile industries and construction, a rise in other activities, particularly in the metal industry, is also noticeable. Industrial growth is still predominantly dependent on domestic demand. The Government tries to break away from this trend by promoting export industries.
33. A paper pulp plant in the hinterland of San Pedro is still in the preparation stage, but studies might be ready by the end of 1972. The concept of the project has not changed from that outlined in the previous report. However, tentative cost estimates have risen by one-third, to about CFAF 40 billion. Negotiations with foreign sponsors for a cotton spinning and weaving plant (CFAF 9 billion) appear to be in a final stage. Annual production is scheduled to reach 4,500 m.t. in 1974 and to rise ultimately to 12,500 m. t.; 90 percent of the production is .to be exported. Negotiations with foreign promoters for a large tire factory (CFAF 20 billion) have not yet been completed. Annual production would be 3 million tires, most of which would have to be exported to neighboring countries, Europe, and the
l/ Statistics on industrial production are compiled only once.a year and are published with considerable delay. Complete data for 1971 are not yet available.
- 17 -
USA (expected export CFAF 11 billion after 10 years). Plans are being devised for an artificial fibre factory to be constructed by 1976/77 which might supply the country's textile plants. Progress of the Bangolo iron ore project is reported in paragraph 37; that of the sugar project in paragraph 30.
Industrial Policies
34. The Government's Investment Code is still under revision. The ob-jective is to make the period and level of duty exemption on imported materials (now ten years) dependent on the needs of individual enterprises. In the Ivory Coast, all new industrial plants and major expansions of existing plants are exempt, for five years, from paying company tax (33 percent of profit). Firms which the Government judges sufficiently important for development, moreover, can obtain priority status under the Investment Code, which entitles them to exemption from import duties on imported capital equipment and a ten year exemption from duties on imported materials and parts. Between 1959 and 1970, 64 firms accounting for about half of industrial sales received priority status. Of this number, 19 firms were established more than ten years ago, which means that the time had come for them to operate without the protection afforded by the Investment Code. However, it has become clear that withdrawal of protection would entail difficulties for a number of firms. In fiscal 1970, 36 out of 59 priority enterprises then in operation earned profits which were smaller than the duty exemptions on imported materials. Half of these firms had obtained priority status before 1965. If these firms had to pay the normal amount of import duty they would immediately start losing money (unless they would be able to raise the prices of their products) and some might have to close. Attempting to avoid failures of priority enterprises, the Government has made ad hoc adjustments in the tariff structure by selectively reducing duties on imported materials or raising duties on finished products. In a number of cases, the Government has applied quantitative restrictions on particular competing imports from all sources, in addition to its general policy of quota restrictions against all imports of final goods from low wage countries in South East Asia.
35. Although the industrialization policy has been undeniably success-ful in promoting a rapid increase in industrial production in the past decade, concern is rising that under the protective system a number of permanently uncompetitive enterprises are being established. There is, moreover, the danger that duty-free imports of capital equipment, materials, and parts is leading to capital-intensive production, both by reducing the price of capital relative to labor and by systematically encouraging the installation of new equipment as against output expansion achieved by fuller use of existing capacity. The system also discourages the local production of these materials and parts, which in some cases may be possible in the Ivory Coast, with rates of protection which are low in relation to the average level. For these reasons it would be desirable to develop criteria to establish which ventures should receive protection and how much. At present, the Government
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seems to be guided chiefly by the domestic value added created by the venture. ll If value added exceeds the loss of import duty, the Government will tend to approve the project. However, the value added criterion does not take into account comparative advantage, i.e. the resource cost of the domestically created value added as against the alternative of importing the product. This is a shortcoming, which could lead to the establishment of an uncompetitive industrial sector. In order to forestall this danger, the authorities might be well advised to develop appropriate criteria for industrial investment and to revise the investment policy accordingly.
D. Mining
36. Manganese mining was stopped in 1971 because the operation was no longer profitable. Diamond production increased in 1971 (from 213,000 carats in 1970 to 300,000 carats, export value CFAF 1.3 billion) as a result of additional equipment.
37. Preparation of the Bangolo iron ore project continued in 1971. This project consists of the development of iron ore deposits (located about 300 km. from the coast) and the construction of a pelletizing plant with supporting transportation and power facilities. The deposits are large and easily accessible. Although iron content of the ore is low, it would be relatively easy to enrich the ore. The capacity of the plant would be between 5 and 10 million tons of pellets. The cost (based on comparison with similar projects elsewhere) is tentatively estimated at CFAF 140 billion (US$560 million). Technical studies indicate that pelletization of the ore should be performed at the coast, since a pipeline rather than a specially constructed railroad would provide the more economic transport from mine to coast. The Government hopes that technical and financial preparations can be completed by end 1973.
38. A consortium of foreign oil companies which have undertaken to spend CFAF 4 billion during 1971-77 started exploratory drillings. Seismic studies of off-shore oil exploration were encouraging.
E. Transport
39. The transport sector continues to absorb a large part of public investment. In 1970 and 1971, investments were high because qf the San Pedro project -- the first stage of which is nearing completion. The Government is implementing a number of new projects (particularly roads) which
ll The authorities also take into consideration the size of the project, employment, l~ages, exports, training of Ivory Coast citizens, etc. but the value adcle.ci criterion seems to have overriding importance.
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tend to further increase transport investments. The proportion of transport investment will rise from about 16 percent in 1971 to some 30 percent in 1972 which compares with a planned average share of about 20 percent for the Five Year Plan.
40. Road traffic continues to increase but the growth rate is tapering off mostly because timber exports have ceased to grow rapidly. Total freight traffic over the next five to ten years is expected to grow at only 2-3 percent a year; public interurban passenger traffic, at about 4 percent; and the use of private passenger cars, by at least 7 percent.
41. The Government is continuing to invest heavily in roads. The Loi-Programme lists projects totalling CFAF 11.0 billion (75 percent of transport investment) in 1972, CFAF 10.2 billion in 1973, and CFAF 12.1 billion in 1974. Average annual expenditure for road maintenance will be CFAF 2.6 billion. Road investments are likely to be financed by conventional (including Bank) loans and possibly also through contractors' credits. In view of the difficult financial position the Government may be forced to curtail investments in road projects below the level proposed in the Loi-Programme.
42. Railroad traffic continues to increase, mainly due to long-distance traffic with three land-locked countries (Mali, Upper Volta, and Niger).
Table 6: RAILROAD TRAFFIC, 1969-71
1969 1970 1971
Passenger km (millions)
Herchandise ton/km (millions)
Source: RAN.
The track from Abidjan to Dimbokro is being Some further 260 km of track (from Dimbokro renewed, possibly with BEl/FED assistance. be coordinated with planned improvements of Badikaha which parallels the railroad.
522 626 701
394 404 448
renewed with FED assistance. to Tafire) still remains to be Such investments will have to the road from Katiola to
43. Road transport appears to be insufficiently taxed, thus possibly favoring this mode of transport, at the expense of the railway. The UNDP financed Transport Survey has tentatively concluded that heavy vehicles do not pay enough user taxes to offset their costs for maintenance and improvement of the road network. If this were confirmed, it would mean that road
- 20 -
transport and shippers are being subsidized. It also might have implications for the division of the long-haul transport market between rail and road. In order to clarify these and related issues and to formulate a future policy on road user taxation, a study is being carried out with funds remaining under the budget for the UNDP Transport Survey. The tentative completion date is late 1972.
44. Port activity at Abidjan continues its gradual expansion, mostly because of increasing imports. Two big investments are being undertaken: a) construction of a groyne to arrest the build-up of a sand barrier across the channel approach to the harbor and deepening of the Vridi channel (CFAF 2.8 billion, to be financed by the Government (CFAF 1.5 billion) and the European Investment Bank (CFAF 1.3 billion)); and b) construction of two new quays (CFAF 1.0 billion with a German public loan of CFAF 0.6 billion).
45. After construction of an airport at Yarnoussokro in the interior of the country (accommodating DC-8 type aircraft), aviation investment is tapering off. Radar equipment is still needed at Yamoussoukro and may be purchased soon (CFAF 0.4 billion). The Government also purchased new aircraft (CFAF 0.5 billion). Planned investments in aviation during 1972-74 amount to CFAF 0.4 billion.
F. Distribution
46. The Government has recently started a program to develop a retail network, primarily for two reasons. First, Ivory Coast participation in this sector is extremely low. Only 16 percent of retail traders in Abidjan are citizens and in rural areas, the proportion is probably less than 5 percent. Second, the present retail network gives poor service to lower income persons and rural residents. An improved retail network should provide a better supply of daily products to a large part of the population and contribute to balanced regional development.
47. In 1970, the Government started with the establishment of a chain of retail stores called PAC (Programme d'Action Commerciale). These stores are run by Ivory Coast citizens. The first 20 stores were opened in December 1970. In March 1971 the 100th store has been put into operation and, by the end of this year, 100 to 150 more stores will be opened in various regions of the country. The stores are run by native retailers who usually obtain credits by the "Credit de Cote d'Ivoire". The Government is planning to establish a management company -- "Societe de Gestion du PAC" -- which will provide certain overall services to the storekeepers such as joint purchase, centralized wholesale stocks, and marketing and management facilities.
48. To provide a group of well trained retailers, the Government set up a Commercial and Management School (Ecole de Commerce et Gestion) in December 1970. As many PAC storekeepers as possible will be taken fr.om among the school's graduates.
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4q. The short operation period does not yet permit an evaluation of the Government's program. Turnover is rising and in 1972, total sales of around CFAF 3 billion are expected. The objectives of the program are certainly well justified; however tight financial supervision will be required to make the program successful.
G. Tourism
50. Visits by foreigners have developed as follows:
January - June 1970
July - December 1970
January - June 1971
Source: Ministry of ~::'ourism.
Arrivals
21,000
23,000
23,000
Nights Spent
92,000
105,000
93,000
In view of the opening of the Assini vacation village, the number of overseas visitors during 1971 may reach 50,000. The proportion of holiday-makers among these visitors is small but definitely rising. The Government views tourism as a means of creating employment and as a source of foreign exchange. Although existing and planned tourism projects are not yet financially attractive, the Government believes that tourism development has considerable potential and intends to continue its efforts in this field.
51. Tourism policy focuses on the development of a small stretch of beach in the east (Assini) and a 4,000 ha. area near Abidjan (African Riviera). For Assini, plans call for eventual construction of facilities comprising 6,000 beds. In 1971, a vacation village of 200 rooms managed by the Club Mediterranee (CFAF 1.7 billion including infrastructure) was completed 1/. Despite expected unfavorable financial results of ongoing projects, the Gov-ernment intends to start this year the construction of a second similar village (Assini II) of 300 rooms at an estimated cost of about CFAF 1,000 million ($13,000 per room). Significantly lower unit costs are attributable to less luxurious standards and to the fact that little additional infrastructure is needed. The project will be financed from public funds; management has not yet been selected.
ll Average cost per room of CFAF 8.5 billion ($30,600) seems very high, since investment per room for vacation villages usually ranges between $5,000 and $12,000.
- 22 -
52. Construction of a 500-room first-class hotel (Hotel du Golfe) in the Riviera area at a cost of CFAF 3.4 billion is planned. It will be financed by a private foreign firm, which will undertake management. A 2,000-seat convention center is under construction at the Hotel Ivoire, which is adding 250 rooms to its existing 500-room capacity. A 100-room hotel is being built in the center of Abidjan. The Government is also continuing to build modest hotels in smaller towns, usually on the occasion of the independence day celebration.
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IV. PUBLIC FINANCE
A. Recent Trends
53. Public finance is showing the full impact of declining GDP growth and sharply rising public investment. In spite of the recession, the Government was able to maintain budgetary savings in 1971 at the level of recent years (CFAF 20 billion, about 5 percent of GDP). These are preliminary figures, but the final outcome will probably not be too different. However, because of the drop in cocoa prices, the savings of the Caisse de Stabilisation fell sharply, from CFAF 13.9 billion in 1970 to CFAF 5.2 billion in 1971. As a result, total public savings have declined considerably. Public investment, however, has continued its remarkable upsurge, since the Government was increasingly able to borrow foreign funds for the financing of its investment program. Therefore, a dwindling proportion of public investment was financed from public savings. This is illustrated by the following figures: public savings (after debt service) financed only 40 percent of public investment in 1971, as compared to 58 percent during 1965-67 and 54 percent during 1968-70. Sharply increased disbursements of foreign aid and loans and a drawdown of reserves compensated for a decline in public savings. The following table 7 provides a summary of these developments in public finance.
54. The growth rate of current revenue declined drastically from 13 percent a year during 1965-70 to an estimated 6-7 percent in 1971 and 1972. The 1971 figures are preliminary and actual revenue may be higher. The slowdown of revenue growth is in line with the deceleration of GDP growth; the proportion of fiscal revenue to GDP remains at the relatively high level of 20 percent.
Current Expenditure
55. Current expenditure rose, according to preliminary estimates, by only 6 percent in 1971, after many years of extremely rapid increase (12 percent during 1965-70). Although final figures may be slightly higher, the rate of increase in 1971 almost certainly has remained well below 10 percent. The main cause of the increase in current expenditures is the continued rapid expansion of personnel expenditures. The proportion of personnel expenditures in total current expenditures rose from 47 percent during 1965-70 to SO percent in 1971 and is budgeted at 52 percent in 1972. Data for the first ten months of the year indicates that personnel expenditures in 1971 were running well ahead (about 5 percent) of budget allocations. This, of course, may happen again in 1972.
Table 7: TRENDS IN PUBLIC FIHAi'i!CE - 1:172
19il5-6 7
1. Current revenue .1
2. Current expenditure ):3.
J, Budeetary Savings (1-2) 11.2
'37 L. Caisse de Stri.bi lisati.:m - l. '}
S. Public en , other savini;s
(. ToL:c l pc.h:! c savings ( J+L+<)
7. Pubiic debt service
t. Savings available for investment ( (, -7
'). External resources
LJ, Changes in h11lances
1! .l!
17.
6 ( ·~
11. i
9 .l
2.1
11. Public investment (.'.+9+1;)22,2
1?. of which BSIE
1), GDP
1/ Preliminary estimates
t.' . '
CFAF billion as a percentage of public investments !. y y y
2/ Inclt:.dir,g errors and or.~issions 11 Est~;<,;Jtcrl ssi on calcnd::.cr ye:'.r ha;JlS. Source: Hinistry o~' Economics and Finrl.nce, of Pla.nning and mission estimates.
as a percentage of GDP
196)-67 1;;6u-'l'-' y y
1:/f~! 1:171 1972 average average
19.(• l9.i3 20.1; 2J.J 2J.3
.2 1L.9 15.7 lS .1: 1).~
} l .l~ 1;. ') 4.? 1 .. 6 lt.(·
u. ·; 3. 3.1: 1.2
1.7 2.2 1.7 1.7 2. ~]
6.{', L.J 9.U 7 c: ·~
6.
2 r:: ·~
2.1: 2. '1 2.7 3.1~
4.3 7.7 7.1 l.:.b 3.4
3.6 h.l !1.6 6.1 6,Cl
u.u -1.1: 0.6 2.3 1.1
• ·r K.L, 12.1.: 13.2 lG
5.7 (~.3 9.4
l:Ji) lDO 1CJO lGO lJO
- 25 -
56. The growth of personnel expenditures is to a large extent due to rapid expansion of the education budget. Education expenditures have been growing about 50 percent faster than other current expenditure and, according to the budget, this tendency is to continue in 1972.
Public Savings
57. According to these preliminary findings, budgetary savings in 1971 were virtually maintained at the 1970 level in spite of the slowdown of economic growth. However, total public savings declined substantially due to the deterioration in the financial results of the Caisse de Stabilisation. The position of the Caisse is likely to become negative in 1972, since the Caisse is currently supporting the cocoa producer price. In the past few years, the Government had been able to transfer large sums from the Caisse to its investment budget: CFAF 14 billion in crop year 1969/70 and CFAF 8 billion in 1970/71. In addition, the Caisse had been directly investing CFAF 3-4 billion a year. Since the reserves of the Caisse have now declined to below CFAF 10 billion less than 15 percent of the combined value of coffee and cocoa exports -- there would not appear to be further scope for transfer from the Caisse to the investment budget. In view of the risk of price fluctuations, the authorities consider further reduction in reserves undesirable.
58. The following table provides an estimate of the loss in public savings caused by the decline in cocoa prices. The loss in export earnings on cocoa is calculated on the basis of average cocoa export prices during 1968-70.
Table 8: EFFECT OF COCOA PRICE DECLINE
Cocoa export prices, FOB Abidjan (CFAF/kg)
Loss in export earnings per kg. (CFAF)
Quantity exported (1,000 M.T.)
Total loss, (CFAF billion)
Loss in % of public investment
1968-70 (average)
198
Source: Tentative mission computations.
1971 1972 (mission estimates)
157 130
41 68
219 194
9.0 13.1
16% 27%
59. The loss in export earnings due to the decline of cocoa prices from the high level prevailing in 1968-70 amounted to the equivalent of 16 percent of public investment in 1971 and is forecast by the mission to be
- 26 -
27 percent of budgeted public investment in 1972. This confrontation of receipts from cocoa exports and public investment is fully justified, since the Government has been maintaining the producer price for cocoa at CFAF 85 per kg. Any drop in world market prices thus directly reduces the net financial results of the Caisse and hence, public savings available for development.
Public Investment
60. Public investment rose from 10 percent of GDP during the late 1960's to 12 percent in 1971 and 13 percent in 1972. This increase is largely due to the fact that expenditures on the two largest projects in the public sector, Kossou and San Pedro, reached a peak in these years. Together, they accounted for one-third of public investment. Investment in both projects is gradually coming down (CFAF 17 billion in 1971 and CFAF 11 billion in 1972) which is part of the reason why public investment in 1972 is budgeted at 16 percent below the 1971 level. However, the loans obtained for the sugar project early in 1972 will raise the volume of public investment above the budgeted level.
61. In recent years, the composition of public investment has become heavily slanted towards economic infrastructure mainly because of the weight of the Kossou and South-West development projects. The share of investments in agricultural development and administrative infrastructure declined proportionately. However, to some extent this shift in the composition of investment exists only in appearance since the main purpose of the South-West development projects is the development of the primary sector.
B. Financial Policies
62. In the preceding section, we discussed the main factors which have contributed to a much more difficult finance position for the public sector than prevailed during he 1960's: declining terms of trade, entailing a deceleration of revenue growth and continued rapid growth of current expenditure. These factors have made it difficult for the Government to finance its expanded investment program and have led it to put increased reliance on foreign funds. However, the extent to which foreign funds can replace public savings is limited by the need for domestic counterpart contributions in many projects, increased current expenditures upon completion of certain projects, and, in the longer run, the difficulty of servicing rapidly increasing external debt. Under these circumstan~es, the Government will have to change certain of its policies in order to marshal sufficient resources for development.
- 27 -
Austerity Policy
63. Perhaps the most important recent development in the field of public finance is the Government's decision to observe austerity with regard to public spending. This austerity policy, publicly announced by the President and the Minister of Finance at the beginning of the year, is to some extent reflected in the budget for 1972 and in subsequent Government decrees.
64. The legislation concerning the second five-year plan had already established the priority of development investment over current expenditures. This law stipulates that current expenditures, in the interest of economic development, are to be held down each year to the expected growth rate of GDP. With expected GDP growth in 1972 far below the level of the 1960's, current expenditures therefore also had to be cut back. Accordingly, the 1972 budget is providing for 8.8 percent growth of current expenditures aa compared with the 1971 budget and only 5.3 percent as compared with estimated actual expenditures in 1971. To achieve this drastic slowdown (from growth rates of 12 percent in the 1960's), the Government initiated a number of austerity measures, with a total estimated effect of CFAF 3.5 billion. The main measures announced thus far are:
Table 9: ESTIMATED EFFECT IN 1972 OF AUSTERITY MEASURES
Reduction in living allowances for Government officials
Reduction in travel allowance
Abolition of credit for car purchases
Abolition of allowance for private cars used in an official function
Other austerity measures
Source: Ministry of Economics and Finance
Estimated reduction in current expenditures
(CFAF billion)
1.0
0.6
0.4
0.1
1.4
65. If the austerity measures yield their full expected result, current expenditures would be cut by 5 percent and budgetary savings would be raised by 15 percent. However, indications are that certain current expenditures have been under-estimated in the budget and that actual expenditures
- 28 -
may be significantly higher than forecast in the budget. Although the austerity measures are chiefly aimed at reducing the cost of government personnel, the fact remains that the 1972 budget again provides for a 13 percent increase in total personnel expenditures in comparison with the 1971 budget. The reason for this is that the austerity measures are mainly concerned with reducing some of the fringe benefits of the better paid civil servants. However, the root of the problem is obviously the recruitment of additional government employees. In the 1960's, the number of government employees increased by 7.5 percent a year. These high recruitment levels and the almost automatic salary increases (perhaps 3-5 percent a year) due to promotions and biennial in-grade increases, have been the main factors in the expansion of personnel expenditures until 1971. The government has decided to reduce the growth of civil servants to 4.4 percent in the 1972 budget, but it felt unable to cut promotion and in-grade increases.
66. Although the Government in the years since independence greatly increased its administrative activities, there can be little doubt that the increase in the number of personnel has exceeded administrative requirements. The Government is subject to strong political pressure to provide employment to graduates of secondary schools and of universities. Therefore, its task to contain personnel expenditures will not be easy.
67. Education expenditures have been rising fast. At present, 24 percent of the current budget is devoted to education expenditures, mostly teachers salaries and other personnel expenditures. The Government's education program provides for a growth rate of education expenditures which continues to surpass the growth of other expenditures. The danger exists that future education expenditures will come to account for too high a proportion of overall spendin~. It is not fully clear whether the Government has assessed the full financial implications of its education policies. Both the standards of educational facilities and the size of enrollment will have to be measured against the financial requirements of other sectors.
68. From a tactical point of view, the Government may have been cor-rect in starting with the dismantling of excessive fringe benefits. The elimination of wasteful expenditures in the higher ranks may be a pre-condition for the application of austerity across the board. However, to obtain substantial savings, the Government will have to rigorously scale down recruitment and fill new manpower needs mainly by re-deployment of available personnel who are not now fully employed.
Revenue Measures
69. The Government feels that rates for the most important taxes are already high and is therefore not planning major tax rate increases. It feels that revenue increases should be primarily derived from growth of the
- 29 -
tax base and improved collection. A number of minor measures are however proposed in the 1972 budget to bring the tax structure more in line with economic requirements and to make tax administration more efficient.
Higher registration fees and stamp duties (estimated additional public revenues CFAF 0.35 billion per annum);
A 10 percent withholding tax on dividends;
Structural reforms of real estate taxes with a possibility of certain minor rate reductions, but leading to improved collection;
Tax reductions (e.g. value - added tax) on low-cost housing;
Municipal tax reforms for Abidjan prior to a general community tax reform;
Modifications of reforestation tax estimated to increase annual revenues in the order of CFAF 0.16 billion.
70. The expected revenue effect of these measures is CFAF 0.7 billion, adding about 3 percent to budgetary savings. To promote Ivory Coast management and ownership of enterprises, the Government is also proposing a 5 percent employer tax on salaries paid to expatriates (estimated yield CFAF 0.15 billion).
71. It is difficult to judge now whether the Government should be able to implement a more general tax rate increase. The Government feels that tax rates are already high and that further increase might induce evasion. In its view, revenue growth should stem from growth of the tax base and improved enforcement at tax laws. Particularly the collection of direct taxes appears to be in need of improvement. The overall fiscal burden is 20 percent of GOP and a higher percentage if the levies of the Caisse de Stabilisation are added. This is a fairly high proportion for a developing country, somewhat higher than the 17 percent average fiscal burden in the associated countries of the EEC, 1/ although well below the fiscal burden in the developed world (e.g. average for the EEC Countries: 36 percent). 1/ As the Ivory Coast economy continues to grow over the. years, the Govermnent may be able to collect a rising proportion of GOP in the form of fiscal revenue in the interest of development. The recent deterioration of the terms of trade may make it difficult to envisage general tax increases at the present time. However, the Government may wish to explore the scope for some increase in import duties.
11 Source: IBRD World Tables.
- 30 -
72. A special enquiry is needed to determine whether there is at present scope for increasing total tax revenue from coffee and cocoa exports. Coffee and cocoa producer prices were raised by the Government in September 1970 to their present levels (from CFAF 95/kg to CFAF 105 for coffee and from CFAF 80/ kg to CFAF 85 for cocoa). Whether they should remain at the present level or be reduced in the interest of higher public saving is a complicated question because a reduction in producer prices would not merely shift income from producers to the Caisse de Stabilisation but would probably also lead to reduction in the volume of production and export earnings, and hence, to further reduction in producer incomes. Decline in volume handled would also to some extent offset the favorable effect of a lower producer price on the receipts of the Caisse de Stabilisation. For a full analysis, it will be necessary to make certain hypotheses regarding the elasticity of supply. The mission does not have sufficient data for this analysis and can only set out certain elements which appear relevant for a decision:
(a) Total Government revenue from coffee and cocoa has been developing as follows over recent years.
Table 10: CALCULATION OF THE TAX BURDEN ON COFFEE AND COCOA PRODUCERS
Tax burden: 38% Taxes as percentage of producer price plus taxes (5: (items 1+5))
Total producer income
95
209
62
31
93
49%
105
230
72
38
110
51%
105
228
69
31
100
49%
70
204
80
26
106
60%
80
198
43
43
86
52%
85
179
18
34
52
38%
(CFAF billion) 18.9 26.6 25.2 9.9 14.6 15.5
/1 Provisional estimates.
85
140
-22
43
21
20%
/2 The levy by the Caisse de Stabilisation is determined as the difference between the export prices and the producer price plus fixed margins for transport, handling and trade.
Source: Tentative mission computations.
- 31 -
Taxes on coffee and cocoa (export taxes proper and the levies of the Caisse de Stabilisation) can be regarded as direct taxes paid by producers of these commodities. Even if we disregard the possibility that the larger producers in addition also pay income tax, the tax level appears quite high in the case of coffee. However, the tax burden on cocoa producers has dropped markedly and since the decline in world market prices for cocoa does not touch them, cocoa producers obviously feel encouraged to continue rapidly expanding their output.
(b) Coffee In reviewing the level of the coffee producer price, it is necessary to take into account that production exceeds the quotas under the International Coffee Agreement by more than one-third. The excess production is either sold to countries outside the agreement or kept in stock. Since the price on non-quota sales is only about half the quota price, a reduction in production following a cut in the producer price would entail a much smaller than proportional reduction in export earnings. Revenue of the Caisse de Stabilisation would rise considerably, since a production decline would reduce the highly unprofitable non-quota sales and stock-keeping operations while profits on quota sales would rise by the full amount of the reduction of the producer price. On the other hand, coffee producers would suffer a decline in income.
(c) Cocoa In the case of cocoa, the producer price has been fixed by the Government at a relatively high level. The cocoa producer price is 81 percent of the coffee price, while the production cost of cocoa per kg. (mainly determined in hours of labor) is a much smaller proportion of the production cost of coffee. This price setting has favored a more rapid increase of cocoa production. Since cocoa output appears to be fairly responsive to price changes, a cut in the producer price might lead to a relatively large loss in export earnings and an even bigger drop in income (in CFA francs) of cocoa producers. However, levies by the Caisse de Stabilisation are bound to increase substantially, in spite of the likely output reduction.
(d) A further factor to be taken into account regarding the cocoa producer price is that planting high-yielding cocoa plants over considerable acreage during the last several years will continue to make cocoa production more efficient. This may make it possible for the Government to reduce the cocoa producer price to some extent and yet maintain a satisfactory growth of producer incomes and export earnings. A lower producer price might cause farmers to stop harvesting less productive trees.
- 32 -
Control Over Government Enterprises
73. The Government is making efforts to tighten ita control over public and semi-public enterprises. As pointed out in the last economic report, these enterprises, which since independence have come to account for a large part of total economic activity, urgently need systematic financial scrutiny. At the end of 1971, the Government established a fund in the Treasury in which Government enterprises and semi-public corporations are to transfer their profits. The Government furthermore established a control mechanism consisting of state controllers (under the supervision of the Ministry of Finance) and a commissioner (under the Ministry of Planning) who are responsible for the control of individual corporations.
Improvements in Planning
74. The link appears weak between the five-year development plan and the rolling three-year public investment budget ("Loi-Progra~~~~~.e"), prepared by the Ministry of Planning, and the annual investment budget, prepared by the Ministry of Economy and Finance.
75. The Government has decided that the three-year investment budget should be jointly prepared by the two Ministries, starting with the 1973-75 version. This measure should establish a closer link between economic planning and budgeting. One further useful step is that the Loi Programme will henceforth include estimated current expenditures resulting from new investment projects.
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V. PROSPECTS
76. In this chapter, we will analyze 1972-74 prospects for GDP, the bal-ance of payments, and public finance. We have made assumptions about production and exports of coffee, cocoa, and timber as well as other elements of GDP, the balance of payments, and the budget; these are set forth in Appendices A and B. Our projections appear to confirm that the country has entered a period of slower GDP growth as compared with the late 1960's and that the balance of payments position might deteriorate resulting in substantial loss of foreign exchange reserves. If debt service is to remain manageable, anumber of adjustments will need to be made in the financing of public investment. The Government will have to make increased efforts at domestic resource mobilization, but may still be forced, in spite of such efforts, to curtail public investments below plan targets.
77. Two qualifications should be made. First, the projections presented below reflect only the foreseeable consequences of current trends. Unexpected eventa -- a mineral (petroleum) discovery or a reversal of cocoa price trends -- could lead to a more favorable situation. Secondly, the unfavorable prospects stem essentially from the fact that the traditional growth factors (cocoa, coffee, and timber .exports) have lost in importance before new production opportunities have obtained momentum. The projections do not mean that the Ivory Coast economy is about to lose its dynamism. On the contrary, development possibilities in many areas remain excellent and the high investment activity of Government and the private sector indicates that these possibilities are being exploited. The great number of projects under preparation for development of production in agriculture, mining, industry, and services (tourism) is likely to lead to another period of rapid economic growth after 1975.
A. Growth of GDP
78. The mission's GDP projections show the following growth rates:
1972 Jlli 1974
GDP growth at current prices 5.3% 9.2% 9.0%
GDP growth at constant (1971) price 5.7% 5. 3% 5. 3%
Even under favorable assumptions, 1972 is likely to be a lean year with GDP growth well below past levels. The reason for the further slowdown is that this will be the first year to show the full impact of the low cocoa prices.
- 34 -
In 1971, the impact had been limited by forward sales at relatively high prices and large production. The conditions under which a 5.3 percent growth rate could be realized include cocoa production of 200,000 metric tons and an average FOB export price of CFAF 130 per kilogram. If the FOB export price would rise to CFAF 150 per kilogram (23 ce.nts ,>er lb.) , GDP growth would still be only 6.2 percent. Moreover, it is assumed that coffee market conditions remain as favorable as they were in 1971~ t~nile this is a possibility, it is unlikely that average market conditions will improve. Assumptions regarding the secondary and services sector are also favorable. Although these conditions may materialize, it cannot be expected that they will be surpassed and, therefore, 1972 growth (in both current and constant prices) is unlikely to exceed six percent.
79. During 1973-74, growth could accelerate to about nine percent per year in current prices. This includes an improvement of the terms of trade after 1972 due to a recovery of cocoa prices (see Appendix A). Cocoa production is expected to increase according to plan provisions. Coffee market conditions are expected to remain at the present, fairly favorable level and forestry production, at about the present volume. Further assumptions are that the secondary and tertiary sectors will grow at the rates forecast in the last economic report (8.7 and 5.0 percent in real terms). The mission believes that these are favorable, but not unrealistic assumptions. Per capita GDP growth in real terms would be much slower than in the past decade •- at most 2 percent a year as compared to 3.5 -- 4 percent in the 1960's. In short, the economy will probably continue to grow, but at a lower rate. Under anything less than the assumed favorable circumstances, per capita incomes may become virtually stagnant.
B. Balance of Payment Prospects
80. From out tentative forecast, it appears that the economic slowdown is likely to be accompanied by balance-of-payments difficulties. In view of the favorable condition of nxternal payments throughout the 1960's, this would be a very unusual situation for Ivory Coast. The resource surplus which has characterized balance-of-payments in the past is likely to change into a deficit, and external reserves, which have been increasing uninterruptedly since the early 1960's, are facing a decline. The following table summarizes the mission's balance-of-payments projections. The background for these projections is given in Appendix B.
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Table 11: BALANCE OF PAYMENTS PROSPECTS: MISSION PROJECTIONS
(annual averages in CFAF billion)
Exports Imports Trade balance
Non-factor services, net Resource surplus/deficit
Factor services, net (interest public debt) Current account
Private transfers, net Public transfers, net
Private capital, net Public capital, gross less: Amortization public debt
Monetary transaction Errors and omissions
Source: BCEAO and mission projections.
1968-70
124 100
24
-10 14
-10 (-3)
4
-11 6
4 13
- 6
- 9 - 2
1972-74
157 145
12
-16 - 4
-19 (-9) -23
-14 7
5 28
-10
6
81. The two most important reasons for the deterioration in balance-ofpayments prospects are the slowdown in export growth and the increase in public debt service. Export of coffee, cocoa, and timber appear to have lost most of their growth impetus. Other export products are still relatively small. Palm oil exports will increase each year by about $6 million. Pineapple products and bananas will also increase in value, as will the export value of the manufacturing sector where processing and textile plants are expected to come into production. However, the large iron ore, paper pulp, and rubber tire projects will not yet be in production. Only.few of current manufacturing projects are strongly export-oriented and their effect on export earnings will be relatively small. Tourism projects will gradually start adding to foreign exchange earnings. Altogether, export growth during 1972-74 is likely to be quite modest, about six percent a year in current prices.
82. The increase in external debt service is accelerating. The debt service ratio during 1972-74 will be fifty percent higher than in 1968-70. However, a more significant measure than the debt service ratio is the speed at which the debt service is increasing.
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1968-70 1972-74 (annual averages in CFAF billion)
Debt service 9 18
Exports (goods and non-factor services) 157 208
Debt service ratio 6% 9%
83. The balance-of-payments projections assume a continuing high level of external assistance. Grant aid is estimated to average CFAF 7 billion during 1972-74 and disbursement of public loans CFAF 28 billion. These projections are in line with the high level of undisbursed aid at the beginning of 1972. In spite of this large amount of external aid (almost twice as high as the foreign aid inflow during 1968-70), the balance-of-payments is likely to be in overall deficit and reserves would decline, according to our calculation, by CFAF 6 billion a year. Since total reserves are CFAF 38 billion (January 1972), which is equivalent to almost four months of imports, some drawdown of reserves appears to be acceptable. Moreover, as a member of the Western Africa Monetary Union, the Ivory Coast can use the overdraft facilities with the French Treasury. However, in view of the uncertain market prospects for exports it is clear that the Government may have to review soon certain of its policies in order to safeguard the balance-of-payments.
C. Prospects for Development Financing
84. The Lei-Programme 1972-74 prepared by the Hinistry of Planning en-visages public investment totalling CFAF 215.5 billion, of which CFAF 174.1 billion represents the hard-core (noyau garanti) of the plan. Full implementation of this program would mean a 90 percent increase in public investment over 1968-70 (a period when public investment had already shown an unprecedented rate of increase). The Lei-Programme is meant as a step in the implementation of the five-year development plan, 1971-75 and a comparison with this plan is therefore in order. It will be recalled that the noyau garanti of plan was calculated in 1970 prices at CFAF 220 billion during 1971-1975, or an average of CFAF 44 billion. The Lei-Programme is calculated at current prices at CFAF 174 billion during 1972-74 or an average of CFAF 58 billion per year (actual 1971: CFAF 56 billion). This represents an increase of 30 percent per year which could be the result of:
(a) price increases,
(b) underestimation of costs in the plan,
(c) new projects.
- 37 -
85. While these elements would help to make the Lot-Programme more re-alistic, it appears that a number of public investments which are underway are not fully or not at all presented in the Lot-Programme. To this extent, the Lot-Programme would still present an under-estimate of public investment.
86. The total program of CFAF 72 billion would go well beyond available financing. Even the execution of the ''hard-core" alone, might entail a drawdown of reserves of some CFAF 5 billion a year, roughly in line with our forecast of the balance-of-payments projection.
Table 12: FINANCING OF PUBLIC INVESTMENT: MISSION PROJECTIONS
(annual averages)
Budgetary savings
Caisse de stabilisation and other public savings
Total public savings
Debt service (1)
Public savings available for investment
Foreign aid disbursements (2)
Use of reserves and mobilization of private domestic resources
Total public investment ("hard core")
Net public inflow (2-1)
in CFAF billion 1968-70 1972-74
18 24
19 12
37 36
9 18
28 18
19 35
- 9 5
38 58
10 17
Source: Mission computations and projections.
% of public investment 1968-70 1972-74
47 41
50 21
97 62
24 31
74 31
50 60
-24 9
100 100
26 29
87. We have based the above projections on the following assumptions re-garding Government policies during 1972-74:
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(a) that Government will increase both current revenue and expenditures at the same rate as GDP at current prices. For 1971-74, this would mean a growth rate of about 8 percent a year. The growth rate of current expenditures would be considerably below that of recent years. It implies that the Government will rigorously implement its austerity policies and introduce further economics (limitations in personnel recruitment, revision of the education policy) as necessary;
(b) th~t Government will maintain the cocoa and coffee producer prices at the present level. In view of foreseeable price trends, savings by the Caisse de Stabilisation will be minimal. However, if the Government were to lower producer prices, savings by the Caisse could increase substantially;
(c) that the Government will improve its financial control over public enterprises. We have assumed that the Government will follow through on the control measures which were introduced during the last year. Savings by public enterprises have been assumed to grow substantially as a result of these measures.
88. Since particularly the assumptions under (a) and (c) are quite fa-vorable, our forecast for public savings is, if anything, on the high side. Even so, public savings available for investment are likely to decline drastically during 1972-74 because of the increasing weight of public debt service. The contrast with 1968-70 is startling: according to our calculations, public savings during 1972-74 would finance only 31 percent of public investment (hard core) compared to 74 percent in the earlier period.
89. In spite of our assumption of a high level of foreign aid disbursements, the financing of the hard core of the Loi-Programme would still entail a substantial loss of reserves or necessitate the mobilization of private domestic resources - about CFAF 5 billion a year. As mentioned some loss in the interest of development financing may be acceptable. However, a more serious shortfall in foreign exchange earnings and public savings should not be ruled out and this may require cutting public investment below the hard core of the Loi-Programme 1972-74. In that case, the question of greatest importance wuuld be which investments are to be curtailed. The GOvernment has already determined its own spending priorities by defining a 11tranche optionelle" within its overall investment program. Certain further suggestions for priority determination were given in the last economic report (paragraph 158). These recommendations stressed that at the present stage of Ivory Coast•s development, investments in agriculture and industry should generally have priority over infrastructure investment. The current slowdown in real economic growth appear• to be primarily due to lack of completion of directly productive projects aDd not to bottleneck• 1n infrastructure.
- 39 -
90. The composition of the Loi-Programme (hard-core) indicates that the Government has to some extent been following the same line of thought. During 1972-74, infrastructure investments are to decline from 53 percent of total public investment in 1970-71 -- when expenditures for Kossou and San Pedro reached a peak -- to 45 percent. The proportion devoted to agricultural development would at the same time rise from 20 to 32 percent. It is difficult to assess whether these intentions will also be reflected in annual investment spending. A comparison of the current Government investment budget (BSIE) with last year's gives the impression that this is not the case, since agricultural development spending was sharply reduced and infrastructure spending increased. However, for a full comparison one would also have to take into account the budgets of all the state enterprises as well as the recently financed sugar project.
D. Debt Management
91. Recent developments suggest that external debt policy should be re-viewed. After years of rapid increase from a low initial level, debt outstanding amounts to almost $600 million (one third of GDP) and debt service is absorbing about half of the gross public capital inflow.
Debt as Public debt Annual percentage
End of outstandin& increase of GDP ($ million) (%)
1965 137 38 14
1966 217 58 21
1967 255 18 23
1968 360 41 27
1969 385 7 27
1970 427 11 29
1971 506 19 32
1972 (May) 588 jJ_ 16 (5 mos.) 33
jJ_ The increase in 1972 is primarily due to a $64 million borrowing for a sugar project.
- 40 -
92. The increase in debt since the beginning of 1971 has been particu-larly large: $161 million, an increase of 38 percent. Debt service is requiring rapidly increasing proportions of foreign exchange earnings and of the Government's financial resources, as is indicated by the following debt service ratios.
Table 13: DEBT SERVICE RATIOS: MISSION PROJECTIONS
Interest on government debt Budgetary savings
Interest on total public debt Total public savings
Total public debt service Total public savings + gross public capital inflow
Total public debt service Export of goods and non-factor services
Source: Mission calculations and projections.
1968-70
9.4%
6.5%
16.1%
5.7%
1972-74
22.9%
16.7%
25.4%
8.7%
93. In the span of only a few years, all debt service ratios in the above table show a substantial increase. The implications are particular1: serious for publi.c finance. The increase in the debt service is a major cause of the current tight financial position of the Government and of the limited amount of public savings available for investment. As a result of the increase in debt service, ever increasing capital inflows will be needed to provide a given net amount of investible funds.
94. Part of the reason for the fast increase in debt service is the hardening of loan conditions. The mission has estimated the following decline in the grant element 11 in Ivory Coast borrowing:
Loans obtained in
1969
1970
1971
Grant element
27%
30%
·22%
1/ The grant element of loans is the face value of loan commitments less the discounted present value of the future flow of amortization and interest payments. We are using the customary discount rate of 10 percent. The grant element thus computed is expressed as a percentage of the face of the value of the loan.
- 41 -
95. These figures suggest comparatively hard terms: of loan commitments obtained in 1969 for all of Africa was French-speaking Africa south of the Sahara 54 percent. l/ is twice as high as the grant element in loans obtained by
the grant element 43 percent and for The latter figure Ivory Coast.
96. For a full evaluation of the terms at which the Ivory Coast has been borrowing, the grant element is admittedly only a partial yardstick. An element often of greater importance than the grant element but much more difficult to quantify, is the price level and the quality of goods and services supplied under the loan. Certain of the supplier and contractor financing obtained during 1971, although nominally on acceptable terms, may in reality have contributed far too much to the financial burden of the public sector. This appears to be the case for the supplier credits for lm1-cost housing. It is hard to see how low cost housing can be expected to repay the heavy charges of contractor financing without direct or indirect Government subsidy. In view of the almost unlimited demand for low-cost housing, this type of financing is setting a potentially dangerous precedent.
97. The rise in external debt reflects Ivory Coast's increasing absorp-tive capacity. which is itself a pre-condition for economic take-off. While many investments undertaken by the Government are fully in line with the growth requirements of the country, the financial viability of certain projects appears to be doubtful. Examples are certain investments in tourism and the earlier mentioned $64 million sugar project.
E. Conclusion
98. The Ivory Coast Government is currently implementing an ambitious but essentially sound development plan deserving the support of substantial external financing. The plan is meant as a step towards the eventual solution of some of the economy's key problems - diversification and expansion of agriculture and industry, improvement in the economic balance between regions, and greater participation of Ivory Coast citizens in the workforce and the management of the economy. Although the plan does not come to grips with the increasingly serious problems of unemployment and income disparities, the Government is attempting to adjust its policies in these areas. In some of its investment decisions, the Government has deviated from the priorities of the plan. However, a new procedure in which the ~finistries
11 Unweighted average. The grant element in loans, received in 1969 by French speaking countries south of the Sahara was as follows: Togo. 90; Dahomey. 81; Burundi, 77; Mali, 76; Mauritania, 72; Central African Republic, 66; Senegal, 63; Zaire, 55; Cameroon, 50; Upper Volta, 43; Gabon, 36; Malagasy, 34; Niger, 33; Chad; 32; Ivory Coast, 27; and Guinea. 25. Source: IBRD.
- 42 -
of Finance and Planning jointly prepare the rolling three year implementation program is expected to establish a closer link between economic planning and budgeting. A further useful step is that under the new procedure, the three year program will also include provisions for the current expenditures resulting from investment projects.
99. Years of project preparation by the Government, with the assistance from foreign aid donors, and private interests have started to pay off in the form of a greatly increased level of public and private investments. However, most of the production increases resulting from these diversification efforts -- in plantation agriculture and in industry -- will only occur in the second half of the decade. Meanwhile the growth impetus provided by the traditional export products has greatly diminished because of unfavorable demand prospects for coffee and cocoa and a declining resource base for timber. The result is likely to be a lover than usual economtc gro¥Jth rate for the next few years.
100. The slowdown in economic growth, which has already been manifesting itself since 1970, is leading to declining growth of Government revenue and a drop in total public savings. The sharp drop of cocoa prices hurt public savings in 1971 and is continuing to do so this year. The shortfall in public savings due to the decline in the cocoa prices is equivalent to 16 percent of public investment in 1971 and, according to the mission's estimates, 27 percent in 1972. Meanwhile, debt service has risen sharply; in 19'/2, half of expected public savings will be absorbed by debt service.
101. The tight financial situation in the 1972 budget moved the Govern-· ment to introduce austeri.ty policies for public spending. In spite of thp··;e measures, it was necessary to reduce total budgeted public investment by 16 percent below the 1971 level. It, therefore, seems necessary to make further adjustn1ents particularly with regard to administrative expenditures. Education expenditures have also been rising very rapidly and even though the needs in this sector are large, economy measures may be needed.
102. In spite of certain shortcomings in current expenditure policies, the Government is maintaining an impressive fiscal performance. Compared with other developing countries, Ivory Coast has a high level of tax revenues -- (20 percent of GDP plus sizeable quasi-fiscal revenues) -- and high public savings-- (10 percent of GDP in 1968-70 and 7.5 percent in 1971). The austerity measures show the Government's determination to maintai.n this performance, in spite of more difficult economic circumstances.
103. Even if the Government's effort at resource mobilization are· suc-cessful, the implementation of the development plan will require a large increase in foreign a:l.d disbursements. For 1972-74, the mission estimates the need for aid dif:hurAcments {~rant and loan funds) at $140 million per year :11' corTnrcd to ah,ut $70 million in 1970 and StOO million in 1971.
104. With tlwse large aid requirements, the terms of aid are becominr in-creasingly im-portant. To prevent an excessive increG:se in debt service, the Government should refrain from undue reliance on all forms of commercial
- 43 -
credits -- supplier credits, contractor financing, or short and medium-term borrowing on capital markets abroad. This caution with regard to commercial credits should extend to the financing needs of all of the public sector, and not of the central Government alone. The last economic report suggested, on the basis of tentative debt service projections, an upper limit for commercial credits of $20 million a year. If anything, the justification for this limita·· tion has only been strengthened by economic developments since that report.
105. With the same concern of keeping down the prospective debt service burden, foreign aid donors should also be prepared to soften the terms of their aid by providing a mixture of conventional and concessionary financing. In view of its favorable level of external reserves, satisfactory growth prospects for export and the economy in general, and a still not excessive debt service burden, Ivory Coast should be able to service additional debt on conventional terms. However, the rapid increase in aid requirements could soon lead to debt service difficulties, and a certain amount of concessionary financing is therefore desirable.
106. At the same time, aid donors should be prepared to finance a relatively high proportion of project cost, including part of local expendi-· tures of projects with low import content. In the mission's esUmate, about: 40 percent of public investment during 1972-74 would be financed from public savings. However, a sizeable proportion of public investment consists of projects which are not likely to attract foreign financing such as administrative buildings and certain investments in social infrastructure. According to the mission's rough estimate, external project financing should therefore on the average finance at least 70 percent of project cost to avoid serious financial difficulties for the Government.
APPENDIX A Page 1
GDP PROJECTIONS, 1971-74
The mission has made projections for GDP at current market prices using the following assumptions:
1. Cocoa sector
Production (1,000 m.t.)
Net Production (less: losa of 3 percent) (1,000 m.t.)
Average FOB export price (CFAF/kg)
Export value of production (CFAF billion)
Inputs (CFAF billion)
Total value added (4-5) (CPAF billion)
Producer price (CFAF/kg)
Producer value (CFAF billion)
CSSPA, trade profits, taxes, transport, etc. (6-8) (CFAF billion)
Preliminary
actuals actuals ~1 ~96~9~~1~9:-::7-::-0 1971
projections 1972 1973 1974
159 186 226 200 210 220
154 180 219 194 204 213
221 187 157 130 150 160
34.0 33.7 34.4 26.0 30.6 34.1
1.0 1.0 1.0 1.0 1.5 1.5
33.0 32.7 33.4 25.0 29.1 32.6
80 80 82.5 85 85 85
12.7 14.5 18.6 17.0 17.9 18.7
20.3 18.2 14.8 8.0 11.2 13.9
Production figures 1969-71 are based on information from CSSPA. Projections for 1972-74 are intrapolations baaed on the Five-Year Plan. Loss and inputs: mission estimates.
FOB export price: The 1972 price is equivalent to a CIF New York price of US426.0 per lb, which compares with a December 1971 price of US423.9 per lb. After 1972, a gradual recovery has been assumed. This is a very favorable hypothesis as cocoa prices are unlikely to rise much over CFAF 140 per kg according to longer-term forecasts.
APPENDIX A Page 2
Line 9 represents the tertiary sector component of the cocoa sector. Since we have not deducted inputs of services, the figures are somewhat over-estimated.
For this sector, the mission followed the same approach as for the cocoa sector.
Production is assumed to grow according to Plan projections.
Domestic use and stocks during 1969-71 have been determined as a residual between production, exports and a 6 percent loss. The resulting figures indicate apparent accumulation, which the mission could not verify statistically. For 1972-74, further stock accumulation is assumed to be minimal. The Plan, also makes this assumption.
Exports include the bean equivalent of instant coffee exports. Quota exports have also been assumed to grow according to Plan provisions from the 1971 level of 172,000 m.t.
Prices in 1969-71 are average actual quotations. For 1972-74, the mission has assumed a quota price of CFAF 225-230 FOB Abidjan which is equivalent to 44-45 US cents per lb. CIF New York. Non-quota prices are those of 1971, i.e. CFAF 120 FOB Abidjan.
3. Forestry
Output in 1971 is estimated 10 percent higher than in 1970 and value added is assumed to have increased by the same proportion. For 1972-74, the mission assumed that the volume of forestry production will stabilize at the 1971 level and that prices will rise by 3.5 percent a year.
4. Oth~r primary sector
The 1971 economic report assumed growth of production value of subsistance agriculture and animal husbandry during 1970-75 of 3.5 percent per year. Growth bf cash crops, excluding cocoa and coffee, will be 11.7 percent per year during 1970-75 according to the Plan. The mission assumed the same growth rates for value added. The average growth rate for "other primary sector" has been computed as follows:
Subsistence agriculture and animal husbandry
Export and industrial agriculture (excluding cocoa and coffee)
Overall average annual growth rate (%)
Percentage of production value
1970
81
19
Average annual growth rate (%)
1970-75
3.5
11.7
5.3
The above estimates are in constant prices. The mission has tentatively assumed price increases of 3.5 percent per year, resulting in
APPENDIX A Page 4
an overall growth rate of the "other primary sector" of 9.0 percent per year.
Secondary sector
During 1968-70, the secondary sector has grown by an average of 15 percent annually. Statistics on 1971 secondary sector production, except for power production, are not yet available. On the basis of partial data available for 1971, the mission estimated a growth rate in current prices of 15 percent.
For 1972-74, the mission assumed yearly growth (in line with the 1971 economic report) of 8.7 percent in constant prices and 12.5 percent in current prices.
Tertiary sector (excluding cocoa and coffee related services)
During 1969 and 1970, value added of the service sector increased by 9.3 percent and 9.0 percent respectively. For the estimate of 1971 and the projections for 1972-74, the mission assumed yearly growth (in line with the 1971 economic report) of 5.0 percent in constant priees and 8.7 percent in current prices.
1) Including CSSPPA levies, taxes and value added of connected services.
2) Excluding transportation and other forestr;y-connected services, but including export taxes.
3) Excluding services mt·ntioned in footnote]:/.
Source: National accounts and mission calcula.tions.
23f2.:1._
552.1
9.0
APPENDIX B Page 1
BALANCE OF PAYMENTS PROJECTIONS 1972-74
The mission has made the following assumptions for balance of payments projections 1972-74:
1. Cocoa, coffee and timber exports
See Appendix A.
2. Other Exports
Other exports are projected to increase by CFAF 6 billion per year during 1972-74. During 1966-70, the annual average increase was CFAF 3.4 billion. During 1972-74, exports will increase annually by roughly CFAF 1.6 billion because of additional palm oil exports. Copra will not yet contribute significantly to exports. However, there may be additional exports of pineapple products and bananas. Most of the increase in "other exports" will have to come from the manufacturing sector, where processing and textile plants are expected to come into production.
3. Imports
The mission assumed the following development of imports in relation to GDP (in CFAF billion):
Imports as a percentage of GDP 26.4 26.1 29.3 29.1 28.6 28.6 28.6
The mission forecasts a modest decline of imports as a percentage of GDP as compared with the extraordinary level of 1970 and 1971. However, due to continued high investment, the proportion may continue to exceed the average ratio of 26 percent of the 1965-69 period.
Other public transfers -1.3 -0.9 -1.0 -1.3 -1.6 -1.9
Total outflow -4.6 -4.8 -5.2 -5.7 -6.4 -7.1
Net inflow 5.3 8.5 7.3 7.2 7.2 7.2 -Technical assistance and domestic contributions for technical
assistance have been assumed to grow at the same rate as GDP. Disbursements in cash and in kind were rather high in 1970; they will probably decline somewhat. The mission has assumed a constant level of CFAF 5.0 billion per year during 1972-74.
1. Private Ca2ital
A constant level of CFAF 5.0 billion per year has been assumed. This does not include private capital movements related to certain big projects on which the final decisions are still to be made. (Bangalo iron ore mine, pulp and paper factory, and tire factory, etc.); imports for these projects have likewise been excluded from the import projections (Public Capital).
8. Public Ca2ital, Gross
Until 1970, disbursement figures refer to the CAA only; disbursements to public enterprises (about CFAF 2-3 billion per year) were included in private capital. From 1971, the figures include borrowing by public enterprises.
9. Amortization of Public Debt
APPENDIX B Page 4
The mission has assumed 7 percent interest and amortization over 20 years after 2 years of grace for all borrowing during 1971-74. For intereest and amortization payment for 1965-70, see Annex table 4.2.
10. Monetary Transactions
For 1971-74, Monetary transactions were determined as a residual.
Area and Population PopUlation • o • • • • • • • • • • • • o o • o • • " • • • • • lol Permanent Wage Earners by Sector of Activity o o • • • • • • • 1.2
National Accounts GNP and GOP, 1961-71 •• o ••• o ••• o ••
Origin and Uses of National Accounts ••••• ••• 0 0 • • • 2.1
2.2
B,alance of Payments, :&xternal Trade Balance of Payments • • • o • • • • • • • • • • • • • • o • • 3.1 Composition of Exports • • • ••• • ••••••• o • • • • • 3.2 Composition of Imports • o • • • • • • o • • • • • o • • • • • 3.3 Volume, Value, and Average Price of Selected Exports • • • • • 3.4 Rxports by Destination and Imports by Origin • • • • • • • • • 3.5
F.ixternal Debt E.."'Cternal PUblic Debt Outstanding as of .December 31, 1970
plus Debts Contracted through March 1, 1972 • • • • • • • • 4.1 .Jebt Service Payments on External PUblic Debt Outstanding
~s of December 31, 1Q70 plus Debts Contracted through March 1, 1972 • • • • • • • • • • • • • • • • • • • • • • • 4.2
Fiscal Statistics Goverm1ent Revenues, 1962-72 • , •• • ••• o ••••• o • o 5ol Functional Classification of Government Current Expenditure,
1965-72 0 •• 0 •••• 0 •••••••• 0 0 0 • 0 •• 0 • 0 5o2 Financing of Government Investment Budget, 1965-72 • o o •• o 5o3 Financial Results of the Agricultural Stabilization Fund • • • 5o4 Indicators of Cocoa and Coffee Markets, 1965-72 • • • • • • • 5o5
jn urban areas between 4,000 and ?5 ,ooo in 1970 ~
j n rural areas 3,352
1970
930
555 :43 36
120 46 28 28 32 42
50S
31 6'77
Growth rate (~ per year)
9.0
10.3 10.6 8.5 7. 1 5.6 8.1 5.9 5.9 7.0
8.2
1.9
Note: These figures represent mid-year estimates based on ORSTOM studies conducted between 1960 and 1967 and'on counts by the Institut d'Hygiene during its 1961-1963 smallpox vaccination campaign. No census has yet been taken, but one is being prepared for 1972.
Source: Population Rurale et Urbaine par Departement et par Sous-Pr&fecture, Februa.ry 1970; Mini stare du Plan.
TABLE 1. 2: I'ERMANENT WAGE EARNEllS BY SECTOR OF ACTIVITY
(In thousands unless otherwise indicated)
1959 1967 1968 1969 1970
Agriculture, forestry, fishing Mining
83 92 99 102 105
Ind~stry and power Construction and public works Transport and storage Trade Banking and insurance Domestic services Other services (including health) Government
2 9
18 12
18
9
L!. 27
3 22 27 21 14
3 12
5
38
2 2 1 25 25 28 27 44 35 21 21 2i 14 15 16
3 3 3 13 13 14
6 5 6
38 39 41
Total. 177 236 247 269 270 - - - === of which:
Unskilled laborers and apprentices Trained and skilled laborers
Total salaries paid (bill. ions of erA franca) 24 59 62 67 n . .r
Average yearly salary (thouaande of CFA francs) 136
L! Included in trade, banking •nd insurance.
250 251 248
Note: The figures in this table are e8timates and extrapolations based on a yearly survey of the Labor Office among the largest enterprises. In 1970,1,844 ente~priaea·emp1oying 146,313 workers reported under the survey. Statistics about nationality, qualifications and geographic distribution of wage earners, covering only the reporting enterprises are given in Table 1.3.
source: Minist&re du Travail et dee Affaire& Sociales.
Table 2.1: GDP A:~D GX~-',
(at current prices; billions of CFA francs, unless otherwise indicated)
France 20,508 20,508 Public]Jr iaiued bonds 20.,208 20.,208
El!V 2,751 2,751 lllropean Development Fund 6,012 6,012 lllropean Investment Bank 3,770 10,775 14,545 4,680 I !liD 4,463 36,931 41,400 27,500 International Coffee Org. 5,810
Loans from int '1 organ:l.Sationa !!la2!l2 2o.!f.6~ 6!f.1zoa 38,050
Loans from gOftriDII.enta 1J6.886 81 16Jl 218.211 ~ u.s.A. ;o.
Unclassified /1 ,
63.500 -Total external public debt ~a!W8 181.161 g26.612 187,953
li u.s. Government and u.s. banks. Note• Debt with a •turit;r ot over one year. Source: ~co nomic and Social Data DiVision, Economic Program Department.
DEBT OUTSTANDING TRANSACltONS DURING PERIOD BEGINNING OF PERIOD CANCEL•
LATIONS' DISBURSED INCLUDING COMMIT• DISBURSE• SERVICE PAYMENTS ADJUST• YEAR ONLY UNDISBURSED MENTS MENTS PRINCIPAL INTEREST TOTAL MENTS ( 1) (2) ( 3) (4) (5) (6) (7) (8)
DEBT OUTSTANDING TRANSACTIONS DURING PERIOD BEGINNING OF PERIOD CANCEL•
LATIONS, D I SfWRSEO INCLUDING COMMIT• DISBURSE• SERVICE PAYMENTS ADJUST• YEAR ONLY UNDISBURSED MENTS MENTS PRINCIPAL INTEREST TOTAL MENTS (1) (2) ( 3) !4) (5) (6) (1) (8)
DEBT OUTSTANDING TRANSACTIONS DURING PERIOD BEGINNING or P!RIOO CANCEL•
LATIONS• DISBURSED INCLUDING COMMIT• DISBURSE• SERVICE PAYMENTS ADJUST• YEAR ONLY UNDISBURSED MENTS MENTS PRINCIPAL INTEREST TOTAL MENTS c 1) (2) (3) (4) (5) (6) (7) (8)
DEBT OUTSTANDING TRANSACTIONS DURING PERIOD BEGINNING nr PERIOD CANCEL~
LATIONS' DISBURSED INCLUDING COMMIT• DISBURSE• SERVICE PAYMENTS ADJUST• YEAR ONLY UNDISBURSED MENTS MENTS PRINCIPAL INTEREST TOTAL MENTS (1) (2) ( 3) (4) (5) (6) (7) (8)
DEBT OUTSTANDING TRANSACTIONS DURING PERIOD BEGINNING Of PERIOD CANCEL•
LATIONS' DISBURSED INCLUDING COMMIT• DISBURSE• SERVICE PAYMENTS ADJUST• YEAR ONLY UNDISBURSED MENTS MENTS PRINCIPAL INTEREST TOTAL MENTS (1) (2) (3) (4) (5) (6) (?') (8)
DEBT OUTSTANDING TRANSACTIONS DURING PERIOD BEGINNING OF PERIOD CANCEL•
LATlONS1 DISBURSED INCLUDING COMMIT• DISBURSE• SERVICE PAYMENTS ADJUST• YEAR ONLY UNDISBURSED MENTS MENTS PRINCIPAL INTEREST TOTAL MENTS (1) (2) (3) c•) (5) (6) C?) (8)
Excluding revenue from municipal taxes. The table is based on tax assessment data as opposed to actual receipts shown in Table S.J. Discrepancies are furthermore due to inclusion of fiscal revenues of a few smaller public agencies (FNI, ONFP, OSHE, ere) above.
Source: Ministry of Economics and Finance.
l) Table 5.2: FUNCTIONAL CLASSIFICATION OF GOVERNMENT CURRENT EXPENDITURE, 196)-72
GENERAL SERVICES
Presidency and Parliament Justice Interior Foreign Affairs Defense Information
SOCIAL SERVICES
Public Function Labor, Social Affairs Education, Youth, Sports Public Health
ECONOMIC SERVICES
Agriculture, Livestock Public Works, Urbanization
Post, Telecommunication Finance, Economic Affairs, Plan Tourism
OTHER EXPENSES
GOVERNMENT CURRENT EXPENDITURES
1965
12.5
5.3 0.6 2.2 0.8 3.1 o.s
9.6
0.1 0.2 6.0 3.3
7.3
1.6
4.4 1.3
4.9
34.3
(CFAF billion)
1966
13 0
4.0 o. 7 3.6 0.9 3.3 0.5
11.8
0.1 0.3 7.3 4.1
8.1
2.0
4.6 1.5
5.4
38.3
1967
12.9
3.8 o. 7 3.4 0.9 3.5 0.6
12.8
0.1 0.3 8.0 4.4
9.0
2.2
5.2 1.6
6.1
40.8
1968
14.1
4.0 o. 7 3.7 1.1 3.8 0.8
14.9
0.2 0.3 9.4 5.0
10.2
2.5
5.8 1.9
7.9
47.1
1969
15.2
4.1 0.8 3.9 1.3 4.2 0.9
16.5
0.2 0.4
10.6 5.3
11. 1
2.6
5.7 2.8
7.9
so. 7
1970
16. 1
3.6 1.0 4.1 1.5 4.9 1.0
20.2
0.2 o.s
13.3 6.2
14.3
3.0
6.7 4.4 0.3
9.4
60.0
1971
15.9
3.0 1.0 4.3 1.5 5.1 1.0
22.1
0.2 o.s
14.8 6.6
13.8
3.0
5.1 5.2 0.5
10.8
62.7
Budget Data (as opposed to cash flow figures in other tables, e.g. Table 5.3).
Source: Ministry of Economics and Finance
1972
17.2
3.2 1.0 4.6 1.8 5.5 1.1
24.8
0.3 0.5
17.3 6.7
14.6
2.7
7.3 4.3 0.3
11.6
68.2
Table 5. 3: FINANCING OF GOVERNMENT INVESTMENT BUDGET 1 196)-7?
/l Government current revenue~
Government current expenditure
Government bud,;etary savin5s
/2 Debt service.;_
Interest
Amortization
Budgetary savings available for investment
Contribution by: Caisse de Stabilisation Caisse Nat. Pr~voyance Caisse P~r~quation
Total public savings
Loan disbursements
Suppliers credits
Total resources for investment
Government Investment Bud~et (BSIE)
Change in balances
(billions of CFA francs)
1965
48.2 35.0
L.5 l.l
3.4
7
7
0.8
3.7 13.0
13.0
0
1966
51.0 39.8
4.7 LO 3.7
6.5
1.3
7.8
o.R 3.2
n.e • F,
-2.0
1967
51.0 41.7
--2.:..3
4.9 1.3 3.6
4.4
3.0
7.4
1.6
3.7 12.7
16.8
-4.1
IJ:. General budget, investment bud5et and debt management fund (CAA).
1968
64.0 50.5
!.3-=.2
5.7 1.5 4.2
7.8
2.1
9.9
3.8 2.h
16.1
19.9
-3.8
lS'69
71.4 52.0
~
5. l
3.9
1.6
0.1
-, c' . ' -' ,)• I
12.1
3.5 Ti -, - ~ .• - l
29.5
1.8
1970
83.5 .1
7.6 2.1
5.5
11.8
13.4
25.2
12.1
2.9
40.2
38.6
l. ~r
Preliminary actuals
1971
3 68.1
10.0 2.8
7.2
10.2
8.0
18.2
16.5
3.3 38.0
41.7
-3.7
forecast 1972
.4 71.7
11.0 3.1 7.9
11.7
11.7
. 5
2.5
30.7
34.9
-4.2
- The division between interest and amortization is not given in the source material. The Mission has estimated the division on the basis of the debt service data prepared by the Bank (cf. Table t.,?;·o
Source: Ministry of Economics and Finance
Ta',le ~; .!, Ff:·;;\:-.CL\.u Ri:ScLTS OF THE AGRICULTURAL STABILIZATIOi·! FWm
Jet resultR of sta~ili~ation
Coffee
··Cocoa
-Cotton nnd Otll0l'
Total net re&!lts o( stabili~ation ( i t.•!"iS 1-),
{) t her re ve r-.tw r;
Net odministr~~iv~ •oSL 3)
'Jlrect suLsid -'<~ymeuts
Contrii..'dl ion t·1 i.nvcs:. ruent '! uu;~e l
t financial resul it<:"'lS ) ( tta:··:;; ' 1 J 7
CUiaul<'ltive nc~t
res·tlts
1) Provisional.
' • 1 l.ll<lnc •.a:.
) ::orojection 1·;; ·:ssi''A.
!:S
l
+;~. u
+ l.)
+J. _)
_I). 4
- ) . 0
... I .. -:
lf) rl~~. 6 ·
CR02 YEARS 1963/64 - l9i'l/12 (CJ:<'AF billions)
l J l 965/66
·l.l ·+2.6
i.l -3. )
-0.1
-'). 9
.l - ) .l
• 3 ·1.3
·L 3
-3.6
f-1 I, f'o.4
1966/67
...., I ., ' + . .)
.f"' :'), ,.>
~~-.u
l.J
--0.1
t-:J. 3
1967/68
... 1.6
+4.9
....-6.'
-1.4
l.l
-::-~. •)
i-3. )
+9.3
3) Including divers licnt Lon funds anJ ccmt:· ~lut on to international organi?.ationso
1968/69
-l.l
+'J.G
n.1
,., ')
+•Jo I
._.' •. I
~-1. 2
-1.6
+-:i .t+
+llf. 7
4) Including a c;n:r.;ove of C;•'c\ • .1~ billions ::r m the per od prior to Se!Jtembe~: Ji), 1063.
Source: Hinistry o.:: Ew nor:' i cs and Finance; CSSP?A
1969/70
+.;.9
+11.9
+ 0.2
... 18JJ
... 1.3
'"' 0. 7
-3.')
13. '•
·H.2
tU.J
1) 1970/i'1
.f-7 .4
t-2. 3
+0 3
.;-10.0
-1- l. ;)
-0.8
-3.1
-8.0
-0.9
.f'lj, 0
2)
1971/72
1-3.2
-6.5
. -r o.s
-2.8
+6.
-), 9
--2.4
-5.6
+9.4
'rablc S .5: IJIDTGATO"TI.S Ol'' COCOA ANTI COFf"i.:l~ HA>IK<.;TS 1 ?~S5-72
·~· Fo.rc liabi li t.:!.es 7.S Go"'Jernment : ~ .1.
G2DOS'l•J3 8.L: Credit frGm c. B. 12.0 0-::.:,e~' liao::.li-::,::.es
'T'CI'L
11.~1 c:.9 I S.B 52.2 I
2.2 2.8
!4 ~so. 9.
1).0 1).6
7.5 ).7 7.2 8.L
ll. 3 9.0 11.3 12.7 1.1 1.5
5 ?_!__4_ 60.9
1L.6
.L
13.G l::>.L
9.6 F.6
?l. 5
7~ .• 1
3. 2
100.8
34.2
22.2 P.C
? .!.~.
19.7 l.3
100.5
1970 197il!
39.5 h3.1
-16.2 -24o4 92.7 98 .. 8
33.6 80.3 39.5 36.0 u3. 1 40.7
23.2 25.2
29.1 22.9
1.5
22.9 2,.2
() 53.6
L5.0 49.2
0.) 0.1
5.2 0 4
0.9 3.9
...2b_Q 53.6
25.3 27.1
3?.3 9L.o LL. 7 2.4
l_],2. 3 123 .. 5
42.0 h?.? 23.2 23.2 l! .1 1L.6
9 c: ./ 15.h 22.9 18.8 7.S 8.13
l19.J. 123o) --· ----·---··-·-·--------
/1 None"'"ar:r survey as of end or Auc;ust; Assets and Liahilities of 'iCEAO as of end o:f' December; ,'.::;sets and Liabili.ties of' DPDosit r~:oney c;anks as of end o~ Se:Jt~;mber.
Source: HIF, Inte:AnationD.l ~'inancial Statistics and BGEAO.
Table 7.1: AGRICULTURAL PRODUCTION
(thousands of metric tons unless otherwise indicated}
and fertilizer 1.2 2.1 2.1-~. 3.0 20.1 16 Rubber products o.o4 0.2 0.4 Oo5 65.6 17 Construction material 0.2 1 1.2 1.5 49.6 18 Material industry 0.1 0.2 0.3 0.5 c 19 Construction and repair
Salaries paid to Ivorians and other Africans 1.8 2.3 2.8 3.4
Salaries paio to other Expatriates 1.3 1.6 1 .. 7 1.8
No'~e: Priority enterprises are those accepted by :.he Gov"'rnment under its Investment Code of 1959 vchich grants exemptions of c:.1stoms duties on imports (both equioment e.nd raw materials) "'~or tc"n years, exemption of income and cor;Jorate ta::-::es for five ~rears or more, and exemption or reduction of other levies (real estate taxes, patent. duties, stamp duties, and ex·;ort taxes) f'or five years or more. At the end of 1970, there were 64 priority cnt~::rpriseso The Code is presently being revised with respect to the duration and :.he 1egree of exemption for various enterprises.
Source: :tv!inistry of Planning
Cost of Living Index African Type Family (February 1960 1 00)
Total or average
Foodstuffs
Housing
Uti:ities
Household Utensils
Ciloth:..ne;
Services
Hiscellaneous
Cost of Living L'1d ex ~ropean T:,rpc I'a~i=-~r ( 1)60 = 1 OJ)
Note: Where a range is indicated, the lower limit.relatel least increased and the upper limit to the one that price since December 1967. As a res,ult, the limits not necessarily apply to the same products as those
Source: i'hn:'_str;--' c:f.' Ecoww.::.cs and 5':_; ance.~
December 1971
120.8
107.2
100.0 - 142.9
150 0- 197.5
103.2 - 116.3
100.0
102.4 - 122.7
100.0
100.0 - 149.0
91.1 - 110.3
100.0
104.3 - 125.4
102.3 - 127.3
100.0 - 137.5
100.0 - 150.7
to the article that has has most increased in for December 1970 do for December 1971.