Monday, March 2, 2009

Which country needs economic reference letters?

Togo - IMF's Assessment Letter for the World Bank;

Reforms implemented during the preceding Staff Monitored Program and the first year of the PRGF-arrangement are showing positive results in terms of public financial management governance and effectiveness, and going forward the focus of the PRGF arrangement will broaden to include reforms to restore the conditions for faster growth and poverty reduction. To achieve this, strong actions are needed to reform the ailing state-owned banks and enterprises and to improve the overall business environment, consistent with the country’s Poverty Reduction Strategy.

With the implementation of planned growth-enhancing reforms, the economy could achieve real GDP growth of about 4 percent annually by 2011, with a gradually improving fiscal position. The fiscal stance in 2009 will not harm long-term debt indicators, given its temporary nature and pro-growth focus. Assuming full HIPC debt relief in 2010, the primary domestic balance is projected to revert to a sustainable 1 percent of GDP surplus by 2011. Inflationary pressures are projected to be moderate over the medium term. The medium-term reform strategy to support this scenario would have two central elements: (i) fiscal reforms to make room for growth-oriented spending and strengthen fiscal and external sustainability; and (ii) economic reforms aimed at raising growth potential and external competitiveness, particularly steps to reform state-owned banks and enterprises. As highlighted in the LIC DSA conducted for HIPC decision point (November 2008), positive debt dynamics depend on this acceleration in growth and fiscal strengthening, even with full HIPC relief. Satisfactory performance under the PRGF will be an essential element in reaching the HIPC completion point. We therefore believe that the PRGF supported program will provide a sound macroeconomic framework to guide the reform efforts. Staff will continue to conduct biannual missions to monitor performance and maintain close coordination with donors.

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