Côte d'Ivoire
Côte d'Ivoire closer to HIPC debt relief

afrol News, 15 April - The International Monetary Fund (IMF) is energetically working on its new country of focus; Côte d'Ivoire. There is no longer doubt the Fund and the government are heading for a rapid inclusion of the country in the Enhanced Heavily Indebted Poor Countries (HIPC) Debt Initiative, meaning a significant debt reduction for Côte d'Ivoire.

In a document published by the IMF today (dated 13 March 2002), a preliminary assessment of Côte d'Ivoire's eligibility for assistance under the HIPC Initiative is made. The preliminary results show that "Côte d'Ivoire could qualify for HIPC Initiative debt relief under the fiscal and openness criterion" and the present net value of the country's debt-to-revenue ratio was estimated at 397 percent, well above the Fund's 250 percent threshold.

Côte d'Ivoire had qualified for assistance under the original HIPC Initiative already in 1998 due to its high level of indebtedness and its "sound track record of macroeconomic and structural reform" since 1994. Government programmes initiated by the IMF were however interrupted in early 1999 and then came the military coup in December 1999, resulting in the IMF withdrawing its support to Côte d'Ivoire. Meanwhile, as the country has returned to the democratic folder and resumed its international financial contacts, the HIPC Initiative has changed and the Ivorian debt situation has changed, "requiring a new preliminary assessment."

The IMF emphasises the importance of the return of political stability and democracy for its willingness to re-engage in the country. "The National Reconciliation Conference, held during October-December 2001, set the stage for a return to political and social stability. A recent follow-up meeting of the four main party leaders was concluded with the issuance of a 14-point communiqué outlining the steps to be taken to achieve full reconciliation," the IMF assessment goes. The implementation of IMF-prescribed economic reforms in the second half of 2001 was of course also of major importance. "Côte d'Ivoire is now positioned to pursue a strong reform agenda, with a view to decisively addressing the challenge of poverty."

Poverty reduction is a central part of the HIPC Initiative. The IMF describes the high occurrence of poverty in the country, which was ranked 144th among 174 countries in a human development index published in year 2000. Many indicators of social welfare are low in Côte d'Ivoire, including poor access to health care, a high infant mortality rate, a high percentage of child malnutrition, low school enrolment and literacy rates and an average life expectancy of 54 years. Some 10 percent live in extreme poverty. The Ivorian social profile certainly made it eligible for the HIPC Initiative.

The recent drastic fall in the prices of Côte d'Ivoire's main export crops - some 40 percent for cocoa and coffee and 20 percent for cotton during 1999-2000 compared with 1998 levels - had had a "devastating impact on agricultural incomes and rural poverty," the IMF assessment notes. Poverty had become acute among crop farmers (58 percent), agricultural labourers and lately also export crop producers (43 percent). A HIV/AIDS prevalence rate of 12 percent (the highest in West Africa) was due to increase social problems.

The government of Côte d'Ivoire is steering towards the inclusion into the HIPC Initiative, which would mean a significant debt cancellation. The country's public and publicly guaranteed external debt at end-2000 was assessed to be US$ 9.94 billion in nominal terms - or 397 percent of government revenues. France is the main creditor, accounting for 25 percent of the outstanding debt, followed by the World Bank, constituting 17 percent of the total. The IMF assesses that the total amount of a possible HIPC Initiative assistance required to bring down the debt-to-government revenue ratio to the Fund's limit of 250 percent would be around US$ 2.6 billion.

Receiving this aid, naturally under strong conditionality, also in most cases leads to other debt relief arrangements with independent creditors. Last week, in awaiting its inclusion to the HIPC Initiative, Côte d'Ivoire negotiated a debt restructuring and modest cancellation with the so-called Paris Club, a group of creditor governments. Critics said the cancellation was surprisingly low, as Côte d'Ivoire could have been eligible for an up to 100 percent cancellation. It was held the Paris Club was awaiting whether Côte d'Ivoire in reality was included in the HIPC Initiative before making substantial cancellations. 

Sources: Based on IMF and afrol archives

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