Lomé’s efforts to implement fiscal reforms, driven by an agreement with the International Monetary Fund (IMF), are beginning to show results. Moody’s has affirmed its « B3 » rating for Togo, shifting the outlook from negative to stable. This improvement is attributed to the government’s success in managing public finances and reducing fiscal deficits, signaling a more robust budgetary approach.
Moody’s commended Togo’s avoidance of further fiscal slippage since the negative outlook was assigned. The agency highlighted that the country has mapped out a clear path toward deficit reduction. To achieve a positive outlook, Togo will need to sustain this fiscal consolidation and reduce its external trade imbalances over the next 12 months.
Fiscal Discipline and IMF Support
In 2023, Togo’s economic growth reached 6.4%, and its budget deficit dropped to 6.7% of GDP, compared to 8.3% in 2022. The deficit is projected to narrow further, to 5.2% in 2024 and 4.1% in 2025. However, the target of reducing the deficit to 3% by 2025, as outlined in the IMF’s Extended Credit Facility (ECF) agreement, remains challenging. The IMF has pledged approximately $390 million in financing between 2024 and 2027, equivalent to 4.3% of Togo’s estimated 2023 GDP.
With this program in place, Togo is expected to improve its debt management, which stood at 66.8% of GDP in 2023, surpassing the B3-rated median of 45%. Moody’s considers the IMF agreement crucial in strengthening Togo’s fiscal policies and reducing the risk of sudden economic deterioration.
By September 2024, Togo had repaid 380 billion CFA francs in debt on the West African Monetary Union (Umoa) public securities market, while raising 621.4 billion CFA francs, surpassing its 2024 budgetary goal.
Boosting Investment Through Reforms
In recent years, Togo has undertaken several business environment reforms aimed at attracting foreign investment. The World Bank’s « Business Ready » report ranks Togo first in West Africa and fourth on the continent for its regulatory framework, public services, and operational efficiency. Reforms in business creation have reduced administrative procedures through digitalization, while improvements in legal protections have streamlined dispute resolution.
Notable reforms include the digitization of construction permit processes and enhanced building quality controls. These initiatives have simplified the procedures for businesses to establish operations or transfer properties, improving the country’s investment appeal.
At the Port of Lomé, which Moody’s describes as a key regional hub and the fourth most active port in Africa, the digitization of customs documentation has been implemented to boost competitiveness on the international market.
Infrastructure Development and Agricultural Advancements
President Faure Gnassingbé has prioritized rural infrastructure, launching projects such as the construction of 21 modular bridges to improve agricultural productivity and access to essential services in rural areas. The program, valued at 65.37 billion CFA francs, is expected to be completed within 36 months. Additionally, 618 kilometers of rural roads will be constructed, further enhancing connectivity for farmers.
Agricultural development remains a focal point of the government’s strategic plan, with initiatives aimed at mechanizing farming and increasing productivity. Since 2021, 2,200 kilometers of rural roads have been completed, with another 2,552 kilometers under construction. Agricultural zones spanning 11,800 hectares have been developed, though only 6,175 hectares are currently in use for various crops.
The government is also advancing the digitalization of public services, with about 50 services already digitized, including passport applications and judicial records. Efforts are underway to roll out biometric identification, starting with targeted groups such as farmers and students.
Moody’s and Investor Confidence
Togo’s efforts to stabilize its economy and attract foreign investment are paying off. The IMF’s support and continued reforms are expected to provide the foundation for long-term economic stability. Moody’s affirmation of a stable outlook reflects this positive trajectory, but challenges remain, particularly in achieving the fiscal targets set by the IMF.
The combination of robust reforms in business regulation, digitalization, and infrastructure development positions Togo as an increasingly attractive destination for investors. However, sustaining this momentum will require continued fiscal discipline and effective use of international financing.
© 2024 – O Bulalmba / ADR
