Improving Public Debt Management

In the OIC Member Countries

4.1.3

Republic of Togo

A) Public Debt Dynamics

After having reached a maximum general government debt ratio of 107.8% of GDP in 2007, the

Togolese Republic’s debt ratio significantly decreased to 49.3% by 2011 (see Figure 47). The

debt reduction was mainly the result of debt reliefs under the Heavily Indebted Poor Countries

(HIPC) Initiative and the Multilateral Debt Relief Initiative (MDRI) (IMF 2015c).

Recently,

Togo’s general government debt has risen to about 61% of GDP by 2016, largely caused by

debt financed public investments accompanied by stagnating revenues (IMF 2015b). Although

having a debt level still below the threshold of 70% set by the West African Economic and

Monetary Union (WAEMU), Togo is facing debt and liquidity pressures (AFMI 2016, IMF

2015b). Togo has also faced problems arising from contingent liabilities, predominantly from

guaranteed loans of state owned enterprises (SOEs), which gave rise to increasing debt levels

when guarantees became due (IMF 2009a).

Togo’s general and primary budget balances were negative in most years between 2006 and

2015. Whereas net borrowing narrowed up to 0.85% of GDP in 2008, the debt reliefs through

the HIPC and MDRI gave room for fiscal expansion. Increased spending for public investments

could not be offset by an increase in revenues because operations at the newly created Office

of Togolese Revenue (OTR) did not start as early as provisioned (IMF 2015b). According to the

government of Togo, infrastructure investments were necessary to stimulate private sector

participation in the economy (IMF 2015b). Although current spending has been considerably

reduced, except for the wage bill and oil price subsidies, the revenue shortfalls in privatization

and cutbacks in donor budget support contributed to the debt accumulation in recent years

(IMF 2015b). For the future, however, the IMF projects a narrowing of the net lending balance

(see Figure 47).

The HIPC, which had started in 2008, reached the completion point in 2010 and granted Togo a debt relief of about $270

million (8.5% of GDP) in terms of net present value (NPV) (IMF 2008). The MDRI debt relief from the International

Development Association (IDA) and the African Development Fund (AfDF) contained $404 million (12.8% of GDP) in

NPV terms.