Togo: A glance at external debt

Economy

Thursday, 13 April 2023 13:04

(Togo First) - Togo's external debt amounted to CFA1,296.11 billion in 2022. According to the Ministry of Finance, this is 38.84% of the public debt portfolio and more than a quarter (25.32%) of the national GDP.

Multilateral creditors (Bretton Woods institutions, development banks, etc.) hold 58.6% of the country’s external debt. Right behind are commercial lenders who hold 36.8% of this debt, and the remaining 4.6% is held by bilateral creditors.

Bilateral and commercial loans

The Kuwait Fund was Togo’s main bilateral credit last year, providing 31.51% of the bilateral loans secured by Lomé. France’s development agency, AFD, and the Abu Dhabi Fund follow, with respective shares of 26.64% and 18.32% of the loans.

Regarding commercial loans, they amounted to CFA476.79 billion in 2022. Eximbank China Société Générale and Bank of Tokyo-MUFG provided, respectively 56.97%, 17.91%, and 13.40% of the amount, making them Togo’s top commercial lenders over the year under review.

Exchange rate risk remains moderate

Since four-fifths (83.5%) of its outstanding public debt is denominated in CFA and euro, Togo is little exposed to fluctuations in international exchange rates. But it is not the case for its external debt portfolio which is sensitive to fluctuations in certain major currencies.

Indeed, 15.99% of the external debt portfolio is denominated in US dollars and 12.07% in yuan renminbi (CNY). The euro, which does not fluctuate against the CFA, accounts for 28.93% of external debt.

The IMF's recent SDR allocations also have no impact in terms of exchange rate risk. Indeed, "It should also be noted that all IMF SDR assistance, the outstanding amount of which represents 15.30% of the external debt, does not affect the exchange rate because of the agreement signed between the BCEAO and the State," says the Ministry of Finance. Finally, loans from the BOAD, a sub-regional multilateral institution, are denominated in CFA and represent 13.87% of the external debt.

In 2021, Togo's external debt was about CFA1,000 billion at the end of September, compared to CFA550 billion in 2017. The country's external debt rose due to its efforts to curb the Covid-19 crisis and post-Covid measures that the government launched for its economic recovery.

Ayi Renaud Dossavi

REFORMS OVERVIEW

STARTING A BUSINESS (more info)

At the fifteenth position, worldwide, and first in Africa, under the Starting a Business index of the 2020 Doing Business ranking, Togo sustains its reformative dynamics with more reforms….

ENFORCING CONTRACTS (more info)

Compared to some years ago when it was one of the lowest rankers under the Doing Business’ Enforcing Contracts indicator, Togo, leveraging many efforts to improve its business climate, was able to jump significantly on the index in the recent years... .

CONTRACT EXECUTION (more info)

Creation of special chambers of commerce for small debts • Creation of chambers of commerce at the Court of Appeal • Civil and commercial cases now handled by distinct clerks • Establishment of commercial courts in Lomé and Kara • Lawyers and bailiffs now have access to the FORSETI COMMERCIAL platform • A maximum period of 100 days was fixed to settle a commercial dispute .

TRADING ACROSS BORDERS (more info)

In comparison to previous years,Togo has significantly improved its ranking under the“Trading across borders” indicator by adopting multiple reforms that focus mainly on the digitization and reduction in delays, for import and export procedures related to import and export.

In comparison to previous years, Togo has significantly improved its ranking on the “Trading across borders” index by adopting multiple reforms that focus mainly on the digitalization and reduction in delays, for import and export procedures related to import and export.

CONSTRUCTION PERMIT (more info)

After moving from the 133rd to 127th place under the 2020 Doing Business’ construction permit index, Togo intends to reiterate this feat in the coming edition of the global ranking. To this end, it has introduced this year multiple reforms.

GETTING ELECTRICITY (more info)

Over the past two years, Togo’s ranking under the Doing Business’ Getting electricity and water indicator has increased consistently. Owing this performance to multiple reforms aimed at making it easier for businesses to access power and water, Lomé plans to introduce even more reforms this year to keep up its improvements.

REGISTERING A PROPERTY (more info)

Out of all the 'Doing Business’ indicators, Property Registration is where Togo has improved the most since 2018. Indeed, after spending years in the lowest part of this ranking, the country now seeks to beat Rwanda which is the best performer on this index in Africa. To do so, Lomé has been introducing many reforms, with the latest batch implemented this year.

PUBLIC PROCUREMENT (more info)

From professionalization to digitization, through legislative regulations, Togo’s public procurement framework is constantly being modernized. Several reforms have been implemented to improve the sector much to the benefit of the private sector, which is the focus of the National Development Plan.

PAYING TAXES AND DUTIES (more info)

To improve its business environment, Togo introduced some important reforms related to the payment of tax and duties. From the replacement of some taxes to the cancellation of others through exemptions, the country has only one objective: offer the most attractive tax framework to investors and economic operators. To achieve this, the authorities relied on digitization.