Economy of Cote D'ivoire / Ivorycoast

Once a stable and relatively prosperous country, CÑ„te d'Ivoire has suffered from continued political instability and economic stagnation since 1999. The current crisis, which began in September 2002, has further aggravated the country's already difficult social and economic conditions.

The civil conflict cut short the incipient economic recovery in 2002. GDP is estimated to have declined by 1.6% in 2002 and 3.8 % in 2003. Inflationary pressures intensified temporarily after the crisis, but decreased subsequently, with 2003 inflation estimated to have averaged 3.8 %. The current account of the balance of payments moved into surplus in 2002 and 2003, as export revenues rose on the strength of international cocoa prices.

Public finances deteriorated in the second half of 2002 and in 2003, reflecting a combination of expenditure overruns, tax revenue stagnation, and a decline in foreign financing. Domestic and external arrears reached 13,5% of GDB by end-2003.

An improvement in security and political normalization are indispensable for economic recovery. However, a coherent economic policy framework and transparent and efficient management of public finances are critical to consolidate the gains from the return to stability, and to restore private sector confidence.

Given the uncertainty about availability of external resources and the need to address the problem of large stock of domestic and external arrears, the authorities should target a higher primary budget surplus in 2004 than the currently envisaged 2,8% GDP. With little room for additional tax revenue mobilization, the authorities need to mobilize more resources from the oil and gas sector and scale down domestically-financed investment and recruitment plans for 2004.

The authorities should be more vigilant and proactive in responding to the fragile state of the commercial banking system and imposing corrective actions on banks in distress. In particular, the financial position of the state-owned Caisse Autonome d'Amortissement (CAA) remains very weak, and options for a resolution of its problems need to be considered, in close consultation with the World Bank.

The structural reform agenda should be revived with a focus on the cocoa, financial, and energy sectors. Most urgently, an action plan and timetable for addressing the institutional weaknesses in the cocoa sector should be