The World Bank and Togo Agree to the Clearance of Arrears

Contacts
In Lomé: Sylvie A. Nenonene (228) 223 33 00
snenonene@worldbank.org
In Washington: Ana Elisa Luna Barros (202) 473 2907
alunabarros@worldbank.org

WASHINGTON, February 27, 2008 -- The World Bank and the Republic of Togo today signed a Memorandum of Understanding (MOU) concerning the process of clearance of arrears owed by Togo to the institution. The agreement builds upon the recommendations of the joint World Bank/International Monetary Fund/African Development Bank of November 28 to December 11, 2007. The main objective of this Memorandum is to lay out the steps toward full clearance of arrears owed by the Republic of Togo to the World Bank, and the resumption of a normal program with the World Bank.  This would also enable the Republic of Togo to launch the process toward debt relief under the Heavily Indebted Poor Countries Initiative (HIPC).

According to the Memorandum of Understanding which was signed, the World Bank’s reengagement with Togo will take place within the framework of: (i) a credible macroeconomic framework supported by an International Monetary Fund (IMF) program in the country; (ii) satisfactory progress in the implementation of structural reforms in governance and transparency in the sectors of cotton, port, energy, phosphates, financial, public expenditures management; and (iii) a program of growth-oriented reforms, developed by the government and submitted to the World Bank in the form of a Letter of Development Policy. The Protocol also emphasizes the need for Togo to reach an agreement for the clearance of arrears owed to other multilateral agencies, mainly the African Development Bank (ADB).

As of January 2, 2008, the total amount of arrears owed by Togo to the World Bank stood at US$135.293 million. For James Bond, the World Bank Country Director for Togo: "An assessment by the World Bank of the Republic of Togo’s capacity to pay indicates that the country has very limited resources to clear its arrears to IDA, even under the strictest fiscal framework. That is why the Memorandum of Understanding which was negotiated provides for the following steps. The Republic of Togo will prepare and submit to the World Bank a Letter of Development Policy outlining government’s reform program geared towards good governance and growth. The World Bank, on its side, will prepare and submit to its Board, an IDA Grant to help clear the arrears and provide an immediate budget support to the country. The Bank would then lift the suspension of disbursements to Togo in effect since 2002, and the country could benefit from new financing".

The Memorandum of Understanding also outlined a potential assistance program of the World Bank to Togo after arrears clearance, consisting mainly of grants supporting, inter alia, the following: governance and financial sector reform; emergency infrastructure rehabilitation; a development policy operation; support for sectors with growth potential; community driven development; HIV/AIDS; as well as studies in the field of economic management (including reviews of public expenditure, energy and competitiveness).

The negotiations that took place this week in Washington between the Togolese delegation, led by  Adji Otèth Ayassor, Minister of Economy and Finance, and the World Bank, represented by James Bond, Country Director for Togo, focused mainly on: (i) the terms of the Memorandum of Agreement; (ii) the government’s draft Development Policy Letter; (iii) the steps to be followed by Togo to benefit from the multi-donor debt reduction initiative for the Heavily Indebted Poor Countries (HIPC); and (iv) the World Bank’s potential program of assistance following the clearance of arrears.

The Togolese Minister of Economy and Finance, His Excellency Adji Otèth Ayassor, welcomed the signing of this agreement, "which finally paves the way for the restoration of Togo's relations with the World Bank."

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It should be recalled that the accumulation of arrears by Togo resulted in the suspension of World Bank’s disbursements to the country since January 2002. However, the Bank has continued to support the country through analytical studies, advisory services, and various grants that helped finance the Emergency Program for Poverty Reduction (EPPR), which provides funding for development priorities defined by the poor communities in Savanes and Maritime regions, and for which a second phase was approved in May 2007. The extension phase of this program to the three other regions of the country has already been approved and will be launched in the coming months. The EPPR has received a total amount of US$4,226,677. Other grants have also been approved recently to help: (i) prepare the economic recovery and international reengagement (US$1,573,630)— the signing of this Grant took place today, February 27, 2008; (ii) support an avian flu program (US$559,000); and (iii) finance priority urban infrastructure in the poorest neighborhoods of Lome (US$1,575,000— pending approval).