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Togo: Country Brief

Economic Overview and performance

Located in the Gulf of Guinea between Benin and Ghana, Togo is a small country with an estimated population of 6.2 million, with an annual population growth of about 2.8%. Per capita income, which was low in 2009 (US$440) as compared to Sub-Saharan Africa (average US$1,165), has started to rise. However, external shocks such as an increase of oil and food prices in particular, have impeded the expected recovery following Togo’s protracted domestic crisis. The country is a member of the West African Economic and Monetary Union (WAEMU) and of the Economic Community of West African States (ECOWAS).

The main economic activities are mining, agriculture, sea port activities and re-exporting. Agriculture employs two-thirds of the population and accounts for about 45% of gross domestic product (GDP). The secondary sector, including phosphates, cement manufacturing, construction and energy employs about 12% of the population and accounts for about 22% of GDP. Services, dominated by commerce and transport, employ about 21% of the population and generate about 33% of GDP. The most important exports are cement and clinker which go entirely to the West Africa regional market where demand remains strong, followed by cotton, both processed and marketed by public enterprises. Togo also produces cash crops, mainly coffee and cocoa, and has a considerable agricultural potential.

Togo’s economic growth which was estimated at 3.7% for 2010 rose to 3.9% in 2011 thanks to satisfactory rainfall, improved power supply, and an increase in the port activity. It is expected to reach 5.2% in 2012, spurred, among other things, by new investments in infrastructure and higher government spending, and thanks to lower debt-servicing costs following debt relief, and continuing structural reforms. The recovery in the cotton sector, the buoyant activity at the Port of Lomé (especially the increase in transit trade), and the public works launched by the government also contribute to this growth performance.
   
Togo’s economy was severely impacted by the surge in global food and fuel prices in 2008, as well as heavy flooding in the summer of the same year that affected key transport infrastructure and damaged agricultural output. The global recession in 2009 contributed to further delay the economic recovery. However, thanks to better rainfall and increased fertilizer subsidies which induced higher cereal production, real GDP growth which was estimated at 3.2% in 2009 rose to 3.7% in 2010. Cotton production is on an upward trend, and rose to an estimate of 45,000 tons in 2010 (as opposed to 25,000 tons in 2009) thanks to a good rainfall, and the creation of a new national cotton company with a good participation of cotton producers.

The increase of food production in 2010 has helped to keep inflation at lower level (1.4% in 2010), despite the increase of fuel prices and the depreciation of the CFA franc against the US dollar. However, severe flooding that affected large parts of the country between September and October 2010 has caused important damage to infrastructure and crops, affecting the country’s economic growth.

In mid-2011, Togo completed the three-year reform program (2008-2011) backed by an IMF extended credit facility (ECF) under which the country achieved several key targets including significant improvements in fiscal management and reaching the completion point under the heavily indebted poor countries initiative in December 2010. This allowed an 82% write-off of its bilateral and multilateral debt. The long-delayed privatization process for four state-owned banks has seen some progress in August 2012 after government has selected Orabank as the winning bidder for “Banque Togolaise de Dévelopment” (one of the four banks). Togo is expected to embark on a successor program later in 2012.

Political Context

The successful legislative elections of 2007 paved the way for Togo’s re-engagement with the international community, after a suspension period of more than 15 years. During that time, foreign assistance was very limited. The March 2010 presidential elections reinstated President Faure Gnassingbe and were well received by the international observers. Prime Minister Gilbert Fossoun Houngbo was reappointed to his position but unexpectedly resigned on July 11, 2012.  A newly appointed Prime Minister, Arthème Kwesi Ahoomey-Zunu, has formed a 32-member government largely dominated by the new presidential party (Union pour la République – UNIR), and comprising members of “Union des Forces du Changement – UFC” of Gilchrist Olympio. 

Development challenges

Togo has achieved considerable progress during the past three years, but significant institutional and economic challenges remain. The rise in oil and food prices, the severe flooding in 2008 and 2010, and the global recession in 2009 adversely impacted Togo’s economy. Togo’s income per capita (US$440 in 2009) is low compared to Sub-Saharan Africa (US$1,165) and Low-Income Countries (US$510) averages. With regard to the Millennium Development Goals, progress has been achieved toward reaching the goals of universal primary education and the combat of HIV/AIDS. However, Togo is unlikely to meet six of the eight goals by the 2015 deadline. The country’s business environment remains difficult as highlighted by the World Bank’s “Doing Business 2012” report which ranks Togo 162nd (out of 183 countries).

The administration’s capacity to create an environment conducive to private sector development needs to be strengthened. The country’s financial sector strategy and planned privatization of ailing state-owned banks is expected to boost investors’ confidence and improve the banking sector’s capacity to finance the economy.

 

 

The World Bank re-engaged with Togo in May 2008 when arrears to the International Development Association (IDA) were cleared and the Board endorsed an Interim Strategy Note (ISN) for FY 2008 to 2010.  The Bank has prepared a second Interim Strategy Note (ISN-2) which was approved by the Board in January 2012 to cover the period from 2012 to 2013, and which, as with its predecessor, is aligned with three of the four pillars of Togo’s poverty reduction strategy paper (PRSP).  The ISN-2 is outlined as follows:  

  • Deepening economic recovery and promoting sustainable development-- The Financial Sector and Governance Project (US$12 million) approved in March 2009 supports the restructuring of the banking sector, the strengthening of the microfinance sector, the reform of the pension sector, and other financial and private sector reforms. A Country Economic Memorandum / Diagnostic Trade Integration Study (CEM/DTIS) was completed in 2010, and provided an in-depth analysis of key economic sectors and reviewed the potential drivers of growth in the medium-term. An Investment Climate Assessment was also completed in 2010 to provide a crucial diagnostic of the business climate.  This is followed by a Private Sector Development Project approved in March 2011. Rehabilitation of critical infrastructure continues to be a priority. Activities financed under a previous LICUS-funded Lomé Infrastructure Rehabilitation and Maintenance Project (US$1.5 million) have been scaled up under an Emergency Infrastructure Rehabilitation and Energy Project approved in June 2009 (US$25 million) and complemented by the GEF Efficient Lighting Program (US$1.82 million). An additional financing of US$15 million was approved in FY11 to scale up basic urban services (drainage systems and roads) to mitigate the impact of the 2010 floods. Togo is part of the regional Abidjan-Lagos Transport and Trade Facilitation Project approved in March 2010. A US$37 million Agricultural Sector operation (IDA and Multi-donor trust funds) was approved in April 2011. This is complemented by a West Africa Agriculture Productivity Project (approved in March 2011) to strengthen the national agricultural research system and extension services.
  • Improving economic governance and state capacity -- Since reengagement, the World Bank has provided five budget support operations (Economic Recovery and Governance Grants -ERGGs) to Togo to help implement policy reforms in public financial management, cotton, phosphates and energy. In May 2008, US$167 million was approved, of which US$157 million was used to pay arrears due to the Bank. In May 2009 US$20 million was approved, US$16.3 million in April 2010, US$28 million in May 2011 and US$14 million in May 2012. An update of the public expenditures management and financial assessment review (PEMFAR) was completed in March 2010 and an Accounting and Auditing Assessment Report in April 2010.

  • Address urgent social needs: The Education for All FTI Grant (US$45 million) came into effect in January 2011 and aims at facilitating access to school, improve the quality of education, and strengthen the institutional capacity of the ministry of education. The Community Development Project (US$17.2 million) approved in May 2008 has been scaled up by the Global Food Response Program (GFRP) Trust Fund in 2008 (US$7 million) to help with the impact of the floods, and received a second additional financing of US$8.7 million in June 2010, from the Crisis Response Window (CRW) to expand the school feeding component of the parent project and add a new component on temporary employment. To address flood risk management and preparedness, a Disaster Risk Management country plan is under preparation as part of an Integrated Disaster Risk and Land Management Project (US$12.3 million, financing from IDA/GEF/TerrAfrica). The Bank also supports Togo (through a multi-donor trust fund) to implement its Extractive Industry Transparency Initiative (EITI) program, in addition to the technical assistance provided.

  • Addressing poverty reduction and urgent social needs: The US$45 million Education for All FTI Grant, effective since January 2011, aims at facilitating access to school, improve the quality of education, and strengthen the institutional capacity of the ministry of education. The $US17.2 million Community Development Project approved in May 2008 has been scaled up by the Global Food Response Program (GFRP) Trust Fund in 2008 (US$7 million) to help with the impact of the floods, and received a second additional financing of US$8.7 million in June 2010, from the Crisis Response Window (CRW) to expand the school feeding component of the parent project and add a new component on temporary employment. In March 2012, a new Community Development and Social Safety Nets Project (US$14 million) was approved to increase access to basic services to the poor and to offer social safety nets to the poorest. To address flood risk management and preparedness, a Post Disaster Needs Assessment was completed in FY11 and an Integrated Disaster Risk and Land Management Project ($16.9 million) has been prepared. The Bank also supports Togo (through a multi-donor trust fund) to implement its Extractive Industry Transparency Initiative (EITI) program, in addition to the technical assistance provided.

IFC

IFC’s strategy in Togo is to actively develop projects in sectors such as agribusiness, infrastructure, and manufacturing; forge partnerships with local banks to foster joint ventures aimed at supporting these projects with local currency financing, as well as developing micro and small to medium enterprises (SME) finance products to support the microfinance and SME sectors in Togo. The strategy also supports investment climate improvement by suggesting reforms aimed at facilitating investment and assisting the authorities in the design and implementation of those reforms, together with donors and local stakeholders. IFC’s total committed portfolio as of August 2011 was US$137.8 million. This includes a subordinated loan and an equity investment of US$8.9 million and US$5.0 million respectively for ContourGlobal Togo, a loan of US$1.2 million to Transam, and a US$122.7 million loan in support of the Euro 350 million greenfield transshipment container handling terminal/port being developed by the Lomé Container Terminal (LCT), a company affiliated with Mediterranean Shipping Company (MSC). In March 2010, IFC committed a US$110 million equity investment in Heidelberg Cement Africa (HCA) to modernize and increase the operational capacity of the company in seven African countries, including Togo.  

IFC, through its Capitalization Fund and African, Latin American & Caribbean Fund, provided Ecobank Transnational Incorporated (ETI) in June 2010 with a comprehensive capitalization package of up to US$150.14 million. Of this volume, Ecobank in Togo was allocated a total of up to US$8.0 million in the form of: a convertible subordinated loan with Tier 2 characteristics of up to US$4.0 million; and a non-convertible subordinated loan with Tier 2 characteristics of up to US$4.0 million, with disbursement occurring in June 2011.

MIGA

Presently, MIGA does not have any exposure resulting from investments in Togo nor has the Agency received any formal requests for support of investments in the country.

WBI

WBI’s mission is to strengthen the capacity of leadership teams & multi-stakeholder coalitions to implement reforms in order to tackle frontier development challenges and achieve results. WBI pursues this mission through four business lines (structured learning, innovation platforms, practitioner exchanges, and leadership and coalition building) and seven thematic areas of focus, organized as follows.  The Governance, Innovation and Fragile States Department is responsible for governance, fragile and conflict-affected situations (FCS). The Thematic Knowledge and Learning Department is responsible for urban, public private partnerships (PPP), climate change, growth and competitiveness, and health systems.

During FY11, WBI offered the following program targeting Togo: WBI’s Parliamentary program supports the West Africa Association of Parliamentary Public Accounts Committees (WAAPAAC) with South-South Knowledge Exchanges among WAAPAC members in Ghana, Liberia, and Sierra Leone. In 2011, Togo became a member of WAAPAC and participated in knowledge exchange dialogues with other WAAPAC members on how parliamentary finance committees can adopt international good practice in their budget oversight.

 

Rural communities take charge of their own development

The Community Development Project (US$25.9 million) provides poor communities throughout the country with improved basic socio-economic infrastructures and income generating activities. This includes the additional financing of US$8.7 million approved in June 2010 to help expand the school feeding program to about 36,000 more pupils, and introduce a new component aimed at offering labor intensive works to about 26,000 people, 60% of whom will be women and the youth.

The new component will focus on the reforestation of degraded lands. This was also supplemented in late 2008 by a US$7 million Global Food Crisis Response Program (GFRP) trust fund in response to a significant escalation of food prices, especially of staple foods, that are at the base of the Togolese diet. The project’s activities started in the second half of 2008, and considerable results have already been achieved.

  • Better community infrastructures: To date, 271 class modules and a dozen health centers have been constructed and rehabilitated. Other socio-economic infrastructures built by the project include sheds in markets, community latrines, potable water boreholes, feeder roads. This have helped to create better working conditions for school children and teachers, provide access to health care and safe drinking water, improve marketing and commercial infrastructure and improve sanitation.
  • Living conditions improved for over 233 organized groups of people who received an average of between FCFA 1.5 million to over eight million per group to engage in income generating activities in agriculture and commerce. From revenues obtained through these activities, beneficiaries are now able to provide better care and schooling for their children. Women are particularly proud of being able to send their girls to school, because they have become more economically independent and can make decisions or take part in the family decision-making process.
  • Children in the poorest communities have access to education — 36,000 school children in 181 schools of the poorest communities in Togo are being offered lunches through the project’s school feeding program. Based on the results so far, the school drop-out rates have been reduced considerably, and school attendance has increased in all the country’s five regions. It is now certain that this project is offering the chance to children from poorest families to at least complete primary education.
  • Increasing agricultural productivity — 4,275 tons of fertilizer and more than 304 tons of cereal seeds (maize, rice and sorghum) were distributed to about 14,000 agricultural farmers during the 2008 to 2009 agricultural season. This allowed the cultivation of 13,395 hectares of land which yielded a cereal production of about 28,000 tons, representing an estimated increase of about two tons per hectare. As a result, cereals are on the markets at affordable prices, compared to previous years.
  • Poor communities are empowered — The Community Development project has empowered beneficiary communities by providing them with tools and techniques that allow them to take charge of their own development. To date, a total of 6,718 village development committee members (including 2,666 women) have received appropriate trainings, and are now able to identify and prepare projects, procure the works, and manage the funds they are granted. Women are also empowered and their participation in the project has increased.

Improving urban infrastructure in Lomé and its surroundings

The US$1.5 million Lomé Infrastructure Rehabilitation and Maintenance project (LIRMP) closed on June 30, 2010. The project helped add a second lane to Boulevard de l’Oti, a major road in a highly populated area in the capital city Lomé heavily used by economic operators working in the industrial zone, including the Port of Lomé. The new roadway (a dual carriageway in both directions) includes a 2.4 kilometers long road with a width of seven meters. The project has improved and eased circulation for the thousands of road users who formerly spent long hours in very congested traffic. Security for motorcyclists and pedestrians has also improved, and the drainage works constructed have improved the quality of life of people living in the immediate surroundings and who used to suffer from regular floods during rainy seasons. A Community Cultural Center at Bè was rehabilitated to restore its multi-purpose auditorium and added new offices, parking space for up to 10 vehicles, toilets and ablution facilities thus enhancing the community’s use of the space for social and cultural events.

The LIRMP was a precursor to a US$41.82 million Emergency Infrastructure Rehabilitation and Energy project (US$40 million IDA/$1.82 million Global Environment Facility) which started in 2009 and received additional financing in 2011. It includes investments in the energy and water sectors, in addition to the rehabilitation, construction and paving of roads and drainage systems in Lomé and its surroundings.

At the end of August 2010, the project completed the cleaning of 70 kilometers (original target was 42 km) of gutters and drainage systems to help reduce the impact of flooding in the city. While efforts are being made to find lasting solutions to the regular flooding that affects Lomé during the rainy seasons, the project has built – at government’s request — a “Centre for the victims of natural disasters” at Logopé (a suburb of Lomé) to offer temporary accommodation to about 1,000 people who are regularly displaced and who usually take refuge in schools during the rainy seasons. The project has completed the rehabilitation of the electricity distribution network in Lomé: 20 medium voltage/low voltage transformer stations have been rehabilitated (a few reconstructed) to upgrade the power distribution system and supply good quality electricity with acceptable voltage drop.

Also, to improve the quality of supply and reduce voltage drops, 30 kilometers of low voltage distribution network have been constructed; and 200 fault detectors have been installed to improve network availability. Procurement is underway to obtain about 400,000 Compact Fluorescent Lamps (CFLs) to implement the energy efficiency sub-component of the project.  Once completed by August 2011, more voltage gains would be achieved for Lomé to enable further extension of the electricity network to disadvantaged neighborhoods. Works are currently underway to rehabilitate some Lomé road networks, and improve access to potable water for communities living in the outskirts of Lomé. The German government through KfW has provided parallel financing of this Bank project with an amount of 13 million Euros to undertake the construction of a 15 kilometer “Petit Contournement,” a road that would further divert large heavy trucks departing the Lomé Port to avoid using city roads as they move to the northern parts of the country onwards to the landlocked neighboring countries.

 

Economic Recovery and Governance Grants help promote good governance and transparency

Since the Bank’s re-engagement with Togo in May 2008, four Economic Recovery and Governance Grants (ERGGs) have been approved. The ERGG-4 approved in 2011 would continue to engage the Bank in the strengthening of governance with the aim of improving budget formulation, execution and controls, and public procurement. It would also help consolidate the basis for strong and sustained growth, including through reforms in the key sectors of the economy (phosphate, cotton and energy sectors).

Financial sector reform

The US$12 million Financial Sector and Governance project effective since August 2009 aims at supporting the Togo government’s financial sector reform program, focusing on the banking, pension and microfinance sectors. With regard to banking reform, the project has financed privatization advisers to provide guidance to the government on the privatization of the four public banks. The Privatization Law was approved by the National Assembly in October 2010. With regard to the pension sector reform, the project is financing various diagnostic reports to prepare the required reforms. With regard to microfinance, the project has been providing support to the national supervisory authority to strengthen the supervision of the microfinance sector.

 

Contribution of other development partners

Since the donor reengagement starting in 2007, donor assistance has gradually increased and several donors have expanded their activities in diverse sectors in the country. The European Union (EU) has scheduled to disburse 123 million Euros over the period 2008-2013 of which seven million euros for budget support per year.

The African Development Bank prepared a new Country Partnership Strategy to cover the period from 2011 to 2015, with US$15 million for budget support. Bilateral partners are also increasing their contributions for the country’s development. These include mainly France, Germany, the United States of America, and China.

 

Last updated October 2012




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