Cote d'Ivoire Second Investment for Growth DPF

The objective of the Second Investment for Growth Development Policy Financing Project is to: (1) strengthen competition in key enabling sectors and domestic revenue mobilization; (2) expand equitable access to health and education services; (3) promote the sustainable use of natural resources. The operation consists of a credit in the amount of EUR 281.4 million (equivalent to US300 million dollars). The operation supports key reforms for advancing Côte d’Ivoire’s medium term inclusive growth objective of becoming an upper middle-income economy by 2030, which entails doubling real Gross Domestic Product (GDP) per capita and halving poverty to 20 percent from 39.5 percent in 2018. The DPF also supports the need to strengthen fiscal and debt sustainability. While growth was relatively resilient in 2020, with a strong rebound in 2021, fiscal deficits have risen since the onset of the global COVID-19 crisis, aggravated by the impact of Russia’s invasion of Ukraine on global inflation and commodity prices. The fiscal deficit (incl. grants) more than doubled over 3 years, from 2.3 to 6.8 percent of GDP between 2019 and 2022, in 2022 due to additional expenditures through price caps and subsidies to contain prices, high capital expenditure levels and security spending due to insecurity in the northern region, while efforts on domestic revenue mobilization have remained below expectation. Public and publicly guaranteed (PPG) debt has increased significantly from just about 40 percent of GDP in 2019 to almost 60 percent of GDP in 2022. Rising external borrowing costs are limiting Côte d’Ivoire’s capacity to access sustainably international markets in the short-term. Recognizing the need to increase fiscal space, and maintain debt sustainability, the government entered a 40, months ECF-EFF arrangement with the IMF in May 2023.