IMF Upgrades Togo's Debt Capacity, Boosting Fiscal Flexibility

Public Management

Tuesday, 15 July 2025 06:04

IMF Upgrades Togo's Debt Capacity, Boosting Fiscal Flexibility

(Togo First) - The International Monetary Fund (IMF) has upgraded Togo's debt-carrying capacity to "strong" from its previous "medium" rating. This reclassification, confirmed in the second review of the Extended Credit Facility (ECF) program published in late June, could positively influence the West African nation's financing conditions in the medium term and provide Togo with greater fiscal flexibility despite its high public debt.

Several factors underpin this reclassification. Economic growth is considered robust, with a 5.3% increase in 2024 and a projected 5.2% in 2025, while inflation remains contained at 2.6% in April. Additionally, the Country Policy and Institutional Assessment (CPIA) score, a World Bank indicator of public policy quality, has improved in recent years. Finally, the rebuilding of regional foreign exchange reserves within the West African Economic and Monetary Union (WAEMU), reaching 5.4 months of imports in April 2025, has helped strengthen Togo’s external position.

A direct consequence of this upgrade is that the debt threshold, based on the net present value (NPV) of public debt, has increased from 55% to 70% of GDP. According to IMF projections, Togo’s NPV debt is expected to reach 60% of GDP in 2025 before gradually declining, keeping it below this new ceiling.

Togo gains some breathing room in managing its debt. Previously, the IMF maintained that the country should not exceed a certain debt level, calculated in "net present value." This value represents the total future repayments of the debt, adjusted to today’s terms using interest rates, meaning it reflects the true "weight" of the debt over time.

Thanks to progress in public finance management, the IMF now believes Togo has a stronger repayment capacity and can sustain a slightly higher debt burden without increased risk. As a result, the debt ceiling has been raised from 55% to 70% of GDP. This new classification allows the government to ease the pace of fiscal consolidation while remaining within acceptable limits. The IMF has even agreed to postpone the target of falling back below the former 55% threshold to 2027, rather than requiring it immediately.

However, this positive development does not overshadow persistent challenges. Overall public debt stood at 72.1% of GDP in 2024, driven higher by exceptional off-budget spending, including a substantial fertilizer purchase amounting to 1.7% of GDP. Moreover, the share of short-term debt on regional markets remains high, increasing refinancing risks. The average interest rate on public debt issuances rose to 7.4% this year, up from 6.1% during the 2019–2023 period.

To maintain this positive momentum, the IMF recommends strengthening tax revenue mobilization, reducing exemptions, and continuing reforms to improve budget transparency and the governance of state-owned enterprises.

Fiacre E. Kakpo

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.