IMF, World Bank Support $1.8 Billion Debt Relief for Togo

Debt relief is equivalent to 82 percent reduction in nominal external debt

Relief created sound public finances, freed up resources for priority spending

Further reforms will need to promote faster growth, notably in private sector

The relief is equivalent to an 82 percent reduction in the West African country’s nominal external debt.

The decision grants Togo debt relief under the Heavily Indebted Poor Countries (HIPC) Initiative. Having reached the HIPC final stage, or completion point, Togo also qualifies for debt relief under the Multilateral Debt Relief Initiative (MDRI) from multilateral financing institutions.

Togo’s graduation from the HIPC process brings to 31 the number of countries reaching the HIPC completion point—the stage at which debt relief becomes irrevocable and unconditional. Liberia and the Democratic Republic of the Congo reached their completion points earlier in 2010.

Togo’s debt relief started in November 2008, when the country reached its decision point in the HIPC process that translated into interim relief on debt service. The interim relief helped Togo devote more budget resources to priority public spending to reduce poverty and rebuild infrastructure (see chart). Such spending has doubled in nominal terms over the period 2008–2010.

“With this milestone, Togo has turned a page on the economic distress of its decade-long domestic crisis and can now face the future without the burden of an unsustainable external debt,” said IMF mission chief for Togo Marshall Mills. “Togo’s rapid progress in economic stabilization and structural reform not only qualified the country for debt relief but also laid the groundwork for future success.”

Commitment to reform

Mills noted that, thanks to its strong commitment to reform, Togo had advanced from interim debt relief to the completion point in two years. This was an exceptional achievement for a country that started with low administrative capacity, Mills said.

“With a much lighter external debt burden, the country is now free to continue devoting more of its scarce resources to priorities, “ Mills stated. “Just as importantly, Togo’s greatly improved financial health can provide a solid foundation for advancing the country’s development, especially the economic growth and private investment essential to meeting its goals.”

With the achievement of the HIPC completion point, Togo’s external debt has been irrevocably reduced from $2.2 billion at end-2007 to about $400...