FOR OFFICIAL USE ONLY

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1 ~ Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Document of The World Bank FOR OFFICIAL USE ONLY REPUBLIC OF TOGO Report No. 454-TG Enhanced Heavily Indebted Poor Countries (HIPC) Initiative Preliminary Document September 2,28 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

2 INTERNATIONAL DEVELOPMENT ASSOCIATION INTERNATIONAL MONETARY FUND TOGO Enhanced Heavily Indebted Poor Countries (HIPC) Initiative Preliminary Document Prepared by the Staffs of the International Development Association and the International Monetary Fund Approved by Danny Leipziger and Obiageli K. Ezekwesili (IDA) and Thomas Krueger and Adnan Mazarei (IMF) September Contents Page Executive Summary... i I. Introduction... 1 I1. Background and Eligibility for HIPC Initiative Assistance... 1 A. PRGF and IDA Status... 1 B. Poverty and Social Issues... 3 C. Policy Track Record... 4 I11. Macroeconomic Outlook... 5 IV. Debt Relief Analysis and Possible HIPC and MDRI Assistance... 7 A. Debt Reconciliation Status... 7 B. Structure ofexterna1 Debt... 8 C. Possible Assistance under the HIPC Initiative... 9 D. Possible Assistance under MDRI E. Impact of HIPC and MDRI Debt Relief on Debt Ratios and Sensitivity Analysis V. The Decision and Floating Completion Points A. Possible Decision Point Timing B. Possible Triggers for the Floating Completion Point C. Monitoring Public Spending Following Provision of HPC Assistance VI. Issues for Discussion... 17

3 Tables Table 1 : Medium- to Long-Term Macroeconomic Framework, FOR OFFICIAL USE ONLY Selected Indicators, Table 2: Togo: Nominal Stocks and Net Present Value of Debt at end-27 by Creditor Groups... 9 Table 3: HIPC Initiative Assistance Under a Proportional Burden-Sharing Approach Boxes Box 1: Arrears Clearance Box 2: Togo - Proposed Triggers for the Floating Completion Point Box 3 : Possible Medium-Term Expenditure Priorities This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not be otherwise disclosed without World Bank authorization.

4 LIST OF ACRONYMS AfDB AfDF AFRITAC- West BADEA BCEAO BOAD CBAO DSA ECOWAS EIB EITI EPA EPCA EU FED FEGECE FSF FSAP GFS HIPC IFAD IDA IMF IsDB LIC MDG MDRI NPV OFID PEMFAR PFM PRGF PRSP WAEMU African Development Bank African Development Fund Africa Technical Assistance Center-West (Bamako) Arab Bank for Economic Development in Africa Central Bank of West African States West African Development Bank Eastern Africa Banking Company Debt Sustainability Analysis Economic Community of West African States European Investment Bank Extractive Industries Transparency Initiative Economic Partnership Agreement Emergency Post-Conflict Assistance European Union European Development Fund Fund of Aid and of Loans Guarantee of the Agreement Council Fragile States Facility (AfDB) Financial Sector Assessment Program Government Finance Statistics Heavily Indebted Poor Country International Fund for Agricultural Development International Development Association International Monetary Fund Islamic Development Bank Low-income country Millennium Development Goal Multilateral Debt Relief Initiative Net Present Value OPEC Fund for International Development Public Expenditure Management and Financial Accountability Review Public Financial Management Poverty Reduction and Growth Facility Poverty Reduction Strategy Paper West African Economic and Monetary Union

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6 i EXECUTIVE SUMMARY After more than a decade with limited external assistance, Togo has made significant progress on political and economic reforms, and has regularized its relations with key development partners, including IDA, the IMF, the African Development Bank (AfDB), and the European Union (EU). Economic performance has been improving though the country has been strongly affected by the recent surge in food and fuel prices. As a consequence of the extended political crisis, interruption in foreign aid and the economic decline, Togo s social indicators remain among the lowest in the world. Togo s public- and publicly-guaranteed external debt was estimated at US$2.2 billion as of end-december 27 (US$1.4 billion in NPV terms after assuming full application of traditional debt relief mechanisms). A preliminary Debt Relief Analysis (DRA) shows that Togo meets the HIPC Initiative indebtedness criterion under the fiscal window based on end- 27 data. HIPC debt relief is estimated at US$270 million in NPV terms, implying a common reduction factor of 19 percent. Upon reaching the HIPC completion point, Togo will also qualify for relief under the Multilateral Debt Relief Initiative, which is estimated to reduce debt service on debt to IDA, the IMF, and the African Development Bank by approximately US$404 million (in NPV terms). Togo could reach the decision point by end-october 28, subject to satisfactory perfonnance under the PRGF arrangement, and understandings with IDA and IMF staffs on appropriate completion point triggers to be established by the Executive Boards of the two institutions. A sensitivity analysis of Togo s external debt after full delivery of HIPC Initiative assistance shows that even under worsening economic conditions, Togo s debt ratios remain below HIPC initiative thresholds.

7 ~ Document of The World Bank FOR OFFICIAL USE ONLY Report No. 454-TG REPUBLIC OF TOGO Enhanced Heavily Indebted Poor Countries (HIPC) Initiative Preliminary Document September 2,28 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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9 I. INTRODUCTION 1. This paper, prepared jointly by the staffs of the IMF and IDA, presents a preliminary assessment of the eligibility of Togo for assistance under the Enhanced HIPC Initiative. The assessment is based on ajoint IDA/IMF data reconciliation mission to Lome in March 28 and subsequent revisions based on updated information. 2. The analysis indicates that after traditional debt relief mechanisms are applied, Togo s NPV of debt-to-revenue ratio at end-27 was significantly above the HIPC Initiative threshold. Togo is potentially eligible for debt relief under the HIPC Initiative and could reach the decision point by end-october 28. Togo has already adopted an I- PRSPU3 Satisfactory implementation of the PRGF-supported program for at least six months and agreement on appropriate completion point triggers will be necessary to reach the decision point. 3. The paper is organized as follows. Section I1 provides background information on Togo s eligibility under the HIPC Initiative, including the country s recent economic developments. Section I11 discusses the macroeconomic outlook. Section lv summarizes the preliminary DRA and presents the size of possible HIPC, MDRI and MDRI-type assistance, including through support obtained for arrears clearance. Section V suggests a timeline for the decision point, outlines possible completion point triggers, and discusses the monitoring of the use of HIPC resources. Section VI presents issues for discussion by Executive Directors. 11. BACKGROUND AND ELIGIBILITY A. PRGF and IDA Status 4. Following a successful Staff-Monitored Program (SMP), the IMF Executive Board approved on April 21,28, a three-year SDR66 million PRGF arrangement, the first since the mid-1990s. The PRGF-supported program, anchored in Togo s I-PRSP, aims to revive economic growth and improve living conditions within a stable macroeconomic environment by: (i) bringing public debt to a sustainable level; (ii) facilitating the resumption of external assistance; (iii) increasing resources for infrastructure, health, and education; (iv) strengthening fiscal governance; (v) restructuring fragile banks; and (vi) reforming the business environment and state-owned enterprises. Preliminary information indicates that Enhanced HIPC Initiative is hereafter referred to as HIPC Initiative. Togo is in the list of potentially eligible countries that have been grandfathered on end 24-data. See IDA and IMF, Heavily Indebted Poor Countries (HIPC) Initiative-Issues Related to the Sunset Clause, August Togo s I-PRSP was adopted in March 28, and discussed by the Executive Boards of the IMF and IDA in April 28. The full PRSP is expected to be completed in early 29.

10 2 performance under the PRGF arrangement has been satisfactory, with continued progress on strengthening public finances and governance. Despite unfavorable economic conditions, expenditure has been under control and the primary deficit target has been achieved by a wide margin. 5. Togo is an IDA-only country with a gross national income (GNI) per capita of US$360 in 27 (using the World Bank s Atlas methodology). Following a re-engagement strategy discussed by the IDA Board in December 24, an Interim Strategy Note was presented to the IDA Board on May 29,28. The note details a support program that is closely aligned with the government s I-PRSP and aims to help Togo recover from its long period of instability and suspension of aid and begin laying the foundations for sustained, shared growth over the medium term. The program consolidates and mainstreams the work supported by the World Bank in the areas of public financial management, economic governance, infrastructure rehabilitation, and community development. In May 28, arrears to IDA were cleared through a bridge loan provided by a bilateral creditor. Togo then used the proceeds of a grant under a Development Policy Operation (DPO) to repay the bridge loan. 6. Togo has made major strides in regularizing its relations with other donors and creditors after more than a decade with limited external assistance. The European Union, Togo s largest donor, announced in late 27 the full resumption of financial assistance after a 15-year suspension. On July 22,28, the Executive Board of the AfDB approved a grant to help clear Togo s arrears under its new Fragile States Facility. On June 12, 28, the Paris Club agreed to clear all of Togo s arrears through debt cancellation and rescheduling, and to reschedule all debt service due over the next few years. Other bilateral and multilateral partners are also reengaging.

11 ~ 3 B. Poverty and Social Issues 7. Togo s long political crisis had a significant impact on social indicators, Key Poverty & Social Indicators - 26 many of which lag behind those of Poverty ( A below poverty line) 62 neighboring countries. The period of Adult literacy rate (%) 53 political instability and the related Female literacy rate (%) 38 withdrawal of donor support have resulted Primary completion rate (%) 66 in an economic decline that has reduced Female primary enrollment (%) 92 living standards for a large segment of the population. Expenditures on health, Under-five mortality (per 1,0) 75 education and public investment are far Life expectancy at birth (years) 55 below regional averages, largely reflecting Child malnutrition (%; 20) 25.1 low external assistance, weak expenditure HIV prevalence (%; 25) 3.2 management and lack of prioritization. Also, Note: Percent of total populations, unless otherwise government budgets favored urban rather indicated. than rural areas; infrastructure investment in the rural areas was very limited, and there is Source: World Development Indicators and Togo I- PRSP. high unemployment in the urban areas. Togo s Human Development Index failed to improve in recent years and stood at for 27-28, in contrast with a gradual improvement experienced in Sub-Saharan Africa. 8. A survey on core welfare indicators4 carried out in 26 indicated that about 62 percent of the population was poor. The poverty level was much higher in rural (about 74 percent) than in urban (about 37 percent) areas. There were also significant variances among regions, with a relatively low level in the Lome area (about 25 percent) and a very high incidence in the northern region of Savanes (over 90 percent). A qualitative survey of the perceptions of poverty in Togo revealed that the population sampled attributed the worsening of living conditions between 20 and 26 mainly to economic difficulties and health problems. Weak public finance management, in particular due to weak financial management of key state-owned companies whose losses have been financed by the public treasury, has eroded resources for vital public services. 9. While some progress has been achieved toward reaching the Millennium Development Goals (MDGs), many of the goals are unlikely to be met by According to a recent assessment of the MDGs, progress has been most notable in reaching the goal of universal primary education: both the net primary enrollment and the primary completion rate improved between 1990 and 25; the youth literacy rate also improved. In 4 The survey was conducted by the Togo Government s General Statistics Department, funded in part by the World Bank and other donors (UNDP, UNICEF and UNFPA). The assessment was undertaken by the Government of Togo with support o f the UNDP.

12 4 addition, there has been some progress toward the attainment of the goal of promoting gender equality. However, it would be difficult to achieve the goals of halving extreme poverty and hunger, as well as the goals of access to improved water and sanitation facilities and reducing maternal and infant mortality. The incidence of tuberculosis increased during the period and the prevalence of HIV/AIDS among the adult population was estimated at 3.2 percent in 25. C. Policy Track Record 10. Togo is emerging from more than a decade of political crisis, interruption in foreign assistance, and economic decline. Togo s growth performance has been among the weakest in sub-saharan Africa, with per capita income declining by an average of one percent a year since the early 1980s. The long-lasting socio-political crisis and withdrawal of donor support took a toll on Togo s economy, infrastructure and institutions. Traditional export sectors suffered from adverse terms of trade and mismanagement of state-owned enterprises. Governance problems and banking sector difficulties inhibited private investment. A heavy external debt burden and weak fiscal management led to the rapid accumulation of arrears. Recent political and economic reforms have paved the way for donor reengagement. 11. In 26, the authorities launched an ambitious economic reform program, initially supported by an IMF Staff-Monitored Program. Performance under the SMP was good: all quantitative targets were comfortably met and progress was made on governance-related structural reforms. Administrative reforms initiated by the new tax and customs directors appointed in May 26 helped broaden the tax base and recover arrears, boosting fiscal revenues from 15% percent of GDP in 25 to 17 percent in 27. Despite election pressures and new outlays to address the energy crisis, expenditures were kept somewhat below the target. As a result, the primary fiscal position for 27 was broadly balanced, compared to a 26 primary deficit of 1 percent of GDP, allowing a net reduction in domestic arrears. 12. Fiscal policies have continued to be prudent under the new PRGF arrangement, despite the adverse impact of the recent global food and fuel price shocks. The 28 budget targets a broadly balanced primary position and higher resources for education, health, infrastructure, and the restructuring of state-owned banks and enterprises. During the first half of 28, revenues have been in line with projections while spending has been restrained, partly reflecting emphasis on fiscal discipline. This resulted in a primary fiscal surplus and sizeable government deposits available for spending in the second half of the year. 13. Significant progress has been made on strengthening governance. The authorities have implemented a wide range of public financial management reforms, including the phasing out of payment orders without budget line identification. A new mechanism for

13 5 monthly monitoring of budget execution has been made fully operational, significantly shortening the time lag for analyzing fiscal data and providing policymakers with the ability to make timely and informed spending decisions. A new General Inspectorate of Finance has been set up to conduct ex-post inspections of agencies that handle public resources. Following an external audit of Togo s large domestic arrears, the authorities are finalizing a strategy for clearing these arrears. Also, an action plan for public procurement reforms has been adopted. Audits of the state-owned cotton company and clearance of its arrears to farmers have paved the way for broader sector reform. The authorities have also prepared a strategy to strengthen Togo s fragile state-owned banks and placed the largest bank under new management and oversight. 14. A nascent economic recovery has been tempered by a region-wide energy crisis and global price shocks. After a sharp upturn in 26, real GDP growth moderated to about 2 percent in 27 as severe region-wide electricity shortages and localized flooding partly offset positive factors such as favorable weather conditions for agriculture, growing regional trade, and a modest rebound in the cotton sector. Despite buoyant money and credit growth, inflation remained subdued in 27, but has risen sharply over the past few months on account of the surge in world food prices. Togo s external competitiveness has continued to suffer from adverse terms of trade and a poor business environment. The current account deficit increased slightly in 27, to 6% percent of GDP, as higher remittances offset a widening trade gap. Gross international reserves stood at about 3 months of imports MACROECONOMIC OUTLOOK 15. The near-term outlook is clouded by the surge in global food and fuel prices, as well as recent heavy flooding. Togo is among the world s hardest hit economies, with an estimated balance of payments impact of 6 percent of GDP in 28. This reflects Togo s heavy reliance on fuel imports owing to its role as a regional transport corridor and dieselbased electricity generation. The balance of payments impact of the food price surge was more limited, but surging food prices have severely hit real incomes, particularly for the urban population without access to subsistence agriculture. Inflation has spiked and international reserves are expected to decline in the near term. 16. Nonetheless, economic growth is projected to pick up over the medium term as donors reengage and confidence returns. The I-PRSP s medium-term framework envisages real GDP growth of almost 4 percent. The initial recovery is expected to be driven by donor-financed public investment, improved business confidence, growing regional trade, and a rebound in cotton and phosphate production. Over the medium term, growth should be sustained by higher foreign direct investment (e.g. in banking, telecom and phosphate sectors, and the port), improved financial intermediation, and upgrades to public infrastructure, especially electricity, which would alleviate bottlenecks that previously stymied private sector growth.

14 6 17. A prudent fiscal policy is expected to support macroeconomic stability and debt sustainability. A domestic primary surplus of about 1 percent of GDP, combined with comprehensive external debt relief and higher foreign aid, would result in a broadly sustainable fiscal and debt position that avoids renewed arrears. The authorities plan to achieve the required fiscal adjustment by gradually raising revenues to about 18 percent over the medium run while holding domestic spending broadly constant in relation to GDP. Spending in priority areas (health, education, infrastructure, and restructuring of state-owned banks and enterprises) is to be increased significantly by (i) reallocating domestic spending away from non priority sectors, particularly untargeted subsidies and transfers, (ii) bringing external assistance (it was US$12 per capita in the period 24-06, per the World Development Indicators database) to the regional average (US$43 per capita), and (iii) using resources to be freed up by HPC and MDRI debt relief. The wage bill, though projected to rise modestly after a decade-long salary freeze, should remain in line with WAEMU convergence criteria. 18. Despite the global price shocks, inflation is expected to be contained over the medium term, anchored in the WAEMU currency union and fiscal prudence. Nonetheless, inflation can be erratic in case of unfavorable weather conditions (droughts or the recent heavy floods) or further volatility in world food and oil prices. 19. External conditions are likely to remain very challenging. Togo s current account deficit is not expected to decline much over the medium term: imports are likely to grow as foreign aid is absorbed and FDI increases. Exports are also expected to pick up, partly on account of higher phosphate prices, but sustained export growth will require enhancing competitiveness through reforms to improve the business environment. External financing is expected to come primarily from debt relief, higher FDI flows and a moderate fall in international reserves. 20. Despite successful reforms over the past two years, Togo still faces significant political and economic risks. Social tensions could intensify in the current difficult economic environment with surging food and fuel prices and tight budget constraints. Capacity constraints resulting from decades of political conflict and donor disengagement severely limit the authorities ability to implement reforms. Governance reform efforts in the public sector, public enterprises and banks could falter under the weight of the significant challenges. Fragile banks could jeopardize macroeconomic stability and weakened public enterprises in key sectors could hamper growth efforts. Furthermore, exogenous shocks could stymie the nascent economic recovery, including a continued rise in world oil prices, a worsening energy crisis, and bad weather affecting agriculture. Already severe floods in August 28 have negatively impacted critical infrastructure. Togo s international reserves are expected to fall below three months of imports in the near term, and the country remains vulnerable to terms of trade shocks (in particular, from oil prices), further euro appreciation, and confidence shocks that could lower remittances or cause capital outflows from the banking sector.

15 7 Table 1: Medium- to Long-Term Macroeconomic Framework, Selected Indicators, (avn. 1 (Annual percentage change) National income and prices GDP at constant prices GDP at current prices GDP deflator Consumer prices (yearly average) o External sector Export volume Import volume Terms of trade (U.S. dollar basis) Money and credit Domestic credit Broad money (In percent of GDP) Central government finance Total revenue (including grants) of which: Tax and nontax revenue Total expenditure Overall balance (including grants) Domestic primary balance I / o External current account balance (including grants) Exports of goods and services Imports of goods and services Net present value of external debt 2/ Sources: Togolese authorities; and IMF and World Bank staff estimates and projections. 1/ Excludes interest payments, foreign-financed investment, and grants. 2/ In percent of exports of goods and non-factor services before traditional debt relief. IV. DEBT ANALYSIS AND POSSIBLE HIPC AND MDRI ASSISTANCE~ A. Debt Reconciliation Status 21. The preliminary DRA below was prepared jointly by the Togolese authorities and the Bank and IMF staffs. It draws on data provided by the authorities and creditors for the public and publicly guaranteed external debt disbursed and outstanding as of end-27. The reconciliation process was completed jointly by the IMF, the World Bank and the 6 The Debt Relief Analysis presented in the paper is based on the HIPC Initiative s methodology.

16 8 Togolese authorities in March 28. All multilateral and 90 percent of bilateral and commercial debt were reconciled. B. Structure of External Debt 22. At end-27, Togo s public and publicly guaranteed external debt before traditional debt relief was estimated at US$2.2 billion in nominal terms. The corresponding NPV (US$1.8 billion) equals about 72 percent of GDP, 191 percent of exports, and 396 percent of fiscal revenues. Multilateral creditors accounted for around half of the total debt in nominal terms, with liabilities to IDA alone constituting more than one third of total external debt. Other multilaterals with substantial claims on Togo are AfDF (6.7 percent of total external debt), BOAD (3.4 percent), EIB (2.4 percent), IsDB (1.8 percent), IFAD (1.2 percent) and OFID (0.6 percent). BADEA, FEGECE, and the IMF only held minor claims on Togo (amounting to 0.2 percent combined). Among the bilateral and commercial creditors, the Paris Club accounted for almost 90 percent of nominal debt at end- 27 (44 percent of Togo s total external debt), with France being the largest creditor. The non-paris Club creditors were China, Kuwait and Saudi Arabia, together representing 4 percent of total external debt. About 1.5 percent of debt was held by 11 commercial creditors of which CBAO Senegal is the major creditor. 23. As of end-27, a large share of Togo s external debt (about 39 percent) was in arrears, though most of these arrears have since been cleared (Box 1). External arrears stood at US$85 1 million, of which US$2 million were owed to multilateral creditors, US$636 million to bilateral creditors, and US$15 million to commercial creditors. Arrears to IDA, which were cleared in May 28, constituted the lion s share of arrears to multilateral creditors at end-27. Arrears to the AfDB were cleared in July 28, and the EU has indicated its intention to clear Togo s arrears to the EIB. Arrears to the Paris Club stood at US$635 million at end-27, and were cleared through cancellation and rescheduling during the June 28 Paris Club meeting.

17 9 Table 2: Togo: - Nominal Stocks and Net Present Value of Debt at end-27 by Creditor Groups Nwninal Debt Stock I/ Arrears Stock NPV of Debt before NPV of Debt after traditional traditional debt relief I / debt relief I / 21 US$ million Percent US$ million Percent US$ million Percent US$ million Percent of total of total of total of total Total 2, , , Multilateral 1, IDA AfDF BOAD European Investment Bank Others 3/ Bilateral 1, Pans Club: Other Official Bilateral: / 6.0 Commercial Sources: Togoiese authorities: and Fund and Wolld Bank 6taH estimates il includes arrean. 21 Base situation for the calculation of HiPC debt relief: assumes a stock.ofdebt operation on Napier terms at end-december27: and comparable action by other ORlciai bilateral creditors on eligible debt (pre-cutoff and non-oda). 31 Othermuitiiaterais include imf, isdb, BADEA, FEGECE, ifad and OFiD. Togo has no arrean to the formerthree. 41 lhe loans that have been cancelled in 27 have been added back to the outstanding debt stock as of end-27. C. Possible Assistance under the HIPC Initiative 24. Togo qualifies for debt relief under the HIPC Initiative s fiscal window based on end-27 data; the common reduction factor is estimated at 19 percent. After full application of traditional debt relief mechanisms, Togo s NPV of debt is estimated at US$1,411 million at end-27, equivalent to 309 percent of fiscal revenues. The required debt relief needed to bring this ratio down to the 250 percent HIPC threshold is estimated at US$270 million in end-27 NPV terms (equivalent to a common reduction factor of 19 percent). Based on proportional burden sharing, multilateral assistance would amount to US$lSO million, and bilateral and commercial assistance to US$120 million (both in NPV terms). So far, 47 percent of HIPC relief has been delivered through multilateral arrears clearance and the cancellation of loans by China. The required threshold for financing assurances for HPC interim and completion point relief should be easily attained, given the large share of Paris Club and multilateral debt. In April 1997, the fiscal revenues/openness criterion was established to allow for the possibility that, for countries with a high export base, reaching the debt-to-export criteria targets may still leave the country with a large external debt burden relative to fiscal revenues. In order to qualify for debt relief under the revenue window, a country must have its NPV/revenue ratio above 250 percent. In addition, to be eligible to access under this window, the country must have an export-to-gdp ratio of at least 30 percent, and a fiscal revenuesto-gdp ratio of at least 15 percent, using an average of the last three years of actual data (see Modifications to the Heavily Indebted Poor Countries (HIPC) Initiative, July 23, 1999, IDNSecM99-475, and EBS/99/138). For 25-27, Togo s average export-to-gdp ratio was 42 percent and its average revenue to GDP ratio was 17 percent. * Togo does not qualify for the export window of the HIPC initiative since its NPV of debt to exports ratio as of end-27 was 149 percent.

18 10 Table 3: HIPC Initiative Assistance Under a Proportional Burden-Sharing Approach 1/ 2/ (In millions of U.S. dollars, unless otherwise indicated) Debt Outstanding Debt Outstanding Reduction of the (NPV terms) (NPV terms) NPV of Debt due end-27 (A) Post-HIPC (B) to HIPC (A-B)/3 Total (as percent of revenue) of which: Multilateral Bilateral Paris Club: Other Official Bilateral: Com mercial Memorandum Items: Common reduction factor (percent) 31 Revenue 41 Revenue/ GDP (3 year average) Exports/ GDP (3 year average) Sources: Tcgolese authorities; and imf and World Bank staff estimates and projections 1/ The proportional burden sharing approach is described in "HIPC Initiative-Estimated Costs and Burden Sharing Approaches" (EBS/97/127, 7/7/97 and IDNSEC M , 7/7/97). 2/ Includes a hypothetical stock-ofdebt operation on Naples terms (end-december 27) and comparable treatment by other official bilateral creditors 3/ Each creditots NPV reduction in percent of its exposure at the reference date, end-december 27, calculated as (A-ByA. 4/ 27 central government revenues excluding grants. 25. A sizeable share of HIPC relief will be (and has already been) delivered through arrears clearance (Box 1). IDA and AfDB have already delivered their full share of HIPC assistance through arrears clearance operations in May and July 28. Other multilaterals are also likely to deliver a substantial share of HIPC relief through arrears clearance. Togo does not have arrears to the IMF, IsDB, BADEA, and BOAD. 26. Each creditor decides at the decision point the modalities and timing for their delivery of HIPC Initiative assistance. However, in order to assess the impact of the HIPC Initiative assistance the following working assumptions have been made in accordance with previous practice (all values are in NPV terms): IDA assistance would amount to approximately US$98 million and has been provided through its concessional arrears clearance operation (Box 1). IMF assistance would total US$0.3 million in NPV terms. Immediately following the approval of the decision point by the Boards of IDA and the IMF, the IMF will extend interim assistance-provided that the necessary financing assurances are in place-in the form of debt-service reduction. Since there will be no principal repayments falling due through 201 3, interim HIPC assistance of about US$O. 1 million will be applied to cover over half of PRGF interim obligations until the completion point, presently assumed for October 2010 (Table AS).

19 11 0 AfDB assistance of US$17.3 million has been delivered through its concessional arrears clearance operation (Box 1). 0 Other multilaterals are expected to deliver assistance amounting to US$35 million through concessional rescheduling of arrears and/or debt service reduction, to commence at decision or completion points. 0 The Paris Club creditors are assumed to provide their share of HIPC debt relief (US$98 million in NPV terms) through a Cologne flow operation (i.e. a 90 percent NPV reduction) after Togo reaches decision point, with the remaining HIPC assistance delivered through a stock of debt operation at the completion point. For non-paris Club official bilateral creditors and commercial creditors, China has already delivered its share of HIPC relief in 27 through loan cancellation. For other bilateral and commercial creditors, Togo has agreed to seek comparable treatment to that given by the Paris Club creditors.

20 12 Box 1: Arrears Clearance The large scale of Togo s arrears distinguishes it from most other HIPC cases. As of end-27, almost half of Togo s official external debt (in NPV terms) was in arrears. Most of these arrears have been or are expected to be cleared through concessional arrears clearance operations. Consistent with the HIPC Initiative methodology, the grant element embedded in the clearance o f arrears will be counted toward the creditor s contribution to debt reduction under the HIPC Initiative. Togo has so far cleared or reached understandings on the clearance o f 96 percent o f its external arrears. It is expected that Togo will normalize relations with the remaining creditors in the context o f the HIPC Initiative on terms consistent with Togo s limited payment capacity. - Togo s arrears to IDA were cleared in May 28 through a bridge loan provided by a bilateral donor. Togo then used the proceeds o f an exceptional allocation of IDA resources through a development policy operation, provided on grant terms, to repay the bridge loan. - Arrears to the AfDB Group were cleared in July 28 under the Fragile States Facility. Ninety-nine percent o f the cost was financed from FSF grant resources, and, in recognition of Togo s limited payment capacity, the country received bilateral donor assistance to finance the remainder. - The authorities have made progress in discussions on clearance of arrears with other multilateral creditors. The European Commission intends to provide grants to clear Togo s arrears to the European Investment Bank in two tranches in 28 and 29 under the ninth and tenth European Development Funds. The International Fund for Agricultural Development has proposed an arrears rescheduling with a moratorium period without debt service. The authorities have approached the remaining multilaterals (OFID and FEGECE), and are expected to clear arrears to these creditors in the context of the HIPC Initiative on terms consistent with Togo s limited repayment capacity. - Togo has been accorded exceptional treatment by the Paris Club. Paris Club creditors reached agreement with Togo in June 28 to alleviate Togo s external public debt under Naples terms, which led to the immediate cancellation of US$347 million of debt contracted prior to the 1st January 1983 cut-off date, leaving a balance debt o f US392 million which is rescheduled or deferred. On an exceptional basis, considering Togo s very limited payment capacity further constrained by the sharp rise of commodities and food prices, the agreement also provides for a moratorium period with no debt service payments between 1st April 28 and 31 March provided that Togo continues to satisfactorily implement the PRGF-supported program. Creditors also agreed, on an exceptional basis, to defer until after March the repayment of arrears accumulated by Togo on short term and post cutoff date debts, the maturities falling due for those debts as well as all moratorium interest due on the rescheduled and deferred amounts. The Togolese authorities are expected to seek comparable treatment from its non-paris Club creditors. See IDA. Further elaboration of a svstematic amroach to arrears clearance. June. 27 (IDNSecM D. Possible Assistance under MDRI 27. On reaching the completion point under the HIPC Initiative, Togo would qualify for MDRI debt relief from IDA and AfDF. MDRI relief from IDA would include all debt outstanding and disbursed before end-23 and still outstanding at the beginning of the quarter following the date on which the country reaches completion point. Similarly, MDRI

21 13 assistance from the AfDF would include cancellation of all debt outstanding and disbursed before end-24 and still outstanding on the day following the completion point. 28. Assuming that Togo reaches the completion point in October 2010, preliminary estimates indicate that the MDRI debt relief could amount to US$753 million in nominal terms (US$404 million in NPV terms). Of this amount, US$618 million and US$135 million would be provided by IDA and the AfDF, respectively. After repaying its debt to the IMF in early 28, Togo has no debt outstanding that would benefit from MDRItype relief by the IMF. Other debt relief beyond HIPC at completion point includes the LIC initiative of the EIB, as well as additional debt relief that has been granted, on a voluntary basis, by Paris Club creditors. E. Impact of HIPC and MDRI Debt Relief on Debt Ratios and Sensitivity Analysis 29. The application of both traditional debt relief and HIPC debt relief would bring the NPV of external public debt down to 196 percent of revenues by 2010, from 396 percent in 27 (Table A5). With MDRI relief added, the NPV would fall further, to 124 percent of revenues (or 21.8 percent of GDP, 51.4 percent of exports) in 2010, primarily as a result of cancellation of debt to IDA. This does not include possible beyond HIPC debt relief that may be provided by Paris Club creditors or the ED. 30. The NPV of debt is projected to decline further over the long term. With both HIPC and MDRI debt relief, the NPV of debt would continue to decline, to 83 percent of revenues by 2027, reflecting the projected growth in fiscal revenues and the authorities intention to limit new borrowing. Debt service would average about 6.5 percent of revenues (2.5 percent of exports) during Togo s external public debt would remain below the HIPC Initiative threshold under an alternative scenario with lower growth, revenues, and exports. The scenario in Table A6 assumes per capita real GDP growth of negative one percent a year throughout , which decreases the average annual growth rate from 3.6 (see Table 1) percent to 1.6 percent. The scenario also assumes that the export- and revenue-to-gdp ratios remain unchanged from the baseline, implying that exports and revenues would be lower by about 40 percent in dollar terms by Assuming that expenditures cannot be fully compressed in line with GDP and revenues, the expenditure-to-gdp ratio would rise to 30 percent by 2027, compared to 23 percent in the baseline, necessitating additional borrowing. With these assumptions, the NPV of debt would still decline over the long term, reaching 180 percent of revenues by 2027 (68 percent of exports, 33 percent of GDP). Debt service would average around 12 percent of revenues and 4.5 percent of exports over the 20-year period.

22 14 v. DECISION AND FLOATING COMPLETION POINTS A. Possible Decision Point Timing 32. Togo could reach the HIPC decision point by end-october 28, together with the completion of the first review under the PRGF arrangement. Assuming that performance under the PRGF is considered satisfactory, Togo would have satisfied the minimum six month track record of satisfactory performance under a program of upper-credit tranche policy conditionality with the IMF. B. Possible Triggers for the Floating Completion Point 33. IMF and World Bank staffs have reached preliminary understandings with the Togolese authorities on a set of completion point triggers. In addition to standard triggers on macroeconomic stability and implementing a full PRSP, the triggers cover four areas critical for ensuring the effectiveness of debt relief (Box 2). The triggers are consistent with the authorities medium-term economic reform program described in the I-PRSP and monitored under the IMF s PRGF program and IDA S Development Policy Operations. 34. In public financial management, the central objective is to continue building institutions that support good governance and transparency, in particular in the areas of procurement, monitoring of budget execution, and auditing. Following the recent implementation of a monthly monitoring template for budget execution, a key medium-term objective is to implement a functional expenditure classification that allows the monitoring and publication of data on poverty-reducing spending. To improve the efficiency and transparency of spending, another important goal is to start reforming Togo s weak public procurement system. Finally, making the Court of Accounts (Cow des Comptes) operational would improve transparency and quality of reporting on budget expenditures by ensuring that public accounts are externally audited and certified annually, and that the audit results are published. 35. On governance, a central goal is to sustain recent efforts to improve transparency in the phosphate sector, Togo s only major natural resource and one of its major exports. An external financial and strategic audit of the sector is under preparation. For the medium term, it will be important to regularly audit the payment flows between the government and the sector, and inform the public about the audit results in order to ensure the transparency of resource extraction. 36. The triggers also reflect the need to bolster the effectiveness and transparency of debt management. In particular, external and domestic debt data should be consolidated under a single unit charged with all public debt management tasks. Regular publication of public debt data will help support debt sustainability and strengthen relations with creditors and investors.

23 In the social area, the objective is to strengthen health and education services. The authorities are committed to raising the share of public spending on health, which is among the lowest in the region, partly reflecting consistent shortfalls in budget execution. The spending increase is critical to increasing the number of medical personnel, drugs and other medical materials in the country s regional health facilities. Another critical objective is to improve education quality, particularly through teacher recruitment and provision of teacher training. Box 2: Togo - Proposed Triggers for the Floating Completion Pointg PRSP Prepare a full PRSP through a participatory process and implement satisfactorily its recommended actions for at least one year, as evidenced by an Annual Progress Report submitted by the Government to IDA and the IMF. Macroeconomic stability Maintain macroeconomic stability as evidenced by satisfactory performance under a PRGF-supported program. Public financial management Adopt a mechanism to track public expenditures for poverty reduction on the basis of a functional expenditure classification and publish quarterly reports on these expenditures executed over a period of at least six months preceding the completion point. Nominate and install the judges for the Cour des Comptes, and submit the draft of the Loi de rgglement and draft General Treasury Balance (Balance ginirale du Trbor) for a given fiscal year to the Cour des Comptes and Parliament within the statutorily-specified period (9 months after the end of that fiscal year) for at least one year immediately preceding the completion point. Adopt a decree creating the Procurement Regulatory Authority in conformity with the WAEMU Procurement Directives, nominate its managerial staff, and provide them with an adequate budget; and monthly publication in a public procurement gazette or on a government website of all of the signed contracts, including sole source contracts and public concessions, for at least six months immediately preceding the completion point. Governance Regular public reporting of payments to, and revenues received by, the government for the phosphates sector in line with the EITI criteria, including an annual report for at least the year immediately preceding the completion point. Debt Management Consolidate external and domestic debt data under a single unit charged with all public debt management tasks. Publish an annual report on a government website providing accurate and complete data on external and domestic public debt, including information on debt stocks, actual debt service, and new loans within six months after the end of the year, for at least one year immediately preceding the completion point. Social sectors Increase domestically-hnded health expenditures in the year prior to the completion point to at least 7.5 percent o f actual domestic non-interest expenditures (the 27 ratio was 5.7 percent). Start implementation of the national education sector plan as evidenced by completing the training of at least 5 new teachers and the remedial training of at least 4,0 existing teachers. The first two triggers (PRSP implementation and satisfactory macroeconomic performance) are requirements for reaching the completion point under the IMF PRGF-HIPC Trust Instrument.

24 16 C. Monitoring Public Spending Following Provision of HIPC Assistance 38. Debt relief under the HIPC Initiative and beyond HIPC (including MDRI) should be accompanied by a program that ensures the effective use of domestic and external resources and reflects the expenditure priorities of the PRSP. This will require continued efforts to strengthen the programming, management, control and monitoring of expenditures, and improved service delivery in key sectors. It will also require costing PRSP priorities and developing a medium-term expenditure framework to efficiently allocate public resources for meeting PRS objectives. 39. With technical assistance from the IMF, the World Bank and other donors, major steps have been taken to improve public financial management (PFM)." Budget discipline has improved with the closure of bank accounts used for off-budget operations, the unification of cash management under the Treasury, the near elimination of the use of exceptional payment authorizations without ex-ante authorization in the Finance Law, and the greater involvement of financial control staff in the review of expenditures processed through normal budget processing channels. Monthly monitoring of budget execution has been established, and strengthened tax and customs administration has enabled a significant increase in revenues. 40. Further efforts are needed to improve PFM, and the government is developing a medium-term PFM reform strategy. Key challenges include improving the quality and composition of public spending, streamlining the expenditure circuit, and strengthening the ex-post system of control over budget execution. Restoration of the regular budget preparation timetable is important during 28. Implementation of a new procurement code and associated procedures is critical, as is greater transparency of the procurement process outcomes. A Public Expenditure Management and Financial Accountability Review (PEMFAR) being conducted in FY09 by the World Bank and other development partners will support these reform efforts, as will an IMF technical assistance mission scheduled for September 28 aimed at defining a strategy to strengthen the public accounting system. Progress of the reforms are being monitored by Bank and Fund staff under the respective support programs (development policy operations and the PRGF, respectively), and selected actions are among the proposed completion point triggers. 41. A basic monitoring mechanism for tracking expenditures is being implemented. The government plans to introduce a fbnctional classification by end-28 that can track poverty reduction expenditures, for implementation in the 29 budget. The government intends to use this mechanism (a proposed completion point trigger) to track its total budget lo This includes an IMF technical assistance mission in 27 to review the PFM system, follow-up work by IMF's AFRITAC-West, and a Public Expenditure Management and Financial Accountability Review conducted by the Bank and other donors in 26.

25 17 outlays against its medium-term expenditure priorities, as defined by its I-PRSP and successor PRSP. Possible medium-term expenditure priorities are in Box 3. These are indicative only and will be elaborated upon in consultation with the government as it develops its PRSP and expenditure plans. Box 3: Possible Medium-Term Expenditure Priorities Education Increasing primary school completion rate and reducing primary school repetition. 0 Training of teachers. Health 0 Increasing health personnel in the country s regional health facilities. Increase in availability of drugs and other materials. Agriculture and food security Expand income generating activities at the community level, including those that increase food production andor facilitate the supply of food products to markets and the population. 0 Expanding availability of quality services to producers-advice, agricultural education and training, and research and development for improving the supply of agricultural inputs. Infrastructure Expand supply of and access to electricity through intensified sub-regional cooperation in the area of investment in new production, purchase and sale of energy, and energy transportation. 0 Expand and improve port and road infrastructure. VI. ISSUES FOR DISCUSSION 42. This paper assesses Togo s eligibility for assistance under the Enhanced HIPC Initiative. Executive Directors views and guidance are sought on the following issues: Eligibility: Do Directors agree that Togo is eligible for assistance under the HIPC Initiative? Timing of the decision point: Do Directors agree with the staffs recommendation that Togo could reach its decision point by end-october 28, provided that it (i) has a satisfactory performance under the PRGF-supported program, and (ii) agrees on appropriate completion point triggers? Floating completion point triggers: What are Directors views on staffs recommendations on possible triggers against which satisfactory performance would be measured for the floating completion point (Box 2)?

26 18 Figure la. Togo: Composition of Stock of External Debt at End- 27 by Creditor Group (Nominal stock: $1.07 billion) (Nominal stock: $2.208 billion) Commercial 1.5% IDA Bilateral: 4 yo Other Multilateral 10% % '-'O Figure lb. Togo: Potential Costs of the HIPC Initiative by Creditor Group (Total Estimated HIPC Enhanced Assistance: $270 million, end-27 NPV terms) Pans Club: 36% Commercial 2% DA 6% Other Official IMF, AR)F Bilateral: % L 6% 6% Other Multilateral 13% Sources: Togolese authorities and staff estimates.

27 19 Figure 2. Togo: External Debt Sustainability Indicators, NPV of Debt to Revenues (In percent of Revenues) 4 Before traditional llpc assistance ---.-_ I --I After conditional HlPC assistance and MDRl I / Debt Service to Revenues (In percent of Revenues) assistance 0 I Sources: Togolese authorities and staff estimates.

28 20 3 I Figure 3. Togo: Sensitivity Analysis, NPV of Debt to Revenues (In percent of Revenues) Debt Service to Revenues (In percent of Revenues) ,, I,, Sources: Togolese authorities and staff estimates.

29 21 Table Al. Togo: Discount and Exchange Rate Assumptions as of end-december 27 Currency Name Discount Rate I/ (In percent per annum) Exchange Rate 21 (Currency per US. dollar) Canadian Dollar CFA Franc Swiss Franc Chinese Yuan Danish Krone Euro U.K. Pound Japanese Yen Norwegian Kroner Special Drawing Rights Swedish Krona US. Dollar Memorandum item: Paris Club cutoff date January 1, oo Sources: OECD; and IMF, lnternafional Financial Statistics. I/ The discount rates used are the average commercial interest reference rates over the six-month period piror to end-december 27, Le., the end of the period for which actual debt and export data are available. 2/ The exchange rates are expressed as national currency per US. dollar at end-december 27.

30 22 Table A2. Togo: Nominal Stock and Net Present Value of Debt as of December 31,27, by Creditor Groups Base Situation for Calculation Legal Situation of HlPC Debt Relief 2/ Nominal Debt Stock 11 Arrears Stock NPV of Debt 1/ NPV of Debt US$ million Percent US$ million Percent US$ million Percent US$ million Percent of total of total of total of total Total 2, , , Multilateral IDA AtDF OFb imf BADEA FEGECE 1, Bilateral and Commercial Bilateral Paris Club: Post-cutoff date ODA Non-ODA Pre-cutoff date ODA Non-ODA Austria Belgium EEC-IDA administered loans France Germany ltaly Japan Netherlands Spain Sweden Switzerland United Kingdom 1, , , Other Official Bilateral: China Kuwait Saudi Arabia / Commercial Arysta Bayer CBAO Senegal Cotecna Filtisac Fortis Bank lvoirembal Natexis Sotico Tema Yara Sources' Togolese authorities; and Fund and World Bank staff estimates. I/ Includes arrears. 21 Includes a hypothetical stock-of-debt operation on Naples terms at end-27 and at least comparable action by other officlal bilateral and commercial creditors on eligible debt (pre-cutoff and non-oda). 3/ The loans that have been cancelled in 27 habe been added back to the outstanding debt stock as of end-27.

31 23 Table A3. Togo: External Debt Service, (in millions of U.S. dollars, unless otherwise indicated) Averages Before tradltlonal debt relief and muitllatenl arrears Clearance Total 96.0 Existing debt Munilateral 50.6 World Bank Group 26 4 IMF 1.7 AmB Group 3.3 Others 19.1 Official bilateral 38.3 Pans Club 29 8 Non Paris Club 85 Commercial 7.2 New debt Debt semce lo exports ratio Debt semce to revenue ratio After tradltlonal debt rdlef and multllat~ral arrears clearance Total Exlating debt Munilateral World Bank Group IMF 31 AOB Group Others Official bilateral Pans Club Non Pans Club Commercial Newdebt Debt semce to exports ratio Debt semce to revenue ratio After HlPC assistance 51 Total Exultng debt 21 Munilateral World Bank Group IMF 31 AmB Group Others Official bilateral Pans Club Non Pans Club Cornmemlal Newdebt Debt SeMce to exports rat! arer HlPC assistance Debt semce to revenue ratio aycer HIPC fssutance Reduction In debt HNICe as a rerutl Of HlPC lnhiatlve assutance After HlPC and MDRl assistanca 71 Total Exuling debt 61 Munilateral Official bilateral Commercial Newdebt Deb1 SeMce to exports ratio after HlPC and MDRl essislance Debt semce to revenue ratio afier HlPC and MDRl assislance Reduction In debt ~ w k as e 1 rerun of MDRl fssistance Memorandum Items: Exports of goods and nonfactor sewices 81 Government revenues 91 1, , , , , , , , , , ,808.2 Sources: Tcgolese authornies and staff estimates and pmjedions. 11 All dab1 IndiCaloR refer lo public and publiclyouamnlee3 (PPG) debl and are defined aflor rescheduling, unless Othewire indicated FIPCSI year ends in Dosember 21 Includes only prlnslpal and Interest due on debt DutotandlnQ 81 of the reference date ( ) and door not include pr0)ecld penally Interest on BrresrS 31 Includes the impect of amears c1earance operation by IDA, AfDB and EIB 41 AsPUmeI a hypothebsd stock of debt DpCratIon on NapleP terms and Cornpatable trealmenl from other bilateral Credltom 51 Biiclertl and commetcisl crediton are assumed to pmmda a Coiwne flow reschedulmg on eligible debt during the intenm penad and a Colwne slmk of debt operelion at the complolion pint (end alabdi 2010) Mull~Islersl credllois am assumed lo proude HlPC debt relief as Of the dcclsion plnt. ezupt for IFAD. BADEA md DFID. whlch era srwmed lo provlds relief at the oomptetion point 81 The reduction I$ measured 8s the dlfferense be0v-n the ploiected debt S~ME@ after hili use of trd1110na1 debt mhef and debt se~ce after the applic~lt~on of HiPC relief 71 MDRl ass~stllncc (IPPII~S to the World Bmk, the IMF and the ADB md starts after tho assumed completion pmt (October AlPUmeD that MOR1 has no impact on TOQO'P new mnowing over!he prqaction period 81 As defined 8n IMF, Bdmnce of Payment* MmuaI. 5th edition, 1883 Refers lo current R(Y expork el Rsianuer are defined LIS central gowmment reian~cs, asiuding grants 1, , ,275.5

32 24 Table A4. Togo: Net Present Value of External Debt (in millions of U.S. dollars, unless otherwise indicated) Averages I. Before traditional debtqellef NPV Of total debt NPV of outstanding debt Official bilateral and commercial Pans Club Other official bilateral Commercial Multilateral Worid Bank APJB Grwp IMF Other multilateral NPV Of new borrmng , ,7072 1, , ,658.5 ' 1, , ,I , , , ,9.7 1, ii. After traditional debt relief and mulitiateral arrears clearance NPV of total debt 1, , NPV of outstanding debt 1, , Official bilateral and commercial Pans Club Other official bilateral Commercial Multilateral World Bank AfDB Group IMF 1.6 Other multilateral NPV of new bomng , , , , , , , ,I , After conditional delivery of enhanced HlPC asslstance 41 NPV of total debt NPV of outstanding debt Omclal bilateral and commercial Pans Club Other official bilateral Commercial Multilateral World Bank APJB Group IMF Other multilateral NPV Of new b omng , , , , , , , ,2174 1, , , , , , , IV. After unconditional delivery of enhanced HlPC assistance 51 NPV of total debt 1, ,112.4 NPV of outstanding debt 1,1405 1,076.3 ORcial bilateral and commercial Pans Club Other official bilateral Commercial Multilateral Wwld Bank APJB Group IMF 1.3 Other multilateral NPV of new bormmng , , , , , , , , V. After conditional delivery of enhanced HlPC and MDRl asslstance NPV of tota debt 1, NPV of outstanding debt Official bilateral and commercial 1, Pans Club Other official bilateral Commercial Multilateral World Bank ADB Group IMF 1.6 Other multilateral NPV of new b m n g , , Sources Tcgolese authorities and staff estimates and projections. 11 Includes the effect of IMF HIPC relief applied to the PRGF approved in April 28. 2/ Includes the impact of arrears clearance operations In 28 by the Worid Bank and APJF (actual) and EIB, IFAD. OFiD and FEGECE (hypothetical) as well as the 27 loans'canceliation by China. 31 In terms of simple historical threeyear average of exports of gwds and nonfactor semces 41 Assumes intenm relief under the enhanced HlPC Initiative from November 28 to October 2010 and hll delivery of assistance In November Assumes full delivery of estimated HlPC initiative debt relief as November MDRl assistance applies to the World Bank and the ADB Group, and star!s after the assumed completion point (December 2011)

33 25 Table A5. Togo: External Debt Indicators, / Averages I. Before traditional debt-relief NPV of debt-to-gdp ratio NPV of debt-to-exports ratio 2/ 3/ NPV of debt-to-revenue ratio 4/ Debt service ratio Debt service-to-revenue ratio 4/ (in percent, unless othelwise indicated) II. After traditional debt relief and mulitlateral arrears clearance 5/ 6/ NPV of debt-to-gdp ratio NPV of debt-to-exports ratio NPV of debt-to-revenue ratio 4/ Debt service ratio Debt serviceto-revenue ratio 4/ After conditional delivery of enhanced HlPC assistance 7/ NPV of debt-to-gdp ratio NPV of debt-to-exports ratio 2/ 3/ NPV of debt-to-exports ratio (existing debt only) NPV of debt-to-revenue ratio 4/ Debt service-to-exports ratio Debt service-to-revenue ratio 4/ IV. After unconditional delivery of enhanced HlPC assistance 8/ NPV of debt-to-gdp ratio NPV of debt-to-exports ratio 2/ 3/ NPV of debt-to-exports ratio (existing debt only) NPV of debt-to-revenue ratio 4/ Debt service-to-exports ratio Debt service-to-revenue ratio V. After conditional delivery of enhanced HlPC and MDRl assistance 9/ NPV of debt-to-gdp ratio NPV of debt-to-exports ratio 2/ 3/ NPV of debt-to-exports ratio (existing debt only) NPV of debt-to-revenue ratio 4/ Debt service-to-exports ratio Debt service-to-revenue ratio 4/ Sources: Togoiese authorities and staff estimates and projections I/ All debt indicators refer to public and publicly guaranteed (PPG) debt at end-december Exports are defined as in IMF, Balance of Payments Manual, 5th edition, Based on a three-year average of exports on the previous year (e.g.. export average over for NPV of debt-to-exports ratio in 27). 41 Revenue is defined as central government revenue, excluding grants. 51 Shows the external debt situation after the full use of traditional debt-reiief mechanisms, and assuming at least comparable treatment from official bilateral creditors. 61 Includes the impact Of arrears Clearance operation by IDA, AfDB, EiB, IFAD, OFiD and FEGECE as well as the 27 loans'cancellation by China. 7/ Assumes interim relief under the enhanced HiPC Initiative from November 28 to October 2010 and full delivery of assistance in November / Assumes fuii delivery of estimated HlPC initiative debt relief as end-december MDRi assistance to the Wodd Bank, the imf and the African Development Bank, and starts after the completion point (October 2010). Assumes that MDRi has no impact on Togo's new borrowing over the projection period.