Ivory Coast's debt relief programme, which was nearly completed before the country plunged into war, will have to be delayed and the earliest it could start is mid-2012, two sources familiar with the matter said on Friday.
Last year, the West African state was on the verge of completing a programme for $3 billion of IMF and World Bank debt relief, under the Heavily Indebted Poor Countries scheme.
Its progress was closely monitored by foreign investors, especially in its $2.3 billion Eurobond , Africa's biggest, which was expected to rally on completion of the debt relief programme, scheduled for around July this year.
But a November election meant to reunite the country instead reignited its armed conflict, when former president Laurent Gbagbo refused to step down until eventually captured by troops loyal to his rival Alassane Ouattara.
Ouattara, a former IMF deputy director who was sworn as president in last week, must now fix an economy wrecked by months of stalemate, economic sanctions and urban warfare.
His government must start its IMF-backed economic programme from scratch, two sources familiar with the matter said, and this would delay debt relief.
“The ... programme is cancelled. We're starting from scratch,” one of the sources, who is close to the negotiations but could not be identified, told Reuters.
“Everything they did in previous years was based on targets that no longer apply ... How much tax revenue will they make next month? Normally that would be an easy question, not now.”
The source it was possible they could reach completion on debt relief by mid-2012 but that meeting conditions by then would be tight.
“SCRAPPED COMPLETELY”
At the time of the last IMF review of Ivory Coast's programme, the Finance Ministry forecast 4 percent growth for 2011. It now expects the economy to shrink by between 1 and 3 percent, and most analysts think that is far too optimistic.
Officials at the ministry were not available for comment.
The IMF, in a document it published in April, projected the Ivorian economy to shrink by 7.6 percent in 2011.
IMF documents from last year show that previous negotiation depended heavily on meeting tight economic and fiscal targets and weighting spending towards a detailed poverty reduction strategy, all of which now needs to be reviewed.
Some officials think output may have halved in the past three months, as cocoa exports dried up and banks shut.
A fresh start is implied in a Thursday IMF press release.
The release said an IMF mission would visit Ivory Coast from May 18 - June 1 to “assess the economic situation and discuss with the authorities policies that could be supported by a loan under the Fund's Rapid Credit Facility (RCF),” which would help it meet “urgent needs, including to restore public services.”
Using this facility implies an emergency situation that is not conducive to the stringent requirements of HIPC.
But the setback is unlikely to have an impact on Ivory Coast's ability to meet its Eurobond coupon payments.
It will get interim debt relief on better terms and the IMF is likely to agree an emergency credit facility of $100 million.
Ivory Coast owes $58 million in coupons in June, including one it defaulted on in January, but analysts say it can pay it.
“Paying them is not going to have a significant impact on finances, but not paying them is going to have an impact on Ouattara's relations with creditors,” Standard Bank's Samir Gadio said. - Reuters