RESTRICTED
FILE CWY                       RAF65
Vol. 1
This report was prepared for use within the Bank and its affiliated organizations.
They do not accept responsibility for its accuracy or completeness. The report may
not be published nor may it be quoted as representing their views.
INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT
INTERNATIONAL DEVELOPMENT ASSOCIATION
PRESENT ECONOMIC POSITION AND PROSPECTS
OF
TOGO
(in three volumes)
VOLUME I
THE MAIN REPORT
March 29, 1968
Africa Department



CURRENCY EQUIVALENTS
US$ 1.00             =     CFAF 246.85
French Franc 1. 00   =     CFAF 50.00
CFAF 1.00            =     US$ 0.004
CFAF 1.00            =     French Franc 0.02
CFAF 1 million       =     French Francs 20, 000
CFAF 1 million       =     US$ 4, 000 (approx.)



TABLE OF CONTENTS
VOLUME I                                                                Page
BASIC DATA .................                              ...... 1 - 3
SUMMARY AND CONCLUSIONS     ....................... .....        ....  i - iv
Io  THE COUNTRY AND THE PEOPLE     .....      ...   .......* .... .        1
Population     ...... .....    0.....  000...... ....................  1
Education     .     ..       .........                           2
Health .........o.... ooo........... .... o................      3
Political Developments ...      .*........so....*.. .......      3
II.  ECONOMIC STRUCTURE AND OVERALL DEVELOPMENTS       .............       3
Changes in the Economy ...........                    ..-- .....  5
Sectors of Production      ....... .......    . ..   .......     6
Agriculture ............. o........................................  6
Industry, Mining, Construction, Power       ......    *..      7
Transport and Commerce ..............................          8
III.   THE BUDGET AND THE PUBLIC SECTOR ..... oo      .................    9
Financial performance of the public sector since 1960.           9
Current Revenue ................    ..    ...................   10
Current Expenditure          ..      .   ...O ........ .....    12
The Investment Budget .         ...........................     13
Financing of Government Excess Expenditure .       ..........   14
Other Accounts and Budgets            ......................#   16
Tresor Advances to Enterprises .......................          16
Local Authorities and Other Budgets        .    ......... ........  16
Public Debt ..  .....................................           17
Conclusions and Problems ............    ..    ...............  18
IV.  MONEY AND CREDIT ................. ....                              20
Monetary Developments ....       ..................      ..     21
Money Supply @o*@s*@****      @@@9t***v*.....     .............. O-$  ................  *........  21
Conclusions and Problems ...          ......................    24
V.  EXTERNAL TRADE AND PAYMENTS ............................... . .       25
Balance of Trade ..... . ...... ....*.*. .......  ...........   25
Exports ........... 0... ..................."...........        26
Imports ............ ............... ....... ...........        28
Export and Import Prices ......        ......................   29
D:Lrection of Trade and Commercial Policy ..        ...........  29
Overall Balance of Payments    ..........................       31
Balance of Payments with Non-Franc Area         ..............  33
External Aid .....     .........    .......... .... .. *. . ...  33
Conclusions and Problems ........        ....*............      34



-2-
Page
VI.  PROSPECTS AND PROJECTIONS ...............................        34
The 1966-1970 Development Plan ............. .........      34
The 1966-1970 Investment Program .....................      35
Investment Expenditures in 1966-67             .   ....  ,  35
Results expected for 1970    ..                      .. *   36
Financing of Investment                    .                37
General Prospects and Mission Projections ...........       38
VOLUME II
ANNEX I    - AGRICULTURE
ANNEX II   -  INDUSTRY - TRANSPORT - SERVICES
ANNEX III - FINANCING OF GROSS CAPITAL FORMAT:[ON
ANNEX IV   - THE MAIN FEATURES OF THE BUDGETARY SYSTEM
ANNEX V    - EXTERNAL AID
ANNEX VI   -  PROJECTIONS
Appendix Tables (45)
*      *       *      *      *
This Report is based on the findings of a Mission to Togo in
April/May 1967. The assignments of the Mission were as follows:
W. F. Stolper (IBRD)
Chief of Mission
L. de Azcarate (IBRD)              Economist
H. Boumendil (FAO/IBRD)             Irrigation Expert
C. Brochu (FAO/IBRD)               Agricultural Expert
A. Duncan (IBRD)                    Transportation Expert
J. Kahane (IBRD)                   Agricultural Economist
E. Minnig (IBRD)                   Electric Power Expert



TOGO
BASIC DATA
Area:               56,000 km2; 22,000 square miles.
Population:         (Jan. 1967) 1,702,300
density: 30 per km2; 77 per square mile
rate of growth: 2.6% per annum
literacy rate: around 10%
primary school attendance: 41% (1966)
Political status: Independent since April 1960.
Gross Domestic Product (market prices)        1963     1964      1965
(estimate)
current prices (CFAF (billion)       33.1     38.4       41.5
(US$  (million)       133       153       166
per head CFAF                 23,760
US$                     95
rate of growth (at current prices)                    Per Annum
1963/64             15.5%
1964/65              8.0%
(very rough estimate) 1958/1965            7.5%
Structure of GDP (1964)     O                   Use
(billion                         (billion
CFAF)   %                        CFAF)   %
Agriculture                  18.9  49  Private consumption    29.9  78
Industry and construc-
tion                        5.7  15  Public consumption      3.5   9
Transport                     2.2   6 Gross fixed capital
formation             5.8  15
Commerce                      7.0  18  Inventories             2.4   6
House ownership               0.9   3  Exports                 8.8 )
Government and other                                               )-8
administrative              2.9   7  Imports               -11.9 )
Other services                0.7   2
Total (rounded)              38.4 100  Total                  38.4  100



- 2-
Financing of gross capital formation
1963    1964      1965
(estimate)
(billion CFAF)
Gross fixed capital formation               3.2     5.8       n.a.
Inventory accumulation                      1.3     2.4       n.a.
Total                                   4.5     8.2       10.5
Provisions for capital consumption          2.6     2.7       2.7
Savings of corporate enterprises           -0.4     2.2       2.1
Savings oE households and non-profit
societies                                -0.4    -0.06      n.a.
Public savings*                             0.9     0.9       1.0
Less deficit on current account             1.8     2.5       4.7
*includes local authorities and capital expenditures budgetted in govern-
ment current expenditure.
Government budget (annual cash budgets)    1965    1966      1967
(estimate)
(billion CFAF)
Current revenues                           4.78    5.32      5.27
Current expenditure*                       4.73    4.94      5.32
Balance                              +0.05   +0.38     -0.05
*includes some capital expenditure.
Money and credit
Conversion rate: US$ 1.00 = CFAF 246.85
FF 1.00 = CFAF 50.00
Relationship to large monetary area: member of the West African
Monetary Union, within the Franc area.
Money supply (as at March 31)
1963      1964      1965       1966      1967
billion CFAF:    3.6        4.5       4.9       5.7       6.9
variation:        -       +25%        +9%      +167.     +21%



-3-
External balance (billion CFAF)
1963    1964     1965    1966
Recorded Exports                      4.5     7.4      6.7     8.9
Recorded Imports                      7.2    10.3     11.1    11.7
Balance                            -2.7    -2.9     -4.4    -2.8
- Commodity concentration of exports (1966)
1 commodity (phosphates)               42%
5 commodities (phosphates, cocoa,
coffee, palm kernels, cotton)        93%
- Balance of payments (billion CFAF)          1965
1.  Estimated exports                      8.4
2.  Estimated imports                    -11.8
3.  Services (net)                         0.0
4.  Factors income (net)                  -1.3
5.  Current balance                       -4.7
6.  Private transfers (net)                0.4
7.  Public transfers (net)                 3.3
8.  Private capital (net)                  0.5
9.  Public capital (net)                   0.8
10.  Monetary sector (net)                 -1.8
11.  Errors and omissions                   1.5
External financial assistance
- investment grants (1960-66) billion CFAF:    8.8
- public external debt* outstanding 19.31.66 - bil:Lion CFAF:    6.0
* debt of the government and of local authorities guaranteed by the
government.
- external debt servicing                     1966               1970
(max.)
Million CFAF                        158.5              332.5
% of recorded exports                 1.8%               -
Foreign exchange reserves (billion CFAF)        1964    1965    1966     1967
Net external assets imputed to Togo within
the West African Monetary Union (as at
March 31)                                      1.9     3.3     3.8      5.9
(Million $)                                  (7.6)   (13.2)  (15.2)  (23.6)
Bank - IDA operations: None.



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SUMMARY AND CONCLUSIONS
1.    Togo is a small country, of 56,000 krn2, but with 1.7 million 2
inhabitants it is densely populated by African standards--30 per km --
and population is growing by 2.6% per year. It is basically an agri-
cultural country with well over three-fourths of the active population
and half of the GDP in this sector. Since independence, it has strongly
developed the non-agricultural sector. In particular, it has put into
exploitation very rich phosphate deposits, started a few industries and
engaged in major infrastructural works.
2.    After an apparently very slow progress before 1960, growth has
accelerated since 1961, and has reached high rates of the order of
10-12% in current prices between 1963 and 1965. It is likely that the
growth has continued in 1966. It may be estimated that the real increase
has been of the order of 6-7% per year compound. Despite this, GDP per
head is still low at around CFAF 24,000 or US$ 95.
3.    These high rates of growth reflect the conjunction of rapid increase
and structural change in investments and a good export performance over
the period 1961-1966. In particular, there have been large investment
expenditures on the Port of Lome, on phosphates, and on a few industrial
enterprises. These investments are coming to an end, and it is not yet
clear how the present high level of investment of around 20% of GDP over
the years 1963-1966 can be maintained after 1967 (which is itself likely
to be a good year) with projects that are ready to start. The recent good
performance can therefore not be extrapolated without special reasons.
4.    The increase in exports (+172% between 1957-59 and 1965-66) is due
largely to the appearance of phosphates, which represent over 40% of recorded
exports in 1966,compared to nothing in 1960. This is the consequence of a
good past investment decision. The full benefits will, however, be achieved
by 1967 or 1968, after which further growth must be expected to slow down
unless new extensions of capacity are decided upon by the mining company
in conjunction with the Togolese Government as owner of 20% of the shares.
Agricultural exports at present are mainly cocoa and coffee, the production
of which, according to official statistics, has not: shown any decisive upward
trend. Exports of cocoa and coffee, however, have increased. The former
has benefitted from re-exports of Ghanaian cocoa smuggled into Togo. Like
all other producers, Togo is subject to the price fluctuations on the world
market since France no longer supports the prices of these products. Exports
of secondary agricultural products (palm oil products, cotton, groundnuts,
copra, etc.) have remained relatively unimportant and some have decreased.
The Government marketing board (OPAT) has made the most of the given world
market conditions.



- ii -
5.    The third factor that has contributed to the recent good perform-
ance is that no obvious mistakes in investments have been made, and in
general that the public policies towards public enterprises, including
participations, have been on the whole sensible. The only major loss
enterprise, the railway is about to be phased out progressively. The
marketing board (OPAT);Jhas made substantial profits which have more than
offset any losses of other public enterprises. On the whole, budgetary
policy has been careful. The high post-independence growth in expenditures
(+85% over 1960-66) has been matched by a parallel increase in revenues.
The level of taxation is, however, still low (around 10% of GDP). The
Government has at the same time succeeded, by using some of OPAT's and other
public funds, to finance a sizeable part of gross investment. These funds
have also been the reason why the whole economy, including the private banks,
have maintained a high degree of liquidity. There has apparently never been
a shortage of funds to finance worthwhile public or private projects.
6.    The rapid increase in imports (+245% between 1957-59 and 1965-66)
has been the consequence of the high rate of investment and the rapid rise
in income. Independent of this, the fact that Togo, as a former Trustee-
ship territory, has lower tariffs than its neighbors has made her tradition-
ally important in an unofficial entrepot trade to Dahomey. In recent years,
the economic difficulties of Ghana have made her also an important customer
for goods imported through Togo. The Togolese trade deficit, which officially
has run between CFAF 2-1/2 and 4-1/2 billion over the last six years, is
known to be in fact significantly lower, by about CFAF 1 billion in 1965.
7.    The balance of payments has never caused any trouble. Large inflows
of public grants mainly from France and EEC and lately also of public loans,
mainly from Germany, and of private investments, at a rate of about CFAF 4 bil-
lion over the last few years, have kept the international financial position
of Togo sound. Actually, Togo, as a member of the CFA franc system with a
central bank common to all members of the West African Mouetary Union, cannot,
within very wide limits, run into a balance of payments problem.
8.    Over the period 1963-65 about 60% of total investment has been
financed from domestic sources (including savings by foreign-owned firms)
and 40% from abroad. The Government budgets, including local authorities',
have saved about CFAF 1 billion per year, i.e., about 13% of total invest-
ment, and over 20% of total domestic investment. Inventories apart, which
are about one-fourth of total gross investment, external finance is estimated
to have provided over half of gross fixed capital formation, and domestic
public savings out of central and local budgets almost two-fifths of the
other half. Total domestic public financing, including public enterprises
and OPAT, may thus have financed as much as half of total gross fixed
investment.
1/ Office des Produits Agricoles du Togo.



- iii -
9.    The combination of circumstances which accounts for past growth
and the good general external and internal performance cannot be expected
to continue automatically. In particular, the growth rate over the Plan
period, 1966-70, is unlikely to exceed 5% per annum, still a very respect-
able rate, but substantially less than in the past few years, and somewhat
less than expected by the Plan.
10.   The major reasons for this can be subsumed under three headings:
(a) No major projects are sufficiently prepared to take up the
slack when the present major projects will be completed during 1967. There
are major road projects, but it remains to be seen at what rate they can be
implemented. The same is true for investments in directly productive sectors.
Even the most promising crops such as cocoa, cotton, or oil palm, and food
crops are, at best, increasing at the same rate as population. The picture
is somewhat more favorable for some industrial investments.
(b) Connected with the lack of investment projects is the uncertain
future for exports. While exports of phosphates will continue to increase
to 1968 and reach about 1.2 million tons, their growth thereafter would
require new investment which is not at present foreseen. In addition,
export prices for agricultural produce must be expected to fall, barring
unforeseen events. Such increases as are projected in the production of
export crops still require measures to be taken and will present the Govern-
ment with major policy decisions, involving not only investment expenditures
but administrative reorganization. Finally, the favorable differential
tariff position of Togo vis-a-vis Ghana and Dahomey may change and in any
case is only partly under the control of Togo.
(c) Thirdly, in order to provide sufficient public savings without
major increases in tax rates, it is essential that the growth of recurrent
expenditures is kept under the strictest control. Their growth should
not, in the Mission's view, exceed 5% per year, a target much below either
past growth or the Plan's projections. The Mission endorses some of the
increases in direct taxation suggested by the Plan, but strongly feels that
any increases in import taxes should be carefully weighed against the strong
possibility that such a step could radically reduce the tax base and increase
consumer prices, and would thereby endanger the equilibrium of the public
sector. Raising export taxes on the other hand would simply reduce OPAT
profits, which are in any case available for the public sector, unless
producers' prices are reduced, which should be avoided. Indeed, low producer
prices can only be accepted as long as low import taxes keep consumer prices
low.
11.   Developments for the immediate future are determined by past momentum
and appear good. But the long-run prospects depend to a large extent on
whether Togo is willing to attack now the problem of the country's absorp-
tive capacity. While there are too few projects ready for external financing,



- iv -
there are promising possibilities, among them the proposed Ghana-Togo-
Dahomey e:Lectric power link, a road maintenance scheme, feeder road
construction, oil palm plantations, integrated cott;on - groundnut - food-
stuff developments, and various small irrigation schemes.
12.   The servicing of the external public debt represents a small propor-
tion of recorded exports, being less than 2% in 1966. By 1970, when
service on existing debt reaches its maximum (CFAF 330 million), the
proportion will still be small; about 3.75% of projected exports. However,
given the specific arrangements governing the monetary system of the CFA
area within the Franc  zone, the problems of debt service and of credit-
worthiness in general lie rather with the Government budget.   No transfer
problem is likely to arise on account of the external balance and of the
state of "external reserves".  Disregarding the internal debt which is
owed entirely by the Government to the public marketing board (OPAT),
the ratio of service of the public external debt to public current revenue
is still modest(2.5% in 1966), and should remain a little under 5% of
projected revenue for 1970. As a proportion of estimated government
savings the relevant ratio becomes, of course, much higher, and would be
of the order of 25% for 1970.
13. In view of a likely rather tight budgetary situation in the years
ahead, it is not advisable for Togo to let its public debt increase as
rapidly as in the last few years. As has been the case in the past, most
of the debt should be on "rsoft" terms, commercial borrowing assuming only
a complementary role. The two decisive actions to be taken by the
Government- in order to attract the inflow of external capital of CFAF
4 to 5 billion that it will need by 1970 without creating financial
difficulties are (i) an improvement in the process of project identifi-
cation and preparation and (ii) a budgetary policy conducive to a slow-
down in the rate of increase of public current expenditure.



I. THE COUtTRY AND THE PEOPLE
1.    Lying on the Gulf of Guinea in West Africa between Ghana on the
West and Dahomey on the East, Togo is a narrow strip of land with about
50 km of sea front and 150 km width from East to West at its maximum.
From the coconut plantations on the seashore to the savanna on the border
of Upper-Volta on the yorth, the country stretches over 500 km. Togo's
area is only 56,000 km   (22,000 sq.mi.), making it the secontd smallest of
the Francophone countries of Africa, after Burundi.
2.    A chain of low mountains crosses the country from Northeast to
Southwest where they reach their maximum altitude at Mount Agou (986 meters).
This, combined with the lengthy shape of Togo and the existence of numerous
rivers, create problems for transportation. Thus, in spite of the small
size of the country, several regions on the east of the Mono River (500 km
long) in the Akposso plateau (in the Southwest), in the Adele mountains,
etc. have remained uncomfortably, if only partially, isolated from the rest
of the country.
3.    Relief, however, compensates for some of the climatic peculiarities
of Togo. Thus, rainfall is much greater on the hilly regions than in the
plains where it is abnormally low, especially in the coastal areas (see map).
Thus, Lome receives 800 mm of rainfall annually whereas, on the same latitude,
Accra, Lagos or Abidjan get twice as much. But at Palime, Badou or Atakpame
it rains between 1500 and 1700 mm, an average level very favorable to most
tropical crops, such as coffee, cocoa or oil palms. The rainy season is
between April and October with a short intermediate dry periodl in August and
a long dry period between November and March in the South and until May-
June in the North. Intra and interannual irregularities in the rainfall are
a problem.
4.    Togo has at least one important mineral resource, phosphates in the
South very near the coast, which is under exploitation since 1960. Official
sources claimed quite recently that a 500 million ton iron ore deposit has
been discovered in the North Central region and another of 30 million tons
near Lome. Also, near Lome, an important limestone deposit is now being
investigated.
Population
5.    The last population survey of 1959-60 gave a total population of
1,439,400.  Estimates for 1967 give a total of 1.7 million (see Appendix-
Table 1). The high rate of demographic growth of 2.6% per year results
from a birth rate of 5.5% and a death rate of 2.9%.   Average density is
30 inhabitants per sq km &77 per sq.mi.), but with very wide regional dif-
ferences: from 25 per km in the Savanna region, to 200 in the Plateau,



and 100 in the South and over 300 in small areas along the coast and in
the Northeast, where some 100,000 people are clustered in the mountainous
region of the Kabre area. The Kabrais tend to migrate to other less
populated regions of Togo, mainly in the Center, where they prove success-
ful settlers. Main urban centers are Lome, the capital (90,000), Anecho,
Atakpame, Palime, Sokode, Bassari, each in the 12,000-16,000 range.    Total
urban population, in centers of 10,000 or over, is around 170,000, or 10%
of total population (but the figure of "urban population,'l not otherwise
defined is often put at 250,000 people or 15% of total population). The
age structure shows that Togo has a very "young" population, with nearly
50% of people less than 14 years old, 8% between the ages of 14 and 19.
6.    There are many groups of different ethnic origins, with different
languages, religions and inclinations. The most numerous are the Ewe branch
in the South, who number about 750,000. In the North, the Kabrais (over
100,000) are remarkable cultivators and show a high degree of social and
political cohesion.   Like their neighbors, the Dahomeans, Togolese have
filled positions in the public administrations, in the French army and
private businesses outside their own country as far away as Dakar or
Brazzaville until reactions started in the late 'fifties. Since then, most
of them were sent back to Togo.
Education
7.    The literacy rate is around 10%.   School attendance is 41% (1966).
The number of pupils in the primary level was 156,000 at the beginning of
1966, of which 61,000 were in private schools. This is three times the
number of ten years ago. Girls account for only one-third of the total.
Classrooms are generally overcrowded, with 56 pupils each as an average.
This is due to a lack of teachers.   A little over 11,000 are in secondary
general schools, with an average of 37 pupils per class. The technical
schools (higher primary and secondary level) had only 1,800 pupils, and
there were 73 university students at the newly created (1965) Institut
d'Enseignement Superieur du Benin, all in the Arts section.    A scientific
section of the same Institut is to be started in Cotonou (Dahomey). There
are numerous Togolese students in universities and higher education centers
abroad.
8.    The entire education appears to be too general in its orientation.
The level of skills, even those who have obtained a secondary or technical
diploma, tends to be poor; education may produce more frustration than
skills. The Government intends to reform primary education progressively,
starting this year. Basically, this will result in devoting half as much
time as in the past to general education, the remainder of the time being
spent by the pupils in "applied" exercises in the arts of agriculture.
However, new programs and new methods will not cost less than those now
being condemned. It is doubtful, both in terms of investment and of
current costs, whether Togo can afford to pursue an objective of a 90%
rate of school attendance by 1985 as envisaged by the Government.



-3-
Health
9.    Great progress has been made over the years in the battle against
epidemic diseases, such as smallpox, resulting mainly in a lowering of
infant mortality.  Endemic diseases, on the contrary, are still a problem.
Malaria, bilharzia and onchocercosis in the river valleys are the most
widespread and damaging. The first two are major factors explaining the
low physical productivity of the country people. There are about 2,000
hospital beds (or 1 for 800 persons), and 60 doctors (or 1 for 30,000
persons, but 1 for 3,500 in Lome). Budgetary expenditures for health amount
to CFAF 320 per head in the 1967 budget.
Political Developments
10.   A French mandated territory since 1919, Togo became independent as
a Republic in April 1960, under President Sylvanus Olympio. On January 13,
1963, a military coup made M. Nicolas Grunitzky President. Following
numerous internal discussions, the military took power formally with Colonel
Etienne Eyadema becominig President on January 13, 1967, exactly four years
after the death of President Olympio.
11.   In May 1967 it was agreed that all political parties would cease
all political activities. The civil service was basically left intact by
the various upheavals, though there was naturally some reshuffling. Most
ministers are civilians, most of them non-political technicians.
12.   Togo has been a member of the United Nations since 1960, and of the
IBRD, IDA, and IMF since 1962. It joined in 1966 the Entente, a group of
countries originally consisting of Dahomey, Ivory Coast, Niger and Upper
Volta. Togo belongs also to the Organization of African Unity. After
considerable difficulties with Ghana's former government, the Ghana-Togo
border is again open, relations between the two countries are friendly,
and cooperation is improving.
II. ECONOMIC STRUCTURE AND OVERALL DEVELOPMENTS
13.   Togo is basically an agricultural economy with over three-quarters
of the active population working in the rural sector and half of the GDP
coming from agricultural activities. In recent years, however, mining
(phosphates) and industry have increased their share at the same time as
decisively contributing to the rapid growth of the economy. Transport,
services and commerce have always played a very important role in Togo and
they account for some 30% of GDP. Active trading of most of the agricultural



- 4 -
products, for internal consumption as well as for exports, are the basis
of these activities. The share of goverument, on the contrary, has
remained modest, with less than 8% of GDP (see Table 2.1).
14.   Of the total population of 1.6 million in 1964, 657,000, or about
41%, are estimated to be "active," i.e., of working age (15 years old and
over) (See Appendix - Table 2). According to statistics, over three-
fourths work in agriculture, This is an over-statement since agriculture
is only the main activity for those concerned: construction of owners'
houses and various handicraft activities occupy a significant part of the
peasants' time. Wage earners number only 35,174 (in 1964), or 5,3% of the
active population, of which about one-fourth are in the public sector.
15.   Unemployment does not seem to be a problem.   Certainly, open unemploy-
ment does not appear to be an acute problem in Togolese towns. The small
number of actual working days in purely agricultural activities, estimated at
100/120 per year, often accompanied by labor shortages in peak seasons, is on
the contrary a widespread reality, as in most of tropical Africa. It is,
however, dangerous to interpret this low figure simply as "disguised unem-
ployment" because of the numerous non-agricultural activities demanded from
the rural population and also because of illness.
16.   The latest detailed estimates show, for 1964, a GDP of CFAF 38.4 billion,
or around CFAF 23,800 per capita, i.e., about $95 at the official exchange
rate, while net national income at factor cost would be CFAF 32 billion, or
CFAF 20,000 per head, i.e., about $80. The wide difference between GDP and
NNI is attributable to heavy reliance on indirect taxes (net of subsidies)
and to capital consumption allowances and not so far to factor income transfers
overseas.  The latter, however, are likely to become more important when the
phosphate mine reaches its full scale of operation and increases its profits
(see Chapter V).
17.   Private consumption amounts to about three-fourths of total GDP, and a
little less than a fourth of GDP is subsistence consumption (= subsistence
production). Public consumption is with less than 10% of the total compara-
tively low, and defense in particular absorbs a very minor portion of the
total. Gross investment by contrast has been over 20% in 1964. Gross fixed
capital formation proper has been almost 13% of GDP. Much of this investment
is attributable to phosphates, the new port of Lome and the construction of
a brewery. Domestic savings were somewhat over GFAF 5.1 billion, about 86%
of total gross fixed capital formation, and about 61% of total gross capital
formation, including inventory accumulation.



- 5 -
Table 2.1
Origin and Uses of GDP - 1964
Current Market Prices (Million CFAF)
Origin                                               Uses
1. Agriculture               18,932     1. Private consumption        29,863
2. Industry and con-
struction                5,660     2. Public consumption          3,449
3. Transport                  2,228     3. Gross fixed capital
formation                 5,833
4. Commerce                   7,051     4. Inventory accumulation      2,402
5. House ownership              947     5. Exports                     8,799
6. Government and other
administration           2,914     6.  Imports                  -11,914
7. Other services               701
8. Total                     38,431                                   38,431
Source: See Appendix - Tables 3, and 4.
Changes in the Economy
18.   It appears, from uncertain data, that over the years 1956-1958 GDP
remained more or less stable at around CFAF 25 billion. Significant growth
probably took place between the late 'fifties and 1963 when GDP is estimated
to have reached some CFAF 32 billion. But the upward trend of the economy
is mostly a feature of the most recent years. For 1964 the estimate of GDP
at CFAF 38.4 billion means a 16% increase over 1963.   For 1965, preliminary
estimates indicate a GDP in the neighborhood of CFAF 41.5 billion, or 8%
above 1964. It is likely that growth has continued during 1966 and that 1967
will be a good year too. It is not possible to estimate GDP in constant
prices. It is certain, however, that there has been an important real
increase, both in aggregate and per capita (see Appendix - Tables 4 and 5).
19.   The growth of GDP has originated mainly in industry, w4here the phos-
phates mine dominates by far, in commercial activities linked with an
increasing export-import trade, and to a lesser degree in agricultural
production. On the expenditure side, there has been initially a rapid
rise in investment in 1960-61 (phosphate mine), and again since 1964 (infra-
structure and industry), an equally rapid rise in exports in 1961 and again
in each year since 1964. Thus, investment and exports, rather than private
and public consumption appear as having been the main engine of growth until



- 6 -
the very recent period. But until 1966 investments have had mainly a
multiplier effect through the outlays made rather than a direct effect
on output: the phosphate mine will reach its full-scale of operation only
this year, the brewery and the textile mill have started producing in the
course of 1966, the new port will not start until the end of 1967, etc.
The resulting increased domestic incomes have in turn induced higher imports
and a larger import surplus in 1965. It is thus likely that, starting in
1965, consumption has been assuming a relatively increasing role in the
growth of the domestic product.
20.   It is probable that gross investment has reached its highest level
in 1965. This is suggested by the substantially increased imports of
"metals, machinery, and metallurgical products" (see Appendix Tables 16-
18). This category reached in 1965 its highest absolute level and, with
32% of total imports, the second highest portion of imports since 1960 when
it accounted for 35%.  Except for those two years, however, imports of this
group were between 17% and 23%.
21.   Gross investment ratios have risen from about 10% of GDP in 1963 to
20% in 1964 and perhaps as much as 25% in 1965, a very high figure due
to increasing capital inflows.   In 1965 the domestic savings ratio was about
15%, a good performance, even though a balance amounting to 10% of GDP had
to be provided by the inflow of external funds. In 1963 the domestic savings
ratio was only about 7% and in 1964 it was 13%.i'
Sectors of Production
(i) Agriculture2/
22.   Of the total GDP (1964) of CFAF 18.9 million attributable to
Agriculture, CFAF 15.9 million originate in agriculture proper and CFAF
1.6 million in animal husbandry; the remainder in forestry and fishing.
The high degree of "monetization" of the rural sector is shown by the fact
that as much as 60% of agricultural production is actually traded. This
is not only true of the purely export produce, such as cocoa, coffee and
cotton, but also, in varying degree, of all the other products, including
purely domestic foodstuffs.
23.   Food crops (yams, cassava, maize, millet, sorghum, rice, etc.) account
for 80% of agricultural output. Cultivation methods have remained traditional
showing no increase in productivity per man or per hectare. Total production
1/ See Annex III.
2/ See Annex I.



appears at best to have increased as population, and supply difficulties
appear from time to time in the more densely populated areas of the south-
east. Irrigation practices are virtually unknown.
24.   The two main export crops are coffee of the Robusta variety (around
9,000 tons) and cocoa (around 7,000 tons). They are produced by local
smallholders, in the southwestern region of Palime', Atakpame', Badou
(350,000 people). Yields are low, mainly because of poor care. Production
greatly fluctuates from year to year, with little tendency to increase.
25,   Other export crops include cotton (about 8,500 tons) of the low-
yielding Mono variety; groundnuts (around 18,000 tons), of which only
one-fourth is traded for export; palm products of which a small proportion
only is exported (some 13,000 tons of kernels and a few hundred tons of
oil); and coconuts (copra). The latter used to be an important product,
but a disease against which no remedy has yet been found is progressively
ravaging the coastal plantations, and quantities mirketed have gone down
drastically (less than 500 tons in 1966). According to recent studies,
prospects for palm appear good. Cotton and groundnuts can also be greatly
developed.
26.   Livestock occupies a modest place, with about 150,000 head of cattle,
mostly in the north, 1.1 million sheep and goats and some 300,000 pigs.
It appears, however, that the rate of slaughtering and marketing of cattle
has increased substantially in recent years.
27.   Forests cover 10% of the country's area; enough, it seems, for local
firewood requirements, but most timber requirements are met with imports.
Fishing (about 6,300 tons catch annually) is a rewarding activity for those
engaged in it on the coast and on lagoons but local demand increases faster
than production.
28.   Togo's overall agricultural potential is not well known for lack of
basic studies. Certainly, great difficulties are encountered as relate to
water supplies, inadequate or irregular rainfall, difficult access, etc.
But, on the organizational side, the situation is unfortunately not conducive
to fast development. Success in the export operations conducted by the
government marketing board (OPAT) is an encouraging factor but this is not
and cannot be a substitute for well organized extension services, adminis-
trative structures capable of producing economic projects, or efficient
agricultural credit for development, three fields where the government per-
formance has so far been at best, mediocre.
(ii)  Industry. Mining, Construction, and Powerl/
29.   Phosphate mining has become the most important single concern in the
1/ See Annex II.



- 8 -
Togolese economy since operations were started in 1961. The mine is
located near the sea (An6cho) and is now fully equipped to reached its full
capacity production of 1.25 to 1.5 million tons. Total investments made
reach CFAF 9 billion and value of sales has been near CFAF 3.5 billion in
1966, for 1,145,000 tons exported. The Togolese government has a 20%
share in this profitable firm whose other interests are American and French.
30. Other important industrial creations since 1960 have been a brewery,
with a capacity being expanded to reach 65,000 hl of beer, and a cotton
textile mill, which have both started operations in 1966. Both firms have
been financed mainly with German funds. The oldest industry in the country--
a cassava starch mill--has encountered increasing difficulties on the supply
side. It is not profitable, and is now undergoing important changes. Other
industries include: a small palm oil mill, four cotton ginneries, a soap
processing plant, one small coffee roasting mill, a few furniture makers,
etc. The most important project under consideration is a cement factory,
for which a first reconnaissance has shown interest-ing limestone deposits
near Lome.
31. Construction activity has been dominated over the last three years
by the works of the new deep water port of Lom6, financed by a German
loan (total: around CFAF 4 billion).
32. Present installed power generating capacity is 20,143 kw, of which
7,943 kw are owned and operated by the national electricity company (CEET),
1,400 kw are owned and operated by the Public Wborks Department and Muni-
cipalities and 10,800 kw by private industrial enterprises (phosphate
mines).  Production by CEET was 14.3 million kwh in 1966, having increased
by nearly 20% per year since 1960, whilst total generation in Togo for
the same year was 38.3 million kwh increasing on the average since 1960
by approximately 10%. The future of electricity generation in Togo was,
at one time, believed to be in the projected Nangbeto Multi-purpose Hydro
Scheme on the Mono River. This project has been deferred and instead
serious consideration is given to the import of power from Ghana (Volta
River Project) to Togo and Dahomey.
(iii) Transport and Commerce l/
33.  Togo's transport needs are served by a network of 1,700 Ion of national
highways, some 3,000 km of secondary roads and by a railway of 500 km, with
two main lines (Lom6-Palim6 and Lom6-Blitta) of one-meter gauge. Inland
water transport is economically insignificant. A local airline serves the
interior once a week, with a five passenger aircraft.
34. The rDad net serves the country reasonably well and major new itiner-
aries to be developed are few. But intensified maintenance is an obvious
priority program and there certainly is scope also for construction or
improvement of a number of secondary roads serving areas of good agricul-
tural or stock raising potential.
1/ See Annex II.



- 9 -
35.   The railway is a losing concern, though its losses of around
CFAF 100 million a year have until now been matched by equivalent profits
made by the wharf. The railway and the wharf are both within the same
public enterprise (Chemins de Fer du Togo-CFT). The progressive phasing
out of the railway has been recommended by foreign consultants and by FED,
and is now considered as a serious possibility by the Government. The paving
of the two major road sections (Lome-Tse`vie`-Blitta and Lome-Palime) would
appear economical only if the phasing out of the parallel rail lines takes
place. FED is financing paving works on the 35 km section from Lome' to
Tsevie.
36.   The importance of "commerce" in GDP (18% in 1964) is attributable
to the great importance of foreign trade in the economy, including re-exports
and also to the relatively high level of trade in foodstuffs at the village
level, between regions and with neighboring countries. Further, the Togolese
have always demonstrated inclination and ability towards trading activities.
But, in the modern sector of the economy, the state import-export firm
(SOTEXIM), which ranks fifth among 16 major enterprises, has been accumulating
losses, partly disguised by the fact that it has failed to pay all customs
duties due. On the contrary, profits made by OPAT account for a substantial
share of commerce in GDP.
III. THE BUDGET AND THE PUBLIC SECTOR
37.   The public sector comprises:   the central government budget; the
24 local budgets; 39 special accounts ("comptes speciaux") which are
outside the central budget but do not correspond to any autonomous institu-
tions; and 18 public or semi-public enterprises (see Appendix - Table 13)
whose main activities will be examined elsewhere in this report. It has
been possible to obtain the accounts of the most important public sector
enterprises although not all accounts have yet been made ready, making it
impossible for this reason and others, to present a consolidated account of
the public sector as a whole.
38.   Certain institutional and organizational features of the public
financial system are of great importance in its functioning. They concern
the central government budget and the role of the Tresor and are dealt with
in Annex IV.
A. Financial performance of the public sector since 1960
39.   The combined current and investment budget of the central government
is the main component of the public sector, by far. The main developments



- 10 -
may be summarized as follows: (a) current revenues have increased
between 1960 and 1966 from CFAF 2,948 million to CFAF 5,324 million, or
by 81%; current expenditures over the same period have increased from
CFAF 2,662 million to CFAF 4,943 million, or by 85%. Both sets of figures
refer to actual cash receipts and expenditures during the calendar year.
(b) Government investment expenditures have totalled CFAF 3,157 million
during the seven years 1960 through 1966, compared to planned investments
of CFAF 3 ,990 million. Growth during the period was apparently irregular.
It should be noted that most investments financed by foreign aid are outside
the government investment budget. (c) The recurrent cash budget appears
to have had surpluses throughout the period, the deficits shown in Table 3.1
for the years 1962 and 1963 referring not to an annual cash budget but to a
legal "exercice" (final account) year of variable actual length. The overall
deficit ini the combined recurrent and investment budget has been mostly,
if not exclusively, due to investment expenditures. About two-thirds of
the overall deficit have been financed from local funds.
Current Revenue
40.   Togo's budget relies heavily on indirect taxes, overwhelmingly on
imports and exports, and this characteristic has been accentuated over
time. Total revenue derived from import and export taxes have increased
more than 88% between 1960 and 1966, and their share from 70% in 1960 to
72% in 1965, 74% in 1966 and 75% in the estimates for 1967. Import taxes
represent between 80% and 85% of the total. However, the share of direct
taxes has increased still more from 6.2% to one of 9.2% of total revenue,
the total having risen more than 2.5 times. Other revenues, such as income
from public property or from sales of services (mainly Post Office) have
increased only moderately but they still account for more than 15% of the
total.
41.   The increased collections have been due mainly to the growth of the
tax base rather than to higher rates. However, the corporate income tax
has been raised in 1964 from 30% to 35%. Over the last two years, the
corporate income tax was further increased to 37%; the general sales tax
on imports ("taxe forfaitaire representative de la taxe sur les transactions"
or TFRTT) from 15.71% to 17%, and on exports from 5.5% to 6.5%. The impact
of these tax increases is mitigated by numerous exceptions. In particular,
new business may benefit from a five-year tax holiday,/ and public enterprises
are entirely exempt from the corporation income tax. The phosphate mining
corporation (CTMB, Compagnie Togolaise des Mines du Benin) is the most impor-
tant instance of a business being exempt from the tax until 1967.
1/ See Law No. 65-10 ("Code des Investissements").



- 11 -
Table 3.1
Government Current Cash Budget for Selected Years
(Million CFA francs)
1960      1965       1966      1967
(Estimate)
1.  Direct taxes                   186.1     401.8     496.3      500.2
2.  Import and export taxes       2128.2    3421.2    4064.8     3951.0
3.  Others                         633.5     591.3      763.0     822.0
4.  Unallocated                     -        367,0       -         -
5.  Total current receipts        2947.8    4781.3     5324.1    5273.3
6. External contribution to
current expenditures           55.8      -         28.3       -
7. General services                880.8    1395.7     1557.2    1316.1
8. Defense                          -        651.4      609.8     620.4
9.  Economic services              498.1     811.0      790.8     550.2
10.  Social services                800.4    1105.6     1212.2    1177.6
11.  Government "interventions"     389.1     558.9      546.7     864.0
12.  Debt                            67.6     114.4      122.4     316.4
13.  Other and unallocated           25.6      88.8      104.3     375.0
14.  Total current expenditures    2661.7    4726.4    4943.4     5319.7
15.  Current balance (5-14)        +286,1     +54.9    +380,7      -46.0
Source: See Appendix-Table 6.
42.   The aggregate tax burden measured as a percentage of GDP is now
between 9% and 10% (1965). This is a low figure even by African standards
and considering the low level of average income.l/ But this figure must be
appraised within the general context of the economic policy and position
of the country: it is a specific feature of the Togolese economy that the
1/ By comparison, Senegal's rate is 21%, the Ivory Coast's 19%., and
Dahomey's 13%.



- 12 -
general low level of taxation, particularly on imports, is the very reason
for the existence and the growth of a large tax base. This is so because
low import taxes have kept the prices of imported goods lower than in neigh-
boring countries and Togo thus assumes an important role in entrepot trade
(see Chapter V). Also, low import taxation, by keeping the cost of living
comparatively low, has reduced the pressures for wage and salary increases
that have plagued so many other economies. The comparatively low tax burden
is thus consistent with the liberal policy from which the country has derived
more benefits than losses. It would therefore be dangerous to think of the
present modest taxation pressure as meaning that there exists a large margin
of untapped resources for the Government. Substantially higher taxation would
endanger the present equilibrium of the economy. On the one hand it would
probably mean, at best, a much less than proportional increase in revenue as
the imports of re-exportable goods would be diverted. On the other hand, it
would raise consumer prices and pressure of wage and salary earners for
higher rates of pay would become a reality. At worst, and not unlikely,
actual collections would fall.   There is, however, certainly room for better
tax collection within the present system and present level of rates. This
is shown by growing tax arrears which approached CFAF 500 million by the end
of fiscal year 1965.
43.   Since 1959, the last pre-independence year, Togo has not received any
regular subsidy for its recurrent budget (CFAF 204 million in 1959). However,
France has extended grants to cover specific expenditures, including some
for current expenditures, e.g., CFAF 83 million in 1964 and CFAF 28 million
in 1966. These kinds of subsidies are not likely to be renewed. Other
specific grants have been extended to the investment budget.
Current Rxpenditure
44.   The rapid growth of total expenditure over the period--it will have
roughly doubled by the end of 1967--is in the main attributable to (i) the
effects of independence, and (ii) growth of the "social" sector. Other
outlays have increased significantly but more irregularly. The increase
in national defense spending (excluding the police), apparently stabilized
over the last four years at around 12% of current expenditure, is in the
main a direct result of independence, as this sort of expenditure was taken
over from France, and it is at a relatively modest level. But all government
departments have grown in size.
45.   Social services expenditure--i.e., health and education, the latter
representing some 50% in 1960 and 1961 and more than 60% of the total in
1967--have become the most important single item in the budget. The addition
to the figures shown for subsidies to private schools (between CFAF 100 and
120 million every year) and for the subsidy to the national hospital (around
CFAF 90 million yearly), both expenditures being included under "inter-
ventions," raises total social expenditures to almost CFAF 1,500 million
in 1966, or about 30% of the total current budget.



- 13 -
46.   The other major "interventions" of the Government are repair and
maintenance expenditure on public buildings, roads and airports. They
have remained between CFAF 150 and 210 million, including the Roads Fund,
a figure recognized as being much too low.
47.   Official figures indicate that the percentage of wages and salaries
in the total budget has hovered around 60% with perhaps a slight tendency
to increase. The number of governnent employees, civil servants and others
paid through the public budget has increased from 4,950 in 1960 to 7,040
in 1966 o:E which 1,142 are military. As of April 11, 1967 there were 149
French technical assistants, including 82 teachers, working in Togo. In
addition there were 1,400 employees in the railways and 302 at the national
hospital. Wage rates have not substantially increased during the period
under consideration. The last general raise occurred in November 1963,
ranging from 5% for the higher and middle grades to 8% for the lower cate-
gories. But average earnings of top officials have actually diminished
somewhat (-2.5%) from 1960 to 1964. According to one recent study by the
statistical service the average monthly net wage is around CFAF 36,000
for the higher grades and CFAF 13,500 in the medium and lower levels. Togo
appears to have the lowest average money wage level in the public (and
private) sector among the former French African territories.
The Investment Budget
48.   Actual expenditures on investment account have constantly been below
estimates, sometimes because of delays in project preparation and execution,
more often because funds have not been released by the Tresor on grounds of
financial "soundness." During the whole period actual outlays have appar-
ently increased substantially but there are substantial movements from year
to year:
Table 3.2
Actual Investment Budget Expenditures
(In Million of CFA francs)
1960     1961      1962     1963     1964     1965      1966     1967
(Estimate)
520.1   176.2     197.4    217.1    216,8    608.0    1220.6     569.5
Source: Tresor, Government of Togo.



- 14 -
By the end of 1966 the cumulative amount of underspending "reported
forward" was CFAF 832 million. This sum is a rough measure for the
amounts inscribed in the investment budget for which no financing was
made available or for projects not ready.
49.   Three main categories contribute to the total although with notable
variations. During the period 1960-1966 inclusive, out of CFAF 3,156 mil-
lion spent, the distribution for a total of CFAF 2,725 million, whose use
has been identified, shows that the greater share went to administrative
and sociaL construction (52%), a small part (15%) to infrastructure, while
capital participation represented one-third. Infrastructure concerns mainly
equipment for the railways and wharf (CFT), (CFAF 127 million) and tele-
communications, excluding maintenance and major repairs. Capital partici-
pation, including creation or acquisition of enterprises, concerns mainly
the construction of the Hotel "Le Benin" (CFAF 300 million), participation
in Credit du Togo (CFAF 57 million) and in the phosphates company (CTMB).
The latter is a major operation completed in 1966. It involved CFAF 575 mil-
lion which accounts for the large figure of budgetary investment expenditure
in 1966. Also in 1966, the private power producing company was acquired by
the government for CFAF 125 million. The 1967 budget estimates project
CFAF 286 million for infrastructure (nothing for the railways), CFAF 75 mil-
lion for capital participations and CFAF 208 million for administrative
buildings and various small operations. The high proportion of administra-
tive and social construction is due to the fact that external aid is not
easily available for this sort of investment which has, therefore, to be
financed mostly through the government's own investment budget.
Financing of Government Excess Expenditure
50.   However  uncertain the figures are, it may be concluded that, over
the period as a whole, government current expenditures have been entirely
financed by current revenue with some small surpluses at times available
for the financing of investments. The nature of the information precludes
an analysis of the financing of budgeted investments year by year. For
the period 1960 through 1966 as a whole the structure of financing investment
appears to have been as follows:



- 15 -
Table 3.3
Financing of Budgetary Investment Expenditures
1960-1966
(Million
CFA francs)
1. Total investment expenditures                           3,157
2. French "investment" grants                                466
3. French "current" grants                                   173
4. Interna:L loans from Stabilization funds and OPAT       1,019
5. Other initernal loans                                      23
6. External loans                                            316
7. Sub-Total                                               1,997
8. Balance=Tresorts funds                                  1,160
9. Total                                                   3,157
Source: From information supplied by the Tresor.
Note:    Any surplus of the recurrent budget over the period as a whole is
subsumed under item 8, Tresor's funds.
51.   French investment grants have been made for specific purposes,
generally in the social sector.   They have greatly varied through time,
the most important one having been in 1965 (CFAF 139 million).    External
loans have been received mainly from Caisse Centrale de Cooperation Economique
and from West Germany and the Netherlands. However, since with minor excep-
tions foreign aid is outside the budget, line 6 of Table 3.5 does not include
all loans granted to Togo during the period. (See Appendix - Table 8 and
Annex V). Mlost striking is, however, the importance of loans made by the
former price stabilization funds, now OPAT. The proceeds of these loans have
provided most or all of the financing of the major operations mentioned earlier.
Not included in the figures are CFAF 300 million lent by OPAT to the Governmeril.
in May 1967 to finance the extension of the new port of Lome now under con-
struction.
52.   The balance of CFAF 1,160 million has been entirely attributed to the
use of the Tresor's liquid funds, although in some years a current surplus
has been important, while in others liquid funds must have been used to meet
a current cash deficit. Financing from this source has taken place, so to
speak, automatically; the Tresor simply meeting expenses by drawing on its
cash balances. These are made up mostly of deposits from public bodies (OPAT,
Pension funds, Post Office checking accounts) and of other sundry depositors.



- 16 -
53.   The large increase of the Tresor's account at the Central Bank (which
in turn is deposited at the French Tresor where it earns interest from
CFAF 575 in 1961 to 1,435 million in 1966 and 1,530 million by March 1967
shows that the Tresor has had no difficulty financing overall government
excess spending (see Appendix - Table 11). In addition to its deposit at
the Central Bank, the Tresor maintains working balances with banks and the
post office checking account, and at its central and local agencies through-
out the country, and it holds rediscountable customs bills amounting to arouad
CFAF 500 million over the last three years.
Other Accounts and Budgets
54.   Most special funds refer simply to some special income or expenditure
accounts of the government which for historic, administrative, or legal
reasons are kept outside the central budget. Fortunately, their combined
volume is, with the exception of the road fund (fonds routier) not large.
The road fund runs around CFAF 50 million a year.   Furthermore, special funds
as a group are consistently creditors of the Tresor. By the end of 1966, the
creditor position amounted to CFAF 435 million.
Tresor Advances to Enterprises
55.   Public  enterprises   may  receive  budgetary   allocations.
In addition, the Tresor has made various advances or loans to
public enterprises,   in particulAr  CZ2,T.  These   sdvances   stnnd
at around CFAF 450-500 million. The main deficit enterprise is the railways
(whose annual average loss of CFAF 100 million a year has been more or less
matched by profits made by the wharf). SOTEXIM, the state trading firm has
a cumulatecl loss of CFAF 7.2 million by the end of 1966 and a debt of
CFAF 148 million to the Tresor, mainly on account of unpaid customs duties.
Editogo (government printshop) is also a permanent deficit concern. Details
on the various public enterprises will be found with Appendix - Table 12.
56.   The family allowances and workman's compensation fund (Caisse de
Compensation des Prestations Familiales et des Accident du Travail) has a
total income which now exceeds CFAF 300 million a year, having increased by
50% since 1964. The Caisse shows a current excess income of CFAF 21, 10
and 28 million respectively for 1964, 1965 and 1966 on account of its two
main operations (family allowances and labor accidents). This amply compen-
sates for losses incurred by the Caisse in operating various minor social
funds and assistance activities.
Local Authorities and Other Budgets
57.   The 17 provinces ("circonscriptions") and 7 municipalities have



- 17 -
autonomous budgets. Aggregate results for the last three fiscal years
are as follows:
Table 3.4
Receipts and Expenditures of Provinces and Municipalities
(In Million CFA francs)
1963    1964     1965
1. Provinces (Circonscriptions) (17)
Income                                      243.7    247.6   24437
Expenditure                                 226.5    232.1   229.6
Balance                                    172     15.5    15.1
2. Municipalities (7)
Income                                      172.9    197.8   200.4
Expenditure                                  155.8   166.5   174.7
Balance                                    1701     31.3    25.7
Source: Tresor and Ministry of the Interior.
In the budgets of the municipalities the town of Lome' alone accounts for
nearly 80% of the total. Revenue of both provinces and municipalities
is based almost exclusively on local taxes, mainly a poll tax ("taxe
civique") with ranges from CFAF 700 to 950 per head. However, borrowing
by local authorities (from Caisse Centrale) the proceeds of which is
included with income, has gained some importance and represents up to 7%
of total income by 1966. A remarkably high proportion - well over half -
of total expenditures is devoted to small-scale public works and social
construction. Cautious administration, high yields in the collection of
taxes and the necessarily limited scope for spending beyond current revenue
account for the existance of continuous surpluses in the local authorities
accounts.
Public Debt
58.   The total public debt, including the government guaranteed debt,
(but excepting CCE's advances to Credit du Togo) amounted to CFAF 7,564 mil-
lion by the end of 1966. In 1966 the service on the total debt, including
the debt to French organizations, was CFAF 138 million, or 2.5% of the govern-
ment current expenditures and is scheduled to be just under 6% for 1967.



- 18 -
Table _3,5
Major Components of the Public Debt, End of 1966
CFAF Million
1  Internal debt                                1,110
2.  Debt to French organizations                 1,208
3.  Debt to Non-Franc area                       5,246
4.  Total                                         7,564
1/ Excluding an additional loan of CFAF 300 million from OPAT contracted
in May 1967.
Source: Ministry of Finance. See Appendix - Tables 8 and 9.
59.   The main components of total debt are the loans from OPAT mentioned
earlier, and the loans of DM 67.3 million contracted in 1963 and January
1967 from the German Federal Republic for the construction of the Port of
Lome. The several pre-independence debts to France (FIDES) were consolidated
in 1962 for a total of CFAF 1,215 million. Supplier credits have played only
a moderate role until the last few years. Since 1964 three important loans
of this type have however been contracted or guaranteed by the government for
an amount of CFAF 676 million (US$ 2.7 million).
B. Conclusions and Problems
60.   Togo's public sector performance since independence has been satis-
factory. Current expenditure of the central government has, not surprisingly,
increased at a fast rate, but has been matched by a parallel increase in
current receipts. This has been achieved while keeping the rate of overall
taxation at a fairly low level. Thanks mainly to funds vaailable through
the successful operations of the export marketing board (OPAT) a sizeable
share of public investment has been financed with local funds. The governmeriL
has taken participations in a number of industrial firms of which the most
important and also the most successful one is the phosphate mine (CTMB).
61.   Among the public enterprises only the railway makes losses for
structural reasons. But it seems now that the decision to phase out
progressively the existing lines has been taken firmly. Other loss enter-
prises such as SOTEXIM and Editogo could perform much better if management
and contro'L were improved. Budgets of local authorities appear to raise no
problems.



- 19 -
62.   Serious difficulties will arise in the near future, however, unless
some measures are taken now. First, the increase in receipts is not likely
to permit the financing of expenditure at the same rate of increase as in
the past. Sinice substantial higher indirect taxation rates may well disrupt
the whole economic equilibrium of the country it is necessary to keep the
growth of public expenditure under strict limits. This means in the first
place limiting the growth of the social sector (health and above all educatior).
63.   Secondly, debt repayments, though still low, have increased in the
past and willalmost double in the next few years. Although additional
borrowing, except for directly revenue raising projects, should not continue
to grow at the same rate as in the past, it will probably still increase in
absolute terms. Higher public savings therefore become more urgent. It is
unfortunately not clear whether the new port of Lome', for the construction
of which important loans have been contracted, will be able to pay its way.
More careful attention will have to be given to the preparation of projects,
particularly those earmarked for external financing, in view of the burden
that uneconomic projects will put on the current budget.
64.   An efficient policy will require a better budgetary organization
capable of producing annual cash budgets and of showing the size of the
government savings. Of more substantive importance is the necessity to
define a policy for the use of public funds now outside the budget, mainly
of OPAT. This raises substantial policy issues mainly as regards (i) the
financing of budgetary expenditures with short-term money, i.e., Tresor's
funds; (ii) the alleged diversion of OPAT's funds from their "proper" use,
i.e., use in the agricultural sector.
65.   On the possibly excessive use of short-term money to finance long-term
(investment) deficit, it must be remembered that the Tresor is functionally
a bank. There is certainly the risk that, when the number of depositors is
small and when the main depositor, OPAT, may suddenly be forced to withdraw
funds because, say, of crop failures or a drop in prices, the Tresor may
suddenly find itself in an illiquid position. The danger of relying too much
on OPAT's funds is periodically emphasized by the Tresor. This problem is
handled in part by the fact that OPAT, in addition to its deposit with the
Tresor, keeps substantial deposits with the commercial banks for its ordinary
commercial needs.
66.   The alleged "diversion" of OPAT's funds into what is almost entirely
non-agricultural investment seems more a question of general development
policy rather than of budgetary ethics. According to its statutes, OPAT
should invest its available funds in agriculture, including feeder roads in
rural areas, etc. Nothing of this has been done as yet by the office. But
as the contents of the statutes implicitly recognize the taxation element in
OPAT's policy of paying low producer prices, it could be argued that OPAT's
"profits" should be returned to the budget or at least that its spending should
be controlled by the budget. This, however, leads back to a major criticism,



- 20 -
namely, the lack of a well-defined policy about the best use of OPAT's
and other public agencies funds deposited at the Tre~sor.   Since the Tresor
is a bank, it can create credit.   At the same time, the limits of borrowing a-a
are not set, as with other systems by the Central Bank and/or deliberate fiscal
policy. The limits are rather found inside thie Tre'sor by the liquditiy of
the system, Since virtually the whole public sector "banks" with the Tr4sor,
this liquidity is at all times very high. It is therefore necessary that the
Government first decide on what best use is to be made of those funds of
OPAT's which are not required for price stabilization purposes or financing
of crops, (and not other.aise allocated).
67.   In any case, the use of funds deposited at the Tre'sor for financing the
government excess spending should be formally recognized as such. This would
mean the issuing by the government of bonds, either short- or long-term but,
of course, interest-bearing in any case at a typical rate in line with that
of the Central Bank..L/
IV. MONEY AND CREDIT
68.   Togo is a member of the West African Monetary Union (Union Monetaire
Ouest Africaine - UMOA) formally created in 1962 and in fact in continuation,
with minor chlan-es, of the previous system.  The CFA franc, issued by the
common Central Bank (Banque Centrale des Etats de l'Afrique de l'Ouest -
BCEAO), of the Monetary Union, is fully convertible into French francs by
virtue of the cooperation agreement with France at the rate of CFAF 50 for
1 French franc and circulates freely within the seven member states of the
IMOA.  There are no external reserve requirerments for individual member
countries and the reserve requirements for the system as a whole are liberal.
The reserves of the Monetary Union have at all times remained high and no
measures of monetary restriction have had to be envisaged over the last six
years. Monetary circulation is regulated through credit ceilings fixed
periodically and separately for each member country and within each member
country for each borrower.   Advances to the government are strictly limited;
they cannot exceed 10% of current revenue of the previous year and are granted
for periods not exceeding one year. The Central Bank discount rate, which
governs the interest rate structure, is the same within the entire UMOA, it
is low (3.5%) and in practice its variations are not used as an instrument
of monetary policy.2/
1/ The de facto creation thereby of an embryonic money market would certainly
have to be further studied.
2/ It should be remembered that the interna'L and external monetary problems
of any given member country of UMOA catnot be fully appreciated in
isolation, as the whole system is both strongly unified and very closely
welded to the French monetary system.



- 21 _
A.  Monetar Develoments
69.   Monetary institutions outside the BCEAO (Banque Centrale des Etats
de l'Afrique de l'Ouest) comprise three commercial banks: Banque Inter-
nationale pour l'Afrique Occidentale (BIAO) formed by French and American
interests, Banque Nationale de Paris (BNP) wholly French, and Union Togo-
laise de Banque (UTB) formed with Togolese Government (35%), French (35%),
and German and Italian (12%) capital. Specialized development institutions
are Caisse Centrale de Coope'ration Economique (CCCE), a French official
institution which is not part of the local banking system and does not affect
the local money supply directly, and Cre'dit du Togo, formed with the parti-
cipation of CCCE and the Togolese Governiment. As of May 24, 1967, the Cre'dit
du Togo has become the Banque Togolaise de Developpement (BTD) with an initial
capital of CFAF 100 million, which is to be increased progressively to
CFAF 300 million. The government holds 60% of the capital, the CCCE 20%,
the BCEAO 10%, and the Family Allowance Fund 5%, The rest is held by the
three local commercial banks just mentioned, 5% each. The agricultural credit
section will become the Caisse de Credit Agricole whose creation has been
officially announced in May 1967. To the above should be added the Tre'sor,
which operates like a bank, and OPAT, for the important amounts it has granted
to the government (see Chapter III) and the smaller ones to the private sectoz.
As deposit collectors, but not lenders, two other public organizations are
to be addecd, the Caisse d'Epargne (Savings Bank) and the Post Office checking
accounts.
Mo        l
70.   No complete monetary statistics are available on a country basis before
1963 because banknote circulation in each country was not known. Develop-
ments from 1963 to 1966 in Togo show essentially a much larger increase in
note circulation (+43%) and deposits (+70%) than in credits, which have
practically stagnated. Hence, there was an important growth in external
assets (+57%).
71.   The money supply as normally defined includes banknotes and coins,
demand deposits and time deposits with the commercial banks (line 4 of
Table 4.1), In addition, the savings bank has slowly increased its deposits.
Although legally not liquid, the deposits could in fact be withdrawn on
short notice and a changed preference might induce savers to shift them to
the commercial banks. These deposits have reached CFAF 370.4 million by
March 31, 1966 and CFAF 425.2 million by March 31, 1967 as against
CFAF 161 million in 1961.
72.   The contribution of the Government to the total resources of the system
clearly appears as of major importance. The negative "credits to government"



_ 22 -
measure the amount of Tresor's deposit with the banks less deposits of the
public at the post office checking account. The latter are considered a
credit ("concours") to the Tresor (since funds of the PO are deposited
with the Tresor). In addition, it is estimated that, in 1967, OPAT's
deposits with the bank amount to roughly one-third of total deposits (line
2, Table 4.1).
73.   The substantial increase in the money supply between March 1963 and
March 1967 of CFAF 3,246.4 million has been in cash and demand deposits in
about equal proportions. It has not been due to credits extended to the
economy by the banking system but is mainly attributable to the successful
operations of the agricultural stabilization funds (subsequently OPAT)
directly in connection with increased exports, and as a result the external
assets have increased. Also, it is known that there are large unrecorded
exports (see Chapter V), the payments for which are made to a very large
extent in banknotes and coins. To the extent to which notes of other members
of the Monetary Union or foreign currencies are involved, foreign reserves
and cash will increase simultaneously.   Undoubtedly a great part of the growt:
of external assets results from larger inflows of external capital, but the
size of the increase is such in 1965 and 1967 that one may doubt if the trade
deficits have been at all of the order of magnitude that the official statis-
tics show (see Chapter V).
74.   The sectoral distribution of credits-' (excluding individual loans
under CFAF 10 million) is fairly simple (see Appendix Table 14). Long-term
credit is almost exclusively from CCCE to the phosphate mining enterprise
and its decline due to reimbursements by that firm; medium-term credit is
mostly to industry for the two years when it has gained some importance (1965a
and 1967); short-term credit is 50% to 60% to the import-export trade within
which the financing of produce exports has a declining share (1/3 in 1964,
less than 1/5 in 1967). The share of the agricultural sector is extremely
small at all times and less than 1%. The decline in short-term credits over
the period is not due to a decrease in the level of exports and imports, but
rather to the fact that the produce stabilization funds and subsequently OPA'i
have been able to finance a growing proportion of their activities with their
own funds. The increasing liquidity of the banks result in a sharp reduction
of the volume of rediscounting by BCEAO. This makes it rather unusual within
the Monetary Union. The average percent of short- and medium-term loans
rediscounted before 1964 was around 40%; by March 31, 1965 it had fallen to
33%; by March 31, 1966 to 19%, and to a negligible proportion by March 31,
1967.
1/ Total credits to the economy are greater than shown in Table 14. The
latter exclude medium- and long-term credits by the Caisse Centrale, the
Tresor's operations as a lender, and a small number of direct loans made by
OPAT (CFAF 112 million in 1965-67). In addition, there are direct loans
from the head offices of expatriate firms to their local offices, the amount
of which is totally unknown.



Table 4.1
Factors Affecting the Money Supply
(March 31 of each year; Millions of CFA Francs)
,~ ~ ~ ~ ~~~~          ~16          196        196        196        196        12_                          _
1. 1nk Notes & Coins                  n.a.       n.a.      2325.0     2745.0    2813.0     3328.0     3260.0
2. Demand Deposits
(Banks & Post Office)             1143.4    1235.1     1291.8     1692.2     2033.3     2233.5    3439.7
2  Time Deposits
(Commercial Banks Only)            118.4      60.6       42.3       8Q.1      117.0      159.5      205.8
4.- Total Money Supply                n.a.        n.a.     3659.1    4521.3     4963.3     5721.0     6905.5
5. Other net items of the
balance sheet                                    -       129n1      67.3      310.8      2Q.9       393.5
6. Total assets and liabilities        -            -      3788.2    4588.6     5274.1     6111.9     7299.0
7. Credits to the Economy (a)        2928.0     3621.0    3799.9     4324.2     3895.0     3892.6     3458.0
8. Credits to Government (b)           -          -       -1786.1   -1641.5    -1914,6    -1568.7    -2087.0
9. External Assets (net) (c)           -          _        1774.4    1905.9     3293.7     3788.0     5928.0
(a) Including credits to public enterprises, other than GPO, granted by the banking system.          Excluding credits
granted by CCCE. See text, para. 60.
(b) Negative because Treasury deposits with the banking system exceed credits and advances extended to the Govern-
ment (excluding Public enterprises). See Text.
(c) Of Central Bank, Commercial Banks and Public Credit institutions. 1967 figures supplied by BCEO, Paris.
Source: Situation Monetaire du Togo, Monthly bulletins, BCEAO.
*Actual circulation of notes and coins is probably higher than shown by as much as 20% or so taking account
of notes and coins from other UNOA countr es      especiatlly Da   O in         a     nte                    n
which have not yet found their way into the A4gent y of te BC       AOncomW.



- 24 -
75.   Small credits (under CFAF 10 million) are important in the agri-
cultural and construction sectors. By the end of September 1966, the
Credit du Togo, the main lender to those two sectors, had outstanding
CFAF 137 million for agriculture and CFAF 725 million for house building.
76.   Credit du Togo receives more than two-thirds of its resources from
advances made by the Caisse Centrale. These advances have totalled
CFAF 1.7 billion of which over CFAF 700 million were outstanding by the
end of 1966.
77.   Interest rates are low, in line with the BCEAO discount rate which
has remained at 3.5% over the last ten years. Typical interest rates are
by law the same for all banks subject to a minimum equal to the discount
rate plus 2.5%, but within the authorized range they vary according to
borrowers and type of loan and go up to 8.5%. There exists as yet nothing
like a money market but the Central Bank is pressing the banks with excess
resources to lend to those banks in need.   Some such inter-bank lending has
already taken place. The normal tendency remains however for banks to appeal
for funds to their main office in France whenever necessary, or, more
frequently in Togo, to transfer their idle funds to Paris where they normally
earn a higher interest.
B. Conclusions and Problems
78.   The Togolese Government joined the West African Monetary Union in
November 1963 after considering creating its owfi central bank and currency.
This formalized a previous de facto adherence, and it was undoubtedly a
wise decision. The only drawback to membership in a multi-national system
is the limitation it places on autonomous national policies. Under the
economic circumstances in which Togo finds herself, and, particularly, giver!
her economic structure, the effectiveness of an autonomous central bank's
economic policies would be very circumscribed in any case. Against this,
the built-in advantages are: the absence of internal inflationary pressures
arising from the monetary situation; absence within very wide limits of
balance of payments difficulties; full convertibility; monetary confidence;
a generous supply of credit; low interest rates; and a highly efficient
organization.
79.   The supply of funds has been plentiful at all times in all sections
of the banking system: resources of commercial banks, discount ceilings
of BCEAO to all sectors, Caisse Centrale's funds for direct lending or for
advances to Credit du Togo, OPAT and even the Tresor. Lack of projects
rather than unavailability of credit has limited the expansion of credit.
It may well be that a degree of conservatism on the part of the banks has
caused some opportunities for new credits to be overlooked, especially those
which might arise outside Lome. It is truer still that credit to the rural
sector must go hand-in-hand with technical and organizational assistance to
the farmers. The very small development of agricultural credit may well
be largely explained by the lack of the latter, or by the lack of coordination
between Credit du Togo and OPAT with the authorities specifically charged to



- 25 -
prepare agricultural programs and projects and to assist farmers. But
these in essence are not monetary or banking problems and in the present
conditions they are difficult to solve. Some unnecessary stress has there-
fore been put in Togo on the search for new forms of organization, which
would lead to the creation of a specialized agricultural credit bank, to tl1e
neglect of identifying and preparing projects suitable for financing and
insuring that the projects are carried out efficiently.
V. EXTERNAL TRADE AND PAYMENTS
80.   Statistical difficulties with external trade and paymencs data make
any evaluation of the present position and past developments meaningless
unless great precautions are taken. The main, but by no means only, reasons
for this state of affairs are the following: unrecorded imports (mainly
cocoa from Ghana); unrecorded exports of previously imported goods and of
local goods; use of conventional unit va'lues rather then of true prices for
taxation purposes by the customs department for imports as well as for
exports; the impossibility of attributing financial transactions within
the franc area to any particular item or agent when they take place; and
compensatory payments between local branches and home offices of firms in
France.
Balance of Trade
81. The official figures of imports and exports are shown in Table 5.1:
Table 5.1
Recorded Imports and Exports
(In Million CFA francs)
Average                                             6 montFs
1956-59  1960   1961  1962  1963  1964  1965  1966   1967 j/
1. Imports C.I.F.      3278   6451  6475  6724   7167 10286- 11100 11668 (55o9)
2. Exports F.O.B.      2776   3588  4615  4239  4509   7448   6679  8872 (h828)
3. Balance             -502  -2863 -1860 -2485 -2658 -2838   -4421 -2796  -681
1/ See also Note Appendix Table 18.
2/ Bull. Statistique Sept. 1967, p. 14.
Source: Bulletin Statistique No. 1, 1967 and Annuaire Retrospectif du
Coimmerce Special 1937-1964 (No. Special, undated).



- 26 -
Unrecorded imports are mainly cocoa from Ghana, for which Togo has offered
more attractive prices. More recently the availability of imported goods
in Togo and the inconvertibility of the Ghanaian cedi has also played an
important role in attracting cocoa from Ghana. The amount of Togolese re-
exports depends on such factors, as well as the relative tariff levels of
neighboring countries. Since during the period as a whole Togolese tariff
levels have undoubtedly been lower than her neighbors, it is certain that
exports have been substantially undervalued by the official figures--by over
CFAF 1 billion in 1965.
Exports
82.   Trends in aggregates and in their composition can however be assessed
with some confidence. Five export products account for more than 90% of
the total, one of them (phosphates) having appeared only in 1961:
Table 5.2
Main Exports
(In Million CFA francs)
Average
1956-59  1960  1961   1962  1963  1964  1965  1966
(1) Cocoa              893   1382  1289  1182  1176   1632  1687  1688
(2) Coffee            1057    636  1245  1430   801   2525  1365  1953
(3) Palm kernels       269    487   308   284   396   445    584   544
(4) Cotton             184    361   312   251   353    166   287   275
(5) Phosphates          -      -    155   489  1068   1948  2198  3771
(6) Tota L 1) to
(5)            2403   2866  3309   3636  3794  6716  6121  8231
(7) Total exports     3001   3588  4615  4239  4509   7448  6679  8872
(8) (6) as % of(7)      80     80    72    86     84    90    92    93
Source: Bulletin de Statistique No. 1, 1967, and Annuaire Retrospectif
du Commerce Special, numero Special, undated.
Over the whole period 1956-59 to 1966, 57% of the nearly three-fold increase
is attributable to phosphates. Moreover, phosphates are the only item which
has grown without interruption; as mining operations were extended, quantities
exported have increased from 57,000 tons in 1961 to 969,000 tons in 1966.



- 27 -
The annual rate of one million tons was exceeded during the first quarter
of 1967, and the full capacity of the medium-term forecast scale of opera-
tions of around 1,250,000 tons is likely to be reached this year. It
is not known how much of the proceeds from phosphates exports are trans-
ferred abroad. It is possible that the figure is now somewhere between
CFAF 0.5 and 1 billion, thus reducing the net proceeds from total exports
by 5% to 10%7, and those from phosphates exports proper by 13% to 26%, in
1966.
83.   Other items--all crude or semi-processed agriculltural products--show
no clear trend. This is due to fluctuations in both quantities and prices,
It appears, however, that the years 1964 to 1966 have been good for palm
kernels, cocoa and coffee. This, combined with the continued increase of
phosphates exports, accounts for the record levels of total exports for the
last three years. Quantities exported of the two key agricultural products
are shown below. It is estimated that since 1961 Ghanaian cocoa may account
for one-half of the total quantities nominally exported by Togo.
Table 5 3
Cocoa and Coffee
Average
1956-59   1960     1961    1962    1963    1964    1965     1966
Cocoa (tons)   5730      9414   11534   11080   10263    13488   17513   17124
Coffee (tons)   7150     4395   10230   11541    6223    16140   10650   13227
Source:  B.{letin de Statistique No. 1, 1967, and Annuaire Retrospectif du
Cu;..znerce Special, numero Special, undatcd.
Togo's quota is not directly fixed under the International Coffee Agreement
but through flexible arrangements made between the African French-speaking
countries which in turn have an overall quota under ICA. Being a small
country, Togo has had no difficulty in marketing its production.
84.   Exports of other agricultural products are so far of minor importance.
However, there are encouraging prospects for palm oil and cotton. Products
not shown in Tables 5.2 and 5.3 include copra whose production is declining
sharply because of the Kainkope' disease (3,000 tons in 1963, less than 1,000
tons in 1966); groundnuts (between 2,000 and 3,000 tons); cassava starch
(down from 5,350 tons in 1960 to 134 tons in 1966); and various food crops
exported to Ghana and Dahomey in unknown amounts.



_ 28 -
Imports
85.   Imports have apparently increased in two steps:   from the pre-independence
average (1956-59) until 1963 there has been a rough doubling, followed, from
that year up to 1966, by an increase of around 60%, making the average for
1964-66 3.3 times above that of 1956-59. The increase of GDP, which may have
been on the order of 60% over the period 1956-59 to 1966, certainly does not
explain adequately the growth of imports, however high the "normal" elasti-
city of imports may be.
36.   More specific factors, some transitory, are involved.    First, the
increase in foreign aid with its high import content from an annual rate of
around CFAF 500 million before 1960 to one about three times higher in the
subsequent period is probably the more permanent of those specific factors.
Second, the growth of exports, has meant more money income of people with
high marginal import propensities, including the farmers.    1965 and 1966 have
meant a level of income for cocoa and coffee producers about 50% higher than
in the pre-1960 period. On the other hand, perhaps, one-half of the gross
value of phosphates leads to direct increase in taxes and other local payments.,
Third, government expenditure has more than doubled between 1960 and 1966.
About 40% is on material, most of which is imported.    The remaining 60% spent
on salaries goes to persons whose consumption patterns also include a high
proportion of imported goods. Fourth, some very important investment projects
have been executed in recent years (in addition to the aid already mentioned):
construction of the Port of Lome', the textile mill, the brewery, etc. implying
in the first instance, imports of heavy machinery, construction materials,
etc. In 1960 and in 1965 investment in the phosphates mine had induced also
a sharp increase in machinery imports. Finally, not easily quantifiable but
nonetheless certain have been the effects of increased tariffs and import
taxes in Dahomey and Ghana and the deterioration of the latter's currency.
These developments divert quickly imports of consumers goods into Togo with
a parallel movement of unrecorded re-exports to both Ghana and Dahomey. The
composition of imports by main categories throws some light on the influences
described above (see Appendix - Tables 16 to 18).
37.   The deficit of the trade balance is still more difficult to appraise
ithan the exports and imports themselves in view of the kind and size of the
corrections which should be made. As it is generally agreed, however, that
exports over the period are more undervalued than imports it is reasonable
ito conclude (but at the same time impossible to prove) that (i) the trade
deficit is smaller than officially recorded; (ii) in all probability there
was a deficit in every year; (iii) it has tended to diminish as a proportion
of total imports. This is suggested by the sharp increase in external assets
(see Table 4.1) which could probably not have taken place solely as a result
of larger capital inflows.



- 29 -
Export and Import Prices
88.   There are no indexes of import prices and only partial ones of export
prices, hence the terms of trade are not known, and their trend is difficult
to assess. According to figures computed by the IMF'F (see international
Financial Statistics) the combined index of the prices of cocoa, coffee,
palm kernels and cotton is as shown below (using 1958 weights). The index
of phosphates prices, as given by CTMB, is shown also:
Table 5.4
Index of Some Export Prices
1960    1961    1962     1963    1964    1965      19'6
(2nd Quarter)
(1) Four corrmodi-
ties        122       100      99     104     114     115        107
(2) Phosphates      -       100      99      94      99      105       117
Note: 1961 has been taken as basis because it is the first year in which
phosphates were exported.
Source: (1) IFS, April 1967.
(2) BCEAO, Monthly Bulletin, April 1967.
Since phosphates exports have increased their share from zero before 1961
to 42% in 1966, "export prices" have certainly not fallen between 1961 and
1966, but a comparison with 1960 allows no obvious answers. On the other
side, import prices have almost certainly not declined over the period, as
most of them come from industrial countries where prices have increased in
various degrees. As an indirect indication of this, it may be noted that
the index of consumer prices at Lome for a "standard" European family has
increased by 20% from May 1961 to the end of 1966. Finally, the evidence
available does not suggest that there has been any spectacular deterioration
in the terms of trade as is often claimed in Togo (in particular, by comparing
present prices to the high export prices of 1954).
]Direction of Trade and Commercial Policy
89.   The major change in the geographical distribution of exports (see
Appendix - Table 21) is the declining share of the Franc area (in which France



- 30 -
itself represents over 90%) although in absolute terms there is an increase
since 1964. This is mainly due to (i) the increasing ease of exports into
EEC countries other than France, with which Togo is associated, and (ii)
the fact that the market for phosphates is widely diversified (in 1966:
28% went to France, 24% to the Netherlands, 20% to Australia, 10% to Japan,
etc.). On the basis of official statistics, the share of other African
countries is small, hardly exceeding 5%. Corrections made for 1965 (BCEAO)
show however that as much as 14% of actual exports may go to these countries,
of which about CFAF 230 million were recorded and CFAF 1 billion unrecorded
exports.
90.   The decline in the percentage of imports (see Appendix-Table 22) from
the Franc area and France after 1960 is not due to changes in tariff prefer-
ences, since Togo, as a mandated territory before 1960 and later-as an
independent country, has never discriminated among countries. The exchange
restrictiorns of the whole Franc area were applied, however. The increase of
the EEC countries other than France, among which West Germany is by far the
most important, is due primarily to imports induced by FED operations, and
more especially in 1964 and 1965 by those projects directly financed by
Germany (port, brewery, textile mill). The most striking feature, however,
is the growth of imports from Japan, which reached CFAF 1.4 billion in 1965,
(or 12.5% of total imports), more than 85% of which were cotton goods. In
order to protect the Dadja textile mill, textile traders now must buy one
yard of fabric from the mill before being granted a license to import two
yards from Japan. This is the only significant quantitative restriction now
existing on Togolese imports.
91.   Not only are customs duties proper lower than in the other countries
of the West African customs union, but so are other (internal) import taxes
and, particularly, the "taxe forfaitaire representative de la taxe sur les
transactions" (TFRTT) in spite of its increase from 15.75% to 17% in 1966.
Thus, total real import duties are lower.   This, of course, is the reason
for the impori-ant flow of "clandestine" re-exports to Dahomey and Ghana (where-
as prior to 1960-61 the flow was from Ghana to Togo). This situation, which
is obviously to the advantage of Togo, is presently criticized by other
countries on the grounds that (i) the termination of the mandate status since
independence removes the legal justification for low tariffs, and (ii) it is
against the aims of "harmonization" nominally pursued by the group of former
French territories and more specially by the Entente countries (Dahomey, Ivory
Coast, Niger, Upper Volta and Togo). The non-discriminatory policy of Togo
is presently also questioned by EEC, which is pressing the government to intro-
duce some tariff preference in its favor in accordance with the 1962 Yaounde
convention of association between the Common Market and the African countries.
92.   Export taxes on cocoa are 7.5% and 12% on coffee, the two main agri-
cultural commodities.   To this must be added the TFRTT of 6.5% (5.5% prior



- 31 -
to 1966) and other miscellaneous taxes amounting to 2.5%. But the basis
for calculation of the tax is variable: it is the F.O.B. price (for the
TFRTT), or the conventional export price ("valeur mercuriale") which
normally is below the FOO.B. price for export taxes proper../ Taxes on
phosphates are progressive, according to tonnage exported, and amount to
a weighted average of 4.05% of one million tons of such exports. Of course,
the profits made by OPAT and attributable to the lowq prices paid to producers
combined with the relatively high export prices have a high taxation content
(see Chapter III). Togo, therefore, appears as a case of low import and high
export taxation.
Overall Balance of Payments
93.   Except for 1965 there are no estimates in the overall balance of
payments and the 1965 estimate2/has still a large "errors and omissions"
item. The summarized results are shown on the following page.
94.   The information provided by the estimates of balance of payments (see
Appendix Table 19) throwslight on some structural features of the country's
external transactions.   It is likely that Togo had (i) a trade deficit througi-
out the period, although smaller than shown by official statistics (Table
5.1); (ii) a more or less balanced account on services due to "government"
and "miscellaneous" transactions; (iii) a deficit on investment income account,
a sizeable part of which is probably due to transfer of profits and amortiza-
tion by the phosphate mine company; (iv) some compensatory net inflow on
account of military and civil pensions paid to Togolese citizens by France,
while other public transactions on current account more or less cancel each
other; (v) and, of course, an important inflow of public grants (investment
and technical assistance counterpart funds) which goes to improve the "basic
balance" (A + B, Table 15.5). (vi) finally, in addition to grants-in-aid,
Togo has received important long-term loans (see Appendix - Tables 8 and 9)
for a total of CFAF 1.9 billion as estimated in the 1965 balance of payments.
These inflows of long-term capital have thus further contributed to a positive
basic balance, which showed a surplus of CFAF 300 million in 1965.
95.   The servicing of the foreign public debt, on the basis of loans receive;~
until January 1, 1967, will become important in 1969 and 1970 when it reaches
a maximum of nearly CFAF 330 million. This is still only 3.7% of 1966 expottc
receipts. Actual service in 1966 amounts to CFAF 158.5 million, or 1.8%
of recorded exports.
1/ Example: "mercuriale" for cocoa in 1966/67 is CFAF 60,000/ton, as
against an F.O.B. average price of over CFAF 80,000/ton.
2/ The study, which is still provisional, has been made available by
BCEAO. Balance des Paiements - Togo - Annee 1965, undated.



- 32 -
Table 5.5
Provisional Estimates of Balance of Payments - 1965
(In Billion CFA francs)
Credit       Debit      Balance
A.  Goods, Services and Transfers
Exports-Imports                         8.4         11.8       -3.4
Services                                1.9          1.9        0.0
Factors income                          0.1          1.4       -1.3
Private transfers on current account    0.5          0.1       +0.4
Public transfers on current account     3.4%/        0.1       +3.3
Total A                             14.3         15.3       -1.0
B. Capital movements: Non-Monetary
Private capital                         1.1          0.6       +0.5
Public capital                          0.8          _         +0.8
Total B                              1.9          0.6       +1.3
Total A + B                         16.2         15.9       +0.3
C. Monetary sector
Commercial banks                        0.2          0.5       -0.3
Central bank                             -           1.5       -1.5
Total C                              0.2          2.0       -1.8
Errors and omissions                    1.5
Total A + B + C                     17.9         17.9
1/ Of which CFAF 1.9 billion are investment grants and the rest goods and
counterpart value of technical assistance.
Source: BCEAO.



- 33 -
Balance of Payments with Non-Franc area
96.   The most important feature of the balance of payments with non-
Franc area countries is the increase of the volume of trnnsactions (see
Appendix - Table 20). Easing of exchange controls of the Franc area, and
the diversification of markets, mainly for phosphates, account for the
growth of trade transactions, whereas the emergence of EEC and Germany as
the main new donors and lenders after 1960 is responsible for larger
transfers and capital movements. The outcome of overall transactions has
never resulted in significant losses of non-franc currencies. Gains in
such currencies have appeared lately as the result of the non-franc grants
and loans mentioned previously and because debt repayments will not become
important until 1969 or 1970.
External Aid
97.   Prior to 1960 foreign aid came almost exclusively from France.    Direct
aid to investment projects averaged CFAF 400 million a year over the period
1947-1959. Since then, other combined contributions from FED (European
Common Market), USA, West Germany, UN, etc. have corne to exceed greatly that
of France.
Table 5.6
Estimate of Public Grants from Main Sources-/ U262-6_)
(In Million CFAF Francs)
1960     1961      1962     1963     1964     1965      1966
400      700     1,780    1,500    1,300    1,75oa    1,500
1/ FAC, FED, USA, West Germany. Military aid and technical assistance
excluded.
2/ As against 1,980 estimated in the balance of payments for 1965.
Source: See Annex V on External Aid.
98.   Long-term loans on soft terms include mainly the German loan for
the Port of Lome contracted in two "tranches" (1963 and 1967) for an amount
of DM 67.8 million (or CFAF 4.3 billion), a German loan of DM 5.2 million
(CFAF 320 million) in March 1966 for a water supply at Sokode', a consolidated
loan by CCCE of CFAF 1.4 billion, mostly on account of pre-1960 operations,
various other loans by CCCE to the government and to local authorities
(CFAF 131 million) over the period 1960-66, and advances to Cre'dit du Togo
also by CCCE (CFAF 1.7 billion over the period).



- 34 -
Conclusions and Problems
99.   Since independence, Togo's external trade has greatly expanded and
its trade deficit has probably diminished as a proportion of total imports
and not increased in absolute terms. Imports have grown irregularly under
the influence of specific factors, mainly large individual investment projects,
and demand from neighboring countries for re-exports. Exports of agricultural
products have grown irregularly, but exports of phosphates, now the major
item in exports, have increased steadily.
100. The policy of comparatively high export and low import taxation has
been successful in inducing a high level of imports as a taxable basis, in
increasing re-exports and in introducing a high deg:ee of financial and
monetary ease into the economy. But it has the immediate shortcoming that
it rests heavily on the peasants' willingness to accept low producer prices.
This willingness is enhanced by the incentive of low prices of imported goods,
but it has its limits.
101. Over the period 1960-66 the inflow of foreign capital--for the
greater part public grants-in-aid from France and EEC--has meant an "easy"
balance of payments, the more so as the servicing of the foreign debt has
remained a very modest burden. At the same time the external position of
the country, as well as its overall monetary situation, find their funda-
mental strength in the institutional framework of the West African Monetary
Union.
VI. PROSPECTS AND PROJECTIONS
A.  The 1966-1970 Development Plan-I
102. The planners observe that of the public investments made in the pre-
independence period too little was allocated to studies (2%) and the rural
economy (17%). On the other side, the high proportion devoted to the social
sector (30%) has resulted in increased recurrent cost to the budget, whereas
the large investments made in necessary infrastructure (51%) have been partil,
wasted by lack of proper maintenance.
1/ See Republique Togolaise, Plan de Developpement Economigue et Social
1966-1970, 1965, 1 vol, pp VI + 221 and 9 Annex volumes on particular
sectors and on technical matters.



- 35 -
The 1966-1970 Investment Program
103. Against this background the proposed pattern of investment puts the
stress on (i) radical improvement of infrastructure, and to a lesser extent
(ii) the productive sector (see Table 6.1).
Table 6.1
Investment Targets 1966-70
(In Millions of CFA francs)
Public    Private     Total       %
Transport and communications           8,206     2,100     10,306     36.0
Town planning and housing              1,734     2,800      4,534     16.0
Rural economy                          5,141       800      5,941     21.G
Industry and commerce                  1,416     2,400      3,816     13.0
Education                              1,336       300      1,636      5 5
Health                                 1,195       140      1,335      4.5
Administration and other              1,024         -       1,024      4.0
Total                                 20,052     8,540     28,592    100.0
Source: Development Plan 1966-70.
The annual average of fixed capital formation over the Five-Year period,
1966-1970, would be CFAF 4 billion public, CFAF 1.7 billion private, and
CFAF 5.7 billion total. This is very much equivalent to the estimated
average for the three years 1963, 1964 and 1965. The target for invest-
ment thus implied appears a possible one, a priori. 3ut in a small
economy such as Togo's an appraisal of aggregate targets is not sufficient
since the whole outcome may depend on whether one or a small number of
individual projects will, or will not, be realized; change is discrete,
not continuous.
Investment Expenditures in 1966-67
104. The revised investment target for the public sector in 1966 (CFAF 4,738
million as:against CFAF 4,650 million originally forecast) had not been
reached as of December 31, 1966. As much as 84% of the financing was obtained
or practically committed, but only 42% (CFAF 1961 million) of the target had



- 36 -
been actually spent on finished projects and 23% (CFAF 1,090 million) was
on projects still underway. A great proportion of the 1966 operations had
been started previously. The Pbrt of Lom6 (over CFAF 700 million spent in
1966) is the major case in point. The lagging sectors are those of public
works (66% of available funds spent in 1966) and still more agriculture
(6% of available funds spent in 1966 although work has commenced on a
wider front than this figure suggests).
105.   This points to two of the most serious bottlenecks in the entire
planning process. The first are delays in preparing and executing agri-
cultural projects and the present inadequacy of the recently established
SORAD's. Y/ In fact, the Plan Office itself, instead of the Agriculture
Department and the Provincial Services, has had to prepare the development
programs for the regions, a task for which it is not suffficiently staffed
in spite of the high level of the small number of responsible officials
working on it. The second is the necessity of planning the financing withoat
an adequate idea of the previous years and budgets and with the idea of
committing funds that are in fact fictitious. At the beginning of 1967,
it is claimed, nearly 80% of the financing scheduled for this year had been
"obtained" (i.e., CFAF 4t,047 million out of a CFAF 5,125 million target).
But this includes CFAF 570 million from the government investment budget,
whose financing at the date was purely hypothetical. 2/    Actual funds
committed therefore amount to only 68% of the objective.
Results Expected for 1970
106.   The increase in GDP expected from the investment program is
estimated at CFAF 11.7 billion in 1970 over the estimated level of 1965,3/
equal to 31.5% or to 5.6% per annum, over the 1966-1970 period.   Main
sectors expected to increase by more than this average are industry,
excluding CTMB, but including power (104%), CTMB (60%), road transport
(35%). Agiiculture will grow only by 25% for the export sector and by
17% for the "traditional" sector.  After allowing for income transfers
abroad, the growth rate of GNP would be slightly less: 30% over the period,
or 5.3% per year. In the Plan only CFAF 6.2 billion, or 53%, of increased
output (for 1970)   is  expected from directly productive   sectors,
agriculture and industry) whereas as much as CFAF 3.1 billion, or
26%, of the increase is to come from commerce and tkmnnpprt;, and CFAF
1.5 billion, or 13%, from the   administrative sector, i.e., from sectors
1/  Societes Regionales d'Amenagement et de D6veloppement.
2/ A "transfer" of CFAF 570 million from the current to the investment
budget is written in the budget estimates for 1967 but at the same
time the overall current-plus-investment budget deficit is forecast
at CFAF 615.5 million (see Chapter III and Annex IV).
3/  The GDF for 1965 as estimated in the Plan at the moment when it was
being prepared (1965/66) a time when the 1963 and 1964 estimates were
not available is lower than the Mission's estimate made with the
assistance of the National Accounts Unit of the Statistical Office.



- 37 -
whose performance is dependent upon the success of the productive sectors
themselves. Thus the incremental gross domestic product will not tend to
enlarge the share of the directly productive sectors relatively to the
present situation. This, however, is also a feature of the Mission's
own projection. It is to be explained essentially by the absence, at the
moment, of major high yielding projects in agriculture, by the high degree
of uncertainty as regards possible industrial projects and by the necessity
of improving the country's infrastructure and hence to invest heavily in
this sector.
Financing of Investment
107. The Plan envisages financing public investments as follows:
Table 6.2
Financing of the Public Investment Program 1966-70
(In Millions CFA francs)
Local
External     External     Public
Loans       Grants     Resources     Total
Administration                     --            164         876         840
Transport and communications     2,969         3,609       1,628       8,206
Towns and housing                  919           718          97       1,734
Social                             -           2,400         315       2,715
Rural economy                      262         4,843          36       5,141
Industry and mines                 390           369         511       1,2?0
Commerce                           -             -           146         146
Total                   4,540        12 103      3 409       20,052
Source: Development Plan 1966-70.
The  target  for  local   resources  is  reasonable   in  view  of  the
level  of  public   sevin;-s  achieved  in recent  y3ars.     In   the
i"ission's vrieu, hoie:er it is not likely that tax rac 'ints will represent
virtually all or the increased revenue. To reach the expected level of
CFAF 7.7 billion of total government current revenue by 1970, it will probably
be necessary for the government to use OPAT's funds and therefore for OPAT
to maintain a high level of profits. On the other side, the expected level
of external grants is probably optimistic since it means an annual average of
CFAF 2.5 billion as against an average of the order of CFAF 1.5 billion over
the period 1961-65. Besides, there has not been any significant increase of
this kind of aid in the years since independence.



- 3 8 -
108,  The sectoral distribution of the various financial resour-es as
envisaged by the Plan is difficult to appraise meaningfully. A striking
feature, however, is that virtually no local public resources have been
allocated to investments in agriculture. This structure of financing
gives an uncomfortable impression. It is certainly strange that such an
important sector, which more than any other is the typically "local"
sector, should be in the planners' view so overwhelmingly dependent on
foreign goodwill. And should grants fail to be forthcoming in the expected
amounts it is more than likely that agriculture will suffer most.
109. The contribution from private sources (CFAF 8.5 billion for the
period 1966-70) is, of course, purely tentative. The greater part is to
go into housebuilding (CFAF 2.8 billion) and transport equipment (CFAF 2.1
billion), two sectors where finance may well be forthcoming without great
difficulty. The CFAF 2.1 billion foreseen from existing (CFAF 1 billion)
or new (CFAF 1.15 billion) industrial and commercial enterprises depends
entirely upon the profitability outlook. The extension of the brewery (for
CFAF 180 million) in 1967 and, perhaps, a 10,000 ton fertilizer plant by
CTMB (for about CFAF 260 million), together with the (non-profitable) cassava
starch factory to be expanded, were the only notable operations in view in
May 1967 for the Plan period.
B. General Prospects and Mission Projections7
110. Delays in starting the plan operations will in all probability not
allow the overall targets for 1970 to be reached. The rate of growth of
GDP will, therefore, be somewhat lower than forecast by the planners.
Table 6.3
Mission Prolection of GDP By Sectoral Origins
(In Billion CFA francs)
Base Average
1964-66        1970
Agriculture                                   19.7         22.4
Extractive industry                            4.1          4.5
Manufacturing                                  2.0          2.6
Construction                                   1.5          1.5
Electricity, water                             1.0          1.6
Transport                                      2.7          3.3
Commerce                                       8.2          9.9
House ownership                                1.1          1.6
Government                                     3.2          4.1
Other Services                                 0.9          1.4
Total                                         44.4         52.9
Sources and Notes: See Annex VI.
I! See Annex VI for detailed projections and underlying asSitDtiDTlSo.



- 39 -
The overall growth is thus expected to be 19%., or 3.5% compounded per year
between the 1964-66 average and 1970, and 27% between 1965 (last pre-Plan
year) and 1970, or 5% per year compounded. This coimpares with the Plan
forecast 6f 31.5% or 5.6% per year. In brief, the projections are based
on the assumption of (i) a feasible and, in view of the lack of definite
trend in the past, modest growth of agricultural production, mainly export
crops; (ii) the use of the full capacity of all major industries, both
extractive and manufacturing; (iii) a rather conservative growth of govern-
ment's "production" (i.e., salaries) of 5% per year, implying definite effolts
to slow down the past trend in the growth of Government current expenditures;
(iv) the same amount of gross investment in 1970 as in 1965 .hen a high level
had been attained, which, in view of the lack of major projects for the near
future, is certainly not a pessimistic assumption.1 The overall growth
seems at best lilely to be of the order of 4-5,; per year.   If ijilportant
new industries are set up, and if exports of agricultural products which
are now of only secondary importance can be expanded significantly, the
growth rate might well reach higher levels after 1970.    3ut such industrial!
agricultural expansion is not predictable now.
111. Projection of GDP by use for 1970 are shown below (Table 6.4):
Table 6.4
Mission Projection of GDP by Use
(In Billions of CFA francs)
1965          1970
(Mission's Estimate)
1.  Consumption                         32.2          42.8
2.  Government consumption               3.5           4.5
3.  Gross investment(incl. inventories)10.5            10.5
4.  Exports                              8.4            8.8
5.  Imports                            -11.8          -12.3
6.  Services and factor payments        -1.3           -1.4
abroad  (net)
7.  Total                               41.5           52.9
Sources and Notes:   See Annex VI.
The key accounts implied in the figures of Table 6.4 have been given special.
attention as they point to the strategic conditions for growth and equili-
brium in the future. They are the external, government, and savings-
investment accounts and are summarized on the following page.
1/  It is indeed quite likely that in the intervening years 1967, 1968 and
1969 the level of gross investment will be less than in 1965. The
assumption therefore is that by 1970 the peak level of 1965 will have
been reached again though not necessarily maintained throughout the ?eri d



- 40 -
Table 6.5
Proj,ection,of External Accounts
1965      1970
1. Agricultural exports                                      5.4
2. Phosphates                                     -          3.4
3. Total Exports                                   8.4       8.8
4. Imports                                       -11.8     -12.3
5. Services (net)                                 0.0        0.0
6. Investment income (net)                       -1.3       -1.4
7.  Current balance                              -4.7       -4.9
8.  Private current transfers                     0.4        0.4
9.  Public current transfersI/                    3.3        2.5
10.  Public debt repayment, including interest    -0.1       -0.3
11.  Private capital                               0.5 )
12.  Public capital                                0.9 )      2.3
13.  Money                                        -1.8 )
14.  Errors and omissions                         +1.5 )
1/ Includes CFAF 0.8 billion of military aid in 1965 not included in
1970, and CFAF 0.5 billion of grants in goods and counterpart value
of technical assistance assumed constant.
Source and Notes: 1965: BCEAO, Balance of Payments; 1270: Ainnex VTI.
112. The size of the current deficit which may be somewhat over-estimated
in 1970 (see Annex VI) shows that the amount of external finance (items 8
to 12 of the above balance) necessary for equilibrium should be of the same
order of magnitude as in 1965. No increase has been allowed for in public
(non-military) transfers in view of the mounting reluctance shown by donor
countries to augment this sort of aid.   To fill the "gap"Tovo should therefore
need mostly an increase in foreign public and private loans and investments.
113. The projection of the public sector account is based on a very, and
possibly unrealistically, modest rate of growth of budget current expendi-
tures of about 27% over 1965/66-1970. This is in contrast to the past growth
of 85% between 1960 and 1966. The Mission's estimate is based on the two
assumptions: (i) past rapid growth is mainly the result of accession to
independence and, therefore, should be considered exceptional; (ii) an austere
budgetary policy for the future is essential to a satisfactory rate of growth
of the economy. This has to be strongly emphasized. The reason for this
policy is not fear of inflation. It has a threefold objective: first, to



- 41 -
avoid as far and as long as possible any increase in import taxes (an
increase that the Plan's authors do suggest) for reasons explained
earlior   (see  Chapter V);  second,  to  generate   enough  public
savings to finance the greatest possible proportion of the high investment
rate assumed in 1970; third, to provide enough counterpart funds to attract
external public and private capital.
Table 6.6
Projection of Public Sector Accounts
(In Billions CFAF)
Actual
Average   -lission   Plan
1965-66     1970     1970
Government current expenditure             4.4        6.0      6.6
Government revenue                         5.0        6.8      7.7
Savings by Central Government              0.6       0.8       1.1
Savings by local authorities               0.1       0.1        -
Net profits from public enterprises        0.78       0.6       -
Public savings                             1.48       1.5       -
Sources and Notes:  See Annex VI, Tables 6 and 7.
114. Finally, the aggregate savings-investment balance of the Togolese
economy by 1970 should be very similar in its structure to that of the
recent years (see Annex III) if it is to reach similar absolute levels,
i.e., about CFAF 10.5 billion.   There is, however, the unknown item of
private savings, both from households and from private firms. Not only is
their level very difficult to assess or forecast, but the amount of such
savings transferred abroad even in 1965 is only a guess now, and may vary
widely in the future according to a host of unpredictable circumstances.
The "savings gap" therefore, once a rough estimate is made of future public
grants-in-aid (CFAF 2.5 billion), is a composite amount of internal private
savings plus external public and private (net) capital inflows.



- 42 -
Table 6.7
Projection of Sav        andInvestments
19654/     1970
Gross Investment (including inventories)           10.5       10.5
Inventories (rough estimate)                      (2.4)       (2.4)
Depreciation allowances                             2.7 )     (4.1)
Domestic savings, households and enterprises        2.2 )
Central and local government savings                1.0        0.9
Other public savings                                 -         0.6
Deficit on current account                         4.7        (4.9)
Total (rounded)                                    10.5       10.5
1/ Note that this column refers to 1965, whereas Table 6.6 refers to
the average of 1965 and 1966.
Source: For 1965, see Annex III; for 1970, see Annex VI.
The figures in brackets are residuals to make the aggregate savings and
investment estimates consistent. They imply in substance that internal
private savings and the import surplus in 1970 constitute interdependent
policy targets, any increase in one of them implying a decrease in the other.
The rate of gross domestic savings implied in Table 6.7 is about 10.5% of
GDP, or 53% of gross investment, with external funds financing 47%.    It
would not be very easy for a low-income country to raise domestic savings
above the 10% level very quickly. On the other hand, because Togo is a
small country, the amount of capital inflows required might be achieved
more easily provided enough projects suitable for external financing can
be prepared in time.
115. The servicing of the external public debt represents a small pro-
portion of recorded exports, being less than 2% in 1966. By 1969, when
service on existing debt reaches its maximum (CFAF 330 million), the
proportion will still be small; about 3.75% of projected exports. However,
given the specific arrangements governing the monetary system of the CFA
area within the Franc zone, the problems of debt service and of creditworthi-
ness in general lie rather with the Government budget. No transfer problem
is likely to arise on account of the external balance and of the state of



"external reserves."  The ratio of service of the public external debt
to public current revenue is still modest (2.5% in 1966), and should
remain a little under 5%5 of projected revenue for 1970.  However, the
significance of any increase in debt service lies in its impact on the
Government surplus, though this is still small, debt service (excluding
internal debt which is entirely between Government and other public
agencies) is expected to be equivalent to about 25% of the projected
surplus for 1970. It would thus take very few loans on conventional
terms to increase the burden of the debt beyond manageable limits.
116.   In view of a likely rather tight budgetary situation in the years
ahead, it is not advisable for Togo to let its public debt increase as
rapidly as in the last few years. As has been the case in the past, most
of the debt should be on "soft" terms, commercial borrowing assuming only
a complementary role.  The two decisive actions to be taken by the
Government in order to maintain the inflow of externAal capital without
creating financial difficulties are (i) an improvement in the process of
project identification and preparation and (ii) a budgetary policy con-
ducive to a slow-down in the rate of increase of public current expenditure.