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Ivory Coast - The Economy Role of Government
In addition to its planning role, the government was the largest single investor in the economy. Following independence, the government embarked on an ambitious capital spending program. Much of the capital for government intervention came from the CSSPPA, which fixed producer prices, operated a reserve price stabilization fund, and extracted profits for the state. Much of this investment went toward developing infrastructure and was one of the state's more positive economic contributions in the 1960s.
By the 1970s, although there was no official change of economic policy, the state intervened more directly in the economy, primarily through the creation of parastatals. This surge in the number of parastatals reflected the government's desire to stimulate growth in those areas where the private sector was considered insufficiently active, to create employment for Ivoirians, and to encourage Ivoirians to invest locally. In the case of agricultural parastatals, the state wanted to lessen income disparities between the north and the south, decrease food imports, provide rural employment, and diminish the importance of foreign investment in agriculture. In some instances, social or political objectives superseded the profit motive, as appears to have been the case with parastatals like the Bandama Valley Authority (Autorité du Vallée du Bandama--AVB), which promoted regional development, and the Sugar Development Company (Société de Développement Sucrier--SODESUCRE), which was also responsible for creating jobs and building schools and medical clinics in the savanna region.
All of the parastatals enjoyed relative financial autonomy, although their technical and financial operations were in theory supervised by the government. In fact, there was often little supervision by, or coordination of activities with, other government agencies, perhaps reflecting the fact that top-level managers of some parastatals were often politically well connected. In many instances, the parastatals withheld or otherwise could not produce crucial financial data for planners. Given the absence of governmental oversight and the sometimes vague social and political objectives of the parastatals, they performed badly and in some cases--notably the housing sector--were rife with fraud.
In spite of these shortcomings--or perhaps because of them--the government support of parastatals steadily increased. By 1974 it amounted to more than half of the entire investment budget. Over the same fourteen years, the proportion of investment spending covered by net public savings fell to 37 percent. This imbalance forced the government to borrow extensively from foreign sources to maintain an even level of investment and growth. Between 1965 and 1975, foreign loans rose from 41 percent to 65 percent of investment in parastatals. Moreover, the outstanding debt figures of the public enterprises and the amount of foreign borrowing, which in theory should have been cleared by the National Amortization Fund (Caisse Autonome d'Amortissement--CAA), were not disclosed until an end-of-year report. This process effectively precluded government attempts to control parastatal finances.
Role of government
In spite of its reputation for having liberal, noninterventionist economic policies, the Ivoirian government played a pivotal role in the domestic economy. Acting primarily through the Ministry of Planning and the Ministry of Finance, the government directed fiscal and monetary strategies over the long term and intervened in the short term in response to changing market conditions. The Ministry of Planning was responsible for coordinating long-term development projects, while the Ministry of Finance was responsible for financing annual investment. The technical ministries, such as the Ministry of Mining, the Ministry of Trade, and the Ministry of Industry, were responsible for preparing and implementing projects. The Ministry of Planning played the central role. It mediated between the technical ministries and the public enterprises on the one hand and the Ministry of Finance and the government (in its role as the formulator of economic objectives) on the other hand. The Ministry of Finance translated the government's policy objectives into a set of long-term output and investment targets and an aggregate investment package. The Ministry of Planning and the technical ministries then used the guidelines to undertake those projects that were deemed feasible and would most contribute to achieving the plan's output and investment targets.
Beginning in 1960, the Ministry of Planning prepared a series of ten-year projections. Subsequently, these were replaced by a series of five-year plans that had built into them a three-year "rolling" program called the Loi Programme. The five-year plans formulated the overall objectives, set priorities, and provided a macroeconomic framework for the country's development. The threeyear overlapping Loi Programmes examined individual projects, taking into account progress toward implementation, annual changes in costs, and political impact.
Public spending was handled under two different budgets: the Ordinary Budget (Budget Ordinnaire) for current government expenditures, which were generally covered by domestic revenues, and the Special Investment and Capital Equipment Budget (Budget Special d'Investissement et d'Equipement--BSIE), which partly depended on foreign investment. The BSIE had two parts: the BSIETreasury (BSIE-Tresor or BSIE-T), which was financed by surpluses from the Ordinary Budget, levies on business profits and farm incomes, and borrowing through bonds issued by the CAA; and the BSIE-CAA, which was funded by foreign borrowing.
The size of each budget reflected the state of the economy. The Ordinary Budget grew by an average of more than 20 percent from 1976 to 1980 and then by an average of about 11 percent per year in 1980, 1981, and 1982. By 1983, however, the deteriorating economy and consequent decline in tax receipts prompted the government to implement a series of austerity measures. Cuts were initially limited to the BSIE, which fell from CFA F277.6 billion in 1980 to CFA F239.1 billion in 1984 and then fell dramatically to 101.8 billion in 1985. In 1984 the government cut the Ordinary Budget for the first time, by 1.5 percent from the previous year. The government reduced the number of foreign technical assistants, froze civil service salaries, and sold one-quarter of the official fleet of 12,000 automobiles.
In 1986, after three years of severe austerity, higher commodity prices increased revenues and, in turn, allowed both budgets to expand. Budgeted expenses rose by 8.6 percent, with most of the increase in the BSIE, where allocations were increased by 13.7 percent. More than a third of these allocations went toward a road building plan cofinanced by the World Bank. Agricultural diversification was the second largest beneficiary. A 3.7 percent increase in the Ordinary Budget again permitted civil service promotions following a protracted wage and hiring freeze.
The period of budgetary expansion, however, was brief. In 1987 coffee and cocoa prices again dropped, resulting in a 5.2 percent cut in the 1987 BSIE and an additional 19.8 percent cut in the 1988 BSIE. For the second year in a row, the BSIE did not receive any funds from the CSSPPA, the agency that marketed the bulk of Côte d'Ivoire's coffee and cocoa. In 1987 the largest share of BSIE funding, amounting to CFA F85.8 billion, came from multilateral donor agencies (CFA F44 billion). Bilateral creditors--including France, Japan, Britain, the United States, and the Federal Republic of Germany (West Germany)--provided CFA F16.2 billion, and commercial creditors provided CFA F25.6 billion. Meanwhile, domestically generated revenue for the BSIE was set to increase from the 1987 level of CFA F38.8 billion to CFA F 57.8 billion in 1988. The increase, however, represented only the inclusion of funds previously classified as extrabudgetary.
The 1987 overall budget increased by a modest 4.8 percent and the 1988 budget by 2.6 percent. These increases were primarily the result of an increase in revenue from taxes on income, imports, fuel, agricultural products, and municipality receipts. But because of an annual inflation rate of approximately 7 percent, it was expected that real spending in 1988 would fall. Debt rescheduling agreements did not affect the budget because the government considered debt service to be outside the main budget calculation.
Banking and Finance
Côte d'Ivoire's banking system developed during the colonial period as an extension of the French financial and banking systems. In 1962 Côte d'Ivoire, along with seven other francophone nations, became a member of the West African Monetary Union (Union Monétaire Ouest Africain--UMOA). The UMOA established the Central Bank of West African States (Banque Centrale des Etats de l'Afrique de l'Ouest--BCEAO), which issued the African Financial Community (Communauté Financière Africaine) franc (CFA F), the unit of currency for the member states, and established policies governing interest rates. Also in 1962, France and the members of the UMOA signed an agreement that guaranteed the convertibility of the CFA F to French francs and established operations accounts for each country with the French treasury in order to centralize their reserves. The signatories also agreed to the free circulation of capital within the union. Since 1962 the UMOA has modified its system gradually to grant greater monetary autonomy to the African member states. For example, the UMOA reduced the share of French votes on the board of directors from one-third to one-seventh, transferred the headquarters of the BCEAO from Paris to Dakar, Senegal, and in 1975 introduced changes to increase the managerial presence of Africans in their national economies and to help the member states make better use of their resources.
Domestically, Côte d'Ivoire had the second most sophisticated banking system in sub-Saharan Africa, after South Africa. In 1988 it had twenty-one credit and loan banks (including fifteen commercial banks and six specialized credit banks), nine foreign bank offices with limited activity, sixteen registered credit or leasing institutions, and seven organization similar to credit unions. More than half of bank ownership remained in foreign control: six of the fifteen commercial banks were branches of foreign banks (including three American institutions). Of the fifteen banks with some domestic ownership, Ivoirians (publicly or privately) owned no more than 48.4 percent.
In the late 1980s, the banking system was especially hard hit by the fall in cocoa earnings and the subsequent liquidity crisis. In 1987 the Ivoirian Bank for Construction and Public Works (Banque Ivoirienne de Construction et de Travaux Publics--BICT) and the National Savings and Loan Bank (Banque Nationale d'Epargne et Credit--BNEC) were closed by authorities. In early 1988, the National Agricultural Development Bank (Banque Nationale pour le Développement Agricole--BNDA), which provided credit to peasant farmers, and the Côte d'Ivoire Credit Bank (Crédit de la Côte d'Ivoire--CCI), an industrial development bank, suspended operations. In the case of the BNDA, a politically well connected borrower who owed the bank as much as US$78.9 million was unable to account for the funds he had borrowed.
You can read more regarding this subject on the following websites:
Politics of Ivory Coast - Wikipedia
Ivory Coast Country Studies index
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