April 20, 2017 / 10:07 AM / 3 years ago

UPDATE 3-Hit by falling cocoa prices, Ivory Coast slashes budget

* Cocoa futures hit multi-year lows

* Ivory Coast is world’s top cocoa exporter

* Budget squeeze worsened by army mutinies, social unrest

* Ivory Coast has been Africa’s stand-out economy (Adds details, Q1 tax revenue figure)

By Loucoumane Coulibaly and Joe Bavier

ABIDJAN, April 20 (Reuters) - Ivory Coast has slashed its 2017 budget due to plummeting cocoa prices, its president said in comments reported in national media on Thursday, as it seeks to shore up state coffers also under pressure following payouts to disgruntled soldiers.

Ivory Coast, the world’s top cocoa exporter, has emerged from a decade-long political crisis capped by a 2011 civil war as Africa’s fastest growing economy, drawing the interest of international investors.

But President Alassane Ouattara said the sharp drop in global prices for cocoa meant spending plans for next year would have to be scaled back by a tenth, according to comments reported by national newspapers.

Bumper cocoa crops in producer countries including Ivory Coast, the world’s top grower of the chocolate ingredient, have sent prices tumbling since last year.

New York cocoa futures slumped to a 9-1/2 year low on Thursday while London prices slid to the weakest levels in more than four years.

Ouattara, in a speech at the presidency, said the decision to cut spending was taken during an International Monetary Fund (IMF) visit this month, according to excerpts published by Le Patriote.

“Excluding salaries, we were obliged to reduce spending by 10 percent. All the ministries will tell you their budgets have been reduced by 5 to 10 percent,” Ouattara said, adding that infrastructure would also be hit.

Two other national newspapers, Le Nouveau Reveil and Fraternite Matin, carried similar comments from the president.


On top of the fiscal impact of the drop in cocoa prices, government employees went on strike for weeks earlier this year to protest pension reforms and demand over $400 million in back wages they said they were owed.

The government is currently in talks with public sector unions, though a final deal has not yet been agreed.

A wave of army mutinies, meanwhile, engulfed military camps across the country, forcing the government to agree to pay bonuses of 12 million CFA francs each to some 8,400 former rebel fighters - a deal with a total price tag of around $160 million.

Ouattara said the investment budget was included in the 2017 cuts and would be reduced by 10 percent, or about 200 billion CFA francs ($320 million).

“When we feel obliged to ... reduce essential spending in this way, it is not pleasant,” Le Patriote quoted him as saying. “These are schools, health centres, dispensaries, cultural centres, roads, drinking wells in some villages that will not be built.”

Despite the cuts and news on Thursday that the Ivorian tax authority beat its first-quarter target by raising nearly 470 billion CFA francs in tax revenues, the government is still expected to seek an increase in lending under its IMF programme.

The programme is currently worth $659 million over three years. It is unclear how much additional funding Ouattara’s government will request.

Having issued two eurobonds since the end of the civil war, Ivory Coast is weighing the option of tapping the international debt market again.

“(Ivory Coast) needs to keep the IMF on board at a time when army mutinies have pressured the budget,” said Charles Robertson, Global Chief Economist for Renaissance Capital.

“The reality is that benefits of investment take time. And the budget is under pressure today.” (Writing by Joe Bavier; Editing by John Stonestreet and Hugh Lawson)

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