Côte d'Ivoire

Côte d'Ivoire has made significant progress, with GDP growth forecasted at +6.5% in 2023. The inflation rate is now among the lowest in the West African area and we expect it to remain relatively stable at roughly 4% in 2023. Average oil production was about 24,000 barrels per day in 2021 and is expected to surpass 200,000bpd by 2025, equivalent to more than USD5bn on an annual basis. However, the economic upturn has been driven by exports, particularly of cocoa and commodities, and infrastructure investment, revealing disparities vis-à-vis the economy's other sectors.

The fiscal profile remains manageable, albeit with increasing pressure on liquidity. Both capital and current government spending rose by +20% y/y in January-October 2022. Total expenditure and net loans are increasing faster than revenue, owing primarily to capital and operating expenditure, but also to debt servicing (15.9% of domestic revenue, up from 13% in 2021). Capital expenditure increased as a result of faster work on infrastructure projects, mostly related to the hosting of the African football cup, but also university and school construction projects. Operating expenses increased as a result of government initiatives to mitigate the economic impact of the war in Ukraine by assisting the energy, bakery and transportation industries. Interest payments increased as well, which has been ascribed to Eurobond payments as well as greater domestic debt payments. At the same time, transfers and subsidies, as well as security spending, fell because of the high base in 2021, when the government supported the economy throughout the pandemic and elections were held.

The most recent civil war was fought in 2011 for four months after a controversial presidential election in which the then opposition candidate, current President Ouattara, was declared the winner by the electoral commission. This was not followed by an orderly transfer of power as the Constitutional Council invalidated the results and declared the outgoing president elected. French military support was provided to Ouattara to achieve victory. The previous civil war (2002-2007) also began after a disputed presidential election, which remains the greatest point of tension in the country. The next round of the presidential election is expected in 2025, but local elections scheduled for October-November this year could also spark tensions across the country. Following the decision by neighboring Burkina Faso to halt military assistance from France, troops deployed in the country are being partially relocated to Côte d'Ivoire, which is positioned to become a major player in the regional fight against insurgents and benefit from enhanced protection at sea in the fight against illegal fishing, drug trafficking and piracy.

Resource protection and management is also coming to the fore. It is clear that there is a desire to gain more control over natural resources and boost local processing. Policy and contract changes are unlikely to be drastic, although stricter local-content requirements, requests for larger production shares and increased taxation and/or regulation are anticipated in the short- to medium-term. Cocoa importers have been under increasing pressure to give guaranteed cocoa prices in order for the government to determine a farmgate price that encourages smallholders to continue cultivating cocoa rather than switching to other commodities. Côte d'Ivoire and neighboring Ghana launched the Sustainable Cocoa Initiative in 2018;  the two nations account for nearly two-thirds of global production. One major goal has been to require firms to pay farmers a Living Income Differential (LID) premium. Côte d'Ivoire has threatened to withdraw from sustainability efforts and has named corporations that it believes are attempting to dodge the LID. The government imposed a new “country premium” in July 2022 and issued an ultimatum in November 2022 to enterprises accused of failing to pay these fees. Following that, it agreed to give companies more time to meet its demands, indicating a reluctance to impose strict enforcement. Premium demands are anticipated to increase if Cameroon and Nigeria join the Sustainable Cocoa Initiative after lengthy talks. Their inclusion would increase the group's share of global supply to around 75%, giving them more bargaining power as the dominant source of supply.

Since 2021, the government has also attempted to allocate at least 20% of national production to Ivorian exporters. This endeavor, however, has been hampered by the fact that most indigenous enterprises lack sufficient financial resources to deal with major swings in world cocoa prices. Recently, poor crop yields due to lower production rates in the major harvest season between October 2022 and March 2023 have prompted smaller local producers to warn of supply contract-default risks due to a lack of adequate stockpiles. Against this backdrop of domestic weakness, the international corporations that dominate the Ivorian market are unlikely to see a reduction in their share of beans for export in the immediate future.