ABIDJAN: Ivory Coast has slashed its 2017 budget due to plummeting cocoa prices, its president said on Thursday, shoring up state coffers also depleted by wage demands from civil servants and discontented soldiers.
Ivory Coast, the world's top cocoa exporter, has emerged as one of the fastest growing developing economies in the aftermath of a 2011 civil war, drawing the interest of international investors.
But President Alassane Ouattara said the sharp drop in cocoa prices, which is also the West African country's main export, meant spending plans for next year would have to be scaled back by a tenth, according to comments reported by national newspapers Le Patriote.
A wave of defaults by Ivory Coast cocoa exporters and higher than expected production has left a glut. Those that remain are now rejecting large volumes of beans because of poor quality as farmers seek to blend leftover main-crop cocoa into new mid-crop arrivals, exporters and merchants said on Thursday.
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 daily 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.
Cocoa futures have plummeted since last year on the back of bumper crops around the world and stagnant demand. They continued their slide on Thursday, a day after New York cocoa slumped to a 9-1/2-year low, while the London market dropped to its lowest since 2013.
KEEPING THE IMF SWEET
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, demanding back wages they said they were owed.
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, the government is still expected to seek an increase in lending under its programme with the IMF, currently worth $659 million over three years.
It is also weighing the option of tapping the international debt market.
"(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."
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