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Cote d’Ivoire ‘s debt relief programme with the International
Monetary Fund (IMF), which was nearly completed before the country plunged into
war, will have to be scrapped and started all over again – and the earliest it
could resume would be mid-2012, two sources familiar with the matter said on
Friday.

Last year, the West African state was on the verge of completing
a programme for $3 billion of debt relief from the IMF and the World Bank,
under the Heavily Indebted Poor Countries (HIPC) scheme.

The progress had been closely monitored by foreign investors,
especially in the country’s $2.3 billion Eurobond, Africa’s biggest, which was
expected to rally on completion of the debt relief programme, which had been
scheduled for around July this year.

But a November election meant to reunite the country, instead
reignited its armed conflict, when former President Laurent Gbagbo refused to
step down until eventually captured by troops loyal to his rival Alassane
Ouattara.

Ouattara, a former IMF deputy director who was sworn in as
president in last week, must now fix an economy wrecked by months of stalemate,
economic sanctions and urban warfare.

His government must also renegotiate debt relief with donors
from scratch, two sources familiar with the matter said.

“The debt relief programme is cancelled. We’re starting from
scratch,” one of the sources, who is close to the negotiations but could not be
identified, told Reuters.

“Everything they did in previous years was based on targets that
no longer apply. … How much tax revenue will they make next month? Normally
that would be an easy question, not now.” The source said it was possible they
could reach completion by mid-2012 but that meeting conditions by then would be
tight.

“Scrapped completely”

At the time of the last IMF review of Cote d’Ivoire’s programme,
the Finance Ministry forecasted four percent growth for 2011. It now expects
the economy to shrink by between one and three percent, a forecast that most
analysts think is far too optimistic.

Officials at the ministry were not available for comment.

The IMF, in a document it published in April, projected the
Ivorian economy to shrink by 7.6 percent in 2011.

IMF documents from last year show that previous negotiations
depended heavily on meeting tight economic and fiscal targets and weighting
spending towards a detailed poverty reduction strategy, all of which now needs
to be reviewed.

Some officials think output may have halved in the past three
months, as cocoa exports dried up and banks shut.

A fresh start is implied in a Thursday IMF press release.

The release said an IMF mission would visit Cote d’Ivoire from
May 18 to June 1 to “assess the economic situation and discuss with the
authorities policies that could be supported by a loan under the fund’s Rapid
Credit Facility,” which would help it meet “urgent needs, including to restore
public services.” Use of this facility implies an emergency situation that is
not conducive to the stringent requirements of HIPC.

“It’s a bit surprising,” said Samir Gadio, emerging market
strategist at Standard Bank. “The assumption was that there would be a disruption
in the programme but that at the end of the day it would be a delay, not
scrapped completely.” The setback, however, is unlikely to have an impact on
Cote d’Ivoire‘s ability to meet its Eurobond coupon payments.

It will get interim debt relief on better terms and the IMF is
likely to agree an emergency credit facility of $100 million.

Cote d’Ivoire owes $58 million in coupons in June, including one
it defaulted on in January, but analysts say it can pay it.

“Paying them is not going to have a significant impact on
finances, but not paying them is going to have an impact on Ouattara’s
relations with creditors,” Gadio said.

REUTERS