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- This year deficit seen at 4.5%, 0.6pps above the initial target on higher interest, subsidy payments
- These will be partly offset by spending cuts, revenue projection maintained unchanged
- Govt remains committed to boosting revenue collection, rationalizing expenditure, including gradual withdrawal of fuel subsidies
- Program likely aligned with IMF, though staff level agreement yet to be reached
- Oil output from Sangomar seen at 11.7mn barrels this year, following first oil on 11 June
The government published the new 3-year fiscal framework, covering 2025 – 2027. In the framework, which is the debut one for the new administration, the government will target a significant reduction of the fiscal deficit to 3% of GDP in 2025. The framework should be endorsed by the cabinet, then submitted to Parliament.
2024 supplementary budget
The deficit for the current year is projected at 4.5% of GDP, 0.6pps above the initial budget target. The increase should be endorsed within a supplementary budget.
The higher deficit comes on the back of projections that debt interest payments and energy subsidies will turn out higher than initially budgeted. Debt interest payments are seen exceeding the budget by XOF 70bn, and subsidies – by XOF 290bn. The latter reflects a decision to keep pump prices unchanged even though oil prices have remained above the budget assumption. Higher spending on interest payments and subsidies will be partly offset by expenditure measures, including cuts in spending on goods and services, transfers, and infrastructure projects. On the revenue side, the projection will be maintained unchanged, despite the downward revision in nominal GDP driven by the delayed start of oil and gas production.
Growth and CA balance projections
The medium term framework assumes growth will pick up to to 7.3% this year, albeit down from an initial projection of 9.2%, reflecting the later start of oil and gas production, as well as a slowdown in non-oil activity. Following the few months delay in the start of oil production, oil output this year is seen at 11.9mn barrels, down from 15.3mn projected within the initial budget last November. Non-oil growth will be negatively affected by reduced infrastructure spending, which will weigh down on the the construction and building materials sectors. In 2025-2027, growth is expected to average 6.4% in the forecast period, with a peak of 9.7% in 2025.
On the external front, the CA deficit is seen contracting to 13.6% of GDP (XOF 2,838bn) this year from 18.9% in the previous one. The capital account is projected to strengthen by 143.5 billion FCFA, reaching 264.7 billion FCFA in 2024, and the financial account – to show a reduction in net liabilities by XOF 808bn in 2024, reflecting decreases in FDI and other investment (respectively XOF 530bn and XOF 595bn), partly offset by XOF 318bn increase in portfolio investment. As a result, the overall balance of payment is projected at a surplus of XOF 107bn. In 2025-2027, the CA balance is expected to average 4.4% of GDP.
Debt stock
Govt’s outstanding debt stock stood at XOF 13,723bn at end-2023, up by 17% y/y, according to the document. In terms of ratio to GDP, the debt stock climbed to 73.7% at end-2023, from 68.2% at end-2022. External (foreign currency denominated) debt rose by 13% y/y to XOF 10,503bn (56% of the debt stock), while domestic debt rose by 31% y/y to XOF 3,270bn.
Oil sector developments
GTA gas project: despite experiencing some difficulties and disruption, the progress of this project is estimated at 92% as of end-April. Production is now seen starting in Q4 2024, and the first commercial sales – in Q1 2025.
Sangomar oil project: Production started on 11 June, and is seen at 11.7mn barrels, of which 4.34mn will be intended for the domestic market. The first commercial cargo is expected in early July this year.
Petrosen’s contribution to development costs is expected to be approximately USD 756mn, of which USD 450mn have been funded by a loan from Woodside, while the remainder has been mobilized by the state. Following an increase in phase 1 cost estimates, announced mid-2023, the govt will have to mobilize additional financing towards the completion of phase 1, according to the document.
Alignment with IMF program
The framework is likely informed by the discussions with the IMF over the second reviews under the country’s ECC/ECF program, unlocking access to a SDR 162mn tranche. The authorities and the IMF did not reach a staff-level agreement following two IMF missions in April and June, though only the details of some policies remain to be worked out, according to the Fund’s latest statement. In it, the Fund acknowledged the authorities’ intention to up the budget deficit for the current year, noting it nonetheless remains committed to pursuing further revenue mobilization and withdrawing energy subsidies.
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