Issues in international lending : the case of the Ivory Coast

Situated in Western sub-Saharan Africa, Cote-d’Ivoire, also known as the Ivory Coast gained its independence from France in 1960. For almost thirty years following its independence, the Ivory Coast represented one of Africa’s strongest economies with growth rates bordering 8% and political stability. Unfortunately today, the reality is quite different. In 1999 the Ivory Coast experienced its first-ever military coup. This was followed in 2002 by an uprising of mutinous soldiers. And since then, the country has been facing political disturbance, rising violence and growing uncertainty. The Ivorian economy is mainly built upon agriculture. The country is one of the world’s largest producers and exporters of cocoa, coffee beans and palm oil. As a consequence, the Ivory Coast’s economy is highly sensitive and highly dependent on external factors such as fluctuations in demand and prices for these products or variation in weather conditions. About 68% of the estimated 16.3 million inhabitants rely on agriculture for their livelihood. With a GDP per capita estimated at US$ 625 in 2000, the Ivory Coast has a life expectancy of 48 years and an adult literacy rate of 47%. Like many developing countries, the Ivory Coast has accumulated an enormous external debt, and the country is today burdened with debt repayments, which greatly compromise the country’s ability to pursue economic development and reduce poverty. The total stock of the country’s public sector debt was approximately US$ 10.5 billion as of the end of 2001. This paper will first examine the debt situation in the Ivory Coast regarding its origins and its major components. The paper will then look at the Heavily Indebted Poor Country (HIPC) Initiative proposed by the International Monetary Fund (IMF) and discuss its application to the Ivory Coast in the context of the country’s recent political and economic developments. In the third section the paper will review some of the proposed alternatives to the HIPC Initiative and discuss how they would affect the Ivory Coast. In particular, the paper will investigate the concept of illegitimate debt and phantom debt in their relevance to the Ivory Coast. In this context the paper will also consider the issue of odious debt and examine whether part of the Ivory Coast’s debt could be considered odious. The paper will conclude with a critical review of the HIPC Initiative as proposed for the Ivory Coast