Côte d’Ivoire has moved to cut government spending following a drop in the global price of cocoa, the country’s primary export earner.
After three years of high demand, with prices peaking above US$3,200 per ton in 2015, the value of cocoa declined sharply in 2017, reaching a four-year low of less than US$1,800/ton in early May. As of April New York Cocoa futures were trading at nine-and-half-year lows.
As Oxford Business Group noted recently, as the world’s top coca exporter, this sharp drop in prices will have a significant impact on Côte d’Ivoire, where the industry contributes 15 per cent to national GDP, makes up more than 50 per cent of export revenue and employs around two-thirds of the population.
“In the face of falling revenues, the government, led by President Alassane Dramane Ouattara, cut the national budget for 2017 by 9 per cent in mid-May to CFA 6.44 trillion (€9.8 billion),” said Oxford Business Group. “This was a slight revision on the 10 per cent reduction in the state’s spending plan announced a month earlier.
“All the ministries will tell you their budgets have been reduced by 5-10 per cent,” Ouattara told media when announcing the change.
Oxford Business group said the complexity of balancing austerity with key social and economic demands was highlighted by a recent revolt by military personnel, who were protesting delayed bonus payments. The four-day army mutiny was called off after the government agreed to pay each soldier CFA5 million in bonuses, while promising to pay the remaining CFA2 million later.
“In spite of the government’s quick response to the changing external factors, the country may be hard-pressed to meet its fiscal targets for the year,” said Oxford Business Group, noting that the drop in commodity prices is also likely to have a broader drag on the country’s macroeconomic performance, although Côte d’Ivoire is slated to remain one of the fastest-growing economies on the continent according to current forecasts.