The financial war in Côte d’Ivoire: answers to five key questions

Dakar, Senegal

Times are going to be difficult for Côte d’Ivoire.

As Senegalese President Abdoulaye Wade pushes for a West African-led military invasion of Côte d’Ivoire, the Ivorian military threatens to mount a devastating defense on behalf of incumbent President Laurent Gbagbo, whom nearly all top world leaders consider the big loser of the Nov. 28 elections.

But the real battle for the world’s largest cocoa producer is not taking place on the streets of the commercial capital, Abidjan. It takes place in the banking corridors where cocoa revenues are transferred, where fiscal reserves are cashed, where government debt is issued and where government debtors come to collect their “coupon”.

Understanding Côte d’Ivoire’s financial war is key to understanding the calm among supporters of President-elect Alassane Ouattara, who played cards at the Hôtel du Golf where their candidate, economist and former deputy director general of the International Monetary Fund. airlifted food for weeks.

One rosy day, Ivory Coast may have a president – ​​or its version of a 38th parallel – but until that dawn, here are the five questions that should determine the outcome of what must be the conflict the most convoluted of the year.

1.) Who controls the Central Bank?

Unlike in Kenya or Zimbabwe, the power struggle in the Ivory Coast is taking place in an economy that was never set up for full independence from its colonial power, in this case France. The country’s currency – the West African CFA franc, a banknote used in eight West African countries – serves as a numerical expression of how the country is geopolitically tied to France and to the other West African nations it colonized.

What this means for the two men who would be presidents is that the currency they use to pay for their shadow governments was not born in Ivory Coast. He was born in Dakar, Senegal, where on Christmas Eve the Central Bank told reporters it would no longer recognize Mr Gbagbo as president.

It could take a while before this principle becomes a bureaucratic reality. Last Friday, the Burkina Faso-based monetary union that sets the bank’s policy brought bank officials to an orientation session in Mali with a “get moving” message.

But for Gbagbo, the bank’s decision means he is essentially cut off from his own country’s financial apparatus. If he wants to underwrite a government bond – essentially a giant IOU to investors looking for a risky purchase – he would need the central bank to advertise, auction, manage and sell it. . If he wants to make a levy on the Ivorian tax reserves, he will have to train to falsify the signature of Mr. Outtara.

2.) Who is responsible for government debt?

But there is a catch: Côte d’Ivoire does not just need money. He owes money.

In fact, the country owed a $29 million interest payment on a $2.3 billion bond that was due on December 31 — and it still hasn’t paid.

“The bill should only be paid when the international community recognizes Laurent Gbagbo,” incumbent spokesman Ahoua Don Mello told Bloomberg News last week. “I think it would be curious to ask our government to pay when the international community does not recognize it.”

On Tuesday, however, Gbagbo’s finance ministry reversed that tone and said it would make the payment before a 30-day grace period triggered a default that would essentially excommunicate Ivory Coast from the global financial community. .

But the Gbagbo government, as bond analyst Samir Gadio wrote in an email, “would probably be unable to do so even if the political will existed and the Treasury authorized the transaction”. Indeed, the payment is expected to be channeled through the Central Bank of West African States which now recognizes Outtarra as president.

3.) How long can Gbagbo pay his government?

“Although Gbagbo appears to be supported by the army at this stage, this will be conditional on his ability to pay the security forces in the coming months,” Gadio added.

It leaves out the part where soldiers pay themselves, or rather, coerce innocent people crossing borders and roadblocks to pull a little something out of their hearts/wallets. Among West African soldiers, the Ivorian fighting force has a reputation for masterful extortion, but that may not be enough to sustain an entire government in the face of international isolation.

Salaries alone cost the Gbagbo administration $170 million a month, according to the British newspaper The Guardian. Expect the military to benefit first from any government paychecks. And since the election, he’s been able to scrounge up enough to pay some of his servants some of their money, even if it’s a few days late.

4.) What control does Gbagbo have over cocoa and oil?

Gbagbo was able to feed his troops and pay his civil servants largely because the lush, tropical part of the Ivory Coast he controls happens to be the world’s cocoa basket. Côte d’Ivoire’s most fertile cocoa hills stretch across sections controlled by Gbagbo’s supporters.

But this industry has been nearly depleted: up to 40 percent of the export price of Ivorian cocoa is made up of the government share, both formal and informal. In the chaotic months ahead, as soldiers, thugs and bureaucrats extract more and more revenue from cocoa farmers, truckers and traders, expect to see more cocoa smuggled through the Ghanaian border, where farmers earn nearly twice the $2 per kilogram they bring in ivory. Coast.

But Gbagbo’s government doesn’t need to live on chocolate alone: ​​the IMF suspects that state revenues from Ivory Coast’s oil reserves could in fact exceed the billion dollars a year it derives from the cocoa harvest. How he manages, retains, invests and disburses those revenues could help determine how long he can retain the Ivorian throne.

5.) Is the idea of ​​a new Ivorian currency real?

In the last-minute effort to nurture their government, Gbagbo’s closest advisers are rushing to build the apparatus of a self-sufficient state – something intrinsically different from the Ivory Coast imagined by the Francophiles who founded.

The idea of ​​launching a strident, self-isolating Ivory Coast that looks more like Zimbabwe (where Gbagbo sought advice) than Senegal, for example, may seem like a midnight gibberish idea designed to stave off impending regime collapse. But it’s closer to the whole purpose of the Gbagbo movement.

“They have an obsession with autarky,” meaning economic autonomy, International Crisis Group analyst Rinaldo Depagne told The New York Times. And it’s an obsession that’s been a long time coming.

Many things are mind-boggling about the Ivorian conflict, but this is clear: the country was founded with limited economic independence from France, from which it has benefited from 40 years of stability, impressive growth and French aid, while neighboring Ghana, now a rising global market, suffered the madness of military coups and banknotes that plunged in value like pogs.

Today, it is not the Ivory Coast, but rather Ghana, that leads West Africa, and the French ties seem more of an inconvenience than a security measure. Growth in the eight countries that use the West African CFA franc, which is pegged to the euro, has been below the average for sub-Saharan Africa.

The Gbagbo era marked a perhaps inevitable reaction to the pro-France policies of the Ivory Coast, and the latest expression of this resentment is the currency of Gbagbo’s Ivorian resistance. These are the notes that Gbagbo’s team offered to print to pay civil servants and soldiers. As a currency, analysts say the MIR would almost surely spell disaster. But the irony is that whenever the rowdiness dies down, it might not be such a bad idea.

“Much of Africa is tied to the least adaptive zone in the world,” African Development Bank chief economist Mthuli Ncube told Bloomberg News in June. “Surely, this is a disadvantage.”

If there is hope for anything to come out of this political crisis, it is that the conflict – messy and destructive that it has been – could offer this nation another chance to reclaim its place as an economic leader. in west Africa.

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