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COMPACT MONITORING REPORT MONITORING REPORT CwA 2021 Monitoring Report Africa Advisory Group Meeting April 2021 CwA COUNTRIES »Benin »Burkina Faso »Côte d’Ivoire »Egypt »Ethiopia »Ghana »Guinea» Morocco »Rwanda »Senegal »Togo »Tunisia Report prepared by: In collaboration with: COMPACT MONITORING REPORT ACKNOWLEDGMENTS This report was produced as a collaborative effort between the World Bank Group (WBG), the International Monetary Fund (IMF) and the African Development Bank (AfDB). It also contains an independent review by the African Center for Economic Transformation (ACET). We are grateful to the Governments of the twelve Compact with Africa (CwA) countries for their support in updating the CwA Reform Matrices. World Bank Contributors: Vincent Palmade (Task Team Leader), Armel Jean-Louis Castets, Ileana Cristina Constantinescu, Gemma Torras Vives, Sara Nyman, Juni Tingting Zhu, Etienne Kechichian, Nah Yoon Shin, Shaun Mann, Louise Twining-Ward, Dan Croft, Julio Cesar Urdaneta, Stefan Rajaonarivo, Peter Kusek and Ana Cristina Alonso Soria. IFC Contributors: Sabri Youcef Draia, Alexei Volkov, Sudha Krishnan and Anouk Pechevy IMF Contributor: Irene Yackovlev (section on the macroeconomic outlook) AfDB Contributor: Gassia Assadourian and Memory Dube (section on the Africa Continental Free Trade Area – AfCFTA) - reviewed by Jean- Guy Afrika and Frederik Teufel WBG CwA Country Focal Points who coordinated the Reform Matrices updates with the governments: • Nathalie Picarelli (Benin) • Maimouna Mbow Fam (Burkina Faso) • Alex Tiemann (Cote d’Ivoire) • Robert Bou Jaoude (Egypt) • Marius Vismantas (Ethiopia) • Errol Graham (Ghana) • Boulel Toure (Guinea) • Gabriel Sensenbrenner (Morocco) • Rolande Simone Pryce (Rwanda) • Meriem Ait Ali Slimane (Senegal) • Ernest Sergenti (Togo) • Zouhour Karray (Tunisia) WBG Leadership/Reviewers: Mona Haddad, Caroline Freund, Deborah Wetzel, Ahmadou Moustapha Ndiaye, Sebastien Dessus, Catherine Masinde, Frank Douamba and Patrick Luternauer. Special thanks to Sandile Dube (South African Treasury) and Frank Schneider (German Ministry of Finance) for their support and guidance. COMPACT MONITORING REPORT TABLE OF CONTENTS EXECUTIVE SUMMARY ............................................................................................................................................................. 5 1. MACROECONOMIC, FDI AND TRADE OVERVIEW ............................................................................................................ 7 Macroeconomic outlook ........................................................................................................................................................... 7 Recent FDI trends .................................................................................................................................................................... 7 Recent trade dynamics ............................................................................................................................................................ 16 The African Continental Free Trade Area (AfCFTA) ............................................................................................................... 26 2. PROGRESS ON 2018 REFORM COMMITMENTS AND ADDITIONAL REFORM INITIATIVES ........................................ 29 Progress on 2018 reform commitments .................................................................................................................................... 30 Additional reform initiatives ................................................................................................................................................... 30 Support from international organizations ................................................................................................................................. 33 3. LEVERAGING NEW GROWTH OPPORTUNITIES ............................................................................................................. 38 The digital economy ............................................................................................................................................................... 39 The green economy ................................................................................................................................................................. 49 4. INDEPENDENT REVIEW BY THE AFRICAN CENTER FOR ECONOMIC TRANSFORMATION (ACET) ......................... 62 ANNEX – UPDATED REFORM MATRICES FOR EACH COMPACT COUNTRY.................................................................... 65 Benin ..................................................................................................................................................................................... 65 Burkina Faso .......................................................................................................................................................................... 71 Côte d’Ivoire .......................................................................................................................................................................... 74 Egypt ..................................................................................................................................................................................... 80 Ethiopia .................................................................................................................................................................................. 84 Ghana ..................................................................................................................................................................................... 86 Guinea .................................................................................................................................................................................... 90 Morocco ................................................................................................................................................................................. 92 Rwanda .................................................................................................................................................................................. 94 Senegal................................................................................................................................................................................... 98 Togo..................................................................................................................................................................................... 104 Tunisia ................................................................................................................................................................................. 108 COMPACT MONITORING REPORT COMPACT MONITORING REPORT EXECUTIVE SUMMARY The G20 Compact with Africa (CwA) was launched in 2017 under the German G20 Presidency to promote private investment in Africa through improvements of the macro, business and financing frameworks. It brings together reform-minded African countries, international organizations and bilateral partners to support reforms and promote private investments. The initiative is demand-driven and open to all African countries. The Africa Advisory Group (AAG) reports bi-annually to Ministers and Governors on progress and future ambitions. The main conclusions of this CwA Monitoring Report are: 1. Macroeconomic, FDI and trade overview: • Despite the COVID pandemic, growth in CwA countries (1.1% in 2020) continued to outpace peers and is expected to rebound to 3.4 percent in 2021, while public debt is expected to increase to 80% of GDP in 2021 (from 71% in 2019). As a sign of market trust, two CwA countries issued oversubscribed Eurobonds in 2020. Vaccination is now the focus for a complete and safe recovery. • Like in the rest of the world, FDI dropped in CwA countries in 2020 (-76%), improving slowly in the second half of the year. Short term priority is to retain FDI and convince investors who held off because of COVID-19. FDI strategies should be adapted to this new uncertain global context. • CwA countries continued to outpace peers in export performance which is almost back to pre-COVID levels. Air travel is back at 60% of pre-COVID levels from a low of 20% in Q2 2020. As the sanitary crisis eases, CwA countries should remove the restrictive measures they put in place (e.g. export bans) and further facilitate trade, leveraging the new AfCFTA.... • The AfCFTA, signed by 54 of 55 countries, will, once implemented, help African countries, CwA countries in particular, be more attractive to FDI, competitive and resilient through economies of scale and diversification including through regional value chains. 2. Progress on 2018 reform commitments and additional reform initiatives: • Progress on 2018 reform commitments has been quite strong along most of the committed reforms. Most CwA countries strengthened their macroeconomic frameworks (most with IMF support in 2020), their business frameworks by leveraging digital solutions (e.g. e- taxes, online one-stop-shops for business registration and customs) and their financial frameworks by facilitating secured lending (e.g. property rights, leasing and commercial courts). • Additional reform initiatives informed by Country Private Sector Diagnostics (CPSDs) include the publication of fiscal risk analyses, SOE reforms/divestments, operationalization of PPP