# **1 Introduction**

**Togo is one of the poorest countries in the world.** With a per capita GDP equal to 437 current US$ in 2008, the economy was ranked within the world’s lowest income decile and in Purchasing Power Parity (PPP) terms it was the world’s 10<sup>th</sup> poorest economy.<sup>1</sup> Similarly and in the same year, Togo was ranked 159<sup>th</sup> among 179 countries appraised in 2008 UN’s Human Development Index.<sup>2</sup> Low aggregate per capita income level has translated into widespread poverty. In 2006, 62% of the population was poor, with poverty headcount rates in the north exceeding 90% in most rural areas (CWIQ, 2006). Furthermore, an additional 20% of the population technically considered non‐poor, was deemed as vulnerable, which raised the fraction of the population that may eventually fall into poverty to over 80% (PRSP, 2009).

<!-- Start of picture text --> Figure 1: GDP per capita development of Togo and LICs 1990‐2007.<br>( $ )<br>400<br>Low Income Avg.<br>350<br>Togo<br>300<br>250<br>200<br>150<br>100<br>50<br>0<br>Real US$ of 2000<br>1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008<br><!-- End of picture text --> _Source:_ Authors’ calculations. DDP Data, World Bank.

**However, Togo has not always exhibited a grim social and economic performance.** In fact, almost half a century ago, Togo began its post‐independence economic journey with a fast‐paced sustained growth, which permitted its per‐capita income to almost double in a span of two decades. An economic collapse after 1980 had wiped out most of the post‐independence improvements in living standards by the early 1990s. If Togo had maintained its average growth rate from the 1960s (5.8% per year per capita), it would have achieved middle‐low‐income status today, with a current US$ per capita GDP comparable to that of Philippines, Honduras and Egypt in 2008.<sup>3</sup> Instead of catching up, per capita income in Togo has diverged from the average of peer low‐income countries, Sub‐ Saharan Africa and the rest of the world (See Figure 1 and Table A1, Appendix).

> 1 Among 192 countries with data reported for 2008, and out of 233 registered by World Bank. Cross country comparisons of income levels, regarded as proxies of individual welfare, are more accurate when presented in Purchasing Power Parity terms (PPP) than in current or real US$. In simple terms, PPP is the ratio of prices for the same quantity of a particular commodity in two countries, when the prices are expressed in each country’s currency. In 2007, the PPP conversion factor was 224.6 XOF (Communaute Financiere Africaine Francs) per US$, implying that, to buy 1 US$ worth of the PPP basket in Togo, one would have needed 224.6 XOF. In turn, the official exchange rate in Togo was 479.3 XOF/US$. At this rate one would have purchased more of the selected PPP basket in Togo  using XOF, than the amount of that basket purchased by 1 US$ in the United States. This is why a per capita income in Togo equal to 379 US$ in 2007 (239 real US$ of 2000) translates into a 808 US$ PPP per capita in 2007 (763 real US$ in PPP of 2005).

> 2 The Human Development Index (HDI) is a summary measure of human development that is published by the United Nations Development Programme (UNDP). The HDI provides an alternative to the common practice of evaluating a country’s progress in development based on per capita Gross Domestic Product (GDP). HDI measures the average achievements in a country in 3 basic dimensions of human development: 1) “A long and healthy life” proxied by the average life expectancy at birth; 2) “Knowledge”, proxied by adult literacy rate, combined with primary, secondary and tertiary enrollment ratio; and, 3) “A decent standard of living”, proxied by GDP per capita at PPP in US$.

> 3 Income level classification is that of the World Bank. According to this, low‐income countries are those with GNI per capita (calculated from World Bank’s “Atlas method”) under US$ 935. Middle low‐income countries are those with GNI per capita ranging from 935$ up to 3,705 US$.

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