- Malangu Kabedi-Mbuyi, Mame Astou Diouf, and Constant Lonkeng Ngouana
- Published Date:
- April 2016
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The study also finds that upgrading the country’s infrastructure endowment to that of the region’s middle-income countries could boost annual growth by more than 3 percentage points per capita.
The country’s vulnerability to disruptions in regional ports was apparent during the political crisis in Côte d’Ivoire, as Burkina Faso strives to find alternative routes for its internationally traded goods.
Gold exports have surged in Burkina Faso since 2011, making the country somewhat resource rich.
Burkina Faso’s ranking improved from 154 under the 2010 Doing Business indicators to 151 under the 2011 indicators (out of 183 countries).
Strategy for Accelerated Growth and Sustained Development.
As stated in the SCADD document, the strategy adopts an approach to poverty reduction that is more focused on developing the productive capacities of the Burkinabè economy.
ODA is defined as project and program grants and concessional loans with a grant element of 35 percent or more.
The 2010 Financial Access report estimates that 6.7 percent of adults hold an account in a commercial bank and 10 percent in microfinance institutions. The calibrated value of 16.7 percent is therefore an upper bound, given that some households might hold accounts in both types of financial institutions. However, the calibrated value is realistic if widespread informal financing systems such as rotating savings are taken into account. Sensitivity analysis using values between 6.7 percent and 16.7 percent show minor differences in the results.
The corresponding value in the case of Uganda is 0.79 (see Berg and others 2010).
In the next section, where the scaling-up of public investment is financed mainly through domestic resources, we calibrate the efficiency parameter using the cross-country distribution of the Public Investment Management Index (PIMI).
Banque Centrale des Etats de l’Afrique de l’Ouest.
Because Burkina Faso’s currency (the CFA franc) is pegged to the euro, the nominal exchange rate remains flat, leading to an even higher real exchange rate appreciation.
The World Bank and the European Union are the main providers of budgetary support to Burkina Faso, with disbursements totaling 66 percent of the country’s budget support in 2010. Other main bilateral contributors include Netherlands (8 percent in 2010) and Sweden (about 5.6 percent in 2010).
This scenario would accommodate new initiatives to finance investment in low-income countries including under Financing for Development.
Examples of such outcomes are public units (that is, hospitals, schools, other administrative entities) or other infrastructures (for example, roads, railways, ports).
In this scenario, we assume that 54 percent of the investment financed with the additional aid is transformed into capital (up from 40 percent under the baseline scenario), which corresponds to the efficiency of capital spending in South Asian countries (Pritchett, 2000).
It has been pointed out that the DSF does not systematically incorporate the linkages between public capital accumulation and growth, nor does it account for the potential fiscal reaction of governments to rising public debt.
The reader may refer to Buffie and others 2012 for the calibration of preferences and technology parameters. These include the intertemporal elasticity of substitution, the elasticity of substitution in consumption, the labor and capital shares in technology, the depreciation rate of capital, and the learning externalities.
The subcomponents of the PIMI suggest that Burkina Faso does relatively well in project selection, management, and ex post evaluation. However, the country performs somewhat poorly in project appraisal.
Based on the macroeconomic framework under the IMF-supported program. The share of project grants in GDP is set at 2.5 percent, its average value over the second half of the 2000s—we focus on project grants because the simulations do not include a scaling-up of current expenditure for which the government may also receive program grants. Remittances account for a tiny share of GDP in Burkina Faso (about 0.2 percent of GDP), perhaps on account of the global financial crisis and informal transfer channels, which are not necessarily captured in official statistics. These (calibrated) GDP shares of grants and remittances are lower than in Buffie and others 2012 (3.5 and 5 percent, respectively).
We assume that concessional loans accrue a nominal interest rate of 2 percent and have an average maturity of 30 years (the time frame of simulations), including a six-year grace period. This implies a grant element of 42.3 percent, which is below the 61 percent value in Buffie and others 2012. Concessional loans in the joint IMF-World Bank debt sustainability analysis for Burkina Faso embed a grant element of 56.8 percent (1.1 percent interest rate; average maturity of 37 years; and a sevenyear grace period). Our somewhat conservative assumption on financing terms reflects the fact that the currently (high) grant element is partly driven by the World Bank’s financing (64.6 percent grant element against the 56.8 percent average) while Burkina Faso would probably have to rely on non–World Bank financing to scale up concessional financing.
The Burkinabè authorities are committed to enhancing tax administration under the ECF program, not modeled here. Accounting for such revenue sources in the model would limit the extent of tax rate adjustment to finance the public investment path under the ECF program.
This number is computed as the ratio between the user fees on existing highways in 2010 and their maintenance costs (the raw data were obtained from the Burkinabè authorities).