Front Matter

Front Matter

Author(s):
Malangu Kabedi-Mbuyi, Mame Astou Diouf, and Constant Lonkeng Ngouana
Published Date:
April 2016
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    African Department

    Walking a Fine Line

    Public Investment Scaling Up and Debt Sustainability in Burkina Faso

    Prepared by Malangu Kabedi-Mbuyi, Mame Astou Diouf, and Constant Lonkeng Ngouana

    Copyright © 2016 International Monetary Fund

    Cataloging-in-Publication Data

    Joint Bank-Fund Library

    Names: Kabedi-Mbuyi, Malangu. | Astou Diouf, Mame. | Lonkeng Ngouana, Constant. | International Monetary Fund. | International Monetary Fund. African Department.

    Title: Walking a Fine Line: Public Investment Scaling Up and Debt Sustainability in Burkina Faso / prepared by Malangu Kabedi-Mbuyi, Mame Astou Diouf, and Constant Lonkeng Ngouana.

    Description: Washington, DC: International Monetary Fund, 2016. | Includes bibliographical references. | At head of title: African Department.

    Identifiers: ISBN 978-1-49835-853-8 (paper)

    Subjects: LCSH: Sub-Saharan Africa—Debt sustainability. | Public Investment—Sub-Saharan Africa. | Economic development—Sub-Saharan Africa.

    Classification: LCC HC800.T723 2016

    The Departmental Paper Series presents research by IMF staff on issues of broad regional or cross-country interest. The views expressed in this paper are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

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    Abstract

    This paper analyzes the macroeconomics of scaling up public investment in Burkina Faso under alternative financing options, including through foreign aid and a combination of tax adjustment and borrowing. Our findings are twofold: (1) raising official development assistance in line with the Gleneagles agreement provides scope for financing public investment at low cost and would have positive, but somewhat moderate, effects on aggregate output—the growth dividends in the nontradables sector would be partially offset by the Dutch disease in the tradables sector; and (2) the massive investment scaling-up contemplated under Burkina Faso’s “accelerated growth” strategy, while boosting medium-and long-term growth, would lead to unsustainable debt dynamics under a plausible tax adjustment and realistic concessional financing. A more gradual approach to closing Burkina Faso’s infrastructure gap is therefore desirable because it would take into account the needed time for the country to address its capacity constraints and to further improve investment efficiency.

    JEL Classification Numbers: D50, F41, F43, H54, H63

    Keywords: Burkina Faso, fiscal sustainability, foreign aid, growth, public investment

    Authors’ E-Mail Addresses: MKabedi@imf.org; MDiouf@imf.org; CLonkeng@imf.org

    Acknowledgments

    This paper draws on two analytical pieces by the authors during their time on the Burkina Faso desk at the IMF. One of them was undertaken to inform policy discussions in the context of an Article IV consultation between the IMF and the Burkinabè authorities (see IMF 2012) and the other was undertaken to guide policy discussions on the macroeconomics of scaling up foreign aid to low-income countries (LICs) to levels compatible with Gleneagles commitments.

    The authors would like to thank Michael Atingi Ego, Laure Redifer, Liam O’Sullivan, the Research Advisory Committee of the IMF’s African Department (Magnus Saxegaard in particular), the Development Macroeconomics Division of the IMF’s Research Department (Felipe Zanna and Salifou Issoufou in particular), and seminar participants in the IMF’s African Department for valuable suggestions and support. The usual disclaimer applies.

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