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Burkina Faso

Author(s):
International Monetary Fund
Published Date:
August 2011
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I. Recent Economic And Social Developments

1. Economic growth accelerated in 2010 and inflation remained low. Favorable weather conditions, higher gold production and prices, and increased public investment led to a strong economic recovery, with real GDP expanding by 7.9 percent, well-above the WAEMU average (Chart 1). In agriculture, growth was boosted by favorable climatic conditions combined with incentive measures taken by the authorities in recent years to support production. The mining sector expanded substantially thanks to increased production at ESSAKANE, the onset of operations in two additional mines, and higher international prices. Activity in the services sector benefitted mostly from increased public investment. Inflation remained low mostly reflecting the good harvest (Table 1, Figure 1, and MEFP ¶¶ 2–3).

Chart 1.Burkina Faso: Real GDP Growth

(Percent, 2006–10)

Sources: Burkinabè authorities: and IMF staff estimates.

Figure 1.Burkina Faso: Recent Economic Developments, 2006–10

Sources: Burkinabè authorities and IMF staff estimates.

Table 1.Burkina Faso: Selected Economic and Financial Indicators, 2008–15
20082009201020112012201320142015
CR 10/361Est.CR 10/361Prog.Proj.
(Annual percentage change, unless otherwise indicated)
GDP and prices
GDP at constant prices5.23.25.27.95.55.25.66.06.56.5
GDP deflator7.93.42.12.82.02.72.02.02.02.0
Consumer prices (annual average)10.72.60.2-0.62.02.82.02.02.02.0
Consumer prices (end of period)11.6-0.30.1-0.32.03.02.02.02.02.0
Money and credit
Net domestic assets (banking system) 115.9-2.09.411.65.55.75.15.97.04.4
Credit to the government 14.60.26.86.43.13.51.6-1.3-2.5-3.0
Credit to the economy 113.61.22.58.92.52.23.57.19.57.4
Broad money (M2)11.718.216.619.17.68.07.78.18.68.6
Velocity (GDP/M2)3.93.63.33.33.33.33.33.33.33.3
External sector
Exports (f.o.b.; valued in CFA francs)3.937.040.365.132.726.313.73.44.86.7
Imports (f.o.b.; valued in CFA francs)21.6-8.323.729.623.332.18.17.25.29.0
Terms of trade-2.519.316.50.6-3.33.3-2.5-1.6-2.0-2.0
Real effective exchange rate (- = depreciation)8.42.6-10.4
World cotton price (US$ cents per pound)71.462.885.0103.580.0190.3107.0100.090.085.0
Average petroleum spot price (US$ per barrel)97.061.876.279.078.8107.2108.0105.5104.5105.0
Average price of Gold (US$ per troy once)871.7973.01,183.31,224.71,220.51,426.81,446.31,478.01,530.01,596.0
(Percent of GDP, unless otherwise indicated)
Central government finances
Current revenue13.113.715.615.615.715.115.015.716.216.7
Of which: Tax revenue12.112.613.013.013.813.013.814.414.815.1
Total expenditure and net lending21.624.426.825.725.226.023.524.024.124.5
Of which: Current expenditure12.312.712.412.212.413.511.911.811.711.6
Overall fiscal balance, excl. grants (commitments)-8.4-10.7-11.2-10.1-9.6-10.9-8.6-8.3-7.9-7.8
Overall fiscal balance, incl. grants (commitments)-4.5-4.8-4.8-5.6-3.9-3.9-3.1-2.8-2.3-2.3
Overall fiscal balance, incl. grants (cash basis)-4.0-2.4-5.4-4.6-3.9-4.4-3.1-2.8-2.3-2.3
Basic primary balance (commitments)-4.6-5.3-4.4-5.0-2.7-4.1-1.3-0.9-0.6-0.6
Savings and investment
Current account balance (including current official transfers)-11.2-4.2-5.2-3.5-6.3-5.8-6.3-7.1-7.2-6.2
Current account balance (excluding current official transfers)-15.1-10.8-9.3-11.2-9.6-12.2-11.8-11.7-11.5-11.0
Gross investment20.216.722.819.024.517.717.217.918.017.9
Government6.28.19.18.59.08.88.18.58.79.0
Private14.08.613.710.515.58.99.19.49.48.8
Gross domestic savings3.66.112.410.013.95.66.06.16.37.4
Government2.31.83.44.03.53.13.34.04.44.9
Private1.24.39.06.010.42.52.72.11.92.5
Gross national savings9.012.517.615.518.311.910.910.810.811.7
Government5.46.07.17.66.57.56.57.07.47.8
Private3.56.510.57.911.74.34.43.83.43.9
External sector and debt indicators
Exports of goods and services10.012.615.018.218.220.821.720.719.919.6
Imports of goods and services26.623.325.527.228.932.932.832.431.630.1
External debt17.418.624.921.526.223.625.627.428.930.1
NPV of external debt11.613.216.516.217.717.418.519.520.320.9
NPV of external debt (percent of exports)116.2107.0109.689.197.183.785.494.5102.1106.4
NPV of external debt (percent of revenues)87.398.6105.6104.1112.9115.2123.7124.3125.3125.2
Memorandum item:
Nominal GDP (CFAF billions)3,6903,9384,2804,3684,6054,7205,0855,4995,9726,488
Sources: Burkinabè authorities; and IMF staff estimates and projections.

Percent of beginning-of-period broad money.

Sources: Burkinabè authorities; and IMF staff estimates and projections.

Percent of beginning-of-period broad money.

2. The external position strengthened further in 2010. The current account deficit narrowed from 4.2 percent of GDP in 2009 to 3½ percent, reflecting an increase in exports. Cotton and gold exports rose significantly thanks to higher production and better global prices, more than compensating the impact of higher oil prices on imports (Table 2 and Chart 2).

Chart 2.Burkina Faso: Cotton, Gold, and Oil Prices

(Index,2007=100, 2007-11)

Sources: Burkinabè authorities; and IMF staff estimates and projections.

Table 2.Burkina Faso: Balance of Payments, 2008–15
20082009201020112012201320142015
CR 10/361Proj.Prog.Proj.
(CFAF billions)
Current account-414.6-166.6-223.4-152.2-275.7-319.4-390.2-431.1-401.3
Excluding official transfers-540.9-340.1-398.2-322.4-498.1-495.5-574.0-626.2-607.7
Trade balance-401.4-227.7-214.2-144.0-231.1-199.4-252.1-269.6-318.9
Exports of goods310.3425.2586.2701.8886.61008.51042.71092.41165.4
Of which: cotton102.896.8134.7108.8131.5193.1162.8153.9149.7
gold70.2179.8332.0440.0578.1630.2683.2728.4790.0
Imports of goods-711.7-652.8-800.5-845.9-1117.7-1207.9-1294.7-1362.0-1484.4
Of which: oil-241.8-179.7-238.2-220.4-358.7-386.8-400.5-404.7-431.0
Services, net-211.6-192.1-234.1-249.0-339.5-369.0-394.8-429.2-360.8
Exports of services59.272.157.293.393.393.393.393.3109.4
Imports of services-270.8-264.1-291.3-342.3-432.9-462.3-488.1-522.5-470.2
Of which: freight and insurance-161.8-149.1-183.8-193.2-255.3-281.0-306.8-341.2-351.8
Income, net15.117.1-17.98.79.48.57.25.63.7
Of which: interest on public debt (incl. IMF charges)-8.4-8.7-10.3-11.3-11.3-13.2-15.2-17.5-20.2
Current transfers183.3236.0242.8232.0285.5240.5249.4262.0274.7
Private transfers, net57.062.568.061.963.164.465.767.068.3
Of which: remittances, net0.40.60.38.28.48.58.78.99.1
Official transfers, net126.3173.5174.8170.2222.4176.1183.8195.1206.4
Of which: program grants88.2145.5151.1147.8199.6152.9160.1170.9181.8
Capital account85.5113.7148.277.9157.2155.6168.6191.0202.6
Project grants58.786.9121.451.1130.4128.8141.8164.2175.8
Other capital transfers26.826.826.826.826.826.826.826.826.8
Financial account311.7272.8150.8182.6149.3201.8256.8266.8275.7
Direct investment47.543.63.516.83.56.636.840.243.7
Portfolio investment4.17.62.48.53.22.72.63.23.5
Other investment260.2221.6144.8157.3142.6192.5217.4223.4228.5
Long-term investment259.4221.4143.3155.0141.1190.5213.3218.7223.9
Project loans69.3109.4148.8152.8164.6218.2234.6241.6258.6
Program loans45.914.512.712.60.00.00.00.00.0
Amortization of public loans (excl. IMF)-13.0-14.3-22.6-14.7-25.6-29.8-30.4-31.6-34.6
Private investment157.1111.84.44.32.12.29.08.70.0
Short-term investment0.80.21.62.41.62.04.14.74.6
Errors and ommisions / gap-17.7-30.60.0-29.00.00.00.00.00.0
Overall balance-35.1189.375.679.330.838.035.126.676.9
Financing35.1-189.3-80.3-79.3-40.4-47.6-39.9-26.6-76.9
Net change in foreign assets of the Central Bank40.0-70.829.689.8-40.4-47.6-39.9-26.6-76.9
Of which: gross official reserves18.2-149.99.963.1-39.3-44.1-26.5-21.2-66.3
IMF net financing8.125.55.95.9-1.0-3.5-3.8-5.4-10.6
Uses of resources8.125.55.95.90.00.00.00.00.0
Repayments (excluding charges)0.00.00.00.0-1.0-3.5-3.8-5.4-10.6
Net foreign assets of commercial banks-4.9-118.5-109.9-169.00.00.00.00.00.0
Financing gap10.00.04.80.09.69.64.80.00.0
(Percent of GDP, unles otherwise indicated)
Memorandum items:
Trade balance (– = deficit)-10.9-5.8-5.0-3.3-4.9-3.9-4.6-4.5-4.9
Cotton export volume (thousands of metric tons)149.8144.7149.7148.2140.2214.8193.8197.7201.6
Gold export volume (metric tons)5.612.518.523.025.927.929.731.133.1
Current account (– = deficit)-11.2-4.2-5.2-3.5-5.8-6.3-7.1-7.2-6.2
Excluding official transfers-14.7-8.6-9.3-7.4-10.6-9.7-10.4-10.5-9.4
Overall balance (– = deficit)-1.04.81.81.80.70.70.60.41.2
Gross international reserves
Gross official reserves (imputed reserves, billions of U.S. dollars) 20.91.31.21.11.21.21.31.31.4
(percent of broad money)46.853.245.139.839.038.437.435.636.2
WAEMU gross official reserves (billions of U.S. dollars)10.713.6
(percent of broad money)55.058.7
(months of WAEMU imports of)6.16.9
US$/EURO1.471.391.331.331.371.361.351.341.33
GDP at current prices (CFAF billions)3,6903,9384,2804,3684,7205,0855,4995,9726,488
Sources: Burkinabè authorities; and IMF staff estimates and projections.

The financing gap is expected to be covered by ECF disbursements as financing from other sources is included in program grants and loans.

Including the Special Drawing Rights allocation of August 2009.

Sources: Burkinabè authorities; and IMF staff estimates and projections.

The financing gap is expected to be covered by ECF disbursements as financing from other sources is included in program grants and loans.

Including the Special Drawing Rights allocation of August 2009.

3. Developments in the financial sector were consistent with the economic recovery. Money supply rose by 19.1 percent, reflecting the sharp increase in net foreign assets of the banking system, while credit to the economy rose substantially, mostly driven by a strong demand from the services sector. (Table 3 and Chart 3).

Chart 3.Burkina Faso: Recent Monetary Trends

(In Billions of CFAF)

Sources: Burkinabè authorities; and IMF staff estimates and projections.

Table 3.Burkina Faso: Monetary Survey, 2008–12
20082009201020112012
Prog.Proj.
(CFAF billions)
Net foreign assets374.2563.6647.6678.4716.4
Central Bank of West African States (BCEAO)315.0385.8300.8331.6369.6
Assets438.7588.7525.6555.3589.8
Liabilities123.7202.9224.8223.7220.2
Commercial banks59.2177.8346.8346.8346.8
Net domestic assets563.1543.9671.9747.2819.6
Net domestic credit604.7618.2787.3862.6935.0
Net credit to government-55.8-53.816.762.785.6
Treasury35.0-3.716.562.585.4
BCEAO-3.3-46.9-27.023.346.2
Commercial banks38.343.143.539.239.2
Other central government-90.8-50.10.20.20.2
Credit to the economy660.5672.1770.6799.9849.4
Crop credit14.122.110.310.711.4
Other646.4650.0760.3789.2838.0
Other items (net)-41.6-74.3-115.4-115.4-115.4
Broad money937.31107.51319.51425.61536.0
Of which: Private sector deposits in commercial banks640.2789.01029.21170.01262.4
(Annual changes in percent of broad money from 12 months earlier, unless otherwise indicated)
Memorandum items:
Net foreign assets-4.220.27.62.32.7
Net domestic assets15.9-2.011.65.75.1
Net credit to government4.60.26.43.51.6
Credit to the economy13.61.28.92.23.5
(annual percentage change)20.81.714.73.86.2
(excluding crop credit)22.30.617.03.86.2
Money supply11.718.219.18.07.7
Of which: bank deposits10.115.921.710.76.5
Currency velocity (GDP/broad money)3.93.63.33.33.3
Sources: Burkinabè authorities; and IMF staff estimates and projections.
Sources: Burkinabè authorities; and IMF staff estimates and projections.

4. The financial health of the banking system remained sound. Commercial banks complied with the regional regulation to raise the minimum capital level at end-2010, and the majority of banks observed the regional prudential ratios. Despite strong ties with the Ivorian banking system and an important portfolio of Ivorian government bonds and Treasury bills, Burkinabè banks were not adversely affected by the Ivorian crisis.

5. The fiscal position improved in 2010 thanks to a strong revenue performance. Revenue collection strengthened further owing to administrative efficiency gains, and one-off nontax revenue from the renewal of cellular phone licenses. Expenditure also increased, reflecting mainly higher capital spending, partly related to special infrastructure projects. The wage policy remained prudent with the wage bill declining slightly compared with 2009. Hence, the basic primary fiscal deficit slightly declined from 5.3 percent of GDP in 2009 to 5 percent in 2010 (Table 4, Chart 4, and MEFP ¶¶ 6–9).

Chart 4.Burkina Faso: Government Revenue

(Percent of GDP, 2006ȃ10)

Sources: Burkinabè authorities; and IMF staff estimates and projections.

Table 4.Burkina Faso: Consolidated Operations of the Central Government, 2008–15
20082009201020112012201320142015
CR 10/361Est.CR 10/361Prog.Proj.
(CFAF billions)
Total revenue and grants630.8771.5940.5880.2981.81041.71042.01165.41301.71440.5
Total revenue483.8539.1667.9681.3721.4711.7760.3863.5966.61082.9
Tax revenue444.7494.6558.1565.7635.1614.4701.5793.4882.8982.6
Income and profits103.5106.7140.4133.6163.4158.2197.8248.2285.0311.9
Domestic goods and services243.8282.9307.0318.4350.8337.9368.3400.5438.5489.3
International trade81.889.794.996.8104.3101.1117.7126.0139.4159.8
Other15.615.215.817.016.717.117.718.819.921.6
Nontax revenue39.244.5109.9115.586.397.458.770.183.8100.3
Grants146.9232.4272.6198.9260.4330.0281.7301.8335.1357.6
Project58.786.9121.451.1130.4130.4128.8141.8164.2175.8
Program88.2145.5151.1147.8130.1199.6152.9160.1170.9181.8
Expenditure and net lending1795.3959.61145.91123.61161.21225.51197.51319.11438.81586.8
Current expenditure455.2499.1532.3530.9571.1635.2606.0647.5699.2750.6
Wages and salaries198.8228.4245.9245.8265.5269.3284.8304.4328.7355.8
Goods and services95.395.1100.390.8106.8104.4117.3126.1137.5144.9
Interest payments12.716.921.121.422.423.425.327.329.732.3
Current transfers148.4158.6164.9172.9176.4238.1178.6189.7203.3217.6
Of which contingency expenditure for 201120.00.00.00.00.017.60.00.00.00.0
Investment expenditure328.5457.4550.5531.2585.1596.6587.5667.6741.6838.2
Domestically financed200.4261.0280.3327.3290.1301.7240.5291.2335.8403.8
Capital transfers6.225.45.43.87.09.07.07.07.07.0
Exonerations27.136.524.829.027.220.030.732.936.441.7
Other investment expenditure167.2199.2250.1294.6255.9272.7202.8251.3292.4355.1
Externally financed128.0196.3270.2203.9295.0295.0347.0376.4405.8434.4
Expenditure carried over from 2009 appropriations30.00.067.767.70.00.00.00.00.00.0
Net lending11.63.2-4.5-6.25.0-6.34.04.0-2.0-2.0
Overall balance (commitment basis)-164.5-188.1-205.4-243.4-179.4-183.8-155.5-153.7-137.1-146.3
Excluding grants-311.4-420.5-478.0-442.3-439.8-513.8-437.2-455.6-472.2-503.9
Basic primary balance (commitment basis)-170.7-207.3-186.6-217.1-122.4-195.4-64.9-51.9-36.7-37.2
Cash basis adjustment15.895.5-27.044.50.0-23.30.00.00.00.0
Change in payment arrears0.0-16.7-6.20.00.0-2.30.00.00.00.0
Expenditures committed awaiting payment orders-36.956.1-56.1020.20.0-21.00.00.00.00.0
Payment orders not executed1.963.6-32.20-24.10.00.00.00.00.00.0
Change in treasury commitments50.74.173.741.50.00.00.00.00.00.0
Change in Basic Education Fund account0.0-11.6-6.27.00.00.00.00.00.00.0
Overall balance (cash basis)-148.7-92.6-232.4-198.9-179.4-207.1-155.5-153.7-137.1-146.3
Excluding grants-295.6-325.0-505.0-397.9-439.8-537.1-437.2-455.6-472.2-503.9
Basic primary balance (cash basis)-154.9-111.8-213.6-172.6-122.4-218.7-64.9-51.9-36.7-37.2
Errors and omissions5.4-6.30.04.00.00.00.00.00.00.0
Financing143.498.9227.6194.9169.7197.5145.9148.9137.1146.3
Foreign financing102.3109.6138.9150.7138.1139.0188.3204.3210.0223.9
Drawings115.3123.9161.5165.4164.6164.6218.2234.6241.6258.6
Project loans69.3109.4148.8152.8164.6164.6218.2234.6241.6258.6
Program loans45.914.512.712.60.00.00.00.00.00.0
Amortization (excl. IMF)-13.0-14.3-22.6-14.7-26.5-25.6-29.8-30.4-31.6-34.6
Domestic financing41.1-10.688.744.231.758.6-42.4-55.3-72.9-77.6
Bank financing38.32.070.870.529.836.413.3-24.6-42.2-54.9
Central bank47.3-42.820.918.229.840.713.3-24.6-42.2-54.9
Commercial banks-9.044.749.952.30.0-4.30.00.00.00.0
Nonbank financing2.8-12.617.9-26.31.822.2-55.7-30.7-30.7-22.7
Government bonds-12.318.016.8-5.01.822.2-55.7-30.7-30.7-22.7
New issues30.955.551.647.530.0139.90.00.00.00.0
Bills0.0115.00.00.00.00.0
Bonds30.024.90.00.00.00.0
Amortization-43.3-37.5-34.9-52.5-28.2-117.7-55.7-30.7-30.7-22.7
Privatization revenue2.930.16.66.90.00.00.00.00.00.0
Other nonbank financing12.3-60.7-5.5-28.10.00.00.00.00.00.0
Financing gap40.00.04.80.09.69.69.64.80.00.0
Memorandum items:
Poverty-reducing expenditure198.5259.6274.5297.2300.6314.4345.8390.4441.9454.2
Of which: Education 582.291.4109.2123.5119.6115.9127.4143.9162.8167.3
Health60.169.883.888.391.785.494.0106.1120.1123.4
Nominal GDP3,6903,9384,2804,3684,6054,7205,0855,4995,9726,488
(Percent of GDP, unless otherwise indicated)
Total revenues and grants17.119.622.020.121.322.120.521.221.822.2
Total revenue13.113.715.615.615.715.115.015.716.216.7
Tax revenue12.112.613.013.013.813.013.814.414.815.1
Income and profits2.82.73.33.13.53.43.94.54.84.8
Domestic goods and services6.67.27.27.37.67.27.27.37.37.5
International trade2.22.32.22.22.32.12.32.32.32.5
Other0.40.40.40.40.40.40.30.30.30.3
Nontax revenue1.11.12.62.61.92.11.21.31.41.5
Grants4.05.96.44.65.77.05.55.55.65.5
Project1.62.22.81.22.82.82.52.62.72.7
Program2.43.73.53.42.84.23.02.92.92.8
Expenditure and net lending121.624.426.825.725.226.023.524.024.124.5
Current expenditure12.312.712.412.212.413.511.911.811.711.6
Wages and salaries5.45.85.75.65.85.75.65.55.55.5
Goods and services2.62.42.32.12.32.22.32.32.32.2
Interest payments0.30.40.50.50.50.50.50.50.50.5
Current transfers4.04.03.94.03.85.03.53.53.43.4
Of which contingency expenditure for 201120.00.00.00.00.00.40.00.00.00.0
Investment expenditure8.911.612.912.212.712.611.612.112.412.9
Domestically financed5.46.66.57.56.36.44.75.35.66.2
Capital transfers0.20.60.10.10.20.20.10.10.10.1
Exonerations0.70.90.60.70.60.40.60.60.60.6
Other investment expenditure4.55.15.86.75.65.84.04.64.95.5
Externally financed3.55.06.34.76.46.26.86.86.86.7
Expenditure carried over from 2009 appropriations30.00.01.61.50.00.00.00.00.00.0
Net lending0.30.1-0.1-0.10.1-0.10.10.10.00.0
Overall balance (commitment basis)-4.5-4.8-4.8-5.6-3.9-3.9-3.1-2.8-2.3-2.3
Excluding grants-8.4-10.7-11.2-10.1-9.6-10.9-8.6-8.3-7.9-7.8
Basic primary balance (commitment basis)-4.6-5.3-4.4-5.0-2.7-4.1-1.3-0.9-0.6-0.6
Cash basis adjustment0.42.4-0.61.00.0-0.50.00.00.00.0
Change in payment arrears0.0-0.4-0.10.00.00.00.00.00.00.0
Expenditures committed awaiting payment orders-1.01.4-1.30.50.0-0.40.00.00.00.0
Payment orders not executed0.11.6-0.8-0.60.00.00.00.00.00.0
Change in treasury commitments1.40.11.70.90.00.00.00.00.00.0
Change in Basic Education Fund account0.0-0.3-0.10.20.00.00.00.00.00.0
Overall balance (cash basis)-4.0-2.4-5.4-4.6-3.9-4.4-3.1-2.8-2.3-2.3
Excluding grants-8.0-8.3-11.8-9.1-9.6-11.4-8.6-8.3-7.9-7.8
Basic primary balance (cash basis)-4.2-2.8-5.0-4.0-2.7-4.6-1.3-0.9-0.6-0.6
Errors and omissions0.1-0.20.00.10.00.00.00.00.00.0
Financing3.92.55.34.53.74.22.92.72.32.3
Foreign2.82.83.23.43.02.93.73.73.53.5
Drawings3.13.13.83.83.63.54.34.34.04.0
Project loans1.92.83.53.53.63.54.34.34.04.0
Program loans1.20.40.30.30.00.00.00.00.00.0
Amortization (excl. IMF)-0.4-0.4-0.5-0.3-0.6-0.5-0.6-0.6-0.5-0.5
Domestic financing1.1-0.32.11.00.71.2-0.8-1.0-1.2-1.2
Bank financing1.00.11.71.60.60.80.3-0.4-0.7-0.8
Central bank1.3-1.10.50.40.60.90.3-0.4-0.7-0.8
Commercial banks-0.21.11.21.20.0-0.10.00.00.00.0
Nonbank financing0.1-0.30.4-0.60.00.5-1.1-0.6-0.5-0.4
Government bonds-0.30.50.4-0.10.00.5-1.1-0.6-0.5-0.4
New issues0.81.41.21.10.73.00.00.00.00.0
Bills0.02.40.00.00.00.0
Bonds0.70.50.00.00.00.0
Amortization-1.2-1.0-0.8-1.2-0.6-2.5-1.1-0.6-0.5-0.4
Privatization revenue0.10.80.20.20.00.00.00.00.00.0
Other nonbank financing0.3-1.5-0.1-0.60.00.00.00.00.00.0
Financing gap40.00.00.10.00.20.20.20.10.00.0
Memorandum item:
Nominal GDP (CFAF billions)3,6903,9384,2804,3684,6054,7205,0855,4995,9726,488
Sources: Burkinabè authorities; and IMF staff estimates and projections.

Commitment (“engagement”) basis

Contingency expenditure to address the impact of expected exogenous shocks in 2011, should they materialize.

For 2010 only.

The financing gap is expected to be covered by ECF disbursements as financing from other sources is included in program grants and loans.

Basic education.

Sources: Burkinabè authorities; and IMF staff estimates and projections.

Commitment (“engagement”) basis

Contingency expenditure to address the impact of expected exogenous shocks in 2011, should they materialize.

For 2010 only.

The financing gap is expected to be covered by ECF disbursements as financing from other sources is included in program grants and loans.

Basic education.

6. The political situation has been volatile in recent months with various groups demonstrating without a common claim. Students’ protests in February were followed by sporadic demonstrations, riots and looting through early June. To address concerns raised during the social turmoil, the authorities held consultations with different stakeholders; a new Cabinet was appointed in early May; and social measures were taken by the government (Box 1).

II. Program Performance at End-2010

7. Performance under the program was generally satisfactory. The authorities met all quantitative targets, implemented all structural reform measures programmed for end-December 2010, and made commendable progress towards meeting the targets set for 2011 (MEFP ¶¶ 10–18 and Text Tables 1 and 2).

Text Table 1.Burkina Faso: Quantitative Performance Criteria and Indicative Targets, 2010(CFAF billions, cumulative from beginning of year; unless otherwise indicated)
20092010
Act.Mar. 5Jun. 6Sep. 5Dec. 6
Prog.Adj.Est.StatusProg.Adj.Est.StatusProg.Est.StatusCR 10/361Adj.Est.Status
Performance criteria and benchmarks
Ceiling on the overall fiscal deficit including grants 1222.771.396.391.3Met95.1120.1123.6Not met143.6102.4Met217.8246.8232.4Met
Ceiling on the amount of new nonconcessional external debt contracted or guaranteed by
the government 2,30.00.00.0Met0.00.0Met0.00.0Met0.00.0Met
Ceiling on the amount of new external debt of less than one year’s maturity contracted or
guaranteed by the government 2,30.00.00.0Met0.00.0Met0.00.0Met0.00.0Met
Accumulation of external arrears 20.00.00.0Met0.00.0Met0.00.0Met0.00.0Met
Indicative targets
Government revenue539.1124.4133.1Met300.1342.1Met438.6504.7Met667.9681.3Met
Poverty-reducing social expenditures259.660.453.2Not met126.3118.0Not met200.4176.6Not met274.5297.2Met
Large taxpayer non-filer rate (percent) 43.05.04.7Met5.03.1Met5.02.3Met5.01.9Met
Accumulation of domestic arrears0.00.00.0Met0.00.0Met0.00.0Met0.00.0Met
Maximum upward adjustment of deficit ceiling including grants due to:
Shortfall in grants relative to program projections25.025.025.025.025.025.050.125.025.0
Excess in concessional loan financing relative to program projections0.015.00.015.00.015.00.615.03.9
Adjustment factors
Shortfall in grants relative to program projections38.70.051.80.080.40.050.1-7.573.6
Excess in concessional loan financing relative to program projections-28.20.0-5.90.0-3.20.00.65.33.9
Memorandum items:
Basic primary balance (cash basis)-111.8-125.1-66.5-168.3-66.8-222.4-84.8-213.6-172.6
Grants232.469.117.2134.554.0212.2162.1272.6198.9
Concessional loans123.937.231.374.471.2119.0119.6161.5165.4
Sources: Burkinabè authorities; and IMF staff estimates and projections.

The ceiling on the overall fiscal defcit is to be adjusted in line with the TMU defnition. It is calculated on a commitment basis.

To be observed continuously.

Excluding Treasury bills and bonds issued in CFA francs on the regional West African Economic and Monetary Union (WAEMU) market. This ceiling excludes supplier credit with a maturity of one year or less.

Applies to average over respective quarter.

Indicative target.

Performance criteria.

Sources: Burkinabè authorities; and IMF staff estimates and projections.

The ceiling on the overall fiscal defcit is to be adjusted in line with the TMU defnition. It is calculated on a commitment basis.

To be observed continuously.

Excluding Treasury bills and bonds issued in CFA francs on the regional West African Economic and Monetary Union (WAEMU) market. This ceiling excludes supplier credit with a maturity of one year or less.

Applies to average over respective quarter.

Indicative target.

Performance criteria.

Text Table 2.Burkina Faso: Structural Conditionality-Status of Implementation, at end 2010
MeasuresDateStatus
Public Financial Management
Electronically connect two additional customs posts to the main Customs system.end-Dec. 2010Done.
Prepare a study on the taxation of petroleum products and on a new pricing system.end-Dec. 2010Done.
Civil Service
Implement the merit-based promotion system.end-Dec. 2010Done.
Financial Sector
Finalize the restructuring of the Banque Commerciale du Burkina.end-Dec. 2010Done.
Cotton Sector
Develop a business plan for SOFITEX.end-Dec. 2010Done.

8. Performance was particularly strong in the fiscal area: (i) the PC on the overall deficit was met as expenditure was contained below the programmed level and revenue targets were exceeded; (ii) the large taxpayer compliance rate was higher than anticipated; (iii) priority social spending were above target; (iv) two additional customs posts were electronically connected to the main terminal as planned; (iv) the merit-based promotion system in the civil service was implemented; and (iv) a study on a new system for petroleum products taxation and pricing was completed.

9. In the cotton sector, the business plan for SOFITEX was completed as scheduled, and additional cost cutting measures were taken. The authorities finalized the arrangements for the redistribution of cotton cultivated area to the two privately-owned cotton ginning companies, as well as studies for financing mechanisms for the cotton price-smoothing fund, and the input fund.

Box 1.Burkina Faso—Managing Exogenous Shocks and Social Tensions

After recovering from the impact of exogenous shocks of 2009 which included the global economic slowdown, the collapse of cotton prices, and severe floods, the economic and social environment was adversely affected by new shocks in early 2011: spillover effects from the Ivorian crisis (January-April); social turmoil (February-early June); and the impact of increased global oil and food prices.

The escalation of the Ivorian crisis in early 2011 affected Burkina Faso’s economy, mainly through higher transportation costs as alternative channels for external trade, through other neighboring countries had to be sought after the closing of the railroad system. Disruptions in the power supply, and other imports fuelled inflationary pressures. Production, particularly for small-scaled enterprises relying on imported spare parts from Cote d’Ivoire was also affected. The overall impact of the Ivorian crisis on Burkina Faso’s economy is expected to be marginal because the crisis was shortlived, and the Burkinabè authorities took mitigating measures, notably to increase energy production through the leasing of generators (MEFP ¶ 31).

The political situation has been volatile since February 2011. Various groups (students, labor unions, cotton producers’ organizations, opposition parties, magistrates, and armed forces) have held demonstrations for different reasons. There have also been several incidents of unrest in the military, as well as looting and destruction of public and private property. The social turmoil has disrupted economic activity, particularly in the capital city. The authorities’ response has included consultations with key stakeholders and social groups, the appointment of a new Cabinet in late April, and social measures some of which generated additional expenditure estimated at 0.5 percent of GDP as presented below.

Mitigating Measures Against the 2011 Social Turmoil
MeasuresCost
Billion

CFA Francs
Percent

of GDP
Total budgetary Impact23.50.50
1. A reduction in the price of rice, sugar, cooking oil for three months5.00.11
2. Elimination of the local development tax0.00.00
3. A 10 percent reduction in the salary tax rate4.00.08
4. Clearance of unpaid civil service promotions for 2008—093.70.08
5. Low interest rate loans to retailers affected by lootings7.00.15
6. Compensation for destroyed private property1.80.04
7. Rehabiliation of destroyed government buildings2.00.04
Sources: Burkinabè authorities and IMF staff estimates.
Sources: Burkinabè authorities and IMF staff estimates.

10. In the financial sector, the authorities reached an agreement with IFC for the sale of 6 percent of the government’s shares in the housing bank, and completed the restructuring of Banque Commeriale du Burkina with its recapitalization.

11. The authorities adopted a new PRSP in December 2010.1 The new strategy aims to accelerate growth and enhance poverty reduction programs. To this end, it outlines policies to consolidate macroeconomic stability, support fiscal and debt sustainability, address impediments to growth, and progress towards the MDGs (MEFP ¶¶ 19–24).

III. Macroeconomic Outlook and Risks

12. The medium-term macroeconomic prospects are positive. Economic growth is forecast to reach 6.5 percent by 2015, supported by higher and more efficient public investment, notably in infrastructure, and continued strong performance in agriculture, mining and services sectors. After the expected spike in 2011, annual inflation would return to levels compatible with the regional convergence criterion of 2 percent on average. The external current account deficit is forecast to widen to 6.2 percent of GDP by 2015 reflecting the projected deterioration in terms of trade, and a strong domestic demand (Text Table 3).

Text Table 3.Burkina Faso - Selected Macroeconomic Indicators, 2008–2015
20082009201020112012201320142015
Projections
(In percent of GDP unless otherwise indicated)
Real GDP (percentage change)5.23.27.95.25.66.06.56.5
Inflation (period average, percentage change)10.72.6-0.62.82.02.02.02.0
Basic primary balance (Commitment basis)-4.6-5.3-5.0-4.1-1.3-0.9-0.6-0.6
Overall budget deficit (Commitment basis, including grants)-4.5-4.8-5.6-3.9-3.1-2.8-2.3-2.3
Current account balance (including official transfers)-11.2-4.2-3.5-5.8-6.3-7.1-7.2-6.2
Sources: Burkinabè authorities; and IMF staff estimates and projections.
Sources: Burkinabè authorities; and IMF staff estimates and projections.

13. The outlook for 2011 has not changed significantly since the last program review despite heightened risks. Economic growth would remain robust at 5.2 percent driven by the expected expansion in agriculture, gold and cotton production and prices. Inflation, however, is expected to inch up, mostly reflecting spillover effects from the Ivorian crisis, increased global fuel prices, and supply disruptions from the social unrest (See Box 1). The external current account deficit is expected to deteriorate mainly because of higher import prices.

14. The short-term economic outlook is subject to important downside risks.

  • Prolonged social turmoil. Further social unrest would increase expenditure pressures and weaken revenue collection. Should this risk materialize, investment spending could be crowed out, thus reducing the scope for fiscal policy’s support to economic growth.
  • Shortfall in budget revenue. Uncertainties on reaching the programmed revenue target have increased mainly because of the social turmoil. In view of potential expenditure pressures, any revenue shortfall would weaken fiscal consolidation efforts and could lead to the accumulation of domestic payment arrears. Under the circumstances, it will be critical for Burkina Faso to meet disbursement conditions agreed with donors to avoid delays or shortfalls in securing the budget support programmed for 2011.
  • Continued rise in global oil prices. Rising oil prices are likely to affect productivity and potentially dampen economic growth in 2011 while contributing to inflationary pressures.

IV. Policy Discussions

15. Burkina Faso’s vulnerability to external shocks dominated the discussions. There was a general agreement that in 2011 policy implementation would take place in a difficult environment because of adverse exogenous shocks. The authorities concurred with staff that while addressing pressing social demands expressed by the population during the social turmoil, it was important to maintain a prudent fiscal policy stance, consistent with the medium-term fiscal sustainability objective, and the need to support poverty reduction efforts and economic growth.

16. Program discussions focused on: fiscal policy and mitigating measures against exogenous shocks; external sector policies and reforms; and prospects for accelerated growth under the new PRSP.

A. Fiscal Policy

17. The authorities intend to maintain a prudent fiscal policy stance in 2011. The revised 2011 budget adopted by parliament is consistent with the macroeconomic framework agreed with staff during the first review although it accounts for additional spending triggered by exogenous shocks and social unrest. While revenue projections are lower than anticipated by 0.6 percentage points of GDP, budget grants are 1.4 percentage points of GDP higher than expected. The projected windfall reflects mostly higher financing from the World Bank under the PRSC program, expected to be presented to the World Bank Executive Board in September. The authorities plan to use the additional resources to mitigate the impact of exogenous shocks, address social demands and increase capital expenditure (Text Table 4 and Figure 2).

Figure 2.Burkina Faso: Fiscal Indicators, 2006–12

Sources: Burkinabè authorities; and IMF staff estimates and projections.

Text Table 4.Burkina Faso - Selected Fiscal Indicators, 2008–2012
20082009201020112012
Projections
(In percent of GDP)
Revenue and grants17.119.620.122.120.5
Tax revenue12.112.613.013.013.8
Grants4.05.94.67.05.5
Expenditure and net lending21.624.425.726.023.5
Overall budget deficit

(Commitment basis, including grants)
-4.5-4.8-5.6-3.9-3.1
Sources: Burkinabè authorities; and IMF staff estimates and projections.
Sources: Burkinabè authorities; and IMF staff estimates and projections.

18. Revenue is forecast to be lower than originally anticipated. Total revenue is projected at 15.1 percent of GDP against 15.7 percent at the time of the first program review, because of spillover effects from the Ivorian crisis that affected economic activity in the first quarter, and the reduction in the salary tax rate introduced by the authorities to address labor unions demands during the social unrest (MEFP ¶ 30). The authorities concurred with staff that to meet the revenue target, it will be critical to ensure an efficient implementation of tax policy and administrative measures planned for 2011,2 particularly the introduction of the corporate income tax.

19. Shock-related spending is expected to bring expenditure above the original program level. Current expenditure is forecast at 13.5 percent of GDP (12.4 percent previously) mostly on account of higher transfers, which reflects mitigating measures against exogenous shocks, notably higher subsidies on petroleum products for vulnerable groups (cooking gas), and for the fuel oil used by the power company, as well as the leasing of generators to address power disruptions during the Ivorian crisis. The authorities intend to increase investment expenditure to support growth-enhancing initiatives under the new PRSP, with a particular focus on infrastructure. Pro-poor spending is expected to increase from 7.7 percent of total expenditure in 2010 to about 9 percent in 2011 (Table 7 and MEFP ¶ 31).

Table 5.Burkina Faso: Indicators of Capacity to Repay the Fund, 2008–15
20082009201020112012201320142015
Projections
Fund obligations based on existing credit(SDR millions)
Principal0.00.00.02.44.75.17.214.1
Charges and interest0.40.20.00.10.30.20.20.2
Fund obligations based on existing and prospective credit(SDR millions)
Principal0.00.00.02.44.75.17.214.1
Charges and interest0.40.20.00.10.30.30.30.3
Total obligations based on existing and prospective credit
SDR millions0.40.20.02.55.05.47.514.4
CFAF billions0.30.10.01.83.84.15.610.8
Percent of exports of goods and services0.10.00.00.20.30.40.50.9
Percent of debt service 11.40.60.04.98.08.210.317.1
Percent of GDP0.00.00.00.00.10.10.10.2
Percent of tax revenue0.10.00.00.30.50.50.61.1
Percent of quota0.70.30.04.18.39.012.423.9
Outstanding Fund credit
SDR millions35.370.483.694.1102.3103.796.582.4
CFAF billions24.851.163.170.677.078.072.662.0
Percent of exports of goods and services6.710.37.97.27.06.96.14.9
Percent of debt service 1117.8221.6252.8186.0165.1157.8133.197.6
Percent of GDP0.71.31.41.51.51.41.21.0
Percent of tax revenue5.610.311.111.511.09.88.26.3
Percent of quota58.6116.9138.9156.3169.9172.2160.3136.8
Net use of Fund credit (SDR millions)11.535.113.910.58.21.4-7.2-14.1
Disbursements11.535.113.912.912.96.50.00.0
Repayments and Repurchases0.00.00.02.44.75.17.214.1
Memorandum items:
Exports of goods and services (CFAF billions)369.5497.2795.2980.01101.81136.01185.71274.9
External Debt service (CFAF billions) 121.123.124.937.946.649.454.663.5
Nominal GDP (CFAF billions)3,6903,9384,3684,7205,0855,4995,9726,488
Tax Revenue (CFAF billions)444.7494.6565.7614.4701.5793.4882.8982.6
Quota (SDR millions)60.260.260.260.260.260.260.260.2
Sources: IMF staff estimates and projections.

Total external debt service includes IMF repurchases and repayments.

Sources: IMF staff estimates and projections.

Total external debt service includes IMF repurchases and repayments.

Table 6.Burkina Faso: Schedule of Disbursements Under the ECF Arrangement, 2010–13
AmountDate AvailableConditions Necessary for Disbursement 1
SDR 7.454 millionJune 14, 2010Following Executive Board approval of the new ECF arrangement
SDR 6.45 millionDecember 15, 2010Observance of the performance criteria for June 30, 2010, and completion of the first review under the arrangement
SDR 6.45 millionJune 14, 2011Observance of the performance criteria for December 31, 2010, and completion of the second review under the arrangement
SDR 6.45 millionDecember 15, 2011Observance of the performance criteria for June 30, 2011, and completion of the third review under the arrangement
SDR 6.45 millionJune 14, 2012Observance of the performance criteria for December 31, 2011, and completion of the fourth review under the arrangement
SDR 6.45 millionDecember 15, 2012Observance of the performance criteria for June 30, 2012, and completion of the fifth review under the arrangement
SDR 6.45 millionMay 31, 2013Observance of the performance criteria for December 31, 2012, and completion of the sixth review under the arrangement
Source: IMF Staff.

In addition to the generally applicable conditions under the Extended Credit Facility.

Source: IMF Staff.

In addition to the generally applicable conditions under the Extended Credit Facility.

Table 7.Burkina Faso: Poverty-Reducing Social Expenditures, 2001–11
20012002200320042005200620072008200920102011
Est.Proj.
(CFAF billions)
Total poverty-reducing social expenditure80.4108.9116.6145.0161.8167.2182.6198.5259.6297.2314.4
Total current expenditure64.976.783.894.0112.6121.7143.1146.2172.0183.2201.4
Total capital expenditure15.532.232.850.949.245.539.552.287.6114.0113.1
Health27.338.537.948.154.255.760.260.169.888.385.4
Current expenditure24.131.529.931.939.443.650.649.955.462.771.1
Capital expenditure3.26.98.016.314.812.19.610.214.525.614.4
Education35.142.747.956.964.570.676.682.291.4123.5115.9
Current expenditure29.830.537.644.253.159.567.672.882.790.296.6
Capital expenditure5.312.210.312.711.411.19.09.58.833.319.2
Rural roads1.91.82.33.33.73.92.72.315.43.33.0
Current expenditure0.00.00.00.00.00.10.00.10.10.10.1
Capital expenditure1.91.82.33.33.63.72.72.215.33.22.9
Women’s welfare and other poverty-reducing
social expenditure16.225.928.536.639.437.043.253.882.982.1110.2
Current expenditure11.114.716.318.020.118.524.923.533.930.233.5
Capital expenditure5.111.212.218.619.318.618.330.349.051.976.7
(Percent of GDP)
Total poverty-reducing social expenditure3.94.94.85.75.65.35.65.46.66.86.7
Total current expenditure3.13.43.43.73.93.84.44.04.44.24.3
Total capital expenditure0.71.41.32.01.71.41.21.42.22.62.4
Health1.31.71.61.91.91.81.91.61.82.01.8
Current expenditure1.21.41.21.21.41.41.61.41.41.41.5
Capital expenditure0.20.30.30.60.50.40.30.30.40.60.3
Education1.71.92.02.22.22.22.42.22.32.82.5
Current expenditure1.41.41.51.71.81.92.12.02.12.12.0
Capital expenditure0.30.50.40.50.40.30.30.30.20.80.4
Rural roads0.10.10.10.10.10.10.10.10.40.10.1
Current expenditure0.00.00.00.00.00.00.00.00.00.00.0
Capital expenditure0.10.10.10.10.10.10.10.10.40.10.1
Women’s welfare and other poverty-reducing
social expenditure0.81.21.21.41.41.21.31.52.11.92.3
Current expenditure0.50.70.70.70.70.60.80.60.90.70.7
Capital expenditure0.20.50.50.70.70.60.60.81.21.21.6
(Percent of total expenditure)
Total poverty-reducing social expenditure17.522.320.024.924.722.321.925.327.128.025.5
Total current expenditure14.115.714.416.117.216.317.218.718.017.316.3
Total capital expenditure3.46.65.68.77.56.14.76.79.210.79.2
Health5.97.96.58.38.37.47.27.77.38.36.9
Current expenditure5.26.45.15.56.05.86.16.45.85.95.8
Capital expenditure0.71.41.42.82.31.61.11.31.52.41.2
Education7.68.78.29.89.89.49.210.59.611.69.4
Current expenditure6.56.26.57.68.18.08.19.38.68.57.8
Capital expenditure1.22.51.82.21.71.51.11.20.93.11.6
Rural roads0.40.40.40.60.60.50.30.31.60.30.2
Current expenditure0.00.00.00.00.00.00.00.00.00.00.0
Capital expenditure0.40.40.40.60.60.50.30.31.60.30.2
Women’s welfare and other poverty-reducing
social expenditure3.55.34.96.36.04.95.26.98.77.78.9
Current expenditure2.43.02.83.13.12.53.03.03.52.82.7
Capital expenditure1.12.32.13.23.02.52.23.95.14.96.2
Sources: Burkinabè authorities; and IMF staff estimates and projections.
Sources: Burkinabè authorities; and IMF staff estimates and projections.

20. The 2011 program is fully financed.3 The overall budget deficit (cash basis, including grants) is projected at 4.4 percent of GDP. It is financed with resources from bilateral and multilateral donors, a drawdown in Treasury deposits, and the issuance of bonds in the WAEMU regional bond market (Text Table 5). In the context of a volatile social situation, and rising fuel and food prices, the authorities agreed with staff that increased caution and vigilance was needed in executing the 2011 budget. They stand ready to take corrective measures to compensate additional expenditure or revenue and external financing shortfall that may arise in the second half of the year. Such measures would include a scaling down of capital expenditure and a reallocation of budgetary appropriations within line ministries. The authorities indicated that they would prepare a second supplementary budget if corrective measures become necessary (MEFP ¶ 32). The 2011 fiscal program provisions for contingency expenditure totaling 0.4 percent of GDP for priority measures aimed at dampening the impact of further exogenous shocks, in consultation with Fund staff.

Text Table 5:Burkina Faso - Program Grants and Loans, 2009–11(In billions CFA Francs, unless otherwise indicated)
200920102011
CR 10/361Proj.
Total Program Grants and Loans195.5195.6139.7209.2
Grants145.5147.8130.1199.6
World Bank56.145.434.059.9
The EU45.452.935.035.0
African Development Bank0.07.70.022.5
The Netherlands16.811.813.413.4
Switzerland3.44.03.74.0
Sweden5.48.37.47.9
Denmark4.27.24.85.1
France4.34.64.34.6
Germany3.95.90.00.0
Other6.10.00.00.0
Multiple donor programs 1/0.00.027.447.1
Loans (excluding IMF)14.512.60.00.0
World Bank0.00.30.00.0
African Development Bank14.512.30.00.0
IMF35.535.19.69.6
Sources: Burkinabè authorities; and IMF staff estimates and projections.

Managed by the World Bank.

Sources: Burkinabè authorities; and IMF staff estimates and projections.

Managed by the World Bank.

21. Staff encouraged the authorities to accelerate pace in the implementation of PFM reforms. Priority areas remain the transition to a program budgeting system; the strengthening of budget execution procedures; and the improvement of Treasury cash flow management. Staff called for the efficient implementation of recommendations from the audits of financial departments in line ministries planned for 2011, and further improvement in the Treasury cash flow management system put in place in 2010, to reflect expenditure prioritization (MEFP ¶ 37). Staff argued that an efficient Treasury cash flow management system was an important tool for domestic debt management, including in the context of bond issuance in the WAEMU market.

B. External Sector Policies and Reforms

22. The authorities intend to intensify efforts to diversify the export base and reduce vulnerability to exogenous shocks. Medium-term diversification prospects include the development of growth poles and business clusters in selected areas, and expansion in the mining sector. The first growth pole initiative in underway, in collaboration with the World Bank, to develop agribusiness in the Bagre region. Regarding business clusters, the authorities plan to focus on agriculture, handicrafts, forestry, and horticulture with the aim of supporting business network across the country, with a potential for income generating opportunities for vulnerable groups. The mining sector’s contribution to growth is expected to increase substantially thanks to planned investment in new gold mines, and potential operations in other minerals. In the event, the authorities are hopeful that the ongoing revisions to the mining law would provide an improved regulatory framework for investment in the mining sector. Until diversification projects are brought to fruition, the external sector will continue to be dominated by cotton and gold exports, thus vulnerable to terms of trade shocks.

23. In 2011, the current account deficit is forecast to widen to 12.2 percent of GDP (11.2 percent in 2010). Despite an increase in exports, the current account is expected to deteriorate because of the projected rise in global oil prices, as well as higher non-oil imports, notably for investment purposes. Nonetheless, the overall balance is expected to be in surplus thanks to the anticipated increase in current transfers (Figure 3).

Figure 3.Burkina Faso: External Sector Indicators, 2006–12

Sources: Burkinabè authorities; and IMF staff estimates and projections.

24. The authorities concurred with staff on maintaining a prudent borrowing policy. The last DSA4 indicated that the risk of debt distress remains high for Burkina Faso. Taking particularly into account the planned increase in public investment under the new PRSP, staff reiterated the need for the authorities to rely mostly on grants and highly concessional loans for investment financing to ensure that external borrowing is consistent with medium-term fiscal and debt sustainability.

25. Staff encouraged the authorities to continue enhancing debt management capacity. Building on measures implemented in 2010, and on recommendations from the recent World Bank DEMPA mission, the authorities will continue to enhance analytical capacity and debt management tools (MEFP ¶ 35).

C. Growth-Enhancing Policies and Structural Reforms

26. The authorities reaffirmed commitment to policies needed to accelerate growth and reduce poverty. Under the SCADD, economic growth is forecast to average 10 percent in 2011-15 through enhanced economic diversification, increased investment, and continued implementation of structural reforms and sound macroeconomic policies. The authorities concurred with staff, however, that growth objectives under the SCADD were too ambitious. In view of existing impediments to growth and financing constraints, it will be challenging to bring economic growth significantly above 6 percent by 2015. For 2011 in particular, it is unlikely that real GDP growth could reach 8.5 percent as envisaged in the SCADD, when new growth-enhancing initiatives under the strategy have not been implemented. Hence, the authorities agreed that projections under the ECF-supported program provide a sound central scenario for the medium term (MEFP ¶ 25).

27. The new strategy to accelerate growth is centered on increasing public investment to support a private sector-led growth and human development. Key priority areas include infrastructure (roads, airports, and electricity), education, and health and sanitation. While agreeing with the authorities that Burkina Faso needs a substantial increase in public investment to close the infrastructure gap, staff stressed that the impact of higher investment on economic growth will critically depend on the authorities’ ability to enhance administrative and analytical capacity in projects preparation and execution; remove bottlenecks in procurement procedures; and increase absorptive capacity. Staff encouraged the authorities to be selective in preparing investment projects to account for financing constraints.

Chart 5.Burkina Faso: Real GDP Growth: SCADD vs. Program

(In percent, 2010-15)

Sources: Burkinabè authorities; and IMF staff estimates and projections.

28. There was an agreement that continued implementation of structural reforms is essential to enhance growth prospects. The authorities intend to maintain the focus on cotton sector reforms, financial sector development and access to financial services, and business climate improvement. In the cotton sector, improved global market conditions have strengthened prospects for financial viability for ginning companies and higher producer prices. Staff encouraged the authorities to press ahead with reforms in the sector. For SOFITEX, management practices will be strengthened thanks to measures put in place at end-2010, and cost-cutting efforts will continue. In addition, a privatization strategy will be completed by end-2012. The authorities agreed with staff that the implementation of the financial sector strategy needed to be reinvigorated. They indicated that efforts were underway to secure financing for key measures under the strategy. The focus in 2011-12 will be on the implementation of the new strategy for microfinance development, and the preparation of a reform plan for postal services (SONAPOST). The setting up of one stop window for merchandise clearance at customs, and civil service reforms aimed at enhancing efficiency in public administration are expected to support the authorities’ efforts to improve the business climate further (MEFP ¶¶ 36–42).

29. A new petroleum product pricing mechanism will be implemented in 2011. Based on the study completed at end-2010, the authorities plan to select the new mechanism to pass-through changes in international oil prices (MEFP ¶ 39). They agreed with staff that general subsidies to petroleum products are costly for the government budget and not efficient to alleviate the impact of the surge in global oil prices on the vulnerable segments of the population. An efficient implementation of the new mechanism will also strengthen the cash-flow position for the oil importing company (SONABHY) that has absorbed the increase in international oil prices through June 2011 (Chart 6). The authorities argued however, that the implementation of the new mechanism should be reprogrammed from June to end-December 2011.

Chart 6.Burkina Faso: Profits/Losses of SONABHY

(2005–11, CFAF per liter)

Sources: Burkinabè authorities and Bloomberg database.

30. The authorities’ poverty reduction efforts are geared towards achieving the MDGs, as indicated in the SCADD. They intend to focus particularly on alleviating extreme poverty and hunger, ensuring universal primary education, improving maternal health, reducing infant mortality, and combating HIV/AIDS and other diseases. Despite the increase in pro-poor spending and recent progress in some of these areas, achieving the MDGs by 2015 will be an important challenge, one that the authorities plan to tackle in the new PRSP (Figure 4).

Figure 4.Burkina Faso: Selected Millennium Development Goals for 2015 1/

Source: World Development Indicators database.

1/ When data were not available for the specific year, the charts use the data from the closest available year.

V. Program Monitoring

31. Program performance will be monitored on a semi-annual basis through structural benchmarks and quantitative targets (MEFP Tables 1 and 2). The program sets quantitative indicative targets for March and September, and performance criteria for June and December 2011. The authorities have requested that the performance criterion on the overall budget deficit for end-June and end-December 2011 be modified to take into account higher than originally anticipated expenditure and a possible revenue shortfall in 2011, mainly triggered by exogenous shocks and the recent social turmoil. Structural conditionality measures in the program aim to support fiscal sustainability through enhanced revenue collection and PFM reforms; improve service delivery in the civil service; and support a private sector-led growth.

VI. Staff Appraisal

32. Economic recovery was strong in 2010, and short-term prospects are broadly positive despite downside risks. Economic growth accelerated significantly in 2010, driven by the agriculture, mining, and services sectors, as well as public investment. The recovery was accompanied by an increase in credit to the economy, particularly in the tertiary sector. Real GDP growth is expected to remain robust in 2011, while inflation could increase, particularly because of rising global oil and food prices. Risks to the short-term outlook are mainly related to domestic uncertainties on the social front, and a potential worsening of the global energy crisis.

33. Performance under the program was satisfactory. All end-December quantitative and structural targets were met, and the authorities have made commendable progress on reform measures programmed for 2011.

34. Staff encourages the authorities to maintain a prudent fiscal policy stance in 2011 to safeguard medium-term fiscal objectives. The economic environment is likely to be difficult in 2011 as exogenous shocks have heightened the risk for inflationary and expenditure pressures, as well as a shortfall in revenue. Staff encourages the authorities to remain prudent in executing the budget, and to ensure an efficient implementation of the tax strategy adopted in 2010 as well as revenue-enhancing measures planned in the 2011 budget. Staff welcomes the authorities’ commitment to revisit budget appropriations and re-prioritize spending if unforeseen expenditure emerges in the second part of the year.

35. Staff commends the authorities for the adoption of the new PRSP for 2011-15. It believes that an efficient implementation of policies and reforms under the new strategy will support higher growth and enhance poverty reduction efforts. Staff finds, however, that it will be challenging for Burkina Faso to achieve the investment and growth targeted under the PRSP, in view of existing impediments to growth, and the time needed to bring new growth-enhancing initiatives to fruition. It encourages the authorities to take the opportunity of the first APR to reassess macroeconomic prospects underpinning the PRSP objectives and prioritize growth-enhancing programs accordingly.

36. Priority areas for structural reforms remain appropriately focused and supportive of the authorities’ objectives under the new PRSP. Staff calls the authorities’ attention on the importance of maintaining the momentum in structural reform implementation, particularly in the cotton and financial sectors that are critical for growth and poverty reduction.

37. Burkina Faso’s risk of debt distress remains high, particularly in relation with the country’s narrow export base. Relying mostly on grants and highly concessional loans to finance investment remains important. Staff encourages the authorities to ensure that investment projects are selected with a particular attention to their impact on growth and debt sustainability.

38. Staff supports the authorities’ request for the modification of PCs, and recommends the conclusion of the second ECF review based on the continued strong performance under the program, and the authorities’ medium-term policy commitments.

Appendix I—Letter of Intent

Ouagadougou, June 28, 2011

John Lipsky

Acting Managing Director,

International Monetary Fund

700 19th Street NW

Washington, DC 20431 (USA)

Dear Mr. Lipsky:

1. The government of Burkina Faso is committed to implementing sound policies and reforms to address Burkina Faso’s developmental challenges. The government is also determined to take the necessary actions to achieve the objectives defined in its new PRSP called “Strategy for Accelerated Growth and Sustainable Development” (SCADD), adopted in December 2010.

2. Government policies in 2010 were sound and supportive of economic objectives. In particular, investment in infrastructure increased significantly to support economic recovery and productivity gains in the private sector, while maintaining a prudent fiscal policy stance. For 2011, however, economic prospects could be tamed by inflationary pressures that could emerge from exogenous shocks, including the surge in global food and oil prices, further social unrest, and spillover effects from the crisis in Cote d’lvoire earlier in the year. Under the circumstances, the government remains vigilant in the execution of the budget and stands ready to take any corrective measures that may be deemed necessary to safeguard macroeconomic stability.

3. The government’s medium-term objectives are aligned with the SCADD. To safeguard the attainment of the SCADD’s objectives, we will focus on five key areas: (i) increasing the diversification of the productive base; (ii) enhancing absorptive capacity and the quality of public investment; (iii) increasing investment in the energy sector to support private sector activity; (iv) closing the infrastructure gap through better prioritization in investment; and (v) improving the business environment further through continued structural reforms. Our ambition is to accelerate the building of a foundation for a robust, double-digit economic growth before 2015 through decisive actions in these key areas; and to intensify poverty reduction actions.

4. Following the recent social unrest in the country, the government took correctives measures at the political level, as well as the necessary social measures to safeguard the return to peace in the country. These measures were taken while ensuring that the macroeconomic framework under the ECF-supported program, as agreed with IMF staff was preserved, particularly in the fiscal area. As a result, the 2011 draft Budget adopted by the National Assembly is consistent with our goal to preserve medium-term fiscal and debt sustainability. Nonetheless, these events, as well as exogenous shocks that affected the economy in the first half of this year, are expected to generate additional expenditure and possible revenue shortfall, compared with the original program projections for 2011, resulting in a higher than anticipated budget deficit. Consequently, the government is requesting that the performance criterion on the overall budget deficit for end-June and end-December 2011 be modified as reflected in the MEFP, to account for these developments.

5. The government is convinced that the economic and financial policies presented in the attached Memorandum of Economic and Financial Policies (MEFP) will help achieve the objectives set under our ECF-supported program. Nonetheless, the government is determined to take any additional measures that may become necessary to reach the objectives. The government will consult with the IMF before adopting such measures, and prior to any revision to policies outlined in the MEFP, in accordance with IMF policies on such consultation. Furthermore, the government will provide the IMF with information on policy and reform implementation, as agreed on under the attached Technical Memorandum of Understanding, or upon request.

6. Despite a difficult environment in the second half of 2010, marked by regional uncertainties, the government implemented its economic and financial program supported by the IMF under the Extended Credit Facility in a satisfactory manner. As a result, at end-December 2010, all quantitative and structural targets under the program were met. On this basis, and in view of our policy commitments in the attached MEFP, the government of Burkina Faso requests the completion of the second ECF review, and the third disbursement totaling SDR 6.45 million.

7. As was the case in the past, the government authorizes the IMF to publish this letter of Intent and its attachments, as well as the staff report, upon approval by the IMF Executive Board.

Sincerely yours,

/s/

Lucien Marie Noël BEMBAMBA

Minister of Economy and Finance

Officier de l’Ordre National

Attachments: Memorandum of Economic and Financial Policies, 2011–12 Technical Memorandum of Understanding

Appendix I—Attachment

1 Memorandum on Economic and Financial Policies for 2011–12

I. Introduction

1. This memorandum updates Burkina Faso’s economic and financial program in connection with the implementation of the three-year economic and financial program supported by the IMF under the Extended Credit Facility (ECF). It reviews recent developments in the economy and performance under the program during the second half of 2010, and assesses the outlook for 2011–12. The objectives of the program, approved by the IMF Executive Board on June 14, 2010, are to consolidate macroeconomic stability, and enhance growth prospects as well as the fight against poverty. This memorandum updates and supplements those of May 31, 2010 and of November 17, 2010. Economic policies presented in this memorandum are consistent with the objectives of the new PRSP (Strategy for Accelerated Growth and Sustained Development–SCADD), which was adopted by the government in December 2010.

II. Recent Economic Developments and Program Implementation at End-December 2010

A. Recent Economic Developments

2. In a regional context marked by uncertainty, the Burkinabè economy recovered its trend growth of the past decade. Real GDP growth is estimated at 7.9 percent for 2010, compared with 3.2 percent in 2009. Although all sectors contributed to this growth, it was largely driven by the agricultural and mining sectors.

  • In the agricultural sector, cereal production, estimated at 4,560,574 tons, increased by 26 percent over the previous crop year, mostly because of more favorable weather conditions and the impact of government measures in recent years to improve agricultural productivity. These measures included (i) supplying farming equipments to enhanced-seed producers; (ii) increasing the use of organic fertilizers; and (iii) training, organizing, and providing technical support for more than 5,000 farming households. The emergency program for food and nutritional security, launched in 2010 with support from the European Union also supported agricultural production through measures to improve the quality and increase production of seeds.
  • Gold production increased from 12.1 tons in 2009 to 23. 7 tons in 2010, representing an increase of more than 90 percent. In addition to the four mines already in production (Mana, Youga, Kalsaka, and Taparko), the Inata and Essakane mines came on-stream in April and October 2010, respectively.
  • However, cottonseed production fell by 6 percent, from 361,991 tons in 2009 to 338,000 tons in 2010. This decline was unexpected, given the rise in the producer price (from CFAF 160 per kg to CFAF 182 per kg), the continuation of measures promoting increased and appropriate use of inputs, and the payment of a bonus. It was mainly due to delayed rainfall and inefficient use of fertilizers. These conditions affected the production of genetically modified cotton in particular, which represents 60 percent of total surfaces.
  • Tertiary sector activities were up by 3.7 percent, boosted by several major events in 2010, including the Ouagadougou International Artisan Exhibition (SIAO), the Ouagadougou International Tourism and Hotel Trade Show (SITHO), the National Culture Week (SNC), and the celebration of the 50th anniversary of Burkina Faso’s independence.

3. Consumer prices remained relatively stable compared with 2009. The average annual inflation rate was -0.6 percent, compared with 2.6 percent for the previous year. Contributing factors included strong growth in agricultural production, which slowed down the rise in food prices, the freeze of retail petroleum prices, and lower mobile telephone rates.

4. The external position improved in 2010. Imports rose sharply, driven by the expansion of mining activities and the need to rebuild the infrastructure damaged by the September 2009 and July 2010 floods. Yet, the current account improved thanks to significantly higher exports, reflecting substantial increases in gold production and prices and the higher price of cotton. The current account deficit (including grants) narrowed from 4.2 percent of GDP the previous year to 3.5 percent of GDP in 2010, a stronger result than projected.

5. Money supply was up by 19.1 percent, compared with end-December 2009, reflecting a substantial increase in the net foreign assets of the banking system. With the economic expansion, credit to the economy increased by 8.9 percent, compared with end-December 2009, with a large increase in credit to the services sector.

6. Public finances continued to improve in 2010 as a result of continued efforts to raise revenue and effectively monitor spending. Revenue measures included the following actions by the tax department: (i) revamping the database of large and medium-size taxpayers; (ii) improving automated management of nonfilers and non-payers; and (iii) crosschecking data from files pertaining to income tax. With regard to customs department, measures to improve revenue collection included: (i) the strengthening of controls; (ii) the simplifying of customs clearance procedures; (iii) automating transit processes; and (iv) increasing the number of inspections by the pre-shipment inspection company. Overall, the authorities’ approach to make revenue collecting units accountable adopted in 2009 continued to produce good results. Revenue increased from 13.7 percent of GDP in 2009 to 15.6 percent in 2010. Tax revenue increased by 14.4 percent to CFAF 565.74 billion, exceeding program projections. Nontax revenue increased by 157 percent, reflecting the 10-year renewals of mobile telephone licenses for a total of CFAF 61.8 billion.

7. Expenditure increased to 25.7 percent of GDP in 2010, compared with 24.4 percent in 2009. This increase reflects measures taken by the government to support the economic recovery after the 2009 downturn, owing to the global financial and economic crisis. Current spending stood at 12.2 percent of GDP, a decline from 2009 owing to a modest reduction in the wage bill and in goods and services expenditure, combined with stable transfers. Investment expenditure totaled 12.2 percent of GDP, compared with 11.6 percent in 2009, reflecting the rehabilitation of infrastructure destroyed or damaged by the 2009 and 2010 floods, and the construction of new infrastructure to celebrate the 50th anniversary of Burkina Faso’s independence.

8. On the reduction of payment arrears audited at end-December 2008, the outstanding balance at end-2009, for which payment was programmed for 2010, stood at CFAF 6.2 billion. The payment could not be made as planned, because the reconciliation work with the National Social Security Fund (CNSS) took longer than anticipated.

9. The overall budget deficit (cash basis, including grants) represented 4.6 percent of GDP in 2010, compared with 2.4 percent in 2009. It was financed primarily by external resources and the issuance of bonds in the regional market. IMF financing under the ECF amounted to CFAF 10.7 billion.

B. Results of Program Implementation in 2010

10. Program implementation was satisfactory. All quantitative performance criteria (Table 1) at end-December 2010 were met: (i) the overall deficit as defined in the November 17, 2010, Technical Memorandum of Understanding totaled CFAF 232.4 billion, below the adjusted ceiling of CFAF 246.8 billion; (ii) the government did not contract or guarantee new nonconcessional external debt; (iii) the government did not contract or guarantee new short-term external debt; and (iv) the government did not accumulate any arrears on external debt. All indicative targets were met or exceeded: (i) the minimum total revenue of CFAF 667.9 billion was exceeded with an actual collection of CFAF 681.3 billion; (ii) the benchmark for social spending was outperformed with an actual execution of CFAF 297 billion, compared to the floor of CFAF 274.5 billion; (iii) the large taxpayer nonfiler rate was reduced to 3 percent, below the 5 percent target; and (iv) the government accumulated no domestic payment arrears.

11. All structural benchmarks for the second program review were achieved (Table 2): (i) computerization and connection of the Bingo and Cinkanse offices to the single customs server is now complete. However, some final arrangements remain to be carried out by the WAEMU to allow operations at the Cinkanse joint border post to begin; these include the interconnection of the Togolese and Burkinabè customs services systems, and the harmonization of procedures and the transit management system; (ii) the government conducted a study of the pricing and taxation of petroleum products to improve the petroleum pricing mechanism; (iii) efforts to enhance the effectiveness of the civil service and compensation policy resulted in the comprehensive application of the merit-based promotion system; (iv) regarding the restructuring of the Banque Commerciale du Burkina, the two principal shareholders agreed at the October 2010 board meeting to pay their respective shares of the capital increase, in accordance with new regional capital adequacy requirements; and (v) SOFITEX prepared its five-year business plan for 2010–2014.

12. To strengthen debt management capacity, a World Bank mission conducted an assessment of debt management performance at the government’s request in March 2011, using the Debt Management Performance Assessment (DEMPA) tool. In addition, new regulations issued by the Minister of Economy and Finance will help clarify the roles and responsibilities of all external-financing parties. Recommendations from the DEMPA mission will help define needed reforms for the period ahead.

13. The process of harmonizing national law with WAEMU directives on public finances began by strengthening national experts’ capacities and updating user guides for the directives, supervised by the WAEMU Commission to ensure a smooth harmonization. Based on the action plan for this harmonization, three working groups were created and began work in January 2011.

14. Reforms in the cotton sector continued in a more favorable context owing to the increase in the international price of cotton. The government signed an agreement with SOFITEX for the repayment of its debts to the domestic banking system, thereby consolidating its financial position. It also began the process of re-allocating the cotton cultivated area between ginning companies. This process is aimed at increasing cottonseed production for the two smaller ginneries to increase their viability. In particular, the government offered to transfer the Koudougou production area operated by SOFITEX to Faso Coton. The area proposed for transfer includes two ginning plants. In addition, studies on the financing mechanisms for the price-smoothing and inputs funds were conducted, and will be finalized during two workshops to be organized in coming months. Moreover, climate risk insurance for the cotton sector is also being studied.

15. Regarding the implementation of the financial sector development strategy, despite continued problems with its funding, several measures were completed: (i) the government and the Central Bank of West African States (BCEAO) organized information and outreach activities to promote access to banking services; (ii) an organizational and functional audit of the Directorate of Insurance was conducted and its recommendations were forwarded to the authorities; (iii) a number of activities were carried out to disseminate and implement the new legal provisions concerning the Decentralized Financial System (SFD), including providing stakeholders with pamphlets on the new SFD law adopted in 2009; organizing an annual information workshop in July 2010 for stakeholders and in March 2011 for regional government authorities; publishing a list of licensed decentralized financial institutions (SFD) in November 2010; and organizing 139 SFD inspection missions. Also, the assessment of contribution arrears to the CNSS established the amount payable by the government to the Fund at CFAF 2.3 billion, which is programmed to be settled in 2011.

16. In 2010–11, efforts to divest the government’s holdings in the productive sector focused on two measures: negotiations with the International Finance Corporation (IFC) to divest part of the government’s holdings in Banque de I’Habitat du Burkina Faso (BHBF) resulted in the transfer of 6 percent of the capital of BHBF to the IFC; and the motor vehicle inspection service (CCVA) was privatized.

17. There was progress in meeting conditions under the Extractive Industries Transparency Initiative (EITI). The main actions taken in 2010 were: (i) a website was developed for the EITI Secretariat (www.itie-bf.gov.bf); (ii) informational, communication, and outreach activities were arranged for representatives of the administration, mining companies, and civil society organizations, as well as for translators from the areas bordering the mining sites; and (iii) the first data reconciliation report was prepared.

18. In accordance with the second pillar of the poverty reduction strategy regarding promoting access to basic social services and social protection, the government continued implementing reforms approved in the education and health sectors. In the education sector, efforts to implement the 10-year educational development plan produced satisfactory results in supply and quality of basic education: (i) the number of students increased from 1,906,275 in 2008/2009 to 2,047,630 students in 2009/2010; (ii) the ratio of books to students increased to 1.1 for reading and 1.0 for mathematics during the 2009/2010 school year. To consolidate these efforts, key institutional changes were implemented by the government, with the creation of the Ministry of National Education and Literacy (MENA), which effectively extended basic education to the first cycle of secondary school. In post-primary and secondary education, the government is committed to finalizing the school districting map. To increase health care coverage, the government implemented measures to construct and equip healthcare centers; recruit healthcare personnel; and increase vaccination coverage. In addition in 2010, the percentage of local healthcare centers’ meeting personnel standards was 84.3 percent, indicating better quality services for the population. The percentage of births attended by qualified personnel was 75.3 percent compared with an annual target of 72 percent. To improve the performance of the national social protection system and develop a coherent strategy of effective social safety nets for vulnerable population groups, the government, with support from its partners, is committed to developing a social protection strategy that will strengthen the government’s capacity to design, implement, monitor, and evaluate pro-poor programs.

C. The Accelerated Growth and Sustainable Development Strategy (SCADD)

19. In December 2010, the government adopted a new Poverty Reduction and Growth Strategy Paper called Strategy for Accelerated Growth and Sustainable Development (SCADD) for 2011–15, which replaces the poverty reduction strategy implemented during 2000–10. The SCADD will now serve as the basis for the government’s medium-term economic policies and objectives and is therefore the reference framework for all development interventions. Its implementation will allow a more effective fight against poverty and will strengthen the dialogue between the government and all stakeholders.

20. The SCADD was prepared following an extensive consultation process. Consultations were conducted at five levels: sector and thematic consultations; regional consultations; consultation with private sector and civil society stakeholders; consultation with government institutions; and national conferences.

21. The main objective under the SCADD is to achieve a strong, diversified, and sustained economic growth, based on sustainable management of natural resources which produces multiplier effects in terms of increasing the population’s income and improving its quality of life. To achieve this objective, the government intends to (i) intensify measures aimed at supporting the diversification of the production base; (ii) significantly improve the absorptive capacity for and quality of public investment; (iii) increase investment in the energy sector to support private sector activity; (iv) give priority to infrastructure investments; and (v) continue structural reforms, especially those needed to improve the business climate. It is expected that these measures will boost growth to an average of 10 percent during the SCADD implementation period.

22. In addition to accelerating growth, the specific objectives of the SCADD are also to make progress toward the Millennium Development Goals (MDG) by 2015. Priority areas will be (i) eradicate extreme poverty and hunger; (ii) achieve universal primary education; (iii) promote gender equality and empower women; (iv) improve citizens’ health by reducing the under-5 child mortality rate; (v) improve maternal health; (vi) combat HIV/AIDS, malaria, and other diseases; and (vii) ensure environmental sustainability.

23. The SCADD is based on the following four pillars:

  • Pillar 1: Developing the engines of accelerated growth. This pillar will identify the sectors and locations to be supported in the production of high value-added goods and services: regional centers, manufacturing industry, agribusiness, culture and tourism, and the environment.
  • Pillar 2: Consolidating human capital and promoting social protection. Significant progress was made during the last ten years in valuing human capital and strengthening social protection. This area remains vital for the country, as it embarks on a new phase in its development, to join the ranks of emerging and prosperous nations. Accordingly, the government will focus on income generating opportunities and job creation, the development of education and training, health—especially women’s health, social protection, demographic issues, urban development, and access to basic social services in general.
  • Pillar 3: Strengthening governance. The government is determined to improve economic, political, administrative, and local governance.
  • Pillar 4: Addressing cross-cutting priorities in development policies and programs. The success of the SCADD will depend on addressing cross-cutting issues such as gender, population, the environment, and regional development. Accordingly, these issues will be considered and addressed in policy dialogue at all levels and in the process of formulating sector policies and programs.

24. The satisfactory implementation of the SCADD and the achievement of the objectives established for 2011-15 are subject to certain risks for which the government will prepare mitigating measures. These risks involve essentially: (i) uncertainties about available financing; (ii) the economy’s vulnerability to natural disasters; (iii) lack of capacity and commitments from stakeholders on needed actions; and (iv) the economy’s vulnerability regional and international economic developments.

III. Medium-Term Macroeconomic Framework

25. The medium-term macroeconomic framework intends to support the SCADD’s objectives. Under the central scenario: (i) growth should reach 6.5 percent by 2015; (ii) inflation will remain modest, in line with regional convergence criteria; and (iii) the external position will improve, with the external current account deficit reaching 5.6 percent of GDP in 2015. The growth and investment projections under the central scenario are less ambitious then under the SCADD, reflecting existing impediments to growth, and some of the risks linked to the implementation of the SCADD, particularly the time needed for the strategy’s effects on growth to materialize.

IV. Economic and Financial Policies for 2011

A. Macroeconomic Framework

26. The government will maintain efforts to support fiscal consolidation, strengthen social policies, and pursue the reforms necessary to increase the pace of growth and reduce poverty. The government is aware that program implementation in 2011 will take place in a difficult context marked by higher petroleum and food prices and the impact of postelection crisis in Cote d’lvoire in early 2011, which negatively affected the Burkinabè economy. Therefore, the government has adopted measures to contain the impact of these shocks on public finance and the most vulnerable groups of the population. The economy has also been affected by the social turmoil that took place during the first part of the year.

27. The objectives for the 2011 framework are

  • Real growth of 5.2 percent. This rate is set slightly below the original program projections of 5.5 percent, mostly because of the potential impact of exogenous shocks. In particular, the crisis in Cote d’Ivoire has affected energy supply and activities of companies that stopped production because of shortages of inputs and raw materials imported from Cote d’Ivoire.
  • Average inflation of close to 3 percent. Despite the anticipated positive effect of a good harvest in 2011, inflationary pressures will be exacerbated by the impact of the Ivoirian crisis on production costs, particularly transportation costs, and by imported inflation.
  • An external current account deficit of 5.8 percent of GDP. This is less optimistic than the 2010 estimates, reflecting the impact of projected higher oil prices and, to a lesser extent, lower exports growth.

B. Fiscal Policy

28. Fiscal policy will aim to support the macroeconomic stability required for accelerated growth and sustainable development. Accordingly, reforms aiming to increase revenue and contain expenditure will be pursued and intensified.

29. The government drafted a supplementary budget for 2011 that takes account of the institutional changes implemented in April 2011 following the social unrest and the impact of exogenous shocks in 2011. Under the supplementary budget, which was adopted by the National Assembly in May, the budget deficit (commitment basis, including grants) would amount to 3.4 percent of GDP, an improvement from 2010, mainly owing to a substantial increase in external budgetary assistance.

30. Revenue mobilization will continue to be supported by the measures presented in the November 17, 2010, Memorandum of Economic and Financial Policies. Revenue will increase through the implementation of tax measures adopted in 2010, notably the entry into force of the corporate income tax; the installation of two scanners at the Ouagadougou and Bobo Dioulasso customs posts to improve valuation of imported goods by December 2011 (Structural Benchmark); the implementation of other administrative measures, including continued computerization of tax offices; and the intensification of joint inspections by the customs and tax administrations. Despite the positive impact of these factors, however, revenue could be lower than originally projected because of the impact of the social unrest and exogenous shocks. Accordingly, fiscal revenue is projected at CFAF 711.7 billion, equivalent to 15.1 percent of GDP.

31. Total expenditure and net lending is expected to reach CFAF 1,207.9 billion. It is higher than originally anticipated owing to the following factors:

  • Higher current spending, in particular the wage bill and transfers. Regarding the wage bill, the increase essentially reflects the regularization of administrative decisions on recruitment and promotion in the civil service, and the impact of measures announced after the social unrest in early 2011. The higher budget allocations for transfers reflect the impact of the 2011 exogenous shocks: (i) increased subsidies for petroleum products to SONABEL for electricity production and for butane gas (the latter being considered of social importance), to mitigate the impact of higher international oil prices on the company financial situation; (ii) increased transfers to SONABHY consistent with the continued freeze in the adjustment of petroleum products retail prices; and (iii) some of the financial cost of measures taken the authorities to ensure the return to peace in the country by meeting some of the claims made by protestors. Key measures taken in this respect include: a three-month freeze in the retail price for rice, sugar, and cooking oil; a 10 percent reduction on the tax on salaries; the extension of low-interest loans to businesses that suffered damages during the lootings; and compensation to private owners for rehabilitation of their properties destroyed by protestors.
  • Higher investment spending. Using a portion of the additional budgetary assistance, this increased spending seeks to support growth as laid out in the SCADD, particularly through investment in infrastructure. Special investment projects planned for 2011 will cover those aiming at increasing energy supply, including solar-powered rural electrification; expanding programs based on multifunctional platforms and programs to provide technology to women for income-generating activities; improving agricultural, sanitation, and health equipment; providing sanitation equipment to improve the quality of public hospitals; extending administrative support, including for government entities; and establishing research funds for major projects and disaster management. Higher capital spending will also finance the leasing of generators to increase SONABEL’s production, thereby compensating the lack of electricity supply from Cote d’lvoire during January-May 2011; and cover higher cost for projects caused by increased oil prices and the expected rise in import prices.

32. The overall budget deficit (cash basis, excluding grants) is projected at 11.1 percent of GDP. It will be financed with budget support from Burkina Faso’s development partners, and the issuance of debt on the regional market. Aware of the uncertainties surrounding 2011, the government has been vigilant in executing the 2011 budget, and agrees to revise spending downward, notably capital expenditure, or to reallocated budgetary appropriations between line ministries to compensate for any shortfall in budget resources, in order to avoid accumulating domestic payment arrears, that would adversely affect economic activity and the banking system. Such actions would take place, if needed, through a second supplementary budget in the second half of the year.

C. Balance of Payments and External Debt

33. In 2011, export receipts are expected to increase by 51.2 percent, primarily as a result of the sharp rise in the export prices of cotton and gold. However, the current account deficit (including grants) is expected to widen to 4.9 percent of GDP owing to the anticipated rise in prices of oil and several food products. The overall balance of payments is projected at a surplus of CFAF 30.8 billion, reflecting a significant increase in other financial flows expected in 2011.

34. The government remains committed to maintaining a prudent external borrowing policy to ensure the sustainability of external debt. To this end, it will continue to request support from Burkina Faso’s development partners to ensure that most of its financing needs are covered with grants. It will also ensure that future loans will be contracted under concessional terms as defined in the Technical Memorandum of Understanding attached to this memorandum.

35. Measures to strengthen external debt management in 2011–12 will essentially follow recommendations of the March 2011 World Bank debt management performance assessment mission (DEMPA). Additional reform measures for 2011–12 will include (i) improving the medium-term borrowing strategy, (ii) developing a debt-issuance strategy for the WAEMU bond market, (iii) conducting an external audit of debt management practices, and (iv) implementing the integrated external-financing system by end-June 2011 (Structural Benchmark). Training activities will be organized in 2011 to facilitate the use of the procedures manual adopted in 2009.

D. Policies and Structural Measures

36. The government will continue to consolidate progress toward implementing measures programmed for end-June and end-December 2011, as presented in the November 17, 2010 memorandum and in Table 2. Building on measures completed in 2010, the government will also initiate reforms in areas expected to support the achievement of program objectives.

37. Regarding public finances, efforts to improve budget procedures and cash management will continue. The new framework for the monthly Treasury cash flow management plan will be refined to present expenditure according to priority. The authorities also plan to complete the audits of expenditure commitment systems in line ministries by end-June 2011 (Structural Benchmark) and to implement recommendations from the audits. In addition, a committee will be set up to coordinate the preparation of budget execution data, and efforts to reduce delays in payments will continue, including through the introduction of verification units in five pilot line ministries by March 2012 (Structural Benchmark).

38. Regarding the reform of the civil service management and compensation policy, preparatory work for the civil service census will continue. The civil service census and the harmonization of the payroll and civil service system are expected to be finalized by December 2011 (Structural Benchmark). Building on the outcome of the census, the authorities plan to issue biometric identification cards to civil servants in three pilot institutions and ministries by June 2012 (Structural Benchmark). This experimental phase will provide lessons to be used for the extension of the system. Also, implementation of the merit-based promotion policy will continue.

39. The authorities are aware of the high cost for the budget of subsidies to petroleum products, and are committed to adopt a new pricing system. Taking into account financing constraints and pressing social needs, the authorities believe that a new pricing system that would allow a pass-through of fluctuations in the international oil price would help contain the level of subsidies to petroleum products, and benefit SONABHY financial situation. Based on the study completed at end-2010, the authorities plan to adopt and implement such a system by December 2011 (Structural Benchmark), instead of June 2011 as originally anticipated.

40. In the cotton sector, the rehabilitation of SOFITEX will continue through implementation of internal measures to reduce costs and improve risk management. The study on revision of the price-smoothing mechanism conducted in 2010–11 was validated on March 25, 2011. The new system was used to assess the final adjustment (décompte) for the 2010/2011 crop year, which determined a producer price of CFAF 210/kg of cottonseed and purchase price of CFAF 245/kg of cottonseed for the 2011/2012 crop year. The preliminary report of the inputs fund study was completed at end-April 2011. Based on the outcome of the two studies, new mechanisms will be agreed upon between stakeholders in the cotton sector by end-June 2011 (Structural Benchmark). The exclusivity arrangement for the three cotton-producing areas will expire in 2012, and discussions will be initiated with stakeholders to reach a new agreement in advance of this date. Based on this new framework to be defined for the sector, and in view of progress made in rehabilitating SOFITEX, the government plans to prepare a strategy to reduce its stake in SOFITEX by end-June 2012 (Structural Benchmark).

41. Regarding developing pillars of growth as defined in the SCADD, the government is in the process of launching the Bagre pilot growth pole in the country’s Central East Region. In March 2011, the government adopted a strategy to promote Public-Private Partnerships (PPP), notably to increase private sector participation in public investment programs. The action plan for the strategy’s implementation, including the definition of the legal and institutional framework will be prepared in coming months.

42. The government intends to continue and intensify the implementation of the financial sector strategy, while continuing efforts to raise the funds needed to properly implement the strategy. Two actions are planned for 2011-12: the implementation of the new strategy for microfinance development by end-June 2011 (Structural benchmark), and the preparation of a strategy to enhance the quality of financial services offered by SONAPOST by end-June 2012 (Structural benchmark).

E. Program Monitoring

43. The authorities intend to closely monitor the implementation of their economic and financial program. To ensure the success of the program, they intend to take the necessary steps to reach the quantitative and structural targets agreed upon with IMF staff and presented in Tables 1 and 2 of this memorandum. In monitoring program implementation, the authorities plan to follow the Technical Memorandum of Understanding, which defines quantitative performance criteria and requirements for data transmission to IMF staff.

44. Throughout the program, the Burkinabè government will not (i) introduce restrictions on payments and transfers under current transactions or tighten any such restrictions without prior consultation with the IMF; (ii) introduce or modify multiple currency practices; (iii) conclude bilateral payment agreements incompatible with the provisions of Article VIII of the IMF Articles of Agreement; or (iv) introduce restrictions on imports for balance of payments’ controls.

45. The second review of the ECF-supported program is expected to be concluded no later than July 15, 2011, and the third review no later than December 15, 2011.

Table 1.Burkina Faso: Quantitative Performance Criteria and Indicative Targets, 2011(CFAF billions, cumulative from beginning of year; unless otherwise indicated)
20102011
Dec.Mar. 5Jun. 6Sep. 5Dec. 6
Prog.7Est.Prog.Prog.Prog.Prog.
Performance criteria and benchmarks
Ceiling on the overall fiscal deficit including grants 1217.8232.473.091.0178.3186.1
Ceiling on the amount of new nonconcessional external debt contracted or guaranteed by
the government 2,30.00.00.00.00.00.0
Ceiling on the amount of new external debt of less than one year’s maturity contracted or
guaranteed by the government 2,30.00.00.00.00.00.0
Accumulation of external arrears 20.00.00.00.00.00.0
Indicative targets
Government revenue667.9681.3142.8347.6508.2711.7
Poverty-reducing social expenditures274.5297.269.2144.6229.5314.4
Large taxpayer non-filer rate 45.01.95.05.05.05.0
Accumulation of domestic arrears0.00.00.00.00.00.0
Maximum upward adjustment of deficit ceiling including grants due to:
Shortfall in grants relative to program projections25.025.025.025.025.025.0
Excess in concessional loan financing relative to program projections15.03.915.015.015.015.0
Adjustment factors
Shortfall in grants relative to program projections-7.573.60.00.00.00.0
Excess in concessional loan financing relative to program projections5.33.90.00.00.00.0
Memorandum items:
Basic primary balance (cash basis)-213.6-172.6-50.6-147.3-196.9-218.7
Grants272.6198.919.9137.2195.2330.0
Concessional loans161.5165.441.241.282.3164.6
Sources: Burkinabè authorities; and IMF staff estimates and projections.

The ceiling on the overall fiscal deficit is to be adjusted in line with the TMU definition. It is calculated on a commitment basis.

To be observed continuously.

Excluding Treasury bills and bonds issued in CFA francs on the regional West African Economic and Monetary Union (WAEMU) market. This ceiling excludes supplier credit with a maturity of one year or less.

Applies to average over respective quarter. The value for 2010 corresponds to the fourth quarter.

Indicative target.

Performance criteria.

CR 10/361.

Sources: Burkinabè authorities; and IMF staff estimates and projections.

The ceiling on the overall fiscal deficit is to be adjusted in line with the TMU definition. It is calculated on a commitment basis.

To be observed continuously.

Excluding Treasury bills and bonds issued in CFA francs on the regional West African Economic and Monetary Union (WAEMU) market. This ceiling excludes supplier credit with a maturity of one year or less.

Applies to average over respective quarter. The value for 2010 corresponds to the fourth quarter.

Indicative target.

Performance criteria.

CR 10/361.

Table 2.Structural Benchmarks, 2011–12
MeasuresDate
Public Financial Management
Prepare an audit of expenditure commitment systems in line ministries.End-June 2011

(Third review)
Implement a new pricing and taxation system for petroleum products.End-Dec. 2011

(New date)

(Third review)
Implement the external financing integrated system.End-June. 2011

(Fourth review)
Set up a one stop window for customs clearance.End-Dec. 2011

(Fourth review)
Set up an electronic system to improve merchandise valuation in two customs posts.End-Dec. 2011

(Fourth review)
Install units in charge of expenditure control in five line ministries.End-March 2012

(Fifth review)
Public Service
Complete the civil service survey and harmonize the payroll and the civil service roster.End-Dec. 2011

(Fourth review)
Implement the biometric card for civil servants in three pilot institutions.End-June 2012

(Sixth Review)
Cotton Sector
Adopt recommendations from the studies on financing mechanisms for the price-smoothing fund, and for the inputs fund, and develop an action plan for implementing the new mechanisms.End-June 2011

(Third review)
Prepare a strategy for the gradual reduction of state participation in the capital structure of SOFITEX.End-June 2012

(Sixth Review)
Financial Sector
Implement the microfinance strategy.End-June 2011

(Third review)
Prepare a strategy to enhance the quality of financial services offered by the SONAPOST.End-June 2012

(Sixth Review)
Attachment II—Technical Memorandum of Understanding

Ouagadougou, June 28, 2011

1. This technical memorandum of understanding (TMU) defines the quantitative performance criteria and indicative targets, as well as structural benchmarks to assess performance under the program supported by the Extended Credit Facility (ECF). It also sets deadlines for data reporting.

I. Definitions

2. Government. Unless otherwise indicated, ‘government’ means the central administration of Burkina Faso and does not include any local administration, the central bank, or any other public or government-owned entity with autonomous legal personality not included in the government flow-of-funds table (TOFE).

3. Definition of debt. For the purposes of the relevant assessment criteria, the definition of debt is set out in Executive Board Decision No.6230-(79/140), Point 9, as revised on August 31, 2009 (Decision No. 14416-(09/91)).

  • a) the term ‘debt’ will be understood to mean a current, i.e., not contingent, liability, created under a contractual arrangement through the provision of value in the form of assets (including currency) or services, and which requires the obligor to make one or more payments in the form of assets (including currency) or services, at some future point(s) in time; these payments will discharge the principal and/or interest liabilities incurred under the contract. Debts can take a number of forms, the primary ones being as follows:
    • loans, i.e., advances of money to the obligor by the lender made on the basis of an undertaking that the obligor will repay the funds in the future (including deposits, bonds, debentures, commercial loans and buyers’ credits) and temporary exchanges of assets that are equivalent to fully collateralized loans under which the obligor is required to repay the funds, and usually pay interest, by repurchasing the collateral from the buyer in the future (such as repurchase agreements and official swap arrangements);
    • suppliers’ credits, i.e., contracts where the supplier permits the obligor to defer payments until sometime after the date on which the goods are delivered or services are provided; and
    • leases, i.e., arrangements under which property is provided which the lessee has the right to use for one or more specified period(s) of time that are usually shorter than the total expected service life of the property, while the lessor retains the title to the property. For the purpose of the guideline, the debt is the present value (at the inception of the lease) of all lease payments expected to be made during the period of the agreement excluding those payments that cover the operation, repair or maintenance of the property.
  • b) Under the definition of debt above, arrears, penalties, and judicially awarded damages arising from the failure to make payment under a contractual obligation that constitutes debt are debt. Failure to make payment on an obligation that is not considered debt under this definition (e.g., payment on delivery) will not give rise to debt.

4. Debt guarantees. For the purposes of the relevant assessment criteria, the guarantee of a debt arises from any explicit legal obligation of the government to service a debt in the event of nonpayment by the debtor (involving payments in cash or in kind).

5. Debt concessionality. For the purposes of the relevant assessment criteria, a debt is considered concessional if it includes a grant element of at least 35 percent;1 the grant element is the difference between the present value (PV) of debt and its nominal value, expressed as a percentage of the nominal value of the debt. The PV of debt at the time of its contracting is calculated by discounting the future stream of payments of debt service due on this debt.2 The discount rates used for this purpose are the currency specific commercial interest reference rates (CIRRs), published by OECD.3 For debt with a maturity of at least 15 years, the ten-year-average CIRR is used to calculate the PV of debt and, hence, its grant element. For debt with a maturity of less than 15 years, the six-month average CIRR is used. The margins for differing repayment periods (0.75 percent for repayment periods of less than 15 years, 1 percent for 15 to 19 years, 1.15 percent for 20 to 29 years, and 1.25 percent for 30 years or more) are added to the ten-year and six-month CIRR averages.

6. External debt. For the purposes of the relevant assessment criteria, external debt is defined as debt borrowed or serviced in a currency other than the CFA franc. This definition also applies to debt among WAEMU countries.

7. Debt-related assessment criteria. The relevant assessment criteria apply to the contracting and guaranteeing of new non-concessional external debt by the government, public enterprises, and other official entities unless excluded in the MEFP (Table 1). The criteria apply to debt and commitments contracted or guaranteed for which value has not yet been received. The criteria also apply to private debt for which official guarantees have been extended and which, therefore, constitute a contingent liability of the government. The assessment criteria are measured on a cumulative basis from the time of approval of the ECF by the Executive Board. ACs will be monitored on a continuous basis. No adjuster will be applied to these criteria.

8. Reporting requirements. The government will report any new external borrowing and its terms to Fund staff as soon as external debt is contracted or guaranteed by the government, but no later than within two weeks of such external debt being contracted or guaranteed.

II. Quantitative Performance Criteria

9. Quantitative performance criteria are proposed for June and December 2011 for the overall deficit (commitment basis, including grants) as defined in paragraph 4; contracting or guaranteeing of non-concessional and short-term external debt as specified below in this paragraph; and accumulation of external arrears. Programmed amounts for March and September 2011 are benchmarks. The following performance criteria will be monitored on a continuous basis: (i) the contracting or guaranteeing of new non-concessional external debt by the government, public enterprises and other official sector entities unless excluded in Tables 1 of the Memorandum of Economic and Financial Policies (MEFP), as well as private debt for which official guarantees have been extended and which, therefore constitute a contingent liability of the government; (ii) the contracting or guaranteeing of new short-term external debt; and (iii) the accumulation of arrears on the external debt service of the government.

A. Overall Deficit Including Grants

Definition

10. For the program, the overall deficit including grants is valued on a commitment basis (base engagement). It is the sum of foreign and domestic financing (net) of the government measured from the financing side plus cash basis adjustment. Net foreign financing is the sum of foreign borrowing minus amortization. Net domestic financing is the sum of (i) net bank credit to the government, including both net bank credit to the treasury as defined below and other government claims on and debts to national banking institutions; (ii) unredeemed government bills and bonds held outside national commercial banks; and (iii) privatization receipts. Net bank credit to the treasury is the balance of the treasury’s claims and debts visa-vis national banking institutions. Treasury claims include the cash holdings of the Burkinabè Treasury, deposits with the central bank, deposits with commercial banks, secured obligations, and government deposits with the postal system (CCP). Treasury debt to the banking system includes funding from the central bank (including statutory advances, consolidated advances, IMF financing, and refinancing of secured obligations), government securities held by the central bank, funding from commercial banks (including government securities held by commercial banks), and CNE (Caisse Nationale d’Epargne Postale)/CCP securitized deposits. Net bank credit to the government is calculated by the Central Bank of West African States (BCEAO), whose figures are recognized as valid for program purposes. The stock of treasury bills and other government debt, as well as net foreign financing, is calculated by the Ministry of Finance. Cash basis adjustment is the sum of (i) expenditure commitments not paid (engagees nonpayees); and (ii) change in treasury deposits.

11. All these items are valued according to the statement of government budgetary execution established monthly in the central government’s financial operations table. This is prepared by the Permanent Secretariat for the Monitoring of Financial Policies and Programs (SP-PPF), in collaboration with the other departments of the Ministry of Economy and Finance.

Adjustment

12. The overall deficit including grants is adjusted upward by the amount that grants fall short of what is programmed up to a maximum of CFAF 25 billion (see the MEFP Table 1). It will not be adjusted if grants are higher than programmed.

13. The overall deficit including grants will also be adjusted upward by the amount that concessional loans exceed what is programmed up to a maximum of CFAF 15 billion (see the MEFP Table 1).

Reporting deadlines

14. The Ministry of Economy and Finance will forward data to the IMF on the overall deficit excluding grants within six weeks after the end of each quarter.

B. Nonaccumulation of External Arrears

Performance criterion

15. The government’s external debt is the stock of debt owed or guaranteed by the government. External arrears are external payments due but not paid on the due date. Under the program, the government undertakes not to accumulate arrears on its external debt, except those arising from government debt being renegotiated with creditors, including non-Paris Club bilateral creditors. Nonaccumulation of external arrears is a performance criterion, to be observed continuously.

Reporting deadlines

16. Data on outstanding balances, accumulation, and repayment of external arrears will be forwarded within six weeks after the end of each month.

C. Nonconcessional External Debt Contracted or Guaranteed by the Government

Performance criterion

17. The government undertakes not to contract or guarantee any external debt maturing in one year or more that has a grant element of less than 35 percent (calculated using the interest reference rate for borrowed foreign currencies provided by the IMF) beyond the ceiling indicated in the MEFP (Table 1). This performance criterion applies not only to debt as defined in point 9 of Executive Board Decision No. 6230-(79/140), as subsequently amended, including by Executive Board Decision No. 14416-(09/91), effective December 1, 2009, but also to commitments contracted or guaranteed (including lease-purchase contracts) for which no value have been received. This criterion also applies to the guaranteeing of private sector debt by the government, which consequently constitutes a contingent liability of the government, as defined in section I of this memorandum. In addition, this criterion applies to public enterprises and other official entities unless excluded in the MEFP (Table 1). External debt excludes Treasury bills and bonds issued in CFA francs on the WAEMU regional market. This performance criterion is to be observed continuously.

Reporting deadlines

18. Details on any loan (terms and creditors) to the government or guaranteed by the government must be reported within four weeks of the end of each month. The same requirement applies to guarantees granted by the government.

D. Government Short-Term External Debt

19. The definitions in paragraph 11 also apply to this performance criterion. Short-term external debt is debt with a contractual term of less than one year. Import- and export-related loans, Treasury bills issued in CFA francs on the WAEMU regional market, normal short-term supplier credits, and debt relief operations are not covered by this performance criterion.

Performance criterion

20. In the context of the program, the government undertakes not to contract or guarantee short-term nonconcessional external debt. The definition of nonconcessional in paragraph 3b applies here. The government also undertakes not to contract or guarantee any short-term external debt without having first determined its concessionality with IMF staff. This performance criterion is to be observed continuously. As of September 30, 2010, the government of Burkina Faso had no short-term external debt.

III. Other Quantitative Indicative Targets

21. The program also includes indicative targets on total government revenue, poverty-reducing social expenditures, accumulation of domestic payment arrears, and large taxpayer nonfiler rates.

A. Total Government Revenue

Definition

22. Total government revenue is valued on a cash basis. It includes all tax and nontax revenue collected by the Directorate General of Taxation, the Directorate General of Customs, the Burkinabè Treasury, and revenue collection units at ministries and institutions. It also includes revenue from treasury checks.

Reporting deadlines

23. Details on total revenue will be sent to IMF staff by the SP-PPF of the Ministry of Finance and Budget within six weeks after the end of each month.

B. Poverty-Reducing Social Expenditures

Definition

24. Poverty-reducing social expenditures are defined by the PRSP priority sector programs designed to accelerate the reduction of poverty. They cover all spending categories for the following ministries: Primary Education and Literacy; Health; Social Action and National Solidarity; Promotion of Women; Labor and Social Security; Employment and Youth; Agriculture, Water and Fishing Resources; Animal Resources; and Environment and Living Conditions. They also cover rural roads and HIPC resources (Category 5) for infrastructure spending and HIPC expenditures only for the Justice Ministry and the Ministry of Economy and Development. These expenditures are monitored directly through the budget.

Reporting deadlines

25. The government will report within six weeks after the end of each month the monthly data on poverty-reducing social expenditures.

C. Nonaccumulation of Domestic Payment Arrears

Definition

26. The government will not accumulate any arrears on domestic government obligations during the program period. This is a benchmark to be observed continuously.

Reporting deadlines

27. Data on balances, accumulation, and repayment of arrears on domestic government obligations will be reported within four weeks after the end of each month.

D. Large Taxpayer Nonfiler Rate

Definition

28. The large taxpayer nonfiler rate is the ratio of late and nonfilers in the Large Taxpayer Office (LTO) relative to the total number of taxpayers obligated to file in LTO. A late filer is anyone who files a tax return after the deadline. A nonfiler is anyone in the database who did not file taxes. The main tax categories are the VAT (TVA), the corporate income tax (BIC), and the tax on wage income (IUTS). Filing deadlines for the main tax categories are set in the tax code.

Reporting deadlines

29. The government will report within two weeks after the end of each quarter the total number of late and nonfilers as well as the total number of taxpayers obligated to file in LTO for the main tax categories.

IV. Structural Benchmarks

30. The program incorporates structural benchmarks (see the MEFP Table 2).

V. Additional Program Monitoring Information

A. Public Finance

31. The government will report the following to Fund staff:

  • The monthly government flow-of-funds table (TOFE) and the customary appendix tables, to be forwarded within six weeks after the end of each month; if data on actual investment financed by external grants and loans are not available in time, a linear implementation estimate based on the annual projections will be used;
  • Complete monthly data on domestic budgetary financing (net bank credit to the government and stock of unredeemed treasury bonds and bills), to be provided within six weeks after the end of each month;
  • Quarterly data on implementation of the public investment program, including details on financing sources, to be sent within six weeks after the end of each quarter;
  • Quarterly data on external debt stock, external debt service, signing of external loans, and disbursements of external loans, to be sent within six weeks after the end of each quarter;
  • Monthly data in the table on the monitoring of poverty-reducing expenditures that will be submitted with the same transmission delay as for the above-defined TOFE table;
  • Monthly data on prices and taxation of petroleum products, including(i) prices prevailing during the month; (ii) detailed calculation of the price structure, from the f.o.b.-MED price to the retail price; (iii) volumes purchased and made available for consumption by the petroleum distributor (SONABHY); and (iv) a breakdown of receipts from the taxation of petroleum products—customs duties, tax on petroleum products (TPP), and value-added tax (VAT)—and of subsidies, to be provided within four weeks after the end of each month;
  • A monthly statement of the status of accounts with the treasury, classified by major category (administrative services, state enterprises, mixed enterprises, public administrative enterprises, international organizations, private depositors, and others), to be provided within six weeks after the end of each month;
  • Quarterly data for the large taxpayer office on (for TVA, BIC, IUTS) the numbers of: register taxpayers, statements received, and reminder letters sent to late and non filers; and
  • These quarterly statistics are to be provided within two weeks after the end of each quarter. Similarly, quarterly data on the following are to be sent within two weeks of the end of the quarter: total number of customs statements, number of statements selected by channel, and number of statements by channel subject to non-standard treatment.

B. Monetary Sector

32. The government will provide the following information within six weeks after the end of each month:

  • The consolidated balance sheet of monetary institutions;
  • Provisional data on the monetary survey provided six weeks after the end of each month (with final data provided ten weeks after the end of each month);
  • Borrowing and lending interest rates; and
  • Customary banking supervision indicators for bank and nonbank financial institutions, if necessary.

C. Balance of Payments

33. The government will report the following to Fund staff:

  • Any revision of balance of payments data (including services, private transfers, official transfers, and capital transactions), as they occur;
  • Foreign trade statistics compiled by the National Statistics Institute, within three months after the end of the month concerned; and
  • Preliminary annual balance of payments data within nine months after the end of the year concerned.

D. Real Sector

34. The government will report the following to Fund staff:

  • Disaggregated monthly consumer price indices, within two weeks after the end of each month;
  • Provisional national accounts; and
  • Any revision of the national accounts.

E. Structural Reforms and Other Data

35. The government will also report the following:

  • Any study or official report on Burkina Faso’s economy, within two weeks after its publication and
  • Any decision, order, law, decree, ordinance, or circular that has economic or financial implications as soon as it is published or at the latest when it enters into force.
1

The new PRSP is called Strategy for Accelerated Growth and Sustained Development (SCADD).

2

See IMF Country Report No. 10/361 (12/15/10).

3

All donors have confirmed their expected financing for 2011.

4

See IMF Country Report No. 10/197 (7/08/10).

1

The following reference on the IMF website creates a link to a tool that allows for the calculation of the grant element of a broad range of financing packages: http://www.imf.org/external/np/pdr/conc/calculator.

2

The calculation of concessionality will take into account all aspects of the debt agreement, including maturity, grace period, payment schedule, upfront commissions, and management fees.

3

For debts in foreign currencies for which the OECD does not calculate a CIRR, calculation of the grant element should be based on the composite CIRR (weighted average) of the currencies in the SDR basket.

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