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Burkina Faso: Debt Sustainability Analysis

Author(s):
International Monetary Fund
Published Date:
July 2012
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I. Background and Underlying DSA Assumptions

1. Burkina Faso’s nominal stock of debt as of end-2011 was 29.3 percent of GDP, equivalent to around US$700 million (Table 1). Roughly 83 percent of this was external debt and the remainder was domestic debt, comprised almost entirely of 10 year government bonds.

Table 1.Burkina Faso: Stock of Public Debt, 2008–2011
2008200920102011
(CFAF billions)
Total Debt883.51029.61185.21407.1
External786.4867.71045.71159.1
Multilateral604.7688.5853.1961.0
Bilaterals181.8179.2192.6198.1
Domestic97.1162.0139.5248.0
(percent of GDP)
Total Debt23.626.127.129.3
External21.022.023.924.1
Multilaterals16.217.519.520.0
Bilaterals4.94.54.44.1
Domestic2.64.13.25.2
Source: Burkinabe authorities
Source: Burkinabe authorities

2. compared to the December 2011 DSA, the main change in macroeconomic assumptions in this DSA is an increase in gold production and associated exports (Table 2). Export projections were significantly increased based gold production development in the pipeline and a slightly higher 2011 outturn than forecast (gold production was 32.4 tons vs. 31.4 tons projected in the December 2011 DSA). The December 2011 DSA had assumed that gold production would drop in 2012 and remain largely flat over the medium term. Recent information show that investments already underway in new mining capacity should bring about large increases in production over the next 2 years, and large ongoing discovery and development—over 50 additional projects are in the exploration or development phases—suggest that production should be at least 49 tons by 2015, if not much higher. Despite a marginal downward adjustment in WEO gold prices, these production volumes would lead to much larger export values.

Table 2.Changes in Assumptions: April 2012 DSA vs. the December 2011 DSA
2011201220132014201520222030
Gold production (tons)2011 DSA31.430.632.034.734.940.148.3
2012 DSA32.435.040.046.149.169.186.6
Exports of G&S (% of GDP)2011 DSA24.124.624.424.523.218.413.6
2012 DSA25.727.128.429.729.627.426.7
GDP growth (y/y)2011 DSA5.65.86.46.86.87.37.4
2012 DSA4.27.07.07.07.06.46.0
Revenue (% of GDP)2011 DSA15.816.216.316.617.018.519.2
2012 DSA16.516.116.317.017.518.519.2
IMF (US$ millions)2011 DSA20.419.910.00.00.00.00.0
2012 DSA20.475.610.00.00.00.00.0
Sources: Burkinabe authorities and staff projections.
Sources: Burkinabe authorities and staff projections.

3. Higher exports also lead to higher GDP growth and more revenues in the near term. Real GDP growth has been increased to 7.0 percent per year until 2015, and revenues are boosted by mining royalties and higher corporate income taxes. An associated reduction in the current account deficit is assumed, which is the main variable driving the accumulation of new external financing under the DS framework. Growth over the longer term, however, has been revised downward somewhat to account for the likelihood of future shocks.

4. This DSA is based on new end-2011 debt data. The authorities had revised the end-2010 stock of debt upward slightly, and the outturn of the end-2011 debt stock was higher than projected (CFAF 1407 billion vs. CFAF 1246 billion projected), and higher still in GDP terms since the 2011 GDP outturn was lower than expected.

5. New external financing assumptions are somewhat more conservative. The proposed augmentation in access to the ECF-supported program (US$55.7 million) has been included in new external borrowing in 2012. The December 2011 assumption of a gradual move from grants to loans has been maintained, but with somewhat less concessional terms for new borrowing (from an average grant element of roughly 45 percent in 2012 to about 35 percent in 2032).

6. Other underlying assumptions remain the same as in the December DSA, summarized in Box 1.

Box 1.Burkina Faso: Macroeconomic Assumptions Underlying the DSA

Real GDP growth is projected at 7 percent per year until 2015, supported by projections of: (i) an increase in gold production and sustained global gold prices; (ii) improved agricultural production; and (iii) an ambitious public investment program. However, longer term real growth has been moderated to 6 percent to account for a deceleration in the rate of growth of gold production and to reflect a more conservative investment-longer term growth link, particularly in light of the frequency of weather and other shocks.

Inflation is projected to remain below 3 percent over the whole projection period. This is consistent with past performance and WAEMU macroeconomic criteria.

Current account deficit is expected to fall to 2.7 percent of GDP by 2015, in line with gold exports and somewhat higher near term imports. Over the longer term, the current account deficit is projected to increase gradually to 6 percent by 2032, as gold exports decelerate but imports remain relatively constant. The overall balance of payments remains relatively unaffected by these developments, however, since gold proceeds (after wage and supplier payments) are mainly held in offshore accounts in order to repay intra-company loans.

Fiscal deficits (including grants) are projected to decrease very gradually, from 3.3 percent of GDP in 2013 to around 2.8 percent in 2032, despite a pronounced decrease in grants (from 6.4 percent of GDP to 2 percent of GDP) and a shift toward external borrowing.

Domestic debt assumptions remain unchanged from the December 2011 DSA, that is, the nominal stock of domestic debt is held constant, resulting in a sharp decline in terms of percent of GDP. Absent a higher fiscal deficit, changing this assumption would result in a lower external financing requirement still.

II. External Debt DSA Results

7. The December 2011 DSA maintained a determination of a “high risk” of external debt distress. This was based on a single indicator, the NPV of debt-to-exports, breaching its indicative threshold, both under the stress tests and the baseline scenario. None of the other stock variables or stress tests breached the indicative thresholds and the flow variables were far below the indicative thresholds. Indeed, the December 2011 DSA noted that it was based on conservative export assumptions and the NPV of debt-to-exports breach under the baseline scenario was 10 years later (2026) than under the 2010 DSA. The 2011 DSA concluded that further improvements in gold exports would lead to a situation where there was no breach.

8. This DSA does not show a breach of the indicative debt distress threshold for NPV of debt-to-exports (Tables 4a and b and Figure 2). The baseline scenario shows a slight decrease in NPV of debt-to-exports, from 53.6 percent in 2012 to 48.7 percent in 2014 (during the years of rapid growth of gold exports), followed by a steady increase to a maximum of 99.2 percent in 2032. The other debt indicators continue to show no breach in their indicative debt distress thresholds. Similarly, the standardized stress tests show no breach in the indicative thresholds.

Table 3.Historical vs. Baseline: December 2011 DSA vs. April 2012 DSA
GDP growthGDP deflatorExport GrowthCA Deficit (% of GDP)Revenues (% of GDP)
Dec. 2011 DSAHistorical 2001–20105.77.124.18.912.9
Baseline 20115.67.250.53.315.8
Baseline 2012–17 avg6.61.05.67.316.8
Baseline 2018–31 avg7.31.85.86.718.6
April 2012 DSAHistorical 2002–20115.67.929.27.813.5
… of which 20114.29.236.61.016.5
Baseline 2012–17 avg7.01.010.13.117.3
Baseline 2018–32 avg6.32.07.84.618.8
Sources: Burkinabe authorities and IMF staff projections.
Sources: Burkinabe authorities and IMF staff projections.
Table 4a.Burkina Faso: External Debt Sustainability Framework, Baseline Scenario, 2009–2032 1/(In percent of GDP, unless otherwise indicated)
ActualHist.6/ AverageStd.6/ DeviationProjections
2009201020112012201320142015201620172012–2017

Average
202220322018–2032

Average
External debt (nominal) 1/22.023.924.124.023.823.924.124.424.930.238.1
o/w public and publicly guaranteed (PPG)22.023.924.124.023.823.924.124.424.930.238.1
Change in external debt1.01.90.2−0.1−0.20.10.20.30.51.30.4
Identified net debt-creating flows3.70.5−2.02.51.00.80.81.21.81.92.5
Non-interest current account deficit4.52.11.07.83.94.22.72.62.53.03.53.95.14.4
Deficit in balance of goods and services10.67.66.89.27.16.76.46.67.27.27.0
Exports12.621.425.727.128.429.729.629.328.827.426.6
Imports23.329.032.536.335.536.436.035.936.134.633.6
Net current transfers (negative = inflow)−6.0−5.3−5.6−4.90.8−4.7−4.1−3.8−3.6−3.3−3.4−3.0−1.9−2.6
o/w official−4.4−3.9−4.2−3.5−2.9−2.8−2.6−2.4−2.5−2.1−1.1
Other current account flows (negative = net inflow)−0.2−0.2−0.2−0.3−0.3−0.3−0.4−0.4−0.4−0.30.0
Net FDI (negative = inflow)-1.1-0.4-0.4-1.11.4-0.3-0.4-0.4-0.4-0.4-0.4-0.5-0.9-0.6
Endogenous debt dynamics 2/0.3−1.2−2.6−1.4−1.3−1.3−1.3−1.3−1.3−1.5−1.8
Contribution from nominal interest rate0.20.20.20.20.20.20.20.20.20.20.3
Contribution from real GDP growth−0.6−1.6−0.9−1.6−1.5−1.5−1.5−1.5−1.5−1.7−2.1
Contribution from price and exchange rate changes0.70.2−2.0
Residual (3–4) 3/-2.71.42.2-2.6-1.2-0.8-0.6-0.9-1.2-0.6-2.1
o/w exceptional financing0.00.00.00.00.00.00.00.00.00.00.0
PV of external debt 4/14.614.514.414.514.614.815.219.326.4
In percent of exports56.653.650.848.749.250.552.770.299.2
PV of PPGexternal debt14.614.514.414.514.614.815.219.326.4
In percent of exports56.653.650.848.749.250.552.770.299.2
In percent of government revenues88.290.288.484.883.380.983.3104.4137.0
Debt service-to-exports ratio (in percent)4.62.72.62.82.52.42.62.62.52.54.7
PPGdebt service-to-exports ratio (in percent)4.62.72.62.82.52.42.62.62.52.54.7
PPG debt service-to-revenue ratio (in percent)4.33.74.04.74.44.24.34.13.93.76.6
Total gross financing need (Billions of U.S. dollars)0.30.20.10.50.40.40.40.50.61.03.0
Non-interest current account deficit that stabilizes debt ratio3.50.20.84.32.92.52.32.63.02.64.8
Key macroeconomic assumptions
Real GDP growth (in percent)3.07.94.25.61.97.07.07.07.06.96.87.06.46.06.3
GDP deflator in US dollar terms (change in percent)−3.2−0.79.27.97.9−2.12.11.61.51.51.41.02.02.02.0
Effective interest rate (percent) 5/1.11.11.20.90.30.90.90.90.90.90.90.90.90.90.9
Growth of exports of G&S (US dollar terms, in percent)27.481.836.629.225.410.614.213.78.37.56.610.17.68.07.8
Growth of imports of G&S (US dollar terms, in percent)−11.733.427.718.215.016.96.811.57.48.48.79.97.38.17.9
Grant element of new public sector borrowing (in percent)41.146.445.243.842.741.743.538.136.237.6
Government revenues (excluding grants, in percent of GDP)13.715.616.516.116.317.017.518.318.318.419.318.7
Aid flows (in Billions of US dollars) 7/0.80.70.80.91.01.11.11.21.31.93.0
o/w Grants0.50.40.50.80.70.80.80.80.91.01.0
o/w Concessional loans0.30.30.30.20.20.30.30.40.40.92.0
Grant-equivalent financing (in percent of GDP) 8/8.27.57.27.06.76.75.63.34.8
Grant-equivalent financing (in percent of external financing) 8/83.585.784.282.580.879.669.355.965.1
Memorandum items:
Nominal GDP (Billions of US dollars)8.49.010.210.711.712.713.815.016.224.554.3
Nominal dollar GDP growth−0.37.113.74.79.28.88.68.58.38.08.58.18.4
PV of PPGexternal debt (in Billions of US dollars)1.41.61.71.82.02.22.54.714.3
(PVt-PVt-1)/GDPt-1 (in percent)1.51.21.31.41.51.71.42.72.52.5
Gross workers’ remittances (Billions of US dollars)0.00.00.00.00.00.00.00.00.00.00.1
PV of PPG external debt (in % of GDP + remittances)14.514.514.414.414.514.815.219.226.3
PV of PPG external debt (in % of exports + remittances)56.353.350.648.549.150.452.569.898.3
Debt service of PPG external debt (in % of exports + remittances)2.62.82.52.42.62.62.52.54.7
Sources: Country authorities; and staff estimates and projections

Includes both public and private sector external debt.

Derived as [r - g - ρ(1+g)]/(1+g+ρ+gρ) times previous period debt ratio, with r = nominal interest rate; g = real GDP growth rate, and p = growth rate of GDP deflator in U.S. dollar terms.

Includes exceptional financing (i.e., changes in arrears and debt relief); changes in gross foreign assets; and valuation adjustments. For projections also includes contribution from price and exchange rate changes.

Assumes that PV of private sector debt is equivalent to its face value.

Current-year interest payments divided by previous period debt stock.

Historical averages and standard deviations are generally derived over the past 10 years, subject to data availability.

Defined as grants, concessional loans, and debt relief.

Grant-equivalent financing includes grants provided directly to the government and through new borrowing (difference between the face value and the PV of new debt).

Sources: Country authorities; and staff estimates and projections

Includes both public and private sector external debt.

Derived as [r - g - ρ(1+g)]/(1+g+ρ+gρ) times previous period debt ratio, with r = nominal interest rate; g = real GDP growth rate, and p = growth rate of GDP deflator in U.S. dollar terms.

Includes exceptional financing (i.e., changes in arrears and debt relief); changes in gross foreign assets; and valuation adjustments. For projections also includes contribution from price and exchange rate changes.

Assumes that PV of private sector debt is equivalent to its face value.

Current-year interest payments divided by previous period debt stock.

Historical averages and standard deviations are generally derived over the past 10 years, subject to data availability.

Defined as grants, concessional loans, and debt relief.

Grant-equivalent financing includes grants provided directly to the government and through new borrowing (difference between the face value and the PV of new debt).

Table 4b.Burkina Faso: Sensitivity Analysis for Key Indicators of Public and Publicly Guaranteed External Debt, 2012–2032(In percent)
Projections
201220132014201520162017201820192020202120222023202420252026202720282029203020312032
PV of debt-to GDP ratio
Baseline151414151515161617181920212223242425262626
A. Alternative Scenarios
A1. Key variables at their historical averages in 2012–2032 1/151719212224252627293031313232333333323232
A2. New public sector loans on less favorable terms in 2012–2032 2151516171819202123242628303133343536373839
B. Bound Tests
B1. Real GDP growth at historical average minus one standard deviation in 2013–2014151515151616171718192022232425252627272828
B2. Export value growth at historical average minus one standard deviation in 2013–2014 3/151619191919192021212223232425252626272727
B3. US dollar GDP deflator at historical average minus one standard deviation in 2013–2014151515151516161718192021222324252526262727
B4. Net non-debt creating flows at historical average minus one standard deviation in 2013–2014 4/151515151516161718192021222223242525262626
B5. Combination of B1-B4 using one-half standard deviation shocks151413131314141516171819202122232425252626
B6. One-time 30 percent nominal depreciation relative to the baseline in 2013 5/152020212121222324262729303133343535363737
PV of debt-to-exports ratio
Baseline545149495153555761667075798386899294969899
A. Alternative Scenarios
A1. Key variables at their historical averages in 2012–2032 1/545863707682879298104109113116119121122122122122121120
A2. New public sector loans on less favorable terms in 2012–2032 25453535660656974818896102109115121127131135139143146
B. Bound Tests
B1. Real GDP growth at historical average minus one standard deviation in 2013–2014545149495053555761667074798286899194959799
B2. Export value growth at historical average minus one standard deviation in 2013–2014 3/5462777778808284889296100104108111114116118120121123
B3. US dollar GDP deflator at historical average minus one standard deviation in 2013–2014545149495053555761667074798286899194959799
B4. Net non-debt creating flows at historical average minus one standard deviation in 2013–2014 4/545251515254565963677175808387909294969899
B5. Combination of B1-B4 using one-half standard deviation shocks544740414245475054586367727680838588909293
B6. One-time 30 percent nominal depreciation relative to the baseline in 2013 5/545149495053555761667074798286899194959799
PV of debt-to-revenue ratio
Baseline908885838183869095100104109113118122126129131133135137
A. Alternative Scenarios
A1. Key variables at their historical averages in 2012–2032 1/90101109118121129136144152158163165167170172173172171169167166
A2. New public sector loans on less favorable terms in 2012–2032 29093939596102109117125134142149157164172179184189193197201
B. Bound Tests
B1. Real GDP growth at historical average minus one standard deviation in 2013–20149091908886889296101106111115120125130134137140142143145
B2. Export value growth at historical average minus one standard deviation in 2013–2014 3/9098112108104105107110113116119122124128131134136138139140141
B3. US dollar GDP deflator at historical average minus one standard deviation in 2013–2014909088868486899498103108113117122126131134136138140142
B4. Net non-debt creating flows at historical average minus one standard deviation in 2013–2014 4/909188868486899397101106110114119123127130132134135137
B5. Combination of B1-B4 using one-half standard deviation shocks9085747372747882879398103108113118123126129131133135
B6. One-time 30 percent nominal depreciation relative to the baseline in 2013 5/90125120118114118122128134141147154159166172178182186188191194
Debt service-to-exports ratio
Baseline332332332232333444455
A. Alternative Scenarios
A1. Key variables at their historical averages in 2012–2032 1/322222323333344444555
A2. New public sector loans on less favorable terms in 2012–2032 2/332333333344556677889
B. Bound Tests
B1. Real GDP growth at historical average minus one standard deviation in 2013–2014332332332232333444455
B2. Export value growth at historical average minus one standard deviation in 2013–2014 3/333333333444445555666
B3. US dollar GDP deflator at historical average minus one standard deviation in 2013–2014332332332232333444455
B4. Net non-debt creating flows at historical average minus one standard deviation in 2013–2014 4/332333333333333444455
B5. Combination of B1-B4 using one-half standard deviation shocks322222322222233344444
B6. One-time 30 percent nominal depreciation relative to the baseline in 2013 5/332332332232333444455
Debt service-to-revenue ratio
Baseline544444444444445556667
A. Alternative Scenarios
A1. Key variables at their historical averages in 2012–2032 1/544444444455556666666
A2. New public sector loans on less favorable terms in 2012–2032 25445555555667789910111112
B. Bound Tests
B1. Real GDP growth at historical average minus one standard deviation in 2013–2014544544544444455566777
B2. Export value growth at historical average minus one standard deviation in 2013–2014 3/544544544555555666777
B3. US dollar GDP deflator at historical average minus one standard deviation in 2013–2014544544444444445566667
B4. Net non-debt creating flows at historical average minus one standard deviation in 2013–2014 4/544444444444445566667
B5. Combination of B1-B4 using one-half standard deviation shocks544444444333444556666
B6. One-time 30 percent nominal depreciation relative to the baseline in 2013 5/566666665555567788999
Memorandum item:
Grant element assumed on residual financing (i.e., financing required above baseline) 6/383838383838383838383838383838383838383838
Sources: Country authorities; and staff estimates and projections.

Variables include real GDP growth, growth of GDP deflator (in U.S. dollar terms), non-interest current account in percent of GDP, and non-debt creating flows.

Assumes that the interest rate on new borrowing is by 2 percentage points higher than in the baseline., while grace and maturity periods are the same as in the baseline.

Exports values are assumed to remain permanently at the lower level, but the current account as a share of GDP is assumed to return to its baseline level after the shock (implicitly assuming an offsetting adjustment in import levels).

Includes official and private transfers and FDI.

Depreciation is defined as percentage decline in dollar/local currency rate, such that it never exceeds 100 percent.

Applies to all stress scenarios except for A2 (less favorable financing) in which the terms on all new financing are as specified in footnote 2.

Sources: Country authorities; and staff estimates and projections.

Variables include real GDP growth, growth of GDP deflator (in U.S. dollar terms), non-interest current account in percent of GDP, and non-debt creating flows.

Assumes that the interest rate on new borrowing is by 2 percentage points higher than in the baseline., while grace and maturity periods are the same as in the baseline.

Exports values are assumed to remain permanently at the lower level, but the current account as a share of GDP is assumed to return to its baseline level after the shock (implicitly assuming an offsetting adjustment in import levels).

Includes official and private transfers and FDI.

Depreciation is defined as percentage decline in dollar/local currency rate, such that it never exceeds 100 percent.

Applies to all stress scenarios except for A2 (less favorable financing) in which the terms on all new financing are as specified in footnote 2.

Figure 1.PV of debt-to-exports ratio with a customized stress test

Figure 2.Burkina Faso: Indicators of Public and Publicly Guaranteed External Debt under Alternatives Scenarios, 2012–2032 1/

Sources: Country authorities; and staff estimates and projections.

1/ The most extreme stress test is the test that yields the highest ratio in 2022. In figure b. it corresponds to a One-time depreciation shock; in c. to a Customized scenario (lower prices for 5 years and LT production decrease) shock; in d. to a Onetime depreciation shock; in e. to a Exports shock and in figure f. to a Terms shock

9. Given that the DSA results are highly dependent upon gold projections, the staffs felt that consideration of a customized stress test was merited. Gold prices are inherently difficult to predict, and production projections in the outlook would also be likely to be affected by a significant change in prices, as this would probably affect investment. Staffs therefore ran a customized scenario based on World Bank Commodities Group projections for gold prices, which are lower than WEO projections. The effect of this change on export values was approximated by extending the standardized export shock for three further years (2013–17). World Bank baseline projections show cumulative price declines of around 40 percent over five years, with lower prices sustained over the remainder of the projection period. Even without altering production, under this scenario the debt distress threshold with respect to exports is breached. Adding any adverse impact on production would intensify this breach.

10. This DSA shows a large deviation between the historical and baseline scenarios (Table 3). This is mainly due to a significant reduction in the current account deficit in the baseline, and thus debt accumulation, relative to the historical average. This reduction is a function of stronger export projections, and is consistent with current account performance over the last three years—those with significant gold exports—in which the current account deficit averaged just 2.5 percent of GDP. In the December 2011 analysis, it was assumed that the current account deficit returned to its pre-gold trend, hence the baseline and historical scenarios were closer. The historical scenario in this new DSA shows an improvement in debt indicators in later years, since the underlying historical averages for GDP, export, and revenue growth are significantly higher than long run projections in the baseline.

III. Total Public Debt DSA Results

11. This DSA does not modify the December 2011 assumptions for the evolution of domestic debt (Box 1, Tables 5a and b, and Figure 3). Therefore, the results of the total public debt analysis mimic those of the external debt analysis, especially over the long term. However, the most extreme shock corresponds now to a shock to growth rather than the primary balance, which results in worse debt indicators under the shock than in the December DSA. The decision to leave domestic financing assumptions unchanged was taken to avoid, in the absence of a higher fiscal deficit, creating lower external financing requirements still and so that the impact of new export projections could be isolated. However, it would be reasonable to assume, in the next joint DSA, that domestic debt levels are maintained, in line with efforts to create a regional bond market and deepen financial markets.

Table 5a.Burkina Faso: Total Public Sector Debt Sustainability Framework, Baseline Scenario, 2009–2032(In percent of GDP, unless otherwise indicated)
ActualEstimateProjections
200920102011Average 5/Std.5/ Dev.2012201320142015201620172012–17 Average202220322018–32 Average
Public sector debt 1/26.127.129.328.327.226.025.324.925.130.238.1
o/w foreign-currency denominated22.023.924.124.023.823.924.124.424.930.238.1
Change in public sector debt2.51.02.2−1.0−1.2−1.1−0.7−0.40.21.30.4
Identified debt-creating flows1.53.40.50.60.90.81.00.50.71.40.2
Primary deficit4.34.12.01.86.73.02.82.62.82.32.42.63.52.73.1
Revenue and grants19.620.121.823.222.723.223.323.823.722.521.1
of which: grants5.94.65.37.16.46.15.85.55.44.11.9
Primary (noninterest) expenditure23.924.223.826.225.625.826.126.126.126.023.8
Automatic debt dynamics−2.1−0.5−1.5−2.4−1.9−1.8−1.8−1.7−1.7−2.0−2.5
Contribution from interest rate/growth differential−0.8−2.1−2.0−2.4−2.0−1.9−1.9−1.8−1.8−2.0−2.5
of which: contribution from average real interest rate−0.1−0.2−0.9−0.5−0.1−0.1−0.2−0.2−0.2−0.3−0.4
of which: contribution from real GDP growth−0.7−1.9−1.1−1.9−1.9−1.8−1.7−1.6−1.6−1.7−2.1
Contribution from real exchange rate depreciation−1.31.70.50.00.00.10.10.10.1
Other identified debt-creating flows−0.8−0.20.00.00.00.00.00.00.00.00.0
Privatization receipts (negative)−0.8−0.20.00.00.00.00.00.00.00.00.0
Recognition of implicit or contingent liabilities0.00.00.00.00.00.00.00.00.00.00.0
Debt relief (FflPC and other)0.00.00.00.00.00.00.00.00.00.00.0
Other (specify, e.g. bank recapitalization)0.00.00.00.00.00.00.00.00.00.00.0
Residual, including asset changes1.0−2.41.6−1.6−2.1−1.9−1.7−0.9−0.5−0.10.1
Other Sustainability Indicators
PV of public sector debt19.718.917.816.615.815.315.419.326.4
o/w foreign-currency denominated14.614.514.414.514.614.815.219.326.4
o/w external14.614.514.414.514.614.815.219.326.4
PV of contingent liabilities (not included in public sector debt)
Gross financing need 2/5.45.43.44.64.44.44.33.73.44.24.0
PV of public sector debt-to-revenue and grants ratio (in percent)90.581.578.171.667.864.264.985.4125.0
PV of public sector debt-to-revenue ratio (in percent)119.4117.2108.897.390.483.584.2104.4137.0
o/w external 3/88.290.288.484.883.380.983.3104.4137.0
Debt service-to-revenue and grants ratio (in percent) 4/5.26.76.36.97.07.76.86.24.23.16.0
Debt service-to-revenue ratio (in percent) 4/7.48.68.39.99.710.59.18.15.53.76.6
Primary deficit that stabilizes the debt-to-GDP ratio1.83.1−0.13.94.03.83.52.72.22.22.4
Key macroeconomic and fiscal assumptions
Real GDP growth (in percent)3.07.94.25.61.97.07.07.07.06.96.87.06.46.06.3
Average nominal interest rate on forex debt (in p ercent)1.11.11.20.90.30.90.90.90.90.90.90.90.90.90.9
Average real interest rate on domestic debt (in percent)5.92.81.73.03.42.33.63.63.43.22.3" 3.01.01.0 r1.0
Real exchange rate depreciation (in percent, + indicates depreciation)−6.78.32.3−3.310.20.1
Inflation rate (GDP deflator, in percent)2.32.85.63.02.83.52.02.02.02.02.02.32.02.02.0
Growth of real primary spending (deflated by GDP deflator, in percent)0.20.10.00.10.10.20.00.10.10.10.10.10.10.10.1
Grant element of new external borrowing (in percent)41.146.445.243.842.741.743.538.136.2
Sources: Country authorities; and staff estimates and projections.

Medium term and long term general government gross debt

Gross financing need is defined as the primary deficit plus debt service plus the stock of short-term debt at the end of the last period.

Revenues excluding grants.

Debt service is defined as the sum of interest and amortization of medium and long-term debt.

Historical averages and standard deviations are generally derived over the past 10 years, subject to data availability.

Sources: Country authorities; and staff estimates and projections.

Medium term and long term general government gross debt

Gross financing need is defined as the primary deficit plus debt service plus the stock of short-term debt at the end of the last period.

Revenues excluding grants.

Debt service is defined as the sum of interest and amortization of medium and long-term debt.

Historical averages and standard deviations are generally derived over the past 10 years, subject to data availability.

Table 5b.Burkina Faso: Sensitivity Analysis for Key Indicators of Public Debt 2012–2032
Projections
20122013201420152016201720222032
PV of Debt-to-GDP Ratio
Baseline1918171615151926
A. Alternative scenarios
A1. Real GDP growth and primary balance are at historical averages1917161514141518
A2. Primary balance is unchanged from 20121918171616172026
A3. Permanently lower GDP growth 1/1918171616162236
B. Boundtests
B1. Real GDP growth is at historical average minus one standard deviations in 2013–20141919191819192637
B2. Primary balance is at historical average minus one standard deviations in 2013–20141921232221212429
B3. Combination of B1-B2 using one half standard deviation shocks1920202019202535
B4. One-time 30 percent real depreciation in 20131923212019181923
B5. 10 percent of GDP increase in other debt-creating flows in 20131924222120202328
PV of Debt-to-Revenue Ratio 2/
Baseline81787268646585125
A. Alternative scenarios
A1. Real GDP growth and primary balance are at historical averages8176686258586585
A2. Primary balance is unchanged from 201281797370687088123
A3. Permanently lower GDP growth 1/81787369676898170
B. Boundtests
B1. Real GDP growth is at historical average minus one standard deviations in 2013–2014818179787780114175
B2. Primary balance is at historical average minus one standard deviations in 2013–20148193101969090105136
B3. Combination of B1-B2 using one half standard deviation shocks818586838183111163
B4. One-time 30 percent real depreciation in 2013811029285787685111
B5. 10 percent of GDP increase in other debt-creating flows in 20138110596918686102134
Debt Service-to-Revenue Ratio 2/
Baseline77876436
A. Alternative scenarios
A1. Real GDP growth and primary balance are at historical averages77876435
A2. Primary balance is unchanged from201277876436
A3. Permanently lower GDP growth 1/77876437
B. Boundtests
B1. Real GDP growth is at historical average minus one standard deviations in 2013–201477877548
B2. Primary balance is at historical average minus one standard deviations in 2013–201477877547
B3. Combination of B1-B2 using one half standard deviation shocks77877548
B4. One-time 30 percent real depreciation in 201378988659
B5. 10 percent of GDP increase in other debt-creating flows in 201377886447
Sources: Country authorities; and staff estimates and projections.

Assumes that real GDP growth is at baseline minus one standard deviation divided by the square root of the length of the projection period.

Revenues are defined inclusive of grants.

Sources: Country authorities; and staff estimates and projections.

Assumes that real GDP growth is at baseline minus one standard deviation divided by the square root of the length of the projection period.

Revenues are defined inclusive of grants.

Figure 3.Burkina Faso: Indicators of Public Debt Under Alternative Scenarios, 2012–2032 1/

Sources: Country authorities; and staff estimates and projections.

1/ The most extreme stress test is the test that yields the highest ratio in 2022.

2/ Revenues are defined inclusive of grants.

IV. Debt Management Issues

12. Burkina Faso has been classified at “lower debt management capacity” by the World Bank/IMF for the purposes of setting programmatic external debt limits. The authorities have enhanced debt management capacity in recent years, as noted by technical experts from the World Bank and IMF. Remaining areas for improvement include: (i) exposition of a medium-term debt management strategy (MTDS); (ii) stronger auditing procedures; (iii) better risk accounting; and (iv) an improved debt database management. The authorities have requested technical assistance from the IMF and the World Bank for the preparation of a MTDS by end-2012, and TA from the IMF to conduct a DSF workshop as a means to start preparing their own regular DSAs.

V. Authorities Views

13. The authorities concurred with the DSA results and reaffirmed their commitment to prudent borrowing policies. They noted that a move from a “high risk” rating would unlock new sources of concessional financing. They acknowledged that the rating change could result in an accelerated move away from grants toward concessional financing, and that this would require determined efforts to continue strengthening debt management capacity and increased diligence to ensure financing terms are the most generous possible.

14. The authorities stressed, however, that more flexibility is needed regarding the zero limit on nonconcessional borrowing under the ECF-supported program. They argued for consideration of some nonconcessional financing linked to high return large infrastructure projects, as yet unspecified. They would like to explore this topic in more detail at the time of the next program review.

VI. Conclusion

15. Based on the results of the new DSA, Burkina Faso’s risk of debt distress shifts from high to moderate. This shift primarily reflects the rapid development of Burkina Faso’s gold mining sector, combined with notable improvements in underlying macroeconomic fundamentals. However, the staffs caution that any adjustments in financing plans—both on the part of the authorities and development partners—should only be undertaken gradually, to ensure that debt management capacity is sufficient to handle evolving needs.

1

Based on the average CPIA score in 2008–10, Burkina Faso is ranked as a “medium performer.” Burkina Faso’s CPIA average for 2009–11 may move it into the category of “high performer.”

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