Burkina Faso: Sixth Review Under the Three-Year Arrangement Under the Extended Credit Facility, Requests for Extension of the Arrangement, Modification of Continuous Performance Criterion, and Rephasing of Disbursement—Informational Annex
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This paper discusses Burkina Faso’s Sixth Review Under the Three-Year Arrangement under the Extended Credit Facility and Requests for Extension of the Arrangement, Modification of Continuous Performance Criterion, and Rephasing of Disbursement. Domestic revenue collection over performed by a significant margin in 2012, and program performance remains good. In 2012, domestic revenues were higher than targeted by 1.7 percentage points of revised GDP. Lower financing needs resulted in government savings in the banking system. The authorities are prioritizing improvements in public investment planning, spending capacity to meet infrastructure, and training needs that constrain growth.

Abstract

This paper discusses Burkina Faso’s Sixth Review Under the Three-Year Arrangement under the Extended Credit Facility and Requests for Extension of the Arrangement, Modification of Continuous Performance Criterion, and Rephasing of Disbursement. Domestic revenue collection over performed by a significant margin in 2012, and program performance remains good. In 2012, domestic revenues were higher than targeted by 1.7 percentage points of revised GDP. Lower financing needs resulted in government savings in the banking system. The authorities are prioritizing improvements in public investment planning, spending capacity to meet infrastructure, and training needs that constrain growth.

Relations with the Fund

(As at April 30, 2013)

Membership Status: Joined: May 2, 1963; Article VIII

General Resources Account:

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SDR Department:

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Outstanding Purchases and Loans:

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Latest Financial Arrangements:

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Formerly PRGF.

Projected Payments to Fund 1/

(SDR Million; based on existing use of resources and present holdings of SDRs):

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When a member has overdue financial obligations outstanding for more than three months, the amount of such arrears will be shown in this section.

Implementation of HIPC Initiative:

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Assistance committed under the original framework is expressed in net present value (NPV) terms at the completion point, and assistance committed under the enhanced framework is expressed in NPV terms at the decision point. Hence these two amounts cannot be added.

Under the enhanced framework, an additional disbursement is made at the completion point corresponding to interest income earned on the amount committed at the decision point but not disbursed during the interim period.

Implementation of Multilateral Debt Relief Initiative (MDRI):

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The MDRI provides 100 percent debt relief to eligible member countries that qualified for the assistance. Grant assistance from the MDRI Trust and HIPC resources provide debt relief to cover the full stock of debt owed to the Fund as of end-2004 that remains outstanding at the time the member qualifies for such debt relief.

Implementation of Post-Catastrophe Debt Relief (PCDR):

Not Applicable

Safeguards Assessments:

The Central Bank of West African States (BCEAO) is a common central bank of the countries of the West African Economic and Monetary Union (WAEMU). The most recent safeguards assessment of the BCEAO was completed on March 1, 2010. The update safeguards assessment was initiated in February 2013. A mission is planned for July 2013. The 2010 update assessment found that the BCEAO continues to have controls in place at the operational level. The overall governance framework needed nonetheless to be strengthened by the addition of an audit committee to ensure that the Board of Directors exercises appropriate oversight over the control structure, including the audit mechanisms and financial statements. The Institutional Reform of the WAEMU and the BCEAO completed after the approval of the safeguards report stipulated creation of the Audit Committee, which should now start working. Efforts to implement fully the International Financial Reporting Standards reporting framework should also be pursued.

Exchange Rate Arrangement:

Burkina Faso is a member of the West African Economic and Monetary Union (WAEMU) and has no separate legal tender. The union’s common currency, the CFA franc, is pegged to the euro at a rate of CFAF 655.957 = EUR 1, consistent with the official conversions rate of the French franc to the Euro and the previous fixed rate of the CFA franc to the French franc of CFAF 100= F 1. Effective January 1, 2007, the exchange arrangement of the WAEMU countries has been reclassified to the category of conventional pegged arrangement from the category of exchange arrangement with no separate legal tender. The new classification is based on the behavior of the common currency, whereas the previous classification was based on the lack of a separate legal tender. The new classification thus only reflects a definitional change, and is not based on a judgment that there has been a substantive change in the exchange regime or other policies of the currency union or its member. The exchange system is free of restrictions on the making of payments and transfers on current international transactions.

Article IV Consultations:

The periodicity of Burkina Faso’s Article IV consultation is set in accordance with the July 15, 2002 Executive Board Decision on consultation cycles. Discussions on the 2011 Article IV consultation were held between September 29–October 14, 2011 in Ouagadougou. The staff report for the 2011 Article IV consultation was considered by the Executive Board on December 21, 2011. The staff report on the previous Article IV consultation was considered by the Executive Board on December 14, 2009. The next Article IV consultation is scheduled for spring 2014.

ROSC/AAP:

An FAD mission visited Ouagadougou during May 7–18, 2001 to assist the authorities undertake a draft fiscal module of a Report on the Observance of Standards and Codes (ROSC). The final report, which was issued in July 2002, found that Burkina Faso was making good progress in a number of areas to increase the transparency and accountability of government. Additional efforts are needed to bring a number of improvements to the point of implementation, particularly with regard to expenditure tracking at the local level and external audit functions. Initial discussions indicated that the authorities broadly concurred with the mission assessment. On July 31, 2002, the authorities formally adopted an action plan based on the recommendations of the final ROSC.

An STA mission during May 8–21, 2003 assisted the authorities in preparing a data ROSC. The report was published in March 2004. The mission found that most of the methodologies used in the compilation of macroeconomic statistics are in broad conformity with internationally accepted guidelines. However, most datasets are affected by limited or impaired source data arising from irregularity in the conduct of surveys (national accounts), use of outdated weights (CPI), or low response rate to surveys (balance of payments). For CPI and government finance statistics, data dissemination meets the SDDS requirement, but for other macroeconomic datasets, timeliness falls short of GDDS recommendations. The authorities broadly concurred with the main findings of the mission as well as the recommendations made to address them.

The team, jointly with World Bank staff, also discussed a HIPC Initiative Assessment and Action Plan (AAP) with the authorities. The aim was to assess the capacity of the public expenditure management system to track poverty-reducing public expenditures under the HIPC Initiative and the need for technical assistance to enhance that capacity. The mission secured the officials’ approval of the jointly prepared preliminary assessment; identified the main needs for technical assistance on upgrading the capacity to track such expenditures; and drew up a draft outline action plan. This plan identifies the main needs for further technical assistance to improve tracking of poverty-reducing expenditures. The AAP has been endorsed by the authorities.

Resident Representative:

Mr. Jean-Baptiste Le Hen took up the post of Resident Representative in September 2012.

Technical Assistance:

Significant technical assistance has been provided since 1989, but more recently the assistance has focused on the fiscal area:

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Statistical Issues

The most pressing issue for the authorities with respect to statistics is changing the base year for the calculation of Real GDP or revising the fixed based year approach altogether. The current usage of 1999 as the base year for the calculation of Real GDP is inconsistent with considerable structural change in the economy. The discovery of more gold and the subsequent rise in gold production in addition to the significant increase in gold prices constitute the most important elements of this structural shift. Changes in agricultural productivity, specifically in the production of cotton have also contributed to shifts in GDP structure. The implication of this vis-à-vis gold production is that the current framework underestimates the contribution of gold mining to economic growth because it uses 1999 prices that are less than a tenth of the present levels in real terms for a sector that has grown substantially. This in turn distorts the contribution of other sectors, and raises potential policy implications that stem from a less than accurately obtained GDP statistics. In order to address this and other issues in National Account Statistics, there has already been TA involvement. In particular, as a part of the AFRITAC West (AFW) FY2013 work program, an AFW mission visited Ouagadougou, Burkina Faso, during March 4–8, 2013 to conduct a Regional Workshop on the implementation of the System of National Accounts 1993 (1993 SNA) in the AFW member countries.

The authorities are making commendable effort in providing detailed GDP statistics at the quarterly level, but with respect to changing the base year and a critical review of Real GDP estimation, more initiative and urgency are needed. The AFR Mission that took place between April 25 and May 8, 2013 as part of the Sixth Review, underlined the importance of this issue.

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Burkina Faso: Sixth Review Under the Three-Year Arrangement Under the Extended Credit Facility, Requests for Extension of the Arrangement, Modification of Continuous Performance Criterion, and Rephasing of Disbursement—Staff Report; Staff Supplements; Press Release on the Executive Board Discussion; and Statement by the Executive Director for Burkina Faso
Author:
International Monetary Fund. African Dept.