Abstract
EXECUTIVE SUMMARYGrowth remains robust, despite slight downward revisions. Growth estimates for 2013 and projections for 2014 were revised to 6.6 and 6.8 percent, respectively, reflecting weather and weaker terms of trade. Inflation is around zero, partly due to subsidized food prices. The revised 2013 current account deficit rose to 7 percent of GDP, with a drawdown of imputed reserves. The 2013 fiscal deficit increased to 3.5 percent of GDP, reflecting weaker revenues and spending for subsidies, partly offset by higher grants.In line with 2011 Article IV recommendations, the authorities maintained a prudent fiscal stance, despite numerous shocks, and implemented structural reforms that have improved the resilience of agriculture, especially cotton. Social transfers have been bolstered to ensure the benefits of growth are better distributed. An updated external stability analysis shows that the exchange rate is broadly in line with fundamentals, and an updated joint debt sustainability analysis maintains a “moderate” risk of debt distress.Program performance has been satisfactory. The authorities are requesting a waiver for a non-observance in the performance criterion for net domestic financing at end-December 2013, with most other quantitative targets met and all structural benchmarks for end-January and end-March met. Program targets differ mainly due to higher budget support projections. The 3 percent fiscal deficit target for the medium term macroeconomic framework remains unchanged, although with a higher share of current spending.Policy discussions focused on composition and quality of spending, transfers to public enterprises, and natural resource revenues. The authorities recently submitted a supplemental budget that increases the share of current spending for a higher wage bill and more social and public enterprise transfers, but remains within program targets as a result of spending offsets and higher budget support. The authorities are proposing an audit of large public enterprises to estimate needs for the medium term, and inform reforms to reduce transfer needs. The National Assembly did not approve a new mining taxation code byend-2013 as expected, rather, the draft code was sent back to the authorities for furtherconsideration of investors’ concerns.
On July 3, 2014, the Executive Board of the International Monetary Fund completed the first review of Burkina Faso’s economic performance under a three-year program supported by the IMF’s Extended Credit Facility (ECF) arrangement, and also concluded the 2014 Article IV Consultation1 with Burkina Faso. The completion of the first review enables the immediate release of an amount equivalent to SDR 2.55 million (about US$3.9 million), bringing total disbursements under the arrangement to an amount equivalent to SDR 5.1 million (about US$7.9 million).
In completing the first review, the Executive Board also approved the authorities’ requests for a waiver for nonobservance of the end-December 2013 performance criterion on net domestic financing, and for modification of the continuous performance criterion on nonconcessional external debt and modification of the performance criterion on net domestic financing for the end-June and end-December 2014 periods. The 36-month ECF arrangement in the amount equivalent to SDR 27.09 million (about US$41.9 million, or 45 percent of Burkina Faso’s quota at the IMF) was approved by the Executive Board on December 27, 2013 (see Press Release 13/542).
Following the Executive Board’s discussion on Burkina Faso, Mr. David Lipton, First Deputy Managing Director and Acting Chair issued the following statement:
“Burkina Faso has a long track record of strong macroeconomic policy management, supported by IMF programs. Structural reforms to improve productivity and resilience in agriculture and increased spending for poverty reduction and food security have resulted in robust growth rates and progress toward the Millennium Development Goals.
“Burkina Faso’s performance under the new ECF-supported program has been satisfactory, with all structural reforms implemented and most quantitative targets reached. Growth has remained robust and the fiscal deficit has been contained. While the outlook for growth remains strong, there are challenges arising from unfavorable terms of trade in the near term. However, fiscal deficits should remain contained around 3 percent of GDP, due to spending adjustment and increased grants. As gold prices recover over the medium term, external balances should improve. The risk of debt distress remains classified as “moderate”.
“The authorities have reaffirmed their strong commitment to the program against the backdrop of a more challenging policy environment. Three macroeconomic challenges have been identified to set the foundation for progress over the longer term. First, ensuring that the quality and composition of spending allows scaling up critical investment, both in infrastructure and people, needed to support private sector-led growth. Second, accelerating investments for increased and more reliable electricity supplies to meet growing demand, while putting the energy sector on a more financially-sustainable footing and scaling down untargeted subsidies. Finally, updating the mining code to harness natural resource revenues, and creating mechanisms, such as a fiscal rule, to direct them toward growth-enhancing spending over a multi-year horizon.”
The Executive Board also completed the 2014 Article IV consultation with Burkina Faso.
Over the past two decades, Burkina Faso has experienced sustained stable and higher growth, with progress toward achieving the Millennium Development Goals. The country has a long track record of strong macroeconomic policy management, supported by consecutive IMF-supported economic programs. The authorities have taken a number of measures to improve productivity and resilience in agriculture, boost revenue collection, and increase spending for poverty reduction and food security.
Growth remained robust in 2013 at 6.6 percent, although slightly lower than average due to the impact of erratic rain on agricultural yield and weaker terms of trade. Inflation hovered around zero, reflecting low food prices. The fiscal deficit was 3.5 percent, slightly higher than expected, mainly due to revenue shortfalls. The current account deficit worsened, due to lower gold prices and sustained imports.
For this year, the authorities have submitted a supplemental budget reflecting an increase in the wage bill (0.6 percent of GDP) and increased social transfers (0.6 percent of GDP). However, to maintain an unchanged fiscal deficit, the new spending will be financed by additional grants and reduced non-priority spending, mainly in investment, also reflecting a reprioritization in favor of energy projects and more “shovel-ready” projects.
Going forward, growth is expected to remain around 7 percent, inflation around 2 percent, and the fiscal deficit (including grants) at around 3 percent of GDP. The current account deficit is expected to stabilize at 7 per cent of GDP as terms of trade improve over the medium term. Risks to the outlook are weather, further terms of trade deterioration, pressure to spend more on untargeted subsidies and public wage increases, and political transition.
Executive Board Assessment2
Executive Directors commended the authorities for their long track record of sound macroeconomic management and structural reforms that have led to robust growth. Good progress has been made towards achieving the development goals, supported by increased investment and poverty-reducing spending. Performance under the Fund-supported program has been satisfactory. While the medium-term outlook is favorable, significant challenges are posed by public spending pressures, energy constraints, and liabilities associated with public enterprises. Directors emphasized that continued strong ownership and commitment to prudent policies and structural reforms will safeguard the macroeconomic gains and foster long-term sustainable and inclusive growth.
Directors underscored the need to contain fiscal expenditure, including by bringing the wage bill back in line with WAEMU rules, while maintaining priority spending in the areas of infrastructure, health, and education. Directors supported plans to continue improving revenue collection through new administrative measures. While welcoming the planned audit of key public enterprises, Directors encouraged the authorities to give consideration to gradual adjustments of retail fuel prices. At the same time, and recognizing the complexity of this issue, they also called for addressing energy supply constraints through planned acceleration of projects to increase power generation and operational efficiency which are critical to alleviating growth constraints. Noting that energy supply shortages are an issue throughout the region, Directors encouraged more focus on regional approaches to help address the problem.
Directors stressed the importance of harnessing natural resource revenues to finance development. They welcomed Burkina Faso’s EITI compliance, and looked forward to an updated mining tax code that is aligned with best international practice, since these revenues will be critical for financing the country’s development needs. To help manage the use of natural resource revenues in the face of volatile commodity prices and investment capacity constraints, they encouraged consideration of a fiscal rule, consistent with WAEMU rules. To ensure debt sustainability, Directors recommended that the authorities limit non-concessional borrowing to high-return projects, and continue to improve debt management capacity.
Directors welcomed the authorities’ commitment to enhance spending in key priority areas, as outlined in their development program. In scaling up investment spending for human and infrastructure capital, Directors encouraged a strong focus on the quality of spending, through careful project selection and results-monitoring. In particular, they called for more attention to higher education and job training programs. Directors supported the authorities’ efforts to expand access to financial services.
Directors encouraged the authorities to continue efforts to update the base year for national accounts statistics, in order to better assess evolving sources of economic growth and structural transformation.
Burkina Faso: Selected Economic and Financial Indicators, 2012–16
Percent of beginning-of-period broad money.
7th review numbers are calculated in percent of revised nominal GDP.
Burkina Faso: Selected Economic and Financial Indicators, 2012–16
| 2012 | 2013 | 2014 | 2015 | 2016 | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Appr. Prog. | Prel. | Appr. Prog. | Est. | Appr. Prog. | Proj. | Proj. | ||||
| (Annual percentage change, unless otherwise indicated) | ||||||||||
| GDP and prices | ||||||||||
| GDP at constant prices | 9.0 | 9.0 | 6.8 | 6.6 | 6.8 | 6.7 | 6.8 | 7.0 | ||
| GDP deflator | 4.6 | 4.6 | 0.9 | −0.9 | 1.7 | 1.1 | 1.9 | 2.0 | ||
| Consumer prices (annual average) | 3.8 | 3.8 | 2.0 | 0.5 | 2.0 | 1.5 | 2.0 | 2.0 | ||
| Consumer prices (end of period) | 1.6 | 1.6 | 2.0 | 0.1 | 2.0 | 2.0 | 2.0 | 2.0 | ||
| Money and credit | ||||||||||
| Net domestic assets (banking system) 1 | 16.1 | 16.1 | 12.9 | 19.6 | 18.2 | 15.4 | 15.0 | 17.5 | ||
| Credit to the government (banking system) 1 | −2.7 | −2.7 | 3.1 | 5.3 | 5.7 | 4.0 | 2.3 | 2.0 | ||
| Credit to the private sector | 24.1 | 24.1 | 20.7 | 26.3 | 20.0 | 15.1 | 16.4 | 19.8 | ||
| Broad money (M3) | 15.9 | 15.9 | 14.0 | 11.3 | 14.9 | 14.3 | 14.9 | 16.8 | ||
| External sector | ||||||||||
| Exports (f.o.b.; valued in CFA francs) | 31.4 | 12.7 | −7.2 | −3.3 | −0.5 | −0.9 | 4.4 | 6.7 | ||
| Imports (f.o.b.; valued in CFA francs) | 25.3 | 19.8 | 1.1 | 5.7 | 5.8 | 2.5 | 3.4 | 6.6 | ||
| Terms of trade | 6.1 | 11.5 | −11.4 | −13.7 | −3.1 | −4.0 | 1.2 | 2.5 | ||
| Real effective exchange rate | … | −0.7 | … | … | … | … | … | |||
| CFAF/US$ (annual average) | 510.0 | 510.2 | … | 493.9 | … | … | … | … | ||
| (Percent of GDP, unless otherwise indicated) 2 | ||||||||||
| Central government finances | ||||||||||
| Current revenue | 17.8 | 17.7 | 19.3 | 18.8 | 19.4 | 19.3 | 19.3 | 19.3 | ||
| Of which: tax revenue | 15.8 | 15.8 | 17.3 | 16.7 | 17.3 | 17.3 | 17.2 | 17.3 | ||
| Total expenditure and net lending | 26.0 | 25.8 | 27.5 | 27.8 | 27.4 | 27.8 | 27.7 | 27.5 | ||
| Of which: current expenditure | 14.7 | 14.7 | 14.8 | 13.8 | 14.0 | 14.7 | 14.7 | 14.7 | ||
| Overall fiscal balance, excl. grants (commitments) | −8.2 | −8.1 | −8.2 | −9.0 | −8.0 | −8.4 | −8.4 | −8.3 | ||
| Overall fiscal balance, incl. grants (commitments) | −3.3 | −3.1 | −3.3 | −3.5 | −3.1 | −3.1 | −3.1 | −3.0 | ||
| Savings and investment | ||||||||||
| Current account balance (incl official transfers) | −0.8 | −4.5 | −3.6 | −7.0 | −6.0 | −7.2 | −7.0 | −7.0 | ||
| Gross investment | 22.8 | 21.4 | 23.0 | 20.6 | 19.9 | 18.0 | 18.4 | 18.7 | ||
| Government | 7.8 | 7.8 | 8.8 | 10.1 | 9.2 | 9.0 | 9.0 | 8.9 | ||
| Private | 15.0 | 13.6 | 14.2 | 10.5 | 10.7 | 9.1 | 9.4 | 9.9 | ||
| Gross national savings | 22.0 | 16.9 | 19.4 | 13.6 | 13.9 | 10.8 | 11.4 | 11.7 | ||
| Government | 7.5 | 7.3 | 9.7 | 8.4 | 9.0 | 8.8 | 8.8 | 8.9 | ||
| Private | 14.5 | 9.5 | 9.7 | 5.1 | 4.9 | 2.0 | 2.6 | 2.8 | ||
| Debt indicators | ||||||||||
| External debt | 23.2 | 22.9 | 25.4 | 21.8 | 25.9 | 22.2 | 21.9 | 21.8 | ||
| NPV of external debt (percent of exports) | 63.0 | 61.5 | 78.4 | 57.4 | 85.0 | 64.6 | 68.6 | 71.6 | ||
| Memorandum items: | ||||||||||
| Nominal GDP (CFAF billion) | 5,629 | 5,629 | 6,062 | 5,947 | 6,582 | 6,413 | 6,983 | 7,621 | ||
| Nominal GDP per capita (US$) | 674 | 670 | … | … | … | … | … | … | ||
| Gold price (US$ per once) | 1,669 | 1,669 | 1,462 | 1,411 | 1,396 | 1,327 | 1,343 | 1,370 | ||
Percent of beginning-of-period broad money.
7th review numbers are calculated in percent of revised nominal GDP.
Burkina Faso: Selected Economic and Financial Indicators, 2012–16
| 2012 | 2013 | 2014 | 2015 | 2016 | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Appr. Prog. | Prel. | Appr. Prog. | Est. | Appr. Prog. | Proj. | Proj. | ||||
| (Annual percentage change, unless otherwise indicated) | ||||||||||
| GDP and prices | ||||||||||
| GDP at constant prices | 9.0 | 9.0 | 6.8 | 6.6 | 6.8 | 6.7 | 6.8 | 7.0 | ||
| GDP deflator | 4.6 | 4.6 | 0.9 | −0.9 | 1.7 | 1.1 | 1.9 | 2.0 | ||
| Consumer prices (annual average) | 3.8 | 3.8 | 2.0 | 0.5 | 2.0 | 1.5 | 2.0 | 2.0 | ||
| Consumer prices (end of period) | 1.6 | 1.6 | 2.0 | 0.1 | 2.0 | 2.0 | 2.0 | 2.0 | ||
| Money and credit | ||||||||||
| Net domestic assets (banking system) 1 | 16.1 | 16.1 | 12.9 | 19.6 | 18.2 | 15.4 | 15.0 | 17.5 | ||
| Credit to the government (banking system) 1 | −2.7 | −2.7 | 3.1 | 5.3 | 5.7 | 4.0 | 2.3 | 2.0 | ||
| Credit to the private sector | 24.1 | 24.1 | 20.7 | 26.3 | 20.0 | 15.1 | 16.4 | 19.8 | ||
| Broad money (M3) | 15.9 | 15.9 | 14.0 | 11.3 | 14.9 | 14.3 | 14.9 | 16.8 | ||
| External sector | ||||||||||
| Exports (f.o.b.; valued in CFA francs) | 31.4 | 12.7 | −7.2 | −3.3 | −0.5 | −0.9 | 4.4 | 6.7 | ||
| Imports (f.o.b.; valued in CFA francs) | 25.3 | 19.8 | 1.1 | 5.7 | 5.8 | 2.5 | 3.4 | 6.6 | ||
| Terms of trade | 6.1 | 11.5 | −11.4 | −13.7 | −3.1 | −4.0 | 1.2 | 2.5 | ||
| Real effective exchange rate | … | −0.7 | … | … | … | … | … | |||
| CFAF/US$ (annual average) | 510.0 | 510.2 | … | 493.9 | … | … | … | … | ||
| (Percent of GDP, unless otherwise indicated) 2 | ||||||||||
| Central government finances | ||||||||||
| Current revenue | 17.8 | 17.7 | 19.3 | 18.8 | 19.4 | 19.3 | 19.3 | 19.3 | ||
| Of which: tax revenue | 15.8 | 15.8 | 17.3 | 16.7 | 17.3 | 17.3 | 17.2 | 17.3 | ||
| Total expenditure and net lending | 26.0 | 25.8 | 27.5 | 27.8 | 27.4 | 27.8 | 27.7 | 27.5 | ||
| Of which: current expenditure | 14.7 | 14.7 | 14.8 | 13.8 | 14.0 | 14.7 | 14.7 | 14.7 | ||
| Overall fiscal balance, excl. grants (commitments) | −8.2 | −8.1 | −8.2 | −9.0 | −8.0 | −8.4 | −8.4 | −8.3 | ||
| Overall fiscal balance, incl. grants (commitments) | −3.3 | −3.1 | −3.3 | −3.5 | −3.1 | −3.1 | −3.1 | −3.0 | ||
| Savings and investment | ||||||||||
| Current account balance (incl official transfers) | −0.8 | −4.5 | −3.6 | −7.0 | −6.0 | −7.2 | −7.0 | −7.0 | ||
| Gross investment | 22.8 | 21.4 | 23.0 | 20.6 | 19.9 | 18.0 | 18.4 | 18.7 | ||
| Government | 7.8 | 7.8 | 8.8 | 10.1 | 9.2 | 9.0 | 9.0 | 8.9 | ||
| Private | 15.0 | 13.6 | 14.2 | 10.5 | 10.7 | 9.1 | 9.4 | 9.9 | ||
| Gross national savings | 22.0 | 16.9 | 19.4 | 13.6 | 13.9 | 10.8 | 11.4 | 11.7 | ||
| Government | 7.5 | 7.3 | 9.7 | 8.4 | 9.0 | 8.8 | 8.8 | 8.9 | ||
| Private | 14.5 | 9.5 | 9.7 | 5.1 | 4.9 | 2.0 | 2.6 | 2.8 | ||
| Debt indicators | ||||||||||
| External debt | 23.2 | 22.9 | 25.4 | 21.8 | 25.9 | 22.2 | 21.9 | 21.8 | ||
| NPV of external debt (percent of exports) | 63.0 | 61.5 | 78.4 | 57.4 | 85.0 | 64.6 | 68.6 | 71.6 | ||
| Memorandum items: | ||||||||||
| Nominal GDP (CFAF billion) | 5,629 | 5,629 | 6,062 | 5,947 | 6,582 | 6,413 | 6,983 | 7,621 | ||
| Nominal GDP per capita (US$) | 674 | 670 | … | … | … | … | … | … | ||
| Gold price (US$ per once) | 1,669 | 1,669 | 1,462 | 1,411 | 1,396 | 1,327 | 1,343 | 1,370 | ||
Percent of beginning-of-period broad money.
7th review numbers are calculated in percent of revised nominal GDP.
Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country’s economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.
At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country’s authorities. An explanation of any qualifiers used in summings up can be found here: http://www.imf.org/external/np/sec/misc/qualifiers.htm.