Burkina Faso: Selected Issues
Author: International Monetary Fund. African Dept.
Publication Date:
24 Jul 2014
eISBN:
9781498359467
Language:
English
Keywords:
ISCR; CR; price; revenue; production; Sofitex; poverty headcount ratio; PPP conversion factor; Real GDP growth; primary sector share; report Burkina Faso; Inclusive growth; Poverty reduction
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In recent years, the IMF has released a growing number of reports and other documents covering economic and financial developments and trends in member countries. Each report, prepared by a staff team after discussions with government officials, is published at the option of the member country.

Abstract

In recent years, the IMF has released a growing number of reports and other documents covering economic and financial developments and trends in member countries. Each report, prepared by a staff team after discussions with government officials, is published at the option of the member country.

Inclusive Growth in Burkina Faso1

Burkina Faso has experienced sustained economic growth between 1990 and 2013. Indeed, growth became more robust and more resilient to chocks, resulting in the economy growing faster than regional standards. However, the perception within the country is that the population hasn’t really benefited from this strong performance and that growth was not inclusive. Indicators show that results are actually mitigated. The improvements can be attributed to the authorities’ numerous measures on the matter but there are still some identified constraints that must be resolved in order to truly tackle the problem of poverty in the country.

A. Growth in Burkina Faso

1. Burkina Faso has experienced sustained growth in the past decade. Although this is true for many countries in the region, Burkina Faso is one of the few non resource-rich low-income countries that have been able to achieve high growth over a long period. The Regional Economic Outlook for Sub-Saharan Africa of October 20132 identifies several key characteristics common to these countries–Burkina Faso, Ethiopia, Mozambique, Rwanda, Tanzania, and Uganda–improved macroeconomic management, stronger institutions, increased aid, and higher investment in human and physical capital.

2. Burkina Faso’s growth per capita has been more robust than regional standards, but the level of nominal GDP per capita is still below WAEMU and Sub-Saharan Africa. Nominal GDP per capita increased steadily over the past two decades, and is catching up with WAEMU average ($1554 versus $1663 in 2012, PPP adjusted). In real terms, the GDP per capita PPP adjusted has increased significantly, surpassing WAEMU and Sub-Saharan African real GDP per capita growth (Text Figures 1 and 2).

Text Figure 1.
Text Figure 1.

Nominal GDP per Capita, PPP, 1990–2012

(in current US$)

Citation: IMF Staff Country Reports 2014, 230; 10.5089/9781498359467.002.A001

Source: World Bank, World Development Indicators, 2014.
Text Figure 2.
Text Figure 2.

Real GDP per Capita, PPP, 1990–2012

(Index, 1990 = 100)

Citation: IMF Staff Country Reports 2014, 230; 10.5089/9781498359467.002.A001

3. Real GDP growth averaged 5.9 percent between 2000 and 2013. Between 1990 and 2013, real growth has become more sustainable and less volatile (Text Figure 3). The five-year average went from 3.0 to 6.4. During the same time, the standard deviation of the five previous years declined steadily from 3.8 to 2.5 percent, demonstrating a decline of the volatility of growth. The resilience against weather shocks is the result of investment in irrigation technologies as well as the increased use of genetically modified cotton seeds. Also, the primary sector share of real GDP has declined from 33.7 in 1995 to 28.0 percent in 2013, decreasing the impact of primary sector shocks on the total activity.

Text Figure 3.
Text Figure 3.

Burkina Faso: Real GDP Growth,1990–2013

Citation: IMF Staff Country Reports 2014, 230; 10.5089/9781498359467.002.A001

Source: CountriesAuthorities; and IMF staff estimates.

4. Despite the emergence of industrial gold production, the share of the secondary sector to real GDP has remained constant since 1995, at about 20 percent, reflecting the lack of capacity to generate higher value added activities. The sector is mainly driven by industry (food processing, textiles). The mining sector’s share increased from 0.5 percent in 1995 to 4.3 percent in 2013. In order to better track sources of growth and structural transformation, the authorities are in the process of updating the base year to 2015, starting with a survey to better capture informal sector activity.

B. Inclusiveness of Growth in Burkina Faso

5. In Burkina Faso and among donors, the perception is that poverty reduction has been too slow. The authorities’ official statistics measuring poverty incidence (defined as 20 US cents per day in 1994, growing to 60 cents in 2009) haven’t improved since 1994, remaining around 45 percent. Urban poverty even increased during the period as the share of people living in urban areas almost doubled, from 14 percent in 1990 to 25 percent in 2009 (Table 1). The level of the authorities’ poverty line has more than tripled over that period. Inflation-adjusted, the poverty line has almost doubled (from $0.6 per day to $1.1 per day) and is now comparable with the poverty line used by the Word Development Indicators.

Table 1.

Burkina Faso: Selected Indicators, 1994–2009

article image
Sources: Burkinabè authorities; and SCADD, 2012.

Data calculated from household surveys.

Share of population whose income is below the poverty line.

Minimum income needed to satisfy food calorific needs and non-food basic needs.

PPP conversion factor is the number of units of a country’s currency required to buy the same amounts of goods and services in the domestic market as U.S. dollar would buy in the US.

6. The perception of a lack of inclusive growth in recent years has been exacerbated by a boom in gold production. Whereas cotton accounted for 80% of exports and gold production was non-existent a decade ago, gold now accounts for almost 80% of exports. However, its main channel of impact on the economy is fiscal revenues, but investment and spending capacity constraints have limited the extent to which these revenues have translated into additional development spending. Recent studies show that less than 10,000 Burkinabè work in the industrial mines, where they usually fill unskilled labor and low-wage positions. Foreign enterprises provide most of the services to the mines. Together, these factors have created a public perception that progress in reducing income poverty has been too slow, with the population at large excluded from the benefits of high growth and the gold sector boom.

7. However, other indicators suggest a more mixed picture about inclusive growth in Burkina Faso. The World Bank’s measure of the poverty headcount ratio demonstrates that the share of the population living under the $1.25 per day threshold, calculated at 2005 prices, was significantly reduced since the early 1990s, from 71.17 percent, to 44.6 percent in 2009 (Text Figure 4), on a par with other west African countries.

Text Figure 4.
Text Figure 4.

Poverty headcount ratio at $1.25/day (PPP), 1990–2011

(% of population)

Citation: IMF Staff Country Reports 2014, 230; 10.5089/9781498359467.002.A001

Source: World Bank, World Development Indicators, 2014.

8. The income share held by the wealthiest 10% of the population has decreased since 1990. The income share held by the poorest 10% of the population increased slightly, but remained under 3% (Text Figure 5). These figures suggest that income gains have benefitted those in the middle. The GINI index supports the hypothesis of better wealth distribution, decreasing from 50.7 in 1990 to 39.8 in 2009. It remains higher than WAEMU average (Text Figure 6).

Text Figure 5.
Text Figure 5.

Income Share Held by Highest and Lowest 10%, 1990–2011

(In percent)

Citation: IMF Staff Country Reports 2014, 230; 10.5089/9781498359467.002.A001

Source: World Bank, World Development Indicators, 2014.
Text Figure 6.
Text Figure 6.

GINI Index, 1990–2009

(0 = perfect distribution)

Citation: IMF Staff Country Reports 2014, 230; 10.5089/9781498359467.002.A001

C. Social Indicators

9. Burkina Faso’s population growth rate has been very high, around 3 percent. The population growth rate averaged 2.9 percent between 1990 and 2012, triggered by substantial decreases in mortality levels, while fertility levels remained constant (Text Figure 7). Mortality decreased owing to improvements in health care and services, as well as hygiene and sanitation. As a result, in 2006, 46.4 percent of the population was 14 years old or younger (SSA average, 43). Around two-thirds of the population was 25 or younger. The rapid demographic growth makes it more difficult to reduce income poverty ratios and puts further demand on public resources for social transfers. Moreover, the rapidly increasing population creates challenges for job creation and puts more pressure on the need for sustained high growth.

Text Figure 7.
Text Figure 7.

Population Growth, 1990–2012

(In percent)

Citation: IMF Staff Country Reports 2014, 230; 10.5089/9781498359467.002.A001

Source: World Bank; and IMF staff estimates.

10. Despite rapid demographic growth, World Development Indicators show notable improvements in living conditions in the country. Besides the reduction of poverty headcount ratio described above, health-related indicators have shown good progress and have reached regional standards. However, education-related indicators have not progressed as well. Despite improvement, they remain lower than SSA averages and primary school enrollment is far from the 2015 target of 100 percent (Text Figure 8).

Text Figure 8.
Text Figure 8.

Burkina Faso: Selected Millenium Development Goals, 1990–2012

Citation: IMF Staff Country Reports 2014, 230; 10.5089/9781498359467.002.A001

Source: World Bank, World Development Indicators, 2014.

11. The country’s Human Development Index (HDI) remained below regional standards (Figure 1). In health, Burkina Faso’s specific HDI is higher than WAEMU and SSA averages, but below low-income countries (LICs). In terms of public expenditure in health, the country spends more in percent of GDP than both WAEMU and LIC averages. Again, education shows the least pronounced progress, and spending is below WAEMU and SSA averages.

Figure 1.
Figure 1.

Burkina Faso: Human Development Indicators and Public Expenditure, 2005–12

Citation: IMF Staff Country Reports 2014, 230; 10.5089/9781498359467.002.A001

Source: Human Development Indicators, 2013 and FAD Health and Education Dataset.

D. Measures to Make Growth More Inclusive

12. The progress in poverty reduction and growth inclusiveness has been supported by numerous measures and projects undertaken by the Burkinabè authorities. The strategy for accelerated growth and durable development (SCADD) is a framework of measures aiming at reducing poverty while insuring economic stability.

13. Improvement of the resilience of the primary sector to weather shocks. For instance, irrigation, increased use of GMO cotton seeds, and more crop rotation have led to greater productivity and improved resilience to weather shocks. Other measures in the cotton sector, such as the provision of subsidized inputs and an income support scheme, have led to more stable incomes in rural areas where poverty is concentrated.

  • Growth poles as an innovative way to improve growth inclusiveness. The establishment of a “growth pole” on the Bagré reservoir has enabled a diverse set of economic activities, initially supported by the government/World Bank, gradually being sold to private sector investors. The reservoir, infrastructure and services established support diverse activities such as fishing, dairy production, diverse crops, ecotourism, and a hydroelectric dam. The project also offered land and training to the local population, as well as free public services, such as schooling. Investors have shown such keen interest that the authorities are planning three additional growth poles elsewhere in the country.

  • Establishment of social transfers, food security schemes, and employment creation measures. Recently, the rhythm of social spending accelerated as social expenditure packages were decided by the Council of Ministers in September 2013 and March 2014 (amounting to 1 percent of GDP each year). Measures included:

    • ➢ targeted transfers for vulnerable groups (orphans, street children, elderly, handicapped);

    • ➢ creation of additional labor-intensive rural jobs (waste recycling, housekeeping, health care, etc), and training programs for young workers;

    • ➢ better food security through increased use of “boutiques témoins” (small public grocery stores selling staple goods at subsidized prices);

    • ➢ credit lines/loan guarantees for small entrepreneurs (female, informal sector associations, small and medium enterprises); and

    • ➢ expanded university infrastructure and more scholarships, to facilitate student participation and enrollment.

  • In order to improve the energy supply, the authorities have undertaken numerous projects supported primarily by international donors. Those projects include the construction of solar plants, thermal plants and interconnections in order to improve import capacity and increase its diversification.

Burkina Faso: Strategy for Accelerated Growth and Durable Development

The Strategy for Accelerated Growth and Sustained Development (SCADD) sets out economic and social policies to support broad-based growth, sustained poverty reduction, and progress towards the MDGs (MEFP, ¶14). At its outset, it was estimated that full implementation of the strategy—disregarding capacity or financing constraints—would be around US$ 15 billion. The strategy follows 4 main axes:

  • Development of accelerated growth pillars: in pursuit of a growth target of 10 percent, the SCADD contains measures to improve the business environment, and develop “growth poles” to attract private investment.

  • Consolidation of human capital and promotion of social protection: the SCADD focuses on investment for expansion of health sector primary education, with coordinated expansion of secondary and vocational education. The SCADD also aims to improve the equity of resource allocation.

  • Strengthening of governance: the SCADD emphasizes internal and external controls to curb corruption and improve accountability of public institutions. A main challenge is judicial reforms.

  • Crosscutting priorities in development policies: reduce gender inequalities, control population growth, sustainable use of natural resources, capacity building.

Taking into account capacity and financing constraints, the strategy sets interim targets to assess implementation progress. Two-thirds of 2013 measures or indicators were implemented or met, notably feasibility studies for three new growth poles, implementation of special export zones, and launching of a new household survey. However, some areas are lagging, e.g. more use of private sector partnerships, implementation of a rural strategy, youth employment action plan, an anti-corruption law and judiciary reforms.

Establishment of a universal health insurance scheme aims to cover 50 percent of the population by 2025, at a cost broadly estimated at 2 percent of GDP. Other health projects in the short run aim to hire health care professionals, establish facilities, and assure free healthcare for children under 5 (20 percent of the population). The 2010–20 education strategy plans to hire 3700 teachers per year, build or renovate existing classrooms and buy textbooks, with a goal of 100 percent primary school enrollment by 2021, at an additional cost of 2 percent of GDP per year.

During the second phase of the SCADD (2014–16), the strategy will focus on priority measures including:

  • Promotion of growth poles with the adoption of an investment code.

  • Development of industrial zones to promote small enterprises.

  • Development of infrastructure support.

  • Promotion of employment and professional formation with the adoption of an action plan for the national employment policy.

E. Constraints to Inclusive Growth

14. As reflected in the main axes of the current ECF-supported program and despite the improvements, much remains to be done to achieve a more inclusive growth. The main identified constraints are:

  • Unreliable and expensive electricity supply.

  • Prominent infrastructure gap (transport, energy, health, education). In particular, while there has been good progress with primary school enrollment, more is needed for secondary and university education, as well as vocational training tailored to labor demand needs.

  • Limited access to financial services. In 2012, only 16 percent of the population had access to these services.

  • Prevalence of unemployment or underemployment. In Burkina Faso, the issue particularly among the young.

  • Need for a stronger judiciary. Although relevant indicators have improved in Burkina Faso and are above regional standards (Figure 2), the World Bank states that Burkina Faso’s justice system suffers from a number of serious systemic weaknesses and that the government’s commitment to fighting corruption has yielded mixed results.3

Figure 2.
Figure 2.

Burkina Faso: Business Environment and Governance

Citation: IMF Staff Country Reports 2014, 230; 10.5089/9781498359467.002.A001

Sources: Doing Business, 2012; World Bank’s Governance Indicators, 2011, (average of control of corruption, government effectiveness, rule of law, regulatory quality, political stability and voice and accountability); Economist Intelligence Unit (EIU); and IMS staff calculations.SSA = Sub-Saharan Africa; LIC=Low-income country; HIC= High-income countries; UMIC= Upper-middle income country; LMIC= Low-middle-income country; OIL=Oil producers; RR= Resource-rich countries.

15. In the report Burkina Faso, Competitiveness and Diversification,4 the World Bank identifies 3 main factors that are crucial to inclusive growth: human, physical and financial capital. In terms of human capital, aside from education, the paper identifies unabated population growth in Sub-Saharan Africa as a major obstacle for achievement of its development goals, and argues that dealing with population growth should be a higher priority. The paper notes that closing the infrastructure gap is necessary to sustain more inclusive growth, especially in energy and transport. Finally, the report calls for improved access to financial services, explaining that small and medium enterprises have little access to financial services and aside from cotton, there is little credit available for agriculture. The World Bank’s Doing Business indicators also show that Burkina Faso’s weaknesses are in the sub indicators: “getting electricity,” “trading across borders and “getting credit” (Figure 2). The overall Doing Business index has increased over the years, although it dropped in the rankings to 154 in 2014, compared to 149 in 2012 (out of 185).

References

  • Regional Economic Outlook, Sub-Saharan Africa, October 2013, Keeping the Pace, IMF.

  • Burkina Faso, Promoting Growth, Competitiveness and Diversification, November 2009, the World Bank.

  • Burkina Faso, Third Growth and Competitiveness operation, November 2013, the World Bank.

  • Burkina Faso, Doing Business 2014, the World Bank.

  • Burkina Faso, Human Development Report 2013, UNDP.

  • Stratégie de Croissance Accélérée et de Développement Durable 2011–15, Ministry of Economy and Finance, Burkina Faso.

1

Primary contributor was David Corvino, with contributions from Laure Redifer and Jean-Baptiste Le Hen.

3

Report No. 80557-BF, November 7 2013, the World Bank.

4

Report No. 51815-BF, November 24 2009, the World Bank.

Same Series

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Cover IMF Staff Country Reports
Burkina Faso: Selected Issues
Author: International Monetary Fund. African Dept.
Volume/Issue:
Volume 2014: Issue 230
Publisher:
International Monetary Fund
ISBN:
9781498359467
ISSN:
1934-7685
Pages:
35
DOI:
https://doi.org/10.5089/9781498359467.002

Nominal GDP per Capita, PPP, 1990–2012

(in current US$)

Real GDP per Capita, PPP, 1990–2012

(Index, 1990 = 100)

Burkina Faso: Real GDP Growth,1990–2013

Poverty headcount ratio at $1.25/day (PPP), 1990–2011

(% of population)

Income Share Held by Highest and Lowest 10%, 1990–2011

(In percent)

GINI Index, 1990–2009

(0 = perfect distribution)

Population Growth, 1990–2012

(In percent)

Burkina Faso: Selected Millenium Development Goals, 1990–2012

Burkina Faso: Human Development Indicators and Public Expenditure, 2005–12

Burkina Faso: Business Environment and Governance