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IMF Country Report No. 19/393
BURKINA FASO
THIRD REVIEW UNDER THE EXTENDED CREDIT FACILITY ARRANGEMENT—PRESS RELEASE; AND STAFF REPORT
December 2019
In the context of the Third Review Under the Extended Credit Facility Arrangement, the following documents have been released and are included in this package:
A Press Release
The Staff Report prepared by a staff team of the IMF for the Executive Board’s consideration on Lapse-of-Time, following discussions that ended on November 6, 2019, with the officials of Burkina Faso on economic developments and policies underpinning the IMF arrangement under the Extended Credit Facility. Based on information available at the time of these discussions, the staff report was completed on December 5, 2019.
A Debt Sustainability Analysis prepared by the staffs of the IMF and the International Development Association.
The documents listed below will be separately released.
Letter of Intent sent to the IMF by the authorities of Burkina Faso*
Memorandum of Economic and Financial Policies by the authorities of Burkina
Faso*
Technical Memorandum of Understanding*
*Also included in Staff Report
The IMF’s transparency policy allows for the deletion of market-sensitive information and premature disclosure of the authorities’ policy intentions in published staff reports and other documents.
Copies of this report are available to the public from
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© 2019 International Monetary Fund
Front Matter Page
BURKINA FASO
THIRD REVIEW UNDER THE EXTENDED CREDIT FACILITY ARRANGEMENT
December 5, 2019
Executive Summary
Context. The security situation continues to be highly challenging. The authorities are allocating more resources for security spending and are seeking further external support to help contain the crisis.
Outlook and risks. Economic growth remained resilient during the first half of 2019 and is expected to stabilize at 6 percent in 2019 and the medium term. Food price deflation after recent good harvests is expected to keep inflation negative at end-2019, before rebounding in 2020. Fiscal performance in the first half of 2019 was broadly satisfactory, albeit helped by windfall nontax revenue. The wage bill reform agenda has advanced in some areas, including transitional measures discussed at the second review, but the national dialogue on public sector pay has not advanced enough for the overarching reform package to be adopted in the near term. In the meantime, the authorities committed not to conclude any new wage agreement or to grant any new benefits outside of the security sector. The main risks to the program remain the heightened security challenges and further labor disputes ahead of the 2020 elections.
Program performance and policies. Performance under the ECF-supported program remains satisfactory. All end-June 2019 performance criteria were met. All-but-one structural benchmarks through end-November were met.
Staff’s views. Staff supports the authorities’ request for the release of the fourth disbursement under the ECF arrangement in the amount of SDR 18.06 million.
Approved By
Dominique Desruelle (AFR) and Kevin Fletcher (SPR)
Discussions were held in Ouagadougou during October 24– November 6, 2019. The staff team comprised Mr. Ahokpossi (head), Mr. Mpatswe and Mr. Simione (all AFR), Mr. Gbohoui (FAD), and Mr. Kass-Hanna (SPR). Mr. Jenkinson (Resident Representative) and Mr. Ouattara (local economist) assisted the mission. Mr. Bah (OED) also participated. Administrative support was provided by Ms. Vibar and Ms. Ouedraogo (all AFR). The team met with Mr. Christophe Dabiré, Prime Minister; Mr. Lassané Kaboré, Minister of Economy, Finance and Development; Ms. Edith Clémence Yaka, Minister Delegate responsible for the budget; Mr Seni Mahamadou Ouedrago, Minister of Civil Service, Labor and Social Protection; and other senior government officials. The mission also met with Mr. Charles Luanga Ki-Zerbo, National Director of the Central Bank of West African States; and development partners.
Contents
BACKGROUND AND RECENT DEVELOPMENTS
A. Background
B. Recent Developments
PERFORMANCE UNDER THE ECF ARRANGEMENT
ECONOMIC OUTLOOK AND RISKS
POLICY DISCUSSIONS
A. Budget Implementation and Outlook
B. Enhancing Revenue Mobilization
C. Energy Subsidies Reform
D. Bringing the Wage Bill to a Sustainable Path
E. Enhancing fiscal discipline and cash management
F. Social Protection and Poverty Reduction
G. Financial Inclusion
PROGRAM MONITORING AND OTHER ISSUES
STAFF APPRAISAL
FIGURES
1. Recent Economic Developments
2. Real and External Developments
3. Fiscal Developments
TABLES
1. Selected Economic and Financial Indicators, 2016–24
2. Balance of Payments, 2016–24
3. Monetary Survey, 2016–20
4. Selected Financial Soundness Indicators, 2012–2018
5a. Consolidated Operations of the Central Government, 2017–24 (CFAF billions)
5b. Consolidated Operations of the Central Government, 2017–24 (In percent of GDP)
5c. Consolidated Operations of the Central Government, 2019
5d. Consolidated Operations of the Central Government, 2020
6. External Financing Requirements, 2017–21
7. Schedule of Disbursements Under Three-year ECF Arrangement,
8. Indicators of Capacity to Repay the IMF, 2017–33
ANNEX
I. Risk Assessment Matrix
APPENDIX
I. Letter of Intent
Attachment I. Memorandum of Economic and Financial Policies
Attachment II. Technical Memorandum of Understanding
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BURKINA FASO
THIRD REVIEW UNDER THE EXTENDED CREDIT FACILITY ARRANGEMENT—DEBT SUSTAINABILITY ANALYSIS
December 5, 2019
Approved by
Dominique Desruelle (IMF) and by Marcello Estevão (IDA)
Prepared jointly by the staffs of the International Monetary Fund (IMF) [and the International Development Association (IDA)]
| Risk of external debt distress | Moderate |
| Overall risk of debt distress | Moderate |
| Granularity in the risk rating | Substantial space to absorb shocks on external debt |
| Application of judgement | No |
| Risk of external debt distress | Moderate |
| Overall risk of debt distress | Moderate |
| Granularity in the risk rating | Substantial space to absorb shocks on external debt |
| Application of judgement | No |
This joint World Bank/IMF Debt Sustainability Analysis (DSA) has been prepared in the context of the 2019 third review of the three-year program supported by the IMF’s Extended Credit Facility (ECF). It is based on end-2018 debt data and the latest methodology underpinning the LIC DSF. The current debt-carrying capacity is consistent with a classification of ‘medium’.1 External risk of debt distress in Burkina Faso remains moderate. All external debt indicators remain below the relevant indicative thresholds under the baseline scenario. In line with the Staff Report, the baseline scenario is anchored on an overall fiscal deficit of 3 percent of GDP starting from 2019. Under a standard stress test of a shock on exports, two of the thresholds of PPG external debt are breached. The overall public debt does not breach the relevant benchmark under all scenarios, yet Burkina Faso is assessed as having a moderate risk of public debt distress, as the external debt risk rating is moderate. Burkina Faso would need to: (i) maintain a sound macro-fiscal framework; (ii) implement structural reforms to diversify its export base of goods and services; (iii) exercise control over government guarantees and contingent liabilities; and (iv) limit non-concessional borrowing and strengthen the implementation of its medium-term debt strategy to contain its debt service and gross financing needs in order to prevent a deterioration of its debt sustainability outlook.
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Press Release No. 19/481
FOR IMMEDIATE RELEASE
December 20, 2019
International Monetary Fund
Washington, D.C. 20431 USA
Telephone 202–623–7100
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