News Brief: IMF Completes Second Review of Burkina Faso Program and Approves US$7 Million Loan
January 10, 2001
The Executive Board of the International Monetary Fund (IMF) today completed the second review for Burkina Faso under a program supported by a three-year arrangement under the Poverty Reduction and Growth Facility (PRGF)1. The completion of this review enables the release of a further loan of SDR 5.59 million (about US$7 million) from the IMF, which brings total disbursements under the PRGF-supported program to an amount equivalent to SDR 16.77 million (about US$22 million).
After the Executive Board's discussion on Burkina Faso, Stanley Fischer, First Deputy Managing Director and Acting Chairman made the following statement:
"During the first year of the PRGF-supported program, Burkina Faso was hit by a number of exogenous shocks, including adverse weather conditions, the increase in import prices, particularly of oil products, and a sharp decline in workers' remittances. These shocks caused a slowdown in economic activity, lower government revenues and a decline in external trade.
"Meanwhile, structural reforms have been implemented broadly as planned, the ongoing privatization program is approaching completion, and the financial situation of the banking system has continued to improve in 2000.
"The fiscal situation deteriorated in the third quarter of 2000 on account of lower growth, the stronger than expected impact of WAEMU's common external tariff in reducing revenue from trade, and a cut in the excise tax on petroleum products. The authorities have taken a number of measures to curtail expenditure in order to contain the deficit.
"The Burkinabé economy is expected to recover in 2001. Real GDP is projected to grow by around 6 percent on the basis of a rebound in agricultural output. On the fiscal side, a number of revenue measures were adopted in order to achieve the programmed revenue and overall deficit targets. The 2001 policy stance is guided by the objectives of the Poverty Reduction Strategy Paper. Accordingly, social spending excluding HIPC assistance was increased in the 2001 budget compared with 2000, and the HIPC assistance expected to become available in 2001 was fully integrated in the budget.
"The main challenge is to move ahead with the reform program, so as to create the conditions for sustainable and equitable growth and durable poverty reduction. The structural reform agenda will focus on the adoption of an automatic pricing policy for petroleum products in line with international prices; pursuit of the reform of the cotton sector; and completion of the privatization program," Mr. Fischer said.
1 On November 22, 1999, the IMF's concessional facility for low-income countries, the Enhanced Structural Adjustment Facility (ESAF), was replaced by the Poverty Reduction and Growth Facility (PRGF), and its purposes were redefined. It was intended that PRGF-supported programs will in time be based on country-owned poverty reduction strategies adopted in a participatory process involving civil society and development partners, and articulated in a Poverty Reduction Strategy Paper (PRSP). This is intended to ensure that each PRGF-supported program is consistent with a comprehensive framework for macroeconomic, structural, and social policies to foster growth and reduce poverty. In the case of Burkina Faso, a full Poverty Reduction Strategy Paper was prepared and endorsed by the Executive Boards of the IMF and the World Bank in July 2000. PRGF loans carry an annual interest rate of 0.5 percent, and are repayable over 10 years with a 5½ year grace period on principal payments.