News Brief: IMF Completes Burkina Faso Review Under PRGF and Approves US$7 Million Loan
July 2, 2001
The Executive Board of the International Monetary Fund (IMF) today completed the third review of Burkina Faso's performance under the arrangement supported by the Poverty Reduction and Growth Facility (PRGF)1. As a result, Burkina Faso will be able to draw SDR 5.59 million (about US$7 million).
Burkina Faso's three-year program was originally supported under the Enhanced Structural Adjustment Facility (ESAF) approved on September 10, 1999 (see Press Release 99/42), for SDR 39.12 million (about US$49 million), of which SDR 16.77 million (about US$21 million) has been disbursed.
After the Executive Board's discussion on Burkina Faso, Stanley Fischer, First Deputy Deputy Managing Director and Acting Chairman, made the following statement:
"Despite a severe drought and other exogenous shocks, the authorities adjusted their policies sufficiently to keep the program on track in 2000, thereby extending their record of good performance under Fund arrangements. The containment of total expenditure in the face of revenue shortfall allowed the government to meet the basic fiscal deficit target, while preserving social outlays. Performance criteria were observed with the exception of that for end-December 2000 on net bank credit to the government, which was exceeded by a small margin because of a larger-than-programmed reduction in the stock of unpaid expenditure commitments. Directors approved the waiver of this criterion on the basis of the compensatory actions taken by the authorities to curtail nonpriority spending.
"The authorities are committed to the fiscal consolidation and structural reform process. To achieve the programmed revenue and overall deficit targets, they have implemented an automatic and transparent pricing mechanism for petroleum products to reflect international prices, undertaken a number of fiscal administration measures, and put in place a flexible fiscal framework. Fiscal developments in the first quarter of 2001 are in line with program projections. Continuing efforts into the medium term to limit low priority spending, broaden the tax base, and improve tax administration are critical if adequate resources are to be efficiently mobilized for urgent social purposes. A centralized database to track social outlays and outcomes is to be established.
"The expected recovery of GDP growth to above 6 percent in 2001 on the basis of a rebound in agricultural output and continuation of the structural reform program remains achievable. The policy stance remains guided by the PRSP objectives, with HIPC assistance being allocated to priority social programs. The challenge is to deepen the reforms so as to strengthen the conditions for sustainable and equitable growth, and durable poverty reduction. The structural reform agenda will focus on reforming the cotton sector; completing the privatization program; and improving public financial management, the judicial system, and governance in general.
"The Board looks forward to considering Burkina Faso's completion point under the enhanced HIPC Initiative later in the year, together with the first annual progress report on the implementation of their poverty reduction strategy," Mr. Fischer said.
1 On November 22, 1999, the IMF's concessional facility for low income countries, the Enhanced Structural Adjustment Facility (ESAF), was renamed Poverty Reduction and Growth Facility (PRGF), and its purposes were redefined. It is intended that PRGF-supported programs will in time be based on country-owned poverty reduction strategies adopted in a participatory process involving civil 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 for foster growth and reduce poverty. Burkina Faso completed its poverty Reduction Strategy Paper in the Spring of 2000. This resulted from a broad participatory process, which led to the elaboration of a comprehensive long-term strategy with a prioritized action plan for the period 2001-03. PRGF loans carry an annual interest of 0.5 percent, and are repayable over 10 years with a 5 ½ year grace period on principal payments.