News Brief: IMF Completes Review Under Burkina Faso's PRGF Arrangement and Approves US$7 Million Disbursement
November 13, 2002
The Executive Board of the International Monetary Fund (IMF) today completed the sixth review of Burkina Faso's economic performance under the Poverty Reduction and Growth Facility (PRGF) arrangement. As a result, Burkina Faso will be able to draw up to SDR 5.58 million (about US$7 million) under the arrangement immediately.
The Executive Board also waived Burkina Faso's non-observance of the end-June 2002 performance criteria on the cumulative change in total net domestic budget financing and on the elimination of the 59 administratively set customs valuations existing as of May 28, 2001.
Burkina Faso's program was originally supported by a three-year arrangement under the Enhanced Structural Adjustment Facility (ESAF) approved on September 10, 1999 (see Press Release 99/42), for SDR 39.12 million (about US$52 million). So far, Burkina Faso has drawn SDR 33.54 million (about US$45 million).
The PRGF is the IMF's concessional facility for low income countries. It is intended that PRGF-supported programs are 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. PRGF loans carry an annual interest rate of 0.5 percent, and are repayable over 10 years with a 5 ½-year grace period on principal payments.
After the Executive Board's discussion on Burkina Faso, Shigemitsu Sugisaki, Deputy Managing Director and Acting chairman, stated:
"Implementation of Burkina Faso's PRGF-supported program remains satisfactory in 2002. Macroeconomic policies and structural reforms have been supportive of economic growth and stability. Prudent management of the cotton sector and efforts to lower energy costs, promote good governance and judiciary reform, strengthen financial intermediation, improve budget management, and develop human capital bode well for sustaining strong economic growth in 2002 and the medium term. However, the recent crisis in Côte d'Ivoire, if not resolved soon, could have some adverse impact.
"Continued fiscal consolidation will be central to sustaining macroeconomic stability and economic growth. Therefore, authorities are encouraged to sustain their efforts to broaden the tax base and improve tax administration, which contributed to an increase in tax revenue in the first half of 2002. To offset expenditure overruns in the first half of 2002, non-essential spending needs to be contained in the second half of the year. Consideration could perhaps be given to reducing subsidies on petroleum for electricity generation. Revenue increases, together with expenditure restraint, will ensure that the necessary budgetary savings are generated to finance infrastructure investment and poverty reduction programs.
"The authorities have been steadfastly pursuing the objectives embedded in the poverty reduction strategy paper, and have prepared a second annual progress report on PRSP implementation. After a slow start in 2000 and 2001, utilization of HIPC Initiative resources accelerated significantly in the first half of 2002. Nevertheless, a stronger effort needs to be made to increase the effectiveness of spending in the health and education sectors, address remaining institutional weaknesses and infrastructure bottlenecks that limit absorptive capacity, strengthen the linkages between the PRSP and the budget process, broaden the PRSP participatory process, and improve the tracking of social outcomes.
"There has been a delay in agreeing on the precise modalities for creditor participation in the topping-up assistance granted to Burkina Faso under the HIPC Initiative, and the process needs to be accelerated. Other multilateral and non-Paris Club creditors are urged to participate fully in the HIPC Initiative for Burkina Faso.
"The authorities intend to embark on a successor economic program that the Fund could support to consolidate the achievements of the current program in the present uncertain external environment. The new program should focus on accelerating economic growth and diversification, and strengthening the fiscal framework," Mr. Sugisaki stated.