News Brief: IMF Completes Review Under Burkina Faso's PRGF Arrangement and Approves US$7 Million Disbursement
April 9, 2002
The Executive Board of the International Monetary Fund (IMF) today discussed Burkina Faso's performance and completed the fifth review under the Poverty Reduction and Growth Facility (PRGF) arrangement. As a result, Burkina Faso will be able to draw up to SDR 5.59 million (about US$7 million) under the arrangement immediately.
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 No. 99/42), for SDR 39.12 million (about US$49 million). So far, Burkina Faso has drawn SDR 27.95 million (about US$35 million).
The PRGF is the IMF's concessional facility for low income countries. 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 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, Horst Köhler, Managing Director, and Chairman, stated:
"Macroeconomic policies and structural reforms in Burkina Faso have remained appropriate during the past year. The prudent management of the cotton sector in the face of low international cotton prices, together with good cotton and cereal crops late in the year, have contributed to a pick-up in real GDP growth and a reduction in rural poverty. Continuation of these sound economic policies, along with further efforts to liberalize the cotton sector, lower the cost of energy, promote good governance and judiciary reform, strengthen financial intermediation, improve public finance management and develop human capital, will position Burkina Faso well to achieve sustained growth rates (of about 5½ percent per annum) and durable poverty reduction over the medium term.
"All of the end-2001 quantitative criteria, benchmarks and indicators under the authorities' PRGF-supported program were met, except for the indicator on government revenue. The containment of expenditure, in the face of a poor performance in tax collection, while preserving social outlays, is welcome. Looking ahead, a sustained effort to improve revenue performance will, however, be needed to free up resources for investment in the social sectors.
"The primary fiscal objective for 2002 therefore appropriately aims at a significant effort to increase tax revenue, while strictly limiting nonessential outlays to consolidate the fiscal position. The authorities are also firmly committed to catch up on the spending on poverty reduction programs of resources freed by the HIPC Initiative. It will be important that these efforts are supported by good coordination of donor assistance.
"The authorities' structural reform agenda aims at strengthening the conditions for sustainable and equitable growth and durable poverty reduction. It will focus on further reform of the cotton sector; improvement of public finance management; progress in the privatization program; and promoting good governance.
"Burkina Faso's performance toward reaching the completion point under the enhanced HIPC Initiative has been satisfactory, with commendable progress in poverty reduction and the maintenance of a stable macroeconomic position.
"A new debt sustainability analysis based on end-2001 data shows that Burkina Faso's prospects for achieving debt sustainability have been adversely affected due to a fundamental deterioration in its external environment, and despite proper macroeconomic and structural policies. The Fund considers that Burkina Faso will need additional assistance to that committed at the decision point in order to achieve debt sustainability. A decision on Burkina Faso's debt relief under the enhanced HIPC Initiative is pending action by the World Bank's Executive Board later this week. A press release will be issued jointly with the World Bank following those deliberations," Mr. Köhler said.