Public Information Notices
Burkina Faso and the IMF
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On April 9, 2002, the International Monetary Fund (IMF) Executive Board concluded the 2002 Article IV consultation with Burkina Faso.1
Since 1991, Burkina Faso has been implementing reforms supported by the Fund through successive Enhanced Structural Adjustment Facility and Poverty Reduction Growth Facility (PRGF) arrangements.2 The current PRGF arrangement was approved in September 1999 in support of a program covering the period 1999-2002. In July 2000, the IMF and World Bank Boards agreed that Burkina Faso had fulfilled the conditions for reaching the completion point under the original Heavily Indebted Poor Countries Initiative (HIPC) and the decision point under the enhanced HIPC Initiative. In November 2001, the Executive Boards considered the first annual progress report of the poverty reduction strategy paper and agreed that the country's effort to implement the strategy provided sufficient evidence of its continuing commitment to poverty reduction.
After a lower growth in 2000 due to exogenous shocks, real GDP growth is estimated to have rebounded to 5.7 percent in 2001 essentially because of good cotton production, which reached a record level of 400,000 tons. Average consumer price inflation accelerated to 4.9 percent driven by price pressures resulting from the poor cereal crops of the previous campaign. The real effective exchange rate appreciated somewhat as a result of higher inflation and the slight decline of the U.S. dollar against the euro, to which the CFA franc is pegged.
In 2001, fiscal revenue reached only 12.5 percent of GDP compared to a target of 14 percent, mainly because of the slower than expected pick up in growth, but also of poor performance of the fiscal administration. Wage outlays remained on target and the Burkinabé authorities took specific measures to tighten both current and capital expenditures. At end-December 2001, the overall fiscal deficit (on a commitment basis and including grants) reached 4.8 percent of GDP compared to a program target of 5.1 percent.
Monetary policy, conducted at the regional level by the Central Bank for West African States, remained prudent. Credit to the economy rose in 2001 by 14 percent while broad money grew by about 5 percent.
The external current account deficit (excluding grants) declined from 17.6 percent of GDP in 2000 to 15.9 percent in 2001. The terms of a trade improved by about 4 percent on account of the decline in petroleum prices and a higher volume of cotton and live animal exports.
Executive Board Assessment
Executive Directors commended the authorities for their continued sound economic policies, and noted, in particular, the prudent management of the cotton sector in the face of low international prices, with the bumper cotton crop contributing to poverty reduction and a rebound in the rate of economic growth. Directors stressed that further efforts to liberalize the cotton sector, lower the cost of energy, promote good governance and judiciary reform, and develop human capital will be essential to maintain steady and rapid growth, strengthen the external position, and achieve durable poverty reduction. It will be important that these efforts are supported by good coordination of donor assistance.
Directors commended the tightening of nonpriority outlays in response to the lower level of fiscal revenue, and the containment of wage outlays within program indicators, while increasing social expenditure. They stressed, however, that a sustained increase in tax revenue will be essential to free resources for investment and the social sectors. Directors strongly encouraged the authorities to persevere in their efforts to broaden the tax base and to strengthen tax and customs administration and public finance management. The authorities' commitment to catch up on the spending on priority social programs of resources freed up by the HIPC Initiative is welcome, and will need to be supported by continued efforts to further improve public expenditure management.
Directors noted that the regional monetary policy of the BCEAO continues to serve Burkina Faso well, but needs to be buttressed by firm adherence to the fiscal targets. They welcomed the actions by the regional banking commission to improve the health of the banking sector, as well as the authorities' efforts to promote the micro finance sector. In this regard, Directors underscored the need for further progress in strengthening financial supervision and regulatory enforcement. They commended the authorities for being among the first countries to have replied to the anti-money laundering/combat of terrorism questionnaire and for spearheading efforts in this regard.
Directors welcomed the authorities' continued commitment to structural reform, including further efforts to realize efficiency gains in the cotton sector, improved public financial management, greater regional integration, improved governance, advances in the privatization program, and the deregulation of public utilities. They encouraged the authorities to proceed forcefully in continuing to implement their structural reform agenda, which will be key to achieve sustained economic development and diversification.
Directors encouraged the authorities to continue improving the quality, timeliness, and frequency of reporting of key data, notably on national accounts and the balance of payments, while noting the need for appropriate technical assistance in this regard. They welcomed the fact that Burkina Faso has begun publishing its General Data Dissemination System metadata on the Fund's website.
1 Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board. At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. This PIN summarizes the views of the Executive Board as expressed during the April 9, 2002 Executive Board discussion based on the staff report.
2 On November 22, 1999, the IMF's concessional facility for low-income countries, the Enhanced Structural Adjustment Facility, was renamed the Poverty Reduction and Growth Facility, 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 society and development partners, and articulated in a poverty reduction strategy paper. 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 interest rate of 0.5 percent a year, and are repayable over 10 years with a 5½-year grace period on principal payments.
IMF EXTERNAL RELATIONS DEPARTMENT