IMF Executive Board Concludes 2007 Article IV Consultation with Burkina Faso

Public Information Notice (PIN) No. 08/02
January 15, 2008

Public Information Notices (PINs) form part of the IMF's efforts to promote transparency of the IMF's views and analysis of economic developments and policies. With the consent of the country (or countries) concerned, PINs are issued after Executive Board discussions of Article IV consultations with member countries, of its surveillance of developments at the regional level, of post-program monitoring, and of ex post assessments of member countries with longer-term program engagements. PINs are also issued after Executive Board discussions of general policy matters, unless otherwise decided by the Executive Board in a particular case.

On January 9, 2008, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Burkina Faso.1


Burkina Faso has made considerable progress towards macroeconomic stability over the past decade. Real GDP growth over the past 10 years was strong, averaging 6 percent annually, and inflation has been contained. Growth was broad-based, supported recently in particular by the telecommunications and transportation sectors. Structural reforms and stability oriented macroeconomic policies have strengthened the market orientation of the economy and improved its flexibility. The gains from macroeconomic reforms have resulted in improvements in social indicators, with household survey poverty incidence decreasing from 54.6 in 2000 to 46.4 percent in 2005. Nevertheless, Burkina Faso continues to rank among the poorest countries in the world, and reaching the Millennium Development Goals might be challenging.

Burkina Faso's macroeconomic performance in 2006 was better than projected during the last Article IV consultation despite a difficult external environment. Real GDP growth was around 5.5 percent and inflation fell below the West African Economic and Monetary Union (WAEMU) convergence criterion of 3 percent because of lower food prices. The current account improved as official current transfers exceeded expectations. Exports grew strongly partly because the fall in world cotton prices was not fully passed on to farmers. Fiscal policy loosened as planned, with the fiscal deficit (excluding grants) rising.

The overall positive macroeconomic performance reflects sound policy implementation, but also delayed adjustment to world cotton prices and additional debt relief. The limited pass through of world cotton prices shielded producers from the decline in world prices, keeping production—as well as exports and real GDP growth—high. The result was large financial losses at ginning companies; and the largest, partially state-owned company, SOFITEX, had to be recapitalized at great cost to the budget. The authorities' policy to pass-through higher energy prices through automatic fuel price adjustments and a tariff increase for electricity were critical for adjusting to the oil price shock. Debt sustainability benefited from debt relief under the Multilateral Debt Relief Initiative (MDRI), which eased a key constraint on fiscal policy. The revenue effort remained low, including in comparison to other WAEMU countries. With lower-than-projected revenues, the authorities also had to cut back expenditure increases.

Burkina Faso's medium-term outlook was impacted by an external shock relating to the balance of payments implications of weather-related declines in cotton exports and increased oil prices. This is expected to reduce growth, and has negatively affected the debt sustainability outlook. Real GDP growth is expected to decline to roughly 4.5 percent for 2007 though an expected increase in gold production could partly offset these effects. The current account deficit, excluding official transfers, will likely widen in 2007 and 2008. However, higher grant inflows, including disbursements from the Millennium Challenge Corporation (MCC), should help rein in the current account deficit, including transfers. The continued appreciation of the euro will make it harder for Burkina Faso to grow its exports base.

Ongoing structural reforms include steps to improve revenue performance. Domestic revenues are still low by regional standards, and measures focus on improving tax compliance and broadening the tax base. Reforms to improve tax administration include the computerization of the large taxpayer office, the removal of exemptions, and the streamlining of the tax code. The strengthening of public financial management is another focus of the authorities' reform program. In other areas, structural reforms are aimed at reducing constraints to the business environment, reduce corruption and improve international competitiveness. The authorities are also working with stakeholders on cotton sector reform.

Executive Board Assessment

Executive Directors commended the Burkinabè authorities for implementing strong policies in 2006 and 2007, in the context of a difficult macroeconomic environment. These policies have contributed to robust economic growth and low inflation.

Directors noted that the fall in international cotton prices, the appreciation of the euro, and rising oil prices pose challenges for sustaining growth and macroeconomic stability going forward. They welcomed the adjustment measures taken by the authorities in response to these challenges, and underscored the importance of maintaining a sound fiscal policy and pressing ahead with structural reforms to improve competitiveness, diversify the economy, and attract private investment. A prudent policy framework is especially important to improve external competitiveness.

Directors encouraged the authorities to reduce the fiscal deficit by increasing the revenue-to-GDP ratio over the medium term. This will be necessary to raise priority spending while reducing the current account deficit and maintaining fiscal and external debt sustainability. In this connection, timely implementation of revenue administration and comprehensive tax policy measures will be crucial. Directors therefore welcomed the focus on revenue-raising reforms in 2008 and encouraged early adoption of the planned tax policy reform. Directors also recommended against contracting new non-concessional borrowing, and stressed that the authorities should seek new assistance in the form of grants wherever possible.

Directors commended the authorities' efforts to strengthen public financial management and governance by improving budget preparation and execution, tightening expenditure controls, and tracking foreign-financed and poverty-reducing expenditure more closely. They welcomed in particular the steps taken to strengthen the government's audit capacity. Directors encouraged the authorities to further enhance transparency and expenditure prioritization, and welcomed their decision to join the Extractive Industries Transparency Initiative.

Directors commended the adoption of the new cotton producer price mechanism, which is a major step toward putting cotton ginning companies on a sustainable footing. They encouraged the authorities to liberalize the cotton sector and reduce the government's role, and to re-activate the automatic mechanism for adjusting domestic petroleum prices. Directors commended the substantial progress achieved in improving the business climate, and encouraged continued attention to improving governance, reducing rigidities in the labor market, and strengthening public institutions and infrastructure. Directors noted that, while the banking system appears to be stable, increasing vulnerabilities point to the need to strengthen the system further. The upcoming Financial Sector Assessment Program would be a good opportunity to help formulate the necessary reform measures.

Burkina Faso: Selected Economic Indicators, 2004-08


2004 2005 2006 2007 2008
      Est. Proj. Proj.


(Annual percentage change; unless otherwise specified)

GDP and prices






GDP at constant prices

4.6 7.1 5.5 4.2 4.5

Consumer prices (annual average)

-0.4 6.4 2.4 -0.7 2.0

Money and credit






Credit to the private sector 1

6.1 14.9 11.2 9.6 7.4

Broad money (M2)

-7.2 -3.8 10.2 15.8 6.2

External sector






Terms of trade

11.0 -23.9 3.7 -2.9 -6.1

Real effective exchange rate (- = depreciation)

-0.5 2.9 0.2 ... ...


(Percent of GDP; unless otherwise indicated)

Central government finances


Domestic revenue

12.8 12.3 12.3 13.3 13.6

Total expenditure (commitment basis)

21.4 21.7 22.9 26.7 26.2

Overall fiscal balance, excl. grants (commitments)

-8.6 -9.4 -10.7 -13.4 -12.7

Overall fiscal balance, incl. grants (commitments) 2

-4.3 -4.9 -5.1 -6.2 -5.4

External sector and debt indicators


Exports of goods and services

10.7 10.0 11.7 10.7 10.3

Imports of goods and services

24.3 24.6 24.6 25.4 26.6

Current account balance (excl. official transfers)

-13.4 -14.6 -12.5 -14.1 -16.0

Current account balance (incl. official transfers)

-10.4 -11.4 -9.6 -10.1 -12.2

External debt

41.2 37.6 19.9 20.9 23.6

NPV of external debt

18.1 19.0 10.6 11.5 13.1

NPV of external debt as percent of exports

164.4 185.4 88.1 104.7 124.2

NPV of external debt as percent of revenues

141.6 154.2 86.1 86.5 96.6

Sources: Burkinabè authorities; and IMF staff estimates and projections.

1 Percent of beginning-of-period broad money.

2 Excluding MDRI grants.

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.


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