Press Release: IMF Approves Second Annual Arrangement Under the ESAF Loan for Burkina Faso
September 9, 1997
The International Monetary Fund (IMF) approved the second annual arrangement for Burkina Faso under the Enhanced Structural Adjustment Facility (ESAF),1 in an amount equivalent to SDR 13.26 million (about US$18 million), to support the government’s economic program covering July 1, 1997 to June 30, 1998. The loan is available in two equal semiannual installments, the first of which can be drawn on September 15, 1997.
Under the 1996 program, Burkina Faso made important progress in strengthening its public finances and widening the revenue base, while containing and improving the composition of expenditure. Progress was also made in strengthening the banking system through privatizations and liquidations, and in resuming the pace of public enterprise privatization, which has slowed in recent years. Budgetary expenditure controls were improved, and the monitoring of tax exemptions intensified. Substantial real GDP growth was achieved, and inflation fell sharply after a spur in mid-1996.
The 1997-98 Program
The economic program for 1997-98 focuses on achieving a further increase in the budgetary revenue to GDP ratio and an acceleration of structural reforms. The key macroeconomic goals are to achieve a real GDP growth rate above 6 percent, contain the rate of inflation at 3 percent and reduce the external current account deficit to 10.5 percent of GDP. To achieve these objectives, fiscal policy will aim at increasing the primary budgetary surplus to 1.9 percent of GDP in 1997 from 1.7 percent in 1996 through a rise in the revenue-to-GDP ratio to 12.9 percent of GDP in 1997 from 12.3 percent in 1996, reflecting the full year impact of the rise in the value added tax rate to 18 percent from 15 percent implemented in September 1996, and a further increase of customs revenues on account of further reductions in exonerations from taxes. The monitoring of budgetary expenditures will be improved further, owing to the computerization of the budgetary cycle. Monetary policy will seek to contain bank credit expansion, in line with the inflation objectives of the program.
In the structural reform area, the government has taken a number of steps to speed up the execution of the privatization program and will also develop a strategy to open public utilities toprivate participation. In the agricultural sector, the government will deregulate the rice and sugar sectors, eliminate nontariff barriers to trade, and restructure the cotton sector by reinforcing the role of farmers’ cooperatives. As part of the effort to facilitate private sector activities, the government will also improve the functioning of the judicial system by recruiting new magistrates and computerizing courts and tribunals.
Addressing Social Needs
The government has defined precise quantitative objectives in the education and health sectors aimed at correcting the major weaknesses of the past. The enrollment rate in primary schools and the enrollment rate for girls will be increased gradually over time, as well as the number of health centers.
The Challenge Ahead
There are serious weaknesses in the present social indicators, indicating that substantial improvements have to be achieved over the next decade. This will require that not only more resources be allocated to health and education, but also that improvements be introduced in the provision of services to ensure that resources are used more effectively.
Burkina Faso joined the IMF on May 2, 1963, and its quota2 is SDR 44.2 million (about US$60 million). Its outstanding use of IMF financing currently totals SDR 63 million (about US$85 million).
1The ESAF is a concessional IMF facility for assisting eligible members that are undertaking economic reform programs to strengthen their balance of payments and improve their growth prospects. ESAF loans carry an interest rate of 0.5 percent a year and are repayable over 10 years, with a 5½-year grace period.