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Press Release No. 99/42
September 10, 1999
International Monetary Fund
700 19th Street, NW
Washington, D.C. 20431 USA

IMF Approves ESAF Loan for Burkina Faso

The International Monetary Fund (IMF) today approved a three-year loan for Burkina Faso under the Enhanced Structural Adjustment Facility (ESAF)1 in a total amount equivalent to SDR 39.12 million (about US$53.79 million) to support the government's 1999-2002 economic program. The first annual loan will be disbursed in two installments, the first of which, in an amount equivalent to SDR 5.59 million (about US$7.69 million), will be available shortly.

In commenting on the Executive Board's discussion of Burkina Faso, Mr. Shigemitsu Sugisaki, Deputy Managing Director of the IMF, made the following statement:

"Directors welcomed the progress made in reducing macroeconomic imbalances and implementing structural reforms under Burkina Faso’s previous ESAF-supported programs. They were encouraged by the economic and financial developments in 1998 and the favorable prospects for 1999 in terms of economic growth, continued low level of inflation and the further increase in the current primary budgetary surplus. They endorsed the focus of the new ESAF-supported program on completing the reform agenda, which should help reduce the economy’s vulnerability to external shocks and help to achieve the high economic growth necessary to reduce poverty and improve the key social indicators.

"In the fiscal area, Directors noted that a main policy objective is to widen the tax base, through improved taxation of the informal sector and a curtailment of exemptions, so as to offset the potential revenue shortfall arising from the implementation of the common external tariff of the West African Economic and Monetary Union. Expenditure policy is to remain prudent while providing additional room for higher expenditure on economic infrastructure and priority in social sectors including health and education. In this context, Directors welcomed the work underway to enhance the transparency and medium term focus of the budget through multi-year program budgets in key ministries. They also welcomed the government’s commitment to further strengthen its policy in the key social sectors and to allocate to these sectors the resources that will be freed as a result of the HIPC Initiative.

"Directors emphasized the need to carry out with determination the ongoing structural reforms. In particular, they urged the authorities to press ahead with diversification of the economy, privatization of the telecommunication and energy sectors, opening up of the cotton sector to private operators, further strengthening of the legal and judicial system, and improving the overall environment for private sector development. Directors attached importance to the recent progress made in attracting a growing domestic consensus in support of the economic reform strategy," Sugisaki said.

ANNEX

Program Summary

The Burkinabč economy has recorded a satisfactory performance in recent years, owing to the improved competitiveness following the 1994 CFA franc devaluation, and the determined implementation of financial and structural policies under programs supported by the successive ESAF arrangements. Significant progress was also made in tax reform, trade and payments liberalization, privatization, banking sector reform, and civil service reform.

The medium-term strategy of the program2 aims at ensuring the economy's high growth by improving its overall competitiveness, expanding the export base, and tackling the remaining reform agenda. The program projects a real GDP growth rate of 5.3% in 1999 and 5.7% in 2000, and an average annual rate of inflation of slightly less than 2% over the two years. It also targets a narrowing of the external current account deficit, excluding grants, to 12.8% of GDP in 2000.

Fiscal policy in 1999 and 2000 will aim at offsetting in part revenue losses caused by the introduction of the Common External Tariff (CET) and the fall of profitability in the cotton sector, by improving tax administration and widening the tax base. The main objective of monetary policy, which is conducted at the regional level in the framework of the West African Economic and Monetary Union (WAEMU), is to preserve the peg to the Euro and strengthen the foreign reserve position of the union.

The structural reform program's focus is on widening the program of public enterprise privatization to include utilities and hotels, enlarging the private sector's involvement in the cotton sector, and facilitating the role of the private sector, in particular strengthening the judiciary. The strengthening of the private sector requires, inter alia, further improvement in the legal and judicial system_including the creation of commercial courts, the training of judges, and the harmonization of national laws with the harmonization of business laws in Africa (OHADA laws).

Efforts at reforming the civil service will focus on introducing a merit-based promotion system and relying increasingly on contractual hires. The debt relief to be obtained under the HIPC3 will boost resources for the social sector. Improvements in key social indicators is a central objective of the medium-term program. In the 1999 budget, health and education spending amounted to 5% of GDP, including foreign-financed investment. In the health sector, the authorities consider as a main objective to ensure that the network of health centers is fully operative, adequately staffed, and supplied with key medicines. Regarding the education sector, the government intends to devote additional resources to school construction and adequate supply of teaching materials.

Burkina Faso joined the IMF on May 2, 1963, and its quota4 is SDR 60.20 million (about US$82.77 million). Its outstanding use of IMF financing currently totals SDR 84.74 million (about US$116.51 million).


Burkina Faso: Selected Economic and Financial Indicators, 1996-2002

1996

1997

1998

  1999

2000

2001

2002

Est.

Prog.

Est.

Est.

Prog.

           Prog.

(Annual percentage changes, unless otherwise specified)

GDP and prices

GDP at constant prices

6.0

4.8

6.2

6.2

5.7

5.3

5.7

6.5

6.6

GDP deflator

4.2

2.2

2.0

3.2

2.2

1.7

1.5

2.3

2.2

Consumer prices (annual average)

6.1

2.3

2.5

5.0

2.5

2.3

1.5

2.0

2.0

Consumer prices (end of period)

6.9

-0.1

2.5

1.0

2.5

2.3

1.5

2.0

2.0

Money and credit

Net domestic assets (banking system) 1/

8.5

21.4

5.1

7.4

4.5

7.4

3.4

...

...

Credit to the government 1/

3.8

8.4

-1.1

0.7

0.8

1.2

0.9

...

...

Credit to the private sector 1/

11.0

16.6

7.1

4.1

4.4

6.9

2.5

...

...

Broad money (M2)

8.2

14.2

10.4

1.7

9.2

3.9

6.1

...

...

Velocity (GDP/M2)

4.0

3.8

3.7

4.0

3.6

4.2

4.2

...

...

External sector

Exports (f.o.b.; valued in CFA francs)

0.7

12.3

31.4

34.6

15.7

-13.1

25.7

16.6

7.1

Imports (f.o.b.; valued in CFA francs)

18.9

3.4

10.2

19.4

9.1

1.0

7.6

8.2

6.1

Volume of exports

3.1

8.4

37.3

42.3

12.0

-8.2

6.0

15.0

4.6

Volume of imports

13.5

-1.4

16.6

29.0

8.1

-4.6

4.8

7.9

6.0

Terms of trade

-6.8

-0.6

1.9

2.2

2.4

-10.6

0.4

1.2

2.3

Real effective exchange rate (depreciation -)

3.0

-2.8

...

4.4

...

...

...

...

...

Gross investment

26.5

27.0

25.5

28.6

25.2

27.2

27.1

27.0

27.1

Government

12.2

14.1

12.5

13.8

12.3

13.2

13.3

13.4

12.8

Private sector

14.3

12.9

12.9

14.8

12.9

14.0

13.8

13.6

14.3

Gross domestic savings

8.8

10.5

11.2

12.4

11.6

10.1

11.8

12.9

13.5

Government savings

6.1

7.5

5.8

7.3

5.3

6.8

6.2

6.7

7.2

Private savings

2.7

3.1

5.4

5.1

6.3

3.3

5.6

6.2

6.3

Gross national savings

16.5

16.8

15.8

19.2

16.2

14.9

17.0

18.0

18.6

Central government finances

Revenue 2/

12.3

13.1

13.0

13.1

12.5

14.3

13.7

14.0

14.3

Domestic primary expenditure and net lending

10.7

11.9

12.2

12.6

12.0

14.1

13.9

13.3

13.4

Overall fiscal balance, excluding grants

-9.0

-10.2

-10.3

-9.8

-10.1

-10.0

-10.4

-9.9

-8.8

Overall fiscal balance, including grants 3/

-0.6

-3.2

-3.8

-2.9

-3.9

-4.6

-5.1

-4.8

-4.0

Primary balance (deficit -) 4/

1.7

1.1

0.8

0.5

0.5

0.2

-0.2

0.4

0.8

Current primary balance 4/

3.0

4.0

3.5

3.6

3.2

4.2

3.9

4.4

4.9

External sector

Exports of goods and nonfactor services

10.9

11.2

16.1

13.8

16.8

11.5

13.0

14.0

13.7

Imports of goods and nonfactor services

28.6

27.7

30.4

30.0

30.5

28.6

28.3

28.0

27.3

Current account balance (excluding current official transfers)

-14.7

-13.9

-10.9

-13.8

-10.2

-15.0

-12.8

-11.5

-10.8

Current account balance (including current official transfers) 3/

-9.9

-10.2

-9.7

-9.4

-9.1

-12.4

-10.1

-9.0

-8.5

Debt-service ratio 5/

21.7

24.2

12.6

16.9

11.9

20.5

17.2

16.2

16.2

Debt-service ratio 6/

19.1

20.8

15.5

17.8

16.0

16.5

16.3

16.1

15.5

Net official reserves (in months of imports)

10.7

10.6

9.8

8.7

9.7

8.5

8.3

8.2

8.3

Nominal stock of public debt,

Before HIPC Initiative relief (in billions of CFA francs)

674.3

764.1

813.7

794.9

861.5

944.5

1,017.3

1,072.3

1,118.4

Nominal stock of public debt

51.9

55.0

53.7

52.2

52.6

58.0

58.2

56.3

53.9

Net present value of public external debt-to-export ratio 7/

247.1

254.8

221.8

274.6

207.7

287.1

277.1

275.6

254.1

Nominal GDP (in billions of CFA francs)

1,298

1,390

1,515

1,522

1,637

1,629

1,748

1,904

2,073

Sources: Burkinabč authorities and IMF staff estimates and projections.

1/ In percent of beginning-of-period broad money.

2/ From 1999 on, revenue includes taxes paid by contractors on foreign-financed public investments using checks issued by the treasury, for an amount equivalent to about 1.5 percent of GDP.

3/ For the projection years 1999-2002, the grants expected to cover the financing gap are not included.

4/ Commitment basis, excluding grants and foreign-financed projects.

5/ In percent of exports of goods and nonfactor services.

6/ Ratio of public external debt service to government revenue, excluding grants.

7/ Ratio of debt to three-year average of exports of goods and services.




1 The 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% and are payable over 10 years with a 5 ˝-year grace period.
2 Details on the program will be available on the IMF's website: http://www.imf.org/external/np/loi/mempub.asp
3 The HIPC Initiative entails coordinated action by the international financial community, including multilateral institutions, to reduce to sustainable levels the external debt burden of heavily indebted poor countries that pursue IMF and World Bank-supported adjustment and reform programs, but for whom traditional debt relief mechanisms are insufficient.
4 A member's quota in the IMF determines, in particular, the amount of its subscription, its voting weight, its access to IMF financing, and share in the allocation of SDRs.

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