Press Release: IMF Completes First Review Under Burkina Faso's PRGF Arrangement and Approves US$5.1 Million Disbursement
March 19, 2004
The Executive Board of the International Monetary Fund (IMF) today completed the first review of Burkina Faso's economic performance under a SDR 24.08 million (about US$35.5 million) Poverty Reduction and Growth Facility (PRGF) arrangement (see Press Release No. 03/82). The completion of the review enables the release of a further SDR 3.44 million (about US$5.1 million), which will bring the total amount drawn under the arrangement to SDR 6.88 million (about US$10.2 million).
In completing the review, the Board waived the nonobservance of the performance criterion pertaining to the effective computerization of the large and medium-sized taxpayers' units in two main cities, Ouagadougou and Bobo-Dioulasso. The Board also concluded that the third progress report submitted by Burkina Faso on its Poverty Reduction Strategy Paper (PRSP) provided a sound basis for IMF concessional assistance.
The PRGF is the IMF's concessional facility for low-income countries. PRGF-supported programs are based on country-owned poverty reduction strategies adopted in a participatory process involving civil society and development partners and articulated in a PRSP. This is intended to ensure that PRGF-supported programs are consistent with a comprehensive framework 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.
"The performance of the Burkinabè economy under the PRGF-supported program has been satisfactory to date. The Burkinabè authorities implemented prudent macroeconomic policies and strengthened fiscal transparency and accountability in 2003. This, along with abundant rainfall and a higher producer price for cotton that boosted agricultural production, resulted in robust economic growth, subdued inflation, and continued narrowing of the current account deficit in 2003. Nevertheless, the Burkinabè economy remains fragile and vulnerable, owing to the country's heavy reliance on cotton exports and external assistance, the high public external debt burden, and the continued difficulties in Cote d'Ivoire.
"The authorities' economic program for 2004 remains guided by the objectives set out in the Poverty Reduction Strategy Paper (PRSP). Successful implementation of the program will depend critically on further fiscal consolidation. The main fiscal challenges will be to increase tax revenue, contain domestically-financed expenditure while re-orienting resources to priority areas, and fully utilize HIPC Initiative-related resources to finance priority social spending. In this regard, the authorities are implementing a comprehensive action plan to improve tax and customs revenue collection, and are taking steps to control the wage bill and non-priority spending and to increase absorptive capacity in the social sectors.
"In the context of the 2004 program, the authorities aim to continue to make progress in enhancing transparency, accountability, and governance; liberalizing prices and trade; privatizing and restructuring public enterprises; and opening up the cotton sector to private firms. These reforms will be important to enhance Burkina Faso's external competitiveness and spur private sector growth.
"The broad participatory approach to preparing the PRSP progress report has been helpful in building national consensus on the poverty reduction strategy. The PRSP is being updated for the period 2004-06, and for this purpose it would be useful to carry out a poverty assessment and develop adequate social and poverty indicators," Mr. Carstens said.