Statement by the IMF Staff Mission to Burkina FasoPress Release No. 06/122
June 8, 2006
Mr. Scott Rogers, the International Monetary Fund's Mission Chief to Burkina Faso, made the following statement in Ouagadougou:
"An IMF mission team visited Ouagadougou during May 23-June 6 for discussions on the sixth and final review of the government's program supported under the Poverty Reduction and Growth Facility (PRGF).1 The mission held discussions with Prime Minister Ernest Paramanga Yonli; Minister of Finance and Budget Jean-Baptiste Compaoré; Central Bank of West Africa States (BCEAO) National Director Bolo Sanou, other senior officials of the Government of Burkina Faso, private sector representatives and development partners.
"Burkina Faso faced substantial economic challenges in 2005 resulting from a sharp decline in world cotton prices and a surge in world oil prices. Nevertheless, strong agricultural growth offset a slowdown in other sectors, pushing real GDP growth to an estimated 7.1 percent in 2005, and inflationary pressures eased late in the year as food prices fell. The projection for real GDP growth in 2006 has been revised upwards to 5.6 percent to reflect early signs of a good cereal harvest, and inflation is expected to average 3 percent for the year as a whole.
"The mission worked with the Burkinabé authorities to assess performance under the PRGF program. On the basis of preliminary data, all quantitative performance criteria for end-March 2006 were met, which include targets for domestic borrowing, non-accumulation of arrears, and contracting of non-concessional debt. A continued high implementation rate of the public investment program, financed by project grants, and higher spending on priority social programs resulted in a moderately higher fiscal deficit than projected. Progress regarding structural reforms was mixed. The Joint Brigade of the Tax and Customs Directorates was established before the end-December 2005 target date, but submitting the report on audits to the Minister of Finance was delayed. In addition, the report on the taxpayer census, which was to have been finished by mid-May, is still to be completed.
"Regarding the remainder of the year, the mission discussed with the government how to respond to some additional expenditure pressures. These include the need for additional budget subsidy to SONABEL, public service advancements for the period 2003-05, higher utility bills, VAT refunds, food security, and the fonds de lissage for the cotton sector. Some of these expenditures are in the area of priority social sectors, and could be financed by additional donor resources, as well as those provided by the IMF, the World Bank, and the African Development Bank under the Multilateral Debt Relief Initiative, which aims to contribute to achievement of the Millennium Development Goals. Other expenditures would need to be financed by reallocating amounts in the 2006 budget. Broad understandings were reached on key structural reforms, including in the areas of tax and customs administration. The mission was encouraged by the progress that has been made in setting up the new fonds de lissage that will help manage the risks associated with volatile world cotton prices and promote a more flexible response to changing world market conditions. It was agreed that any resources provided to the fund by the government (which also includes donor contributions) would be made in the form of an interest-free loan to be repaid after the balance in the fonds de lissage reaches a sufficiently high level.
"The discussions on the sixth review under the PRGF arrangement will continue in the period ahead and their successful conclusion would open the way for consideration of the review by the IMF Executive Board."
1 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 the country's Poverty Reduction Strategy Paper. This is intended to ensure that PRGF-supported programs are consistent with a comprehensive framework for macroeconomic, structural, and social policies 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 5½-year grace period on principal payments.