IMF Executive Board Completes Second Review Under PRGF Arrangement with Burkina Faso and Approves US$6.5 Million Disbursement
July 1, 2008Press Release No. 08/157
The Executive Board of the International Monetary Fund (IMF) has completed the second review of Burkina Faso's economic performance under the three-year, SDR 15.05 million (about US$24.5 million) Poverty Reduction and Growth Facility (PRGF) arrangement. The completion of the second review enables the release of an amount equivalent to SDR 4.014 million (about US$6.5 million) bringing total disbursements under the arrangement to SDR 8.02 million (about US$13 million).
In completing the review, the Board granted a waiver for the non-observance of a performance criterion related to delays in sending automatic reminders to late filers and nonfilers of tax returns, given that the substance of the measure has been achieved, and other corrective steps are being taken.
The PRGF arrangement with Burkina Faso was approved on April 23, 2007 (see Press Release No. 07/77) to support the government's economic reform program for 2007-10. On January 9, 2008, an SDR 9.03 million (about US$14.7 million) increase in access was approved to help address the impact of higher oil prices and the adverse shock to the cotton sector (see Press Release No. 08/04).
Following the Executive Board's discussion, Mr. Takatoshi Kato, Deputy Managing Director and Acting Chair, stated:
"In a difficult macroeconomic environment, the Burkinabè authorities' generally solid macroeconomic policy performance has been commendable. With oil and food price prices rising, the authorities' commitment to striking an appropriate balance in maintaining economic and social stability is welcome.
"Fiscal policy that is in line with the targets set under the authorities' program has helped preserve macroeconomic stability. Over time, it will be important to develop a well-targeted social safety net to phase out short-term measures introduced in response to quickly rising food prices. Improving debt sustainability will depend on a continued reduction of fiscal deficits over the medium term.
"Consolidating progress in tax and customs administration and implementing a broad-based tax policy reform will be key to achieving the authorities' medium-term revenue targets. Mobilizing more revenue will help reduce fiscal deficits and preserve space for poverty-reducing expenditures. To minimize budgetary risks, it will be important to gradually close the gap between petroleum pump prices and prices mandated by the price adjustment mechanism.
"A number of planned structural reforms will help to set Burkina Faso's economy on a sustainable high growth path. In the cotton sector, priorities include following-through on plans to find a strategic partner for the largest ginning company and improving productivity of cotton production. In the financial sector, better managing financial risks related to cotton financing, facilitating access to finance, and strengthening microfinance supervision will be key," Mr. Kato said.
The PRGF is the IMF's concessional facility for low-income countries. 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.