Press Release: IMF Executive Board Completes Fourth Review Under PRGF Arrangement for Burkina Faso
June 22, 2009Press Release No. 09/227
June 22, 2009
The Executive Board of the International Monetary Fund (IMF) today completed the fourth review of Burkina Faso’s economic performance under a program supported by the Poverty Reduction and Growth Facility (PRGF), opening the way for the government to request a further disbursement amounting to SDR 1.004 million (about US$1.55 million) under the three-year arrangement. As a result, total disbursements to Burkina Faso will amount to SDR 13.042 million (about US$20.08 million).
Economic growth in Burkina Faso rose to an estimated 5 percent in 2008 thanks to a rebound in agricultural production. However, growth is expected to drop to 3.5 percent in 2009 due to the effects of the global financial crisis, including lower world cotton prices.
The country’s IMF-supported economic program for 2009 focuses on sustaining reform momentum, in particular to manage the continuing effects of the global crisis, advancing tax reform, broadening and strengthening the financial sector, and advancing other structural reforms, including to make the cotton sector more efficient and promoting private sector investment.
The PRGF arrangement for 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$13.90 million) increase in access was approved to help address the impact of higher oil prices and the adverse shock to the cotton sector, bringing the total value of the arrangement to SDR15.05 million (US$23.17 million) (see Press Release No. 08/04).
Following the Executive Board's discussion of Burkina Faso's performance under the PRGF-supported program, Murilo Portugal, Deputy Managing Director and Acting Chair, said: “In the context of the global economic downturn, the Burkinabè authorities have maintained a satisfactory macroeconomic policy performance. As a result, the program supported by the PRGF arrangement remains broadly on track. Inflation peaked at 15.1 percent in June 2008, but has fallen since then as a result of lower commodity prices and prudent macroeconomic policies. However, economic growth is expected to decline in 2009, mostly because of the global economic slowdown and lower cotton prices.
“The authorities are making welcome efforts to preserve hard-won economic gains in the face of a difficult external environment, while maintaining social stability. A modest increase in the fiscal deficit target is warranted given the expected decline in revenue and the need to preserve poverty-reducing expenditures. However, debt sustainability calls for caution, and fiscal consolidation remains a key priority for the medium term. Revenue mobilization efforts will need to be sustained over time, while spending should be reprioritized in order to protect poorer citizens.
“Broad-based tax policy reform will be key to achieving medium-term fiscal objectives, and the authorities’ commitment to revise the business tax, streamline the investment code, and strengthen the value added tax are welcome. Timely implementation of further reforms in customs administration will help the authorities achieve their ambitious revenue targets.
“Structural reforms will be required to reduce the vulnerability of the economy to external shocks and promote sustainable growth. In the financial sector, better surveillance, supervision, and risk management will be key to enhance financial stability, and the preparation of a comprehensive financial sector action plan is welcome in that regard. In the cotton sector, efforts will focus on enhancing the efficiency and transparency of the largest ginning company and increasing productivity of cotton production.”
The PRGF is the IMF's low-interest lending facility for low-income countries. PRGF-supported programs are underpinned by comprehensive country-owned poverty reduction strategies.