## BURKINA FASO — THIRD REVIEW UNDER THE EXTENDED CREDIT FACILITY ARRANGEMENT — EXECUTIVE SUMMARY ## Source details **Canonical URL:** [BURKINA FASO — THIRD REVIEW UNDER THE EXTENDED CREDIT FACILITY ARRANGEMENT — EXECUTIVE SUMMARY](https://www.imf.org/-/media/files/publications/cr/2019/1bfaea2019004.pdf) ## Other formats - [Markdown version](/-/media/files/publications/cr/2019/1bfaea2019004.pdf.md) - [Structured JSON version](/-/media/files/publications/cr/2019/1bfaea2019004.pdf.json) --- ### Context and security situation - Security situation described as "highly challenging." - State of emergency extended in several administrative regions for an additional six months. - Internally displaced people (IDPs) increased by 267,000 in the three months to October to reach 486,000. - As chair of the G5 Sahel, President Roch Kaboré presented plans for a new Partnership for Security and Stability for the Sahel at the G7 summit in August 2019 to identify resource needs and improve security coordination across G5 Sahel countries. - Presidential and parliamentary elections scheduled for November 2020. - Security shock requires: permanent increase in security capability and additional social spending to meet needs of rising IDPs. ### Recent economic developments and macro performance - Growth - Growth was 6.4 percent y/y in the first half of 2019. - Growth expected to stabilize at 6 percent in 2019 and over the medium term. - Inflation - Annual inflation remained negative since beginning of 2019 due to exceptionally good harvests and falling telecommunications prices. - Projected to be -3.5 percent y/y at end-2019. - Projected to rise to around 2 percent in the medium term (below WAEMU criterion of 3 percent). - Fiscal outturn H1 2019 - Overall fiscal deficit reached 0.9 percent of GDP (program projection for H1: 1.2 percent of GDP). - Total revenue exceeded the program floor by 1.6 percent of GDP, helped by windfall nontax revenue of 1.4 percent of GDP from the sale of 4G telecommunication licenses. - Execution of current transfers exceeded 50 percent of the budget annual target; lower-than-projected spending on goods and services offset this. - Banking and credit - Credit to private sector (excluding public companies) growth: 2.4 percent y/y in February 2019 (8-year low) accelerating to 8.4 percent in August 2019. - Capital adequacy ratio as of end-December 2018: (12.0) exceeding regulatory minimum (8.6). - NPL ratio fell to 7.4 percent from 8.8 percent a year earlier. - External sector - Current account deficit: 4.7 percent of GDP in 2018 (down from 5.7 percent in 2017). - First half of 2019 saw marked decline in exports due to poor cotton season, disappointing gold production, and sharp drops in prices of exported agricultural raw materials and livestock. - Current account expected to widen to 5.2 percent of GDP in 2019 and narrow to 4.0 percent of GDP in 2020. ### Fiscal outlook, policy settings, and public finances - Fiscal anchor - Fiscal stance expected to remain anchored by WAEMU convergence criterion for fiscal deficit of 3 percent of GDP in 2019 and 2020. - 2020 budget headline (commitment) - Fiscal deficit target: -3.0 percent of GDP in 2020. - Tax revenue projected higher by 0.5 percent of GDP relative to 2019. - Non-tax revenue projected lower by 1.0 percent of GDP (lower windfall revenue). - Grants higher by 0.4 percent of GDP (new project grants). - Investment spending higher by 0.9 percent of GDP. - Current expenditure lower by 0.8 percent of GDP (lower subsidies and containment of wage bill). - Overall security spending (current and investment) expected to increase to 4.0 percent of GDP in 2020. - Selected consolidated operations of central government (Percent of GDP) - Total revenue and grants: 2018 = 22.2; Prel.2019 = 22.8; 1st Rev.2019 = 24.4; 2nd Rev.2019 = 24.2; 2019 Budget = 23.1; 2020Proj = 24.2 - Total revenue: 2018 = 19.5; Prel.2019 = 19.9; 1st Rev.2019 = 21.3; 2nd Rev.2019 = 21.1; 2019 Budget = 20.4; 2020Proj = 20.6 - Tax: 2018 = 17.3; Prel.2019 = 17.8; 1st Rev.2019 = 17.8; 2nd Rev.2019 = 17.5; 2019 Budget = 18.3; 2020Proj = 18.0 - Nontax: 2018 = 2.2; Prel.2019 = 2.2; 1st Rev.2019 = 3.5; 2nd Rev.2019 = 3.6; 2019 Budget = 2.1; 2020Proj = 2.6 - Grants: 2018 = 2.7; Prel.2019 = 2.8; 1st Rev.2019 = 3.0; 2nd Rev.2019 = 3.2; 2019 Budget = 2.7; 2020Proj = 3.6 - Total expenditure: 2018 = 27.1; Prel.2019 = 25.8; 1st Rev.2019 = 27.4; 2nd Rev.2019 = 27.3; 2019 Budget = 26.1; 2020Proj = 27.3 - Current spending: 2018 = 17.6; Prel.2019 = 18.8; 1st Rev.2019 = 18.9; 2nd Rev.2019 = 19.2; 2019 Budget = 18.0; 2020Proj = 17.6 - Wages and salaries: 2018 = 9.0; Prel.2019 = 9.8; 1st Rev.2019 = 9.9; 2nd Rev.2019 = 10.0; 2019 Budget = 9.6; 2020Proj = 9.6 - Goods and services: 2018 = 2.5; Prel.2019 = 1.8; 1st Rev.2019 = 2.3; 2nd Rev.2019 = 2.2; 2019 Budget = 2.1; 2020Proj = 2.2 - Interest payments: 2018 = 1.2; Prel.2019 = 1.3; 1st Rev.2019 = 1.3; 2nd Rev.2019 = 1.4; 2019 Budget = 1.4; 2020Proj = 1.3 - Current transfers (incl. subsidies): 2018 = 4.9; Prel.2019 = 5.8; 1st Rev.2019 = 5.5; 2nd Rev.2019 = 5.7; 2019 Budget = 4.9; 2020Proj = 4.5 - Investment expenditure: 2018 = 9.6; Prel.2019 = 7.0; 1st Rev.2019 = 8.5; 2nd Rev.2019 = 8.1; 2019 Budget = 8.1; 2020Proj = 9.6 - Overall balance: 2018 = -4.9; Prel.2019 = -3.0; 1st Rev.2019 = -3.0; 2nd Rev.2019 = -3.0; 2019 Budget = -3.0; 2020Proj = -3.0 - Memo: security expenditure: 2018 = 3.2; Prel.2019 = -3.7; 1st Rev.2019 = 3.9; 2020Proj = 4.0 ### Adjustments to expenditure composition and contingencies - Upward pressures recognized for 2020 - Wage bill for security sector: could be 0.2 percent of GDP higher than previously projected. - Subsidies: could be 0.2 percent of GDP higher due to partial implementation of automatic fuel price mechanism. - Authorities’ commitment - Control other expenditures to accommodate these pressures. - Possibly moderate planned increase in investment spending between 2019 and 2020. - If tax revenue improvement does not fully materialize, reduce other expenditure including low-priority investment and goods and services spending. ### Revenue mobilization — measures planned/underway - Implementation imperative: steadfast execution of tax measures included in 2019 and 2020 budgets; 2019 measures limited by work stoppages in the Ministry of Finance in H1 2019. - New and continuing measures (MEFP ¶64) - Tax rate on tobacco products increased to a minimum 50 percent (from 45 percent) in line with WAEMU directive. - Improve enforcement of withholding tax on foreign institutions. - Speed up reforms on online tax payments and filing; commence mandatory online filing for relevant large taxpayers. - Introduce an additional unit focusing on medium-sized enterprises in Ouagadougou. - Revise individual files following taxpayer database review to generate additional revenue. - Customs strengthening planned for 2020 (MEFP ¶64) - Split Bobo Customs Station Office (Bobo Inter) into three offices for road traffic, railway traffic and fuels. - Implement exemption management module to reduce processing time and obtain rapid statistics. - Open SYDONIA WORLD on the internet for remote filings by authorized customs agents. - Roll out telepayment of customs duties and taxes. - Policy guidance - Refrain from granting unnecessary tax exemptions and consolidate existing ones. - Caution against 2020 budget VAT exemption for transporters (estimated revenue loss less than 0.01 percent of GDP). ### Energy subsidies reform and energy sector performance - Automatic fuel price adjustment mechanism - Partial resumption; prices adjusted in October 2019: - Gasoline: +13 CFAF. - Diesel: +9 CFAF. - Adjustments fall short of amounts required under automatic mechanism; missed earlier adjustments in July and April. - Mechanism not fully delegated to a technical committee. - Authorities intend to complete by June 2020 studies reassessing burden of fuel price changes on consumers and transport sector. - Plan to continue gradual implementation, balancing social burden without a comprehensive social safety net. - Planned actions (MEFP ¶83-86) - Step up public communication on fiscal costs and regressivity of fuel subsidies. - Make adequate budget provision to cover fiscal costs and avoid payment arrears to SONABHY. - Designate and ensure independence of the technical structure implementing the fuel price mechanism; retain Prime Minister discretion for large price changes. - Implement reforms to strengthen social safety nets. - Complete financial audit of SONABHY by end-March 2020 (structural benchmark). - Assess SONABHY and SONABEL performance against Contrats-Plans and initiate discussions for new performance contracts (structural benchmark). ### Bringing the wage bill to a sustainable path - Progress and actions - Administrative census (early 2019) redeployed 18,000 teachers from overstaffed to understaffed locations. - New hires in education reduced to about 1,000 in 2019 versus about 5,000 in previous years. - Civil service census preparation ongoing with World Bank support to audit payroll database. - Functional review project progressing; awaiting further technical review and World Bank financial support. - Special bonuses to Ministry of Finance staff replaced with a lower-cost “motivation premium”; these bonuses recorded in the 2020 budget. - Outstanding elements - National forum on public sector pay not yet held; second stakeholders conference delayed. - Adoption of an organic law needed to set pay principles, harmonize job descriptions, revise salary and indemnity scales, and update salary indexation methodology (MEFP ¶23). - Transitional short-term measures (MEFP ¶81) - Organize second stakeholders conference as soon as possible. - Commit to staying within the wage bill envelope and grant no new benefits to non-security sector until reform adopted (structural benchmark). - Finalize simulations of new salary and indemnity scales; improve recruitment planning; complete functional review. ### Public financial management (PFM) reforms and cash management - Reforms underway: broaden tax base through simplification and computerization; establish Treasury Single Account (TSA) to improve cash management. - TSA and accounting reform progress - Decree adopted in October 2019 defining broad principles for TSA (MEFP ¶75); ministerial decision to follow with detailed regulations. - Revised road map for TSA operationalization to be adopted based on AFRITAC technical assistance. - Key pre-TSA milestones: government accounts mapping; closure of obsolete accounts; technical connectivity between Treasury and BCEAO. - Structural benchmark missed: operationalization of the TSA (not met); progress includes decree adoption. - Implementation risks and capacity constraints - Multiplicity of major accounting reforms risks overloading staff capacity (MEFP ¶77-79). - Planned actions include creation of separate networks of accountants in Customs, Tax and Treasury and switch to accruals accounting from January 2020. - Upgrade of Comptabilité Intégrée de l’Etat (CIE) and begin production of quarterly general ledger balance to reconcile with BCEAO accounts. ### Social protection and poverty reduction - Steps taken - Institutional mechanism for coordination and monitoring of social safety nets in place with broad stakeholder participation. - Harmonization underway of tool for collecting information on poor and vulnerable population. - Harmonized tool expected to advance creation of a Single National Registry of Beneficiaries for more efficient targeting. - Remaining challenges - Need to improve targeting and expand coverage. - Fragmentation: over one hundred social safety net programs; staff urged consolidation. ### Financial inclusion - Recent progress - Proportion of adult population with bank/financial transaction account increased to 43 percent in 2017 from 13.4 percent in 2014. - Drivers: expansion of microfinance services and growth of mobile money services. - Strategy and targets - Action plan adopted April 2019 to increase financial inclusion to 75 percent of adult population by 2023. - Financing mobilized: BOAD (FCFA 20 billion), World Bank (EU87.6 million) and other partners. - Four pillars: increase access to credit; promote agriculture finance; increase usage of transaction accounts via digitization; strengthen regulatory and supervisory capacity in microfinance sector. - November 2019 Round Table led to establishment of a committee and secretariat to coordinate and monitor implementation (MEFP ¶90-92). ### Program performance, IMF action, and risks - Program performance - Performance under ECF-supported program remains satisfactory. - All end-June 2019 quantitative performance criteria (QPCs) and indicative targets (ITs) were met. - All-but-one structural benchmarks through end-November were met. - IMF support - Staff supports authorities’ request for release of the fourth disbursement under the ECF in the amount of SDR 18.06 million. - Risks - Balance of risks tilted to the downside. - Main domestic risks: heightened security disruptions and labor disputes (including risks of increased current spending ahead of 2020 elections). - External risks: spillovers from intensified protectionism and downside risks to global growth. ### Debt sustainability — DSA findings and implications - DSA conclusions - Risk of external debt distress remains moderate, with substantial space to absorb shocks. - Burkina Faso has a medium debt-carrying capacity based on the composite indicator. - Under baseline, all external debt and debt service indicators remain below relevant thresholds; under a standard export shock stress test, two thresholds of external debt sustainability indicators are breached. - No breach is triggered to the indicator of overall public debt under baseline and all alternative scenarios. - Overall risk of public debt distress is moderate, with substantial space to absorb shocks. - Key DSA metrics and projections (selected) - Nominal stock of public debt as of end-2018: 43.2 percent of GDP. - Public Debt (percent of GDP): 2014 29.9; 2015 35.6; 2016 39.2; 2017 38.4; 2018 43.2. - External Debt share of total debt (percent): 2014 77.1; 2015 73.9; 2016 71.1; 2017 62.8; 2018 57.0. - Domestic Debt share of total debt (percent): 2014 22.9; 2015 26.1; 2016 28.9; 2017 37.2; 2018 43.0. - PV of external debt-to-GDP expected to remain at or below 17 percent over projection horizon (decreasing from 16.7 percent in 2019 to 14.9 in 2029). - Tailored commodity price shock applied to 2020 exports: gold price decline 12 percent; grains price decline 15 percent; cotton price decline 11 percent. - Policy recommendations from DSA - Maintain sound macro-fiscal framework and meet 3 percent fiscal deficit target. - Limit off-budget debt-creating operations and provide provisions for subsidies (e.g., SONABHY). - Prioritize concessional external financing; limit non-concessional borrowing. - Strengthen export diversification and resilience to commodity price volatility. - Strengthen analysis and mitigation of contingent liabilities; extend debt coverage to guarantees. ### Program monitoring, financing, and macro context - Monitoring and timelines - Semiannual reviews based on quantitative performance criteria through June 2020 and indicative benchmarks through December 2020. - Fourth program review: should be completed after June 15, 2020. - Fifth program review: should be completed of December 25, 2020. - Financing - Completion of review would release a fourth disbursement of SDR 18.06 million under the ECF. - Program fully financed for next 12 months; good prospects for remainder of program. - External financing requirement to be met through budget support and project loans from IFIs and bilateral donors, and limited non-concessional borrowing. - Capacity to repay and Fund obligations - Obligations to the Fund would peak in 2019 at 1.1 percent of government revenue or 0.2 percent of GDP. - Fund obligations (principal, in millions of SDRs): 2017 Act. 17.8; 2018 Act. 24.1; 2019 Proj. 10.7; 2020 Proj. 19.0; 2021 Proj. 21.2; 2022 Proj. 18.3; 2023 Proj. 14.2; 2024 Proj. 16.3; 2025 Proj. 24.1; 2026 Proj. 25.3; 2027 Proj. 24.4. ### Key economic projections and statistics (selected exact figures) - GDP at constant prices: 2018 Act. 5.9; 2019 Est. 6.3; 2020 Proj. 6.8; 2021–2024 Proj. 6.0, 6.0, 6.0, 6.0. - Consumer prices (annual average): 2018 Act. -0.2; 2019 Est. 0.4; 2020 Proj. 2.0; 2021–2024 Proj. -3.4, 2.0, 2.0, 2.0, 2.0. - Central government current revenue (percent of GDP): 2018 Act. 19.1; 2019 Est. 19.4; 2020 Proj. 19.5; 2021–2024 Proj. 21.1, 20.6, 20.6, 20.9, 21.1, 21.3. - Total expenditure and net lending (percent of GDP): 2018 Act. 25.4; 2019 Est. 29.9; 2020 Proj. 27.1; 2021–2024 Proj. 27.3, 27.3, 26.1, 26.4, 26.5, 26.7. - Overall fiscal balance, incl. grants (commitments) (percent of GDP): 2018 Act. -3.5; 2019 Est. -7.8; 2020 Prel. -4.9; 2021–2024 Proj. -3.0 (each year 2021–2024 shown as -3.0). - Total public debt (percent of GDP): 2018 Act. 39.2; 2019 Est. 38.4; 2020 Prel. 43.2; 2021–2024 Proj. 43.5, 43.1, 42.7, 42.4, 42.1, 41.8. - Nominal GDP (CFAF billion) memorandum: 2018 Act. 6,444; 2019 Est. 7,177; 2020 Prel. 7,849; 2021–2024 Proj. 8,471; 9,156; 9,901; 10,707; 11,576; 12,516. - Exports of goods (CFAF billions): 2018 Act. 1,676; 2019 Est. 1,996; 2020 Prel. 2,196. - Gold within exports (CFAF billions): 2018 Act. 1,092; 2019 Est. 1,387; 2020 Prel. 1,492. - Imports of goods (CFAF billions): 2018 Act. -1,677; 2019 Est. -1,890; 2020 Prel. -2,035. - BCEAO reserves (billion USD, selected): 2016 10; 2017 13; 2018 15; 2019 17; 2020 17; 2021 19; 2022 20; 2023 24; 2024 28. - Selected banking soundness: Gross NPLs / Total loans: Dec-2016 8.9; Dec-2017 8.8; Dec-2018 7.4. Capital adequacy (Reg. capital to risk-weighted assets): Dec-2016 13.0; Dec-2017 12.2; Dec-2018 11.8. ### Structural benchmarks, conditionality, and reporting - Structural benchmarks (2019–2020) — selected status - Met: establish VAT refund special account and produce quarterly reports; appoint independent external auditor for SONABHY (July 2019); complete national accounts revision and disseminate revised series (September 2019); reduce number of new civil service hires in 2019 below projection; budget/account for incentive bonus in 2020 budget; submit 2020 budget aligned with ECF projected wage bill; harmonize tobacco taxation (minimum 50 percent) — November 2019; include PPPs in public investment program — December 2019. - Not met: operationalizing the Treasury Single Account (TSA) — September 2019. - Quantitative performance criteria and indicative targets (selected, units CFAF billions) - Ceiling on net domestic financing of the government (cumulative): 60 (Mar./June), 67 (Sept./Dec.), 125, 201. - Ceiling on amount of external debt contracted or guaranteed by government (PV): 410, 410, 410, 410. - Indicative floor on government revenue (cumulative): 418, 888, 1332, 1775. - Indicative floor on poverty-reducing current social expenditures (cumulative): 52, 103, 154, 205. - Ceiling on stock of certified and unpaid VAT refunds older than 30 days: 40, 40, 40, 40. ### Social, agricultural, and governance developments (selected) - ASPHF resilience and social safety nets (selected figures) - 62,902 vulnerable persons received cash benefits. - 1,073.73 tons of provisions distributed in the framework of food aid. - 2,500 tons of food commodities distributed to malnourished vulnerable persons. - Producers given access to 543 tons of livestock feed; 30 tons of forage seed; 1,812 tons of producer seed. - 2,452 vulnerable households given small ruminants and poultry. - Food security and storage - 25 warehouses built. - National security stock (SNS) increased to 50,038.15 tons in first half of year. - Cumulative outflows totaled 25,623.28 tons. - Governance and anti-corruption - ASCE LC carried out financial and accounting audit for 2018 of Presidency, Prime Ministry and Ministries; outreach campaign on Law 0004-2015/CNT; investigations and prosecutions ongoing; dematerialization of asset declarations and ASCE-LC website set up (activities underway). *Source: IMF staff report excerpt (Burkina Faso) contained in the provided chapter content.* ### 2020. However, the security crisis poses risks to the growth outlook and to the authorities’ ### BURKINA FASO — THIRD REVIEW UNDER THE EXTENDED CREDIT FACILITY ARRANGEMENT — EXECUTIVE SUMMARY ### Context and security situation - The security situation is described as "highly challenging." - The authorities extended the state of emergency in several administrative regions for an additional six months. - Internally displaced people (IDPs) increased by 267,000 in the three months to October to reach 486,000. - As chair of the G5 Sahel, President Roch Kaboré presented plans for a new Partnership for Security and Stability for the Sahel at the G7 summit in August 2019 to identify resource needs and improve security coordination across G5 Sahel countries. - Presidential and parliamentary elections are scheduled for November 2020. - The security shock requires a permanent increase in security capability and additional social spending to meet the needs of rising IDPs. ### Recent economic developments and macro performance - Growth: - Growth was 6.4 percent y/y in the first half of 2019. - Growth is expected to stabilize at 6 percent in 2019 and over the medium term. - Inflation: - Annual inflation remained negative since the beginning of 2019 due to exceptionally good harvests and falling telecommunications prices. - Projected to be -3.5 percent y/y at end-2019. - Projected to rise to around 2 percent in the medium term (below WAEMU criterion of 3 percent). - Fiscal outturn H1 2019: - Overall fiscal deficit reached 0.9 percent of GDP (program projection for H1: 1.2 percent of GDP). - Total revenue exceeded the program floor by 1.6 percent of GDP, helped by windfall nontax revenue of 1.4 percent of GDP from the sale of 4G telecommunication licenses. - Execution of current transfers exceeded 50 percent of the budget annual target; lower-than-projected spending on goods and services offset this. - Private sector credit and banking: - Growth of credit to the private sector (excluding public companies) reached an 8-year low of 2.4 percent y/y in February 2019 and accelerated to 8.4 percent in August 2019. - As of end-December 2018, capital adequacy ratio was (12.0) exceeding the regulatory minimum (8.6). - NPL ratio fell to 7.4 percent from 8.8 percent a year earlier. - External sector: - Current account deficit: 4.7 percent of GDP in 2018 (down from 5.7 percent in 2017). - First half of 2019 saw a marked decline in exports due to poor cotton season, disappointing gold production, and sharp drops in prices of exported agricultural raw materials and livestock. - Current account expected to widen to 5.2 percent of GDP in 2019 and narrow to 4.0 percent of GDP in 2020. ### Fiscal outlook, policy settings, and public finances - Fiscal anchor: - Fiscal stance expected to remain anchored by the WAEMU convergence criterion for the fiscal deficit of 3 percent of GDP in 2019 and 2020. - Revenue and expenditure targets: - 2020 budget envisages tax revenue mobilization to around 18.0 percent of GDP (higher than projected realization of 17.5 percent of GDP in 2019). - Wage bill projected to start a gradual decline in 2020 from a peak of 10 percent of GDP in 2019. - 2019 budget revision and implementation: - 2019 budget revised in September to account for windfall revenue (1.4 percent of GDP) while continuing to target the 3 percent deficit. - 2019 tax revenue-to-GDP likely to increase by 0.2 percent of GDP relative to 2018, instead of 0.5 percent of GDP as previously envisaged. - Creation and endowment of a special treasury account for VAT reimbursement in June 2019 will lower net tax intake while improving timeliness of reimbursement. - Authorities plan to restrain investment spending if tax projections prove unfeasible; slow implementation of the investment budget through end-September implies tax shortfalls will be absorbed by lower investment. - Wage bill and security incentives: - 2019 wage bill revised upward to reflect new incentive schemes for security forces with retroactive effect to 2018. - Authorities committed to refrain from any new agreements on wages or allowances outside of the security sector pending approval of the overall reform package. - Transitional measures to help bring down the wage bill relative to tax revenues have been implemented in some areas; overall reform package adoption remains limited. - Energy and social spending: - Gradual implementation of the fuel price adjustment mechanism expected to reduce fuel subsidies’ burden on the state budget. - Authorities intend to rationalize existing social safety net programs and improve targeting of beneficiaries to provide timely and targeted support for the most vulnerable. ### Structural reforms, financial inclusion, and public financial management - Public financial management reforms: - Authorities committed to broaden the tax base through further simplification and computerization of the tax system. - Plans to establish a treasury single account (TSA) to improve cash management and strengthen institutional capacity and coordination for public financial management reforms. - Structural benchmark missed: operationalization of the TSA; progress includes adoption in October 2019 of a decree defining broad principles for the TSA. - Structural benchmark met: inclusion of PPPs in the public investment program (end-December benchmark). - Broader structural priorities: - Reforms required to boost productivity, competitiveness, and inclusive growth. - Authorities committed to expand financial inclusion as a key policy priority for poverty reduction and private sector-led growth. ### Program performance, risks, and IMF action - Program performance: - Performance under the ECF-supported program remains satisfactory. - All end-June 2019 quantitative performance criteria (QPCs) and indicative targets (ITs) were met. - All-but-one structural benchmarks through end-November were met. - IMF support: - Staff supports the authorities’ request for the release of the fourth disbursement under the ECF arrangement in the amount of SDR 18.06 million. - Risks: - Balance of risks is tilted to the downside. - Main domestic risks: heightened security disruptions and labor disputes (including risks of increased current spending ahead of the 2020 elections). - External risks: spillovers from intensified protectionism and downside risks to global growth. - Debt sustainability: - Debt Sustainability Analysis (DSA) finds risk of external debt distress remains moderate, with substantial space to absorb shocks. - Burkina Faso has a medium debt-carrying capacity based on the composite indicator. - Under baseline, all external debt and debt service indicators remain below relevant thresholds; under a standard export shock stress test, two thresholds of external debt sustainability indicators are breached. - No breach is triggered to the indicator of overall public debt under baseline and all alternative scenarios. - DSA indicates overall risk of public debt distress is moderate, with substantial space to absorb shocks. *International Monetary Fund* ### 17. The 2020 budget maintains the fiscal deficit at 3 percent of GDP, by offsetting the ### The 2020 budget maintains the fiscal deficit at 3 percent of GDP, by offsetting the lower windfall nontax revenue with an increase in tax revenue and a better control of current expenditure ### Overview of the 2020 budget and fiscal composition - Fiscal deficit target: -3.0 percent of GDP in 2020. - Drivers of the 2020 fiscal stance: - Tax revenue projected higher by 0.5 percent of GDP relative to 2019. - Non-tax revenue projected lower by 1.0 percent of GDP, reflecting lower windfall revenue. - Grants higher by 0.4 percent of GDP, reflecting new project grants. - Investment spending higher by 0.9 percent of GDP. - Current expenditure lower by 0.8 percent of GDP, reflecting lower subsidies and containment of the wage bill. - Overall security spending (current and investment) expected to increase to 4.0 percent of GDP in 2020. - Text Table 1: Selected consolidated operations of central government (Percent of GDP) - Total revenue and grants: 2018 = 22.2; Prel.2019 = 22.8; 1st Rev.2019 = 24.4; 2nd Rev.2019 = 24.2; 2019 Budget = 23.1; 2020Proj = 24.2 - Total revenue: 2018 = 19.5; Prel.2019 = 19.9; 1st Rev.2019 = 21.3; 2nd Rev.2019 = 21.1; 2019 Budget = 20.4; 2020Proj = 20.6 - Tax: 2018 = 17.3; Prel.2019 = 17.8; 1st Rev.2019 = 17.8; 2nd Rev.2019 = 17.5; 2019 Budget = 18.3; 2020Proj = 18.0 - Nontax: 2018 = 2.2; Prel.2019 = 2.2; 1st Rev.2019 = 3.5; 2nd Rev.2019 = 3.6; 2019 Budget = 2.1; 2020Proj = 2.6 - Grants: 2018 = 2.7; Prel.2019 = 2.8; 1st Rev.2019 = 3.0; 2nd Rev.2019 = 3.2; 2019 Budget = 2.7; 2020Proj = 3.6 - Total expenditure: 2018 = 27.1; Prel.2019 = 25.8; 1st Rev.2019 = 27.4; 2nd Rev.2019 = 27.3; 2019 Budget = 26.1; 2020Proj = 27.3 - Current spending: 2018 = 17.6; Prel.2019 = 18.8; 1st Rev.2019 = 18.9; 2nd Rev.2019 = 19.2; 2019 Budget = 18.0; 2020Proj = 17.6 - Wages and salaries: 2018 = 9.0; Prel.2019 = 9.8; 1st Rev.2019 = 9.9; 2nd Rev.2019 = 10.0; 2019 Budget = 9.6; 2020Proj = 9.6 - Goods and services: 2018 = 2.5; Prel.2019 = 1.8; 1st Rev.2019 = 2.3; 2nd Rev.2019 = 2.2; 2019 Budget = 2.1; 2020Proj = 2.2 - Interest payments: 2018 = 1.2; Prel.2019 = 1.3; 1st Rev.2019 = 1.3; 2nd Rev.2019 = 1.4; 2019 Budget = 1.4; 2020Proj = 1.3 - Current transfers (incl. subsidies): 2018 = 4.9; Prel.2019 = 5.8; 1st Rev.2019 = 5.5; 2nd Rev.2019 = 5.7; 2019 Budget = 4.9; 2020Proj = 4.5 - Investment expenditure: 2018 = 9.6; Prel.2019 = 7.0; 1st Rev.2019 = 8.5; 2nd Rev.2019 = 8.1; 2019 Budget = 8.1; 2020Proj = 9.6 - Overall balance: 2018 = -4.9; Prel.2019 = -3.0; 1st Rev.2019 = -3.0; 2nd Rev.2019 = -3.0; 2019 Budget = -3.0; 2020Proj = -3.0 - Memo: security expenditure: 2018 = 3.2; Prel.2019 = -3.7; 1st Rev.2019 = 3.9; 2020Proj = 4.0 ### Adjustments to expenditure composition and contingencies - Recognized upward pressures for 2020: - Wage bill for security sector: could be 0.2 percent of GDP higher than previously projected. - Subsidies: could be 0.2 percent of GDP higher due to partial implementation of automatic fuel price mechanism. - Authorities’ commitment: - Control other expenditures to accommodate these pressures. - Possibly moderate the planned increase in investment spending between 2019 and 2020. - If tax revenue improvement does not fully materialize, reduce other expenditure including low-priority investment and goods and services spending. ### Enhancing revenue mobilization (measures planned/underway) - Implementation imperative: steadfast execution of tax measures included in the 2019 and 2020 budgets; 2019 measures limited by work stoppages in the Ministry of Finance in the first half of 2019. - New and continuing revenue measures (MEFP ¶64): - Revision of tax rates: increase tax rate on tobacco products to a minimum 50 percent (from 45 percent) in line with the WAEMU directive. - Tax enforcement: improve enforcement of the withholding tax on foreign institutions. - Computerization: speed up reforms on online tax payments and filing; commence mandatory online filing for relevant large taxpayers. - Reinforced segmentation: introduce an additional unit focusing on medium-sized enterprises in Ouagadougou. - Follow up to taxpayer census: revise individual files based on recent taxpayer database review to generate additional revenue. - Customs strengthening measures planned for 2020 (MEFP ¶64): - Split Bobo Customs Station Office (Bobo Inter) into three offices for road traffic, railway traffic and fuels. - Implement an exemption management module to reduce processing time and obtain rapid statistics. - Open SYDONIA WORD on the internet to allow authorized customs agents to file declarations remotely. - Roll out telepayment of customs duties and taxes. - Policy guidance: - Refrain from granting unnecessary tax exemptions and consolidate existing ones. - Caution against the 2020 budget VAT exemption for transporters (estimated revenue loss less than 0.01 percent of GDP) and risk of proliferation of similar exemptions. ### Energy subsidies reform and energy sector performance - Partial resumption of the automatic fuel price adjustment mechanism; prices adjusted in October 2019: - Gasoline: +13 CFAF. - Diesel: +9 CFAF. - Implementation notes: - Adjustments fall short of amounts required under the automatic mechanism; missed earlier adjustments in July and April. - Mechanism not fully delegated to a technical committee. - Authorities intend to complete by June 2020 studies reassessing burden of fuel price changes on consumers and transport sector. - Plan to continue gradual implementation, balancing social burden without a comprehensive social safety net. - Planned actions to reduce energy subsidies and strengthen sector (MEFP ¶83-86): - Step up public communication on fiscal costs and regressivity of fuel subsidies. - Make adequate budget provision to cover fiscal costs and avoid payment arrears to SONABHY. - Designate and ensure independence of the technical structure implementing the fuel price mechanism; retain Prime Minister discretion for large price changes. - Implement reforms to strengthen social safety nets to mitigate negative impacts on vulnerable households. - Complete financial audit of SONABHY by end-March 2020 (structural benchmark). - Assess SONABHY and SONABEL performance against Contrats-Plans (expire end-2019) and initiate discussions for new performance contracts (structural benchmark). ### Bringing the wage bill to a sustainable path - Progress and actions: - Administrative census (early 2019) redeployed 18,000 teachers from overstaffed to understaffed locations. - New hires in education reduced to about 1,000 in 2019 versus about 5,000 in previous years. - Civil service census preparation ongoing with World Bank support to audit payroll database. - Functional review project progressing; awaiting further technical review and World Bank financial support. - Special bonuses to Ministry of Finance staff replaced with a lower-cost “motivation premium”; these bonuses recorded in the 2020 budget. - Outstanding reform elements: - National forum on public sector pay not yet held; second stakeholders conference delayed. - Adoption of an organic law needed to set principles for pay and allowances, harmonize job descriptions, revise salary and indemnity scales, and update salary indexation methodology (MEFP ¶23). - Transitional short-term measures (MEFP ¶81): - Organize second stakeholders conference as soon as possible. - Commit to staying within the wage bill envelope in the program and grant no new benefits to the non-security sector that would increase the wage bill until reform adopted (structural benchmark). - Reinforce efforts to finalize simulations of new salary and indemnity scales; improve recruitment planning; complete functional review with World Bank support. ### Enhancing fiscal discipline and cash management (PFM reforms) - Reforms underway: improving accounting and establishing a Treasury Single Account (TSA) in line with WAEMU Directives. - Recent actions and next steps: - Decree adopted in October 2019 establishing scope of TSA (MEFP ¶75); ministerial decision to follow with detailed regulations. - Revised road map for TSA operationalization to be adopted based on AFRITAC technical assistance. - Key pre-TSA milestones: completion and verification of government accounts mapping; closure of obsolete accounts; technical connectivity between Treasury and BCEAO. - Implementation risks and capacity constraints: - Multiplicity of major accounting reforms risks overloading staff capacity (MEFP ¶77-79). - Planned work program includes creation of separate networks of accountants in Customs, Tax and Treasury and switch to accruals accounting from January 2020. - Upgrading of accounting financial information system (Comptabilité Intégrée de l’Etat - CIE). - Begin production of a quarterly general ledger balance to reconcile with BCEAO accounts. - Staff urged timely use of training opportunities from development partners. ### Social protection and poverty reduction - Steps taken: - Institutional mechanism for coordination and monitoring of social safety nets in place with broad stakeholder participation. - Harmonization underway of the tool for collecting information on poor and vulnerable population. - Harmonized tool expected to advance creation of a Single National Registry of Beneficiaries for more efficient targeting. - Remaining challenges: - Need to improve targeting and expand coverage. - Fragmentation: currently over one hundred social safety net programs; staff urged consolidation. ### Financial inclusion - Recent progress: - Proportion of adult population with a bank/financial transaction account increased to 43 percent in 2017 from 13.4 percent in 2014. - Drivers: expansion of microfinance services and growth of mobile money services. - Strategy and targets: - Action plan adopted April 2019 to increase financial inclusion to 75 percent of the adult population by 2023. - Financing mobilized: BOAD (FCFA 20 billion), World Bank (EU87.6 million) and other partners. - Four pillars of the financial inclusion strategy: 1. Increase access to credit. 2. Promote agriculture finance. 3. Increase usage of transaction accounts by accelerating financial digitization. 4. Strengthen regulatory and supervisory capacity in microfinance sector. - November 2019 Round Table led to establishment of a committee and secretariat to coordinate and monitor implementation (MEFP ¶90-92). ### Program monitoring, financing, and macro context - Program monitoring: - Staff supports completion of the third review under the ECF. - Program targets and structural benchmarks presented in MEFP Tables 1 and 4; QPCs and ITs through December 2020 set out in MEFP Tables 1 and 3. - Financing: - Completion of review would release a fourth disbursement of SDR 18.06 million under the ECF (Table 7). - Program is fully financed for the next 12 months; good prospects for remainder of program (Table 6). - External financing requirement to be met through budget support and project loans from IFIs and bilateral donors, and limited non-concessional borrowing. - Project support (grants and loans) projected to remain robust; direct budget support projected to continue a downward trend. - Fund obligations and capacity to repay: - Obligations to the Fund would peak in 2019 at 1.1 percent of government revenue or 0.2 percent of GDP (Table 8). - Macro outlook and risks: - Economy remains resilient; GDP growth expected to stabilize at around 6 percent in the medium term. - Security crisis increases risks to the growth outlook. ### Data, capacity development, and safeguards - Data: - Authorities published rebased national accounts on September 30, 2019: base year updated from 1999 to 2015 and methodology from 1993 SNA to 2008 SNA. - Under revised series, nominal GDP is 13.5 percent higher in the new base year than in the old base year. - Staff’s analysis for the third review anchored on the 1999 base year; revised series to be incorporated from the fourth review onwards (MEFP ¶102). - Capacity development: - Technical assistance priorities agreed under the capacity building framework. - Ongoing assistance areas: mobilization of domestic revenues (customs and taxation), management of fiscal risks, control of recurrent spending (wages and salaries), spending efficiency, public investment management, public financial management, and debt management. - Safeguards: - Updated safeguards assessment of the BCEAO (April 2018) found a strong control environment; audit arrangements broadly in conformity with international standards; financial statements prepared in accordance with IFRS. - BCEAO has enhanced oversight role of its audit committee per assessment recommendations. *Source: IMF staff report excerpt (Burkina Faso) contained in the provided chapter content.* ### 40. Staff welcome the authorities' commitment to the fiscal deficit of 3 percent of GDP in ### 40. Staff welcome the authorities' commitment to the fiscal deficit of 3 percent of GDP in ### Fiscal stance and revenue/expenditure plans - Staff welcome the authorities' commitment to the fiscal deficit of 3 percent of GDP in the 2019 and 2020 budgets. - The 2020 budget envisages commendable revenue and expenditure efforts to offset the partial loss of the 2019 windfall nontax revenue. - Staff encouraged the authorities to continue their reform agenda towards broadening the tax base through further simplification and computerization of the tax system. ### Wage bill reforms and constraints - Reforms to contain the wage bill are advancing in some areas, but decisive progress is held back by the lack of implementation of key legislative reforms. - The adoption of the overarching “organic” law, either by parliament or referendum, remains politically unfeasible in the near term. - Meanwhile, the authorities aim to finalize the technical work of the new salary and indemnity scales that will provide a basis for the preparation of the medium-term wage bill strategy document. - The authorities are committed to granting no new wage or indemnity agreements outside of the security sector until the overall reform package is adopted. ### Fuel price adjustment mechanism and social protection - The authorities will continue to pursue a gradual implementation of the automatic fuel price adjustment mechanism. - The absence of efficient social safety nets constrains the process. - The authorities adjusted fuel prices upwards in October 2019. - They now envisage a gradual, frequent and sustained implementation of the fuel price mechanism, while balancing its social burden in the absence of a comprehensive social safety net system. - Efforts are underway to strengthen the social safety net system by harmonizing across all stakeholders (including donors) the tool for collecting information on the poor and vulnerable population. - This harmonization is expected to help advance the work to establish a reliable Single National Registry of Beneficiaries, a key milestone to enable a more efficient targeting across various social safety nets and poverty reduction programs. ### Public financial management (PFM) reforms and coordination - Reforms in public financial management (PFM) are advancing but require stronger coordination. - Most WAEMU's PFM directives have been transposed into domestic legislation through associated decrees. - Given the multiplicity of major reforms in the pipeline, the authorities intend to adopt a revised road map for their implementation. - The roadmap will help foster coordination among the teams leading the reforms, while avoiding overburdening them. *Source: IMF staff report excerpt.* ### 44. Staff recommend the completion of the third review and the disbursement of ### 44. Staff recommend the completion of the third review and the disbursement of SDR18.06 million under the ECF. ### Program recommendation and capacity to repay - Staff recommend the completion of the third review and the disbursement of SDR18.06 million under the ECF. - The authorities' letter of intention and MEFP spell out measures necessary to ensure that the objectives of the program would be met. - The capacity to repay the Fund remain adequate and risks to the program are manageable. ### Recent economic developments (highlights) - Growth accelerated to 6.8 percent in 2018 despite security concerns and social unrest. - Credit growth fell sharply in late 2018, with a timid recovery starting in early 2019. - Good food harvests in late 2018 and early 2019 kept inflation negative by mid-2019. - Tax revenue performance in the first half of 2019 was broadly in line with projections and remained resilient in the first half of 2019 as government services recovered from strikes. - Public investment execution fell short of projections in the first half of 2019. ### Real and external sector developments (highlights) - Gold export volumes peaked in 2018 as the cotton sector faced a production crisis spilling into 2019. - Gold prices soared during 2019 while cotton prices and exports plummeted. - The gold mining sector is increasingly the main driver of total exports. - Imports are mostly driven by oil and manufactured goods. - The current account balance showed a strong improvement in 2018 at -4.7% of total GDP. - The real exchange rate depreciated in the second half of 2018 and continued this trend into 2019. - Note: Figures for 2018 are preliminary. ### Fiscal developments (highlights) - Current spending declined in 2018. - The wage bill is higher than in peers. - Investment spending is estimated to have declined in 2018. - The fiscal deficit shrank markedly in 2018, although public debt increased as the share of domestic debt continued to rise. - Domestic revenue remained stable in 2018. ### Selected projections and key statistics (from Tables) - GDP at constant prices: 2018 Act. 5.9; 2019 Est. 6.3; 2020 Proj. 6.8; 2021–2024 Proj. 6.0, 6.0, 6.0, 6.0. - Consumer prices (annual average): 2018 Act. -0.2; 2019 Est. 0.4; 2020 Proj. 2.0; 2021–2024 Proj. -3.4, 2.0, 2.0, 2.0, 2.0. - Current account (percent of GDP): 2018 Act. -7.2; 2019 Est. -5.7; 2020 Prel. -4.7; 2021–2024 Proj. -5.2, -4.0, -4.3, -4.6, -4.9, -5.3 (note multi-year series). - Central government current revenue (percent of GDP): 2018 Act. 19.1; 2019 Est. 19.4; 2020 Proj. 19.5; 2021–2024 Proj. 21.1, 20.6, 20.6, 20.9, 21.1, 21.3. - Total expenditure and net lending (percent of GDP): 2018 Act. 25.4; 2019 Est. 29.9; 2020 Proj. 27.1; 2021–2024 Proj. 27.3, 27.3, 26.1, 26.4, 26.5, 26.7. - Overall fiscal balance, incl. grants (commitments) (percent of GDP): 2018 Act. -3.5; 2019 Est. -7.8; 2020 Prel. -4.9; 2021–2024 Proj. -3.0 (each year 2021–2024 shown as -3.0). - Total public debt (percent of GDP): 2018 Act. 39.2; 2019 Est. 38.4; 2020 Prel. 43.2; 2021–2024 Proj. 43.5, 43.1, 42.7, 42.4, 42.1, 41.8. - Nominal GDP (CFAF billion) memorandum: 2018 Act. 6,444; 2019 Est. 7,177; 2020 Prel. 7,849; 2021–2024 Proj. 8,471; 9,156; 9,901; 10,707; 11,576; 12,516. - Exports of goods (CFAF billions, Table 2): 2018 Act. 1,676; 2019 Est. 1,996; 2020 Prel. 2,196; 2021–2024 Proj. 2,238; 2,497; 2,586; 2,667; 2,767; 2,869. - Gold within exports (CFAF billions, Table 2): 2018 Act. 1,092; 2019 Est. 1,387; 2020 Prel. 1,492; 2021–2024 Proj. 1,645; 1,840; 1,891; 1,942; 2,013; 2,083. - Imports of goods (CFAF billions, Table 2): 2018 Act. -1,677; 2019 Est. -1,890; 2020 Prel. -2,035; 2021–2024 Proj. -2,170; -2,290; -2,407; -2,550; -2,708; -2,886. - BCEAO reserves (Table 2 memorandum): In billion USD (selected): 2016 10; 2017 13; 2018 15; 2019 17; 2020 17; 2021 19; 2022 20; 2023 24; 2024 28. In months of next year's WAEMU imports: 2016 3.9; 2017 4.1; 2018 4.5; 2019 4.8; 2020 4.5; 2021 4.6; 2022 4.5; 2023 5.0; 2024 5.2. ### External financing and balance of payments (highlights) - Current account (CFAF billions, Table 2): 2018 Act. -462; 2019 Est. -412; 2020 Prel. -369; 2021–2024 Proj. -443; -371; -421; -491; -570; -662. - Financial account (CFAF billions): 2018 Act. 245; 2019 Est. 369; 2020 Prel. 511; 2021 Proj. 253; 2022 Proj. 123; 2023 Proj. 297; 2024 Proj. 371; 2025 Proj. 441; 2026 Proj. 544. - Net change in foreign assets of the central bank (CFAF billions): 2018 Act. 71; 2019 Est. -125; 2020 Prel. -314; 2021 Proj. -34; 2022 Proj. -59; 2023 Proj. -96; 2024 Proj. -109; 2025 Proj. -109; 2026 Proj. -128. - Disbursements (past and prospective) (CFAF billions): 2018 Act. 194; 2019 Est. 144; 2020 Prel. 429; 2021–2026 shown as 0. ### Monetary and financial sector indicators (highlights) - Private sector credit/GDP (Table 1 memoranda): 2018 Act. 30.5; 2019 Est. 31.3; 2020 Prel. 30.5; 2021 Proj. 31.7; 2022 Proj. 32.9. - Broad money (M3) (annual change): 2018 Act. 11.8; 2019 Est. 21.6; 2020 Prel. 10.4; 2021 Proj. 12.7; 2022 Proj. 15.4. - Selected banking soundness (Table 4): Gross NPLs / Total loans: Dec-2016 8.9; Dec-2017 8.8; Dec-2018 7.4. Capital adequacy (Reg. capital to risk-weighted assets): Dec-2016 13.0; Dec-2017 12.2; Dec-2018 11.8. - Loans to deposits (liquidity): Dec-2016 86.1; Dec-2017 83.9; Dec-2018 85.7. ### Indicators of capacity to repay the IMF (Table 8, selected series) - Fund obligations based on existing and prospective credit (in millions of SDRs) — Principal: 2017 Act. 17.8; 2018 Act. 24.1; 2019 Proj. 10.7; 2020 Proj. 19.0; 2021 Proj. 21.2; 2022 Proj. 18.3; 2023 Proj. 14.2; 2024 Proj. 16.3; 2025 Proj. 24.1; 2026 Proj. 25.3; 2027 Proj. 24.4. - Total obligations (in millions of SDRs): 2017 Act. 17.8; 2018 Act. 24.1; 2019 Proj. 19.3; 2020 Proj. 21.4; 2021 Proj. 18.5; 2022 Proj. 14.5; 2023 Proj. 16.5; 2024 Proj. 24.3. - Outstanding IMF credit (in millions of SDRs): 2017 Act. 141.9; 2018 Act. 135.8; 2019 Proj. 166.3; 2020 Proj. 183.4; 2021 Proj. 162.3; 2022 Proj. 144.0; 2023 Proj. 129.8; 2024 Proj. 113.5; 2025 Proj. 89.4; 2026 Proj. 64.1; 2027 Proj. 39.7; 2028 Proj. 21.7; 2029 Proj. 5.4. - Net use of IMF credit (in millions of SDRs): 2017 Act. -13.3; 2018 Act. -6.1; 2019 Proj. 43.4; 2020 Proj. 16.8; 2021 Proj. -21.4; 2022 Proj. -18.5; 2023 Proj. -14.5; 2024 Proj. -16.5; 2025 Proj. -24.3; 2026 Proj. -25.6; 2027 Proj. -24.6; 2028 Proj. -18.3; 2029 Proj. -16.5; 2030–2033 Proj. -5.7, -0.3, -0.3, -0.3. - Memorandum: Nominal GDP (in billions of CFAF) projections: 2024 12,516; 2025 13,532; 2026 14,631; 2027 15,819; 2028 17,104; 2029 18,493; 2030 19,994; 2031 21,618; 2032 23,373; 2033 25,271. *Source: Burkinabè authorities; and IMF staff calculations and projections.* ### Annex I. Risk Assessment Matrix ### Annex I. Risk Assessment Matrix ### Risk matrix — sources, likelihood, and impact - Sharp rise in risk premia in global markets - Relative Likelihood: High - Impact if Realized: Medium - Consequence noted: Tighter financing conditions in regional market - Rising protectionism - Relative Likelihood: High - Impact if Realized: Medium - Consequence noted: Challenges for exports and diversification - Weaker-than-expected global growth - Relative Likelihood: Medium/High - Impact if Realized: High - Consequence noted: Weaker demand for exports, lower external aid - Large swings in energy prices - Relative Likelihood: Medium - Impact if Realized: High - Consequence noted: Lower exports, higher fuel import prices, increased subsidy needs - Pressures for higher recurrent spending, particularly on wages - Relative Likelihood: High - Impact if Realized: Medium/High - Consequence noted: Crowding out of investment spending; pressure on fiscal deficit target - Further terrorist attacks - Relative Likelihood: Medium/High - Impact if Realized: Medium/High - Consequence noted: Adverse impact on economic activity, notably tourism, and government revenue; longer term impact on foreign investment; crowding out of productive capital spending - Revenue mobilization lags - Relative Likelihood: Medium - Impact if Realized: High - Consequence noted: Reduced fiscal space and risk of higher fiscal deficit and financing needs - Poor weather conditions; agricultural pests - Relative Likelihood: Medium - Impact if Realized: High - Consequence noted: Lower agricultural output and exports, higher food prices; increased poverty ### Possible policy responses to risks (staff suggestions recorded) - Limit domestic financing needs through adherence to fiscal deficit targets. - Implement measures to improve competitiveness and the business environment. - Adhere to fiscal deficit targets to preserve international reserve adequacy. - Allow more flexibility in pump fuel prices; adhere to fiscal deficit targets to build buffers for shocks. - Contain recurrent spending, especially the wage bill. Intensify efforts to mobilize domestic revenues. - Maintain efforts to strengthen security services; participate in regional security arrangements; adhere to fiscal deficit targets to create space for security spending. - Pursue tax policy and revenue administration reforms; optimize current spending and re-prioritize public investment. - Adhere to fiscal deficit targets to address food emergencies. In the medium-term, provide support to farmers through better seeds, feritilizer, and irrigation. - Communications campaign on the costs of subsidies granted to consumers and their inequitable distribution; evaluate oil and gas supply chain performance; audit SONABHY’s organizational and expenditure performance to identify reforms to minimize subsidy burden. ### Key economic and program developments and indicators (selected figures preserved exactly) - Growth and inflation - Real growth rate projected at 6.0 percent for 2019; for 2020 growth is projected to keep the same pace of 6 percent. - Inflation projected to remain below the WAEMU regional norm of 3 percent. - Q2 2019 real GDP growth: 2.8 percent (compared to a contraction of -0.6 percent in the preceding quarter). - Q2 2019 growth compared with Q2 2018: +9.0 percent (Q2 2018 was +7.3 percent). - Inflation at end-June 2019: year-on-year average of -3.9 percent and an annual average of -0.4 percent. - Inflation at end-September 2019: year-on-year average of 5.4 percent and an annual average of 2.2 percent. - Fiscal balances and program financing - Overall deficit expected to stand at 3.0 percent of GDP in 2019, 1.9 percentage points down from its level in 2018. - The deficit will remain at this level in 2020. - The deficit in 2019 and 2020 will be financed through the use of budgetary support, drawings on IMF resources, and the issuance of securities on the regional financial market. - Government requests the disbursement of SDR 18.06 million under the third review. - External sector and trade (first half of 2019) - Trade deficit of CFAF 44.3 billion, compared to a surplus of CFAF 87.6 billion in the first half of 2018. - Current account registered a deficit of CFAF 249.1 billion in the first half of 2019, compared to a deficit of CFAF 42.6 billion in the first half of 2018. - Deterioration driven by imports (+7.0 percent) and exports (-6.2 percent); reduction in exports reflects change in gold and cotton exports. - Monetary aggregates (between end-August 2018 and end-August 2019) - Money growth: CFAF 229.5 billion (+6.4 percent). - Increase in domestic claims: CFAF 272.3 billion (+10.5 percent). - Increase in net foreign assets (NFA): CFAF 60.8 billion (+4.4 percent). - NFA of monetary institutions amounted to CFAF 1,431.3 billion at end-August 2019, up from CFAF 1,370.5 billion at end-August 2018. - Domestic claims stood at CFAF 2,869.7 billion at end-August 2019, compared to CFAF 2,597.4 billion at end-August 2018. - Claims on the economy totaled CFAF 2,907.6 billion at end-August 2019, up from CFAF 2,543.0 billion at end-August 2018 (+14.3 percent). - Public finances and revenues (selected items) - Total revenue and grants mobilized at end-June 2019: CFAF 982.3 billion, compared to CFAF 803.0 billion in the same period in 2018 (+22.3 percent). - Total revenue and grants at end-September 2019: CFAF 1,429.8 billion, compared to CFAF 1,198.5 billion a year earlier (+19.3 percent). - Domestic revenue at end-June 2019: CFAF 929.8 billion (+26.8 percent from end-June 2018). - Tax revenue at end-June 2019: CFAF 720.3 billion (grew by 10.7 percent, or CFAF 69.4 billion, compared to end-June 2018). - Nontax revenue increased by CFAF 127.1 billion (+154.4 percent) at end-June 2019, including CFAF 120 billion from 4G mobile telephony licenses. - Mobilized domestic revenue at end-September 2019: CFAF 1,360.6 billion, compared to CFAF 1,105.1 billion in the same period of 2018 (+23.1 percent). - Mining revenue at end-June 2019: CFAF 134.9 billion (including CFAF 101.5 billion in tax revenue), compared to CFAF 122.5 billion (including CFAF 86.7 billion in tax revenue) at June 30, 2018 (+10.2 percent). - Mining revenue represented 14.5 percent of domestic revenue at end-June 2019, compared to 16.7 percent at end-June 2018. - Mobilized grants at end-June 2019: CFAF 52.5 billion, compared to CFAF 69.8 billion at end-June 2018 (-24.8 percent). - Expenditure - Total expenditure and net lending executed at end-June 2019: CFAF 1,106.4 billion, up from CFAF 895.6 billion in the same period of 2018 (+23.5 percent). - Growth in spending driven by increases in current expenditure (+23.0 percent) and capital expenditure (+23.5 percent). ### Revenue mobilization and tax administration measures (as implemented) - Intensification of collection efforts featuring a personalized, targeted approach to taxpayers with outstanding balances; negotiation of payment plans; increased educational visits (promotion of tax compliance). - Control/enforcement of the use of the standardized invoice in Ouagadougou and Bobo-Dioulasso. - Strengthening of online tax filings and payments. - Increasing the number of taxpayer census trips. - Reinforced control of service execution in offices by Regional Directors and Technical Inspectorate audits at the Directorate General of Customs (DGD). - Reinforced verification in offices through activation of the ASYCUDA valuation module: 22 products were valued, with plans to increase. - Strengthened interconnection between Burkina Faso’s customs IT systems and those of Côte d’Ivoire for single electronic road transit documents. - Anti-fraud initiatives in offices, particularly targeting imports without declarations, by scanning arriving cargo. - Improvement of value recovery operations through continued SYLVIE and ASYCUDA interfacing. - Expansion of the scope of the tax on capital gains from sales of mining stocks. - Increase in the rate of the tax on nonalcoholic beverages from 10 percent to 15 percent. - Increase in the rate of the tax on biodegradable and authorized nonbiodegradable plastic bags and packaging. - Continuation of campaigns to recover outstanding tax payment balances (RAR). *Source: Annex I. Risk Assessment Matrix and selected sections of the accompanying Letter of Intent and Memorandum of Economic and Financial Policies (text as provided).* ### 16. The growth of current expenditure (+23.0 percent since end-June 2018) is essentially ### 16. The growth of current expenditure (+23.0 percent since end-June 2018) is essentially ### Current and capital expenditure developments - Current expenditure grew by +23.0 percent since end-June 2018, driven by: - personnel expenditure: +25.2 percent (+CFAF 82.5 billion) - current transfer expenditure: +40.8 percent (+CFAF 80.2 billion) - operating expenditure contracted by 2.8 percent since end-June 2018 - financial costs of debt contracted by 16.1 percent since end-June 2018 - At end-June 2019, capital expenditure totaled CFAF 298.0 billion, explained partly by: - increase in investment expenditure financed with own resources: +CFAF 40.5 billion - externally financed investment expenditure: +CFAF 16.7 billion - At end-September 2019: - total expenditure and net lending: CFAF 1,645.5 billion (compared to CFAF 1,410.4 billion at end-September 2018) - increase attributable to CFAF 252.2 billion (+20.0 percent) rise in current expenditure - capital expenditure contracted by CFAF 11.73 billion (-2.9 percent) - Current expenditure at end-September 2019: CFAF 1,263.5 billion (up 24.9 percent from end-September 2018), composition of the increase: - current transfer expenditure: +CFAF 126.1 billion - wage bill: +CFAF 120.6 billion - interest payments on debt: +CFAF 5.3 billion - operating expenditure: +CFAF 0.2 billion - Capital expenditure at end-September 2019: CFAF 393.9 billion (down 2.9 percent from end-September 2018) - domestically-financed investment decreased by CFAF 35.9 billion - externally financed investment expenditure increased by CFAF 24.2 billion ### Wage bill, transfers, and measures to control personnel costs - Drivers of wage bill growth: - implementation of government commitments to social partners - adjustment of the wage bill due to statutory advancements and new staff - Growth of current transfer expenditure linked to: - increases in transfers to households - subsidies to public enterprises, including energy sector subsidies - Government control measures and reforms implemented or initiated: - reduced number of new staff recruited in 2019 by 44.5 percent: hired 5,892 of projected 10,615 new hires - launched a job description project; progress significant - Council of Ministers (September 11, 2019) adopted a decree containing an inter-ministerial directory of civil service professions (RIME) - preparation of employment organization texts underway - administrative census of civil servants carried out; results published on the Government Information Website (SIG) - redeployment plan for approximately 18,000 teachers; 10,498 teachers already transferred - ongoing discussions and drafts produced for civil service compensation reform, including: - a preliminary draft of the organic law setting out basic principles and values of the civil service - draft wage and compensation scales to ensure fiscal sustainability and equity - continued dialogue with social partners and traditional and religious authorities pending a stakeholders’ conference ### Fiscal outcomes, program targets, and quantitative performance - Overall commitment-basis deficit: - end-June 2019: CFAF 124.1 billion (compared to CFAF 92.6 billion a year earlier) - end-September 2019: CFAF 215.8 billion (a widening of CFAF 3.9 billion since same period of 2018 which was CFAF 211.8 billion) - Program quantitative criteria at end-June 2019 (all met): - Net domestic financing of the government: CFAF 83.50 billion (ceiling CFAF 100 billion) - Present value of external debt contracted or guaranteed by government: CFAF 121.42 billion (ceiling CFAF 370 billion) - No guarantees of domestic loans to suppliers and contractors; no guarantees of bank prefinancing for public investment - Indicative targets at end-June 2019 (all met): - no domestic arrears accumulated - overall fiscal deficit including grants: CFAF 124.1 billion (ceiling CFAF 130 billion) - domestic revenue collection: excess of CFAF 929.83 billion (floor CFAF 798 billion) - current poverty-reducing social expenditure: CFAF 183.34 billion (floor CFAF 95 billion) - stock of certified VAT reimbursement claims unpaid for more than 30 days: CFAF 33.4 billion (ceiling CFAF 40 billion) - nominal value of six PPP renewable energy contracts signed in April 2019: approximately CFAF 140.6 billion (ceiling CFAF 200 billion for the year) - Program performance at end-September 2019: - Five quantitative performance criteria met: - Net domestic financing: CFAF 139.4 billion (ceiling CFAF 146 billion) - Present value of external debt contracted or guaranteed: CFAF 205.5 billion (ceiling CFAF 370 billion) - No external arrears, no guarantees of domestic supplier loans or bank prefinancing - Of five performance targets at end-September 2019, four met; one missed: - Overall fiscal deficit including grants: CFAF 215.8 billion (ceiling CFAF 196.00 billion) — overrun of CFAF 19.8 billion - Current poverty-reducing social spending: CFAF 292.83 billion (floor CFAF 143 billion) - Stock of certified VAT reimbursement claims unpaid >30 days: CFAF 38.2 billion (ceiling CFAF 40 billion) - Nominal value of PPPs signed: approximately CFAF 140.6 billion (ceiling CFAF 200 billion) - No domestic debt arrears accumulated ### Structural benchmarks, reforms, and public financial management - Eleven (11) structural benchmarks selected for the program; status: - Eight (8) structural benchmarks for end-September 2019: all met except one related to the Treasury Single Account (TSA) - Three (3) structural benchmarks for end-November 2019 and March 2020: on track - Seven (7) structural benchmarks met include: - establish a special account funded by a portion of VAT revenue for the reimbursement of VAT credits and produce a quarterly operational management report on that account - recruit an independent external auditor to audit financial operations and accounting practices of SONABHY (Burkinabé National Hydrocarbons Corporation) - reduce number of new civil servants in 2019 to below initial projection of 10,615 - conduct a study of the system of taxation of small and micro enterprises - complete revision of national accounts statistics with a new base year and publish the revised series - budget and account in appropriate budgetary accounts all revenue and disbursements for the incentive bonus in the 2020 budget - submit to the National Assembly a 2020 budget proposal with a wage bill fully aligned with the ECF-supported program - Structural benchmark not met: - operationalizing the Treasury Single Account (TSA) was not met - Remaining benchmarks recorded in draft 2020 Budget Law and 2020 PIP include: - harmonizing the taxation of tobacco in line with the new WAEMU directive by setting the rate at a minimum of 50 percent - including PPPs in the public investment program - Transparency and anti-corruption benchmarks: - dematerializing asset declarations and creating a searchable database (online declaration; online search) — activities under way - ASCE-LC website set up; development of the platform for declaration of wealth and interest income nearing completion - delivery of servers, local network overhaul, standardization and securing of the computer room in progress - consultant being hired for communications strategy and launch of information and communications campaign ### Implementation of the PNDES — progress by strategic pillar - Pillar 1: Institutional reforms and modernization of the administration - promotion of human rights and strengthening capacities of development actors on a human rights-based approach - legal aid provided through the Legal Aid Fund to 138 people out of 300 identified - adoption on June 21, 2019 of Law 044-2019/AN setting out the new criminal code - Economic governance progress: - adoption of three decrees for implementation of the Law aimed at steering the economy and development - swearing-in of the Director General and General Financial Officer of the Caisse de Dépôt et de Consignation (CDC) - regular consultation and management forums; adoption of the PUS-BF outreach strategy and action plan (Council of Ministers, June 19, 2019) - Security sector reorganization and support (in response to security challenges): - reorganization of defense and security forces and strengthening operational capacities through staffing increases, procurement, intelligence intensification, and territorial network strengthening (construction of district police stations and gendarmerie posts) - progress noted in G5 Sahel cooperation: meetings on March 23, 2019 and extraordinary summit on May 1, 2019 in Ouagadougou; G5 Sahel ministerial meeting on energy held September 13, 2019 - Pillar 2: Human capital development - expansion of health services: construction/equipping of CSPS, CHR, CHU, and a hemodialysis center; hiring of additional staff; expansion of range of free services - free access to birth planning toolkit entered into force on June 24, 2019 in two health regions (the Cascades and the Center-West) - education sector: construction of four (4) new vocational training schools (Manga, Kaya, Tenkodogo, Zorgho); redeployment of 10,079 classroom teachers and 419 office staff; assembly centers opened for affected students - water and sanitation: rural — 317 new boreholes drilled and 158 rehabilitated; urban — number of persons supplied with drinking water and sanitation: 5,275,642 persons at June 30 (compared to 5,137,058 in all of 2018) - Pillar 3: Revitalization of economic growth and jobs drivers - Agriculture: - supply of inputs to farmers at subsidized prices: 6,949.35 tons of inorganic fertilizers; 2,296.20 tons of seeds of improved varieties; 6,695 pieces of processing equipment; 35,516 liters of pesticides; 122 prospecting and surveillance kits - provision of 3,918 pieces of animal-drawn equipment (carts, plows, seeders, hillers) - arrangement and rehabilitation of plots and bottom lands for 94,057 farmers, of whom 30,463 are women - Energy: - completion of the Fada N’Gourma thermal power plant to boost capacity by 7.5 MW - ongoing improvement of the Pâ-Diébougou and Ziniaré-Kaya 225 KV lines and the Wona-Dédougou 90 KV line - construction and outfitting of three posts on the Pâ-Diébougou, Ziniaré-Kaya, and Wona-Dédougou lines - installation of 14 mini solar power stations, with storage, in medical centers with surgical units (CMA) - ongoing construction of mini power stations in Bontioli and Gongourou - Employment and SME support: - financing of seven projects through guarantee fund with SOFIGIB - 2,898 projects totaling approximately CFAF 2.6 billion financed by national funds (FAPE; FASI; FAIJ; FBDES) - PAE/JF disbursed CFAF 4.5 billion to finance 9,956 projects (including portion financed through national funds) - recruitment of 13,000 brigadiers for THIMO in urban areas and 7,500 brigadiers for THIMO in rural environment - training and employment of 2,000 young people in various enterprises *IMF staff report (excerpts) — Burkina Faso: fiscal and program implementation developments as at end-June and end-September 2019* ### 45. Progress in the promotion of sustainable community development in mining areas is related ### 45. Progress in the promotion of sustainable community development in mining areas is related ### Sustainable community development in mining areas - Progress is related to: (i) installation of the members of the national committee for monitoring the collection, distribution, and use of the Local Mining Development Fund (FDML) and (ii) the issuance of an order formalizing the transfer of taxes to communities. ### Transport infrastructures and telecommunications - Completion of 107 km of roads out of a length of 620 km under construction, bringing the proportion of paved roads to 26.2 percent. - Fiber optic interconnection of the provinces, through the national BackBone project (laying of 736 km of optical fiber). - Improvement of internet access by increasing domestic traffic capacity from 2,150 Mbps at end-2018 to 4,684 Mbps at June 30, 2019. ### Macroeconomic framework and outlook - 2019 growth projected at 6.0 percent, as against 6.8 percent in 2018. - Sectoral value added projections for 2019: - Tertiary sector: increase by 6.9 percent (as against 6.7 percent in 2018). - Secondary sector: increase by 5.6 percent (3.6 percent in 2018). - Primary sector: projected at 3.8 percent in 2019, compared to 9.9 percent in 2018. - Agriculture subsector: up 4.4 percent; cash crops up 8.4 percent as a result of the 14.0 percent rebound in cotton production, equivalent to 554,651 tons. - Market services: up 6.4 percent as against 5.2 percent in 2018. - Nonmarket services: increase in value added of 7.4 percent, as against 9.4 percent in 2018. - Inflation: - Annual average inflation in 2019 expected to be within WAEMU convergence criteria of 3.0 percent. - Inflation rate at end-December 2019 is expected to be negative. - 2020 outlook: - Economic activity projected to remain resilient, with growth levels of 6.0 percent. - Inflation rates should remain negative and in compliance with the union’s norm of 3.0 percent, under the assumption of good rainfall and continued actions to contain prices. ### External sector and balance of payments - Foreign trade 2019: decline in exports in real terms due to decline in cotton fiber shipments; imports expected to grow, widening the trade deficit from a surplus in 2018 to a deficit in 2019. - Net capital inflows and net financial flows with the rest of the world expected to improve. - Overall: transactions with the rest of the world should accentuate the current account deficit and generate an overall balance of payments surplus in 2019. - Current transactions with the rest of the world in 2019 expected to widen the deficit by CFAF 168.2 billion. - Current account deficit expected to be 6.3 percent of GDP in 2019, as against 4.7 percent in 2018 (deterioration of 1.6 percentage point). - The current account deficit not including grants: expected to increase from 8.8 percent in 2018 to 10.3 percent in 2019 (7.4 percent in 2019 as against 5.9 percent in 2018, not including public grants). ### Fiscal policy — Supplementary Budget (LFR) FY2019 - Midterm review of State Budget implementation conducted during June-July 2019 led to anticipation of challenges and corrective measures. - Revised collection targets (first half 2019 performance): - Directorate General of Taxes—DGI: up by CFAF 10 billion; revised target CFAF 869.05 billion. - Directorate General of Customs—DGD: up by CFAF 5 billion; revised target CFAF 664.95 billion. - Directorate General of Treasury and Public Accounting—DGTCP: up by CFAF 125.5 billion; revised target CFAF 303.5 billion. - Increase for the DGTCP derives from mobile telephone licenses (CFAF 120 billion) and revenue from expenditure reduction (CFAF 5.5 billion). - DGI measures to achieve revenue targets include: - VAT spot checks through information sharing (between customs, statistics, government procurement, VAT reimbursement records, and surveys). - Off-site control targeting medium-scale and large enterprises. - Tighten control of all air transport companies to ensure implementation of recently raised levies on airline tickets. - Control and reclassification of taxpayers based on survey data in Ouagadougou and Bobo. - Make the Fourth Medium-Scale Enterprise Directorate operational in Ouagadougou. - Diligent processing of appeals filed. - Continued collection of tax arrears through intensive recovery campaigns in all 19 revenue recovery units (UR). - DGD measures include: - Extend number of products subjected to value control from 22 to 32 by end-December 2019 and strengthen monitoring. - Strengthen skills of inspectors for valuation of imports according to WTO valuation in connection with plan to exit the import verification program (PVI). - Secure transit of goods through enhanced geolocation trucking systems. - Intensify post-clearing control, manifest clearing checks, and on-site routing control in accordance with signed memorandums of understanding. - Estimated revenue and grants in 2019: CFAF 2.0988 trillion, as against outturn of CFAF 1.7459 trillion in 2018 (about 20.2 percent increase). - Revenue-GDP ratio projected at 18 percent. - Earmarked account (CAS) established in June 2019 credited with CFAF 45 billion in 2019; expected to reduce net revenue for the year by CFAF 45 billion. - Grants expected at end-December 2019: CFAF 270.4 billion, as against initial projection of CFAF 257.6 billion (increase from program grants CFAF 6.6 billion and project grants CFAF 6.2 billion). - Total expenditure and net lending revised upward to CFAF 2.3577 trillion at end-December 2019, against CFAF 2.1276 trillion in 2018 (10.8 percent increase). - Wage bill projected to 9.9 percent of GDP against 9.0 percent in 2018. - Budget allocations to security and defense sector in 2019 increased by about 33.93 percent compared to 2018. - Government-financed capital expenditure will stand at 5.2 percent of GDP. - Total expenditure and net lending as a share of GDP projected at 27.7 percent, up 0.6 percentage points from 2018. - Overall deficit in 2019 expected to be 3.0 percent of GDP (deterioration of 1.9 points compared with 2018). - Financing: budget support, drawings on IMF resources, and issues of securities on the financial and money markets. ### Fiscal policy — Initial Budget (LFI) for FY2020 - 2020 Draft Budget Law submitted to the National Assembly broadly consistent with the ECF-supported program, specifically level of overall deficit to nominal GDP (a maximum of 3 percent). - Draft State Budget for the 2020 fiscal year amounts: - Revenue: CFAF 2.21728 trillion. - Expenditure: CFAF 2.50242 trillion. - Overall balance: negative CFAF 285.14 billion, corresponding to -3 percent of nominal GDP. - Planned adjustments to the initial budget law: - Additional subsidies of CFAF 34 billion for energy consumption. - Margin of CFAF 20 billion for the wage bill in the security sector. - Any adjustments to be reflected in the Amending Budget Law no later than end-September 2020. - Measures under the 2020 Budget Law: - Increase in the tax rate on tobacco, cigars, cigarettes, and cigarillos from 45 percent to 50 percent in compliance with WAEMU Directive 01/2017/CM/UEMOA of December 22, 2017. - Expansion of the group liable for withholding to include diplomatic and consular missions, international organizations, and similar entities paying remuneration to service providers. - Promotion of online procedures, including making online declaration compulsory for all taxpayers under normal tax regime. - Make electronic payment compulsory for taxpayers under the DGE (Direction des Grandes Entreprises). - Introduction of the lump-sum tax for fees recording changes of ownership of real properties used as homes valued at CFAF 20 million or less. - Additional tax and administrative measures include: - Strengthen operational capacities of Medium-Scale Enterprise Directorates. - Strengthen fight against fraud, false documentation, and corruption via risk-based analysis for tax audits. - Generalized use of online filing to all taxpayers. - Expansion of use of standard invoices to all taxpayer sectors. - Broaden creation of tax units in municipalities with high tax potential. - Further expansion of tax base through ongoing taxpayer censuses, surveys, and cross checking of information. - Further rationalization of tax exemptions. - Broaden implementation of the property tax registry project. - Pursue implementation of the tax payment arrears recovery strategy. - Make the DGI information center operational for collection, analysis, sharing, and archiving of tax information. - Optimize DGI revenue management software (SINTAX, unique tax identifier—IFU, etc.) and interface with partner administrations' databases. - Measures to prevent counterfeiting of foreign trade documents via interface between SYLVIE and ASYCUDA. - Creation of specialized offices at Bobo Station, Bobo Hydrocarbons, and Bobo Road to increase revenue from specialized activities. - Enhance interconnection of Burkina Faso’s customs information systems with those of Togo and the Côte d'Ivoire. - Intensification of post-customs clearing controls, including monitoring of economic arrangements and beneficiaries of incentive measures. - Implementation of an Exemption Management Module s to reduce file processing times, fight fraud, and obtain real-time statistics on shortfalls. - Introduction of ASYCUDA World on the Internet for licensed customs agents. - Online/electronic payment of customs duties. - Expenditure-side rationalization measures to create fiscal space: - Streamlining of travel missions (internal and external). - Rationalization of electricity, water, and telephone consumption (termination of inactive meters and lines; adjust electricity subscription powers). - Adoption and implementation of a state fleet optimization policy. - Strengthening materials accounting for management of government real and movable properties. - Establishment of regional monitoring and control mechanism for physical outcomes based on state budget and effective application of free and subsidization policies. - Efficient management of maintenance and repairs of motorized assets. - Budget management strengthening activities: - Further digitalization of public procurement procedures. - Support for program managers via capacity development for better steering of public activity. - Strengthening system of multiple authorizing officers through progressive staffing of ministries with inspection units. - Expenditure rationalization of diplomatic missions and consular posts. - Contingency measures: contain non-priority spending on investment and goods and services if revenues fall short of expectations. ### Debt management policy - Main objective: cover government financing requirements and meet payment obligations at lowest possible cost while maintaining satisfactory risk levels and supporting development of the subregional financial market. - 2019 implementation findings: recourse to domestic debt to offset shortage of external concessional resources, focus on long-term domestic debt instruments; moderate risk of overindebtedness still present. - Drawings at June 30, 2019 for domestic debt: CFAF 389.32 billion, including CFAF 223.02 billion in Bons Assimilables du Trésor (BAT) and CFAF 166.30 billion in obligational assimilable treasuries (OAT). - External debt mobilized at June 30, 2019: CFAF 69.29 billion. - Public debt stock at June 30, 2019: CFAF 3.55908 trillion, including CFAF 1.60799 trillion in domestic debt and CFAF 1.95108 trillion in external debt (45 percent and 55 percent respectively). - Projected outstanding public debt at end-2019: CFAF 3.73869 trillion, comprised of CFAF 1.86376 trillion domestic debt and CFAF 1.87493 trillion external debt (49.85 percent and 50.15 percent respectively). - Outstanding debt to nominal GDP at December 31, 2019 expected to be 43.7 percent, as against 42.9 percent at the same date in 2018. - Present value of the ceiling on external debt arranged or guaranteed by the government in 2019: CFAF 370 billion. - 2019 financing instruments: issues of public securities on the regional financial market and a combination of concessional and nonconcessional borrowing. - Capacity-building actions: assessments and actions to align institutional framework with good practices; Ministry of Economy, Finance, and Development mission to Dakar, Senegal during August 19-23, 2019 for immersion in Senegal's public debt management processes and information system; activities to improve design and publication of the statistical bulletin on debt. - 2020-2022 strategy aims: - (i) maintain use of concessional resources to finance the economy’s requirements; external financing denominated in euro will be given priority. - (ii) use a smaller proportion of nonconcessional external resources in accordance with the IMF ECF Program; shift domestic debt profile towards reducing outstanding amounts in favor of external debt. - (iii) slow down country's participation in regional financial market: reduce issue volumes and lengthen maturities. - Commitment: Before undertaking debt management operations, Burkina Faso will consult with IMF staff and provide detailed information on financing conditions. *International Monetary Fund — Content unit from PDF chapter/section.* ### 75. Burkina Faso conducted the assessments using the methodologies of the Debt Management ### Burkina Faso: Public Financial Management Reforms and Sectoral Strategies ### Assessments and Integrated Action Plan - Burkina Faso conducted assessments using DeMPA, PIMA, PEFA, and TADAT methodologies between 2008 and 2018 to improve public financial management. - Reform action plans were prepared for the areas identified; due to proliferation, an integrated action plan of public financial reforms was prepared as a federative document. - A mechanism for monitoring implementation of the integrated action plan was established by decree of the minister responsible for economy. ### Treasury Single Account (CUT) and Accounting Reform - A decree establishing the treasury single account was adopted; a ministerial order describing organization and operation of the CUT was to be adopted by end-2019. - Intention to adopt a roadmap and an updated detailed timetable to monitor implementation of the CUT (benchmark). - Monitoring of the roadmap will be incorporated into activities of the Budget Execution and Cash Flow Monitoring Committee. - Two important accounting reform activities in progress with the DGTCP: - Establishment of the network of accounting officers within customs, tax, and treasury administrations. - Implementation of the law on accrual-basis accounting. - Network of accounting officers: - Decree establishing networks adopted. - Prerequisites being addressed: review of organizational structures (degree organizing MINEFID and order organizing DGD, DGI, DGTCP), allocation and training of human resources, updating procedures, adaptation of information system. - Accrual-basis accounting: - Draft opening balance sheet for 2019 validated by the reform steering committee; comments being processed. - A fine-tuning strategy is being developed with a five-year horizon. - A steering committee has been established and is operating regularly to ensure orderly implementation; government intends to continue leading accounting reform within that committee. ### Program Budget Implementation - Continued implementation (begun in 2017) requires: - Appointment of the Operational Program Office Managers (RBOP) and Operational Program Unit Managers (RUOP). - Review of the template for the Annual Performance Project and the Annual Performance Report. - Implementation of the Annual Performance Report. - Implementation of the initial expenditure programming and performance steering tools. ### Bringing the Wage Bill Under Control - Government measures to align wage bill with revenue collections include: - Developing tools capable of estimating in real time the exact level of the wage bill. - Conducting controls to ensure workforce corresponds to payments made. - Reinforcing capacities of those in the payroll processing chain to reduce overpayment errors. - Taking into account Government guidelines to gradually reduce the rate of increase in additional staffing level by 40 percent. - Continuing revitalization of staff redeployment from high-concentration areas to shortage areas to reduce requirements for additional staff until rationalized job descriptions and a national strategy are finalized. - Enforcing employment ceilings as provided under the Organic Law on Finance Laws (LOLF) by establishing an overall envelope to determine limits for new staff recruitments by ministry. - Decentralization of processing for postal checking accounts and individual revenue orders (ORI) by involving Regional Budget Directorates to recover overpayments. - Continuation of effort for all wages to be paid through the banking system. - Commitment to non-conclusion of any agreements (except for the security sector) leading to an increase in the wage bill before adoption of a comprehensive reform package, including the organic law on the civil service and relevant implementing texts and instruments (Structural benchmark). - Roadmap to overhaul civil service payroll system — targeted actions by end of December 2019: - Hold meeting of steering committee overseeing implementation of 2018 public salary conference’s recommendations. - Pursue implementation of measures to reduce government operating costs. - Resume work of technical team developing wage bill scenarios and drafting the organic law defining general guiding principles of the civil service. ### Oil and Power Subsidies - Government policy: partial application of retail fuel prices adjustment mechanism to protect vulnerable populations from inflationary pressure. - Retail pump fuel price adjustments on October 21, 2019: - Increase of CFAF 13 for Super fuel. - Increase of CFAF 9 for diesel fuel. - Annual allocations will be regularly provided in the State Budget to cover any shortfalls connected with subsidies of oil consumption to prevent arrears and enhance budget transparency. - Communication efforts to explain costs and inequitable distribution of subsidies will be stepped up given social context. - Specialized studies under way to be finalized by end-June 2020 on: - Effects of retail fuel price changes on prices of consumer goods. - Expenditure items in price structures. - Subsidy for butane gas in Burkina Faso. - Assessment in progress to grant the unit responsible for monitoring consumer fuel prices decisionmaking autonomy within a predefined range. ### Improve Performance in the Energy Sector - Memorandum of Understanding (2016) between Government and SONABHY and SONABEL fully implemented by SONABEL, with effects including: - Increase in capital by clearing debit carryover at end-2015 of CFAF 40 billion. - Payment of a balancing subsidy of CFAF 26.9 billion to offset arrears in repayment of loans owed to the State by SONABEL. - Achievement of profits in 2016, 2017, and 2018. - Substantial reduction in operating debt through rescheduling some debt to SONABHY (CFAF 26.6 billion). - Government recognizes fiscal costs related to SONABEL and SONABHY activities; additional reforms planned to strengthen operational and financial performance. - Audit of financial operations and accounting practices of SONABHY to be completed by end-March 2020. - Government intends to conduct assessment of hydrocarbon supply chain performance and audit of performance, organization, and operating costs of SONABHY to inform policy recommendations. ### Cotton Sector and Other Agricultural Sectors - Cotton sector recovery actions expected to increase production, productivity, and quality through: - Rehabilitation of producer groups. - Upgrading of Research and Development activities and involvement. - Close monitoring of cotton producers and access to quality inputs. - Clearing of producers’ domestic and external arrears. - Establishment of a high-level committee, co-chaired by Ministers of Trade, Agriculture, and Finance, to follow up on sustainable recovery measures for cotton production. - Policy to support local processing of cotton fiber to create wealth and jobs for young people and women. - Major actions to develop a productive, resilient, market-oriented agricultural sector include (inter alia): - Scaling innovative mechanisms to improve delivery of agricultural consulting services. - Establishment of a new input subsidization mechanism. - Creation of an innovative incubator for agricultural entrepreneurs in certain Rural Promotion Centers (CPR) and the Multipurpose Agricultural Center (CAP of Matroukou). - Acceleration of agricultural mechanization with subsidized equipment and establishment of an assembly facility for tractors and cultivators. - Promotion/development of innovative mechanisms for access to agricultural credit (agricultural insurance, storage, warehouse warrants). - Continuation of efforts to make agricultural cooperatives compliant with OHADA Uniform Acts. - Decentralization of Banque Agricole du Faso. - Technical assistance agreement with China for construction of major hydroagricultural improvements and consulting support services. - Continued implementation of hydroagricultural improvements in the Sourou Agropole. - Continuation of works on the Sanghin Dam under PVEN with AGETER. - Establishment of agricultural product processing units in high-output areas. - Establishment of post-harvest agricultural infrastructures (canning factories, trading centers, shops). - Establishment of an agricultural development fund (Council of Ministers' decree to establish fund pending). - Implementation of a natural phosphate-based mineral fertilizer production plant. - Establishment of an agricultural training center in each of the Center's regions—Central Plateau, Northern, Central-Eastern, and Cascades. - Implementation of the National Rural Land Agency (ANTR); preliminary documents prepared and process in progress. - Promotion of contract farming via projects (VAFA funded by EU; Contract Farming and Ecological Transition Program funded by AFD and DANIDA/PACTE). - Plans to establish a contract farming observatory and a contract farming development fund. - Land tenure security: 209 out of 351 municipalities (approximately 60 percent) will have rural property services to issue rural property titles by horizon 2020. ### Financial Inclusion - National Strategy for Financial Inclusion (SNFI) target: increase adult population with access to and use of financial services from 43 percent in 2017 to 75 percent by 2023. - Five strategic areas: (1) availability and supply of credit; (2) promotion of digital finance; (3) availability of agricultural financing; (4) improvement of risk coverage options; (5) strengthening policies, regulation, supervision. - Financing commitments for SNFI divided as: - Government own resources: CFAF 20.1 billion. - Professional Association of Decentralized Financial Systems: CFAF 0.97 billion. - Development partners: Luxembourg CFAF 1.8 billion; West African Development Bank CFAF 20.0 billion; World Bank €87.6 million. - A round table took place on November 12, 2019 to confirm commitments and to kickstart implementation. - Legal change: Article 53 of Law 013-2016/AN of May 3, 2016 on Regulation of Credit Information Bureaus amended on May 14, 2019 by Law 024-2019/AN to dispense with requirement for a register of prior consent on credits established before May 25, 2016. - Actions planned for 2020: - New impetus for the National Consultation Framework for Financial Inclusion Stakeholders (CNC-AIF); make follow-up and assessment mechanism operational. - Develop and implement strategy communication plan. - Develop and implement national financial education program. - Implement 2020 annual action plan focused on increasing awareness, strengthening capacities of decentralized financial systems on new instruments and loans, implementation of National Inclusive Finance Fund (FONAFI), and Inclusive Finance Promotion Project. ### Government’s Social Protection Strategy (SP-PNPS) and Key Activities - National Social Protection Policy (PNPS) aims to provide coherent, efficient, sustainable social protection for poor and vulnerable populations. - Institutional achievements: - Establishment of institutional follow-up and assessment mechanism chaired by the Prime Minister (Decree 2013-492/PRES/PM/MASSN/MFPTSS/MEF of June 20, 2013); coordination bodies operational and hold regular meetings. - Establishment of a single register of vulnerable persons: - Database of 10,270 households (61,627 persons), including 5,727 vulnerable households (48,067 persons), covering 21 municipalities at end-June 2019. - Completion nationwide requires municipalities to establish social services; advocacy with regional governors ongoing. - Establishment of the single register might be completed by 2021 for 245 municipalities and districts remaining to be covered, with 100 municipalities in 2020 and 145 municipalities in 2021. - As of June 30, 2019, national program to meet requirements of vulnerable persons supported 5,727 vulnerable households (48,067 persons) through transfers in kind: - Provisions: 1,074.7 tons. - Improved seed: 51.045 tons. - Coverage of school expenses for 3,055 children from these vulnerable households. - Outlook and focus areas: - Strengthening advocacy for establishment of social services in municipalities. - Continue efforts to establish single register targeting 60 municipalities at end-2019 with aim to cover entire country by 2022. - Advocacy for creation of a budget item in municipalities to support social protection activities. - Strengthening synergies and partnerships, capacity development, establishment of national social protection fund, and continued implementation of national program to meet requirements of vulnerable persons. *BURKINA FASO — INTERNATIONAL MONETARY FUND* ### 95. Strengthening the resilience of households in the agricultural, forestry, livestock, wildlife, and ### 1bfaea2019004 - 95. Strengthening the resilience of households in the agricultural, forestry, livestock, wildlife, and ### Strengthening resilience of households in the ASPHF sectors - 62,902 vulnerable persons have received cash benefits. - 1,073.73 tons of provisions were distributed in the framework of the food aid. - 2,500 tons of food commodities were distributed to malnourished vulnerable persons. - Producers were given access to: - 543 tons of livestock feed, - 30 tons of forage seed, - 1,812 tons of producer seed. - 2,452 vulnerable households were given small ruminants and poultry. - 30 tons of forage seed, and 1,812 tons of seed were provided as support for production in structurally deprived areas. ### Food and nutritional security stock and storage capacity - 25 warehouses were built to increase storage capacities. - National security stock (SNS) increased during the first half of the year to 50,038.15 tons. - Cumulative outflows totaled 25,623.28 tons. - 135 pilot shops were opened. ### Support for agricultural production in deprived areas - 93 sites received support in vegetable production during the first half of the year. - 1,765 producers were trained to make manure pits. - 1,320 vulnerable producers were trained in vegetable production techniques. - Fertilizer distribution: - 346.33 tons of fertilizer were distributed at subsidized prices to vulnerable persons in support of agricultural production. - 27.65 tons of fertilizer were distributed free of charge to benefit vulnerable persons in support of agricultural production. - 106.31 tons of improved variety seed were made available to vulnerable households. ### Highly labor-intensive activities (HIMO) and cash-for-work - As of June 30, 2019: - 925.93 tons of provisions were distributed free of charge under HIMO activities. - 62,902 vulnerable persons received cash for work benefits. ### Cash transfer activities: Burkin-Naong-Sa Ya social safety net project - As of June 30, 2019: - 81,857 beneficiaries in the Eastern, Central-Eastern, Central-Western, and Northern regions received cash transfers. - Total amount disbursed: CFAF 13,628,580,000. - Reported impacts: - Resources enabled beneficiaries to meet basic social requirements (food, health care, education, etc.). - Some beneficiaries used saved cash to undertake income-generating activities. ### Disaster and humanitarian assistance - As of June 30, 2019: - 193,399 persons (50,180 men and 143,219 women) who had been victims of disasters and humanitarian crises received assistance. - This figure contrasts with a projected 40,000 beneficiaries and reflects implementation influenced by intercommunity conflicts and terrorist attacks. ### Brigades vertes and related initiatives - Supplementary recruitment targeted women over 40 years of age from vulnerable or disadvantaged sectors. - 3,000 women benefited from an increase in their allowances from CFAF 12,000 to CFAF 37,000 per month corresponding to payments for HIMO. - Literacy for HIMO beneficiaries and Brigades vertes supported via opening of literacy centers throughout the country, with women as main beneficiaries. - National project for treatment and recycling of plastic waste materials: - Plan to build and equip 13 plastic waste collection and recycling centers in cooperation with municipalities. - Project aims to create approximately 10,000 jobs. ### Improvement of macroeconomic data - Revision of the national accounts with the new 2015 base year has been fully completed. - Results were published in December 2018 at the National Institute of Statistics and Demography (INSD) website. - National accounts series were retropolated for the period 1999-2014. - A new national accounts series for the period 1999-2017 in accordance with SNA 2009 was made available. - Revised series were made available to users at the INSD website (www.insd.bf) on September 28, 2019. - The revised GDP series will be incorporated into the macroeconomic framework of the program beginning with the fourth program review. - Forecasting and modeling updates: - Ongoing working sessions to update the automated forecasting instrument (IAP) at the end-2019 horizon. - A restricted technical workshop in September updated IAP nomenclatures and tables relating to the balance of payments, monetary statistics, tables of government financial operations (TOFE) and debt; these are compliant with GFSM 2014, Sixth Edition of the Balance of Payments Manual, GFSM 2000, and Debt. - The Resources and Expenditure Table (TRE) update is effective largely from the 2015 TRE (new base year). - Remaining tasks for the year: overall completion and consistency of the exploratory module, testing calculation mechanisms, preparation and integration of the 2016, 2017, and 2018 TREs depending on the IAP format. - A technical workshop on monitoring and assessment of efforts for the IAPs to be updated by experts, particularly AFRITAC and GIZ, is programmed to be held in October 2019. ### Governance and anti-corruption activities - The Higher Authority for Government Anti-Corruption and Control Activity (ASCE LC) carried out: - Financial and accounting audit for the 2018 fiscal year of the Presidency of Burkina Faso, the Prime Ministry and Ministries. - Outreach campaign for Law 0004-2015/CNT of March 3, 2015 on Prevention and Repression of corruption in Burkina Faso, including information and awareness missions for populations of rural municipalities in 12/13 regions. - Educational presentations for secondary school students in municipalities visited. - Pursuit of declarations of interest and assets. - Two money laundering investigations based on information from the National Financial Intelligence Processing Unit (CENTIF). - Two investigations related to alleged offenses involving politically exposed persons. - Continuation of investigations on assets improperly acquired by politically exposed persons. - Implementation of Law 016-2016/AN of May 3, 2016 on Anti-Money Laundering and Terrorism Financing: - Government adopted texts to implement the National Coordination Committee for Anti-Money Laundering and Financing of Terrorism Activities. - Established an effective system for the supervision and monitoring of parties subject to regulation in the nonfinancial sector. - Adopted a supplementary list of persons subject to requirements in connection with anti-money laundering and financing of terrorism and proliferation of weapons of mass destruction activities. *Source: 1bfaea2019004 - 95. Strengthening the resilience of households in the agricultural, forestry, livestock, wildlife, and fisheries (ASPHF) sectors (extracted content).* ### 106. The government will take all necessary steps to achieve the objectives and criteria as ### 106. The government will take all necessary steps to achieve the objectives and criteria as ### Program monitoring and reviews - Program monitoring: semiannual reviews based on quantitative performance criteria established through June 2020 and indicative benchmarks through December 2020 (Table 3), and structural benchmarks (Table 4). - Reviews timing: - Fourth program review: should be completed after June 15, 2020. - Fifth program review: should be completed of December 25, 2020. - The program will be reviewed in accordance with the Technical Memorandum of Understanding (TMU) that defines quantitative performance criteria and reporting requirements. ### Quantitative performance criteria and indicative targets (selected figures) - Units: CFAF billions. - Table 3 — Quantitative Performance Criteria (cumulative from beginning of year unless noted): - Ceiling on net domestic financing of the government: 60 (Mar. 1/June), 67 (Sept. 1/Dec. 1/), 125, 201. - Ceiling on the amount of external debt contracted or guaranteed by the government (PV): 410, 410, 410, 410. - Ceiling on the accumulation of external payment arrears by the government: 0, 0, 0, 0. - Ceiling on the guaranteeing of new domestic loans to suppliers and contractors by the government: 0, 0, 0, 0. - Ceiling on government guarantees of new bank pre-financing for public investments: 0, 0, 0, 0. - Table 3 — Indicative Targets: - Ceiling on the accumulation of domestic arrears by the government: 0, 0, 0, 0. - Ceiling on the overall fiscal deficit including grants: 0, 141, 176, 278. - Floor on government revenue: 418, 888, 1332, 1775. - Floor on poverty-reducing current social expenditures: 52, 103, 154, 205. - Ceiling on the stock of certified and unpaid VAT refunds older than 30 days: 40, 40, 40, 40. - Ceiling on the value of PPPs contracted: 200, 200, 200, 200. - Sources: Burkinabè authorities; and IMF staff estimates and projections. - Notes and adjustments: - The ceiling on net domestic financing will be adjusted upward for shortfalls in external program assistance up to a maximum of CFAF 80 billion (see Table 1 projections). - The ceiling on net domestic financing will be adjusted upward by the amount of securitization of accumulated SONABHY losses owing to below cost-recovery sales by end-June 2018, up to a maximum of CFAF 97 billion (only applies to 2018 securitization proceeds not yet cashed by SONABHY). - The ceiling on net domestic financing will be adjusted downward by the full proceeds of any concessional budget support loan used for debt management purposes as specified in the TMU. - Projected External Program Assistance (Table 1): - End-December 2019: Program grants and loans 119 (Of which program grants) (99). - End-June 2020: 55 (46). ### Structural benchmarks — 2019 (Table 2) — objectives, completion dates, and status (selected) - Establish a special account for VAT credit refunds funded with a portion of VAT revenues and produce quarterly reports on operational management: Strengthen integrity of VAT system — June 2019 — Met. - Appoint an independent external auditor to audit SONABHY's operations, financial position, and accounting practices: Reduce fiscal risks and eliminate fiscal costs associated with subsidies — July 2019 (reset from April 2018) — Met. - Complete revision of national accounts statistics to the new base year and disseminate revised series: Improve accuracy of national statistics — September 2019 (reset from December 2018) — Met. - Operationalize the Treasury Single Account: Improve treasury management — September 2019 (reset from December 2018) — Not Met. - Conduct a study on taxation system of small- and medium-sized enterprises: Strengthen tax administration — September 2019 — Met. - Reduce number of new civil service staff hires in 2019 compared to initial projection of 10,615 hires: Tighten control of the wage bill — September 2019 — Met. - Budget and account for revenue from/expenditure on prime de motivation in the 2020 budget law: Improve fiscal transparency — September 2019 — Met. - Submit to the National Assembly a 2020 budget proposal fully aligned with projected wage bill of ECF-supported program: Contain public-sector wage bill — September 2019 — Met. - Harmonize taxation of tobacco in line with new WAEMU directive by setting rate at minimum of 50 percent: Increase revenue — November 2019 — Met. - Include PPPs in the public investment program: Mitigate fiscal risks — December 2019 — Met. ### Structural benchmarks — 2020 (Table 4) — objectives and completion dates (selected) - Dematerialization of asset declarations of government officials (online submissions, searchable database): Improve governance and fight corruption — March 2020 (reset from December 2018). - Conclude no new agreements (except security sector) leading to increase in wage bill before adoption of comprehensive reform package: Contain public-sector wage bill — From the approval of the 2020 budget. - Adoption by the Treasury Directorate of a roadmap with detailed chronogram on implementation of Treasury Single Account: Improve cash management — December 2019. - Finalize external audit on SONABHY’s financial operations and accounting practices: Reduce fiscal risks — March 2020. - Complete a performance audit of SONABHY and evaluate performance contracts with SONABHY and SONABEL upon expiration: Reduce fiscal risks — June 2020. ### Technical Memorandum of Understanding — definitions and conditionality (selected) - Government definition: central government of Burkina Faso; excludes local governments, central bank, and other public/government-owned entities with autonomous legal status not included in TOFE unless otherwise indicated. - Definition of debt: per IMF Executive Board Decision No. 15688-(14/107); includes loans, suppliers’ credits, leases (PV of lease payments at inception, excluding operation/repair/maintenance), and arrears/penalties/judicially awarded damages arising from contractual obligations. - Debt guarantees: explicit legal obligation to service a debt in the event of nonpayment by the borrower. - Debt concessionality: a debt is concessional if it includes a grant element of at least 35 percent. Present value of debt at contracting is calculated by discounting borrower’s future debt service payments; discount rate used is 5 percent. - External debt: debt contracted or serviced in a currency other than the CFA franc; relevant performance criteria apply to external debt of government, public enterprises receiving transfers, other public entities with government holding >50 percent capital, and private debt guaranteed by government. - Quantitative performance criteria (2019–2020): - (i) ceiling on net domestic financing of the government; - (ii) ceiling on contracting or guaranteeing of external debt by the government in PV terms; - (iii) ceiling on accumulation of payment arrears on external debt service; - (iv) ceiling on guaranteeing of domestic loans to suppliers and contractors; - (v) ceiling on guaranteeing of bank pre-financing of public investments. ### Specific definitions and operational rules (selected) - Net domestic financing: sum of (i) net bank credit to the government (including net bank credit vis-à-vis national banking institutions; IMF disbursements included); (ii) stock of unredeemed government bills and bonds held outside national commercial banks; (iii) privatization receipts and other government claims and debts vis-à-vis national nonbank institutions. Calculated based on TOFE and government flow-of-funds table. - Adjustment rules: - Cumulative ceiling on net domestic financing adjusted upward by shortfall in external program support up to CFAF 80 billion (calculated relative to projections in Table 1). - Ceiling adjusted downward by full amount of disbursement of concessional budget support loans used for debt management operations replacing relatively more expensive domestic debt. - Ceiling adjusted upward by securitization of accumulated SONABHY losses up to CFAF 97 billion (only for 2018 securitization proceeds not yet cashed by SONABHY). - Reporting deadlines: - Ministry of the Economy and Finance to forward data on net domestic financing to IMF within six weeks after end of each quarter. - Details on any loan contracted by government (terms and creditors) must be reported within four weeks of the end of each month; same for guarantees. ### Quantitative indicative targets and other program definitions (selected) - Program includes quantitative indicative targets for: - accumulation of domestic arrears; - overall fiscal deficit (commitment basis, grants included); - total government revenue; - poverty-reducing current social expenditures; - value added tax refunds; - public-private partnerships. - Accumulation of domestic arrears: government will not accumulate payment arrears during program period. Definitions of arrears: - Debt unpaid >30 days after contractual due date. - Wages or pensions unpaid 90 days after due date. - Payments for goods and services received more than 90 days after processing of supporting documents. - Overall fiscal deficit including grants: valued on commitment basis; defined as sum of government’s net foreign and domestic financing (from financing side) plus a cash basis adjustment. Ceiling adjusted upward for shortfalls in external program grants up to CFAF 80 billion. - Government revenue: valued on cash basis; includes all tax and non-tax revenue collected by relevant directorates and treasury, including revenue from treasury checks. - Poverty-reducing current social expenditures: defined as current expenditure in social spending program in the budget; criteria listed for eligible programs. - Certified and unpaid VAT refunds older than 30 days: stock comprised of signed tax refund amounts; 30-day period from date of signature of tax refund certificate by Director General of Taxes. - Public-private partnerships: defined as long-term contract between private party and government entity where private party bears significant risk and management responsibility and remuneration linked to performance; excludes pre-financing and supplier credit arrangements. ### Data reporting requirements (selected deadlines and frequencies) - TOFE and customary appendix tables: Ministry of Economy, Finance and Development (MINEFID) — Monthly — 6 weeks. - Domestic budgetary financing (net bank credit and stock of unredeemed government bonds and bills): MINEFID/BCEAO — Monthly — 6 weeks. - Monthly execution rates by customs office relative to monthly forecasts: MINEFID/DGD — Monthly — 6 weeks. - Quarterly report on cross-check control using single taxpayer identification between DGI and DGD (starting with large taxpayers): DGD/DGI — Quarterly — 6 weeks. - Stock of external debt, external debt service, external debt contracted and external debt repayment: DGTCP — Quarterly — 6 weeks. - Social poverty-reducing expenditures in table format: DGTCP — Monthly — 6 weeks. - Petroleum product prices, consumption and taxes and subsidies unpaid: SONABHY/DGTCP — Monthly — 4 weeks. - Quarterly summary report of SONABHY monthly accounts including gains/losses, cash flows, income statement and subsidies: SONABHY/MINEFID — Quarterly — 6 weeks. - Quarterly summary report of SONABEL accounts including cash flows, income statement and taking into account all received subsidies and project grants and loans: SONABEL/MINEFID — Quarterly — 6 weeks. - Monthly statement of accounts with the treasury, broken out by major category: DGTCP — Monthly — 6 weeks. - Quarterly activity report from Investigation and Intelligence Directorate including taxpayer controls (DGI/DGD): Quarterly — 6 weeks. - Monthly customs revenue projections by customs post and outcomes vs projections: DGD — Monthly — 6 weeks. - Monthly DGI revenue projections (annualized basis) by type and outcomes vs projections: DGI — Monthly — 6 months. - Monthly DGTCP revenue projections (annualized basis) by type and outcomes vs projections: DGTCP — Monthly — 6 months. - Quarterly summary report of VAT refunds including transfers received from ACCT, cumulative amount paid since beginning of year, stock of certified refund claims, total VAT refund claims being processed: DGI — Quarterly — 3 months. - Monthly update of PPP and sovereign guarantee databases: DGCOOP/MINEFID — Monthly estimate of implicit pump fuel price subsidy — CIDPH — 4 weeks. - Monetary and banking data (consolidated balance sheet, monetary survey provisional and final, interest rates, bank supervision indicators): BCEAO — Monthly — 6 weeks to 10 weeks depending on series. - Balance of Payments preliminary annual data: BCEAO — Annual — 9 months. - Foreign trade statistics: INSD/MINEFID — Monthly — 3 months. - Any revision of balance of payments data: BCEAO — As they occur — 2 weeks. - Provisional national accounts and any revision: MINEFID — Annual — 2 weeks. - Disaggregated monthly consumer price indices: MINEFID — Monthly — 2 weeks. - Any study or official report on Burkina Faso’s economy on date published or date of entry into force: MINEFID — 2 weeks. - Any decision/order/law/decree/ordinance/circular having economic or financial implications on date published or date of entry into force: MINEFID — 2 weeks. ### Debt sustainability analysis — key findings and policy implications - Risk ratings: - Risk of external debt distress: Moderate. - Overall risk of debt distress: Moderate. - Granularity in the risk rating: Substantial space to absorb shocks on external debt. - Application of judgement: No. - Basis: Joint World Bank/IMF Debt Sustainability Analysis (DSA) prepared in context of 2019 third review of three-year program supported by ECF; based on end-2018 debt data and LIC DSF methodology; current debt-carrying capacity consistent with classification of ’medium’. - Findings: - External risk of debt distress remains moderate. - All external debt indicators remain below relevant indicative thresholds under baseline scenario. - Baseline scenario anchored on overall fiscal deficit of 3 percent of GDP starting from 2019. - Under a standard stress test of a shock on exports, two of the thresholds of PPG external debt are breached. - Overall public debt does not breach relevant benchmark under all scenarios, but public debt distress assessed as moderate because external debt risk rating is moderate. - Policy recommendations to prevent deterioration of debt sustainability outlook: - Maintain a sound macro-fiscal framework. - Implement structural reforms to diversify export base of goods and services. - Exercise control over government guarantees and contingent liabilities. - Limit non-concessional borrowing. - Strengthen implementation of medium-term debt strategy to contain debt service and gross financing needs. *Prepared jointly by the staffs of the International Monetary Fund (IMF) and the International Development Association (IDA); December 5, 2019.* ### 1. Burkina Faso’s public debt levels have increased in the last few years following ### 1. Burkina Faso’s public debt levels have increased in the last few years following ### Public debt levels and composition - The nominal stock of public debt as of end-2018 stood at 43.2 percent of GDP. - The sizable increase in 2018 was driven by: - an elevated budget deficit; - the domestic securitization of the off-budget government subsidies to the national oil company SONABHY accumulated in 2017 and the first half of 2018; - the large cash adjustment in 2018, driven by the payment of the committed expenditures without payments (DENO) accumulated in 2017. - Composition shifts: - External debt comprised 57.0 percent of the total debt stock at end-2018, down from 77.1 percent at end-2014. - Domestic debt increased as the regional market traditionally financed the fiscal deficit at competitive rates. - Text Table 1: Burkina Faso: Public Debt Stock, 2014-18 (percent of GDP) - 2014 2015 2016 2017 2018 - Public Debt: 29.9 35.6 39.2 38.4 43.2 - External Debt: 23.0 26.3 27.9 24.1 24.6 - share (in percent to total debt): 77.1 73.9 71.1 62.8 57.0 - Domestic Debt: 6.8 9.3 11.3 14.3 18.6 - share (in percent to total debt): 22.9 26.1 28.9 37.2 43.0 - Memorandum items: - Overall fiscal balance: -1.9 -2.2 -3.5 -7.8 -4.9 - GDP growth (in percent): 4.3 3.9 5.9 6.3 6.8 ### Coverage of public debt - Current coverage includes external and domestic obligations of the central government but excludes guarantees and non-guaranteed SOE debt. - Authorities expressed willingness to exert efforts to extend coverage to include guarantees to the public and private sectors for the next vintage. - According to authorities, the two main state-owned enterprises that are majority owned by the public sector do not borrow externally. - The two public enterprises are SONABHY, the state-owned oil-importing company, and SONABEL, the national electricity company. - Domestic debt is defined as debt denominated in the regional currency, the FCAF. - Choice of coverage is based on currency rather than residency due to the difficulty of monitoring residency of creditors for debt traded in the WAEMU regional market. ### Macroeconomic forecasts and revisions underlying this DSA vintage - Main changes versus the previous DSA (January 2019): - The current account has been revised sizably upwards to account for artisanal gold exports and more favorable external sector conditions. - Gold price forecasts are sizably larger than projections during the previous DSA and maintain an upward path amid robust domestic gold sector expansion. - Cotton price forecasts have slightly deteriorated relative to the previous DSA, though prospects for improved production and quality remain favorable. - Box 1 highlights: - Gold prices revised upwards; cotton prices marginally worsened. - Gold production expected to rise moderately as new mines begin exports; security situation could hamper exploration and limit prospective mining. - GDP growth: 2018 exceeded the last DSA baseline; growth projected to remain at 6 percent in 2019 onwards. - Fiscal targets: Assumes authorities reach and maintain a 3 percent fiscal deficit target by 2019 onward, consistent with WAEMU convergence criteria and the ECF-supported program. - Domestic debt projected to continue increasing; in 2019 domestic debt expected to increase by 0.3 percentage points of GDP to be around 18.9 percent of GDP. - Medium-term domestic debt composition assumed: - 45 percent T-bills with an average interest rate of 5 percent; - 30 percent of 3 to 5-year bonds with an average interest rate of around 6¼ percent; - 25 percent of 8-year bonds with an average interest rate of 6.5 percent. - Remainder of the deficit (around 20 percent) assumed financed via external debt on gradually less generous terms. - Current account: estimated to reach 5.2 percent of GDP in 2019 then drop to around 4.0 percent of GDP in 2020 as new gold mines export. - Realism checks: - Baseline credible versus cross-country experiences and historical experience. - Planned fiscal adjustment of around 2 percent of GDP over the next 3 years, reflecting large deficits of 7.8 percent of GDP in 2017 and 4.9 percent of GDP in 2018. - Fiscal adjustment lies in middle of distribution of past primary deficit adjustments; adjustment started in 2018 and was satisfactory in H1 2019. - Growth expected to stabilize at 6 percent under plausible fiscal multipliers. ### Financing assumptions and non-concessional borrowing - DSA assumes an increase of non-concessional financing over the forecast horizon. - Authorities seek external loans for projects in 2018 and 2019 (Text Tables 4 and 5 list projects). - Actual new loans contracted, particularly non-concessional, expected to be well short of targeted amounts; borrowing plans have an aspirational element. - DSA includes both already-contracted and anticipated borrowing on a disbursement basis. - Authorities' debt strategy: exhaust concessional financing before non-concessional/commercial options. - Given financing needs, DSA assumes non-concessional borrowing will expand to an average of around 20 percent of total external borrowing, with a growing share over time starting from 2020. - Grant element of new borrowing assumed to decrease gradually over the forecast horizon. ### Country classification and stress test determination - Debt-carrying capacity classified as "medium". - Composite Indicator (CI) index is 3.02 based on October 2019 WEO and 2018 CPIA score; below threshold of 3.05. - Relevant indicative thresholds for 'medium' category: - PV of debt-to-GDP ratio: 40 percent - PV of debt-to-exports ratio: 180 percent - Debt service-to-exports ratio: 15 percent - Debt service-to-revenue ratio: 18 percent - Benchmark for PV of total public debt for medium capacity: 55 percent of GDP. - Text Table 4: External debt burden thresholds (Weak/Medium/Strong) and TOTAL public debt benchmark (PV of total public debt in percent of GDP): 35/50/70 for weak/medium/strong. - Determination of scenario stress tests: - A combined contingent liability shock of 8.5 percent of GDP was conducted (Text Table 5). - 1.5 percent of GDP included as contingent liability for guarantees to the private sector. - Standard SOE debt of 2 percent of GDP included to reflect potential guaranteed and unguaranteed domestic debt of public companies (e.g., SONABHY, SONABEL, SOFITEX). - No shock for PPPs as the stock is still less than 1 percent of GDP. - Default value of 5 percent of GDP retained, representing average government cost of a financial crisis. - Tailored commodity price shock for 2020 applied to exports, capturing a one standard deviation decline: - Gold price decline: 12 percent - Grains price decline: 15 percent - Cotton price decline: 11 percent - Commodity shock applied where commodities constitute more than 50 percent of total exports; commodities constitute around 80 percent of total exports in Burkina Faso. ### External debt sustainability (baseline and stress tests) - Baseline results: - Under the baseline, all external public and publicly-guaranteed (PPG) debt indicators remain below policy-relevant thresholds for the next ten years. - PV of external debt-to-GDP ratio expected to remain at or below 17 percent over the projection horizon, decreasing from 16.7 percent in 2019 to 14.9 in 2029. - PV of debt-to-exports ratio expected to grow gradually from 55.2 percent in 2019 to 68.7 percent in 2029, remaining below the 180 percent threshold. - Debt service-to-exports ratio remains around 4 percent for most of the next 10 years, reaching 4.8 percent in 2029. - Debt service-to-revenue ratio declines from 6.9 percent in 2019 to 4.8 percent in 2029. - Sensitivity and standardized stress tests: - Export shock has the largest negative impact, triggering minor breaches to two external PPG debt indicators: - PV of debt-to-exports ratio reaches 181.7 percent in 2021 and remains above 180 percent thereafter. - Debt service-to-exports ratio reaches its threshold in 2027 through 2029. - Other shocks (real GDP growth, primary balance, one-time 30 percent depreciation, contingent liabilities, commodity prices) do not lead to breaches of external debt thresholds. ### Public sector debt sustainability (baseline and stress tests) - Baseline projections: - PPG public debt projected to peak at 43.5 percent of GDP for end-2019 and then trend downward. - Small increase in public debt in 2019 driven by domestic debt to finance a consolidated budget. - External debt-to-GDP projected to be contained gradually and at a faster rate. - PV of public debt-to-GDP ratio does not breach the 55 percent benchmark; remains around 36 percent over the projection horizon. - PV of debt-to-revenue ratio expected to peak in 2021 at 155 percent then decrease to 150 percent by 2029. - Debt service-to-revenue and grant ratio escalates from 30 percent in 2019 to 42½ percent by 2021 due to short maturity of domestic financing, raising concerns over medium- to long-term liquidity risks for total public debt service. - Sensitivity and standardized stress tests: - Most extreme shocks for public debt figures: commodity price shock, exports shock, and contingent liability shock. - Under a commodity price shock, PV of debt-to-GDP would peak at 51 percent of GDP in 2029—below but closer to the 55 percent threshold. - Commodity price shock underscores susceptibility to terms-of-trade shocks given volatility in gold, cotton, and agricultural product prices. - Negative gold price shocks also adversely affect fiscal position via lower gold revenues. - Tailored combined contingent liability shock notably deteriorates debt service-to-revenue ratio. ### Key policy implications and recommendations (implied by analysis) - Sustain fiscal consolidation to meet the 3 percent fiscal deficit target from 2019 onward as committed under WAEMU and the ECF program. - Limit off-budget debt-creating operations and provide provisions for subsidies (e.g., to SONABHY) to contain domestic securitization risks. - Continue efforts to deepen domestic financial markets while managing short-term liquidity risks from increased short-maturity domestic financing. - Prioritize exhausting concessional external financing and carefully manage the planned expansion of non-concessional borrowing (assumed average of around 20 percent of total external borrowing). - Strengthen export base and resilience to commodity price volatility, especially for gold and cotton, to reduce vulnerability to external shocks. - Extend debt coverage over time to include guarantees to public and private sectors to improve transparency and the comprehensiveness of debt monitoring. *Source: IMF staff analysis and DSA materials as presented in the provided content unit.* ### 15. Fiscal risks are substantial. The baseline scenario assumes Burkina Faso achieves the ### 15. Fiscal risks are substantial. The baseline scenario assumes Burkina Faso achieves the ### Fiscal consolidation and baseline assumptions - Baseline assumes Burkina Faso achieves the planned fiscal consolidation to WAEMU fiscal deficit convergence criteria of 3 percent of GDP in 2019 and then maintains the deficit at this level over the medium-term. - Windfall revenues of around 1.4 percent of GDP in the first half of the year make the 2019 target appear achievable. - The projected fiscal adjustment is described as "realistically ambitious in historical comparison, standing at around the 75th percentile." - Risks to maintaining the baseline include: - Absence of comparable windfall revenues in 2020. - Increased public expenditures associated with a potentially deteriorating security situation, in the context of a year of elections. - Possible less favorable development of exports and overall GDP due to vulnerability of primary exports (cotton and gold) to commodity price shocks and potential deterioration in security conditions. ### Export structure, diversification, and contingent liabilities - Exports currently consist mainly of gold and agricultural products; diversification of goods exports and strengthening services exports are emphasized as important. - Under all external debt indicators, the most extreme shock was an export shock. - Diversification is framed as a long-term policy objective achievable through sustainable and efficient public investment in infrastructure and education. - Burkina Faso has a high risk of debt shocks arising from contingent liabilities associated with off-budget activities, including: - debt of state-owned enterprises, - fuel subsidies, - pre-financing of public investment projects, - other potential public-private partnerships (PPPs). - Authorities’ planned measures to build capacity to analyze and mitigate these risks include: - auditing the national oil company – SONABHY, - operationalizing the fuel price adjustment mechanism, - including future fuel subsidies in the budget, - developing a database of sovereign guarantees and PPPs. ### Market access and external financing options - The regional market appears more willing to absorb a higher amount of debt issued by Burkina Faso as large WAEMU economies increasingly seek external financing through Eurobond issuance. - This may allow Burkina Faso to issue more bonds on the regional market with longer average maturity, potentially decreasing the average interest rate on sovereign bonds and easing rollover risks. - Authorities are studying alternative external financing sources that could be semi-concessional to help meet increasing gross financing needs. - Concessional loans are defined as loans with a grant element above 35 percent. Semi-concessional loans are those "that have a material positive grant element but that is lower than 35 percent." ### Debt sustainability assessment and stress tests - Staff assessment: Burkina Faso’s risk of external debt distress remains moderate. - Baseline scenario: no breach of debt distress thresholds for any of the debt and debt service indicators. - Under a standard stress test (shock to exports), two thresholds of external PPG debt sustainability are breached. - The granularity in the risk rating (Figure 5) suggests substantial space to absorb shocks without downgrading to a "high" risk of debt distress. - Overall risk of public debt distress is assessed as moderate, reflecting the moderate risk of external debt distress. - Key vulnerabilities to address to avoid deterioration of the risk rating: - (i) pressures to deviate from the agreed fiscal consolidation, - (ii) a non-diversified export base and a weak services exporting sector, - (iii) fiscal costs arising from contingent liabilities associated with various off-budget activities, including potential future PPP arrangements, - (iv) rollover risk related to domestic financing. ### Authorities’ view and policy intentions - Authorities concurred with the DSA results. - They agreed that export diversification is important to limit the risk of debt distress but noted difficulties in addressing this objective and lack of capacity building and support. - In view of increasing domestic debt service, authorities are considering expanding external financing while giving priority to concessional financing, and are open to semi-concessional financing with conditions evidently more favorable than domestic market conditions. - Authorities reiterated commitment to maintain prudent overall debt levels and to enhance debt composition while maintaining an assessed risk of debt distress at a "moderate" rating. *Source: IMF staff analysis and Debt Sustainability Assessment (selected excerpts, including references to Figures and Tables for 2016–2039 and 2019–2029).* --- _Source: https://www.imf.org/-/media/files/publications/cr/2019/1bfaea2019004.pdf_