## cr1915-burkina-faso-a4

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### Executive summary — context, outlook, and main priorities
- Context and growth:
  - Burkina Faso faces large social and physical infrastructure gaps, a deteriorating security situation, and unease among the rapidly-expanding population about economic prospects.
  - Growth averaged more than 6 percent over the past two years; GDP grew by 6.3 percent in 2017, up from 5.9 percent in 2016.
  - Staff projects GDP growth will stabilize around 6 percent in 2018 and beyond.
- Macroeconomic indicators:
  - Headline inflation: twelve-month rate of 2.1 percent at end-year 2017; inflation at end-June 2018: 2.5 percent year-on-year and annual average of 1.3 percent.
  - Current account deficit: estimated 9.7 percent of GDP in 2017; projected to narrow to 8.1 percent of GDP in 2018 and settle around 7½ percent of GDP over the medium-term.
  - Broad money growth: 21.6 percent (year-on-year, 2017).
  - Private sector credit growth: 15.3 percent year-on-year at end-August 2018, from 14.4 percent at end-2017.
  - BCEAO international reserves: 4.9 months of prospective imports at end-March 2018; 4.3 months at end-September 2018.
- Program objective and priorities:
  - ECF-supported program aims to reduce the overall fiscal deficit to no more than 3 percent of GDP by 2019 (WAEMU convergence criterion) while reconciling PNDES 2016-2020 objectives.
  - Key priorities: improve budget management and fiscal transparency; strengthen government accountability for public service delivery; address social and infrastructure gaps; improve the business climate; reduce corruption; expand financial inclusion.
- Risks (balance tilted to the downside):
  - Domestic: further security threats; continued labor unrest; poor rains and agricultural pests.
  - External: lower gold and cotton prices; higher oil prices; spillovers from tightening global financing conditions; intensified protectionism; weaker-than-expected global growth.

### Program performance and conditionality
- ECF-supported program status:
  - Arrangement approved March 2018. Staff supports authorities’ request for waiver of nonobservance of a performance criterion and release of second disbursement: SDR 18.06 million.
  - All but one quantitative performance criterion and indicative targets for first review were met; zero-ceiling on government guarantees on new bank pre-financing for public investment was not observed (pre-financing signed in September 2018).
  - Four of six structural benchmarks for the first review were completed; progress on the other two.
- Quantitative performance and indicative targets (selected):
  - Net domestic financing of the government: ceiling/prog. figures and outturns reported in tables (cumulative from January 1, 2018).
  - Ceiling on government guarantees on new bank pre-financing for public investments: Prog. 0 / Outturn 181 / Status Not met.
  - Overall fiscal deficit (commitment basis): 2017 = -7.8 percent of GDP; 2018 various entries include -5.4, -5.0, -5.0; Rev. Prog. = -4.7; 2019 projections include -3.0.
  - Schedule of ECF disbursements (three-year arrangement 2018–20): six tranches of SDR 18.06 million on specified test and review dates.

### Fiscal developments, 2017–2019 framework and projections
- 2017 fiscal outturns:
  - Tax revenue collection rose by 0.6 percentage points of GDP, to 17.3 percent.
  - Domestically-financed investment spending rose by 2.7 percentage points of GDP, to 8.2 percent.
  - Overall fiscal deficit (commitment basis) widened to 7.8 percent of GDP, from 3.5 percent in 2016.
  - Public debt eased to 38.4 percent of GDP.
- First half of 2018:
  - Overall fiscal deficit amounted to CFAF 81 billion (1 percent of GDP).
  - Tax revenue collection was CFAF 38 billion (0.6 percentage points of GDP) lower than projected.
  - Domestically-financed capital spending was CFAF 127 billion (1.6 percent of GDP), about one half of projection.
- 2018 supplementary budget estimates:
  - Tax revenue collection will amount to CFAF 1314 billion (nominal), up from CFAF 1238 billion in 2017.
  - Revenue collection estimated to decline from 17.3 percent to 16.7 percent of GDP between 2017 and 2018.
  - Full wage bill for 2018 projected at CFAF 700 billion, or CFAF 69 billion higher-than-initially budgeted.
  - Military and security spending projected to increase by 35 percent to 3.1 percent of GDP in 2018 and planned to increase by another 28 percent in 2019.
- 2019 fiscal framework assumptions:
  - Target: limit overall fiscal deficit to 3 percent of GDP in 2019.
  - 2019 targets: tax revenue to 17.8 percent of GDP (1.1 percent of GDP increase); wage bill to reach CFAF 836 billion (9.8 percent of GDP); current transfers CFAF 496 billion (5.8 percent of GDP); domestically-financed capital spending CFAF 308 billion (3.6 percent of GDP).
  - Staff estimates tax collection will remain about ½ percentage point of GDP below trend in 2019.

### Debt sustainability and DSA findings
- DSA assessment:
  - Risk of external debt distress: Moderate.
  - Debt-carrying capacity upgraded to strong: composite indicator 3.052 (exceeds threshold between medium and strong of 3.05).
  - Baseline: all debt and debt service indicators remain below relevant thresholds.
  - Customized scenario: two thresholds breached under an export shock; breach amplified if a large private loan is contracted by authorities.
  - Overall public debt distress risk: Moderate.
- Key DSA baseline figures and projections (selected):
  - Public sector debt (percent of GDP): 2017 = 38.4; projection around 41.1–42.5 in near years; PV of public debt-to-GDP ratio ~35 percent over projection horizon.
  - PV of PPG external debt-to-GDP ratio (selected): values shown across projection years (e.g., 17.2; 16.0; 15.9...).
  - Gross external financing need (Billion of U.S. dollars): series shown including higher values in stressed years.
- Stress tests and vulnerabilities:
  - Combined contingent liability shock used: 9.7 percent of GDP (includes state-owned enterprise debt 4.7 percent of GDP; financial crisis cost 5 percent of GDP).
  - Tailored commodity price shock and export shock produce largest negative impacts; export shock breaches some thresholds in customized scenarios.
  - Policy implication: limit non-concessional borrowing, maintain fiscal consolidation, mitigate contingent liabilities (audit SONABHY, include fuel subsidy in budget, monitor PPPs).

### Revenue mobilization, tax policy and administration
- Medium-term target:
  - Raise tax revenue-to-GDP ratio to WAEMU criterion of 20 percent of GDP.
- Projected yield of 2019 revenue measures (percent of GDP):
  - Tax increase for non-alcoholic drinks, airline tickets and plastic bags: 0.2
  - Opening of new tax collection point: 0.1
  - Base broadening, improved compliance, modernization: 0.4
  - Strengthened valuation procedures for imports through Sydonia: 0.2
  - Tightened assessment/reduced abatement for imported used vehicles: 0.1
  - Reorganization of Bobo customs bureau into three specialized units: 0.1
  - Total: 1.1
- Priority tax-policy actions:
  - Ensure strict application of income tax laws on bonuses and allowance of civil servants.
  - Reduce tax exemptions (e.g., introduce a VAT rate of 5 percent on currently exempted goods and services; apply standard 18 percent VAT on household electricity and water).
  - Align tax rates with regional standards (e.g., tobacco duties).
- Customs and administration reforms:
  - Implement follow-up procedures for non-filers; assess tax arrears; develop strategy to collect non-disputed debts and write off uncollectable ones.
  - Introduce streamlined procedures for small businesses; adopt risk-based approach to improve VAT refund system (structural benchmark).
  - Ensure customs department equipped and staffed to control import valuation in line with WTO standards following end of COTECNA support.

### Wage bill, pay and allowances reforms
- Key statistics:
  - Wage bill rose to 8.6 percent of GDP in 2017, compared with 6 percent in 2013.
  - LIDCs average wage bill: 7.3 percent of GDP.
  - Wage bill projected to exceed 50 percent of total tax revenue in 2018; WAEMU convergence criterion wage bill to tax revenue: 35 percent.
  - Education sector accounted for 41 percent of the wage bill in 2017; Health sector 11 percent; Security sector 12 percent; Other sectors 35 percent.
  - Public-sector staffing level relative to population estimated at around 1.1 percent.
  - TA projection: wage bill would reach 10 percent of GDP by 2020 on current trends.
  - Authorities’ target: reduce wage bill from peak of 55 percent of tax revenue in 2019 in 2020-2022 multiannual budget.
- Policy measures and structural benchmarks:
  - Medium-term public sector strategy to include framework legislation, harmonized job descriptions, revised salary and indemnity scales (structural benchmark), updated indexation methodology, publication of number of public servants by grade/region/ministry.
  - Near-term: trim allowances, slow promotions, limit hiring in lower priority sectors; reduce number of new hires in 2019 relative to initial projection (structural benchmark); publish payroll breakdown (April structural benchmark).

### Energy subsidies, pump-price mechanism, and SONABHY
- Fiscal cost of fuel subsidies:
  - Shortfall estimated at average prices in October of about US$80 per barrel:
    - CFAF 100 billion (1.2 percent of GDP) shortfall for 2018.
    - Not less than CFAF 120 billion (1.5 percent of GDP) shortfall in 2019.
  - Government budgeted CFAF 21 billion to subsidize electricity prices but no allowance for pump fuel shortfalls.
- Measures adopted:
  - November 9, 2018 pump prices for gasoline and diesel raised by CFAF 75 per liter (an average of 13.4 percent).
  - Decree adopted a new automatic fuel price adjustment mechanism:
    - Quarterly adjustments to close gap between retail price and cost-recovery price; adjustment at any time not to exceed CFAF 75 per liter.
    - If gap exceeds CFAF 50 per liter within a quarter, trigger immediate adjustment in the quarter.
  - Authorities maintain subsidized price for butane and exploring protection for vulnerable households.
  - Budget transfer of CFAF 20 billion to cover SONABHY’s losses in 2018; government intends to securitize remaining 2017 and 2018 losses and reflect them in fiscal accounts (MEFP ¶82).
  - Commitment to publish monthly report on any implicit subsidies on pump fuel prices (structural benchmark).

### Public investment management, PIP, and PPPs
- Public investment and efficiency:
  - Total public expenditure in 2017: 29.9 percent of GDP (above SSA median 25.4 percent).
  - Capital expenditure higher than most WAEMU countries but not translating into better infrastructure quality; WEF scores for electricity supply, railroads and roads below SSA benchmark.
  - Authorities prepared reduced list of priority investment projects; largest projects subject to standardized cost-benefit analysis; cost-benefit analyses of top 10 projects annexed to 2019 budget law.
- PPPs and contingent liabilities:
  - Database for monitoring PPPs updated semiannually; structural benchmark to include PPPs in the public investment program by end-December 2019.
  - Recommendation: revise PPP law definition to exclude pre-financing and supplier credits; analyze PPPs’ fiscal and debt sustainability implications; avoid off-budget financing vehicles.
  - Program contains adjustors if a large private concessional loan materializes; any disbursements not used for debt management would be placed in escrow at BCEAO or a commercial bank until used for debt management operations.

### Financial sector, inclusion, and vulnerabilities
- Banking system:
  - Dominated by banks and traditional insurance companies; vibrant microfinance sector main conduit for financial inclusion.
  - Banking system shallow and highly concentrated: top five banks (out of 14) account for over 70 percent of total assets at end-June 2018.
  - Two new banks licensed in 2018, including a state-owned agricultural bank.
- Credit and risks:
  - Private credit to GDP ratio: 31.3 percent at end-2017, up from 30.4 percent end-2016 (other tables show private credit/GDP 28.4 in 2015 rising to 34.9 in 2020 proj.).
  - Credit gap analysis: cyclical credit gap stayed below 2 percent of GDP threshold.
  - Banks profitably deploy liquidity on regional market, reducing lending to real economy; credit concentrated in few large borrowers and sectors.
  - Banks show significant exposure to nonresidents; underlying assets mostly denominated in CFAF.
- Financial inclusion:
  - Authorities adopted financial inclusion strategy 2017 aligned with WAEMU; target to increase bank penetration to 35 percent by 2020.
  - Staff recommends operationalize credit bureau and finalize action plan for National Strategy for Inclusive Finance.

### External sector assessment (Annex I) — REER and competitiveness
- REER assessment:
  - CAM indicates potential REER overvaluation of 10.6 percent; staff favors CAM results for Burkina Faso.
  - REER depreciated roughly 7 percent since 2010 (movement mainly 2015–2017); nominal effective exchange rate appreciated reflecting euro movements.
- Current account and outlook:
  - Current account projected -9.7 percent (EBA-Lite summary); staff projects narrowing to 8.1 percent of GDP in 2018 and averaging around 7½ percent medium-term as gold production rises and agriculture improves.
- Structural constraints:
  - Doing Business indicators: weaknesses in access to electricity and credit; shared weaknesses in resolving insolvency and enforcing contracts.
  - Recommendation: accelerate structural reforms to improve competitiveness and diversify exports.

### Public finances, program monitoring, data, and reporting
- Reporting and TMU:
  - TMU defines program rules, quantitative performance criteria, and reporting requirements; data submission deadlines and responsible agencies specified (monthly, quarterly, annual reporting items listed).
  - Net domestic financing definition, ceilings, and adjustments specified (e.g., upward adjustment by up to CFAF 80 billion for shortfall in external program support; securitization of SONABHY losses up to CFAF 80 billion).
- Statistics and capacity development:
  - Authorities committed to disseminating e-GDDS data through a National Summary Data Page by December 5, 2018; adopting SNA2008 and rebasing national accounts from 1999 to 2015.
  - Extensive TA received in revenue mobilization, fiscal risks, wage control, public investment management, PFM, and debt management.
- Safeguards:
  - Updated safeguards assessment of the BCEAO (April 2018) found a strong control environment; IFRS adopted beginning with 2015 financial statements.

### Authorities’ stance and program support
- Authorities concurred with the updated DSA and request completion of first review and disbursement SDR 18.06 million.
- Authorities reiterated commitment to:
  - maintain prudent debt levels and prefer concessional over non-concessional borrowing;
  - fiscal consolidation to reach overall fiscal deficit of no more than 3 percent of GDP by 2019;
  - reforms to strengthen revenue mobilization, contain wage bill, improve PFM, and mitigate contingent liabilities.

*IMF staff report: cr1915-burkina-faso-a4 (December 12, 2018).*

### EXECUTIVE SUMMARY

### EXECUTIVE SUMMARY

### Context
- Burkina Faso faces large social and physical infrastructure gaps, a deteriorating security situation, and unease among the rapidly-expanding population about economic prospects.
- Growth has been robust, averaging more than 6 percent over the past two years.
- Activity has been supported by expansionary fiscal policy, including from a boost to capital spending in 2017.
- Revenue has not increased as expected and the wage bill has been rising.
- The program aims to reconcile the authorities’ National Plan for Economic and Social Development (PNDES) 2016-2020 with maintaining macroeconomic stability by reducing the overall fiscal deficit to no more than 3 percent of GDP (the WAEMU convergence criterion) by 2019.
- Burkina Faso joined the G20 Compact with Africa initiative during the 2018 IMF/World Bank Annual meetings to encourage alternative sources of financing of the PNDES, including from public-private partnerships (PPPs).
- Key priorities: improve budget management and fiscal transparency, strengthen government accountability for public service delivery, address social and infrastructure gaps, improve the business climate, reduce corruption, and expand financial inclusion.

### Recent developments, outlook, and risks
- Growth and macro indicators:
  - GDP grew by 6.3 percent in 2017, up from 5.9 percent in 2016.
  - Headline inflation: twelve-month rate of 2.1 percent at end-year 2017.
  - Current account deficit: widened to an estimated 9.7 percent of GDP in 2017, from 7.6 percent in 2016.
  - Broad money growth: 21.6 percent (year-on-year, 2017).
  - Private sector credit growth: 15.3 percent year-on-year at end-August 2018, from 14.4 percent at end-2017.
- Drivers and constraints:
  - Mining and services were main contributors to growth in 2017; pests and low rainfall held back agricultural output.
  - Import demand buoyed by rising budget spending on investment and wages.
  - Banking system remains profitable and well-capitalized but risk-averse; banks prefer regional and domestic government bonds over private lending.
  - Credit concentrated in a few large borrowers and sectors.
  - Banks show significant exposure to nonresidents; underlying assets mostly denominated in CFAF.
- External sector and reserves:
  - Current account deficit projected to narrow to 8.1 percent of GDP in 2018 and settle around 7½ percent of GDP over the medium-term.
  - BCEAO international reserves reached 4.9 months of prospective imports of goods and services at end-March 2018; reserves stood at 4.3 months of imports at end-September 2018.
  - Burkina Faso’s external position was weaker than consistent with macro-economic fundamentals in 2017, due largely to the fiscal expansion.
- Outlook:
  - Staff projects GDP growth will stabilize around 6 percent in 2018 and beyond (about one percentage point lower than the authorities’ projections).
  - Inflation anchored by the peg to the euro is projected to remain around 2 percent per year.
- Risks (balance tilted to the downside):
  - Domestic risks: further security threats, continued labor unrest, poor rains and agricultural pests.
  - External risks: lower gold and cotton prices, higher oil prices, spillovers from tightening global financing conditions, intensified protectionism, and weaker-than-expected global growth.
  - Intensified security threats could weigh on mining and tourism and impair government revenues and expenditure execution.
  - Continued labor unrest could add pressure for increased current spending, reducing space for priority capital spending.

### Program performance and policies
- ECF-supported program approved in March 2018:
  - Performance in the first half of 2018 was mixed. All but one quantitative performance criterion and indicative targets were met, many with a large margin despite the tax revenue shortfall.
  - The zero-ceiling on government guarantees on new bank pre-financing for public investment was not observed in September 2018 when the government signed a pre-financing arrangement for a high priority road project.
  - Government requested a waiver for nonobservance of the zero-ceiling based on the Prime Minister’s executive order of November 9, 2018 prohibiting any government guarantees of new bank pre-financing arrangements and commitment to adhere to the zero-ceiling going forward.
  - Four of six structural benchmarks relevant for the first review were completed; progress made on the other two.
- 2019 budget and fiscal policy:
  - The 2019 budget represents a credible fiscal framework that limits the overall fiscal deficit to 3 percent of GDP, consistent with the WAEMU convergence criterion.
  - Steps to create fiscal space for priority capital, social, and security spending:
    - Recent hike in fuel prices and adoption of an automatic fuel price adjustment mechanism curtail energy subsidies.
    - Comprehensive medium-term reforms of the public-sector pay and allowance system are being formulated to contain the wage bill, including revisions to the salary and indemnity scales; aim to ensure a continuous reduction in the wage bill to tax revenue ratio from its projected peak in 2019.
    - Efforts to mobilize additional revenues and strengthen the efficiency of capital spending.
  - Continuing efforts to improve the business climate and promote financial inclusion are important for structural transformation.

### Financial sector and macro-financial assessment
- Banking system characteristics:
  - Dominated by banks and traditional insurance companies; vibrant microfinance sector is main conduit for financial inclusion.
  - Banking system is shallow and highly concentrated: top five banks (out of 14) account for over 70 percent of total assets at end-June 2018.
  - The banking system continues to expand; two new banks licensed in 2018, including a state-owned agricultural bank.
- Credit and vulnerabilities:
  - Ratio of private credit to GDP: 31.3 percent at end-2017, up from 30.4 percent at end-2016.
  - Net domestic assets grew by 13 percent in 2017.
  - Credit gap analysis: cyclical credit gap consistently remained lower than the 2 percent of GDP threshold above which financial sector risks are deemed to start rising.
  - Tepid financial penetration and subdued lending to the real economy partly due to banks’ ability to profitably deploy liquidity on the regional market.
  - Outflow of capital since the political transition of 2014-15 increased net foreign assets of domestic banks in 2016-17, coinciding with a slowdown in private sector credit growth.

### Staff views and IMF financing
- Staff supports the authorities’ request for a waiver of the nonobservance of a performance criterion and the release of the second disbursement under the ECF arrangement in the amount of SDR 18.06 million.

*IMF staff report: EXECUTIVE SUMMARY (December 12, 2018).*

### 9.      The updated Debt Sustainability Analysis (DSA), prepared under the new DSF,

### 9.      The updated Debt Sustainability Analysis (DSA), prepared under the new DSF,

### Debt sustainability and risk assessment
- The updated DSA confirms that Burkina Faso’s risk of external debt distress remains moderate.
- The country’s debt-carrying capacity has been upgraded to strong as the composite indicator is 3.052 (exceeds the threshold between medium and strong of 3.05).
- Under the baseline scenario, all the debt and debt service indicators remain below the relevant thresholds.
- Under a customized scenario designed to take account of fiscal and external risks, two thresholds are breached under an export shock.
- If the authorities finalize plans to contract a large loan from a private consortium, the breach of thresholds in the most extreme test would be amplified in both the baseline and customized scenarios.
- The overall risk of public debt distress is also moderate.

### Risk Assessment Matrix — key risks, likelihoods, impacts, and policy responses
- External risks
  - Tightening of global financial conditions — Relative Likelihood: High; Impact if Realized: Medium. Possible policy response: Limit domestic financing needs through adherence to fiscal deficit targets.
  - Rising protectionism — Relative Likelihood: High; Impact if Realized: Medium. Possible policy response: Implement measures to improve competitiveness and the business environment.
  - Weaker-than-expected global growth — Relative Likelihood: Medium; Impact if Realized: High. Possible policy response: Adhere to fiscal deficit targets to preserve international reserve adequacy; implement measures to improve competitiveness.
  - Lower gold and cotton prices, higher oil prices — Relative Likelihood: Medium; Impact if Realized: High. Possible policy response: Adhere to fiscal deficit targets to build buffers for shocks; allow more flexibility in pump fuel prices.
- Domestic risks
  - Pressures for higher recurrent spending, particularly on wages — Relative Likelihood: High; Impact if Realized: Medium/High. Possible policy response: Contain recurrent spending, especially the wage bill; intensify efforts to mobilize domestic revenues.
  - Further terrorist attacks — Relative Likelihood: Medium/High; Impact if Realized: Medium/High. Possible policy response: Maintain efforts to strengthen security services; participate in regional security arrangements; adhere to fiscal deficit targets to create space for security spending.
  - Revenue mobilization lags — Relative Likelihood: Medium; Impact if Realized: High. Possible policy response: Pursue tax policy and revenue administration reforms; optimize current spending and re-prioritize public investment.
  - Poor weather conditions; agricultural pests — Relative Likelihood: Medium; Impact if Realized: High. Possible policy response: Adhere to fiscal deficit targets to address food emergencies; medium-term support to farmers through better seeds, fertilizer, and irrigation.

### Fiscal policy and governance — immediate challenges and channels
- Immediate challenges: maintain macroeconomic stability through fiscal consolidation, and create fiscal space for priority investment, social, and security spending.
- Three main channels to meet challenges:
  - (i) enhanced revenue mobilization;
  - (ii) containment of recurrent spending, particularly the wage bill;
  - (iii) improved spending efficiency.
- Strengthening institutions and governance is a priority to promote stability and inclusive growth; weaknesses remain in fiscal governance, risking revenue mobilization progress and undermining control of spending.
- Staff discussions focused on improving realism of the medium-term fiscal framework and strengthening fiscal reporting and accountability.

### Fiscal outturns and near-term projections (selected figures preserved exactly as in source)
- 2017 outturns and changes:
  - Tax revenue collection rose by 0.6 percentage points of GDP, to 17.3 percent.
  - Domestically-financed investment spending rose by 2.7 percentage points of GDP, to 8.2 percent.
  - Overall fiscal deficit (on a commitment basis) widened to 7.8 percent of GDP, from 3.5 percent in 2016.
  - Public debt eased to 38.4 percent of GDP.
- First half of 2018:
  - Overall fiscal deficit amounted to CFAF 81 billion (1 percent of GDP).
  - Tax revenue collection was CFAF 38 billion (0.6 percentage points of GDP) lower than projected.
  - Domestically-financed capital spending was CFAF 127 billion (1.6 percent of GDP), about one half of projection.
- Supplementary budget 2018 estimates:
  - Tax revenue collection will amount to CFAF 1314 billion (nominal), up from CFAF 1238 billion in 2017.
  - Revenue collection is estimated to decline from 17.3 percent to 16.7 percent of GDP between 2017 and 2018.
  - Full wage bill for 2018 projected at CFAF 700 billion, or CFAF 69 billion higher-than-initially budgeted.
  - Military and security spending projected to increase by 35 percent to 3.1 percent of GDP in 2018 and planned to increase by another 28 percent in 2019.
- Program and projection highlights (Text Table 4 summary):
  - Total revenue and grants: 2017 = 22.1; Prel. Budg. = 25.6; EBS/18/11 = 23.1; Suppl. Budg. = 22.3; Rev. Prog. = 22.8; EBS/18/11 (rev) = 23.9; (columns reflect variations across documents).
  - Tax revenue: 2017 = 17.3; (projections and budget entries vary; see source for full table).
  - Domestically financed investment: 2017 = 8.2; Suppl. Budg. (2018) projection = 6.3 percent of GDP (domestically-financed capital spending will need to be limited to 6.3 percent of GDP in 2018).
  - Overall balance (commitment basis): 2017 = -7.8; 2018 (various entries) include -5.4, -5.0, -5.0; Rev. Prog. = -4.7; 2019 projections include -3.0, -3.0, -3.0.
  - Memorandum: Nominal GDP (CFAF billion) entries include 7,174; 7,873; 7,896; 7,920; 7,873; 8,540; 8,775; 8,512. Real GDP growth (percent) entries include 6.3; 6.0; 6.0; 6.7; 6.0; 6.0; 6.9; 6.0.

### Policy commitments and fiscal rules
- Authorities committed to program’s fiscal deficit targets: no more than 5 percent of GDP in 2018 and 3 percent of GDP in 2019.
- Given lower revenue collection and higher wage bill for 2018, domestically-financed investment spending limited to 6.3 percent of GDP in 2018 (compared with 8.2 percent in 2017).
- Underlying deficit target for 2018 is 5 percent of GDP; due to an emergency World Bank grant of CFAF 19 billion expected to be disbursed in 2018 but not spent until 2019, actual deficit projected at 4.7 percent of GDP.
- Staff recommendation: raise revenue and constrain non-priority spending to meet priority needs sustainably.

### 2019 fiscal framework assumptions and projections
- 2019 fiscal framework targets a 1.1 percent of GDP increase in tax revenue to 17.8 percent of GDP.
- Key assumptions:
  - Wage bill will reach CFAF 836 billion (9.8 percent of GDP) based on agreed undertakings.
  - Current transfers will amount to CFAF 496 billion (5.8 percent of GDP).
  - This leaves CFAF 308 billion (3.6 percent of GDP) in domestically-financed capital spending under the overall fiscal deficit ceiling of 3 percent of GDP.
- Staff estimates that tax collection will remain about ½ percentage point of GDP below trend in 2019.

### Budgeting, transparency, and governance issues
- Budgeting process needs urgent reform: practice of tabling budgets based on unrealistic revenue assumptions should end.
- The ECF-supported program required freezing CFAF 264 billion in planned investment spending to establish a viable fiscal deficit target for 2018.
- On November 5, 2018, the Minister of Finance submitted amendments to align the draft 2019 budget with the fiscal framework.
- Fiscal transparency has regressed:
  - Open Budget Index score fell to 24 (out of 100) in 2017 from 43 in 2015.
  - Burkina Faso now ranks below WAEMU peers (median score = 31.5).
  - Oversight of the budget by the legislature scored 37 out of 100.
- Authorities have recommenced publication of in-year fiscal reports and budget documents.

### Borrowing policies, debt management, and contingent financing options
- Moderate risk of debt distress assessment hinges on fiscal risks in a customized scenario.
- Authorities have mainly relied on concessional loans but are exploring alternative financing, including a large private concessional loan that would allow replacement of more expensive domestic and regional financing through debt management operations.
- Program contains adjustors if this loan materializes; any part of disbursements not used for debt management operations would be placed in an escrow account at the BCEAO or a commercial bank until used for debt management operations.
- Authorities stated the loan involves no collateralization or side agreement (including related to PPP contracts).
- Relations with China were recently reestablished after a 24-year hiatus; authorities are exploring opportunities for economic cooperation.
- Diversification via instruments like a Eurobond would likely be more costly than regional financing and require capacity building, particularly in the “middle-office” analysis function; should be preceded by a robust medium-term debt strategy (MTDS).
- Staff encouraged strengthening debt management by organizing the debt unit into front, middle, and back office.
- Authorities intend to articulate debt policy in a medium-term framework during 2019 and to avoid pre-financing contracts; considering better definition of PPPs in revised legislation to limit contingent liabilities.

### Enhancing revenue mobilization — measures and priorities
- Mobilization of additional domestic revenue is key given constrained borrowing and the need to fund priority spending.
- Target: raise tax revenue-to-GDP ratio to the WAEMU criterion of 20 percent of GDP over the medium-term.
- Projected yield of 2019 revenue measures (percent of GDP):
  - Tax increase for non-alcoholic drinks, airline tickets and plastic bags: 0.2
  - Opening of new tax collection point: 0.1
  - Measures aimed at base broadening, improved compliance, and modernization of administration: 0.4
  - Strengthened valuation procedures for imports through Sydonia: 0.2
  - Tightened assessment procedures and reduced abatement for imported used vehicles: 0.1
  - Reorganization of Bobo customs bureau into three specialized units: 0.1
  - Total: 1.1
- Priority tax policy measures:
  - Ensure strict application of income tax laws on bonuses and allowance of civil servants.
  - Reduce tax exemptions (e.g., introduce a VAT rate of 5 percent on currently exempted goods and services; apply the standard 18 percent VAT tax rate on household consumption of electricity and water; consider revising the investment code to reduce tax expenditures).
  - Align tax rates with regional standards, e.g., increase duties on tobacco in line with WAEMU ceilings.
- Revenue and customs administration reform priorities:
  - Implement follow-up procedures for non-filers.
  - Conduct assessment of tax arrears and develop a strategy for collecting non-disputed debts and writing off uncollectable ones.
  - Develop issue-oriented audits.
  - Introduce streamlined procedures for small businesses.
  - Eliminate administrative burdens and adopt a risk-based approach to improve the VAT refund system (structural benchmark).
  - Ensure customs department is equipped and staffed to control the value of imports in line with WTO standards with the end of COTECNA’s support.
- Box 3 summary on revenue mobilization:
  - Tax revenue recovered to 17.3 percent of GDP in 2017 before the early-2018 setback.
  - Greatest potential to raise revenue relative to peers is from taxes on goods and services.
  - Weaknesses: numerous exemptions, weak control of the tax base, divergence from regional tax directives.

*IMF staff and Burkinabè authorities (content excerpt).*

### 22.      While the 2019 budget proposal contains important measures to strengthen tax

### 22. While the 2019 budget proposal contains important measures to strengthen tax collection, including streamlining the excise tax on drinks, staff urged the authorities to consider additional tax policy measures and measures to further strengthen revenue and customs administration over the medium term (see Box 3).

### Tax policy, revenue mobilization, and customs administration
- Findings:
  - 2019 budget proposal includes measures to strengthen tax collection, including streamlining the excise tax on drinks.
  - Management contract with COTECNA ended in August 2018; authorities are establishing a customs valuation unit (MEFP ¶63).
  - Staff emphasizes importance of ensuring the customs administration is sufficiently staffed and equipped and continued implementation of TA recommendations to strengthen processes and minimize risks to customs revenue collection.
  - Procedures for customs clearance, inspection, and valuation need to be applied in a timely and transparent manner.
  - Authorities could consider establishing a rapid and agile dispute resolution mechanism to minimize disruption in contentious cases.
- Authorities’ view and measures:
  - Authorities are confident tax policy and administration measures will continue to bear fruit despite 2018 labor disruptions; they cite mainstreaming of e-filing to ensure tax revenues continue to flow during labor unrest.
  - Transition from COTECNA is assessed by authorities as proceeding fairly smoothly; new valuation unit expected to increase customs revenue mobilization over time as it gains experience.
  - 2019 Tax Code amendments aim to close loopholes and reinforce compliance.
  - Investment Code recently revised to improve incentives to inward investment; authorities will keep it under review to ensure revenue streams are optimized.
  - Authorities remain open to removing VAT exemptions and extending VAT to water and electricity but wish to evaluate impact of fuel price liberalization on household finances before further tax increases of this nature.

### Controlling current spending — overview
- Findings:
  - Containing the wage bill and transfer payments is important to create fiscal space (Box 4).
  - The wage bill is on an unsustainable path; transfer payments could be impacted by accumulation of contingent liabilities from energy subsidies.

### Containing the wage bill — findings and projections
- Key statistics and findings (Box 4 and text):
  - Wage bill rose to 8.6 percent of GDP in 2017, compared with 6 percent in 2013.
  - LIDCs average wage bill: 7.3 percent of GDP.
  - Wage bill projected to exceed 50 percent of total tax revenue in 2018.
  - WAEMU convergence criterion for wage bill to tax revenue: 35 percent.
  - Education sector accounted for 41 percent of the wage bill in 2017.
  - Health sector: 11 percent of the wage bill in 2017.
  - Security sector: 12 percent of the wage bill in 2017.
  - Other sectors: 35 percent of the wage bill in 2017.
  - Public-sector staffing level relative to population estimated at around 1.1 percent (below peers).
  - A July TA mission projected the wage bill would reach 10 percent of GDP by 2020 on current trends (not counting the Fonds communs).
  - Wage bill peak of 55 percent of tax revenue in 2019 (authorities’ target to reduce from this peak in 2020-2022 multiannual budget and economic programming document; structural benchmark and MEFP ¶78).
- Causes and composition:
  - Large increase driven mainly by increases in compensation and employment in education and health.
  - Allowances and bonuses account for a large share of total compensation; perception that base salary is low and allowances are not equitable or fairly implemented.

### Containing the wage bill — policy recommendations and planned reforms
- Medium-term public sector strategy (from tripartite conference recommendations; MEFP ¶65 and ¶78) to include:
  - (i) preparing framework legislation (organic law) establishing key principles governing public service functioning;
  - (ii) harmonizing job descriptions based on minimum qualifications for functional groups;
  - (iii) revising salary and indemnity scales (structural benchmark);
  - (iv) updating the indexation methodology;
  - (v) publication of the number of public servants according to grade, region, and ministry.
- Additional measures and actions:
  - Prepare a civil service census and establish staffing and recruitment norms to ensure balanced geographical distribution of public services.
  - Prepare a medium-term recruitment plan that would restrain recruitment relative to earlier projections.
  - Operationalize the medium-term strategy and maintain reform momentum from the June tripartite conference.
  - Make full use of technical assistance offered by development partners.
- Near-term containment measures urged by staff:
  - Trim allowances, slow pace of promotions, and limit hiring in lower priority sectors in the near term, including 2019.
  - Authorities committed that the 2020-2022 multiannual budget will target continuous reduction in the ratio of the wage bill to tax revenue from the peak of 55 percent in 2019 (structural benchmark and MEFP¶78).
  - Authorities will reduce the number of new hires in the public service in 2019 from its projected level (structural benchmark and MEFP ¶65).
  - Authorities will begin to publish the number of public servants on the government payroll according to grade, region, and ministry (April structural benchmark).
- Expected macro impact:
  - Staff emphasized that for every percentage point of GDP less in public wage spending and commensurately more in domestically-financed capital spending could boost the trend growth rate by about a ¼ percentage point (October 2017 SSA REO).

### Fonds Communs and allowances
- Findings:
  - Longstanding practice: proceeds from fines and penalties collected by the Ministry of Finance and fees collected by some other ministries used to pay bonuses to staff (Fonds Communs).
  - There are now 21 individual Fonds Communs spread across a dozen ministries; most significant in the Ministry of Finance.
  - Ministry of Finance paid allowances of CFAF 55 billion (113 percent of the eligible base salaries) in 2017.
- Planned and recommended reforms:
  - Draft 2019 budget envisages payment of allowances limited to amounts collected in the previous year and amounting to no more than 25 percent of the base salaries of civil servants in ministries eligible to receive such allowances (MEFP ¶80).
  - 2020 budget will require clear identification of the source and amounts to be paid in such allowances (structural benchmark).
  - Authorities consider that the entire pay and allowances system requires an overhaul; intend to rationalize and codify payment of allowances and bonuses following stakeholder consultations and conclusions of a national conference held in June 2018, to be translated into overarching legislation (organic law).

### Managing energy subsidies — findings and measures
- Findings:
  - Maintenance of fuel prices below cost-recovery levels has weighed on the fiscal position.
  - Shortfall estimated at average prices in October of about US$80 per barrel:
    - CFAF 100 billion (1.2 percent of GDP) shortfall for 2018.
    - Not less than CFAF 120 billion (1.5 percent of GDP) shortfall in 2019.
  - Government budgeted a limited amount (CFAF 21 billion) to subsidize electricity prices but made no allowance for pump fuel shortfalls.
- Measures and commitments:
  - Authorities committed to adjust retail fuel prices to cost-recovery levels going forward.
  - On November 9, 2018 pump prices for gasoline and diesel were raised by CFAF 75 per liter (an average of 13.4 percent).
  - President issued a decree announcing a new automatic fuel price adjustment mechanism:
    - Retail fuel prices for gasoline and diesel will be adjusted on a quarterly basis to close the gap between retail price and cost-recovery price.
    - Adjustment at any given time will not exceed CFAF 75 per liter for each type of fuel product.
    - If the gap between market and domestic price exceeds CFAF 50 per liter within a given quarter, this would trigger an immediate adjustment in the quarter.
  - Authorities have chosen to maintain a subsidized price for butane (used for cooking) and are exploring mechanisms to protect vulnerable households.
  - Budget transfer of CFAF 20 billion made to cover SONABHY’s losses owing to below-cost-recovery sales of petroleum products in 2018.
  - Government intends to securitize SONABHY’s remaining 2017 and 2018 losses, which will be reflected in fiscal accounts and debt stock as the securitization proceeds (MEFP ¶82).
  - Government committed to publish a monthly report on any implicit subsidies on pump fuel prices going forward (structural benchmark).
  - Electricity tariffs should be increased when the budgeted subsidy allocation is exhausted in line with the 2016 tariff agreement.
  - Need for subsidy to SONABEL expected to decline as grid supply from Ghana rises from the current 50 MW to 100 MW by March 2019.

### Improving public financial management and public investment efficiency
- Findings:
  - Efficient selection and execution of public investment projects is crucial under severe resource constraints.
  - Efficiency frontier analysis shows efficiency of public investment and education spending is relatively low compared to peers (Box 5).
  - Total public expenditure in 2017: 29.9 percent of GDP (above SSA median of 25.4 percent of GDP).
  - Education spending as percent of GDP is lower than in LICs and SSA.
    - Net enrollment ratio in secondary schools: 28 percent (SSA average: 38 percent).
    - Adult literacy is less than half the rate in peer countries.
  - Health care spending about 5.7 percent of GDP (in line with SSA average and other LICs) but infant deaths higher and hospital beds and other outcome metrics lower than in other SSA countries and LICs.
  - Capital expenditure typically higher than in most WAEMU countries and SSA median but has not translated into better infrastructure quality; WEF Global Competitiveness scores for electricity supply, railroads and roads below SSA benchmark average.
- Recommendations and reforms:
  - Authorities prepared a reduced list of priority investment projects, including PPPs; largest projects subject to standardized cost-benefit analysis.
  - In January, authorities reinstated regular public procurement procedures that were temporarily relaxed in 2017.
  - Continue to streamline and increase transparency of public procurement procedures with World Bank support.
  - Staff encourages strengthening procedures for selection and execution of projects, drawing on manual for selecting projects and integrating PPPs into public investment process (structural benchmark), building on TA recommendations.
  - Continue to invest in human capital and social protection systems, particularly strengthen higher education systems with World Bank support.
  - Authorities should eschew off-budget financing vehicles (supplier credits and pre-financing arrangements) and carefully analyze PPPs’ implications for fiscal risk, contingent liabilities, and debt sustainability.
  - Definition of PPPs in the law on PPPs should be revised to exclude pre-financing and supplier credits.

_International Monetary Fund_

### Box 5. Benchmarking and Efficiency of Public Spending in Burkina Faso (concluded)

### Box 5. Benchmarking and Efficiency of Public Spending in Burkina Faso (concluded)

### Public financial management and spending efficiency
- Progress and reforms
  - Burkina Faso implemented program budgeting in 2017 and has a committee to strengthen fiscal reporting quality (MEFP ¶77).
  - Progress made in regularizing VAT refunds and eliminating “irregular” domestic debts identified in 2015.
- Recommended actions
  - Continue strengthening fiscal reporting and cash management, including:
    - Move to issuance of a quarterly trial balance.
    - Establish a single treasury account.
  - Continue technical assistance and reforms to strengthen spending efficiency, especially public investment spending and debt management (¶42).

### Structural reforms, diversification, and business climate
- Current constraints
  - As a large, landlocked country, Burkina Faso faces challenges to diversify its economy and address a weak business climate.
  - Doing Business indicators highlight particular weaknesses in access to electricity and credit, and common weaknesses with peers in resolving insolvency and enforcing contracts (Text Figure 2).
  - The draft investment code broadens tax exemptions and can be improved in investor protection.
- Governance and anti-corruption
  - Since 2015, strengthened anti-corruption legal and institutional framework: asset declarations, access to information, and an organic law on the High Authority for State Control and Anti-Corruption (ASCE-LE).
  - Authorities instituting an annual audit of government management by ASCE-LC; 2016 report available and 2017 report being finalized (MEFP ¶92). Progress toward full compliance for wealth and asset declarations, with online consultable form planned in early 2019 (MEFP ¶93).
- Financial inclusion and financial sector
  - Authorities adopted a financial inclusion strategy in 2017 aligned with WAEMU regional strategy, emphasizing mobile banking, microfinance, and reducing administrative barriers.
  - Staff recommendations:
    - Accelerate efforts to fully operationalize the credit bureau to minimize information gaps and support access to credit.
    - Translate the financial inclusion strategy into concrete actions, building on the Action Plan expected to be finalized in 2018.
  - Authorities are operationalizing a Caisse de Depots (French model) and setting up a recently licensed agricultural development bank (MEFP ¶85).
  - Staff highlights fiscal and governance risks associated with state-owned financial institutions, especially if regulated and supervised under a different regime than other financial institutions.
- Security and banking operations
  - Banking system characterized as sound and stable with potential to expand, but recent terrorist attacks increased operational risk in remote areas and led some banks to temporarily close branches, potentially hampering financial inclusion efforts.

### Poverty reduction, inclusion, and social spending
- Social programs and health
  - Authorities expanding program providing free healthcare to cover more vulnerable persons.
  - Steps to establish institutional and legal framework for a universal health insurance system.
- Regional and local development
  - Implementation of Program to Support the Development of Local Economies (PADEL) and Emergency Program for the Sahel (PUS-BF) ongoing; plans to implement PADEL in six additional regions and continue investments supporting PUS-BF (MEFP ¶87-¶90).

### Macroeconomic statistics, capacity development, and safeguards
- Statistics
  - Authorities committed to disseminating e-GDDS data through a National Summary Data Page by December 5, 2018.
  - Adopting SNA2008 methodology and rebasing national accounts from 1999 to 2015, broadening coverage of informal sector activity; 2015 rebased estimates will be somewhat higher and enriched by several data sources (2015 agriculture survey, 2015 NPI survey, 2015 national survey on employment and informal sector, 2017 survey on gold extraction) (MEFP ¶91).
- Capacity development
  - Extensive technical assistance received in mobilization of domestic revenues (customs and taxation), management of fiscal risks, control of recurrent spending (wages and salaries), and reforms to strengthen spending efficiency, public investment management, public financial management, and debt management (¶42).
- Safeguards
  - Updated safeguards assessment of the BCEAO (April 2018) found a strong control environment since 2013; governance arrangements broadly appropriate.
  - IFRS adopted beginning with the 2015 financial statements; a 2016 external quality review of internal audit found broad conformity with international standards.
  - BCEAO risk management framework established in 2014 is progressing well.

### Program issues, financing, and risks
- Disbursement and conditionality
  - Completion of the review will release a second disbursement under the ECF arrangement in the amount of SDR 18.06 million.
  - It is proposed that beginning with the end-June 2019 test date the performance criterion on contracting of external debt be changed from a ceiling on contracting of non-concessional debt to a ceiling on the present value (PV) of the contracting of all external debt.
- Financing outlook
  - The program is fully financed. External financing requirement will be met through budget support and project loans from other IFIs and bilateral donors, as well as limited non-concessional borrowing. Project support (grants and loans) projected to remain robust; direct budget support projected to continue a downward trend.
- Main risks
  - Fiscal risks: disappointing domestic revenue performance, shortfall in external support, inability to control the wage bill amid social pressures.
  - Other risks: deterioration in the security environment, adverse weather conditions (e.g. drought/flood), and terms of trade shocks.
  - Maintaining program on track would require proactive adjustment in macroeconomic policies in consultation with Fund staff; capacity to repay the Fund is assessed to be adequate (Table 8).

### Staff appraisal, outlook, and policy recommendations
- Outlook and recent performance
  - Burkina Faso is a low-income country with significant development challenges intensified by security shocks and social unrest.
  - Growth averaged more than 6 percent over the past two years and is projected to stabilize at 6 percent in 2018, but risks are tilted to the downside.
  - Inflation remains contained, anchored by the CFAF’s peg to the euro.
  - Program performance in first half of 2018 was mixed: domestic revenue fell somewhat short of projection but the program floor was exceeded; all but one quantitative performance criterion and all indicative targets for the first review were met; four out of six structural benchmarks for the review were fully completed.
- Fiscal anchor and budgeting
  - Staff welcomes authorities’ commitment to the fiscal anchor of the ECF-supported program: an overall fiscal deficit of no more than 3 percent of GDP by 2019.
  - In September, authorities presented a supplementary budget for 2018 aligning spending plans with available resources under the 5 percent of GDP overall fiscal deficit ceiling.
  - The 2019 budget proposal under discussion in Parliament is aligned with the program’s fiscal framework and based on realistic domestic revenue projections.
- Revenue and tax administration reforms
  - Critical to accelerate reforms to raise domestic revenue given security, social, and development spending needs.
  - Under the program, tax and customs administration reforms will focus on expanding online tax filing and payments, strengthening tax compliance and audit capacities, modernizing collection procedures, and establishing a customs valuation unit in line with WTO standards (¶52).
  - Over the medium term consider additional tax policy measures building on the January 2018 FAD tax policy TA.
- Wage bill and public-sector compensation
  - Urged to expedite public-sector compensation reforms to stem unsustainable rise of the wage bill.
  - Authorities should formalize commitment to contain the wage bill and put it on a declining trend from its peak at 55 percent of tax revenue in 2019 in the context of the 2020-2022 multiannual budget and economic framework document.
  - Follow-up actions should include:
    - Harmonizing job descriptions based on minimum qualifications for functional groups.
    - Revising salary and indemnity scales.
    - Updating the indexation methodology.
  - Short-term measures: contain growth of the wage bill by reducing recruitments in nonpriority sectors and examining scope to rationalize allowances and bonuses; properly account for incentive payments in the budget (fonds communs), clarify allocation rules, reduce their size, and subject them to income tax (¶53–¶54).
- Other fiscal policy and PPPs
  - Recent adjustment of retail fuel prices and adoption of an automatic price adjustment mechanism should help protect the budget against rising international oil prices; authorities committed to budget ex ante for remaining fuel subsidy needs (¶55).
  - Continue improving quality and efficiency of investments through prioritization and cost-benefit analysis for projects, including PPPs; strengthen legal and institutional framework for public investment management and PPPs and include PPPs in the public investment program.
  - Revise definition of PPPs in law to exclude pre-financing and supplier credits; carefully analyze PPPs’ implications for fiscal risk, contingent liabilities, and debt sustainability; develop a robust medium-term debt strategy before costly debt diversification alternatives (¶56).
- Structural priorities to increase competitiveness
  - Remove barriers limiting competitiveness: alleviate infrastructure bottlenecks (energy and transportation), increase productivity and value-added in agriculture, diversify the economy, and enable the financial sector to better support inclusive growth.
  - Enhancing access to financial services is essential to support economic diversification and structural transformation (¶57).
- Program support and recommendation
  - Staff supports the authorities’ request for a waiver of the non-observance of a performance criterion and the release of the second disbursement under the ECF arrangement in the amount of SDR 18.06 million.
  - The LOI and MEFP set out appropriate policies to pursue the program’s objectives; capacity to repay the Fund is adequate and risks to the program are manageable (¶58).

*International Monetary Fund — Box 5. Benchmarking and Efficiency of Public Spending in Burkina Faso (concluded).*

### 59.      The next Article IV Consultation is expected to take place on a 24-month cycle.

### cr1915-burkina-faso-a4 - 59.      The next Article IV Consultation is expected to take place on a 24-month cycle.

### Recent economic developments and growth
- Growth averaged 6 percent in recent years.
- Real GDP growth (annual percentage change) series shown for 2000–2017 with a 3-year moving average; specific values in Table 1 project GDP at constant prices:
  - 2017: 3.9 (Act.)
  - 2018: 5.9 (Est.)
  - 2019: 6.4 (SR 18/81 Prel.)
  - 2020–2023: 6.3; 6.0; 6.0; 6.0; 6.0 (Proj. annual values shown)
- Sectoral contributions to growth (2011–2017): Services, Industry and Mining, Agriculture featured; Industry and mining contributed importantly to growth in 2017.

### Inflation, credit, and monetary conditions
- Inflation remained subdued in 2017.
- Private credit growth (y/y percent change), Jun-13–Jun-18: chart indicates relatively subdued credit growth; Table 3 memorandum items report credit to private sector (annual % change):
  - 2015: 8.7
  - 2016: 12.1
  - 2017: 8.7
  - 2018: 14.4 (Proj. in Table 3)
  - Private sector credit/GDP: 28.4 (2015) rising to 34.9 (2020 proj. in Table 3)
- Monetary aggregates (Table 3):
  - Broad money (M3) annual % change examples: 19.3 (2015), 11.8 (2016), 15.6 (2017), 21.6 (2018 prog.)
  - Net domestic assets (banking system) and other monetary items detailed in Table 3.

### External sector, trade, and commodity developments
- Current account deficit estimated to have widened in 2017.
- Composition of exports and imports (CFAF billions, charts and Table 2):
  - Exports of goods (f.o.b., valued in CFA francs) (Table 2, select years):
    - 2015: 1,398
    - 2016: 1,676
    - 2017: 1,771 (Est.)
    - 2018–2023 projections: 1,851; 1,963; 2,034; 2,133; 2,147; 2,169
  - Imports of goods (Table 2):
    - 2015: -1,540
    - 2016: -1,677
    - 2017: -1,965
    - 2018–2023 projections: -2,059; -2,198; -2,233; -2,319; -2,399; -2,490
  - Current account (percent of GDP) (Table 2 memorandum): -8.6 (2015), -7.6 (2016), -9.7 (2017), projections: -8.1 (2019), -8.3 (2020), -7.0 (2021), -7.3 (2022), -7.5 (2023), -7.7 (2024)
- Commodities:
  - Gold and cotton important for exports; charts show international gold price (USD per troy ounce) and cotton (US cents per pound), Aug. 2013–Aug. 2018.
  - Composition of exports (2011–2017 chart and Table 2 components): Gold and cotton major shares.
  - Cotton production recovered due to abundant rainfall; prospects for cotton and gold exports continued to improve.
- External reserves and liquidity (Table 2 memorandum, BCEAO Reserves):
  - In million USD series (selected): 12,474; 10,494; 12,963; 16,011; 16,132; 16,958; 18,448; 20,124; 24,246 (years cover 2011–2017 and projections)

### Fiscal developments and public finances
- Fiscal deficit widened markedly in 2017; public debt remained at its current level while the share of domestic debt rose.
- Investment spending execution increased, buttressed by temporary easing of investment procedures; investment spending estimated to have sharply increased in 2017.
- Domestic revenue continued to trend up in 2017; tax revenues continued to recover in 2017.
- Central government finance aggregates (Table 1 and Tables 5a–5d; selected figures):
  - Current revenue (percent of GDP, Table 1): 17.0 (2015 Act.), rising to 19.1 (2018 Est.), with projections up to 21.1 (2023 proj.)
  - Tax revenue (percent of GDP, Table 1): examples—15.1 (2015), 16.7 (2016), 17.3 (2018 Est.), projected 19.0 (2022), 19.3 (2023)
  - Total expenditure and net lending (percent of GDP, Table 1): 22.9 (2015), 25.3 (2016), 29.9 (2017), with projections 29.9 (2018 SR18/81 Prel.) and declining toward 26.6 (2023 proj.)
  - Overall fiscal balance, incl. grants (commitments) (percent of GDP, Table 1): -2.2 (2015), -3.5 (2016), -8.2 (2017), projections: -7.8 (2018 SR18/81 Prel.), -4.7 (2019 Prel.), and -3.0 for 2021–2023 (Proj.)
  - Total public debt (percent of GDP, Table 1): 35.6 (2015), 39.2 (2016), 38.3 (2017), projections around 42.5 (2019) then stabilizing near 41.1–41.4 through 2023
- Central government consolidated operations (Table 5a, 5b): detailed revenue, expenditure, financing, and projections for 2017–23 in CFAF billions and percent of GDP.
  - Example: Total revenue and grants (CFAF billions, Table 5a) — 1,584 (2017 Prel.), 2,012 (2018 Budget), 1,822 (2018 Suppl. Budg. Rev. Prog.), with projections rising to 2,741 (2023)
  - Overall balance (commitment basis) examples (CFAF billions, Table 5a): -563 (2017 Prel.), -423 (2018 Budget), -395 (2018 Suppl. Budg. Rev. Prog.); projections: -354 (2023)
  - Wage bill to tax revenue ratio (percent, Table 5b memorandum): 49.9 (2017), 39.2 (2018), 47.6 (2019 prog.), examples through 2023.

### Balance of payments and financing
- Balance of payments (Table 2, selected):
  - Current account (CFAF billions): -529 (2015), -488 (2016), -696 (2017 Est.), -639 (2018 Est.), projected -708 (2019), -646 (2020), -725 (2021), -810 (2022), -896 (2023)
  - Trade balance (goods) (CFAF billions): -1430 (2015), -194 (2016), -207 (2017), -235 (2018 Est.), projected -199 (2019), -185 (2020), -253 (2021), -321 (2022), (2023 value listed)
  - Financial account (CFAF billions): 375 (2015), 560 (2016), 524 (2017), 286 (2018 Est.), projections up to 725 (2023)
- External financing requirements and sources (Table 7):
  - Financing need (CFAF billions): -492 (2017 Prel.), -586 (2018 Staff Proj.), -519 (2019), -488 (2020), -452 (2021)
  - Financing (CFAF billions): 489 (2017), 558 (2018), 491 (2019), 459 (2020), 451 (2021)
  - IMF ECF-Financing (past and prospective): 428; 28; 28; 280 (Table 7 entries)
  - Project loans and program loans breakdowns and official transfers detailed in Table 7.

### IMF arrangements and disbursements
- Schedule of Disbursements Under Three-year ECF Arrangement 2018–20 (Table 6):
  - SDR 18.06 million — March 14, 2018 — Executive Board Approval of a new arrangement under the Extended Credit Facility
  - SDR 18.06 million — December 15, 2018 — Observance of continuous and end-June 2018 performance criteria, and completion of the first review under the arrangement
  - SDR 18.06 million — June 15, 2019 — Observance of continuous and end-December 2018 performance criteria, and completion of the second review under the arrangement
  - SDR 18.06 million — December 15, 2019 — Observance of continuous and end-June 2019 performance criteria, and completion of the third review under the arrangement
  - SDR 18.06 million — June 15, 2020 — Observance of continuous and end-December 2019 performance criteria, and completion of the fourth review under the arrangement
  - SDR 18.06 million — December 15, 2020 — Observance of continuous and end-June 2020 performance criteria and completion of the fifth review under the arrangement

### Capacity to repay the IMF and debt metrics
- Indicators of capacity to repay the IMF (Table 8, selected):
  - Fund obligations based on existing and prospective credit (in millions of SDRs, selected years):
    - Principal: 14.4 (2016 Act.), 17.8 (2017 Prel.), 10.9 (2018), 23.6 (2019), 19.0 (2020)
    - Charges and interest: 0.0 (2016–2017), small amounts in later years (table shows 0.1, 0.5)
  - Total obligations (in millions of SDRs): 14.4 (2016), 17.8 (2017), 11.0 (2018), 24.1 (2019), 19.5 (2020)
  - Outstanding IMF credit (in millions of SDRs): 155.2 (2016 Act.), 141.9 (2017 Prel.), 153.9 (2018), 166.3 (2019), 183.4 (2020)
  - Outstanding IMF credit in percent of government revenues: 10.4 (2016), 8.2 (2017), 8.2 (2018), 7.7 (2019), 7.7 (2020)
  - Net use of IMF credit (in millions of SDRs): 8.6 (2016), -13.3 (2017), 25.2 (2018), 12.0 (2019), 16.6 (2020)
- Memorandum items (Table 8): Nominal GDP, exports, government revenue, and projected debt service series provided for 2016–2032.

*Source: Burkinabè authorities; and IMF staff estimates and projections (as presented in the supplied content).*

### Annex I. External Sector Assessment

### Annex I. External Sector Assessment

### REER Assessment and External Position
- The real effective exchange rate (REER) is assessed using the IMF’s External Balance Assessment Lite (EBA-Lite) methodology, employing the current account model (CAM) and REER index model approaches.
- CAM assessment indicates a potential REER overvaluation of 10.6 percent (Figure A1.2 and Table A1.1).
- The REER index model suggests an undervaluation; staff’s view favors the CAM results for Burkina Faso because macroeconomic variables play a larger role for the country, while the REER index model relies more on financial variables influenced by the overall health of the WAEMU region.
- Summary EBA-Lite findings (percent of GDP, unless otherwise stated):
  - Current Account: Projected -9.7
  - Current Account: Norm -7.2
  - Current Account gap -2.5
  - Elasticity of CA to REER (ratio) -0.2
  - Real Exchange rate gap (percent) 10.6

### Current Account Developments and Outlook
- The current account balance has remained in perpetual deficit, consistent with development objectives and the economy’s structure.
- Major exports: gold and cotton have registered consistent growth over the last decade but have been counterbalanced by strong import demand.
- Staff projections:
  - Current account deficit to narrow to 8.1 percent of GDP in 2018 as fiscal consolidation reins in import demand.
  - Over the medium term the current account deficit is expected to moderate to an average of around 7½ percent as gold production rises and the agricultural sector improves quantity and value-added of exports.
- Figure A1.2 indicators (2007–2017, percent of GDP) show:
  - CA-Norm-2017, CA-Fitted, CA actual series with the noted projected and normative values above.

### Exchange Rate Dynamics and Competitiveness
- REER developments:
  - The REER has depreciated by roughly 7 percent since 2010, with almost all movement during the 2015-2017 period.
  - In contrast, the nominal effective exchange rate appreciated over the same period, reflecting the movement of the euro (the CFA franc is pegged to the euro) against major currencies.
  - The relatively lower inflation performance in Burkina Faso compared to main trading partners explains the decline in the REER.
- Despite REER depreciation being generally welcome for competitiveness, broader structural constraints have prevented significant export diversification.
- Figure A1.3: Real and Nominal Effective Exchange Rates, 2010-2017 (Index 2010=100).

### Risks and Scenario Considerations
- Risks to the external outlook are tilted to the downside, with some upside risks:
  - Baseline scenario assumptions:
    - Gradual improvement in the security environment as increased security spending and coordination through the G5 Sahel Joint Force achieve durable results.
    - Steady improvements in productivity and resilience of the agricultural sector, including increased irrigation and physical infrastructure investment to reduce market access costs and facilitate diversification.
  - Downside risk:
    - Failure to materially improve the security situation and agricultural productivity would negatively affect the external position, dampen GDP growth, and place additional pressure on the fiscal stance.
  - Upside risk:
    - Resolution of legal issues surrounding Burkina Faso’s manganese mine could provide a new large scale, long term, commodity export.

### Structural Reforms and Competitiveness Enhancements
- Scope for competitiveness improvement by building on structural reforms in known bottleneck areas.
- World Bank Doing Business indicators identify specific areas for improvement relative to comparator sub-Saharan African economies, particularly:
  - Access to electricity
  - Access to credit
- Shared weaknesses with peers:
  - Resolving insolvency
  - Enforcing contracts
  - These point to concerns with the speed and efficacy of the judicial system in regulating financial matters.
- Burkina Faso has lost ground in recent years relative to peer economies; increasing the pace of structural reforms is recommended.
- Figure A1.4: Doing Business indicators (Distance to frontier 0 to 100) and Ease of Doing Business Index, 2015-17.

### Recent Economic Developments and Program Implementation (as reported in the Letter of Intent and MEFP)
- Context: Program under the IMF Extended Credit Facility (ECF) for 2018-2020 implemented amid persistent terrorist attacks, public sector labor unrest, and a food security crisis from low rainfall and crop damage.
- Growth and inflation:
  - Growth remained strong in 2017 at 6.3 percent.
  - Growth projected to be 6.0 percent in 2018 with balanced sectoral contributions.
  - Inflation at end-June 2018: 2.5 percent year-on-year and an annual average of 1.3 percent (compared to -0.4 percent and -5 percent, respectively, at end-June 2017).
  - Inflation expected to remain within WAEMU maximum of 3.0 percent at end-December 2018 due to government measures.
- Sectoral drivers:
  - Primary sector recovery expected from more favorable rainfall, improved irrigation, producer support, and maintained producer price incentives.
  - Secondary sector buoyed by extractive industries (start of production at SEMAFO Boungou BF S.A. gold mine in 2018) and major capital projects including roughly 1400 kilometers of rural road maintenance/rehabilitation and 600 kilometers of other road works.
  - Tertiary sector benefits from telecommunications, financial services, and transportation; tourism and hotel subsector hindered by deteriorating security.
- Balance of payments (first half of 2018):
  - Current account surplus of CFAF 35.9 billion (improvement of CFAF 58.9 billion vs. first half of 2017).
  - Trade in goods surplus increased from CFAF 20.5 billion (H1 2017) to CFAF 87.6 billion (H1 2018).
  - Increased exports: +CFAF 136.0 billion; increased imports: +CFAF 68.9 billion.
  - Surplus on secondary income increased by CFAF 20.4 billion (budget support +CFAF 8.9 billion; migrant remittances +CFAF 7.8 billion).
  - Services current account deficit widened by CFAF 28.5 billion.
  - Capital account surplus: CFAF 74.5 billion (H1 2018) vs. CFAF 64.1 billion (H1 2017).
  - Overall balance of payments deficit: CFAF 42.3 billion in H1 2018 (an improvement of CFAF 49.4 billion vs. H1 2017).
- Monetary developments at end-June 2018:
  - Money supply increased by 8.4 percent compared to end-December 2017.
  - Domestic claims increased by 4.3 percent; deposit institutions’ net foreign assets (NFA) contracted by 9.3 percent.
  - Increase in domestic credit entirely due to a 7.5 percent increase in claims on the economy (increased bank credit to the private sector).
  - Reduction in banks’ NFA: -CFAF 264.3 billion (-19.9 percent) following contraction in gross claims on nonresidents: -CFAF 428.3 billion (-21.7 percent), partially offset by a decrease in exposures in respect of nonresidents: -CFAF 164.0 billion.

### Policy Measures Noted in the Letter of Intent
- Fiscal and program implementation:
  - All quantitative performance criteria and indicative targets met except the zero ceiling for new pre-financing of public investments; government sought a waiver for non-fulfillment related to a pre-financing agreement signed in September 2018 for a high-priority road infrastructure project whose tendering and partner selection phases were completed in November 2017.
  - Ministerial Order No. 2018-479 / PM / MINEFID / CAB dated 09 November 2018 prohibits negotiation and signing of contracts with pre-financing features.
  - Expenditures related to the pre-financed project to be included in the 2019 budget and recorded as public debt in accordance with best practices in the 2017 IMF technical assistance report on PPP fiscal risk management.
- Budgetary stance and financing:
  - Draft supplementary budget law for 2018 submitted to parliament respects program objectives including a maximum 5 percent budget deficit as a share of GDP.
  - Draft budget law for 2019 consistent with WAEMU fiscal deficit limit of 3 percent of GDP and ECF objectives.
  - 2019 deficit financing to be via government securities on the regional financial market and a combination of concessional and non-concessional borrowing; government will ensure no preferential treatment for private partners granting concessional loans.
- Public sector compensation and fuel pricing:
  - Government preparing an organic law to specify public service functioning principles to ensure compliance with regional standards by 2021 as part of controlling the wage bill.
  - Measures to address oil price rise:
    - Clear SONABHY’s operating shortfall through budgetary transfers and securitization.
    - Reduce subsidy per liter for retail fuel prices.
    - Council of Ministers decided on November 8, 2018 to adjust hydrocarbon prices to ensure a pump price increase of 75 FCFA, representing an increase of 12.5%.
    - Decree No. 2018-1012 / PRES / PM / MINEFID / MCIA / ME of November 14, 2018 adopts a new mechanism for determining retail fuel prices with quarterly adjustment to align domestic and market prices.
- Program financing request:
  - Government requests completion of the first review under the ECF arrangement and disbursement of the equivalent of SDR 18.06 million.

_International Monetary Fund. Annex I. External Sector Assessment (from cr1915-burkina-faso-a4)._

### 25.4 percent). The decrease in banks’ gross external claims is primarily attributable to decreased

### BURKINA FASO

### Banks’ external exposures and external claims
- Decrease in banks’ gross external claims primarily attributable to:
  - decreased credit to nonresidents (-CFAF 193.4 billion)
  - decreased government securities of other WAEMU States (-CFAF 125.9 billion)
  - decreased deposits with foreign correspondents (-CFAF 97.3 billion)
- Reduction of banks’ external exposures reflects, inter alia:
  - decreased nonresident deposits (-CFAF 111.6 billion)
  - decreased credit from foreign financial institutions (-CFAF 59.7 billion)

### Monetary aggregates
- At end-June 2018, the money supply posted a decline of 8.1 percent with respect to end-December 2017 under the combined effect of:
  - decreased NFA (-9.3 percent)
  - domestic claims (+4.2 percent)

### Public finances — revenue, grants, and tax composition
- Total revenue and grants:
  - First half of 2018: CFAF 800.3 billion compared to CFAF 719.3 billion for the same period of 2017, an increase of 11.3 percent
  - Represented 10.1 percent of GDP at end-June 2018 compared to 10.0 percent of GDP during the same period of 2017
  - Increase due to revenue (+CFAF 63.0 billion) and grants (+CFAF 18.0 billion)
  - At end-September 2018: CFAF 1213.4 billion compared to CFAF 1096.6 billion for the same period of 2017, an increase of 10.6 percent
- Tax revenue:
  - At end-June 2018: CFAF 649.3 billion, up 10.3 percent versus end-June 2017
  - Tax revenue represented 8.2 percent of GDP (same as period in 2017)
  - Increase attributable to:
    - “income and profits taxes” (+CFAF 33.9 billion)
    - “goods and services tax” (+CFAF 17.5 billion)
    - “taxes on international trade and transactions” (+CFAF 9.3 billion)
  - At end-September 2018: tax revenue CFAF 1007.1 billion compared to CFAF 907.0 billion for same period of 2017, an absolute increase of CFAF 100.2 billion (+11.1 percent)

### Mining receipts
- At end-June 2018: CFAF 122.5 billion compared to CFAF 107.2 billion at end-June 2017, an increase of 14.3 percent
- At end-September 2018: CFAF 187.9 billion compared to CFAF 168.9 billion for same period of 2017, an increase of 11.2 percent
- Performance reflects increased gold production combined with favorable gold price

### Domestic revenue mobilization measures
- Stepped-up efforts to collect tax arrears through targeted, individual approaches and negotiated repayment plans with large taxpayers
- Expanded implementation of the - procedure for payment of taxes by notification of credit, through outreach to taxpayers to encourage regular submission of tax returns
- Verification of use of the standardized invoice in Ouagadougou and Bobo-Dioulasso and imposition of fines on offenders
- Rationalization of tax exemptions
- Automated management of the most recent tax arrears via SINTAX 2 application and establishment of arrears collection groups in each decentralized unit
- Interconnection of the Burkina Faso and Togo customs information systems
- Continued efforts to combat customs fraud
- Continued satellite monitoring of goods traffic covering all main transit routes
- Connection of licensed customs brokers to ASYCUDA WORLD allowing the closing of physical customs posts (des unités banalisées de dédouanement)

### Grants
- First half of 2018: CFAF 69.8 billion grants (0.9 percent of GDP) compared to CFAF 51.8 billion (0.7 percent of GDP) in same period of 2017, an increase of 34.7 percent
  - Increase attributable to project grants (+CFAF 9.1 billion) and program grants (+CFAF 8.9 billion)
- At end-September 2018: CFAF 93.4 billion compared to CFAF 74.8 billion during same period of 2017, an increase of 24.8 percent

### Expenditure, net lending, and composition
- Total expenditure and net lending:
  - At end-June 2018: CFAF 881.2 billion compared to CFAF 972.8 billion at end-June 2017, a decrease of CFAF 91.6 billion (-9.4 percent)
  - Total expenditure execution represented 11.1 percent of GDP at end-June 2018 compared to 13.6 percent of GDP during same period of 2017
  - Decrease attributable to decreased capital spending (-CFAF 120.1 billion, or 1.5 percent of GDP) while current spending increased by CFAF 48.8 billion
  - Reasons for decrease in capital expenditure include labor unrest affecting expenditure processing staff and precautionary withholding of CFAF 264 billion from all expenditure categories in early 2018
  - At end-September 2018: total executed expenditure and net lending CFAF 1385.5 billion compared to CFAF 1472.5 billion for same period of 2017, a contraction of 5.9 percent
- Current expenditure:
  - At end-June 2018: CFAF 671.9 billion, up 7.8 percent versus end-June 2017
  - Increase reflects personnel expenditure (+CFAF 35.5 billion), debt service (+CFAF 32.7 billion), goods and services purchases (+CFAF 7.1 billion), mitigated by decrease in current transfer expenditure (-CFAF 26.6 billion)
  - Increased personnel expenditure reflects accounting recognition of government’s liabilities to management and labor and correction of employee salary situations via wage scale adjustments
  - Current personnel expenditure execution at end-September 2018: CFAF 1007.2 billion compared to CFAF 921.3 billion the previous year, an increase of 9.3 percent

### Measures to contain salary expenditure
- Slowed civil service hiring and did not systematically replace every employee who leaves, reducing hiring by roughly 40 percent in 2018 (resulting in 10,000 new positions compared to initial projection of about 15,000)
- Redeployed personnel from areas of high concentration to areas with shortages
- Limited new hiring to priority sectors with approval of the Council of Ministers
- Established policy of hiring within defined financial limits through a total budget each year for direct competitive hiring to the civil service
- Objective: facilitate compliance with WAEMU convergence criterion limiting wage expenditure to 35 percent of domestic revenue by 2021

### Fiscal balance and capital expenditure quality
- Overall fiscal balance (commitment basis) deficits:
  - Posted a deficit, widening from CFAF 80.8 billion at end-June 2018 to CFAF 172.2 billion at end-September 2018
  - Comparable deficits in 2017: CFAF 253.4 billion at end-June and CFAF 375.8 billion at end-September
- New general regulations on development projects and programs adopted in February 2018 through Decree No. 2018-0092/PRES/PM/MINEFID governing public investment management from project conception to closure, project management and implementation, and accounting treatment of fixed and intangible assets
- New programming criterion: any new project must include a gross fixed capital formation (GFCF) component of at least 85 percent
- Guide for ex ante evaluation, selection, and prioritization of projects established; oversight committee created to screen budget-included proposals

### Project management and implementation reforms
- Rationalization of project management units into a single technical unit per program, headed by the budget program manager, to minimize wasted resources and refocus units toward investment
- Emphasis on monitoring and control of infrastructure projects at all stages to ensure quality

### Energy sector investments and access
- Theoretical installed electric power increased by 134.1 MW following:
  - Completion of photovoltaic solar plants at Zagtouli (33 MWp) and Ziga (1.1 MWp)
  - Completion of interconnection with Ghana (100 MW)
- Actions to increase access to electricity:
  - Electrical interconnection of multiple Burkinabè cities
  - Connection work in progress by SONABEL in 63 towns and cities, including 57 departmental administrative centers
  - Solar-powered electrification of 385 socio-community infrastructures in 120 villages of rural communes of the Centre and Hauts-Bassins regions and 100 districts of Ouagadougou and Bobo-Dioulasso arrondissements
  - Installation of 79,413 LED lights in 79,413 households and installation of an additional 115,510 in progress to increase energy efficiency
  - Installation of 3000 LED streetlights to replace high-pressure sodium- and mercury-vapor lamps in Ouagadougou

### Security, health, and employment actions
- Security:
  - Strengthened security measures and territorial coverage, including construction of functional security services in the Sahel and procurement of operational and special-purpose equipment for police units (armaments, vehicles, operational equipment, and special-purpose equipment)
- Health:
  - Construction and equipping of 158 new health and social promotion centers (CSPS)
  - Conversion of Ouahigouya regional hospital center (CHR) to a university hospital center (CHU)
  - Completion of construction of Bogodo district hospital in Ouagadougou
  - Expansion of community health services with hiring and training of 17,668 community health workers (35 percent women)
  - Hiring of 3995 new health workers, including 787 physicians
  - Installation of hospital pharmacies at Tingandogo CHU, Charles de Gaulle pediatric CHU, Bogodogo CHU, and Gaoua regional CHU
- Employment:
  - Implementation of Youth Employment for National Education Program (PEJEN) with hiring of 2100 young university graduates underway
  - Financing of 49 projects and micro-projects for “downsized” and retired workers
  - Training and support for women:
    - 1270 women trained in processing local products
    - 9480 women trained in entrepreneurship and business management
    - 970 women trained in collective/association management through FAARF
    - 884 women’s associations provided with working capital and investment credits

### Program quantitative and structural criteria — performance
- All quantitative performance criteria and indicative objectives at end-June 2018 were met except performance criterion relating to zero ceiling for new pre-financing of public investments
- Quantitative performance criteria:
  - Net domestic financing of the government:
    - CFAF 104.4 billion at end-June 2018
    - CFAF 237.7 billion at end-September 2018
    - Ceilings: CFAF 200 billion at end-June and CFAF 263 billion at end-September
  - Nonconcessional external debt contracted or guaranteed by the government: CFAF 52.4 billion at end-September 2018 compared to ceiling of CFAF 200 billion at end-December 2018
- Pre-financing agreement for construction of ring road around Ouagadougou signed in September 28 with firm EBOMAF; government contends contract signature was formality given prior completion of bid analysis, partner selection, and negotiation in November 2017
- Government requested waiver of nonobservance of zero ceiling on new pre-financing arrangements; by order no. 20018-479/PM/MINEFID/CAB of November 9, 2018, Head of Government advised prohibition on negotiating contracts that entail characteristics of pre-financing
- Expenditures relating to ring road project to be included in 2019 budget and subsequent budgets and in public debt data in accordance with 2017 IMF technical assistance report on PPP fiscal risk management

### Indicative targets and arrears
- No domestic arrears accumulated at end-June or end-September 2018
- Overall fiscal deficit (including grants):
  - CFAF 80.8 billion at end-June 2018 compared to ceiling of CFAF 236 billion
  - CFAF 172.2 billion at end-September 2018 compared to ceiling of CFAF 316 billion
- Own revenue collected:
  - CFAF 730.5 billion at end-June compared to floor of CFAF 692 billion (exceeding target by CFAF 38.5 billion)
  - CFAF 1120.0 billion at end-September compared to floor of CFAF 1087 billion
- Current social expenditure to reduce poverty:
  - CFAF 119.8 billion at end-June 2018 compared to floor of CFAF 88 billion
  - CFAF 184.0 billion at end-September compared to floor of CFAF 132 billion
- VAT refunds:
  - Stock of certified VAT refund requests more than 30 days outstanding:
    - CFAF 33.4 billion at end-June 2018 compared to ceiling of CFAF 55 billion
    - CFAF 40.54 billion at end-September 2018 compared to ceiling of CFAF 55.0 billion
- No PPP project contracted at end-September 2018

### Structural benchmarks — status and implementation
- Measures met by end-April 2018 (three):
  - Create and update semiannually a database of all official government guarantees containing beneficiary, underlying contract, signature date, expiration date, and budget implications
  - Create and semiannually update a database of all projects signed or planned as PPPs, pre-financing, or supplier credit arrangements including type of contract, total cost, payments made, and schedule of remaining principal and interest payments
  - Approval by ministry in charge of finance, SONAPOST, and ministry in charge of the digital economy of a plan for SONAPOST’s repayment of Treasury assets held in postal accounts
- Measures in progress:
  - Adopt a text establishing limits or thresholds for total value of PPPs contracted by public administrations (draft submitted to IMF technical assistance team; final version to be submitted for signature during November 2018)
  - Hire an independent external auditor to audit SONABHY’s operations, financial position, and accounting practices (only negotiation and signature of contract remaining; to be finalized during November 2018)
- Measures planned and completed:
  - Study on mitigating impact of flexible fuel pricing mechanism on the vulnerable — completed, capitalizing on benchmarking in Côte d’Ivoire and Senegal
  - Inclusion of a cost-benefit and risk analysis of the 10 largest investment projects, including PPPs, as an annex to the 2019 budget law — completed and annexed to the 2019 budget law submitted to the National Assembly
- Four measures to be implemented by end-December 2018 with broadly satisfactory implementation expected to be completed on schedule:
  - Revision of national accounting systems with new base year and publication of revised series
  - Incorporation of results of study on artisanal gold mining in national accounting system
  - Development and adoption of mechanism for operation of the Treasury single account
  - Automation of asset reporting by persons subject to Law 04/CNT/2018 and implementation of searchable online reporting and query database

### Implementation of the PNDES — outcomes and challenges
- Implementation marked by difficult context and events that affected expected outcomes, including:
  - increased terrorist attacks
  - intensified labor protests affecting nearly all spheres of government
  - disappointing crop production following early end to rainy season, legionnaire caterpillar infestations, and damage from granivorous birds
- Pillar I — Institutional reform and modernization of the administration: substantial gains including:
  - Strengthening financing mechanisms via establishment of specialized institutions such as Burkina STARTUP Program and Youth and Women’s Economic Empowerment Program; establishment in progress of Caisse des Dépôts et Consignations and Agriculture Financing Bank
  - Improved access to legal system via offsite hearings (audiences foraines), payment of legal fees for 239 vulnerable persons, establishment of 25 assistance centers, construction of a regional court, hiring of personnel, and establishment of centers specializing in economic and financial crimes and terrorist acts

*International Monetary Fund — selected excerpts from CR1915: Burkina Faso chapter*

### 42. In the area of human capital development (Pillar II), the achievements were also substantial

### 42. In the area of human capital development (Pillar II), the achievements were also substantial

### Health
- Expansion of healthcare infrastructures, equipment of health facilities, and increase in healthcare personnel.
- Reform: introduction of free healthcare for children under age 5 and pregnant women.
- Maternal deaths per 100,000 births: declined from 135 in 2015 to 120.9 in 2017.
- Overall in-hospital mortality rate: declined from 109.9 per 1000 in 2015 to 52.2 per 1000 in 2017, or a reduction of 111 percent.

### Education
- Post-primary completion rate: climbed to 32.95 percent in 2017 compared to 24.24 percent in 2016 and a target of 30.2 percent.
- Opened the first two scientific secondary schools in Ouagadougou and Bobo-Dioulasso.
- Inaugurated preparatory classes for professional engineering schools at Ouaga I University.
- Completed facilities to house university teacher training and administrative buildings, including the Virtual University of Burkina Faso, and to provide space for social services.

### Safe drinking water
- Built and rehabilitated infrastructures providing an additional 646,000 persons with access to safe drinking water.
- Access rate increased from 71 percent in 2015 to 73.4 percent in 2017.

### Transformation of the economy (Pillar III)
- Construction of 11 new dams and rehabilitation of 11 existing dams increased surface water storage capacities by 6,135.35 million cubic meters relative to a target of 6,126.12 million cubic meters.
- Paving commenced on 756.6 kilometers of roads, of which 171 kilometers were completed.
- Agriculture: adoption of the investment code and implementing decrees for agro-sylvo-pastoral, fisheries, and wildlife segments.
- ICT: 1795 kilometers of fiber optic cable installed and put in service in 7 regional and 42 communal administrative centers under the National Telecommunications Backbone project; another 1020 kilometers are being deployed.
- SMEs/SMIs: Law for the Promotion of SMEs/SMIs adopted and implementing regulations promulgated; SME/SMI promotion agency and the National SME Commission created.

### A. Macroeconomic Framework for 2019
- Outlook: economic activity expected to continue accelerating in 2019.
- Growth projection: economic growth should attain a minimum of 6.0 percent in 2019, as in 2018.
- Growth drivers: mining, construction and civil engineering, manufacturing, services, and agro-sylvo-pastoral activities.
- Inflation: expected to remain within the community maximum of 3 percent in 2019.
- Balance of payments 2018: current trade deficit expected to narrow to 6.6 percent of GDP and generate an overall balance of payments surplus in 2018 following an estimated deficit in 2017.
- Current account 2019: expected to widen to 8.0 percent of GDP.

### B. Fiscal Policy for the Remainder of 2018 (Supplemental Budget Law) and 2019

2018 Supplemental Budget Law
- Context: first half of 2018 marked by terrorist attacks and labor unrest; supplemental budget law submitted for approval in October.
- Fiscal deficit limit under the ECF-supported program: 5 percent of GDP.
- Total revenue and grants: reduced by CFAF 246 billion (or 3.2 percent of GDP) compared to the initial 2018 budget law and stand at CFAF 1766 billion (or 22.3 percent of GDP).
- Total expenditure and net lending: reduced by CFAF 246 billion compared to the initial 2018 budget law and stand at CFAF 2189 billion, representing 27.6 percent of GDP.
- Financing of 2018 fiscal deficit: budgetary support, drawings on IMF resources, issuance of securities on the financial and money markets, and concessional loans from other partners.
- Revenue collection measures (tax administration DGI and customs DGD) include:
  - continued clearing of validated tax arrears through intensive collection campaigns;
  - continuation of audit operations and sanctions on the use of the standardized invoice;
  - continued implementation of measures provided in the General Tax Code (CGI);
  - stepped up investigations and cross-check of information for targeted verifications;
  - systematic unloading of trucks transporting more than two different articles;
  - suspension of individual licensed customs brokers for regulatory violations;
  - observance of reference values for consumer product imports and exports;
  - continued scanning at the Ouagadougou (highway transport) and Bobo-Dioulasso (railroad transport) customs bureaus;
  - strengthening of regional directors’ oversight of offsite reviews and audits by the Office of the Technical Inspector;
  - monitoring of the tax and customs provisions of public contracts financed from own resources;
  - collections associated with re-registration of automobiles throughout the national territory;
  - strengthening of inspectors’ and staff expertise to improve merchandise valuation according to World Trade Organization methodology in the context of exit from the Import Verification Program through COTECNA;
  - continued efforts to combat all forms of customs fraud (contraband, undeclared imports, false declarations, and breach of commitments).

2019 Initial Budget Law
- Overall fiscal deficit ceiling: maximum of 3 percent of nominal GDP to conform to the ECF-supported program.
- Revenue mobilization objectives: expand tax base and improve taxpayer compliance and tax administration efficiency to meet the WAEMU community objective of a 20 percent tax ratio in the medium term.
- Measures in 2019 budget law to expand tax base and raise revenue include:
  - expanding scope of application of the tax on capital gains from the transfer of mining permits;
  - bringing the drinks sector into the general tax system through revocation of exemptions previously subject to the Beverage Sector Contribution (CSB);
  - instituting a tax on heavy duty vehicles;
  - increasing the tax rate on arms;
  - increasing the tax on airline tickets;
  - increasing the rate of the specific tax on perfume and cosmetic products;
  - broadening the scope for licenses for drinking establishments;
  - eliminating the system of flat taxes on beverage sector activities and applying generally applicable tax laws to the sector, with the institution of a 5 percent estimated income tax;
  - increasing the tax rate for nonalcoholic beverages from 10 percent to 15 percent;
  - increasing the tax rate for biodegradable and authorized non-biodegradable plastic wrapping and bags;
  - increasing receipts from the property tax on improved and unimproved properties (TF B/NB), the residence tax, and the microenterprise contribution through use of data from the general census of Ouagadougou and Bobo-Dioulasso taxpayers;
  - anticipated proceeds of the campaign to collect tax arrears;
  - enhancing off-site surveillance through implementation of the ASYCUDA value module;
  - ongoing offsite surveillance of merchandise valuation by the Valuation Control Unit;
  - pursuing outsourcing of the valuation of used vehicles less than 10 years old and heavy machinery to the Motor Vehicle Control Center (CCVA), and reducing the allowance from 50 percent to 25 percent of the value;
  - continuing efforts to interconnect the Burkinabè customs IT systems with those of Togo pending receipt of data on all merchandise exported to Burkina Faso;
  - interconnecting the Burkinabè customs IT systems with those of Côte d’Ivoire to manage merchandise flows into Burkina Faso;
  - dividing the Bobo international customs bureau into three bureaus (roads, railway, and hydrocarbons) to introduce specialization;
  - automating revenue management in customs offices and mobile brigades not connected to the ASYCUDA system.
- Additional commitments and timing:
  - establish inspection certificates as a mandatory requirement in the clearance process, and institute scanning of documents in ASYCUDA World by end-April 2019;
  - harmonize taxes on tobacco in line with the new WAEMU directive, raising the rate to a minimum of 50 percent (structural benchmark) by November 2018.
- Administrative and structural measures:
  - review options to identify new tax measures while avoiding too many measures in a short period;
  - strengthen revenue administration by monitoring procedures for taxpayers who do not file declarations, enhance cooperation between the DGD and the DGI;
  - launch effort to evaluate tax arrears and develop strategy to collect non-contested debts and write off unrecoverable debts;
  - institute targeted audits for specific issues;
  - conduct a study on the taxation of small businesses and microenterprises (structural benchmark) and reform taxation of the informal sector;
  - increase online declarations and payments.
- Customs transition measures following termination of contract with COTECNA:
  - use of the ASYCUDA valuation module;
  - creation of a value control team for daily monitoring of merchandise values in clearance bureaus;
  - implemented transition and supervision committee with director general, deputy director general, and all headquarters directors to provide weekly oversight of clearance operations;
  - monitoring of clearing of 20 targeted products in 2018 and 50 products in 2019 likely associated with fraud or subject to particular import regulations.
- Expenditure profile 2019:
  - total expenditure stood at CFAF 2196 billion compared to CFAF 2166 billion in 2018.
  - wage bill: CFAF 836 billion (9.8 percent of GDP).
  - transfers: CFAF 496 billion (5.2 percent of GDP).
  - capital expenditure financed from domestic resources: CFAF 306 billion (3.6 percent of GDP).
- Personnel expense objectives and actions to meet WAEMU limit of 35 percent of tax revenue by 2021:
  - implement conclusions of the national stakeholders conference (CFVN) on the civil service compensation system;
  - clear arrears on payment of monetary benefits payable to employees for prior fiscal years to adhere to the one-year budget rule;
  - heighten internal control of components of compensation provided to government employees;
  - continue consolidation of the wage bill combined with implementation of the biometric census of government personnel;
  - continue efforts to reduce new civil service hiring in 2019 with respect to the initial forecast of 14700 new hires (structural benchmark);
  - publish the number of public servants on the government payroll according to grade, region and ministry (structural benchmark);
  - adoption of salary and indemnity scales consistent with the medium term objective to contain the overall wage bill within the WAMEU convergence criterion of 35 percent of tax revenues (structural benchmark).
- Rationalization of public sector operating expenditure measures:
  - adoption and implementation of a policy to rationalize the government’s vehicle fleet;
  - restrictions on staff travel;
  - effective implementation of assets inventories;
  - monitoring of electricity, telephone, and water consumption.
- Budget management improvements:
  - early implementation of procurement processes and actions aimed at reconciling physical and financial budget execution, including in the context of delegated project management;
  - hiring of program managers to strengthen management of public projects;
  - implementation of the decentralized mechanism for monitoring and oversight of physical works funded from the government budget, and effective application of policies on subsidies and provision of services to populations free of charge.

### C. Debt Management Policy
- Medium-term debt strategy: reduce reliance on national and regional borrowing and gradually reorient financing toward external sources offering lower costs and more favorable terms.
- Objective: maintain moderate risk of external debt distress and meet financing needs at lowest possible long-term cost while maintaining acceptable risks and supporting subregional financial market development.
- Limitation: in context of declining concessional resources, use of nonconcessional financing will be limited to critical projects offering substantial, guaranteed economic returns.
- Debt stock at July 31, 2018: estimated at CFAF 2972.4 billion, representing CFAF 1140.9 billion in domestic debt and CFAF 1831.5 billion in external debt, or 38.4 percent and 61.6 percent, respectively.
- Debt ratio at July 31, 2018: estimated at 37.5 percent compared to 38.6 percent at end-December 2017.
- Disbursements by end-September 2018: external debt disbursed estimated at CFAF 75.5 billion; domestic debt raised CFAF 213.7 billion through issuance of bonds on the financial market.
- Program ceiling on external debt contracted or guaranteed by the government in 2019: net present value of CFAF 370 billion.
- 2019 financing: issuance of government securities on the regional financial market and a combination of concessional and nonconcessional loans.
- Fiscal deficit program objectives: 5 percent and 3 percent of GDP in 2018 and 2019, respectively.
- Debt-management operations: possible replacement of domestic debt falling due with concessional external borrowing limited to debt and cash management purposes; prior consultation with IMF staff and full details of financing terms committed; any proceeds in excess of needs to be saved in a dedicated account.
- Policy on concessional lenders: government will refrain from extending preferential treatment to any private partner or subsidiaries of any private partner that provided concessional loans, including for public sector contracts or PPPs.
- Strengthening debt management capacities: discussions under way to improve effectiveness and efficiency drawing on recommendations of technical assistance missions.

### D. Improved Efficiency of Expenditure
- Project selection and appraisal: guidelines elaborated.
- Cost-benefit analysis guide: being developed with technical assistance from West Afritac.
- A cost-benefit analysis of major investment projects included in the 2019 budget was annexed to the draft Budget Law 2019 transmitted to the National Assembly.
- Public procurement: regular procedures reinstated in January 2018 after temporary simplification; commitment to retain those procedures and avoid costly supplier credits and pre-financing arrangements.
- Continued efforts to rationalize and increase transparency of public procurement procedures.

*International Monetary Fund — CR1915 Burkina Faso (excerpt)*

### 76. PPPs will be implemented according to best practices with a view to ensuring that any

### 76. PPPs will be implemented according to best practices with a view to ensuring that any potential for contingent liabilities will be strictly contained

### Public-private partnerships (PPPs) and fiscal risks
- Transmit to IMF staff the results of analyses of budgetary risks of projects to be completed and analyses of their potential effects on Burkina Faso’s debt sustainability.
- A database for monitoring PPPs was created and is updated semiannually.
- Structural benchmark: include PPPs in the public investment program by end-December 2019.
- As recommended by the November 2017 IMF technical assistance mission, incorporate PPPs in the public investment process and include PPP contracts planned or already signed in the multiyear budget and economic programming document (DBEP), with their budgetary implications.

### A. Public finance reforms: modernization and management improvements
- Continue modernization of management procedures and tools associated with program budgets introduced in the 2017 budget year to be completed in 2019.
- Planned actions:
  - Continue adaptation of information systems to integrate new modules on accounting and control.
  - Determine government assets; implement materials accounting; prepare the first opening balance sheet for fiscal year 2019.
  - Review budget program templates.
  - Review guides and model formats (monitoring-evaluation, annual performance plan, annual performance report).
  - Publish budget execution reports on the Ministry of Finance website regularly within 15 days following adoption by the Council of Ministers, in addition to publication of proposed budget laws, supplemental budget laws, and the budget execution law (loi de reglement).
  - Produced first monthly Treasury account balance for January through April 2018; established an audit committee to improve financial report quality.
  - Prepare for implementation of accrual accounting; new Chart of Accounts, consistent with the budget classification, took effect in January 2017.
  - Continue process of implementing a Treasury single account.
- Wage bill management:
  - Implement conclusions of the national conference on rationalizing the civil service compensation system.
  - Prepare a medium-term strategy to manage the growing wage bill and a framework law establishing basic principles governing public services.
  - Strategy aims to ensure adherence to regional standards by 2021.
  - Government committed to adopt a multi-annual budget and economic programming document with a continuous reduction in the ratio of the wage bill to tax revenue from its peak of 55 percent in 2019, with an eventual gradual convergence toward the WAEMU community limit of 35 percent.
- VAT refunds (structural benchmark):
  - Establish a Special Treasury Appropriations Account (CAST) to be used exclusively for reimbursement of VAT credits to ensure transparency, clarity, timeliness, and autonomy.
  - CAST revenue sources: VAT collected by the DGD when mining companies import goods for consumption during the production phase and their subcontractors plus 20 percent of all VAT revenues collected throughout the country by the DGI.
- Common funds and allowances:
  - 2019 budget limits payment of allowances to amounts collected in the previous year and to no more than 25 percent of base salaries of civil servants in eligible ministries; source: amounts collected from penalties and fines.
  - Funds received and paid from common funds to be budgeted and accounted for in appropriate budget accounts in the 2020 initial budget law (structural benchmark).

### B. Improved energy sector results
- Continued implementation in 2018 of the MOU between the government, SONABEL, and SONABHY.
- Government cleared the full amount of SONABEL arrears.
- For SONABHY, a report was submitted to the Council of Ministers for adoption of measures to clear arrears.

### C. Pump price adjustment mechanism and hydrocarbon subsidies
- Rising international fuel prices since early 2017 led to a substantial loss of revenue estimated at CFAF 67 billion at end-October 2018 for SONABHY, posing a contingent liability risk.
- If pump prices remain unchanged and international petroleum prices keep rising, 2018 and 2019 subsidies will represent close to CFAF 100 billion; subsidies are financed by the government and crowd out public investment and priority social spending.
- Council of Ministers decisions (November 8, 2018):
  - Clear arrears to SONABHY and reduce the hydrocarbon subsidy.
  - Shortfall to SONABHY projected at about CFAF 100 billion at end-2018; a tranche of CFAF 20 billion immediately due was paid and the remainder will be securitized.
  - Adjust hydrocarbon price structure to ensure an increase in pump prices of about CFAF 75 per liter, representing an increase of about 12.5 percent (prior action).
- Decree No. 2018-1012/PRES/PM/MINEFID/MCIA/ME of November 14, 2018:
  - Adjust domestic pump prices quarterly to align with market prices at least every three months.
  - Monthly publication of the amount of the implicit subsidy of pump prices on the Ministry of Economy, Finance, and Development website (structural benchmark).

### Cotton and agriculture sector reforms and measures
- Cotton sector:
  - Replenishment of the income-smoothing fund and launch of the cotton inputs fund to consolidate sector financial soundness.
  - Strategy to increase productivity, improve cotton quality, and promote diversification; pursue reforms to increase resilience to exogenous shocks and climate change.
  - Support for initiatives increasing value added, including processing of local cotton fiber to create jobs and wealth.
- Broad agro-sylvo-pastoral, wildlife, and fisheries actions:
  - Introduce an innovative mechanism to improve delivery of agricultural advisory services.
  - Implement a new input subsidy mechanism.
  - Implement an innovative incubator for agricultural entrepreneurs at rural promotion centers (CPR) and at the multidisciplinary agriculture center in Matroukou.
  - Increase pace of mechanization via provision of power tillers and 500 tractors at subsidized prices and creation of production/fabrication units in the medium term.
  - Promote innovative agricultural credit mechanisms: agricultural insurance, warehousing, inventory credit (warrantage).
  - Sign framework agreement with OCP to build a fertilizer plant using natural phosphate from Khodjiari.
  - Reform agricultural cooperatives to comply with the OHADA uniform act.
- Banking and legal reforms:
  - WAMU Banking Commission approved licensing application for creation of an agricultural bank; arrangements under way for start of operations.
  - National Assembly adopted in May 2018 a law establishing the Agro-Sylvo-Pastoral, Fisheries, and Wildlife Investment Code.
  - Signed technical assistance agreement with China for large-scale irrigation facilities and agricultural advice/support services.

### Financial inclusion
- PNDES objective: increase expanded bank penetration rate (total base population) to 35 percent by 2020.
- Prepare National Strategy for Inclusive Finance (SNFI) with an implementing action plan based on the “Making Access Possible” (MAP) approach.
- Two surveys conducted to establish supply and demand status for financial products and services; diagnostic report and roadmap prepared to feed into SNFI.
- Draft Action Plan for the National Strategy for Inclusive Finance (PASNFI) compiled in late October 2018 and expected to be finalized in 2018.
- A donor roundtable planned in November 2018 to raise financing.

### Poverty reduction and social programs
- Free healthcare program (rolled out April 2016) for children under 5 and pregnant women expanded to include poor elderly:
  - Delivered over 41 million medical services at a cost of more than CFAF 45 billion.
  - Government plans to continue and expand free healthcare to vulnerable persons.
- Integrated Program for the Empowerment of Women in Burkina Faso (PIAF-BF) and project to promote socioeconomic integration of homeless children and youth:
  - Targets: register 8,550 informal women-owned businesses; provide working capital and investment credits for women’s associations; deliver entrepreneurship training for 1,195 women.
  - Aim to cover 57 percent of vulnerable children identified and reduce the number of homeless children to 4,000.
- Universal Health Insurance System (RAMU):
  - Financial and actuarial evaluation conducted accounting for free healthcare financial data.
  - Anticipated implementation of 15 percent of RAMU coverage and put in place institutional and legal framework.
- Territorial development programs:
  - Program to Support the Development of Local Economies (PADEL) cost: CFAF 339 billion.
  - Emergency Program for the Sahel (PUS-BF) cost: CFAF 455.3 billion.
  - Outcomes: construction of infrastructures, identification of 3,000 vulnerable persons to benefit from cash transfers (CFAF 30,000 per quarter), credits to 617 promoters (microenterprises and professional associations).
  - Plans to extend PADEL to six additional regions and continue investments supporting PUS-BF.
  - Technical and financial partners promised additional commitments totaling CFAF 220 billion for both programs; total financing stands at CFAF 621 billion of the total cost of CFAF 851.46 billion.

### Improvement of macroeconomic data
- Continue updating base year for national accounts in accordance with SNA 2008, incorporating data from:
  - National survey on employment and the informal sector.
  - National survey on the artisanal gold mining sector.
  - Specific studies.
- Initial results expected at end-October 2018 in preparation for an international technical workshop in early November 2018 to assess results and provide recommendations.
- Work under way to revise the 1999-2015 national accounts series in accordance with SNA 2008.

### Anti-corruption efforts and asset declaration automation
- Implement legal and institutional anti-corruption mechanism strengthened by Law No. 004-2015-CNT of March 3, 2015; implementing decrees and decisions adopted.
- Measures implemented:
  - Institute annual audit of government management by Government Oversight and Anti-Corruption Authority (ASCE-LC). The 2016 audit report is available; 2017 report being finalized.
  - National Assembly adopted law on specialized jurisdictions on January 19, 2017, to create specialized judicial centers for economic and financial offenses; implementation ongoing.
- Automate asset reporting under Law No. 004-2015/CNT:
  - National Assembly approved draft law amending the law to include automation of asset reporting by individuals.
  - Measures toward automation of the Declaration of Interest and Assets (DIP) by December 2018:
    - Hire external experts to implement the DIP platform.
    - Prepare procedures manual for the DIP.
    - Create the ASCE-LC website.
  - Survey of persons subject to the DIP, DIP platform rollout, and communication/outreach campaigns are being implemented.

### D. Quantitative performance criteria and structural benchmarks (high-level)
- Quantitative performance criteria set for end-December 2018 and end-June 2019; indicative targets for end-March, end-September, and end-December 2019.
- Second and third program reviews expected on or after June 15, 2019 and December 15, 2019, respectively.
- Selected figures and outcomes reported for 2018 (CFAF billions) from Table 1:
  - Ceiling on net domestic financing of the government: Prog. 258 / Outturn 258 / Status Met.
  - Ceiling on the amount of nonconcessional external debt contracted or guaranteed by the government: Prog. 200 / Outturn 200 / Status Met.
  - Ceiling on the accumulation of external payment arrears by the government: Prog. 0 / Outturn 0 / Status Met.
  - Ceiling on guaranteeing of new domestic loans to suppliers and contractors by the government: Prog. 0 / Outturn 0 / Status Met.
  - Ceiling on government guarantees on new bank pre-financing for public investments: Prog. 0 / Outturn 181 / Status Not met.
  - Ceiling on the accumulation of domestic arrears by the government: Prog. 0 / Outturn 0 / Status Met.
  - Ceiling on overall fiscal deficit including grants: Prog. 97 / Outturn 121 / Status Met (memorandum shows 312/382 elsewhere in table).
  - Floor on government revenue: Prog. 657 / Outturn 657 / Status Met (memorandum: 1,011/1,444).
  - Floor on poverty-reducing current social expenditures: Prog. 88 / Outturn 88 / Status Met (132/176 in table).
  - Ceiling on stock of certified and unpaid VAT refunds older than 30 days: Prog. 5 / Outturn 5 / Status Met.
  - Ceiling on the value of PPPs contracted: Prog. 200 / Outturn 200 / Status Met.
  - Memorandum item: Ceiling on amount of concessional external debt contracted or guaranteed by the government: Prog. 550 / Outturn 550 / n.a.
- Notes excerpted:
  - Cumulative from January 1, 2018.
  - The ceiling on net domestic financing will be adjusted by full proceeds of any private concessional budget support loan and by securitization of SONABHY losses up to a maximum of CFAF 80 billion.

### Structural conditionality (selected items and status)
- April 2018 benchmarks:
  - Approve a repayment plan for reimbursement by SONAPOST of Treasury assets held in postal accounts (MINEFID, SONAPOST) — Objective: improve cash management — Status: Met.
  - Create a database of all existing formal sovereign guarantees (beneficiary, underlying contract, date of signature, date of expiration, budget implications) — Objective: improve budget transparency and mitigate fiscal risks — Status: Met.
  - Create a database of all projects signed or planned as PPP, prefinancing or supplier credits agreements (type, total cost, payments made and due, interest payments) — Objective: improve budget transparency and mitigate fiscal risks — Status: Met.
  - Establish a limit on the amount of PPPs that can be contracted by the Government — Objective: improve budget transparency and mitigate fiscal risks — Status: Not met. Guidelines drafted and discussed in technical workshop February 2018; approval of final version expected by end-November 2018 following harmonization with IMF technical advice.
- December 2018 and other benchmarks:
  - Include as an Annex to the 2019 Budget law an analysis of the costs-benefits of the ten largest investment projects, including PPP projects — Objective: improve budget transparency and mitigate fiscal risks — Completion Date: December 2018 — Status: In progress.
  - Develop and adopt a framework for transitioning to a single treasury account — Objective: improve treasury management — Completion Date: December 2018 — Status: In progress.
  - Complete a study on automatic fuel price mechanisms and effectiveness of measures to mitigate effects of flexible fuel prices on the poorest and most vulnerable — Objective: improve quality of public expenditures — Completion Date: September 2018 — Status: Met.
  - Appoint an independent external auditor to conduct an audit of SONABHY's operations, financial position, and accounting practices — Objective: reduce fiscal risks and eliminate fiscal costs associated with subsidies — Completion Date: April 2018 — Status: Not met. A call for bids was launched and provisional results published in September.

*Source: IMF staff and Burkinabè authorities, as presented in the provided content.*

### 2018. The hiring process will be finalized by

### cr1915-burkina-faso-a4 - 2018. The hiring process will be finalized by

### Governance, public financial management, and statistics — planned actions and status
- Complete the revision of national accounts statistics to the new base year, and disseminate the revised series. Improve the accuracy of national statistics. Target date: December, 2018. Status: In progress.
- Integrate the results of the artisanal gold study into the system of national accounts and revise the base year. Improve the accuracy of national statistics. Target date: December, 2018. Status: In progress.
- Proceed with the dematerialization of asset declarations of government officials and those covered by the law, by instituting online submisisons, and create a searchable database. Objective: Improve governance and improve the fight against corruption. Target date: December, 2018. Status: In progress.

### Quantitative performance criteria and indicative targets for the ECF arrangement (2019) — key figures (CFAF billions)
- Table entries as presented:
  - Mar. 1/: Ceiling on net domestic financing of the government 2/ 3/0 — 100146159
  - JuneSept. 1/Dec. 1/: Ceiling on the amount of external debt contracted or guaranteed by the government (PV) 2/ 4/ 5/ — 370 370370370
  - Ceiling on the accumulation of external payment arrears by the government 6/ — 0000
  - Ceiling on the guaranteeing of new domestic loans to suppliers and contractors by the government 6/ — 0 0000
  - Ceiling on government guarantees of new bank pre-financing for public investments 6/ — 00 00
- Indicative targets (as presented):
  - Ceiling on the accumulation of domestic arrears by the government 6/ — 00 00
  - Ceiling on the overall fiscal deficit including grants 2/ — 0130 196259
  - Floor on government revenue 2/ — 376 798 12621697
  - Floor on poverty-reducing current social expenditures 2/ — 4895143190
  - Ceiling on the stock of certified and unpaid VAT refunds older than 30 days 2/ 45 — 404040
  - Ceiling on the value of PPPs contracted 2/ — 200200 200200

- Sources noted: Burkinabè authorities; and IMF staff estimates and projections.
- Cumulative from January 1, 2019 for items marked 2/.
- Continuous performance criteria to be observed continuously for items marked 6/.
- The ceiling on the amount of external debt will be increased up to an additional CFAF 400 billion to allow for any private concessional budget support loan as specified in the TMU.
- The ceiling on net domestic financing will be lowered by the full proceeds of any private concessional budget support loan as specified in the TMU.

### Structural conditionality — selected benchmarks, objectives, supporting documents, and completion dates
- Submit a 2019 budget proposal to the National assembly fully aligned with the fiscal framework of the ECF-supported program (overall fiscal deficit (commitment basis) of no more than 3 percent of GDP) through tabling of an amendment to the initial budget proposal. Objective: Maintain fiscal sustainability. Supporting document: Amendment Letter submitted to the National Assembly. Completion date: November 11, 2018.
- Adjust the pricing structure for hydrocarbons to raise pump fuel prices by around 12.5 percent. Objective: Maintain fiscal sustainability. Supporting documents: Order establishing the composition of the price structure and decree establishing the introduction of a price readjustment. Completion date: November 7, 2018.
- Harmonize the taxation of tobacco in line with the new WAEMU directive by setting the rate at a minimum of 50 percent. Objective: Increase revenue. Supporting document: 2020 draft initial budget law (LFI). Completion date: November 2019.
- Raise the rate of tax on non-alcoholic beverages from 10 percent to 15 percent. Objective: Increase revenue. Supporting document: DGI Communiqué. Completion date: January 2019.
- Increase tax on airline tickets from CFAF 1000 to CFAF 20000 for economy class and from CFAF 7000 to CFAF 40000 for business class. Objective: Increase revenue. Supporting document: DGI Communiqué. Completion date: January 2019.
- Eliminate the flat-rate tax system for beverage sector businesses and place them under the standard tax regime by introducing a 5 percent tax as an advance income tax payment. Objective: Increase revenue. Supporting document: DGI Communiqué. Completion date: January 2019.
- Conduct a study on the taxation system of small- and medium-sized enterprises. Objective: Strengthen tax administration. Supporting document: Report on the Study. Completion date: September 2019.
- Make the inspection certificate compulsory for checking transactions for customs clearance purposes and ensure documents are scanned in ASYCUDA World. Objective: Increase revenue and protect the revenue base. Supporting document: DGD Memorandum. Completion date: April 2019.
- Establish a special account for VAT credit refunds that is funded with a portion of VAT revenues and produce quarterly reports on the operational management of this account. Objective: Strengthen the integrity of the VAT system. Supporting document: Opening of a special Treasury account for VAT credit refunds and produce a quarterly report of the flows in and out of the account and the stock of VAT credits. Completion date: June 2019.
- Publish the implicit subsidy of fuel pump prices on the website of the Ministry of Economy, Finance and Development on a monthly basis. Objective: Increase transparency on the fiscal cost of fuel subsidies. Supporting document: Publication of subsidies on the MINEFID website. Completion date: January 2019.
- In the appropriate budget accounts, budget and account for revenue from/expenditure on Fonds communs in the 2020 budget law. Objective: Improve fiscal transparency. Supporting document: 2020 Draft LFI. Completion date: September 2019.
- Include PPPs in the public investment program. Objective: Mitigate fiscal risks. Supporting document: PIP 2020. Completion date: December 2019.
- Approval by the Cabinet of Ministers of the 2020-2022 Multiannual Budget and Economic Programming Document with a continuous reduction in the ratio of the wage bill to tax revenue ratio from its peak of 55 percent in 2019. Objective: Contain public-sector wage bill. Completion date: Mid-June 2019.
- Publish the number of public servants on the government payroll according to grade, region and ministry. Objective: Contain public-sector wage bill. Completion date: April 2019.
- Reduce the number of new civil service staff members in 2019 compared to the initial projection of 14700 hires. Objective: Tighten control of the wage bill. Supporting document: Report on the recruitment of staff in 2019. Completion date: September 2019.
- Adopt salary and indemnity scales which are consistent with the medium term objective to contain the overall wage bill within the WAMEU convergence criterion of 35 percent of tax revenues. Objective: Contain public-sector wage bill. Completion date: November 2019.

### Technical Memorandum of Understanding (TMU) — definitions and program rules
- Purpose: The TMU defines the quantitative performance criteria, indicative targets, and structural benchmarks that will serve to assess performance under the ECF-supported program, and sets the framework and deadlines for submission of data to IMF staff.
- Government definition: “Government” means the central government of Burkina Faso and does not include local governments, the central bank, or any other public or government-owned entity with autonomous legal status not included in the table detailing the financial operations of the state (TOFE).
- Definition of debt: As set out in IMF Executive Board Decision No. 15688-(14/107), Point 8. Debt means all current liabilities created under a contractual arrangement requiring future payments; primary forms include (i) loans, (ii) suppliers’ credits, and (iii) leases (present value of lease payments at inception).
- Debt-related specifics:
  - Arrears, penalties, and judicially awarded damages arising from failure to make payment under a contractual obligation that constitutes debt are debt.
  - A government debt guarantee = explicit legal obligation to service a debt in event of nonpayment.
  - Debt concessionality: concessional if grant element is at least 35 percent. Present value calculated by discounting borrower’s future debt service; 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 government external debt, public enterprises that receive government transfers, other public entities with government ownership >50 percent, and any private debt guaranteed by the government.
- Quantitative performance criteria for 2018 (and 2019, with modification on external debt):
  - (i) ceiling on net domestic financing of the government;
  - (ii) ceiling on contracting or guaranteeing of non-concessional external debt by the government (2018); for 2019 replaced by ceiling on contracting or guaranteeing of total external debt (concessional or non-concessional) by the government in PV terms;
  - (iii) ceiling on non-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.
- Net domestic financing definition: sum of (i) net bank credit to the government (including claims associated with IMF disbursements), (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. Net bank credit defined as balance of government’s claims and debts vis-à-vis national banking institutions; calculated using BCEAO information and government flow-of-funds table.
- Adjustments to net domestic financing ceiling:
  - Upward adjustment by amount external program support to central government falls short of projected amount, up to a maximum of CFAF 80 billion (calculated relative to Table 1 projections).
  - Ceiling will not be adjusted downward if external program assistance is higher than programmed.
  - Table 1: Projected External Program Assistance (Cumulative, CFAF Billions) — End-December 2018: Program grants and loans 183 (Of which program grants) (147); End-June 2019: Program grants and loans 17 (Of which program grants) (17).
  - Cumulative ceiling on net domestic financing will be adjusted downward by the full amount of any disbursement of concessional budget support loans from a private creditor before end-2018 and in the first half of 2019.
  - Ceiling on net domestic financing will be adjusted upward by the amount of securitization of accumulated SONABHY losses owing to below cost recovery sales of petroleum products in 2017 and 2018, up to a maximum of CFAF 80 billion.
- Reporting requirements:
  - Ministry of the Economy and Finance to forward data on net domestic financing to the IMF within six weeks after the end of each quarter.
  - Details on any loan (terms and creditors) contracted by the government must be reported within four weeks of the end of each month. Same applies to guarantees extended by the government.
- Non-accumulation of new external payment arrears: Government agrees not to accumulate external payment arrears on its debt except arrears arising from external payment obligations being renegotiated; observed continuously.
- Guaranteeing of new domestic loans to suppliers and contractors: Government undertakes not to provide new financial guarantees for domestic loans to its suppliers or contractors; observed continuously. “Government” includes central government, EPIC, EPA, public institutes, local authorities, public enterprises, national corporations, semi-public corporations (government holds at least 50 percent), and state agencies.
- Guaranteeing of new bank pre-financing for public investments: Government undertakes not to guarantee new bank pre-financing for public investments; observed continuously. Definition of pre-financing arrangement provided.

*Source: IMF staff and Burkinabè authorities material as presented in the document.*

### 21.      The program also includes quantitative indicative targets for:

### The program also includes quantitative indicative targets for

### Indicative targets (overview)
- (i) the accumulation of domestic arrears;  
- (ii) the overall fiscal deficit (commitment basis, grants included);  
- (iii) total government revenue;  
- (iv) poverty-reducing current social expenditures;  
- (v) value added tax refunds; and  
- (vi) public-private partnerships.

### A. Accumulation of Domestic Arrears by the Government
- Policy stance: The government will not accumulate payment arrears on domestic obligations during the program period.
- Definition of “domestic obligation”: one serviced in CFA francs; excludes government liabilities to local governments or any other public or government-owned entity with autonomous legal status not included in the table detailing the financial operations of the state (TOFE), except the central bank.
- Treatment of arrears (unless transaction terms stipulate a longer period):  
  - (i) Debt unpaid for more than 30 days after the due date stipulated in the agreement between the parties (creditor/debtor).  
  - (ii) Wages or pensions unpaid 90 days after their due date.  
  - (iii) Payments for goods and services rendered received more than 90 days after processing of the supporting documents submitted by suppliers.

### B. Overall Fiscal Deficit Including Grants
- Definition: The overall deficit including grants is valued on a commitment basis. It is defined as the sum of the government’s net foreign and domestic financing, measured from the financing side, plus a cash basis adjustment.
  - Net foreign financing = sum of new foreign borrowing less amortization.
  - Government net domestic financing = as defined in paragraphs 10 and 11 above (in source).
  - Cash basis adjustment = sum of: (i) the total change in unauthorized expenditure commitments, (ii) the change in pending bills, and (iii) the change in government deposits.
- Adjustment rules:  
  - The ceiling on the overall fiscal deficit will be adjusted upward by the amount by which actual external program grants to central government falls short of the amount projected, up to a maximum of CFAF 80 billion. The shortfall will be calculated in relation to the projections in Table 1 above. The ceiling will not be adjusted downward should actual external program grant assistance be higher than projected.  
  - The ceiling on the overall fiscal deficit will be adjusted upward by the amount of securitization of accumulated SONABHY losses owing to below cost recovery sales of petroleum products in 2017 and 2018, up to a maximum of CFAF 80 billion.

### C. Government Revenue
- Definition: Government revenue is valued on a cash basis.
- Scope: Includes all tax and non-tax revenue collected by the Directorate General of Taxation, the Directorate General of Customs, the Burkinabè Treasury, and other government revenue collection units. It also includes revenue from treasury checks.

### D. Poverty-Reducing Current Social Expenditures
- Definition: Social spending is the sum of current expenditure included in the social spending program as defined in the budget.
- Eligibility criteria for programs or parts of programs that target poor households:  
  - (i) ensure access to basic social services;  
  - (ii) promote access to health services and nutrition programs;  
  - (iii) fight against HIV/AIDS;  
  - (iv) promote access to drinkable water;  
  - (v) improve living conditions, including environment and sanitation; or  
  - (vi) ensure social protection.
- Only budget lines classified as social spending within these programs or parts of programs are retained.

### E. Certified and Unpaid VAT Refunds Older than 30 Days
- Definition: The stock of value added tax (VAT) refund claims that have been certified but remain unpaid for more than 30 days is comprised of signed tax refund amounts.
- Timing: The 30-day period starts from the date of signature of the tax refund certificate by the Director General of Taxes.

### F. Public-Private Partnerships
- Definition: A public-private partnership is a long-term contract between a private party and a government entity for providing a public asset or service, in which the private party bears significant risk and management responsibility, and remuneration is linked to performance.
- Exclusions: It excludes pre-financing and supplier credit arrangements.

### Additional Information for Program Monitoring — Summary of Data Reporting Requirements (highlights)
- Purpose: To enable IMF staff to assess program performance, the government will submit data in paper format and/or MS Excel electronic files with specified frequencies and deadlines.
- Key reporting items, responsible institutions, frequency, and reporting deadlines:  
  - The government’s fiscal reporting table (TOFE) and customary appendix tables — Ministry of Economy, Finance and Development (MINEFID); Monthly; 6 weeks.  
  - Domestic budgetary financing (net bank credit to the government and stock of unredeemed government bonds and bills) — MINEFID/BCEAO; Monthly; 6 weeks.  
  - Quarterly report on consistency of the government’s net position in monetary statistics with TOFE data on net domestic financing of the banking sector — MINEFID/BCEAO; Quarterly; 8 weeks.  
  - Monthly data on execution rates by the customs office relative to monthly forecasts — MINEFID/DGD; Monthly; 6 weeks.  
  - Quarterly report on outcomes and actions to control and supervise taxpayers using the single taxpayer identification number — DGD/DGI; Quarterly; 6 weeks.  
  - Data on implementation of the public investment program, including details on financing sources — DGB/DGTCP; 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, including: (i) the price structure for the month concerned; (ii) detailed calculation of the price structure, from the fob-MED price to the retail price; (iii) volumes purchased and distributed for consumption by SONABHY (distinguishing retail and industry sales); and (iv) breakdown of tax revenue from petroleum products — SONABHY/DGTCP; Monthly; 4 weeks.  
  - Quarterly summary report of monthly data of SONABHY’s accounts including gains and/or losses from buying and selling hydrocarbon products by type of product, cash flows position and income statement, taking into account all received subsidies and government securities issued or sold in the banking system or else — SONABHY/MINEFID; Quarterly; 6 weeks.  
  - Quarterly summary report of monthly data of SONABEL’s accounts including cash flows position and income statement and taking into account all received subsidies and project grants and loans — SONABEL/MINEFID; Quarterly; 6 weeks.  
  - Monthly statement of the accounts with the treasury, broken out by major category — DGTCP; Monthly; 6 weeks.  
  - Quarterly activity report from the Investigation and Intelligence Directorate including taxpayer controls across DGI and DGD using the unique taxpayer identification number — DGI/DGD; Quarterly; 6 weeks.  
  - Monthly customs revenue projections (annualized basis) by customs post and monthly outcomes compared to projections — DGD; Monthly; 6 weeks.  
  - Keep 'Champ 44' enabled for input of references from inspection notices for all customs declarations — DGD; Continuous.  
  - Monthly DGI revenue projections (annualized basis) by type and monthly outcomes compared to projections — DGI; Monthly; 6 months.  
  - Monthly DGTCP revenue projections (annualized basis) by type and monthly outcomes compared to projections — DGTCP; Monthly; 6 months.  
  - Quarterly summary report of VAT refunds, including transfers received from the ACCT, cumulative amount paid since the beginning of the year, the stock of certified refund claims (Régisseur d’avance), and total VAT refund claims being processed (DGE, DLC) — DGI; Quarterly; 3 months.  
  - Monthly update of the PPP and sovereign guarantee databases — DGCOOP/MINEFID; Monthly; 4 weeks.  
  - Monthly estimate of the implicit pump fuel price subsidy — CIDPH; 4 weeks.  
  - The consolidated balance sheet of monetary institutions (NDs of the BCEAO) — BCEAO; Monthly; 6 weeks.  
  - The monetary survey: provisional data — BCEAO; Monthly; 6 weeks.  
  - The monetary survey: final data — BCEAO; Monthly; 10 weeks.  
  - The lending and borrowing interest rates — BCEAO; Monthly; 6 weeks.  
  - The standard bank supervision indicators for banks and nonbank financial institutions — BCEAO; Monthly; 6 weeks.  
  - Preliminary annual balance of payments data — BCEAO; Annual; 9 months.  
  - Foreign trade statistics — INSD/MINEFID; Monthly; 3 months.  
  - Any revision of balance of payments data (including services, private transfers, official transfers, and capital transactions) — BCEAO; As they occur; 2 weeks.  
  - Provisional national accounts and any revision of the national accounts — MINEFID; Annual; 2 weeks.  
  - Disaggregated monthly consumer price indices — MINEFID; Monthly; 2 weeks.  
  - Any study or official report on Burkina Faso’s economy, on the date published or date of entry into force — MINEFID; 2 weeks.  
  - Any decision, order, law, decree, ordinance, or circular having economic or financial implications, on the date published or date of entry into force — MINEFID; 2 weeks.

*Source: cr1915-burkina-faso-a4 - 21. The program also includes quantitative indicative targets for.*

### 2001. In September 2018, a data standards mission visited Burkina Faso to assist the authorities in

### cr1915-burkina-faso-a4 - 2001. In September 2018, a data standards mission visited Burkina Faso to assist the authorities in

### Data standards, reporting, and metadata
- A data standards mission visited Burkina Faso in September 2018 to assist the authorities in fully implementing the e-GDDS by launching a National Summary Data Page (NSDP).
- The NSDP is expected to go live by December 5, 2018.
- The mission was financed by the United Kingdom Department for International Development (DFID).
- A data ROSC visited Burkina Faso during May 8-21, 2003.
- The BCEAO`s National Direction located in Ouagadougou compiles annual BOP, IIP and CDIS data for Burkina and reports them to STA.
- The reported BOP and IIP data are in line with the BPM6 format.
- Burkina Faso participates in the Coordinated Direct Investment Survey (CDIS) and reports to STA annual direct investment data by partner country; reported CDIS data are based on an annual survey of transactions, crosschecked with annual Financial Reports of companies as available in BCEAO.
- The BCEAO does not provide any metadata describing the methodology used for data collection in relation to any datasets reported to STA.
- Since October 2010, annual data and quarterly data covering the budget of the central government are reported to STA for publication in International Financial Statistics and the Government Finance Statistics Yearbook (GFSY).
- The latest data reported for GSFY 2018 cover 2017.

### Table of Common Indicators (selected observations and reporting frequencies)
- Exchange Rates: Date of latest observation: Current; Date received: Current; Frequency of data: D; Frequency of reporting: D; Frequency of publication: D.
- International Reserve Assets and Reserve Liabilities of the Monetary Authorities: Date of latest observation: 09/2018; Date received: 10/2018; Frequency of data: M; Frequency of reporting: M; Frequency of publication: M.
- Reserve/Base Money: 09/2018; 10/2018; M; M; M.
- Broad Money: 08/2018; 10/2018; M; M; M.
- Central Bank Balance Sheet: 09/2018; 10/2018; M; M; M.
- Consolidated Balance Sheet of the Banking System: 09/2018; 10/2018; M; M; M.
- Interest Rates: Date of latest observation: 3/2016; Date received: 4/2016; M; M; M.
- Consumer Price Index: 08/2018; 10/2018; M; M; M.
- Revenue, Expenditure, Balance and Composition of Financing – General Government: Date of latest observation: 12/2014; Date received: 10/2015; Frequency of data: I; Frequency of reporting: I; Frequency of publication: I.
- Revenue, Expenditure, Balance and Composition of Financing – Central Government: Date of latest observation: 06/2018; Date received: 10/2018; M; M; M.
- Stocks of Central Government and Central Government-Guaranteed Debt: Date of latest observation: 12/2017; Date received: 3/2018; A; A; A.
- External Current Account Balance: Date of latest observation: 2016; Date received: 1/2018; A; A; A.
- Exports and Imports of Goods and Services: 2016; 1/2018; A; A; A.
- GDP/GNP: 2016; 12/2017; A; A; A.
- International Investment Position: 2016; 1/2018; A; A; A.

### Debt sustainability assessment and key 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: Yes: Inclusion of customized scenario to take account of fiscal and external risks.
- This joint World Bank/IMF Debt Sustainability Analysis (DSA) was prepared in the context of the 2018 Article IV consultation and first review of the three-year program supported by the IMF’s Extended Credit Facility (ECF).
- The DSA is based on end-2017 debt data and the latest methodology underpinning the LIC DSF, which triggered an improvement in debt indicator thresholds.
- All external debt indicators remain below relevant indicative thresholds under the baseline scenario.
- Baseline scenario is anchored on an overall fiscal deficit of 3 percent of GDP from 2019.
- In a customized scenario illustrating fiscal and external risks, two thresholds are breached.
- Overall public debt does not breach the relevant benchmark in the baseline and Burkina Faso is assessed as having a moderate risk of public debt distress, as the external debt risk rating is moderate.
- Policy implications highlighted for Burkina Faso:
  - (i) maintain a sound macro-fiscal framework;
  - (ii) implement structural reforms to diversify its export base;
  - (iii) limit non-concessional borrowing to prevent deterioration of its debt sustainability outlook.

### Public debt stock and composition (2014-2017, selected figures)
- Public Debt (percent of GDP): 2014: 29.9; 2015: 35.6; 2016: 39.2; 2017: 38.4; Share (2017): 100.0.
- External Debt (percent of GDP): 2014: 23.0; 2015: 26.3; 2016: 27.8; 2017: 24.1; Share (2017): 71.1.
- Domestic Debt (percent of GDP): 2014: 6.8; 2015: 9.3; 2016: 11.3; 2017: 14.3; Share (2017): 28.9.
- Memorandum items:
  - Overall fiscal balance: 2014: -1.9; 2015: -2.2; 2016: -3.5; 2017: -7.8.
  - GDP growth (in percent): 2014: 4.3; 2015: 3.9; 2016: 5.9; 2017: 6.3.

### Coverage and classification issues
- Coverage of public debt is currently limited to external and domestic obligations of the central government.
- Authorities report that the two main state-owned enterprises that are majority owned by the public sector do not borrow externally (SONABHY and SONABEL).
- Authorities are pursuing PPPs, some of which may have components that would need to be classified as debt depending on financing packages.
- Domestic debt is defined as debt denominated in the regional currency, the CFAF; choice based on currency rather than residency due to difficulty monitoring residency of creditors in the WAEMU regional market.

### Macroeconomic forecasts, assumptions, and realism checks
- The baseline scenario is considered credible relative to cross-country experiences and Burkina Faso’s historical experience.
- The larger increase in overall public debt is mainly the result of unusually large fiscal deficits in 2016 and 2017.
- The DSA baseline assumes a narrowing of the deficit to 3 percent of GDP by 2019 under the ECF-supported program.
- Planned fiscal adjustment for the next 3 years is around 5 percent of GDP, reflecting 2017’s unusually high fiscal deficit of 7.7 percent of GDP.
- Growth performance is expected to stabilize at 6 percent, slightly above potential, assuming successful fiscal adjustment and considering resilience and uncertainty about fiscal multipliers.
- The DSA assumes modest use of non-concessional financing over the forecast horizon, on average around 20 percent of total external borrowing but with a growing share over time.
- The grant element of new borrowing is assumed to decrease from 40 percent in 2018 to 34 percent in 2028.
- A potential private international consortium budget support loan of €1.5 billion is under discussion but is not reflected in the baseline scenario.

### Box 1 — Macroeconomic assumptions (selected points)
- Gold and cotton prices: WEO gold price projections lowered slightly since last DSA but remain well above cyclical lows; WEO cotton price projections have improved.
- Gold production: expected to rise steadily as new mines complete development and begin to export.
- GDP growth assumptions: somewhat higher than the last DSA baseline but downside risks remain from security challenges and commodity price shocks.
- Fiscal policy: DSA assumes authorities reach and maintain an overall fiscal deficit (including grants) of 3 percent of GDP by 2019.
- Domestic debt path: In 2018 domestic debt expected to be around 18.6 percent of GDP, reaching 22 percent in 2028.
- Domestic debt composition in medium term: 25 percent of 1-year maturity bills, 75 percent of 1 to 3-year bonds; average interest rate assumed at 6.5 percent.
- Current account: estimated to reach 8.1 percent of GDP in 2018, projected to settle around 7 percent of GDP in 2020.

### Planned borrowing (2018 snapshot, selected items and totals)
- Aggregate planned financing in 2018 (Text Table 4) — Sub-total 2018: 602.69 (Concessional); 100.67 (Non concessional); Total: 698.66 (Financing Requested in CFAF billion).
- Selected projects and requested financing (CFAF billion), status:
  - Project to strengthen community road Cu2a section Gounghin-Fada N Gourma (Road infrastructure, Japan): 28.63 (Concessional); Signed on March 02 2018.
  - Interconnexion project (North Backbone) (Electricity, BAD): 27.74 (Concessional); Signed on March 14 2018.
  - Contract farming and ecological transition (PATCE) (Agriculture, AFD): 6.5 (Concessional); Signed on March 29 2018.
  - OFID: 8.4 (Concessional); Signed on April 2018.
  - BADEA: 6.25 (Concessional); Signed on January 20 2018.
  - Additional financing of Bagrépole (Agriculture, IDA): 25 (Concessional); Signed on May 11 2018.
  - Regional support project for the initiative for irrigation in the Sahel (PARIIS) (Agriculture, IDA): 12.5 (Concessional); Signed on May 11 2018.
  - Additional Financing for the West Africa Regional Communication Infrastructure Project (PRICAO-BF) (Telecommunications, IDA): 10 (Concessional); Signed on May 11 2018.
  - CHU Bassinko (Health, Commerz Bank/Belgium): 46.05 (Non concessional) + 46.05 (Concessional?) — listed as 46.0546.05; Signed on June 4 2018.
  - Water and sanitation program (Water and sanitation, IDA): 150 (Concessional); Signed on August 21 2018.
  - Reproductive health (Health, IDA): 55 (Concessional); Signed on August 21 2018.
  - Higher education support project (Higher education, IDA): 38.8 (Concessional); Signed on August 21 2018.
  - Energy sector reform support project (Energy, BAD): 7.67 (Concessional) + 7.67 (Non concessional?) — listed as 7.677.67; Signed on August 28 2018.
  - BackBone Project (NTIC, Bank Of China): 43.32 (Non concessional); Signed on September 2 2018.
  - Hydromet-Burkina (Change, IDA): 4.25 (Concessional); Signed on October 26 2018.
  - Various other projects at different stages with financing amounts and statuses ranging from negotiation to discussion underway.
- The DSA notes actual amounts of new loans contracted, particularly non-concessional loans, will likely fall short of targeted amounts; borrowing plans have an aspirational element.

*Prepared jointly by the staffs of the International Monetary Fund (IMF) and the International Development Association (IDA) — December 12, 2018*

### 7.      Burkina Faso’s current debt-carrying capacity is consistent with a classification of

### 7.      Burkina Faso’s current debt-carrying capacity is consistent with a classification of

### Debt-carrying capacity and relevant indicative thresholds
- Composite Indicator (CI) index: 3.052 (calculated based on the October 2018 WEO and the 2017 CPIA score), marginally above the “strong” threshold of 3.05.
- Relevant indicative thresholds for the “strong” category (applicable to public and publicly guaranteed external debt):
  - PV of debt-to-GDP ratio: 55 percent
  - PV of debt-to-exports ratio: 240 percent
  - Debt service-to-exports ratio: 21 percent
  - Debt service-to-revenue ratio: 23 percent
- Benchmark for the PV of total public debt for medium debt-carrying capacity: 70 percent of GDP.
- Final classification based on current vintage: Strong
  - CI vintage values shown: 3.05, 3.06, 3.63 (previous vintages)

### Determination of scenario stress tests
- Combined contingent liability shock used in stress test: 9.7 percent of GDP (Text Table 8).
  - State-owned enterprise debt included as additional public debt: 4.7 percent of GDP (SONABHY and SONABEL).
  - PPP shock: 0.0 percent of GDP (stock still less than 1 percent of GDP).
  - Default value for financial crisis cost: 5 percent of GDP.
  - Total (2+3+4+5) in percent of GDP: 9.7
- Tailored commodity price shock:
  - Commodities constitute around 70 percent of total exports.
  - Shock applied when commodities > 50 percent of total exports (previous three-year period).
  - One standard deviation decline in export prices of gold and wheat in 2019:
    - Gold price decline: 13 percent
    - Wheat price decline: 6 percent

### External debt sustainability analysis (A)
- Baseline scenario (2018–2028):
  - PV of debt-to-GDP ratio: decreases from 16 percent in 2018 to 13 in 2028; remains below the 55 percent threshold and below 18 percent over projection horizon.
  - PV of debt-to-exports ratio: expected to grow from 58 percent in 2018 to 71 percent in 2028; remains below the 240 percent threshold.
  - Debt service-to-exports ratio: around 5 percent for most of projection period, reaching 7 percent in 2028.
  - Debt service-to-revenue ratio: declines from 6 percent in 2018 to 5 percent in 2028.
- Standardized stress tests:
  - Export shock has largest negative impact; no thresholds breached under baseline stress tests.
  - Under export shock:
    - PV of debt-to-exports ratio reaches 182 percent in 2024 and continues increasing thereafter.
    - Debt service-to-exports ratio reaches 17 percent in 2027 and 2028.
  - Other shocks (real GDP growth, primary balance, one-time 30 percent depreciation) do not breach thresholds.
- Tailored contingent liability and commodity price tests:
  - Cause upward movement in debt trajectories post-shock, but no threshold breach.
- Private loan materialization:
  - Would increase external debt trajectories; under export shock PV of debt-to-exports and debt service-to-exports would breach thresholds earlier and higher, though country risk rating would remain moderate.

### Public sector debt sustainability analysis (B)
- Baseline scenario:
  - PV of public debt-to-GDP ratio: around 35 percent over projection horizon; does not breach 70 percent benchmark.
  - PV of debt-to-revenue ratio: expected to remain around 145 percent until 2028.
  - Debt service-to-revenue ratio: reaches nearly 50 percent by 2028, driven by short maturity of domestic financing.
- Sensitivity analysis:
  - Most extreme shock for highest debt figures in 2028: commodity price shock.
    - PV of debt-to-GDP ratio would reach 49 percent of GDP in 2028 under commodity price shock.
    - Export shock triggers PV of debt-to-GDP ratio of 46 percent in 2020.
  - Commodity price shock also produces most extreme outcomes for PV of debt-to-revenue ratio and debt service-to-revenue ratio.
- Combined contingent liability shock:
  - Moves PV of public debt-to-GDP ratio upward by 1-10 percentage points from baseline without breaching the benchmark.

### Risks and vulnerabilities
- Fiscal risks substantial:
  - Baseline assumes planned fiscal consolidation to WAEMU fiscal deficit convergence criteria of 3 percent of GDP in 2019 and maintenance thereafter.
  - Achieving this requires substantial policy actions; projected fiscal adjustment is large in historical comparison.
- External and commodity risks:
  - Exports and GDP may underperform due to vulnerability of narrow exports (cotton and gold) to price shocks and potential deterioration in security conditions.
  - Burkina Faso susceptible to terms of trade shocks; negative shocks to gold and oil prices affect fiscal position via lower gold revenues and higher import fuel costs.
- Contingent liabilities and off-budget activities:
  - Increased risk from contingent liabilities related to state-owned enterprise debt, fuel subsidies, and potential PPPs.
  - Proposed ECF program benchmarks to mitigate risks:
    - Audit SONABHY.
    - Adopt a fuel price adjustment mechanism and include remaining fuel subsidies in the budget.
    - Develop a database of sovereign guarantees and PPPs.
- Market and rollover risks:
  - Regional market’s willingness to absorb higher debt uncertain; liquidity conditions affected by BCEAO monetary policy and borrowing of other WAEMU members.
  - Increasing regional market interest rates and direct government borrowing from domestic financial institutions could crowd out private credit and heighten rollover risks.
  - If private concessional loan materializes and replaces domestic borrowings, rollover risks would be mitigated due to longer maturity.
- Security risk:
  - Deterioration in Sahel security conditions could weigh on external and fiscal positions, undermine growth, discourage investment, and increase security-related spending.

### Conclusion
- Staff assessment of external debt distress risk: moderate.
  - Baseline: no breach of debt distress thresholds for debt and debt service indicators (implying low risk rating absent additional shocks).
  - Customized scenario: two thresholds breached under export shock.
  - Granularity in risk rating suggests substantial space to absorb shocks without downgrading to high risk of debt distress.
- Overall public debt distress risk: moderate (no breaches for overall public debt, but external risk is moderate).
- Key vulnerabilities to address to avoid deterioration of debt distress rating:
  - Pressures to deviate from agreed fiscal consolidation.
  - Non-diversified export base.
  - Fiscal costs from contingent liabilities and possible future PPPs.
  - Rollover risk related to domestic financing.
  - Risks related to possible private sector external debt (limited information).
  - Constrain non-concessional borrowing to maintain debt vulnerabilities.

*Source: IMF staff estimates; INTERNATIONAL MONETARY FUND.*

### 24.      The authorities concurred with the results of the updated DSA. Given the elevated

### cr1915-burkina-faso-a4 - 24.      The authorities concurred with the results of the updated DSA.

### Authorities' stance and policy choices
- The authorities concurred with the results of the updated DSA.
- Given elevated expectations from the population for swift reforms, the authorities saw the necessity to utilize some fiscal space to finance public investment and catalyze sustainable economic growth.
- The authorities reiterated their commitment to:
  - maintaining prudent debt levels;
  - favoring concessional over non-concessional borrowing;
  - maintaining their assessed level of debt distress at a ‘moderate’ rating.

### Key external DSA baseline findings and projections (selected indicators)
- External debt (nominal) (percent of GDP): 26.3; 27.8; 24.1; 24.2; 23.4; 22.5; 21.3; 20.6; 20.1; 18.5; 20.2; 24.2; 20.7.
- Identified net debt-creating flows (percent of GDP): 10.9; 3.3; 3.4; 3.8; 4.0; 3.0; 3.7; 4.6; 5.0; 8.0; 9.1; 4.1; 5.4.
- Non-interest current account deficit (percent of GDP): 8.4; 7.3; 9.5; 7.7; 8.1; 6.8; 7.0; 7.3; 7.4; 10.3; 11.3; 7.2; 8.3.
- Net FDI (negative = inflow, percent of GDP): -2.1; -3.1; -3.0; -3.0; -2.9; -2.8; -2.4; -1.7; -1.6; -1.6; -1.6; -2.0; -2.0.
- PV of PPG external debt-to-GDP ratio (selected projection years): 17.2; 16.0; 15.9; 15.4; 14.7; 14.3; 14.0; 12.9; 14.7.
- PV of PPG external debt-to-exports ratio (selected projection years): 60.3; 58.2; 58.8; 58.8; 58.2; 60.1; 62.3; 71.0; 113.6.
- PPG debt service-to-exports ratio (percent): 3.9; 3.6; 3.9; 4.3; 4.8; 4.0; 4.2; 4.2; 4.4; 6.5; 11.5.
- Gross external financing need (Billion of U.S. dollars): 0.8; 0.6; 0.9; 0.8; 1.0; 0.8; 1.0; 1.3; 1.5; 3.1; 7.8.

### Key macroeconomic and fiscal assumptions (selected)
- Real GDP growth (in percent): 3.9; 5.9; 6.3; 6.0; 6.0; 6.0; 6.0; 6.0; 6.0; 6.0; 6.0; 5.7; 6.0.
- GDP deflator in US dollar terms (change in percent): -19.1; -1.4; 6.6; 8.7; 0.6; 3.4; 2.6; 2.9; 2.4; 2.0; 2.0; 0.9; 2.8.
- Effective interest rate (percent): 0.8; 0.9; 0.9; 2.1; 1.0; 1.2; 1.2; 1.3; 1.4; 1.7; 2.4; 1.0; 1.5.
- Growth of exports of G&S (US dollar terms, in percent): -13.9; 18.3; 7.9; 11.0; 4.9; 5.7; 5.3; 2.6; 2.6; 4.8; -1.0; 19.2; 4.6.
- Growth of imports of G&S (US dollar terms, in percent): -12.7; 7.5; 16.2; 10.4; 3.4; 3.2; 6.4; 5.1; 4.9; 7.2; 7.1; 12.4; 6.3.
- Grant element of new public sector borrowing (in percent, selected years): 39.5; 38.9; 38.1; 38.8; 38.1; 37.4; 33.7; 26.4; 37.0.
- Government revenues (excluding grants, percent of GDP): 17.0; 19.1; 19.4; 18.7; 19.9; 20.4; 20.8; 21.1; 21.1; 21.8; 21.4; 16.7; 20.9.
- Aid flows (Billion of US dollars): 122.5; 145.1; 124.8; 0.7; 0.6; 0.6; 0.6; 0.7; 0.7; 1.0; 1.7.
- Grant-equivalent financing (in percent of GDP, selected years): 5.1; 3.7; 3.3; 3.1; 3.1; 3.1; 2.9; 2.4; 3.3.
- Nominal dollar GDP growth (selected years): -15.9; 4.5; 13.4; 15.3; 6.7; 9.6; 8.8; 9.1; 8.6; 8.1; 8.1; 6.7; 9.0.

### Public sector DSA baseline findings (selected)
- Public sector debt (percent of GDP): 35.6; 39.2; 38.4; 42.5; 42.0; 41.7; 41.4; 41.2; 41.1; 40.9; 40.6; 31.5; 41.3.
- Of which: external debt (percent of GDP): 26.3; 27.8; 24.1; 24.2; 23.4; 22.5; 21.3; 20.6; 20.1; 18.5; 20.2; 24.2; 20.7.
- Change in public sector debt (percent of GDP): 5.7; 3.5; -0.7; 4.0; -0.5; -0.3; -0.3; -0.2; -0.1; 0.0; 0.0.
- Primary deficit (percent of GDP): 1.5; 2.5; 6.9; 3.4; 1.7; 1.7; 1.6; 1.6; 1.6; 1.4; 1.4; 3.1; 1.7.
- Revenue and grants (percent of GDP): 20.7; 21.8; 22.1; 22.8; 22.8; 23.0; 23.3; 23.5; 23.6; 24.0; 23.1; 21.0; 23.5.
- Automatic debt dynamics (percent of GDP): 3.4; -0.2; -6.0; -1.7; -2.2; -1.9; -1.8; -1.8; -1.6; -1.4; -1.3.
- PV of public debt-to-GDP ratio (selected years): 30.7; 34.6; 34.4; 34.6; 34.8; 34.9; 34.9; 35.3; 35.1.
- Debt service-to-revenue and grants ratio (percent): 13.1; 25.2; 22.6; 28.7; 39.1; 34.9; 36.4; 42.5; 42.7; 49.1; 49.6.
- Gross financing need (percent of GDP): 4.2; 8.0; 11.9; 10.0; 10.6; 9.7; 10.1; 11.6; 11.6; 13.2; 12.8.

### Stress tests, sensitivity analysis, and risk identification
- Stress-test design notes:
  - The most extreme stress test is the test that yields the highest ratio in or before 2028; one-off breaches are presented but deemed away for mechanical signals.
  - All additional financing needs generated by shocks under stress tests are assumed to be covered by PPG external MLT debt in the external DSA.
- Figures and tables indicate:
  - For multiple indicators (PV of debt-to-GDP, PV of debt-to-exports, debt service ratios), the most extreme shock is often the Exports shock or Commodity price shock.
  - Sensitivity tables present alternative scenarios (historical averages), bound tests (real GDP growth, primary balance, exports, other flows, depreciation, combinations), and tailored tests (combined contingent liabilities, commodity price).
  - Selected breaches and high values appear in stress runs for PV of debt-to-exports and debt service ratios under adverse scenarios.

### Drivers of debt dynamics and realism tools
- Drivers identified in Figures:
  - Endogenous debt dynamics components include contributions from nominal interest rate, real GDP growth, and price and exchange rate changes.
  - Residuals capture exceptional financing, changes in arrears, changes in gross foreign assets, and valuation adjustments.
- Realism assessment tools:
  - Comparison of government and private investment between previous and current DSA vintages.
  - Fiscal adjustment and possible growth paths under different fiscal multipliers (Multiplier = 0.2; 0.4; 0.6; 0.8).
  - Distribution of historical 3-year adjustments in Fund-supported programs and projected 3-year fiscal adjustments.

### Qualification of the 'Moderate' debt-distress category
- Figure 5 indicates the methodology for qualifying the Moderate category for 2018-2028.
- For PV debt/GDP and PV debt/exports thresholds, x is 20 percent and y is 40 percent.
- For debt service/Exports and debt service/revenue thresholds, x is 12 percent and y is 35 percent.
- The baseline and projected indicators are compared to thresholds and bands labelled as "Limited space", "Some space", and "Substantial space".

*Sources: Country authorities; and staff estimates and projections.*

### 1. On behalf of the Burkinabe authorities, we thank the Executive Board, Management and

### Authorities’ Statement on the ECF-Supported Program (Burkina Faso)

### Recent Economic Developments
- Real GDP growth: expected to remain strong at 6.0 percent in 2018 (against 6.3 percent in 2017) with balanced contributions across all sectors.
- Inflation: at end-June 2018 increased to 2.5 percent and is expected to remain within the West African Economic and Monetary Union’s (UEMOA) convergence criterion of 3 percent by the end of 2018.
- Current account: after deteriorating in 2017, the current account deficit is projected to narrow in 2018 thanks to higher exports (notably gold and cotton) and subdued import growth from ongoing fiscal consolidation.
- Public debt: around 40 percent of GDP; country remains at a moderate risk of debt distress according to the recent DSA.
- Fiscal performance H1 2018:
  - Fiscal deficit at end-June 2018 was better than projected.
  - Revenue collection underperformed due to security issues and labor strikes impacting budget execution and resource mobilization.
  - Expenditures increased mainly owing to high security spending and higher wage bill; increase accommodated mainly through cuts in capital expenditures.
  - Authorities adopted a revised 2018 budget law including additional measures to achieve the fiscal deficit objective of 5 percent of GDP.
- Revenue mobilization and PFM reforms:
  - Started rationalizing tax exemptions, stepped up efforts to collect tax arrears, and accelerated modernization of tax and customs administrations.
  - Adjusted petroleum product prices by 13 percent and established an automatic petroleum price-setting mechanism in November 2018.
  - Elaborated guidelines for project selection and appraisal; developing a cost-benefit analysis guide with AFRITAC West technical assistance.
  - A cost-benefit analysis of major investment projects included in the 2019 budget was annexed to the draft 2019 budget law submitted to the National Assembly.
- Wage bill sustainability:
  - Measures include slowing civil service hiring and limiting new hiring to priority sectors; expected to reduce hiring by roughly 40 percent in 2018.
  - Launched process to review public sector compensation system; organized a national conference in June 2018.
  - Preparing an organic law to specify basic principles governing public service functioning and revise salary and indemnity scale with aim of ensuring compliance with the regional convergence criterion on the wage bill by 2021.
- Banking sector: remains well-supervised and profitable; expanded with two new banks including an agricultural bank. Systemic risks contained but security risks have increased and some banks reduced operations at certain borders.
- Social and sectoral progress:
  - Progress under PADEL and PUS-BF to reduce poverty and combat terrorism.
  - Population’s access to energy and health improving as investment in infrastructure grows.
  - Programs to improve employability of young graduates and socioeconomic empowerment of women advancing.
- Agriculture and diversification:
  - Adopted in May 2018 an investment code to improve business environment in agriculture.
  - Increased support to farmers through advisory services, provision of mechanical equipment, and construction of facilities.

### Program Implementation
- Overall assessment: implementation during the period under review is broadly satisfactory.
- Performance criteria and benchmarks:
  - All quantitative performance criteria (PC) at end-June 2018, except the continuous criterion for pre-financing, and quantitative indicative targets at end-September 2018 were observed.
  - Structural measures: four out of six structural benchmarks were observed; the two others are well advanced and expected to be completed before end-2018.
- Missed PC on pre-financing:
  - Performance criterion relating to the zero ceiling for new pre-financing of public investments was missed following the signature in September 2018 of a pre-financing agreement for a high-priority road project around Ouagadougou.
  - Authorities’ position: misunderstanding about scope of commitment; they believed the PC covered only new projects and that the road project was significantly advanced before ECF approval (assessment of tenders, partner selection, negotiation phases completed in November 2017) and staff was informed accordingly.
  - Remedial action: adopted and published a ministerial order in November 2018 formally prohibiting negotiation and signing of contracts including provisions for pre-financing.
  - Request: authorities request a waiver for the nonobservance of the PC.

### Policies for 2019
- Macroeconomic outlook:
  - Medium-term outlook positive, supported by PNDES investments, de-escalation of labor conflicts, and improvement in security.
  - Short-term growth: expected to remain robust at 6.0 percent in 2019 driven primarily by mining, services, and agricultural activities.
  - Inflation: expected to remain within the WAEMU’s limit of 3 percent in 2019, reflecting good prospects for the 2018/2019 crop year.
  - Current account: expected to widen slightly to 8.0 percent of GDP.
- Security and social programs:
  - Authorities will devote resources to limit terrorism risk, pursue PADEL and PUS-BF implementation, and strengthen security operations as needed.
  - Grateful to development partners for assistance and look forward to additional support in security.
- Fiscal consolidation priorities:
  - Fiscal consolidation remains cornerstone of the program with emphasis on domestic revenue mobilization and wage bill sustainability.
  - Submitted draft 2019 budget law targeting an overall fiscal deficit of 3 percent of GDP, consistent with the Fund-supported program’s objectives.
  - Draft budget includes measures to expand tax base, levy new taxes, and raise rates of a number of existing taxes; tax legislation will be aligned with regional directives.
  - Authorities stress importance of adequate sequencing of tax reforms to mitigate impact on economic activity.
  - Expenditure measures: continue streamlining non-essential expenditure and reduce wage bill within the WAEMU’s limit of 35 percent of tax revenue by 2021.
  - Wage bill trajectory: expected to peak in 2019 and start to decline in 2020 as measures become fully effective.
- Public financial management, transparency, and governance:
  - Modernization of management procedures and tools (begun in 2017) to be completed in 2019.
  - Strengthen approval, implementation and monitoring of Public-Private Partnerships (PPPs) to limit contingent liabilities.
  - Continue publication of in-year budget documents to improve transparency in budget execution.
  - Sustain efforts to streamline and increase transparency in public procurement.
  - Continue promotion of good governance and anti-corruption measures initiated in 2015, including publication of reports on government management and ongoing automation of asset declaration by the anti-corruption authority.
- Debt policy:
  - Pursue a prudent debt policy to maintain moderate risk of external debt distress.
  - Medium-term debt strategy: reduce reliance on national and regional borrowing in favor of external sources offering more favorable terms.
  - Limit use of non-concessional financing to critical projects offering substantial guaranteed economic returns given increased scarcity of concessional resources.
  - Strengthen debt management capacities drawing on technical assistance recommendations.
- Structural reforms and financial inclusion:
  - Press ahead with reforms to foster economic diversification and increase financial inclusion (top PNDES priorities).
  - Acknowledge current banking business models are not supportive of diversification; enhancing access to financial services essential.
  - New agriculture bank expected to offer credit access to the agriculture sector in line with best practices and contribute to financial inclusion.
  - Goal to increase bank penetration rate to 35 percent by 2020, consistent with the PNDES.
  - A draft action plan for the National Strategy for Inclusive Finance (SNFI, adopted in 2017) is being prepared and should be finalized by end-2018; strategy will promote microfinance and leverage mobile technology.
  - Continue improving business environment by removing excessive red tape and implementing judicial centers specializing in economic and financial crimes and terrorist acts.

### Conclusion and Request
- Despite terrorist attacks and severe weather, performance under the ECF-supported program has been broadly satisfactory.
- Authorities remain committed to policies and structural reforms to strengthen macroeconomic stability, meet regional commitments, and create fiscal space for development needs.
- Given recent strong measures and program performance, authorities request Directors’ favorable consideration of completion of the first review under the ECF.

*Authorities’ statement submitted to the IMF on behalf of the Burkinabe authorities.*

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_Source: https://www.imf.org/-/media/files/publications/cr/2019/cr1915-burkina-faso-a4.pdf_