## _cr05342 - Section 1

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---

### I. Overview
- This Joint Staff Advisory Note (JSAN) reviews the second full Poverty Reduction Strategy Paper (PRSP-2) for the period 2004–06 prepared by the Government of Burkina Faso and the fourth progress report on the implementation of PRSP-1.
- PRSP-2 is embedded in the government’s long term vision “Burkina 2025,” and in a medium-term outlook consistent with the Millennium Development Goals (MDGs) and the New Partnership for Africa’s Development (NEPAD).
- PRSP-2’s main objectives:
  - increase per capita gross domestic product by at least 4 percent per year beginning in 2004;
  - reduce the poverty headcount to less than 35 percent by 2015;
  - increase life expectancy to at least 60 years by 2015.
- PRSP-2 retains the four pillars of PRSP-1:
  - (i) accelerating broad-based growth;
  - (ii) promoting access to basic social services for the poor;
  - (iii) increasing employment and income-generating activities for the poor;
  - (iv) promoting good governance.
- Key updates in PRSP-2:
  - broadening of priority sectors;
  - introduction of a regional dimension;
  - wider involvement of civil society;
  - overhaul of the monitoring and evaluation system centered on a Priority Action Plan (PAP).

### II. Poverty trends — findings and data issues
- Official government poverty headcount figures reported in PRSP-2 (based on three household surveys):
  - 44.5 percent in 1994;
  - 45.3 percent in 1998;
  - 46.4 percent in 2003.
- Economic context reported: economic growth of more than 5 percent on average during 1998–2003.
- Gini coefficient series reported:
  - 0.560 in 1994;
  - 0.530 in 1998;
  - 0.506 in 2003 (indicating declining inequality).
- World Bank Poverty Assessment finding (contrasting with official figures): a significant reduction in the poverty headcount (−8 percent) between 1998 and 2003.
- Methodological adjustments used to build a comparable welfare indicator for 1998 and 2003:
  - excluding a limited number of items measured differently in both surveys;
  - applying a consistent set of monthly price data to household consumption items to eliminate the effect of price changes over time and space.
- Staff recommendation: place additional emphasis in the next APR on developing poverty statistics that are comparable over time and strengthen capacity to collect and analyze poverty data.
- Bank support noted: Statistical Capacity Building Project and Public Sector Capacity Building Project.

### III. Poverty characteristics and determinants — analytical gaps and priorities
- Staffs welcome the breadth of poverty information but suggest deeper analysis on links between health, nutrition, water supply, and poverty in the next APR.
- PRSP-2 (Box 8) indicates that at current trends most MDGs will not be met; PRSP-2 estimates MDGs related to poverty and nutrition could be met, but those related to education, reproductive health, and gender will be more difficult to reach.
- Staffs suggest the next APR should:
  - define enabling policies and programs to bring some MDGs into reach;
  - discuss causes of continued high inequality, focusing on access to productive assets, particularly land and credit;
  - provide deeper analysis of price stabilization mechanisms and the impact of an efficient agricultural price information system;
  - discuss the impact of volatility in international cotton prices and the effect of cotton subsidies in developed countries.

### IV. Strategic pillars for poverty reduction — summary assessments and policy recommendations

#### A. Accelerating Broad-Based Growth
- 2003 APR macroeconomic outcomes:
  - Real GDP growth increased to 8 percent in 2003 owing to record levels of cotton and cereal production;
  - inflation fell;
  - fiscal and external current account deficits were reduced;
  - overall balance of payments was in surplus.
- Growth–poverty linkage: World Bank Poverty Assessment attributes reduction in national poverty rates between 1998 and 2003 largely to growth in agricultural output (subsistence and cotton farming) and urban absorption of population without rising urban poverty rates.
- PRSP-2 macroeconomic growth assumption: average real growth rate of about 6½ percent (consistent with the average observed in the last ten years).
- Growth drivers identified: favorable external environment, continued strong economic policies, improved competitiveness, dynamic export crops (cotton, fruit, vegetables), manufacturing exports (food processing, leather, cotton spinning), mining, trade, tourism, and remittances.
- Staffs’ updated view on external conditions:
  - outlook deteriorated since PRSP drafting due to a sharp increase in world oil prices and sharp decline in world cotton prices;
  - staffs’ recent growth projections are lower than those in PRSP-2 by about 2 percent per year and subject to downside risks.
- Observations and recommendations:
  - PRSP-2 should explicitly treat risks to the economic outlook and specify contingent policies if projected growth rates are not realized.
  - Downside risk to revenue projections in the MTEF due to adverse terms of trade movements.
  - Authorities’ PAP indicates capital expenditures for 2004–06 will need to be about one-third more than those contained in the MTEF.
  - Financing of PAP should not translate into new borrowing that increases external debt vulnerability; additional resources should be mobilized from domestic revenue and additional donor support, preferably in the form of grants.
  - Tax revenue dynamics: tax revenues increased by about 12 percent in 2003, but tax revenue-to-GDP ratio remains well below the WAEMU convergence criterion of 17 percent.
  - Authorities should identify ongoing tax reforms and implementation schedule more explicitly in the PAP (including census of taxpayers, monitoring of imports benefiting from fiscal exonerations, strengthening audit and enforcement capacities).
  - If concessional or grant financing does not materialize, authorities should curtail some planned expenditures and consider narrowing expenditure priorities in a revised PAP that includes a debt sustainability analysis.
  - Staffs support PRSP-2 private sector development agenda (improve competitiveness, reduce unit factor costs) and urge use of a variety of benchmarks for improving the business climate; Bank staff to carry out an investment climate review in FY 2006.
  - Urgent implementation of privatization program and strengthening of regulatory framework recommended.
  - Emphasis on diversification and rural development supported; caution that ambitious agenda may exceed available resources and require prioritization in the forthcoming APR.
  - Authorities should resist protectionist policies when promoting downstream agroindustrial activities.
  - Trade policy: encourage greater emphasis on trade liberalization and export diversification; Bank Integrated Trade Study underway that could inform policy.
  - Financial sector: PRSP-2 stresses access to financing and microfinance development; staff caution that creation of several funds could introduce distortions; forthcoming FSAP in FY 2006 expected to provide recommendations.

#### B. Promoting Access to Basic Social Services by the Poor
- Education sector outcomes (2003 APR):
  - School enrollment rate increased by 5 percentage points compared to 2002/2003.
  - Enrollment in literacy classes rose by 44 percent in 2003.
  - Progress in quality indicated by reduction in dropout rates; however, school infrastructure construction was slow, leading parents to build temporary classrooms.
  - Student teacher ratio rose in 2003/2004 and number of instructional hours remains low.
- Staff recommendations for education:
  - Further decentralize management and hiring of teachers.
  - Address aid coordination in the sector.
  - Implement cost-effective school construction.
  - Ensure financial resources are used efficiently toward reaching MDG targets.
  - Increase instructional hours effectively provided to pupils to enhance quality.
- Health, nutrition, HIV/AIDS outcomes and concerns (2003 APR):
  - Progress in raising immunization coverage rates, lowering infant and child mortality rates, ensuring a good supply of essential drugs, and reducing HIV/AIDS transmission.
  - Number of health centers with minimum required personnel increased to 77 percent in 2003, up from 74 percent in 2001.
  - Need for stronger personnel reforms to ensure health specialists are present in rural areas.
- Staff recommendations for health:
  - Future APRs should stress malaria and malnutrition issues; malaria programs are seriously underfinanced relative to disease burden despite cost-effective interventions (e.g., increased coverage of insecticide-treated bed nets).
  - Nutrition and reproductive health programs need greater attention.
  - Maintain dialogue among Ministries of Health, Finance, and Civil Service on improving availability of health workers in rural areas, given macroeconomic constraints.
  - On HIV/AIDS, ensure scaling up ARV treatment does not undermine prevention programs.
  - Government has drafted a human resources action plan for health; many proposed measures are not costly but require interministerial dialogue.

#### C. Equitably Increasing Employment and Income-Generating Activities for the Poor
- Strategic focus: agriculture sector as main vehicle for income generation given that 92 percent of the poor live in rural areas and agriculture’s dominant role in employment and the economy.
- Staff view: overall strategy targets the right areas but next APR should present prioritization of activities consistent with resource constraints.
- Staff recommendation: finalize costing of the PAP consistent with the macroeconomic framework.

#### D. Promoting Good Governance
- Staffs welcome governance as a key pillar and encourage the government to highlight progress in future APRs.
- PRSP-2 improves on PRSP-1 by providing indicators and targets to monitor progress in implementing the governance reform program.

---

### _cr05342 - Section 2

### Justice sector and public finance management
- Authorities are commended for being candid in describing the limited development of the justice sector.
- Regarding public finance management, the staffs encourage the authorities to steadfastly implement reforms in the tax and customs administrations designed to minimize fraud.
- The staffs urge taking into account the recommendations of the recently completed Public Expenditure Review and of the Country Procurement Assessment Report which is currently carried out in collaboration with the World Bank.

### Anti-corruption
- The anticorruption drive should be reinforced, in particular through the strengthening of the High Authority for the Coordination of the Fight Against Corruption.
- The High Authority should have the autonomy and the operational capacity to conduct its work.
- Adoption in 2005 of a national policy to fight corruption is recommended.

### V. Conclusion
- Staffs’ view: PRSP-2 presents a candid and rich picture of poverty reduction challenges in Burkina Faso.
- PRSP-2 improves on PRSP-1 reviewed by the Executive Directors in June 2000, notably through a broader debate on poverty reduction and the introduction of a Priority Action Plan as the centerpiece of a more effective monitoring and evaluation system.

### Areas where PRSP-2 could be strengthened (staffs’ recommendations)
- adopting a methodology to improve data comparability in future surveys and research, so as to correctly measure poverty trends and draw relevant lessons;
- integrating the PAP and the macroeconomic strategies into a consistent framework that will take into account debt sustainability;
- including alternative macroeconomic scenarios in the PRSP and APRs that permit to gauge the authorities’ response to exogenous shocks (low cotton prices, high oil prices, regional instability, dollar/euro exchange rate, inadequate external assistance, etc);
- setting the correct benchmarks for improving the business climate and taking swift actions in that area;
- in the education sector, pursuing the decentralization of the hiring and management of teachers, improving school construction programs, and implementing an action plan to increase instructional hours which remain low;
- in the health sector, adequately financing malaria programs, addressing nutrition and reproductive health programs issues, improving the availability of health workers in rural areas, and on HIV/AIDS, ensuring that the emphasis on scaling up ARV treatment does not undermine prevention programs.

*Prepared by the Staffs of the International Development Association (IDA) and the International Monetary Fund (IMF); Approved April 11, 2005.*

### Section 1

### _cr05342 - Section 1

### I. Overview
- This Joint Staff Advisory Note (JSAN) reviews the second full Poverty Reduction Strategy Paper (PRSP-2) for the period 2004–06 prepared by the Government of Burkina Faso and the fourth progress report on the implementation of PRSP-1.
- PRSP-2 is embedded in the government’s long term vision “Burkina 2025,” and in a medium-term outlook consistent with the Millennium Development Goals (MDGs) and the New Partnership for Africa’s Development (NEPAD).
- PRSP-2’s main objectives: (i) increase per capita gross domestic product by at least 4 percent per year beginning in 2004; (ii) reduce the poverty headcount to less than 35 percent by 2015; and (iii) increase life expectancy to at least 60 years by 2015.
- PRSP-2 retains the four pillars of PRSP-1: (i) accelerating broad-based growth; (ii) promoting access to basic social services for the poor; (iii) increasing employment and income-generating activities for the poor; and (iv) promoting good governance.
- Key updates in PRSP-2: broadening of priority sectors, introduction of a regional dimension, wider involvement of civil society, and an overhaul of the monitoring and evaluation system centered on a Priority Action Plan (PAP).

### II. Poverty trends — findings and data issues
- Official government poverty headcount figures reported in PRSP-2 (based on three household surveys): 44.5 percent in 1994; 45.3 percent in 1998; 46.4 percent in 2003.
- Economic context reported: economic growth of more than 5 percent on average during 1998–2003.
- Gini coefficient series reported: 0.560 in 1994; 0.530 in 1998; 0.506 in 2003 (indicating declining inequality).
- World Bank Poverty Assessment finding (contrasting with official figures): a significant reduction in the poverty headcount (−8 percent) between 1998 and 2003.
- Methodological adjustments used to build a comparable welfare indicator for 1998 and 2003: (i) excluding a limited number of items measured differently in both surveys; and (ii) applying a consistent set of monthly price data to household consumption items to eliminate the effect of price changes over time and space.
- Staff recommendation: place additional emphasis in the next APR on developing poverty statistics that are comparable over time and strengthen capacity to collect and analyze poverty data.
- Bank support noted: Statistical Capacity Building Project and Public Sector Capacity Building Project.

### III. Poverty characteristics and determinants — analytical gaps and priorities
- Staffs welcome the breadth of poverty information but suggest deeper analysis on links between health, nutrition, water supply, and poverty in the next APR.
- PRSP-2 (Box 8) indicates that at current trends most MDGs will not be met; PRSP-2 estimates MDGs related to poverty and nutrition could be met, but those related to education, reproductive health, and gender will be more difficult to reach.
- Staffs suggest the next APR should:
  - Define enabling policies and programs to bring some MDGs into reach.
  - Discuss causes of continued high inequality, focusing on access to productive assets, particularly land and credit.
  - Provide deeper analysis of price stabilization mechanisms and the impact of an efficient agricultural price information system.
  - Discuss the impact of volatility in international cotton prices and the effect of cotton subsidies in developed countries.

### IV. Strategic pillars for poverty reduction — summary assessments and policy recommendations

H3: A. Accelerating Broad-Based Growth
- 2003 APR macroeconomic outcomes: Real GDP growth increased to 8 percent in 2003 owing to record levels of cotton and cereal production; inflation fell; fiscal and external current account deficits were reduced; overall balance of payments was in surplus.
- Growth–poverty linkage: World Bank Poverty Assessment attributes reduction in national poverty rates between 1998 and 2003 largely to growth in agricultural output (subsistence and cotton farming) and urban absorption of population without rising urban poverty rates.
- PRSP-2 macroeconomic growth assumption: average real growth rate of about 6½ percent (consistent with the average observed in the last ten years).
- Growth drivers identified: favorable external environment, continued strong economic policies, improved competitiveness, dynamic export crops (cotton, fruit, vegetables), manufacturing exports (food processing, leather, cotton spinning), mining, trade, tourism, and remittances.
- Staffs’ updated view on external conditions: outlook deteriorated since PRSP drafting due to a sharp increase in world oil prices and sharp decline in world cotton prices; staffs’ recent growth projections are lower than those in PRSP-2 by about 2 percent per year and subject to downside risks.
- Observations and recommendations:
  - PRSP-2 should explicitly treat risks to the economic outlook and specify contingent policies if projected growth rates are not realized.
  - Downside risk to revenue projections in the MTEF due to adverse terms of trade movements.
  - Authorities’ PAP indicates capital expenditures for 2004–06 will need to be about one-third more than those contained in the MTEF.
  - Financing of PAP should not translate into new borrowing that increases external debt vulnerability; additional resources should be mobilized from domestic revenue and additional donor support, preferably in the form of grants.
  - Tax revenue dynamics: tax revenues increased by about 12 percent in 2003, but tax revenue-to-GDP ratio remains well below the WAEMU convergence criterion of 17 percent.
  - Authorities should identify ongoing tax reforms and implementation schedule more explicitly in the PAP (including census of taxpayers, monitoring of imports benefiting from fiscal exonerations, strengthening audit and enforcement capacities).
  - If concessional or grant financing does not materialize, authorities should curtail some planned expenditures and consider narrowing expenditure priorities in a revised PAP that includes a debt sustainability analysis.
  - Staffs support PRSP-2 private sector development agenda (improve competitiveness, reduce unit factor costs) and urge use of a variety of benchmarks for improving the business climate; Bank staff to carry out an investment climate review in FY 2006.
  - Urgent implementation of privatization program and strengthening of regulatory framework recommended.
  - Emphasis on diversification and rural development supported; caution that ambitious agenda may exceed available resources and require prioritization in the forthcoming APR.
  - Authorities should resist protectionist policies when promoting downstream agroindustrial activities.
  - Trade policy: encourage greater emphasis on trade liberalization and export diversification; Bank Integrated Trade Study underway that could inform policy.
  - Financial sector: PRSP-2 stresses access to financing and microfinance development; staff caution that creation of several funds could introduce distortions; forthcoming FSAP in FY 2006 expected to provide recommendations.

H3: B. Promoting Access to Basic Social Services by the Poor
- Education sector outcomes (2003 APR):
  - School enrollment rate increased by 5 percentage points compared to 2002/2003.
  - Enrollment in literacy classes rose by 44 percent in 2003.
  - Progress in quality indicated by reduction in dropout rates; however, school infrastructure construction was slow, leading parents to build temporary classrooms.
  - Student teacher ratio rose in 2003/2004 and number of instructional hours remains low.
- Staff recommendations for education:
  - Further decentralize management and hiring of teachers.
  - Address aid coordination in the sector.
  - Implement cost-effective school construction.
  - Ensure financial resources are used efficiently toward reaching MDG targets.
  - Increase instructional hours effectively provided to pupils to enhance quality.
- Health, nutrition, HIV/AIDS outcomes and concerns (2003 APR):
  - Progress in raising immunization coverage rates, lowering infant and child mortality rates, ensuring a good supply of essential drugs, and reducing HIV/AIDS transmission.
  - Number of health centers with minimum required personnel increased to 77 percent in 2003, up from 74 percent in 2001.
  - Need for stronger personnel reforms to ensure health specialists are present in rural areas.
- Staff recommendations for health:
  - Future APRs should stress malaria and malnutrition issues; malaria programs are seriously underfinanced relative to disease burden despite cost-effective interventions (e.g., increased coverage of insecticide-treated bed nets).
  - Nutrition and reproductive health programs need greater attention.
  - Maintain dialogue among Ministries of Health, Finance, and Civil Service on improving availability of health workers in rural areas, given macroeconomic constraints.
  - On HIV/AIDS, ensure scaling up ARV treatment does not undermine prevention programs.
  - Government has drafted a human resources action plan for health; many proposed measures are not costly but require interministerial dialogue.

H3: C. Equitably Increasing Employment and Income-Generating Activities for the Poor
- Strategic focus: agriculture sector as main vehicle for income generation given that 92 percent of the poor live in rural areas and agriculture’s dominant role in employment and the economy.
- Staff view: overall strategy targets the right areas but next APR should present prioritization of activities consistent with resource constraints.
- Staff recommendation: finalize costing of the PAP consistent with the macroeconomic framework.

H3: D. Promoting Good Governance
- Staffs welcome governance as a key pillar and encourage the government to highlight progress in future APRs.
- PRSP-2 improves on PRSP-1 by providing indicators and targets to monitor progress in implementing the governance reform program.

*Prepared by the Staffs of the International Development Association (IDA) and the International Monetary Fund (IMF); Approved April 11, 2005.*

### Section 2

### _cr05342 - Section 2

### Justice sector and public finance management
- The authorities are commended for being candid in describing the limited development of the justice sector.
- Regarding public finance management, the staffs encourage the authorities to steadfastly implement reforms in the tax and customs administrations designed to minimize fraud.
- The staffs urge taking into account the recommendations of the recently completed Public Expenditure Review and of the Country Procurement Assessment Report which is currently carried out in collaboration with the World Bank.

### Anti-corruption
- The anticorruption drive should be reinforced, in particular through the strengthening of the High Authority for the Coordination of the Fight Against Corruption.
- The High Authority should have the autonomy and the operational capacity to conduct its work.
- Adoption in 2005 of a national policy to fight corruption is recommended.

### V. CONCLUSION
- 24. In the staffs’ view, PRSP-2 presents a candid and rich picture of poverty reduction challenges in Burkina Faso.
- PRSP-2 improves on PRSP-1 which was reviewed by the Executive Directors in June 2000, in several dimensions: the staffs welcome in particular the broader debate on poverty reduction and the introduction of a Priority Action Plan as the centerpiece of a more effective monitoring and evaluation system.

### Areas where PRSP-2 could be strengthened (staffs’ recommendations)
- adopting a methodology to improve data comparability in future surveys and research, so as to correctly measure poverty trends and draw relevant lessons;
- integrating the PAP and the macroeconomic strategies into a consistent framework that will take into account debt sustainability;
- including alternative macroeconomic scenarios in the PRSP and APRs that permit to gauge the authorities’ response to exogenous shocks (low cotton prices, high oil prices, regional instability, dollar/euro exchange rate, inadequate external assistance, etc);
- setting the correct benchmarks for improving the business climate and taking swift actions in that area;
- in the education sector, pursuing the decentralization of the hiring and management of teachers, improving school construction programs, and implementing an action plan to increase instructional hours which remain low;
- in the health sector, adequately financing malaria programs, addressing nutrition and reproductive health programs issues, improving the availability of health workers in rural areas, and on HIV/AIDS, ensuring that the emphasis on scaling up ARV treatment does not undermine prevention programs.

*Source: _cr05342 - Section 2*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2005/_cr05342.pdf_