## _cr16173

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### Executive summary — context, growth, inflation, external
- Growth:
  - 4 percent in 2014 and 2015; projected 5.2 percent in 2016; projected about 6 percent on average in 2017-19 (Text Table 1).
- Inflation:
  - Consumer prices (annual average): 0.9 percent in 2015; 1 percent in March 2016 (y/y); projections: 0.9 in 2016 and 1.8–2.0 in 2017-19 (Text Table 1).
- Current account and trade:
  - Current account deficit: 8 percent of GDP in 2014 → 6.4 percent of GDP in 2015 (improved trade balance and recovery in current transfers).
  - Exports: increased by 3.1 percent in 2015.
  - Imports: increased by 5.4 percent in volume terms; total import value +2 percent owing to improved oil import bill by CFAF 120 billion (1.8 percent of GDP).
- Risks:
  - External: depressed external demand and lower prices for cotton and gold.
  - Domestic: security threats, youth unemployment (almost 65 percent of population under 25), contingent liabilities in cotton sector.
- Opportunity:
  - Tambao manganese mine: could increase GDP by up to 20 percent at full capacity, timing and infrastructure uncertain.

### Fiscal developments, public finances, and 2016 budget
- Revenue and expenditure shifts 2013–15:
  - Revenue collection declined by 2 percentage points of GDP since 2013.
  - Public investment: 14.2 percent of GDP (2013) → 7.7 percent of GDP (2015).
  - Wage bill rose by 1.3 percent of GDP over 2013–15.
- 2015 fiscal outcomes (selected):
  - Total revenues (excluding grants): decreased by 1.2 percent of GDP relative to 2014.
  - Current spending: 14.4 percent of GDP (2014) → 14.2 percent of GDP (2015).
  - Public investment: 9 percent of GDP → 7.7 percent of GDP.
  - Overall fiscal deficit (cash basis): rose to 3.4 percent of GDP (2015).
- Text Table 2 (percent of GDP highlights):
  - Total revenue and grants: 19.6 (2013), 21.8 (2014), 21.1 (2015).
  - Total revenue: 16.1 (2013), 17.9 (2014), 17.3 (2015).
  - Tax revenue: 14.3 (2013), 16.0 (2014), 15.6 (2015).
  - Expenditure and net lending: 21.7 (2013), 25.1 (2014), 24.2 (2015).
  - Investment expenditure: 7.7 (2013), 10.5 (2014), 9.6 (2015).
  - Financing: 3.4 (2013), 3.0 (2014), 2.8 (2015); Foreign financing: 1.4 (2013), 2.2 (2014), 1.4 (2015); Domestic financing: 2.0 (2013), 0.9 (2014), 1.4 (2015).
- 2016 budget and stance:
  - Fiscal policy in 2016 remains prudent and anchored by the WAEMU convergence criterion.
  - Overall cash deficit: from 3.4 to 3.1 percent of GDP (decline marginally compared with 2015).
  - 2016 LFR priorities: health, education, infrastructure; domestic revenues projected 17.6 percent of GDP; program grants 0.9 percent of GDP; Expenditure CFAF 1750.8 billion (24.9 percent of GDP).
- Revenue mobilization measures and projected yield (Text Table 3, total 1.2 percent of GDP):
  - Standardized invoicing & Tax Investigations and Intelligence Directorate: 0.24
  - Exhaustive survey of medium-sized enterprises: 0.19
  - Input cross checks for customs: 0.13
  - Estimated increase in mining revenues vs 2015: 0.10
  - New policy measures (reduced exemptions; new stamp duties; higher rates on certain alcoholic beverages and tobacco): 0.19
  - Supervision using single taxpayer ID: 0.09
  - Recovery of unpaid 2015 taxes: 0.07
  - SYLVIE: 0.07
  - Motorcycle import fraud measures: 0.04
  - GPS tracking and customs scanners: 0.03
  - Additional toll revenues: 0.004
- Mining taxation code:
  - New corporate tax rate: 27.5 percent (previous preferential 17.5 percent under 2003 code).
  - New code: 35 percent of royalties allocated to local development funds (about CFAF 14 billion in 2015).
  - Short-term revenue gain from new code expected limited given existing fiscal stability clauses.

### Public wage bill, expenditure containment, and public investment execution
- Public wage bill:
  - Projected increase ~CFAF 39 billion in 2016 (0.6 percent of GDP) due to new salary measures.
  - Wage bill already high in the region; staff encouraged limiting blanket increases.
- Investment execution:
  - Low absorption of external financing and compressed fiscal space reduced public investment.
  - Measures: accelerate approval of foreign loans, streamline procurement, allow partner agencies to oversee implementation.
  - Planned PIMA in first half of 2016 to identify bottlenecks.

### Cash management, arrears, and Treasury Single Account (TSA)
- Domestic arrears:
  - FAD mission identified up to 0.9 percent of GDP in domestic arrears by March 2015 (partly unpaid VAT reimbursements).
  - Reports indicate arrears had fallen to CFAF 4 billion by end-December 2015.
  - Full audit of central government pending payments expected to be finalized in May 2016.
- Net domestic financing and issuance plans:
  - Net domestic financing ceiling raised by CFAF 15 billion to CFAF 111 billion.
  - Authorities’ Treasury Plan anticipated gross T-Bill and T-bond issuances reaching 6.9 percent of GDP in 2016; net domestic financing need 1.4 percent of GDP.
  - For program monitoring, ceiling on net domestic financing set in line with actual fiscal financing need (MEFP ¶23).

### Energy sector reforms and use of oil-price windfall
- Windfall estimates:
  - CFAF 120 billion in 2015 (1.8 percent of GDP).
  - Potential further windfall ~CFAF 100 billion (1.5 percent of GDP) in 2016 based on WEO projections.
- Distribution under current policies:
  - 21 percent to SONABHY; 37.5 percent benefits consumers via pump price reductions.
- Key reform measures (effective May 1, 2016):
  - New flexible price structure for SONABHY → SONABEL; PRCIF = PCIF (Mar = 0); PDEP = PRCIF + Costs; PBEL fixed by CIDPH reflecting break-even.
  - Subsidy formula: Sub = PDEP - PBEL if PDEP > PBEL; Sub = 0 otherwise.
  - Expected SONABEL savings in 2016: around CFAF 20 billion.
  - Exceptional dividend from SONABHY to clear part of SONABEL arrears: CFAF 40 billion (CFAF 5 billion from 2015 profits; remainder from 2016).
  - Quarterly financial summaries from SONABHY and SONABEL starting June 2016; technical memorandum to be signed in May 2016.
- Financial interlinkages and 2015 figures:
  - SONABEL arrears to SONABHY: CFAF 66 billion at end 2015 (also noted as CFAF 66.6 billion in MEFP excerpts).
  - Tripartite transfers (2015): CFAF 93 billion (1.3 percent of GDP).
  - Short-term one-time 8 percent reduction in fuel prices for pump consumers, mining and construction sectors.

### Financial sector and credit
- Private sector credit growth:
  - 18.9 percent in 2014; 7 percent at end-December 2015 (y/y); 4.8 percent (y/y) at end-March 2016.
- Banking indicators (Jun-15):
  - Gross NPLs / Total loans: 9.5 percent (Burkina Faso).
  - Concentration risk (5 largest clients / equity): 178.5.
  - Regulated capital to risk-weighted assets: 11.2.
- Financial inclusion:
  - Share of population age 15+ with financial account: 13.4 percent at end-2014 (11.8 percent for women; 15.1 percent for men); sub-Saharan Africa average: 28.9 percent.
- Policy actions:
  - Task force chaired by Prime Minister to improve business environment and access to credit; explore agency banking, microcredit, mobile banking.

### Program performance, ECF reviews, and monitoring
- Program status and disbursements:
  - 2nd/3rd ECF reviews approved on June 5, 2015; access augmented by 40 percent of quota (pre-14th general review).
  - Current ECF arrangement expires December 26, 2016.
  - Schedule of ECF disbursements (SDR): SDR 2.55 million (Dec 27, 2013); SDR 2.55 million (May 15, 2014); SDR 4.11 million (Dec 1, 2014); SDR 18.92 million (May 15, 2015); SDR 14.10 million (Dec 1, 2015); SDR 4.47 million (May 16, 2016); SDR 4.47 million (Dec 1, 2016).
- Performance criteria and benchmarks:
  - All quantitative PCs for end-June and end-Dec 2015 met except indicative revenue floor missed by 0.5 percent of GDP (June) and 1.4 percent of GDP (Dec).
  - Structural benchmarks: 7 of 11 planned for 2015 met; SYLVIE launched Feb 2016; customs scanners installed (with minor repairs).
  - Program monitoring adjustments: net domestic financing ceiling increased by CFAF 15 billion; ceiling on non-concessional debt raised by CFAF 30 billion; indicative revenue targets for end-June reduced by CFAF 20 billion.
- Program financing:
  - ECF-supported program fully financed; projected ECF disbursements close remaining financing gap of 0.3 percent of GDP.
  - Completion of 4th/5th ECF review would unlock SDR 18.57 million.
  - Total outstanding Fund credit: 120 percent of quota (below cumulative access limit 225 percent).
  - Capacity to repay the Fund assessed as adequate.

### Debt sustainability, DSA results, and risks
- Public debt and projections (selected):
  - Total public debt (percent of GDP): 29.6 (2015); 28.1 (2016); 33.1 (2017); 32.1 (2018); 32.4 (2019) (Text Table 1).
  - DSA projection: total public debt projected rise from 32.2 percent of GDP in 2015 to 67.4 percent of GDP in 2035 (previous DSA: 53 percent).
  - Domestic debt: low at 7 percent of GDP (2015); projected domestic debt share rises to 24.6 percent of GDP by 2035.
  - Borrowing composition: non-concessional share increases from 29 percent to 55 percent by end projection period.
- DSA indicators (selected PV and ratios):
  - PV of external debt (percent of GDP): 15.1 (2014), 18.9 (2020), 23.1 (2021), 28.6 (2025), 29.6 (2030), 30.7 (2031), 31.9 (2032), 33.1 (2033), 34.4 (2034).
  - PV of external debt (percent of exports): 58.7 (2014), 79.2 (2020), 111.3 (2021), 149.9 (2025), 158.4 (2030).
  - Public sector gross debt (percent of GDP): 29.6 (2013), 32.1 (2015), 36.3 (2016), 36.9 (2021), 43.3 (2025), 58.0 (2030), 67.4 (2035).
  - Gross financing need (percent of GDP): 4.8 (2013), 3.6 (2014), 4.1 (2015), 7.6 (2016), 5.2 (2017), 5.1 (2018), 4.7 (2019), 4.2 (2020).
- Risk assessment:
  - Risk of debt distress: remains “moderate.”
  - Stress tests: debt-to-exports ratio breaches threshold around 2029 under extreme shock (one-standard-deviation drop in exports growth).
  - Key DSA assumptions: real GDP growth projected at 5.4 percent on average over medium term in DSA narrative; baseline convergence to 6 percent per year medium term; current account projected to average about 5.2 percent of GDP per year over medium term.
- Policy implication:
  - Strengthen debt management capacity and limit new non-concessional borrowing consistent with Fund’s new debt limit policy (performance criterion on new non-concessional borrowing and memorandum item on concessional borrowing from end-June 2016).

### Cotton sector stabilization and subsidy strategy
- Cotton smoothing fund balance: CFAF 4.5 billion.
- State subsidies and advances: ~CFAF 15 billion in 2014-15.
- Additional resources needed for 2016-17 season: CFAF 31.5 billion subsidy (0.4 percent of GDP).
- Staff financing recommendation for CFAF 31.5 billion: combination of deferred non-priority spending and additional budget support within supplemental budget.
- Authorities allocated CFAF 20 billion to the cotton sector in 2016 LFR to repay subsidies and advances.
- Longer-term recommendation: implement medium-term agriculture diversification to reduce contingent liabilities.

### Program monitoring, data reporting, and transparency
- Reporting requirements (selected):
  - Monthly TOFE and appendix tables — MINEFID — 6 weeks.
  - Quarterly reconciliation of Treasury net position with monetary statistics — MINEFID/BCEAO — 8 weeks.
  - Monthly petroleum product prices, consumption, taxes, and subsidies unpaid — MINEFID — 4 weeks.
  - Quarterly SONABHY and SONABEL financial reports (cash flows and income statements) — SONABHY/MINEFID; SONABEL/MINEFID — Quarterly — 6 weeks.
- Statistical updates:
  - Quarterly national accounts published; planned rebasing from 1999 to 2008 (and elsewhere new base year 2014 announced).
  - ENESI informal sector survey data entry completed March 29, 2016; data cleaning through end-May 2016.
- Safeguards and regional central bank:
  - 2013 BCEAO safeguards assessment: strong control environment; all recommendations implemented; IFRS adoption starting with FY 2015.

### Staff appraisal and policy recommendations (priorities)
- Revenue mobilization:
  - Implement tax and customs administration reforms, enhanced controls, anti-fraud measures, standardized invoicing for large and medium enterprises (effective end-June 2016 as structural benchmark).
  - Establish and use Tax Investigations and Intelligence Directorate (implemented ahead of schedule).
- Expenditure and fiscal space:
  - Rebalance spending toward priority investments; resist pressures to further increase public wage bill and recurrent spending.
  - Identify non-priority spending to withhold if revenue risks materialize.
- Energy sector:
  - Capture oil-price windfall to address energy sector issues and support investment in electricity production.
  - Gradually introduce flexible domestic fuel prices and review electricity tariff structure; protect poorer consumers with targeted measures.
- Public investment management:
  - Prioritize new investments under PNDES given limited resources; implement PIMA to remove bottlenecks.
- Debt management:
  - Improve debt-management capacity and link debt strategy to macro program; seek concessional financing where possible and limit non-concessional borrowing consistent with performance criteria.
- Financial sector and inclusion:
  - Address declining private credit growth and concentration risks; encourage policies to expand access to financial services (agency banking, microcredit, mobile banking).

*Source: _cr16173 - EXECUTIVE SUMMARY and selected chapters (May 26, 2016), IMF staff report for Burkina Faso*

### EXECUTIVE SUMMARY

### EXECUTIVE SUMMARY

### Context and recent developments
- Growth is projected to increase moderately from 4 percent in 2014-15 to 5.2 percent in 2016, as the broad-based recovery anticipated in the wake of the November elections has been dampened by the January terrorist attacks.
- Following almost two years of political crisis and transition, the central policy challenge is to create the necessary fiscal space to deliver tangible improvements in the quality of life of the Burkinabè people.
- Security concerns and social pressures are high: almost 65 percent of the population is under 25, youth employment is a key priority, and the government adopted urgent social measures in the 2016 budget.

### Growth, inflation, and external sector
- Real GDP growth: 4 percent in 2014 and 2015; projected 5.2 percent in 2016; projected about 6 percent on average in 2017-19 (Text Table 1).
- Consumer prices (annual average): 0.9 percent in 2015; 1 percent in March 2016 (y/y); projections show 0.9 in 2016 and 1.8–2.0 in 2017-19 (Text Table 1).
- Current account deficit: estimated decline from 8 percent of GDP in 2014 to 6.4 percent of GDP in 2015, driven by an improved trade balance and a recovery in current transfers.
- Exports increased by 3.1 percent in 2015; imports increased by 5.4 percent in volume terms, with total imports value increasing by 2 percent due to improved oil import bill by CFAF 120 billion (1.8 percent of GDP).
- Terms of trade and external risks: depressed external demand and lower prices for main export commodities, particularly cotton, could put pressure on the external position.

### Fiscal developments and public finances
- Revenue and expenditure shifts 2013–15:
  - Revenue collection declined by 2 percentage points of GDP since 2013, owing to rising tax evasion, lapses in revenue administration, and declines in retail fuel prices and gold prices.
  - Public investment fell from 14.2 percent of GDP in 2013 to 7.7 percent of GDP in 2015.
  - Wage bill rose by 1.3 percent of GDP over the same period.
- 2015 fiscal outcomes:
  - Total revenues (excluding grants) decreased by 1.2 percent of GDP relative to 2014.
  - Current spending declined from 14.4 percent of GDP in 2014 to 14.2 percent of GDP in 2015.
  - Public investment declined from 9 percent of GDP to 7.7 percent of GDP.
  - Overall fiscal deficit rose to 3.4 percent of GDP on a cash basis due to payment of commitments carried over from 2014.
- Text Table 2 (selected items, percent of GDP):
  - Total revenue and grants: 19.6 (2013), 21.8 (2014), 21.1 (2015).
  - Total revenue: 16.1 (2013), 17.9 (2014), 17.3 (2015).
  - Tax revenue: 14.3 (2013), 16.0 (2014), 15.6 (2015).
  - Grants: 3.5 (2013), 4.0 (2014), 3.8 (2015).
  - Expenditure and net lending: 21.7 (2013), 25.1 (2014), 24.2 (2015).
  - Investment expenditure: 7.7 (2013), 10.5 (2014), 9.6 (2015).
  - Overall balance (cash basis): -3.4 (2015).
  - Financing: 3.4 (2013), 3.0 (2014), 2.8 (2015).
  - Foreign financing: 1.4 (2013), 2.2 (2014), 1.4 (2015).
  - Domestic financing: 2.0 (2013), 0.9 (2014), 1.4 (2015).

### Financial sector and credit
- Private sector credit growth: 18.9 percent in 2014; 7 percent at end-December 2015 (y/y); 4.8 percent (y/y) at end-March 2016.
- Commercial banks accumulated foreign assets in the regional bond market amid political uncertainty.

### Program performance and status
- Program implementation under the ECF arrangement has remained satisfactory despite the challenging backdrop.
  - All quantitative performance criteria for end-June and end-December 2015 were met, except the indicative floor on revenue collection was missed by 0.5 percent of GDP in June and by 1.4 percent of GDP at end-December 2015.
  - Most structural benchmarks were met: seven out of 11 planned for 2015 were met; progress on others includes launch of SYLVIE in February 2016 and installation of all customs scanners.
  - Some benchmarks delayed or modified: invoicing based on delivery prices for fuel transport not implemented; to be replaced by sealed valve and tagging system for fuel delivery trucks.
- Program status:
  - The 2nd/3rd ECF reviews were approved on June 5, 2015, and access was augmented by 40 percent of quota (pre-14th general review).
  - The current ECF arrangement expires on December 26, 2016.

### Medium-term outlook and risks
- Baseline projections:
  - GDP growth projections (Text Table 1): 2016: 5.2; 2017: 5.9; 2018: 6.1; 2019: 6.2 (annual percent changes as presented).
  - Total public debt projections (percent of GDP): 2015: 29.6; 2016: 28.1; 2017: 33.1; 2018: 32.1; 2019: 32.4 (Text Table 1).
  - Current account projections (percent of GDP): 2016: -6.4; 2017: -7.8; 2018: -5.9; 2019: -5.3 (Text Table 1).
- Key risks:
  - Domestic: looming security threats; delays in public investment implementation; perceptions of slow social response could trigger unrest; contingent liabilities in the cotton sector.
  - External: depressed global demand and lower commodity prices (cotton, gold) could put pressure on external position and investment; further declines in cotton and gold prices would have large social repercussions.
  - Opportunity and uncertainty: exploitation of the Tambao manganese mine could increase GDP by up to 20 percent when operating at full capacity, but timing and required infrastructure investments are uncertain.

### Policy recommendations and priorities
- Revenue mobilization:
  - Implement tax and customs administration reforms to effectively enhance controls and curb fraud, so as to increase revenue.
  - Establish the controls and investigations unit at the tax administration (implemented ahead of schedule).
- Expenditure and fiscal space:
  - Continue efforts to rebalance spending towards priority investments.
  - Resist pressures to further increase the public wage bill and other recurrent spending.
  - Address contingent liabilities in the cotton sector.
- Investment and project execution:
  - Given limited resources, carefully prioritize new investments in line with the government’s development strategy (PNDES), while addressing remaining bottlenecks to project execution.
  - Capture the oil price windfall to address longstanding issues in the energy sector and support higher investment in electricity production.
- Structural and sectoral reforms:
  - Standardize VAT invoicing for large and medium-sized enterprises (to become effective end-June 2016 as part of the 6th ECF review structural benchmarks).
  - Finalize audits and feasibility studies: annual audit of pending payments expected by end-May 2016; SONABEL production and energy import options study and SONAPOST feasibility study ongoing but delayed.

*Source: _cr16173 - EXECUTIVE SUMMARY (May 26, 2016), IMF staff report for Burkina Faso*

### 11.       Fiscal policy in 2016 will remain

### 11.       Fiscal policy in 2016 will remain

### Fiscal policy stance and 2016 budget
- Fiscal policy in 2016 will remain prudent and anchored by the WAEMU convergence criterion (MEFP ¶15-16).
- Overall cash deficit: from 3.4 to 3.1 percent of GDP (decline marginally compared with 2015).
- Expenditure: allowed to increase from compressed levels due to a recovery in revenue and foreign project financing.
- The 2016 revised budget was approved by the National Assembly in April 2016 and reflects the new government’s focus on health, education and infrastructure (Text Table 2, Box 2).

### Regaining lost ground in domestic revenue mobilization
- Authorities prioritize measures to boost domestic revenue mobilization (MEFP ¶18).
- Projected increase in revenue from strengthened tax and customs administration, including enhanced controls, fraud prevention, and systematic cross-checking of tax and customs declarations: 1.2 percent of GDP relative to last year (Text Table 3, Appendix Table 3).
- 2016 budget envisages a larger revenue increase of 0.6 percent of GDP compared with the agreed program framework, based on more optimistic expectations regarding the impact of revenue measures and the new mining code.
- To mitigate risks, authorities agreed to identify and withhold a corresponding amount of non-priority spending (MEFP ¶19).
- Q1 2016 tax collection: 6 percent above budget; staff noted the authorities’ target could be within reach if sustained.

- Text Table 3 — Projected yield of revenue measures (in percent of GDP), total: 1.2
  - Standardized invoicing for large and medium firms and establishment of the Tax Investigations and Intelligence Directorate: 0.24
  - Exhaustive survey of medium-sized enterprises and firms segmentation: 0.19
  - Activation of input cross checks for customs declarations: 0.13
  - Estimated increase in mining revenues compared to 2015: 0.10
  - New policy measures: (i) reduction in certain tax exemptions; (ii) new stamp duties; (iii) increased tax rate for certain alcoholic beverages and tobacco: 0.19
  - Supervision of taxpayers using the single taxpayer identification number to cross-check information between tax offices: 0.09
  - Recovery of unpaid 2015 taxes: 0.07
  - Virtual Liaison System for Import and Export operations (SYLVIE): 0.07
  - Addressing fraud in the market for motorcycles imports: 0.04
  - GPS tracking system and customs scanners: 0.03
  - Additional revenues from tolls: 0.004

### Mining taxation code
- Revised mining taxation code approved at the end of 2015 is not expected to yield significant additional revenue in the short term.
- New code sets the corporate tax rate for the sector at the standard 27.5 percent (compared to the preferential rate of 17.5 percent payable under the 2003 mining code).
- Authorities and staff agreed that, pending review of individual contracts (many with fiscal stability clauses), existing mining operations would likely remain taxable under previous code’s conditions.
- New code specifies that 35 percent of royalties (about CFAF 14 billion in 2015) must be allocated to financing local development funds.
  - Staff cautioned this could undermine budget transparency and introduce spending rigidities.
  - Authorities agreed full amount of royalties would be reflected in the budget, together with transfers to development funds.

### Containing recurrent expenditure and boosting public investment
- Public wage bill: projected increase of around CFAF 39 billion in 2016 (0.6 percent of GDP), largely due to new salary measures in the revised budget (Box 2).
- Staff observations:
  - Wage bill already one of the highest in the region (Figure 3 and Text Figure 3).
  - Encouraged authorities to reconsider blanket salary increases or limit increases to a relatively small number of civil servants based on competencies/qualifications.
  - Authorities should strive to contain medium-term impact and identify options to gradually reduce the public wage bill in line with the WAEMU convergence criterion.
  - Authorities expressed interest in further Fund advice in this area.
- Recurrent nature of some social measures could lead to permanent increases in the wage bill; staff emphasized private sector should lead employment creation and the state should ensure favorable legal/regulatory environment.
- Public investment execution:
  - Recent reduction in public investment driven by low absorption of external financing and reduced fiscal space for domestically-financed investment.
  - Measures to accelerate approval of foreign loans, streamline procurement, and allow dedicated partner agencies to oversee project implementation expected to improve execution.
  - New investments must be carefully prioritized given limited resources.
  - Authorities welcomed a planned Public Investment Management Assessment (PIMA) in the first half of 2016 to identify bottlenecks.

### Implementing realistic financing plans and domestic issuances
- External financing in 2016: projected to remain stable in real terms as decline in budget support is offset by higher project financing.
- Budget support projection: decline sharply to 1.4 percent of GDP from exceptionally high 2015 levels (Text Table 4).
- Program fiscal framework uses staff’s more conservative projection of external financing due to absorption difficulties and poor Q1 investment spending execution.
- Domestic and regional financing:
  - Authorities’ Treasury Plan anticipated gross T-Bill and T-bond issuances reaching 6.9 percent of GDP in 2016, compared with a 1.4 percent of GDP net domestic financing need.
  - Longer maturity on T-Bills issued in 2016 would imply significant amortization payments in 2017-18.
  - Authorities clarified issuances would be limited to actual financing needs over the year but prefer maintaining an intra-year liquidity buffer.
  - For program monitoring, ceiling on net domestic financing will be set in line with actual fiscal financing need (MEFP ¶23).

### Strengthening cash management and Treasury Single Account (TSA) implementation
- Efforts ongoing to avoid recurrence of domestic payment arrears and to move effectively to a Treasury Single Account.
- FAD mission identified up to 0.9 percent of GDP in domestic arrears accumulated by March 2015, due in part to unpaid VAT reimbursements.
- Authorities agreed to prepare regular reports on pending payments at the Treasury and to conduct a full audit of central and general government pending payments.
- Reports indicate arrears had fallen to CFAF 4 billion by end-December 2015 (MEFP ¶27).
- Full audit of central government pending payments expected to be finalized in May 2016.
- Staff reminded authorities to inventory pending payments outside the Treasury as suppliers and companies had raised concerns about unpaid bills.

### Capturing the oil price windfall to boost electricity supply
- Drop in international fuel prices generated a windfall:
  - CFAF 120 billion in 2015 (1.8 percent of GDP).
  - Potential further windfall of almost CFAF 100 billion (1.5 percent of GDP) in 2016 based on current WEO projections (Text Table 5 and Text Figure 4).
- Under current policies, distribution of the windfall: 21 percent to SONABHY, 37.5 percent benefiting consumers from pump price reductions agreed in 2015 and May 2016.
- Reforms to better distribute windfall across energy sector:
  - New flexible price structure for sale of fuel from SONABHY to SONABEL effective May 1, 2016; based on actual fuel import prices adjusted monthly.
    - Expected to reduce need for state subsidies and allow SONABEL to benefit and make a profit.
    - Incorporates a breakeven fuel purchase price that would automatically result in a proportional state subsidy if oil prices rise.
    - Expected savings for SONABEL in 2016: around CFAF 20 billion.
  - Agreement to clear a portion of SONABEL’s arrears to SONABHY via an extraordinary dividend of CFAF 40 billion from SONABHY’s 2015-16 windfall profits (MEFP ¶33).
  - Authorities intend to gradually increase share of solar power and imported electricity in the energy mix.
- Institutional and governance measures:
  - Authorities and management committed to implement recommendations of 2014 audits of SONABHY and SONABEL.
  - A technical memorandum between SONABHY, SONABEL, and the state covering financial/logistical operations, outstanding liabilities, and rules for supply/payment/subsidization has been finalized.
  - Closer monitoring of accounts of the two state enterprises; regular financial reports to be made available (MEFP ¶35).
  - Companies to implement audit recommendations on management and accounting, enact performance contracts, identify performance indicators, and appoint monitoring committees (MEFP ¶30-32).
- Medium-term policy stance:
  - Gradual introduction of more flexible domestic fuel prices and review of electricity tariff structure desirable.
  - Re-introduction of automatic price adjustment mechanism would help put SONABHY on sustainable footing and remove state obligation to cover losses from selling below market price.
  - Once SONABEL’s finances stabilize and energy supply improves, government could consider electricity tariff review for cost recovery while protecting poorer consumers.

### Other policy discussions: debt policy and financial sector
- Fund’s new debt limit policy implementation discussed (MEFP ¶24-26).
  - DSA update suggests Burkina Faso remains at moderate risk of debt distress (Annex II).
  - Given low debt-monitoring capacity, new policy calls for a performance criterion (ceiling) on new non-concessional borrowing and a memorandum item on concessional borrowing, as of end June 2016.
  - Non-concessional borrowing at CFAF 159.9 billion in December 2015.
  - Authorities request increase in existing performance criterion from CFAF 200 billion to CFAF 230 billion to accommodate an additional CFAF 63.7 billion in non-concessional borrowing for priority infrastructure.
  - Authorities indicated concessional borrowing could amount to CFAF 256.4 billion for 2016 (MEFP Table 1).
  - Authorities welcome technical assistance to improve debt management strategy, link it to the macro program, and integrate domestic and external borrowing.
  - Planned capacity building: enhanced risk management, improved technical management of new issuances, training in financial programming.
- Financial sector indicators and concerns:
  - Banking sector remains sound but persistent decline in private sector credit is a concern.
  - Gross NPLs / Total loans (Burkina Faso): 9.5 percent at end-June 2015 (lowest in WAEMU region).
  - Concentration risk: second highest 5 largest clients / equity ratio in region (178.5 as of Jun-15 for Burkina Faso).
  - Regulated capital to risk-weighted assets (Burkina Faso): 11.2 (Jun-15).
  - Access to financial services low: share of population age 15+ with an account at a financial institution was 13.4 percent at end-2014 (11.8 percent for women; 15.1 percent for men), below sub-Saharan Africa average of 28.9 percent.
  - Authorities note a Prime Minister-chaired task force looking at measures to improve business environment and access to credit: incentives for banks to increase agency coverage, increased use of microcredit institutions, adoption of mobile banking technologies.
- BCEAO safeguards:
  - 2013 safeguards assessment of the WAEMU regional central bank (BCEAO) found a continuing strong control environment.
  - All recommendations implemented: strengthened external audit arrangements (international firm with ISA experience for FY 2015–17 audits), reinforced audit committee capacity with external expertise, adoption of IFRS starting with financial year 2015.

*Source: IMF staff report content (chapter 11) as provided in the supplied PDF content.*

### 27.      A strategy to reduce the reliance on state subsidies for the cotton sector in the context

### 27.      A strategy to reduce the reliance on state subsidies for the cotton sector in the context

### Cotton sector stabilization and subsidy needs
- Cotton stabilization fund balance: CFAF 4.5 billion.
- Recent resort to state subsidies and advances: about CFAF 15 billion in 2014-15 (MEFP ¶36).
- Additional resources needed to support the 2016-17 season: a CFAF 31.5 billion subsidy (0.4 percent of GDP).
- Staff recommendation for financing the CFAF 31.5 billion subsidy: a combination of deferred non-priority spending and additional budget support within the supplemental budget envisaged in the Summer-early Fall.
- Authorities’ agreed objective: devise a strategy to minimize future state support calls in light of the trend decline in cotton prices.
- Longer-term recommendation in Staff Appraisal: reduce contingent liabilities from the cotton sector by implementing a medium-term agriculture diversification strategy given the long-term trend of declining prices.

### National accounts and statistics update
- Publication: statistical agency has begun to publish quarterly national account data (MEFP ¶37).
- Planned rebasing: from 1999 to 2008 pending finalization of a survey of the informal sector, including in mining.
- Timeline: the informal sector survey should be completed in the next year.
- Technical support: project supported by technical assistance from AFRITAC West.
- Intended use: quarterly data will form the basis for the new annual GDP series at constant prices.

### Program monitoring, adjustments, and financing
- Net domestic financing ceiling: raised by CFAF 15 billion to CFAF 111 billion to accommodate higher government financing needs and close a 2016 financing gap identified at the 2nd/3rd ECF reviews.
- PC on non-concessional debt: raised by CFAF 30 billion to accommodate new infrastructure projects and related exchange rate risks.
- Indicative revenue targets for end-June: reduced by CFAF 20 billion to reflect weak revenue performance over the past two years.
- End-June target for poverty-reducing social spending: reduced by about CFAF 40 billion to reflect low investment budget execution in the first quarter related to the delayed establishment of the new government.
- Structural benchmarks: proposed for the 6th and final ECF review to support policies in the MEFP; 4th and 5th ECF review SBs include measures initially programmed up to May 2016 due to implementation delays.
- Monitoring improvement: authorities agreed to provide quarterly reports reconciling monetary data with government financial statistics to better track liabilities after difficulties attributing financing between banks and nonbanks and an unexpected SONABHY sale of a government bond.
- Program financing and Fund access:
  - ECF-supported program is fully financed.
  - Projected ECF disbursements would close the remaining financing gap of 0.3 percent of GDP based on identified budget support commitments.
  - Completion of the 4th/5th ECF review would unlock a disbursement equivalent to SDR 18.57 million, including the remainder of the 40 percent of quota augmentation of access approved at the time of the 2nd/3rd ECF reviews.
  - Total outstanding Fund credit: 120 percent of quota, well below the (revised) cumulative access limit of 225 percent of quota.
  - Assessment: Burkina Faso’s capacity to repay the Fund remains adequate.

### Program risks and fiscal management
- Political risks: program risks have receded with the appeased political environment.
- Fiscal risks highlighted:
  - Ambitious revenue projections.
  - Social pressures to increase the public wage bill and other recurrent spending.
  - Additional investment needs from the revised national development plan.
  - Vulnerabilities from potential future tightening of regional monetary conditions as authorities increase reliance on bank financing.
- Authorities’ mitigation measures: strategy to address revenue shortfalls; intention to conduct a thorough mid-year review of budget execution to prevent expenditure overruns.
- Cash management: strengthened practices recommended to avoid accumulation of new arrears.

### Staff appraisal — growth, revenue mobilization, and spending priorities
- Growth outlook:
  - Output remains below potential despite improving outlook.
  - Growth should gradually accelerate towards 6 percent and beyond over the medium term, supported by increases in mining output, potential gains in energy supply, and improved investment budget execution.
  - Caveat: favorable outcome predicated on addressing security threats and building fiscal space by curbing growth in recurrent spending while boosting revenue mobilization.
- Performance against program targets: all continuous and end-June and end-December 2015 quantitative targets met except the indicative target on the revenue floor; structural reforms advanced with some delays.
- Revenue mobilization:
  - Authorities taking steps to rapidly recover lost domestic revenue.
  - Falling commodity prices and sociopolitical instability contributed to past declines; reversal offers an opportunity for reform.
  - The package of measures already in place appears to be bearing fruit; with resolute implementation, staff considers ambitious targets could be within reach.
- Recurrent vs. investment spending:
  - Major challenge: addressing pent-up social and political pressures to increase recurrent spending at the expense of investment.
  - 2016 budget is fully financed but with little space to accommodate further pressures given a high public wage bill and new youth employment measures that will inflate recurrent spending.
  - Staff strongly encourages minimizing future budgetary impact of revised status of public servants and resisting pressures to increase the public wage bill, including by setting clear expectations regarding temporary hiring measures.
  - Recommendation to prioritize and sequence additional spending commitments from the new development strategy, targeting high-impact projects and enhancing the quality and execution of investment spending.
  - Planned PIMA noted to help address remaining bottlenecks.
- Energy sector opportunity:
  - Significant oil price windfall provides an opportunity to address structural deficiencies in the energy sector.
  - Authorities have implemented important reforms addressing financial instability in the power sector, removing financial constraints and paving the way for significant improvement in electricity supply over the medium term.

*Source: _cr16173 - 27.      A strategy to reduce the reliance on state subsidies for the cotton sector in the context*

### 39.      Based on the strength of the authorities’ policy commitments, staff supports

### _cr16173 - 39.      Based on the strength of the authorities’ policy commitments, staff supports

### Program review and IMF support
- Staff supports completion of the 4th and 5th reviews under the ECF arrangement and the authorities’ requests for modification of performance criteria.
- The final program review is scheduled for December 2016 and will be combined with the next Article IV consultation.
- Schedule of disbursements under ECF Arrangement 2013–16:
  - SDR 2.55 million — December 27, 2013
  - SDR 2.55 million — May 15, 2014
  - SDR 4.11 million — December 1, 2014
  - SDR 18.92 million — May 15, 2015
  - SDR 14.10 million — December 1, 2015
  - SDR 4.47 million — May 16, 2016
  - SDR 4.47 million — December 1, 2016

### Recent economic developments (Q1 2015–Q4 2015; Jan 2012–Mar 2016)
- Activity and credit:
  - After rebounding in 2015Q1 and Q2, economic activity weakened in Q3 but picked up somewhat in Q4.
  - Private credit growth slowed to levels unseen since 2010.
  - Private Credit Growth, Jan. 13–Mar. 16 (y/y % change) — charted between 0 and 40 on the source figure (no single numeric summarizing value provided).
- Prices and inflation:
  - Inflation remained subdued in 2015 but started rising in 2016 owing to higher food prices.
  - Inflation, Jan. 2012–Mar. 2016 (y/y % change) — headline, food, non-food series shown (no single numeric summarizing value provided).
- Revenues and investment:
  - Tax revenues continued to fall short of expectations, constraining public investment.
  - Tax Revenue Performance, Jan. 12 - Dec. 15 (in % of program, cumulative) — series for VAT, CIT, Other Tax shown up to 2015 (no single numeric summarizing value provided).
  - Investment Spending Execution (excluding capital transfer in 2013) — domestically and externally financed series show compression of investment.

### Real and external sector developments (2009–15)
- Exports and production:
  - Cotton production dropped due to erratic rainfall while gold output remained robust.
  - Composition of Exports (Billions of CFAF): Other, Livestock, Cotton, Gold series displayed for 2009–2015.
  - Commodities Production (Cotton in tonnes, Gold in kg) charted 2009–2015; Cotton and Gold series plotted (no single numeric summarizing value provided).
  - International Gold and Cotton Prices, Jan. 2013–Mar. 2016: Cotton (US cents per pound, RHS) and Gold (USD per troy ounce, LHS) series shown.
- Trade and current account:
  - Imports dropped due to compression of investment and the fall in oil prices.
  - Current account balance is estimated to have improved in 2015.
  - External debt increased only slightly and remained below its 2009 level.
- Selected external indicators (Table 4, 2013–19, CFAF billions and percent of GDP):
  - Current account (– = deficit): -11.0, -8.0, -7.6, -6.4, -7.8, -5.9, -5.3, -5.7, -6.0 (2013–2019)
  - Exports of goods (percent of GDP): 21.8, 22.1, 18.4, 21.6, 17.4, 21.4, 21.7, 21.9, 21.8 (2013–2019)
  - Imports of goods (percent of GDP): -27.3, -24.2, -22.0, -23.4, -21.4, -22.0, -23.0, -23.9, -24.5 (2013–2019)
  - Nominal GDP (CFAF billions): 6,026; 6,162; 6,561; 6,509; 7,085; 7,024; 7,587; 8,211; 8,895 (2013–2019, Table 4 memorandum)

### Fiscal developments (2009–15 and projections to 2019)
- Fiscal balances and spending:
  - The fiscal deficit was halved (chart note).
  - Current spending is trending up owing to an expanding wage bill and constraining investment spending.
  - Domestic revenue continued to decline, falling below peers.
- Central government fiscal aggregates (Table 1; percent of GDP and CFAF billions):
  - Current revenue (percent of GDP): 18.5, 17.3, 17.3, 16.1, 17.9, 17.3, 17.8, 18.6, 19.4 (2013–2019)
  - Of which: tax revenue (percent of GDP): 16.5, 15.3, 15.7, 14.3, 16.1, 15.6, 16.0, 16.7, 17.3 (2013–2019)
  - Total expenditure and net lending (percent of GDP): 27.4, 23.3, 24.8, 21.7, 25.6, 24.2, 25.3, 26.2, 27.0 (2013–2019)
  - Overall fiscal balance, incl. grants (commitments, percent of GDP): -3.5, -1.8, -2.5, -2.1, -3.0, -3.1, -3.0, -3.0, -3.0 (2013–2019)
  - Total Public Debt (percent of GDP): 29.6, 28.1, 33.1, 32.1, 32.4, 36.3, 36.2, 36.5, 36.4 (2013–2019)
  - Nominal GDP (CFAF billion, Table 1 memorandum): 6,026; 6,162; 6,561; 6,509; 7,085; 7,024; 7,587; 8,211; 8,895 (2013–2019)
- Consolidated central government operations (Table 2a, selected CFAF billions):
  - Total revenue and grants: 1,441.7; 1,321.1; 1,462.8; 1,277.7; 1,603.4; 1,481.7; 1,691.4; 1,898.1; 2,135.2 (2013–2019)
  - Total revenue: 1,117.4; 1,064.7; 1,137.2; 1,047.7; 1,270.4; 1,215.3; 1,350.0; 1,528.6; 1,726.1 (2013–2019)
  - Tax revenue: 992.6; 940.7; 1,032.5; 929.0; 1,142.4; 1,092.5; 1,214.2; 1,373.7; 1,539.3 (2013–2019)
  - Wages and salaries: 355.5; 437.3; 456.7; 468.5; 488.8; 507.9; 555.4; 607.6; 658.2 (2013–2019)
  - Investment expenditure: 858.4; 554.1; 663.7; 501.0; 814.7; 672.4; 773.9; 912.5; 1,067.4 (2013–2019)
  - Overall balance (commitment basis, CFAF billions): -210.8; -113.4; -163.7; -133.9; -209.5; -216.6; -224.4; -249.1; -270.3 (2013–2019)

### Monetary and credit developments (Table 3)
- Broad money (M3, annual % change): 11.3; 11.9; 14.3; 19.9; 15.0; 13.9; 14.9; 15.7; 15.0 (2013–2019)
- Credit to the private sector (annual % change): 26.3; 18.9; 15.1; 7.0; 16.8; 9.9; 12.0; 15.3; 15.8 (2013–2019)
- Net domestic assets (banking system) (annual % change): 19.6; 20.0; 18.1; 7.3; 16.7; 11.3; 11.8; 11.6; 12.2 (2013–2019)
- Net foreign assets levels and broad money (CFAF billions) shown in Table 3 (2013–2019) with detailed BCEAO and commercial banks components.

### Balance of payments highlights (Table 4, CFAF billions; selected)
- Current account (CFAF billions): -664.6; -495.5; -500.6; -417.4; -551.8; -412.0; -401.6; -467.7; -533.6 (2013–2019)
- Trade balance (CFAF billions): -328.8; -128.6; -234.8; -116.6; -282.9; -41.2; -97.8; -167.6; -246.3 (2013–2019)
- Exports of goods (CFAF billions): 1,315.3; 1,362.3; 1,207.7; 1,404.0; 1,232.2; 1,503.0; 1,649.7; 1,794.8; 1,934.8 (2013–2019)
- Imports of goods (CFAF billions): -1,644.2; -1,490.9; -1,442.5; -1,520.6; -1,515.0; -1,544.2; -1,747.5; -1,962.3; -2,181.1 (2013–2019)
- Gross official reserves (part of net change in foreign assets of the central bank, CFAF billions): 211.5; 148.2; 93.9; 14.1; 53.9; -59.6; -78.6; -127.8; -102.5 (2013–2019)

### Risk Assessment Matrix — key risks, likelihood, and policy actions
- External risks:
  - Dollar surge — Likelihood: High.
    - Potential impact: Boost commodity export earnings but attenuate windfall from low international fuel prices; increase dollar-denominated debt.
    - Policies: Prepare alternative measures to support energy sector reforms; improved debt management practices.
  - Structurally weak growth in key advanced and emerging markets and sharp China slowdown — Likelihood: Medium.
    - Potential impact: Lower prices and demand for gold and cotton; deteriorating current account.
    - Policies: Accumulate and preserve international reserve buffers; diversify economic structure and export markets.
- Domestic risks:
  - Continuing terrorist attacks — Likelihood: Medium.
    - Potential impact: Depressed economic growth; diversion of productive public investment into security.
    - Policies: Accelerate efforts to restore and strengthen security services following political transition.
  - Pressures for higher recurrent spending — Likelihood: High.
    - Potential impact: Destabilize budget sustainability.
    - Policies: Limit spending proposals to priority areas; ensure domestic revenue mobilization increases in step with spending plans.
  - Delays in PFM reforms — Likelihood: Medium–High.
    - Potential impact: Ineffective public spending; recurrence of arrears; compromised recovery, particularly in energy sector.
    - Policies: Encourage necessary PFM reforms to guarantee benefits of oil price windfall.

### Capacity to repay the Fund and Fund obligations (Table 6)
- Principal repayments (in millions of SDRs, 2015–2026): 14.1; 14.5; 17.8; 24.4; 23.6; 19.0; 21.2; 18.3; 11.5; 10.0; 6.9; 2.8 (2015–2026)
- Charges and interest (in millions of SDRs): 0.0; 0.0; 0.0; 0.0; 0.3; 0.2; 0.2; 0.1; 0.1; 0.1; 0.0; 0.0 (2015–2026)
- Outstanding IMF credit (in millions of SDRs): 146.6; 155.2; 137.4; 113.3; 89.6; 70.6; 49.4; 31.2; 19.6; 9.7; 2.8; 0.0 (2015–2026)
- Net use of IMF credit (millions of SDRs): 8.9; 8.6; -17.8; -24.2; -23.6; -19.0; -21.2; -18.3; -11.5; -10.0; -6.9; -2.8 (2015–2026)

*Source: Burkinabè authorities and IMF staff (from the provided IMF staff report content)._

### Annex I. Technical Annex on Energy Sector Reform

### Annex I. Technical Annex on Energy Sector Reform

### Background and electricity production
- Thermal generation: "thermal generation amounts to 55-65 percent of the energy mix".
- Imports: electricity imports from Côte d’Ivoire "30-35 percent" and potentially from Ghana.
- Hydroelectricity: "stagnant, hydro-equipment (dams) being close to maximum capacity".
- Solar: "Production of solar electricity should start in 2017, and will gradually lower average costs."
- Electrification rates: "about 25 percent in terms of territorial coverage, but only 18 percent of households have electricity."
- Generation capacity and demand: "The current total generation capacity is around 300 MW, which is largely insufficient to meet peak demand."
- Consequences: "Frequent power cuts impede private sector development and the energy sector has long been identified as a binding constraint to growth."

### Institutional and financial weaknesses
- Key state-owned companies: SONABHY (state hydrocarbon importer) and SONABEL (electricity company) are "undercapitalized and financially unsustainable".
- Causes: "rigid price structures for the re-sale of hydrocarbons and for retail fuel and electricity prices, insufficient investment and generally low management efficiency."
- Interdependence and arrears: SONABHY sells hydrocarbons at a price last fixed in 2013 to SONABEL, which "has to sell electricity below cost", resulting in "SONABEL’s inability to pay its fuel bill" and both companies "relying on (mostly unpaid) state subsidies and transfers", "leading to arrears and contingent state liabilities."

### Fuel price structure and opacity
- SONABHY role: "imports and stores hydrocarbons, while distribution is delegated to private operators."
- Clients: "the three main clients of SONABHY are (i) private fuel retailers, (ii) SONABEL, and (iii) the construction and mining private operators."
- Price determination: since 2010 sale prices follow regulation by the CIPDH (Inter-ministerial Committee for determination of oil prices) under the Prime Ministry.
- Preferential pricing: "SONABEL produces its thermal electricity using fuel supplied at a 'preferential' price set by the CIDPH."
- Artificial CIF discrepancy: "The CIF price shown in the CIDPH price structure (PCIF) does not reflect the CIF price effectively paid at the coastal port (PRCIF), and the difference between the two has been generating a margin for SONABHY since the beginning of the oil price decline."
- Effect: "This artificially high CIF price explains the absorption by SONABHY of the windfall, and also generates the illusion of a need for a subsidy on its sales to SONABEL." Subsidies "are often not paid on time by the government, generating notional arrears from the state."

### Missing oil price windfall gains (2014–2015)
- Oil price decline: "40 percent decline in oil prices since 2014".
- Pass-through to consumers in 2015: "about one third of the benefit ... has been passed through to consumers in 2015, in the form of lower pump prices."
- Accrued to SONABHY: "the rest of the oil windfall, equivalent to 1 percent of GDP, has accrued to SONABHY."
- SONABEL arrears: "SONABEL keeps accumulating arrears to SONABHY (amounting to CFA 66 billion at end 2015) and requiring operational subsidies from the state."
- Notional state transfers: updated 2015 data for tripartite transfers "still amounts to CFA 93 billion (1.3 percent of GDP)."

### New price structure (effective May 1, 2016) and arrears clearance
- New rules for SONABHY:
  - PRCIF = PCIF (Mar = 0)
  - PDEP = PRCIF + Costs
- Sale price to SONABEL (PBEL): "is fixed by the CIDPH and reflects its break-even point (to be lowered if SONABEL manages to use cheaper heavy fuel more intensively, and when the solar plants and the new interconnections eventually lower the average KWH production price)."
- Subsidy formula:
  - Sub = PDEP - PBEL if PDEP > PBEL
  - Sub = 0 otherwise
- Complementary measures: "an exceptional dividend payment from SONABHY will help clear part of SONABEL’s arrears."
- Intended outcome: "Together, these measures would eliminate the need for recurrent state subsidies and allow SONABEL to become more profitable."
- Short-term price cut: "authorities have also implemented a one-time 8 percent reduction in fuel prices for SONABHY’s other two clients, pump consumers and the mining and construction sectors."

### Reducing state contingent liabilities
- Mechanism: "increased flexibility in price setting between SONABHY and SONABEL will much reduce the need for subsidies to cover operational losses at SONABEL as the revised price structure is designed to provide fuel at a price which allows SONABEL to cover its costs (at least as long as international prices remain at their current low level)."
- Correction of import reference methodology: "by correcting the methodology on the basis of which import reference prices are calculated (making them more realistic) the revised price structure will eliminate the need for a large proportion of the market subsidies from the government to SONABHY."
- Fiscal example: "if the new price structure for SONABHY’s fuel purchase had been effective between January and April 2016, the budgetary savings associated with lower subsidies to SONABEL only would have amounted to 0.1 percent of GDP."

### Financial interlinkages and 2015 figures (selected)
- SONABEL arrears to SONABHY: "CFA 66 billion at end 2015."
- Tripartite transfers (2015): "CFA 93 billion (1.3 percent of GDP)."
- Text Table 1 (summary mention): "Outstanding Payments as of end-2015 -84,731 34,131 50,600; Hydrocarbon and Electricity Bills -66,600 66,600; Subsidies -18,131 34,131 -16,000." (values as presented in source.)
- Dividend and tax lines (selected figures shown in source table): "Dividends -4,500 4,500 0; Income taxes and others -7,020 8,070 -1,050." (values as presented in source table.)

### Annex II. Debt Sustainability Update — key findings and assumptions
- 2015 public debt: "stock of public debt has increased to 32.1 percent of GDP from 28.1 percent of GDP in 2014."
- Nominal debt growth: "The stock of nominal debt increased by 10 percent."
- External vs domestic debt 2015: "External debt is estimated to drive the bulk of the increase ... as it increased by 12 percent while domestic debt only increased by 5 percent."
- Domestic debt level: "Domestic debt remains low at 7 percent of GDP."
- Creditor composition (shares of total public debt stock): "IDA 29 percent; AFDB 15 percent; bilateral donors 10 percent; other multilaterals 8 percent; IMF 6 percent; Islamic Development Bank 5 percent; BOAD (3%)."
- Currency composition (Text Figure 2 distribution as listed): "SDR 42%; EUR 27%; CFAF 17%; USD 7%; Others 7%." (percent labels as shown in source figure.)

### DSA assumptions and projections
- Real GDP growth: "projected at 5.4 percent on average over the medium term, down from 6 percent relative to the previous DSA"; "Economic growth is projected to converge gradually to an average of 6 percent per year in the medium term."
- Commodity price assumptions: "Gold price projections ... projected to overshoot previous assumptions by 26 percent in the long term." "Cotton price projections ... gradually increase by 43 percent above previous assumptions over the projection period."
- Current account: "projected to average about 5.2 percent of GDP per year over the medium term (compared to 7.7 percent of GDP in the previous DSA)"; "The current account deficit is expected to stabilize around 7.5 percent of GDP over the long run."
- Overall fiscal deficit: "projected to remain anchored at 3 percent of GDP over the medium term compared to an average 3.7 percent in the previous DSA but is projected to gradually converge towards about 6.1 percent of GDP as in the previous DSA."

### DSA results and risks
- Risk of debt distress: "remains moderate, in line with the assessment at the time of the 2nd/3rd ECF reviews."
- Stress test outcome: "the debt-to-exports ratio breaches the debt distress threshold around 2029" under the most extreme standardized stress test (one-standard-deviation drop in exports growth).
- Baseline vs thresholds: "debt and debt service indicators remain significantly below relevant thresholds under the baseline scenario."
- Medium-term risk drivers: "Mining revenues are inherently volatile and subject to uncertainties regarding both production volumes and prices, and the currently favorable U.S. dollar/euro exchange rate dynamics can reverse rapidly."

### Total public debt projection (selected)
- Projection to 2035: "Total public debt is projected to rise from 32.2 percent of GDP in 2015 to 67.4 percent of GDP in 2035 (53 percent of GDP in the previous DSA)."
- Threshold comparison: "somewhat below the 74 percent threshold."
- Domestic debt share by 2035: "the stock of domestic debt gradually rises to 24.6 percent of GDP by the end of the projection period."
- Borrowing composition shift: "the share of the non-concessional borrowing to total borrowing will increase from barely 29 percent to 55 percent at the end of the projection period."
- Downside risk: "The authorities’ heavy reliance on bank financing represents a downside risk, should the BCEAO need to tighten regional monetary conditions over the medium term."

*Source: Annex I. Technical Annex on Energy Sector Reform and Annex II. Debt Sustainability Update (excerpts) from the provided IMF content unit.*

### Conclusion

### Conclusion

### Debt sustainability assessment
- The DSA results indicate that Burkina Faso’s risk of debt distress remains “moderate.”
- Under the baseline scenario, all relevant ratios remain below indicative thresholds.
- The ratio of debt to exports breaches its indicative threshold, underlining vulnerability to shocks to exports.
- Projected increases in domestic and external debt, combined with vulnerabilities associated with export revenue and regional liquidity conditions, raise risks to the debt path.

### Key projections and indicators (selected)
- PV of external debt (in percent of GDP and selected years): 15.1 (2014), 18.9 (2020), 23.1 (2021), 28.6 (2025), 29.6 (2030), 30.7 (2031), 31.9 (2032), 33.1 (2033), 34.4 (2034).
- PV of external debt (in percent of exports): 58.7 (2014), 79.2 (2020), 111.3 (2021), 149.9 (2025), 158.4 (2030), 166.0 (2031), 176.8 (2032), 184.8 (2033), 193.4 (2034).
- PV of PPG external debt in percent of government revenues: 87.5 (2014), 95.4 (2020), 118.4 (2021), 160.4 (2025), 167.1 (2030), 172.4 (2031), 178.7 (2032), 185.5 (2033), 192.8 (2034).
- PPG debt service-to-exports ratio (in percent): 3.1 (2014), 5.5 (2020), 7.8 (2021), 10.9 (2025), 11.8 (2030), 12.6 (2031), 13.6 (2032), 14.3 (2033), 15.1 (2034).
- Total gross financing need (Billions of U.S. dollars): 0.8 (2014), 1.0 (2020), 2.0 (2021), 2.4 (2025), 2.6 (2030), 2.8 (2031), 3.0 (2032), 3.3 (2033), 3.6 (2034).
- Public sector debt (central government gross debt, in percent of GDP): 29.6 (2013), 32.1 (2015), 36.3 (2016), 36.9 (2021), 43.3 (2025), 58.0 (2030), 67.4 (2035).
- PV of public sector debt (selected years, percent of GDP): 23.6 (2015), 26.1 (2016), 29.4 (2017), 30.0 (2018), 30.2 (2019), 30.3 (2020), 30.6 (2021), 31.1 (2025), 37.5 (2030), 50.7 (2035).
- Gross financing need (percent of GDP): 4.8 (2013), 3.6 (2014), 4.1 (2015), 7.6 (2016), 5.2 (2017), 5.1 (2018), 4.7 (2019), 4.2 (2020), 4.2 (2021), 6.1 (2025), 7.7 (2030), 7.8 (2035).

### Vulnerabilities highlighted by stress tests and scenarios
- The DSA emphasizes susceptibility to export shocks: the debt-to-exports ratio breaches its threshold under stress.
- Stress-test results show larger increases in PV debt-to-exports and PV debt-to-revenue ratios under scenarios such as a one-time depreciation shock and export shocks (most extreme shocks identified).
- Sensitivity analysis (selected outcomes):
  - PV of debt-to-exports ratio (baseline): 68 (2015), rising to 193 (2035).
  - PV of debt-to-GDP ratio (baseline): 17 (2015), rising to 34 (2035).
  - PV of debt-to-revenue ratio (baseline): 107 (2015), rising to 193 (2035).
  - Bound tests and alternative scenarios (e.g., one-time 30 percent nominal depreciation, lower export growth, less favorable loan terms) yield materially higher ratios and stress outcomes across the projection period.

### Key macroeconomic assumptions (selected)
- Real GDP growth (in percent): 4.0 (2015), 6.0 (2016–2020 baseline average), 6.0 (2021 onward baseline projection).
- GDP deflator in US dollar terms (change in percent): -1.6 (2014), 3.9 (2015), 6.9 (2016), -15.2 (2017), 2.7 (2018), 2.8 (2019), 2.1 (2020), 2.5 (2021), 2.7 (2025).
- Effective interest rate (percent): 1.0 (2014–2015), 0.2 (2016), rising to 2.4 (2025), 3.4 (2035).
- Growth of exports of G&S (US dollar terms, in percent): 1.7 (2014), 21.6 (2015), 26.4 (2016), -13.2 (2017), 9.3 (2018), 6.7 (2019), 6.9 (2020), 7.7 (2021).
- Government revenues (excluding grants, in percent of GDP): 17.3 (2014), 16.1 (2015), 17.3 (2016), 17.8 (2017), 18.4 (2018), 19.4 (2019), 19.6 (2020), 19.8 (2021), 19.5 (2025).

### Policy implication and recommendation
- In light of projected increases in domestic and external debt and vulnerabilities associated with export revenue and regional liquidity conditions, the authorities ought to strive to enhance debt management capacity, which is currently assessed as weak.

*Source: IMF staff estimates and projections (Conclusion and accompanying DSA tables for Burkina Faso).*

### Appendix I. Letter of Intent

### Appendix I. Letter of Intent

### Context and objectives
- Government elected after presidential and parliamentary elections of November 29, 2015, reaffirms commitment to measures in 2013–2016 three-year economic program supported under the Extended Credit Facility (ECF).
- Goals: continue implementing sound economic and financial policies, combat poverty, foster inclusive growth, implement National Economic and Social Development Plan (Plan National de Développement Économique et Social – PNDES).
- 2016 program to be implemented amid: relatively weak cotton and gold prices; deteriorated security situation following attacks on January 15, 2016; slower recovery of private sector activity.

### Key macroeconomic developments (2014–2015)
- Real GDP growth: expected to reach 4 percent in 2015 (population growth 3 percent); growth remains far below ten-year average at 4 percent for the second consecutive year.
- Sectoral and agricultural impacts:
  - Cereal production: 6.3 percent decline.
  - Cash crops: 11.0 percent drop.
- Credit and monetary aggregates:
  - Credit to the economy rose by 7 percent in 2015 (compared with increases of between 20 and 25 percent in recent years).
  - Net foreign assets up by 72.9 percent at end-December 2015.
  - Broad money expanded by 19.9 percent as at December 31, 2015.
- Inflation:
  - Annual inflation at end-2015: 0.9 percent.
  - Price components: foodstuffs and non-alcoholic drinks +5.4 percent; housing services and fuel +3.5 percent; transport services -4.2 percent; alcohol, tobacco, and narcotics -1.5 percent.
- External current account:
  - Deficit of 6.4 percent of GDP in 2015 (compared to 11 percent two years earlier).
  - Exports increased by 3.1 percent; imports grew by 2 percent despite a drop in the oil bill.

### Public finances (2013–2015)
- Overall deficit (commitment basis): 3.5 percent of GDP in 2013; 1.8 percent in 2014; 2.1 percent of GDP in 2015.
- Revenues:
  - Total tax and non-tax revenues: 16.1 percent of GDP at end-2015 (17.3 percent in 2014; 18.5 percent in 2013).
  - Drivers of revenue decline: contraction in VAT of 0.4 percent of GDP; decreasing port duties of 0.3 percent of GDP; declining taxes on corporations of 0.5 percent of GDP.
- Current expenditure:
  - Current expenditure: 13.6 percent of GDP in 2013; 14 percent in 2014; 14.2 percent of GDP in 2015.
  - Wage bill: 5.9 percent of GDP in 2013; 6.7 percent of GDP in 2014; 7.3 percent of GDP in 2015.
  - 2014 compensation reform increased wage bill by roughly CFAF 54.7 billion, including CFAF 39.3 billion for staff in social sectors.
- Public investment:
  - Investment relative to GDP: 14.2 percent in 2013; 9 percent in 2014; 7.7 percent in 2015.
  - Donor-financed investment: 4.4 percent of GDP in 2013; 3.5 percent in 2014; 2.3 percent in 2015.
  - Domestically financed investment: 9.8 percent of GDP in 2013; 5.5 percent in 2014; 5.4 percent in 2015.

### 2016 supplementary budget law (LFR) priorities
- Revenue measures to increase resources by 1.8 percentage points of GDP compared to 2015 via:
  - Tax rate hikes on tobacco, alcohol, and stamp duty.
  - Modernization of tax and customs administrations.
  - Strengthened controls and anti-fraud efforts.
- Expenditure priorities: support for health, education, and security sectors while maintaining space for investment.
- Opportunity from low international oil prices to strengthen energy sector finances, particularly electricity sub-sector, through:
  - Clearing a large part of payment arrears owed by SONABEL to SONABHY via special dividend payment from SONABHY to the government.
  - Clarifying and simplifying financial relationships between government, SONABHY, and SONABEL via a new, more flexible oil purchase price structure by SONABEL.
  - Improving monitoring of financial positions of SONABHY and SONABEL and implementing audit recommendations from 2014.

### Program implementation and performance (end-June and end-December 2015)
- Quantitative performance criteria:
  - All quantitative performance criteria met: ceiling on net domestic financing, non-concessional external borrowing, and non-accumulation of external arrears.
  - Net domestic financing: 1.69 percent of GDP at end-June; 2.27 percent of GDP at end-December.
  - Non-concessional loans: CFAF 121.2 billion at end-June; CFAF 159.9 billion at end-December 2015.
  - No external payment arrears accumulated.
- Indicative targets:
  - Government deficit remained below the ceiling set at end-June of 1.2 percent of GDP, rising to 2.1 percent of GDP at end-December.
  - Government revenue floor missed: revenue below floor by approximately 0.5 percent of GDP at end-June 2015 and 1.4 percent of GDP at end-December.
- Structural benchmarks (2015):
  - 7 out of 11 planned benchmarks completed, including:
    - Exhaustive survey of medium-sized enterprises to support enterprise segmentation and controls.
    - Legislation requiring identity and identification number on appointment documents for automatic updating of salary status.
    - Cash payment operations for all government employee wages to monitor staffing and streamline remuneration.
    - Performance contracts (contrat-plan) between government and SONABEL, and government and SONABHY.
    - Preparation of quarterly reports on pending payments.
    - Adoption of action plan to implement recommendations in SONABHY audit report.
  - Remaining benchmarks: two implemented with delay; two underway.
    - Scanners for customs inspections operational except two cargo scanners at the airport undergoing repairs.
    - SYLVIE (Virtual Liaison System for Import and Export Operations) became operational in February 2016.
    - Standardized invoicing for large enterprises delayed due to change from limited tender to open tender for technical operator; planned for June 2016 together with medium-sized enterprises.
    - Hydrocarbon transport “leakages” benchmark replaced by technical measure for securing loads; alternative technical solution adopted to be implemented as part of 6th ECF review benchmarks.
  - Five additional benchmarks planned for January–March 2016:
    - Establish Investigations and Intelligence Directorate (met).
    - Adopt standardized invoicing for medium-sized enterprises (not met; planned for June 2016).
    - SONAPOST Board to adopt feasibility study recommendations on decentralized services (not met; study started in April).
    - Finalize study on viability of options for energy production and import by SONABEL (not met; study ongoing).
    - Finalize annual audit on pending payments and arrears (initially planned for March 2016; expected in May).

### Implementation of SCADD and outlook for PNDES
- Growth pole developments:
  - Continued construction of Bagré growth pole; preparation of Sahel growth pole and Bobo-Dioulasso oil mill cluster.
  - PNDES to consolidate gains from existing growth poles and establish new ones (Sourou, Samendeni, Est, etc.).
- Pillar 1 (accelerated growth) actions continued in Q4 2015:
  - Environmental safeguards studies and construction work for Sahel growth pole.
  - Agricultural support: provision of plows and carts, distribution of improved seeds and fertilizers at subsidized prices, dissemination of improved animal breeds.
  - Strengthening nutritional and food security mechanisms.
  - Adoption of a new mining code.
  - Establishment of tourism development funds.
  - Actions toward creating an industrialization fund.
  - Implementation of multiannual contracts for routine road maintenance.
  - Interconnection of CEFORE, CEFAC, and GUF with partner administrations to simplify procedures.
- Pillar 2 (human capital and social protection) accomplishments:
  - Special job creation program for youth and women: technical and financial support for 3,000 youth to create micro-enterprises; recruitment of young people for high labor intensity public works.
  - Operationalization of joint monitoring mechanism between MENA and communes for powers transferred to communes.
  - Actions to operationalize Assurance maladie universelle (AMU) and development of social mutual funds (mutuelles sociales).
  - School and university infrastructure works.
  - Actions to implement National Social Protection Policy (PNPS).

### Requests to the IMF and commitments
- Requests:
  - Conclude the fourth and fifth reviews under the ECF arrangement and disburse SDR 14.10 million and SDR 4.47 million, respectively, under the two reviews.
  - For the sixth program review: modify performance criteria and indicative targets and approve new structural benchmarks, including changes to the ceiling on net domestic financing (performance criterion) and to the floors on domestic revenues and social spending (indicative target).
  - Under the new policy on debt limits in Fund-supported programs (effective June 2015), request approval of a new non-concessional borrowing ceiling.
- Government stance:
  - Believes policies in attached MEFP are adequate to achieve program objectives but will take further measures if appropriate.
  - Will consult with the IMF in advance of revisions to MEFP policies according to applicable IMF consultation policies.
  - Will provide information on implementation via the revised Technical Memorandum of Understanding or at IMF request.
  - Agrees to publication of this letter, attachments, and related IMF staff report upon IMF Executive Board approval.

*_Source: Appendix I. Letter of Intent (MEMINISTRY OF ECONOMY, FINANCE AND DEVELOPMENT), Ouagadougou, May 26, 2016._

### 10.  With respect to strengthening governance (Pillar 3), considered in relation to its economic,

### _cr16173 - 10.  With respect to strengthening governance (Pillar 3), considered in relation to its economic, political, administrative, and local aspects

### Strengthening governance (Pillar 3) — major reforms
- Continue necessary work for implementation of the program budget within ministries and institutions, and introduce the standardized invoicing.
- Carry out the ongoing multisectoral survey on household living conditions (poverty component).
- Start reviewing the law establishing the judicial system to improve the quality of the public service of justice.
- Adopt the law regarding the prevention and suppression of corruption in Burkina Faso.
- Start assessing the Strategic Framework for Decentralization (Cadre stratégique de mise en œuvre de la decentralisation).

### Cross-sectoral issues in development policies and programs (Pillar 4)
- Strengthen the financing mechanism to support women entrepreneurs.
- Take stock of the water resources managed by the Nakanbé Water Agency.

### National Economic and Social Development Plan (PNDES)
- Government decision (January 2016) to develop a 2016-2020 National Economic and Social Development Plan (PNDES), to be adopted by May 2016 as a replacement for the SCADD.
- PNDES will become:
  - the reference framework for interventions by national and international partners;
  - an instrument for political dialogue with technical and financial partners (TFPs);
  - a medium for mobilizing resources to finance development.
- PNDES will bring together all sectoral policies, factor in Burkina Faso’s international commitments, align regional and communal development plans at the decentralized level, draw on lessons from the SCADD, and seek to realize the “Burkina 2025” vision for the 2016–2020 period.

### Macroeconomic framework — growth and inflation projections
- 2016 projected growth: 5.2 percent (revised down from 6 percent foreseen in earlier reviews).
- 2017 projected growth: 5.9 percent.
- Medium-term growth expectation: around 6–6.5 percent.
- Inflation: expected to remain moderate and below the WAEMU criterion of 3 percent.
- Drivers and constraints:
  - Support from manufacturing, services, opening of two new gold mines.
  - Attenuation due to recent terrorist attacks and falling commodity prices.
  - 2017 support from a dynamic agro-pastoral sector, operationalization of growth poles (Bagré, Samendeni, Sourou), hydroagricultural and water management infrastructure, full-year implementation of public investment projects under the PNDES, mining operations, and services (telecommunications, financial services, transport).
  - Medium-term improvement from energy supply efforts, gradual start of the Tambao manganese project, opening of new gold mines, and enhanced investments in productive sectors.

### External current account and trade projections (2016)
- Imports: expected to be up 1.6 percent owing to higher investment spending, particularly public investments.
- Exports: expected to rise by 7.1 percent.
- Net effect: improvement in the external current account in 2016.

### Fiscal policy stance and 2016 budget measures
- New government (took power January 2016) intends to continue a prudent fiscal policy in line with WAEMU convergence criteria and public debt sustainability.
- Draft supplementary budget law (Loi de Finances Rectificative – LFR) adopted by Council of Ministers on March 21, 2016, and submitted to the National Assembly on March 23, 2016, to finance urgent measures to revive economic activity and address security, health, education, water, youth employment, and commitments to social partners and the cotton sector.
- Underlying assumptions in 2016 LFI recap:
  - Expected additional revenue from tax measures: about CFAF 24.7 billion over 2015.
  - Budget support projections in 2016: 1.4 percent of GDP (grants and concessional loans), down from 3 percent of GDP in 2015.
  - Overall deficit expected to reach 3.3 percent of GDP in 2016, and remain anchored at 3 percent in the medium term.

### 2016 LFR priorities and fiscal aggregates
- LFR priorities mirror LFI: develop accelerated growth pillars; consolidate human capital and promote social protection; strengthen good governance; consider cross-sectoral priorities; strengthen internal security and national defense.
- Fiscal aggregates under LFR:
  - Domestic revenues: 17.6 percent of GDP.
  - Program grants: 0.9 percent of GDP.
  - Expenditure: CFAF 1750.8 billion, i.e., 24.9 percent of GDP.
- Additional revenue under the LFR relative to LFI: CFAF 58.9 billion, generated through:
  - broadening of the tax base via enterprise segmentation and increased tax inspections;
  - clearing stock of unpaid balances;
  - systematic cross-checking between DGI and DGD using unique taxpayer ID;
  - activating field 44 for input of references from COTECNA inspection notices (effective March 1, 2016);
  - combating fraudulent import of motorcycles.
- Government will monitor mobilization of additional revenues closely and identify non-priority spending covered by at-risk revenue.

### Expenditure containment and public administration measures
- Planned measures to streamline current spending and reallocate savings to investment:
  - reducing allocations for fuel;
  - limiting number of vehicles for government officials;
  - capping call credits for government officials and restricting new landline connections;
  - reducing number of government leases and state-funded housing for officials (villas de fonction);
  - streamlining tasks and their weight on public spending;
  - creating a pool of vehicles for ministries;
  - reforming service vehicle system and reducing government vehicle fleet.
- Civil servant wage bill containment:
  - continue and enhance biometric enrolment in SIGASPE (Système Intégré de Gestion Administrative et Salariale du Personnel de l'État);
  - automate clearance of the payroll file through regular monitoring of temporary and final outflows and require identity and identification number on appointment documents for automatic salary-status updating;
  - boost redeployment system to transfer personnel from high-concentration to underserved areas to better control additional staff recruitment;
  - hold constructive exchanges with social partners on implementing law 081 on the status of civil servants, aiming for an implementation scheme that factors in budgetary resources.

### Investment and financing requirements (2016)
- Investments financed with domestic resources: CFAF 383.8 billion, i.e., 5.5 percent of GDP (compared to 5.4 percent in 2015).
- Total financing requirement in 2016: estimated at 3 percent of GDP, of which:
  - net external financing: 2.2 percent of GDP;
  - net domestic financing: 0.9 percent of GDP.
- Financing gap: 0.3 percent of GDP.
- Treasury issuance plan (subject to revision): issuance of CFAF 180 billion in bonds and CFAF 303.5 billion in Treasury bills.
- Overall deficit arising from LFR: CFAF 231.9 billion, or 3.3 percent of GDP.

### Debt policy and planned borrowing (2016)
- Debt policy objective: keep characteristic debt ratios within “moderate” risk boundaries.
- 2016–18 project portfolio priorities: energy, telecommunications, water, agricultural, and road infrastructure sectors.
- Government plans to diversify borrowing sources, give preference to grants and concessional loans, and increase the non-concessional debt ceiling to CFAF 230 billion.
- Commitments at end-2015: CFAF 159.9 billion; new projects amounting to CFAF 63.7 billion to be added in 2016.
- Government contemplating CFAF 256 billion in new concessional borrowing for 2016.
- Selected projects and amounts (Text Table 1):
  - Project for construction and asphalting of national road between Guiba and Garango (IsDB): 25.7 (Non-concessional; Interest rate: 2.5%; Reimb. period: 11 years; Grace period: 04 years).
  - Electrification of the periurban district of Ouaga and Bobo (AfDB-WB): 38.0 (Non-concessional; Terms not yet defined).
  - WESSA hydroelectric and hydro-agricultural dam (India): 110.4 (Concessional; Interest rate: 1.75%; Term 20 years; Grace period: 5 years).
  - Sahel irrigation project (IDA): 18.0 (Concessional; IDA loan conditions).
  - Transportation sector technical assistance (IDA): 12.0 (Concessional; IDA loan conditions).
  - Livestock project (IDA): 18.0 (Concessional; IDA loan conditions).
  - Urban sector modernization project (IDA): 60.0 (Concessional; IDA loan conditions).
  - Integrated Rural Development Project (Sanguié-Mouhoun) (WB-Gates Foundation): 26.0 (Concessional; Blend (grant from Gates Foundation)).
  - University dormitories (2,500 beds) - Koudougou (Kuwait Fund): 12.0 (Concessional; Interest-free loan).

### Treasury bill and bond issuance strategy
- Government extended maturities of issuances from 3–6 months to 1–2 years to take advantage of favorable regional financial market conditions.
- Importance recognized of enhancing planning and monitoring to control repayment schedule and refinancing needs.
- Need to build capacities of stakeholders and update management and analysis tools for improved external and domestic debt management.

### Public finance reforms and arrears management
- Quarterly reports on pending payments published under the Fund-supported program.
- Arrears paid down in 2015, totaling just CFAF 4 billion at end-December 2015.
- Government intends to conduct a complete audit of non-Treasury-related government arrears by end-April 2016.
- Continue efforts to improve cash management and planning to avoid tight liquidity and minimize risk of new pending payment accumulations.
- Efforts to repatriate Treasury assets in the postal checking center (CCP):
  - Out of a balance of CFAF 169.8 billion at end-2014, CFAF 75 billion agreed to be made available to the Treasury in December and during 2015.
  - Actions taken to date:
    - suspension of coverage on CCP clearing operations by the Public Treasury;
    - repatriation of assets amounting to CFAF 62.5 billion;
    - completion of an audit of SONAPOST requested by the Minister responsible for Finance and conducted by BCEAO headquarters in January–February 2016 to assess SONAPOST’s capacity to return Treasury assets at the CCP; audit report expected to be completed by April 2016.

### Energy sector reforms — objectives and planned actions
- Priority: quickly increase electricity production to avoid blackouts and outages during the hot season and support growth.
- Reforms to enable SONABEL to manage new investments effectively, including:
  - put SONABEL on a sounder financial footing;
  - clarify and simplify the structure of financial relationships between the government, SONABHY, and SONABEL;
  - improve readability of financial operations performed by SONABHY and SONABEL.
- Short-term: identify profits from the 2014 decline in oil prices and have these benefits accrue to the energy sector, particularly SONABEL.
- Implement key findings from recent audits of SONABEL and SONABHY; performance contracts signed but progress delayed due to political events.
- SONABHY 2016 audit-recommendation action plan (internal and external monitoring committees to track implementation). Recommendations to be implemented in 2016 include:
  - producing an internal audit guide;
  - developing a program to resolve issues with the “JDE” integrated management software and PCA implementation;
  - updating corporate accounting procedures;
  - bringing quarterly account statements in line with Accounting Standards as of April 2016;
  - analyzing accounts quarterly and comprehensively cleaning up corporate accounts before end-2016;
  - introducing hydrocarbon cost price accounting before end-2016;
  - establishing a long-term investment plan with credible financing for working capital requirements;
  - optimizing spending through currency management by recruiting a market finance specialist or building staff capacity;
  - transferring recovery of doubtful loans to a lawyer and taking legal action when recovery is unsuccessful;
  - eliminating all-taxes-included sales by having customers bear customs duties or make cash pre-payments to improve cashflow and minimize financial costs.
- SONABEL implementation timeline and measures:
  - risk mapping recommendations to be implemented in June 2016;
  - management software acquisition supported by the World Bank, with calls for tenders to be launched by September 2016;
  - cost accounting effective as of December 2016; consultant recruitment underway;
  - performance contract monitoring committee to be put in place in June 2016 with government and SONABEL representatives.

*Source: _cr16173 - 10.  With respect to strengthening governance (Pillar 3), considered in relation to its economic, political, administrative, and local aspects (extracted content).*

### 33. The government intends to clarify the mechanism for reallocating the surplus arising from

### _cr16173 - 33. The government intends to clarify the mechanism for reallocating the surplus arising from

### Energy sector: surplus from decline in world oil and hydrocarbon prices
- If hydrocarbon prices remain in their recent range, the surplus is believed to reduce the bill for petroleum product imports by about CFAF 95 billion (1.4 percent of GDP) in 2016.
- A portion of the surplus will be passed on to consumers in the form of lower prices at the pump, already effective since end-2015.
- The remaining surplus will be used to strengthen SONABEL’s financial position, including clearing arrears SONABEL owes to SONABHY (totaling CFAF 66.6 billion at end-2015).

### Use of SONABHY capital gain and dividend transfers
- Clearing of SONABEL arrears will be achieved by way of payment of a special dividend from SONABHY to the government on the capital gain realized in 2015-16 in order to support investment in electricity production (new benchmark).
- The total dividend will amount to CFAF 40 billion, of which CFAF 5 billion resulting from 2015 SONABHY profits and the remainder from profits realized by SONABHY in 2016.
- First transfer of CFAF 5 billion due in July 2016 (Table 3; new structural benchmark).

### Automatic price-adjustment mechanism and technical memorandum
- The government undertakes to adopt the implementation of automatic price adjustments based on oil price fluctuations in international markets to prevent new arrears accumulation linked with the rigid fuel purchase price by SONABEL from SONABHY.
- This mechanism will be set forth in the technical memorandum between the government, SONABEL, and SONABHY, to be signed in May 2016.
- The agreement will clarify all the financial relationships between the government, SONABHY, and SONABEL, and will ensure the financial sustainability of SONABHY and SONABEL by avoiding the parallel renewal of an accumulation of government subsidies and arrears.
- In the medium term, tiered electricity pricing driven by activity sector and social groups should be adopted so that the subsidy benefits only the most disadvantaged and only certain industries.

### Transparency and reporting requirements for SONABHY and SONABEL
- Complete audited financial statements for 2015 will make it possible to assess the current situation.
- SONABHY and SONABEL will provide summaries of their financial statements and cash positions on a quarterly basis starting in June 2016 (new benchmark, Table 3 and TMU).

### Cotton sector reforms
- The cotton sector price smoothing fund (fonds de lissage) has been without resources since the end of the 2014–2015 crop year.
- The fund had a balance of CFAF 4.5 billion and was supposed to be empty following a drawing right in the amount of CFAF 11 billion for cotton companies for the 2014–2015 crop year.
- A subsidy amounting to CFAF 6.5 billion from the government in mid-2015 is allowing the fund to remain operational until mid-2016.
- The government also allocated CFAF 20 billion to the cotton sector in the 2016 LFR. This amount will be used to repay the subsidy and other advances to cotton producers.
- For state support for the 2016-17 crop season, the government commits to seek additional external financing and/or identify savings on other expenditures, as possible given the already-tight budget situation.
- Sustainable resources must still be identified for future crop years to enhance the fund’s capacity to address situations involving drastic falls in cotton prices over the long term.
- Recommendations include a revision of programming and regulation of the smoothing mechanism to make it more effective in dealing with cyclical cotton price fluctuations.

### Reforms to improve macroeconomic monitoring
- The government supports the update of the base year for the national accounts. The new base year will be 2014.
- The national informal sector and employment survey (ENESI) data were collected at end-2015 and entered fully on March 29, 2016. Data cleaning work has begun and will continue until the end of May 2016.
- Major remaining steps: process the ENESI data and conduct specific studies (including the survey on the informal sector and gold panning), prepare 2014 accounts according to SNA 1993 and SNA 2008, and perform backward extrapolation of the national accounts series.

### Program modalities, monitoring, and timelines
- The government intends to take all the necessary measures to achieve the objectives and criteria, as presented in Tables 1 and 3 of this Memorandum of Understanding.
- The program will be examined in keeping with the TMU, which defines the quantitative performance criteria and requirements regarding data reporting to Fund staff.
- The sixth program review is expected to take place on or after December 1, 2016.

### Selected numerical and timeline highlights from accompanying tables and TMU (as stated)
- SONABEL arrears to SONABHY: CFAF 66.6 billion at end-2015.
- Petroleum import bill reduction estimate: CFAF 95 billion (1.4 percent of GDP) in 2016.
- Total dividend from SONABHY: CFAF 40 billion (CFAF 5 billion from 2015 profits; remainder from 2016 profits).
- Dividend first transfer due: CFAF 5 billion in July 2016.
- SONABHY and SONABEL to provide quarterly financial summaries starting in June 2016.
- Technical memorandum to be signed in May 2016.
- ENESI data entry completed on March 29, 2016; data cleaning through end-May 2016.
- New national accounts base year: 2014.
- Sixth program review expected on or after December 1, 2016.

*Source: IMF staff and Burkinabè authorities, extracted from the Memorandum of Economic and Financial Policies and Technical Memorandum of Understanding.*

### 9.      For the purposes of the relevant performance criteria, net domestic financing is defined as

### _cr16173 - 9.      For the purposes of the relevant performance criteria, net domestic financing is defined as

### Definition of net domestic financing (performance criteria)
- Net domestic financing is the sum of:
  - (i) net bank credit to the Treasury, including net bank credit to the Treasury vis-à-vis the national banking institutions (claims associated with IMF disbursements are included);
  - (ii) the stock of unredeemed Treasury bills and bonds held outside national commercial banks;
  - (iii) privatization receipts and other Treasury claims and debts vis-à-vis national nonbank institutions.
- Net bank credit to the Treasury is the balance of the Treasury’s claims and debts vis-à-vis national banking institutions. Treasury claims include:
  - cash holdings of the Burkinabè Treasury;
  - deposits with the central bank;
  - deposits with commercial banks;
  - secured obligations;
  - Treasury deposits in postal checking accounts (CCP).
- Treasury debt to the banking system includes:
  - funding from the central bank (including statutory advances, consolidated advances, IMF financing, and refinancing of secured obligations);
  - Treasury securities held by the central bank;
  - funding from commercial banks (including Treasury securities held by commercial banks).
- Net bank credit to the Treasury is calculated based on information provided by the Central Bank of West African States (BCEAO), whose figures are deemed valid for program purposes.
- Calculation basis: the foregoing items are calculated based on the Treasury budget execution report presented each month in the Treasury flow-of-funds table prepared by the Ministry of Economy and Finance.

### Adjustment to the cumulative ceiling on net domestic financing
- Adjustment rule:
  - The cumulative ceiling on net domestic financing will be adjusted upward in the amount by which external program support to central government, excluding project grants and project loans, falls short of the amount projected, up to a maximum of CFAF 65 billion.
  - The shortfall will be calculated in reference to the projections in Table 1 below.
  - The ceiling will not be adjusted downward if external program assistance is higher than programmed.
- Table 1. Projected External Program Assistance (Cumulative, CFAF Billions)
  - End-March 2016: Grants and loans — 0.0
  - End-June 2016: Grants and loans — 37.7

### Reporting requirement for net domestic financing
- The Ministry of the Economy and Finance will forward data on net domestic financing to the IMF within six weeks after the end of each quarter.

### Nonconcessional external debt contracted or guaranteed by the government (performance criterion)
- Commitment:
  - The government undertakes not to contract or guarantee any nonconcessional external debt beyond the ceiling indicated in MEFP Table 1.
  - Applies to external debt as defined in paragraph 7 and uses the concept of concessionality as defined in paragraph 6 of the memorandum.
  - Applies to private debt guaranteed by the government that constitutes contingent government debt as defined in paragraphs 4 to 7.
  - Also applies to public enterprises that receive government transfers, local governments, and other public sector entities, unless excluded in MEFP Table 1.
  - Exclusions: Treasury bills and bonds issued in CFA francs on the WAEMU regional market, suppliers’ normal short-term credits, and IMF loans.
- Measurement:
  - This is a performance criterion to be observed continuously and is measured on a cumulative basis from the IMF Executive Board’s approval of the ECF; no adjustment factor will apply.
- Reporting deadline:
  - Details on any loan (terms and creditors) contracted by the government must be reported within four weeks of the end of each month. The same applies to guarantees extended by the government.

### Non-accumulation of new external payment arrears (performance criterion)
- Definition:
  - External payment arrears are external payments due but unpaid.
  - Under the program, the government agrees not to accumulate external payment arrears on its debt, except arrears arising from obligations being renegotiated with external creditors, including bilateral non-Paris Club creditors.
  - No accumulation of new external arrears by the government is a performance criterion, to be observed continuously.
- Reporting deadline:
  - Data on outstanding balances, accumulation, and repayment of external arrears will be forwarded within six weeks after the end of each month.

### Other quantitative indicative targets
- The program includes indicative targets for:
  - ceiling on net domestic financing beyond the Treasury;
  - overall deficit (commitment basis, grants included);
  - total government revenue;
  - poverty-reducing social expenditures.

A. Ceiling on Net Domestic Financing beyond the Treasury
- Definition for the indicative target:
  - Net domestic financing beyond the Treasury is the sum of:
    - (i) net bank credit to public bodies beyond the Treasury, including net bank credit to these bodies vis-à-vis national banking institutions (claims associated with IMF disbursements are included);
    - (ii) the stock of unredeemed bills and bonds held outside national commercial banks;
    - (iii) privatization receipts and other claims and debts of public bodies beyond the Treasury vis-à-vis national nonbank institutions.
  - Net bank credit to public bodies beyond the Treasury is the balance of claims and debts of the bodies concerned vis-à-vis national banking institutions. These include:
    - deposits of public bodies (beyond the Treasury) at the BCEAO;
    - deposits of public bodies (beyond the Treasury) at commercial banks;
    - commercial liabilities of public bodies beyond the Treasury;
    - commercial bank liabilities of the postal savings bank (CCP);
    - remaining Treasury deposits in postal checking accounts (CCP);
    - Treasury deposits at the CNE;
    - other net liabilities of the State (secured obligations).
  - Debt to the banking system includes funding from the central bank (including statutory advances, consolidated advances, IMF financing, and refinancing of secured obligations), government securities held by the central bank, and funding from commercial banks (including any government securities held by commercial banks).
  - Net bank credit to public bodies beyond the Treasury is calculated based on information provided by the BCEAO, whose figures are deemed valid for program purposes.

B. Overall Deficit Including Grants
- Definition:
  - Valued on a commitment basis.
  - 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 = new foreign borrowing less amortization.
  - Government net domestic financing is defined in paragraphs 9 and 10.
  - Cash basis adjustment = (i) total change in unauthorized expenditure commitments, (ii) change in pending bills, and (iii) change in Treasury deposits.
- Adjustments:
  - Upward adjustment: The ceiling on the overall fiscal deficit, including grants, will be adjusted upward in the amount by which external program support, excluding grants and project loans, falls short of the projected amount, up to a maximum of CFAF 65 billion. The shortfall will be calculated in reference to Table 2. The ceiling will not be adjusted downward if actual external program assistance is higher than projected.
  - Project loans adjustment:
    - The ceiling will be adjusted downward by the amount equivalent to the difference between projected and actual project loans if actual figures are lower than projected.
    - The ceiling will be adjusted upward by the amount equivalent to the difference between projected and actual project loans if actual figures are higher than projected.
    - Differences are calculated in reference to Table 2 below.
- Table 2. Projected External Program Grants and Project Loans (Cumulative, CFAF billions)
  - End-March 2016:
    - Grants — 0.0
    - Project loans — 12.5
  - End-June 2016:
    - Grants — 37.7
    - Project loans — 35.0

C. Total Government Revenue
- Definition:
  - Valued on a cash basis.
  - Includes all tax and nontax revenue collected by:
    - Directorate General of Taxation;
    - Directorate General of Customs;
    - Burkinabè Treasury;
    - revenue collection units at ministries and institutions.
  - Also includes revenue from treasury checks.

D. Poverty-Reducing Social Expenditures
- Definition:
  - Expenditures of sectors sponsoring priority programs identified in the Strategy for Accelerated Growth and Sustainable Development (SCADD) to accelerate achievement of poverty reduction objectives.
  - Cover all spending categories for the following ministries:
    - Promotion of Women and Gender Issues;
    - Health;
    - Social Action and National Solidarity;
    - National Education and Literacy;
    - Agriculture and Food Security;
    - Animal Resources;
    - Environment and Sustainable Development;
    - Youth, Professional Training and Employment including the labor and social security components of Civil Service, Labor, and Social Security;
    - Water, Hydraulic Improvements, and Sanitation.
  - Also cover rural roads and Heavily Indebted Poor Countries (HIPC) initiative (Category 5) for Infrastructure, Integration, and Transport; and HIPC expenditures only for Communication; Justice and Human Rights; Economy and Finance; and Mines, Quarries, and Energy.
  - Added allocation: section 98 “transfers to subnational governments” from Health, Agriculture and Food Security as well as National Education and Literacy.
  - Monitoring and threshold:
    - These expenditures are monitored directly through the budget.
    - Indicative threshold for the program: 90 percent of the amount established by the budget authority.

E. Non-accumulation of Domestic Payment Arrears
- Commitment:
  - The government will not accumulate payment arrears on domestic obligations during the program period. This is a structural benchmark.
- Definitions for arrears:
  - Domestic payment arrears arise when actual payment is made more than 90 days after liability is incurred for an undisputed debt to a third party, except where terms stipulate a longer period.
  - In the case of debt service, arrears arise 30 days after the due date.
  - Payments are deemed to be in arrears per the following:
    - Debt unpaid for more than 30 days after the due date stipulated in the agreement between the parties (creditor/debtor).
    - Wages or pensions unpaid 90 days after their due date.
    - Payments for services rendered received more than 90 days after processing of the supporting documents submitted by suppliers.

*Source: IMF staff report text provided in the content unit.*

### 23.      To enable IMF staff to assess program performance, the government agrees to submit the

### 23.      To enable IMF staff to assess program performance, the government agrees to submit the following data to them in paper format and/or MSC Excel electronic files, with the frequencies and deadlines specified below.

### Data Reporting Requirements (Public Finance, Monetary, Balance of Payments, Real Sector, Structural)
- Public Finance (responsible institution and frequency / reporting deadline):
  - The government flow-of-funds table (TOFE) and the customary appendix tables; (if data on actual investment financed by external grants and loans are not available in time, a linear estimate of execution based on the annual projections will be used) — Ministry of Economy, Finance and Development (MINEFID) — Monthly — 6 weeks
  - Domestic budgetary financing (net bank credit to the government and stock of unredeemed treasury bonds and bills) — MINEFID/BCEAO — Monthly — 6 weeks
  - A quarterly report on the consistency of the net position of the Treasury in monetary statistics with the data from the TOFE on net domestic financing of the banking sector — MINEFID/BCEAO — Quarterly — 8 weeks
  - Monthly data on the execution rates by the customs office relative to monthly forecasts — MINEFID/DGD — Monthly — 6 weeks
  - A quarterly report on the outcomes and actions undertaken to put in place a better control and supervision of taxpayers using the single taxpayer identification number to cross-check information between DGI and DGD, starting with large taxpayers — MINEFID/DGD/DGI — Quarterly — 6 weeks
  - Data on implementation of the public investment program, including details on financing sources — MINEFID — Quarterly — 6 weeks
  - The stock of external debt, external debt service, external debt contracted, and external debt repayment — MINEFID — Quarterly — 6 weeks
  - Social poverty-reducing expenditures in table format — MINEFID — 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 f.o.b-MED price to the retail price; (iii) volumes purchased and distributed for consumption by the petroleum distributor (SONABHY); with a distinction made between retail and industry sales; and (iv) a breakdown of tax revenue from petroleum products — customs duties, tax on petroleum products (TPP) and value-added tax (VAT) — and subsidies unpaid — MINEFID — Monthly — 4 weeks

- Public Enterprises / Sector Reports:
  - A quarterly report of monthly data of SONABHY’s accounts including gains and/or losses from the buying and selling of 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
  - A quarterly report of monthly data of SONABEL’s accounts including its cash flows position and income statement, and taking into account all received subsidies and project grants and loans from the technical and financial partners — SONABEL/MINEFID — Quarterly — 6 weeks
  - A monthly statement of the accounts with the treasury, broken out by major category (administrative services, state enterprises, joint public-private enterprises, public administrative enterprises, international organizations, private depositors, and others) — MINEFID — Monthly — 6 weeks

- Monetary Statistics:
  - The consolidated balance sheet of monetary institutions — NDs of the 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

- Balance of Payments and External Sector:
  - 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

- Real Sector:
  - Provisional national accounts; and any revision of the national accounts — MINEFID — Annual — 2 weeks
  - Disaggregated monthly consumer price indices — MINEFID — Monthly — 2 weeks

- Structural Reforms and Other Data:
  - Any study or official report on Burkina Faso’s economy, on the date published, or the 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 the date of entry into force — MINEFID — 2 weeks

### Relations with the Fund — Key Financial and Program Indicators (as of dates in the document)
- Membership Status:
  - Joined: May 02, 1963
- Quota / Fund holdings:
  - Quota 120.40 — 100.00
  - Fund holdings of currency (Exchange Rate) 97.64 — 81.10
  - Reserve Tranche Position 22.76 — 18.90
- SDR Department:
  - Net cumulative allocation 57.58 — 100.00
  - Holdings 19.92 — 34.60
- Outstanding Purchases and Loans:
  - ECF Arrangements 144.52 — 120.03
- Latest Financial Arrangements (dates, amounts):
  - ECF Dec 27, 2013 — Dec 26, 2016 — 51.17 — 28.13
  - ECF Jun 14, 2010 — Dec 23, 2013 — 82.27 — 82.27
  - ECF Apr 23, 2007 — Apr 22, 2010 — 48.16 — 47.16
- Projected Payments to the Fund (SDR Million; based on existing use of resources and present holdings of SDRs):
  - Forthcoming 2016 2017 2018 2019 2020
  - Principal 12.36 17.80 24.15 23.63 19.03
  - Charges/Interest 0.01 0.02 0.02 0.23 0.17
  - Total 12.37 17.82 24.17 23.86 19.20

### HIPC/MDRI and Safeguards / Exchange System
- HIPC Initiative:
  - Decision point date Sep 1997 — Jul 2000
  - Assistance committed by all creditors (US$ Million) 229.00 324.15
  - Of which: IMF assistance (US$ million) 21.70 35.88
  - (SDR equivalent in millions) 16.30 27.67
  - Completion point date Jul 2000 — Apr 2002
  - Disbursement of IMF assistance (SDR Million): Assistance disbursed to the member 16.30 27.67 43.97; Interim assistance -- 4.15 4.15; Completion point balance 16.30 23.52 39.82; Additional disbursement of interest income -- 2.01 2.01; Total disbursements 16.30 29.68 45.98
- MDRI:
  - I. MDRI-eligible debt (SDR Million) 62.12
  - Financed by: MDRI Trust 57.06; Remaining HIPC resources 5.06
  - II. Debt Relief by Facility (SDR Million): Eligible Debt Delivery Date GRA PRGT Total January 2006 N/A 62.12 62.12
- Safeguards Assessment:
  - Latest assessment of the BCEAO completed on December 13, 2013. Assessment found a strong control environment, enhanced governance from 2010 Institutional Reform of the WAMU, establishment of an audit committee, increased transparency, and commitment to IFRS implementation by end-2014. Identified limitations in the external audit process; all recommendations from the assessment have been implemented.
- Exchange System:
  - Member of WAEMU. Historical parities: CFAF 1 = F 0.02 (before Jan 12, 1994); devalued Jan 12, 1994 to CFAF 1 = F 0.01; parity switched Dec 31, 1998 to the euro at CFAF 655.96 = €1.
  - Burkina Faso maintains an exchange system free of restrictions on the making of payments and transfers for current international transactions.

### Recent Economic and Financial Developments and Performance under the ECF
- Macroeconomic outcomes (selected figures and observations):
  - Real GDP growth in 2015: 4 percent
  - Agricultural output declines: cereal production - 6.3 percent; cash crops - 11 percent
  - Annual inflation at end-2015: 0.9 percent
  - Credit to private sector increase in 2015: 7 percent (compared to 20-25 percent in recent years)
  - Net foreign assets increased by 72.9 percent at end-December 2015
  - Broad money increased by 19.9 percent during same period
  - Current account deficit in 2015: 6.4 percent of GDP (compared to 11 percent in 2013)
  - Exports increased by 3.1 percent; imports increased by 2 percent
  - Overall fiscal deficit (commitment basis) improved from 3.5 percent of GDP in 2013 to 2.1 percent in 2015
  - Public investment fell from 14.2 percent of GDP in 2013 to 8.5 percent in 2014 and 7 percent in 2015
- Performance under the ECF:
  - All quantitative performance criteria (PCs) at end-June and December 2015 were met.
  - Indicative targets: all met except one — the floor on Government revenue.
  - Structural benchmarks for 2015: 7 out of 11 completed; most remaining are being implemented.
  - Additional four benchmarks planned Jan–Mar 2016: three being implemented, one completed.

### Medium-term Policies and Projections
- National economic and social development plan (PNDS 2016-20):
  - PNDS will be the new reference framework for development interventions and will implement the vision “Burkina 2025”.
  - PNDS builds on SCAAD (2011-2015) which focused on: (i) developing engines of accelerated growth; (ii) consolidating human capital and promoting social protection; (iii) strengthening governance; and (iv) addressing cross-cutting priorities.
- Real GDP projections:
  - Growth projected at 5.2 percent in 2016 (revised down from 6 percent expected during second and third reviews)
  - Growth projected at 6 percent in 2017
  - Drivers: manufacturing, services, operations of 2 new mining companies, and public investment projects in PNDES
- Fiscal policy intentions and measures:
  - Maintain prudent fiscal policy in compliance with WAEMU convergence criteria and debt sustainability
  - Revised budget law (LFR) approved April 2016 aims to increase fiscal space for priority social, infrastructure and security investments
  - Revenue measures: broaden tax base through new segmentation of enterprises; strengthen tax inspections; improve revenue collection; cross-check tax and customs information
  - Expenditure measures: identify non-priority expenditures to hold; reforms to streamline current expenditures and generate savings on fuel, vehicles, telecommunications and missions
  - Public wage bill control: consolidate biometric enrolment of government employees; computerize the payroll; redeploy staff from redundant to underserved areas

### Statistical Issues, Technical Assistance, and IMF Engagement
- Assessment of Data Adequacy for Surveillance:
  - General: Data provision has some shortcomings, but is broadly adequate for surveillance. Most affected: national accounts and price statistics.
  - National accounts: Annual GDP estimates compiled by activity, sector, and expenditure at current and constant prices (1999=100). Weaknesses: coverage of informal sector, private household consumption data validation, delayed rebasing. National informal sector and employment survey delayed in 2015; data collected end 2015; data cleaning continuing until end of May 2016. New base year will be 2014.
  - Price statistics: CPI (2008=100) only covers African households in the capital; excludes various purchased goods and services; owner-occupied dwellings excluded; prices of unavailable products presumed unchanged for up to three months rather than imputed. Producer price index and wholesale price index are not compiled due to budgetary constraints.
  - Government finance statistics: Committee oversees GFS compilation; provision of expenditure data improved with functional presentation. Remaining improvement: extend TOFE coverage to general government and base compilation on the Treasury ledger.
  - Monetary finance statistics: Difficulties estimating currency in circulation in each WAEMU member due to large backlogs of unsorted banknotes held by the central bank in national agencies.
- Data Standards and Reporting:
  - Participates in the General Data Dissemination Standard since December 28, 2001. A data ROSC visited May 8-21, 2003.
  - Balance of payments: coverage of informal trade incomplete; services and transfers coverage depends on reporting bodies; BCEAO started publishing IIP data in line with BPM 6. BCEAO does not provide metadata.
  - Government Finances: Since October 2010, annual and quarterly central government budget data reported to STA; latest reported data cover 2014. BCEAO reports monetary data to STA with a lag of at most three months.
- Technical Assistance (selected entries and dates):
  - Macroeconomics Analysis and Forecasting — AFRITAC West I — April 2016
  - Commitment authorizations / Payment appropriations — AFRITAC West I — April 2016
  - PFM / Program budgeting — AFRITAC West I — April 2016
  - Implementation of the GFSM 2001-14 — STA — May 2015
  - Quarterly national accounts and provisional estimates — STA — April 2015; February 2015
  - Automated risk management — AFRITAC West I — March 2015
  - Cash Management and Budget Execution — FAD — March 2015
  - Real Sector Statistics and National Accounts — STA — September 2013; April 2013
  - Many additional AFRITAC West I and FAD engagements listed between 2013–2016 (see original list for full entries)
- Joint Management Action Plan (IMF and World Bank coordination highlights):
  - IMF-supported program: Sixth ECF review Sept 2016 Nov 2016; implementation of new debt policy as needed; work on fiscal rule to manage natural resource revenues; analysis of regional energy needs
  - IMF TA priorities: GFSM 2001; BPM 6; follow-up TA on mining taxation; TA on program budgeting; TA on National Accounts (quarterly and base year)
  - Bank and Fund mutual requests and joint products include TA on public procurement, judiciary sector, energy sector work, artisanal mining issues, and follow-up TA on debt management (Bank lead)

*Source: IMF staff document — Burkina Faso: fourth and fifth reviews under the Extended Credit Facility arrangement and informational annex (May 26, 2016).*

### 2015. The authorities will continue their efforts to improve cash management and planning

### 2015. The authorities will continue their efforts to improve cash management and planning

### Cash management and treasury assets
- Continue efforts to improve cash management and planning to minimize the risks of accumulating new arrears.
- Actions to make available treasury assets held by the postal agency (SONAPOST) will be pursued, including:
  - suspension of compensation operations,
  - repatriation of assets,
  - completion of an audit to assess the capacity of the SONAPOST to return treasury assets.

### Debt policy and debt management
- Aim to maintain debt ratios at sustainable levels while implementing priority investment projects in energy, telecommunications, hydraulic, agriculture and road infrastructure.
- Continue to diversify borrowing sources and rely primarily on grants and concessional loans.
- Increase the non-concessional debt ceiling to CFA 230 billion to account for new projects.
- Bonds and treasury bills issuance:
  - Authorities began to extend maturities from 3 to 6 months to 1 to 2 years, taking advantage of favorable conditions on the regional financial market.
  - Need to strengthen planning and monitoring of these operations and reinforce the capacities of the Debt Directorate.
- Broader capacity-building intent:
  - Build capacities of all stakeholders involved in the domestic and external debt process.
  - Update analytical and management tools.

### Structural reforms and sectoral measures
- Continue implementing measures supporting private sector development, notably in the energy and cotton sectors.
- Priorities for the energy sector and public electricity company (SONABEL):
  - Improve the financial situation of SONABEL.
  - Clarify and simplify the financial relations between SONABEL and the State and the oil importing company (SONABHY) and the government.
  - Measures are intended to allow SONABEL to benefit from the decline in oil prices, manage efficiently the new investments in the energy sector, and prevent the accumulation of arrears.
- Cotton sector measures:
  - Work towards restoring the financial viability of the cotton sector.
  - Recapitalize the stabilization fund and make it financially sustainable in the long term to address cyclical fluctuations in cotton prices.

### Conclusion and program commitment
- Authorities remain committed to the objectives of the ECF program.
- Staff report notes that authorities’ commitment to the program has remained exemplary under difficult circumstances.
- Authorities will continue to implement reforms aimed at:
  - achieving strong economic growth,
  - preserving macroeconomic stability,
  - improving public financial management and the business environment.
- Request for support:
  - In view of satisfactory progress under the ECF arrangement and the commitment of the authorities, Directors’ support is requested for the completion of the fourth and fifth reviews and modification of performance criteria.

*Source: _cr16173 - 2015. The authorities will continue their efforts to improve cash management and planning*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2016/_cr16173.pdf_