Press Release No. 09/349

Press Release No. 09/349
October 2, 2009

An International Monetary Fund (IMF) mission headed by Ms. Malangu Kabedi-Mbuyi visited Ouagadougou during September 17-October 2, 2009 to carry out the fifth review of the authorities’ economic and financial program supported by the IMF under the Poverty Reduction and Growth Facility (PRGF), and to conduct the 2009 Article IV consultation discussions.¹ The mission held discussions with Mr. Lucien Bembamba, Minister of Economy and Finance, and other Cabinet members, Mr. Bolo Sanou, the National Director of the Central Bank of West African States (BCEAO), and other senior officials. The staff team also met representatives of labor unions, non-governmental organizations, the private sector, donors, commercial banks, and the press.

Ms. Malangu Kabedi-Mbuyi, IMF mission chief for Burkina Faso, issued the following statement in Ouagadougou on October 2, 2009:

“In 2008-09, economic activity was negatively affected by the food and oil prices increase, the global economic crisis and the ensuing lower demand for cotton, and torrential rains that caused significant flooding in Ouagadougou and other cities in September 2009. Following a 5.2 percent increase in 2008 driven by the agriculture and mining sectors, real gross domestic product (GDP) growth is expected to slow to 3.1 percent in 2009. Inflationary pressures have abated, reflecting the decline in international commodity prices and a good harvest. At end-August 2009, the twelve-month average inflation rate stood at 8 percent, down from 10.7 percent in 2008. The external current account deficit (including grants) is expected to improve from 11.9 percent of GDP in 2008 to 9.1 percent of GDP in 2009, mostly on account of higher gold exports.

“The exogenous shocks that affected Burkina Faso put a significant strain on the government budget. The authorities adopted a number of measures under the 2009 Supplementary Budget to support domestic demand, strengthen social safety nets, address urgent humanitarian needs for some 170,000 displaced people and to rehabilitate key infrastructure destroyed or heavily damage by the flooding. Consequently, the overall budget deficit (excluding grants) is projected to reach 6.7 percent of GDP in 2009, up from 4.4 percent in 2008; and 1.6 percentage points of GDP higher than the original program target. The mission finds that this additional fiscal stimulus in 2009 is appropriate to help mitigate the impact of the global recession, as well as the flooding. It supports the authorities’ plan to maintain a degree of fiscal stimulus in 2010 as the expected global recovery takes hold. Nonetheless, some consolidation is expected, with the overall budget deficit (excluding grants) easing to 5.3 percent of GDP. On this basis, real growth is expected to recover to 4.2 percent in 2010, with low inflation.

“In the medium term, Burkina Faso’s key challenges remain economic diversification to reduce reliance on cotton, improved competitiveness, and the development of the financial sector. Progress in these areas, together with increased investment in infrastructure and in the mining sector should contribute to improved growth prospects.

“Notwithstanding the difficult environment in 2009, performance under the PRGF-supported program was broadly satisfactory. The overall fiscal deficit target at end-June was met, in large part because of lower than expected capital expenditure. However, the indicative target for fiscal revenue was narrowly missed because of the impact of the global crisis on the economy, and poverty-reducing spending was slightly below target. The implementation of structural reforms progressed, particularly in the fiscal area: a tax reform strategy was prepared, and the enhanced monitoring system for poverty-reducing expenditure was put in place. Progress was also made in the preparation of a financial sector strategy and of an action plan to restructure the largest cotton ginning company, SOFITEX.

“The authorities plan to continue the dialogue with the IMF in the context of the reform of its instruments, aimed at better responding to its member countries’ needs and better supporting Low Income Countries’ efforts. In the context of this dialogue, a special emphasis will continue to be put on measures needed to support economic recovery and lay the foundation for sustained growth and poverty reduction over the medium term.

“The mission would like to express its gratitude for the authorities’ warm hospitality and the constructive dialogue during its stay in Ouagadougou.”

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¹ Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board. At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities.