On December 21, 2018, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation [1] with Burkina Faso. The Board also completed the First Review of Burkina Faso’s economic performance under a three-year program supported by the IMF’s Extended Credit Facility (ECF) arrangement; a press release on this was issued separately.
The Burkinabe economy has shown considerable resilience in the face of significant security shocks over the last two years. GDP grew by 6.3 percent in 2017, up from 5.9 percent in 2016 and is projected to stabilize at 6 percent in 2018. Activity has been supported by expansionary fiscal policy, including from a boost to capital spending in 2017. Inflation was 2.1 percent year-on-year at end-December 2017 and has remained at that level in 2018. Public debt eased to 38.4 percent of GDP in 2017, as the impact of new borrowing was offset by the appreciation of the euro against the dollar and robust GDP growth. The risks to the outlook are tilted to the downside, mainly from the threat of further terrorist attacks, which could weigh on mining and tourism, and social tensions and unrest, which could impact government revenue collection and add pressures on current spending.
Executive Board Assessment [2]
Directors agreed with the thrust of the staff appraisal. They welcomed the broadly satisfactory performance under the ECF‑supported program. Directors noted that Burkina Faso has significant development challenges, which have recently intensified due to security shocks and social unrest. Despite some improvements in recent years, Burkina Faso’s human development indicators remain among the lowest in the world and poverty remains high. In view of downside risks to the outlook, Directors emphasized the importance for the authorities to steadfastly implement macroeconomic policies and structural reforms to preserve macroeconomic stability, foster inclusive growth, and improve living conditions.
Directors stressed the importance of strengthening fiscal discipline and transparency. They welcomed the authorities’ commitment to a fiscal deficit of no more than 3 percent of GDP by 2019, and the authorities’ decision to base their budgets on realistic revenue projections. In view of the growing security spending needs, combined with the large social and development agenda, Directors urged the authorities to intensify efforts to mobilize additional domestic revenue through both tax and customs administration reforms and tax policy measures. They welcomed the recent adjustment of retail fuel prices in response to higher international fuel prices, as well as the adoption of an automatic fuel price adjustment mechanism that should shield the budget against unforeseen subsidy needs, while encouraging the authorities to take measures to protect the most vulnerable. Directors also welcomed the authorities’ commitment to budgeting ex ante for any remaining fuel subsidy needs.
Directors urged the authorities to expedite public‑sector compensation reforms to reverse the rapidly rising public‑sector wage bill, and convert the recommendations of the June 2018 stakeholder conference into specific actions. They stressed that short‑term measures to contain the wage bill should focus on reducing recruitments in non‑priority sectors and examining the scope to rationalize allowances and bonuses. Looking ahead, the authorities’ commitment to contain the wage bill and ensure its sustainability should be formalized in the 2020‑2022 multiannual budget and economic programming document.
Directors encouraged the authorities to continue to improve the quality and efficiency of public investments through prioritization and cost‑benefit analysis of projects, including public‑private partnerships. Directors also recommended strengthening debt management, including developing a robust and prudent medium‑term debt strategy. External financing alternatives would need to remain on concessional terms and be considered carefully.
Directors encouraged further structural reforms to remove barriers that limit the competitiveness of the economy. Priority areas include alleviating infrastructure bottlenecks, notably in energy and transportation, increasing productivity and value‑added in the agricultural sector, diversifying the economy, and enabling the financial sector to better support inclusive growth. Directors stressed that enhancing access to financial services is essential to support economic diversification and structural transformation. They encouraged the authorities to continue to strengthen the anti‑corruption framework.
It is expected that the next Article IV consultation with Burkina Faso will be held in accordance with the Executive Board decision on consultation cycles for members with Fund arrangements.
Table 1. Burkina Faso: Selected Economic and Financial Indicators, 2015–23
|
2015 |
2016 |
2017 |
2018 |
2019 |
2020 |
2021 |
2022 |
2023 |
||
|
Act. |
Est. |
SR 18/81 |
Prel. |
Proj. |
Proj. |
Proj. |
Proj. |
Proj. |
Proj. |
|
|
(Annual percentage change, unless otherwise indicated) |
||||||||||
|
GDP and prices |
||||||||||
|
GDP at constant prices |
3.9 |
5.9 |
6.4 |
6.3 |
6.0 |
6.0 |
6.0 |
6.0 |
6.0 |
6.0 |
|
GDP deflator |
-3.1 |
-1.1 |
2.3 |
4.5 |
3.5 |
2.0 |
2.0 |
2.0 |
2.0 |
2.0 |
|
Consumer prices (annual average) |
0.9 |
-0.2 |
… |
0.4 |
2.0 |
2.0 |
2.0 |
2.0 |
2.0 |
2.0 |
|
Consumer prices (end of period) |
1.3 |
-1.6 |
2.1 |
2.1 |
2.0 |
2.0 |
2.0 |
2.0 |
2.0 |
2.0 |
|
Money and credit |
||||||||||
|
Net domestic assets (banking system) 1 |
16.6 |
1.7 |
21.2 |
22.4 |
26.2 |
13.1 |
13.4 |
… |
… |
… |
|
Credit to the government (banking system) 1 |
-1.3 |
-4.5 |
12.4 |
5.9 |
7.9 |
4.1 |
4.6 |
… |
… |
… |
|
Credit to the private sector |
8.7 |
12.1 |
8.7 |
14.4 |
12.3 |
12.9 |
12.6 |
… |
… |
… |
|
Broad money (M3) |
19.3 |
11.8 |
15.6 |
21.6 |
21.6 |
12.4 |
12.7 |
… |
… |
… |
|
Private sector credit/GDP |
28.4 |
30.4 |
29.0 |
31.3 |
32.0 |
33.5 |
34.9 |
… |
… |
… |
|
External sector |
||||||||||
|
Exports (f.o.b.; valued in CFA francs) |
2.6 |
19.9 |
11.9 |
5.7 |
4.5 |
6.0 |
3.6 |
4.9 |
0.6 |
1.0 |
|
Imports (f.o.b.; valued in CFA francs) |
3.3 |
8.8 |
19.5 |
17.2 |
4.8 |
6.8 |
1.6 |
3.8 |
3.5 |
3.8 |
|
Terms of trade |
13.2 |
8.7 |
… |
0.4 |
-4.9 |
-3.4 |
2.6 |
2.3 |
1.1 |
0.6 |
|
Current Account (percent of GDP) |
-8.6 |
-7.6 |
-8.4 |
-9.7 |
-8.1 |
-8.3 |
-7.0 |
-7.3 |
-7.5 |
-7.7 |
|
Real effective exchange rate |
-6.4 |
-5.3 |
… |
-3.2 |
… |
… |
… |
… |
… |
… |
|
(Percent of GDP, unless otherwise indicated) |
||||||||||
|
Central government finances |
||||||||||
|
Current revenue |
17.0 |
19.1 |
19.0 |
19.4 |
18.7 |
19.9 |
20.4 |
20.8 |
21.1 |
21.1 |
|
Of which : tax revenue |
15.1 |
16.7 |
… |
17.3 |
16.7 |
17.8 |
18.3 |
18.7 |
19.0 |
19.3 |
|
Total expenditure and net lending |
22.9 |
25.3 |
29.9 |
29.9 |
27.5 |
25.8 |
26.0 |
26.3 |
26.6 |
26.6 |
|
Of which : current expenditure |
15.0 |
17.3 |
… |
18.4 |
17.3 |
18.8 |
17.6 |
16.8 |
17.0 |
16.6 |
|
Overall fiscal balance, incl. grants (commitments) |
-2.2 |
-3.5 |
-8.2 |
-7.8 |
-4.7 |
-3.0 |
-3.0 |
-3.0 |
-3.0 |
-3.0 |
|
Total Public Debt |
35.6 |
39.2 |
38.3 |
38.4 |
42.5 |
42.0 |
41.7 |
41.4 |
41.2 |
41.4 |
|
Of which : external debt |
26.3 |
27.8 |
24.2 |
24.1 |
24.2 |
23.4 |
22.5 |
21.3 |
20.6 |
20.1 |
|
Memorandum items : |
||||||||||
|
Nominal GDP (CFAF billion) |
6,163 |
6,457 |
7,302 |
7,174 |
7,873 |
8,512 |
9,202 |
9,952 |
10,763 |
11,637 |
|
Nominal GDP per capita (US$) |
576 |
584 |
652 |
643 |
732 |
759 |
810 |
858 |
911 |
964 |
|
Sources: Burkinabe authorities; and IMF staff estimates and projections. |
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|
1/ Percent of beginning-of-period broad money. |
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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.
[2] 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. An explanation of any qualifiers used in summings up can be found here: http://www.imf.org/external/np/sec/misc/qualifiers.htm.
