Press Release No. 07/219

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Press Release No. 07/219

Martin Petri, International Monetary Fund (IMF) Mission Chief to Burkina Faso, made the following statement today in Ouagadougou:

"An IMF mission team visited Ouagadougou during September 18-October 3 for the 2007 Article IV consultation and first review of the program supported under the Poverty Reduction and Growth Facility (PRGF).¹

"The mission held constructive discussions with Prime Minister Tertius Zongo, Minister of Economy and Finance Jean-Baptiste Compaoré; Central Bank of West Africa States (BCEAO) National Director Bolo Sanou, several ministers, other senior officials of the Government of Burkina Faso, members of parliament, representatives of the private sector, labor unions, nongovernmental organizations, and development partners.

"Growth for 2007 is estimated slow to 4¼ percent with prices falling slightly. The main factor in the growth slowdown compared to earlier expectations is a reduction in cotton production by almost a third, caused primarily by late rains. Good cereal harvests have contributed to the decline in inflation. For 2008, real GDP growth is projected to increase slightly to 4½ percent, as cotton production is expected to rebound. Developments in world market prices for cotton and oil as well as rainfall patterns pose the main risks to the outlook.

"Notwithstanding some setbacks, overall performance under the PRGF-supported program has been good and, subject to approval by Fund management, the IMF Board is expected to consider the first review under the arrangement later this year. Almost all end-June 2007 program quantitative performance criteria and indicative targets were observed. There was some delay in the implementation of the structural reform agenda in tax and customs administration, but the authorities are working on addressing these delays.

"Regarding fiscal policies for 2008, the government will need to balance the twin objectives of preserving debt sustainability—where the outlook to service external debt has worsened with the decline in cotton exports—and spending sufficient resources in order to progress toward the Millennium Development Goals. The projected increase in grants from development partners facilitates achieving these two objectives. Thus, the government should be able to reduce the fiscal deficit from 6.3 percent of GDP expected for 2007 to 5.4 percent of GDP in 2008, without jeopardizing its social and infrastructure spending program.

"Structural measures included in the authorities' program for 2008 focus on mobilizing revenue and reinforcing public expenditure management. Amid some concerns about external competitiveness, the authorities' emphasis on productivity enhancing reforms is well placed, and donors can play an important supporting role. These reforms should be aimed at strengthening the business environment, enhancing labor market flexibility, and combating corruption.

"The mission team would like to thank the authorities for their hospitality and for the close collaboration and constructive policy dialogue."

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¹ The PRGF is the IMF's concessional facility for low-income countries. PRGF-supported programs are based on country-owned poverty reduction strategies adopted in a participatory process involving civil society and development partners and articulated in the country's Poverty Reduction Strategy Paper. This is intended to ensure that PRGF-supported programs are consistent with a comprehensive framework for macroeconomic, structural, and social policies to foster growth and reduce poverty. PRGF loans carry an annual interest rate of 0.5 percent and are repayable over 10 years with a 5½-year grace period on principal payments.