IMF Executive Board Concludes 2016 Article IV Consultation with Burkina Faso

December 22, 2016

On December 16, 2016, the Executive Board of the International Monetary Fund concluded the 2016 Article IV Consultation with Burkina Faso. [1] The Board also completed the sixth 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.

Economic activity started to rebound in 2016, after two years of weak growth. The January terrorist attacks and delays in approving the budget weighed on activity in the early part of 2016, but activity has rebounded and real GDP growth is now projected at 5.4 percent, improving from 4.0 percent in 2015. The recovery is being led by the coming on stream of two new gold mines and a sharp projected rebound in agricultural output in late 2016-early 2017, after three disappointing years. Inflation continued to decline and is expected to remain subdued at 0.6 percent at end-year. Private sector credit growth remained weak in 2015 at 7.0 percent, and is only expected to gradually recover to 9.4 percent in 2016. The government approved an ambitious five-year national economic and social development plan (PNDES) in July. The plan aims at transforming the economy to achieve strong, sustainable and resilient growth that will create jobs and raise living standards.

The recovery is expected to consolidate in 2017 with growth being projected to rise to 6.1 percent as domestic and external conditions remain supportive. In particular, a scaled up public infrastructure investment program, a supportive monetary stance, higher agricultural output and continued low international prices for energy imports should assist the recovery. Implementation of the authorities’ PNDES will lead to an increase in public investment, notably aimed at closing energy and transport infrastructure gaps. In that context, the fiscal deficit is set to widen to 3.6 percent of GDP.

Program performance remains strong and the authorities have advanced important reforms to create the conditions for sustained medium-term economic performance and poverty reduction. Reforms include, most notably, actions to improve tax administration, broaden the tax base, and improve the management and financial health of the publicly-owned energy utilities. In addition, the authorities have embarked upon a comprehensive five-year development agenda to tackle growth bottlenecks and support job-rich, poverty-reducing, sustainable growth, which focuses on increasing physical and human capital, improving the business environment, expanding financial access, and lower the cost of energy.

Executive Board Assessment [2]

Executive Directors welcomed the authorities’ continued strong performance under their Fund-supported program and the improving economic outlook after two years of weaker growth. Looking ahead, Directors emphasized that sustaining higher economic growth rates will require sound policies that create fiscal space to sustainably and gradually scale up public investment and address infrastructure gaps, and ambitious structural reforms that will reduce barriers to higher and more inclusive growth.

Directors welcomed the progress made in 2016 in mobilizing higher domestic revenue. They noted that, in addition to continued enhancements in tax and customs administration, efforts to expand the tax base will be needed to achieve revenue objectives. Directors welcomed the envisaged measures to protect the tax base from transfer pricing practices, particularly in the mining sector. They agreed that containing recurrent spending, particularly the wage bill, will also be necessary to create adequate fiscal space for key public investment projects. Directors recommended continuing with ongoing reforms in the energy and cotton sector to avoid the buildup of contingent liabilities and the need for subsidies.

Directors welcomed the authorities’ comprehensive National Economic and Social Development Plan. They emphasized the importance of careful prioritization and sequencing of public investment projects, as well as effective implementation of measures to improve absorptive capacity. In particular, Directors cautioned against a too rapid increase in public investment that would negatively impact its efficiency and debt sustainability. They recommended further improvements in public financial and debt management, and noted that a Public Investment Management Assessment could help identify bottlenecks and improve the rate of execution of the investment budget.

Directors encouraged the authorities to continue improving the competitiveness of the economy. They welcomed the authorities’ focus on alleviating infrastructure bottlenecks, fostering more dynamism in the agricultural sector, and enabling the financial sector to better support the real economy. Directors noted that recent reforms in the energy sector have improved the financial health of the state-owned energy companies and that these successes should be consolidated and built upon to support critical investments to increase electricity supply.

It is expected that the next Article IV consultation with Burkina Faso will take place in accordance with the Executive Board decision on the consultation cycles for members with Fund arrangements.



Burkina Faso: Selected Economic Indicators, 2013–2018

Prel.

Proj.

Proj.

2012

2013

2014

2015

2016

2017

2018

(Annual percentage change, unless otherwise indicated)

National income and prices

GDP at constant prices

6.5

5.7

4.2

4.0

5.4

6.1

6.3

GDP deflator

5.8

-2.1

-0.9

3.7

1.9

2.0

2.0

Consumer prices (eop)

1.7

0.1

-0.1

1.3

0.6

2.0

2.0

Exchange rate (eop, depreciation -)

CFAF per US dollar

-0.5

4.3

-11.1

-13.4

3.1

0.7

0.5

Real effective exchange rate

0.7

-1.7

4.1

6.5

…

…

…

Money and credit

Private sector credit

24.1

26.3

18.9

7.0

9.4

12.9

14.7

Broad money

15.9

11.3

11.9

19.9

13.3

18.4

15.9

Net domestic assets (banking

system)

16.1

19.6

20.0

7.3

9.6

14.9

12.7

Credit to the government

(banking system)

-2.7

5.3

4.9

1.8

1.2

5.8

2.9

Central government finances (percent of GDP)

Current revenue

17.5

19.0

17.5

15.9

18.3

18.9

19.3

Total expenditure and net

lending

25.5

28.0

23.6

21.5

24.5

26.5

26.8

Primary balance

-2.4

-3.0

-1.1

-1.5

-1.8

-2.7

-2.8

Overall fiscal balance, incl.

grants

-3.1

-3.6

-1.9

-2.1

-2.5

-3.6

-3.5

Total Public Debt

28.3

29.3

30.6

32.5

31.7

32.6

32.9

Public External Debt

22.6

21.9

22.0

23.8

23.2

22.4

22.3

External sector

Exports (f.o.b.; valued in CFAF)

0.5

15.9

4.0

2.3

7.4

17.2

8.0

Imports (f.o.b.; valued in CFAF)

19.8

21.3

-9.3

3.3

7.9

13.8

9.6

Terms of trade

11.1

-12.8

-5.5

13.3

8.7

…

…

Current Account (percent of

GDP)

-7.0

-11.3

-8.1

-8.0

-7.6

-6.7

-6.5

Memorandum items

Nominal GDP (US$ billion)

11.2

11.9

12.3

11.1

12.0

13.1

14.3

Nominal GDP per capita (US$)

677.1

706.4

707.8

619.9

651.6

692.5

734.4

Sources: Burkinabè authorities; IMF staff estimates.


[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.

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