Press Release No. 20/314

IMF Staff Completes a Virtual Fourth and Fifth Extended Credit Facility Reviews Mission with Burkina Faso

October 14, 2020

• The ongoing pandemic and its response resulted in a sharp decline in economic activity in the first half of 2020. While a recovery is underway, economic growth is projected to remain muted until 2021.
• The budget deficit is projected to widen in 2020 and remain high in 2021 as revenues have declined and the pandemic response has boosted expenditure.
• The 2021 budget supports recovery from the pandemic shock, as well as security and priority development spending. The medium-term fiscal path should be underpinned by reforms to advance tax administration, right size the wage bill, and promote stronger public financial management, governance and social safety nets.

Washington, DC: A staff team from the International Monetary Fund (IMF), led by Calixte Ahokpossi, conducted a virtual mission during September 8 to 30, 2020 to conduct discussions for the fourth and fifth reviews of Burkina Faso’s economic and financial program supported by the IMF under the Extended Credit Facility (ECF) arrangement. The fourth review was delayed from March 2020, allowing the authorities time to respond to the pandemic and the IMF provided emergency financing and debt relief on debt service to the Fund (SDR103.28 million in total) to help address the impact of the pandemic. Discussions for the 4^th and 5^th reviews have allowed the authorities and the IMF team to reach a staff level agreement, subject to approval by IMF management and the Executive Board. Consideration by the IMF’s Executive Board is expected in November 2020.

At the end of the mission, Mr. Ahokpossi issued the following statement:

“The economy has been hit hard by the COVID19 pandemic with economic activity contracting in the first half of 2020. At the same time, there remain considerable uncertainties about the strength of the recovery that now appears to be underway. Against this background, real GDP is projected to decline by 2.8 percent in 2020 and to grow by 4.1 percent in 2021. Meanwhile inflation has begun to reverse its recent negative trend as supply chain issues related to the pandemic begin to impact prices. The economic outlook remains subject to downside risks, however, owing to the uncertain evolution of the pandemic and the impact of the ongoing security crisis.

“The pandemic has negatively affected revenue collection while requiring additional expenditures to contain its impacts. As a result, the budget deficit for 2020 is expected to widen to 5.3 percent of GDP. The supplementary spending is essentially allocated for health, transfers to vulnerable households, support for the most affected economic sectors and for security. The COVID19-related spending is also subject to high standards of transparency, with audited reports of the spending to be published in 2020 and 2021. Lower international oil prices combined with a partial implementation of fuel price mechanism has helped lower subsidies. The mission urged the authorities to take advantage of this context to clear outstanding subsidies that have emerged under the fuel price adjustment mechanism and contain their buildup going forward.

“The mission reached agreement with the authorities on a 2021 budget framework that is in line with program and WAEMU objectives. The budget would allow fiscal space for the continued response to the pandemic and the ongoing security crisis, in addition to priority development expenditure. The deficit is expected to remain elevated, at around 5.5 percent of GDP. At the same time, the focus on improving tax administration should continue; the recent reform to VAT reimbursements is a promising first step in this area.

“In the face of significant challenges, program performance has been satisfactory. The authorities have strived to meet program targets in the face of the increased fiscal pressures presented by the pandemic. While targets for end 2019 were met, the impact of the shock on the budget deficit for 2020 has meant that the June target for net domestic financing was missed. Progress has been made in key structural reforms such as the implementation of the Treasury Single Account and the online publication of asset declarations by members of the government and the parliament . Staff urged the authorities to continue efforts to foster consensus around a medium-term public sector compensation strategy that could provide the basis for more sustainable medium-term path for salaries and allowances. At the same time, the pandemic has highlighted the important role that a social safety net can have in providing well-targeted, timely support for the most vulnerable. Staff urged the authorities to continue their efforts to rationalize their social safety nets and continue to expand their scope.”