Press Release No. 24/219

Burkina Faso: IMF Executive Board Completes First Review under Extended Credit Facility Arrangement and Concludes 2024 Article IV Consultation

June 14, 2024

• The IMF Executive Board today completed the first review of Burkina Faso’s Extended Credit Facility arrangement. The decision allows for an immediate disbursement of about US$ 31.7 million. The Executive Board also completed the 2024 Article IV consultation.
• Burkina Faso’s performance under the program has been positive. All quantitative performance criteria, all indicative targets but one, and most structural benchmarks for the first review were met; some structural benchmarks were implemented with delay. The authorities are progressing in their fiscal consolidation efforts, structural reforms and fiscal governance measures, and the creation of fiscal space for priority spending.
• Growth accelerated in 2023 to 3.6 percent of GDP, supported by a rebound in construction and expansion of the tertiary sector. Inflation significantly decreased, and the fiscal and debt positions improved. Growth is projected at 5.5 percent in 2024 but remains below potential in the medium term, and a lasting recovery is contingent on bringing security under control.

Washington, DC: The Executive Board of the International Monetary Fund (IMF) concluded today the Article IV consultation [1] with Burkina Faso. The Board also completed the First Review of the 48-month Extended Credit Facility (ECF) arrangement, approved on September 21, 2023 . The approval of the first review enables the immediate disbursement of about US$ 31.7 million (SDR 24.08 million), bringing total IMF financial support under the arrangement to about US$63.4 million (SDR 48.16 million). The Board also completed the Financing Assurances Review.

Burkina Faso faces multiple development challenges, including heightened security conditions, climate change, and food insecurity. This complicates efforts to combat food insecurity and forced displacement, while also disrupting economic activity, especially in the agriculture, livestock, and mining sectors. Following a modest GDP recovery of 3.6 percent in 2023, up from 1.8 percent in 2022, growth is projected to accelerate to 5.5 percent in 2024, buoyed by the expectation of improvements in the security situation. However, medium-term growth remains below potential. The overall fiscal deficit declined from 10.7 percent of GDP in 2022 to 6.7 percent of GDP in 2023, supported by revenue mobilization efforts and expenditure control. It is expected to further decline as fiscal consolidation efforts continue under the ECF-supported program. Inflation averaged 0.7 percent in 2023, down from 14.1 percent in 2022, and is projected to stabilize around 2 percent going forward. Public debt eased to 55.6 percent of GDP in 2023 and is expected to remain stable on account of convergence of the fiscal deficit to 3 percent of GDP over the program period.

In January 2024 the authorities decided to exit the Economic Community of West African States (ECOWAS) but reaffirmed their commitment to their membership in the West African Economic and Monetary Union (WAEMU), which should help support domestic and regional economic stability. The authorities are also committed to a capacity development agenda supported by the IMF and other partners to further enhance fiscal governance and transparency.

Discussions under the 2024 Article IV consultation focused on measures to improve medium-term economic performance and resilience, including policies to (i) enhance growth through structural reforms, diversifying exports, regional integration, and addressing the security crisis; (ii) control fiscal risks and ensure fiscal sustainability; (iii) enhance social safety nets; (iv) adapt to, and mitigate the impact of, climate change; and (v) address forced displacement.

Risks to the outlook are tilted to the downside, mainly stemming from the continuous threat of terrorist attacks, which weighs on mining and agricultural production, impacting government revenue collection and adding pressures on current spending.

Following the Executive Board’s discussion, Mr. Kenji Okamura, Deputy Managing Director and Acting Chair, issued the following statement:

“Burkina Faso faces a challenging macroeconomic outlook amid large development and security needs, compounded by acute food insecurity and long-standing fragility. A sustained recovery, supported by a pick-up in agricultural production and gold mining, is contingent on substantial progress in security and overall reductions in political uncertainty. Adherence to a structural reform agenda aimed at improving economic efficiency, promoting private sector development, diversifying the economy, and increasing resilience to climate change could create the conditions for sustained, shock-resistant long-term growth and poverty reduction.

“Despite the challenging context, the results achieved under the program are broadly satisfactory. All quantitative performance criteria and five of six indicative targets were reached by the end of December. Implementation of the authorities’ structural reform program is also broadly on track, with three of five structural benchmarks having been met by December. A resolute commitment to the policy and reform agenda under the arrangement, as well as to the timeline of the political transition, will be critical to safeguard fiscal and debt sustainability, anchor the country’s macroeconomic outlook, and catalyze additional concessional financing.

“The authorities remain committed to a gradual fiscal consolidation. They plan to continue domestic revenue mobilization efforts, including by strengthening tax and customs administration. On the expenditure side, the authorities remain on track to bring the public sector wage bill as a share of tax revenue to a sustainable level over the medium term and on reforming the energy sector, including by reducing untargeted energy subsidies and increasing efficiency. In this context, strengthening fiscal governance and transparency is paramount to restoring donors’ trust and catalyze concessional financing.

“Given the large humanitarian and socio-economic development needs, social spending must be further scaled up and social protection strengthened, including by consolidating existing social safety nets and accelerating the establishment of the Single National Registry of Beneficiaries.

“For the country’s long-term development process, it remains essential to sustain structural reforms to foster economic growth and diversification, enhance fiscal governance and transparency, as well as to reduce poverty. In this context, further efforts to improve the business environment, reinforce governance and anti-corruption efforts, and address the security crisis are critical.”

Executive Board Assessment[2]

Executive Directors agreed with the thrust of the staff appraisal. Against a context of acute development challenges and downside risks, including security and humanitarian crises, compounded by political instability and climate change, they continued to support the program’s objectives of helping address the country’s balance of payment needs, creating fiscal space for priority spending and reducing debt vulnerabilities. Directors also underscored the importance of strengthening resilience to security and climate shocks, while reducing poverty and inequality and reinforcing fiscal discipline, transparency, and governance.

Directors welcomed the Burkinabè authorities’ satisfactory performance under the ECF-supported program, including their continued commitment to and progress in implementing reforms despite the difficult context. At the same time, noting the still substantial risks to the program, Directors underscored that a resolute commitment to the policy, structural reform, and fiscal governance agenda will be critical, including for donor confidence and to catalyze additional concessional financing. In this context, they welcomed the comprehensive fiscal governance agenda, including an accelerated timeline for the Governance Diagnostics Assessment and the authorities’ request for conducting a Fiscal Transparency Evaluation. Directors also called for contingency planning and stronger safeguards to be incorporated into the program going forward to mitigate potential reputational risks to the Fund. They called on staff to maintain close engagement with the authorities on program implementation and adapt program objectives, as needed, given the uncertainties.

Directors encouraged the authorities to stay the course of fiscal consolidation with continued efforts to mobilize revenue and rationalize expenditure, while prioritizing concessional financing. They urged the authorities to appropriately balance security-related, development, and social expenditures. Directors stressed in particular the importance of scaling up social spending and strengthening social protection, including resuming the cash transfer programs to security-affected regions. They also called for prompt implementation of overdue measures to improve the efficiency of the energy sector.

Directors stressed the need to sustain structural reforms to foster economic growth and diversification, reduce poverty, and enhance resilience to climate shocks. They called for further efforts to reinforce governance, address corruption, and enhance AML/CFT frameworks. Directors emphasized the importance of a tailored capacity development strategy to support the country’s reforms. They also noted the authorities’ interest in accessing the Resilience and Sustainability Facility.

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.

Burkina Faso: Selected Economic and Financial Indicators, 2021–28