The Executive Board of the International Monetary Fund (IMF) completed the seventh and final review of Burkina Faso’s program supported by the Extended Credit Facility (ECF). The decision was taken without a Board meeting and enables the disbursement of SDR 4.47 million (about US$6.2 million), bringing total disbursements under the ECF arrangement that was approved in 2013 to SDR 55.64 million (approximately US$77.4 million).
Burkina Faso’s program implementation remained satisfactory under the ECF arrangement. After averaging 4 percent over 2014-2015, real GDP growth accelerated to 5.9 percent in 2016. The current account deficit narrowed slightly to just below 7 percent of GDP as increased cotton and gold exports were offset by higher domestic demand for consumer goods and public investment related imports. Despite an increase in revenue collection, the fiscal deficit widened in 2016 to 3.1 percent of GDP on a commitment basis, marginally above the WAEMU convergence criteria. The increase in the deficit largely resulted from higher current expenditures, particularly the wage bill following adoption of a new salary grid for public servants. This was partially offset by a decline in domestically-financed public investment to 4.8 percent of GDP, a reduction of 0.5 percent of GDP compared to the previous year.
Burkina Faso’s program implementation remained satisfactory under the ECF arrangement
The outlook for Burkina Faso is generally positive, owing to a significant increase of public investment as well as positive prospects for the mining and agricultural sectors. IMF staff projects real GDP growth of about 6.5 percent over the medium term, with risks tilted to the downside. Principal among these are security risks, volatility in international commodity prices (gold, cotton, oil), negative environmental shocks to agriculture, and socio-political tensions.
The government’s fiscal framework is appropriately anchored toward reaching a deficit of no more than 3 percent of GDP in 2019, consistent with the West African Economic and Monetary Union (WAEMU) convergence criteria. It is also geared toward achieving the economic and social development goals of the National Economic and Social Development Plan (PNDES), which entails significant investment in physical and human capital over the medium term. The authorities’ intention to revise the original 2017 budget is welcome, as it would make for a more realistic framework that accounts for developments in the first half of 2017. The authorities’ medium-term framework continues to retain some optimistic elements. Consequently, careful monitoring of budget execution and its financing is important, together with a readiness to adjust spending, if necessary.
To maximize the benefits of the planned increase in public investment, it will be important to pursue fiscal structural reforms that strengthen the budget and investment processes. Reforms should prioritize increasing fiscal space by enhancing revenue mobilization, containing the wage bill, and limiting the buildup of contingent liabilities from the energy sector. Strengthening investment efficiency through improved prioritization and selection of projects and institutional reforms to increase absorptive and implementation capacity are also priorities.