The Executive Board of the International Monetary Fund (IMF) today completed the fourth and fifth reviews of Burkina Faso's economic program under the Extended Credit Facility (ECF). Completion of these reviews, which constitute the last two under the ECF-supported program, unlocks access to SDR 36.12 million (about US$51.28 million), bringing total disbursements under the arrangement to SDR 108.36 million (about US$152.58 million). Burkina Faso's three-year ECF arrangement was approved by the IMF Executive Board on March 14, 2018. It aims at maintaining macroeconomic stability, reducing poverty and creating fiscal space for priority spending.
The Executive Board also approved the authorities' requests for a waiver for the nonobservance of the program performance criterion on the ceiling on net domestic financing of the government and rephasing of access for the fifth review to make the sixth disbursement available on November 13, 2020.
In addition, Burkina Faso has benefited from a second tranche of debt relief on its debt service falling due to the IMF from October 14, 2020 to April 13, 2021 (SDR 10.3 million or about US$ 14.52 million), in the form of grant assistance under the Catastrophe Containment and Relief Trust. This relief follows that granted for debt service due between April 14 and October 13, 2020 (about US$12 million).
The economic impacts of the global and domestic measures to contain the COVID19 pandemic have been stronger than expected. Real GDP is expected to contract by 2.8 percent in 2020, compared to a forecast of 6.0 percent expansion prior to the pandemic. The fiscal deficit in 2020 is expected to widen to about 5.3 percent of GDP, to accommodate an effective response to the fallout from COVID19 and security shocks. The main risks to the outlook are the uncertainty surrounding the duration of the pandemic and the ongoing security crisis.
Following the Executive Board's discussion on Burkina Faso, Mr. Mitsuhiro Furusawa, Deputy Managing Director and Acting Chair, issued the following statement:
"The COVID19 pandemic and the security crisis continue to negatively impact Burkina Faso's economy. The authorities took swift actions to contain the spread of the pandemic, and implement accommodative fiscal measures, including additional healthcare spending and support for vulnerable households and affected businesses. Performance under the ECF-supported program has been satisfactory despite the challenging policy environment.
"A widening of the fiscal deficit in 2020 and 2021 is warranted to accommodate the COVID19 spending, additional security needs, and post-COVID19 recovery. Such spending should be cost-effective and appropriately targeted, while safeguarding macroeconomic stability and debt sustainability. In addition, efforts should focus on boosting domestic revenue mobilization, which was affected by the large contraction in economic activity.
"Good governance remains of paramount importance, including in the context of emergency spending related to COVID19. In this regard, the authorities published asset declarations by members of the government and completed an audited report on COVID19-related expenditures at end-June 2020. They have also committed to publish further reports along with all pandemic-related procurement contracts and their beneficial owners. Shortfalls noted in the report on spending at end-June 2020 should be expeditiously addressed.
"Addressing the security crisis and promoting higher and inclusive growth will remain crucial for Burkina Faso over the medium term. Consequently, a gradual return of the fiscal deficit to the regional target of 3 percent of GDP (2024 - one year later than the regional goal) is important and will preserve policy space to balance the growth impact and the fiscal adjustments related to shocks associated with security and pandemic spending needs.
"The authorities should make efforts to promptly adopt and implement the necessary reforms to put the wage bill on a sustainable path."
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