Burkina Faso: Seventh Review Under the Extended Credit Facility Arrangement and Request for a New Three-Year Extended Credit Facility Arrangement

EXECUTIVE SUMMARY Economic activity continued to grow at a brisk pace in 2013. Growth projections have been revised slightly downwards to 6.8 percent in 2013 and 2014, based on lower gold and cotton prices that are leading to somewhat lower output, and the impact of the high base of agricultural production in 2012 on growth in 2013. Inflation has continued to decline, reaching 2 percent, with notable reductions in the prices of food and staple goods. The current account is likely to deteriorate more than previously anticipated due to declining terms of trade, and higher volume imports of fuel and capital goods. Program performance remains strong. Revenue performance remains on target, but is no longer overshooting targets as in recent years, while spending execution is below target. Almost all program targets were met, including on net domestic financing and the fiscal balance. All structural benchmarks slated for completion in June and September were met. The authorities are requesting a successor 3-year ECF arrangement to meet projected balance of payments needs. Based on ad referendum agreements, the requested successor ECF-supported program aims to address long-term structural issues, while preserving stability in a potentially more challenging macroeconomic environment going forward. Structural reforms are articulated around four key themes: managing the use of natural resources revenues; improving the quality and pace of investment spending; supporting efforts to transform high growth into more inclusive growth; and, in the energy sector, improving supply while ensuring financial sustainability. The medium-term macroeconomic framework aims to contain the deficit at around 3 percent of GDP while providing space for higher social and investment spending. The program framework targets current spending adjustment, primarily through expiration of exceptional spending needed to address exogenous shocks, which will be complemented by modestly-growing domestic revenues and financing. There would be modest residual fiscal and balance of payments needs over the three-year program period; proposed access of 45 percent of quota would fill about one third of the identified needs.