International Monetary Fund (IMF) Reaches Staff-Level Agreement with Burkina Faso on Rapid Credit Facility through the Food Shock Window
IMF to discuss the economic outlook, macroeconomic policy and possible responses to the ongoing food crisis through the provision
Within this economic context, the mission encourages the authorities to intensify the dialogue with the international community to secure concessional financing in 2023
IMF staff and the Burkinabé authorities have reached a staff-level agreement for about US$ 80 million (50 percent of Burkina Faso’s IMF quota) in emergency financing through the IMF’s Food Shock Window of the Rapid Credit Facility to support measures to provide urgent assistance to households in acute food insecurity conditions; the post-COVID economic recovery was disrupted by deteriorating security conditions, political uncertainty, and rising foodstuff prices as a result of the war in Ukraine, worsening the food crisis and weighing on the budget. Economic recovery in 2023 will depend on financing conditions, as well as efforts to mobilize domestic revenues and concessional financing to ensure priority public expenditure and public debt sustainability; Burkina Faso’s request for emergency support is subject to approval by IMF management and the Executive Board.
An International Monetary Fund (IMF) team led by Martin Schindler visited Ouagadougou during January 31-February 8, 2023, to discuss the economic outlook, macroeconomic policy and possible responses to the ongoing food crisis, including through the provision of IMF financing through the Food Shock Window under the Rapid Credit Facility.
At the end of the mission, Mr. Schindler issued the following statement: “The IMF team reached a staff-level agreement with Burkina Faso on A Rapid Credit Facility through the IMF’s new Food Shock Window. The disbursement under the Food Shock Window, of up to about US$ 80 million (50 per cent of IMF quota, SDR 60 million) will help support measures to provide urgent assistance to household in acute food insecurity condition, such as distribution of good and drinking water, subsidized agricultural inputs, and cash transfers to eligible households.
“We are now preparing to present to the IMF’s Executive Board for approval the authorities’ request for emergency financing through the Food Shock Window”
“The food crisis that was already affecting the country has indeed worsened after the war in Ukraine and requires immediate humanitarian and budgetary assistance. 2.6 million people are in acute food insecurity conditions, and, in absence of assistance measures, this number could go up to 3.5 million people – representing 16 percent of the population –, according to the Food and Agriculture Organization (FAO). “The mission also discussed the economic outlook and macroeconomic with the authorities”
“Economic activity in Burkina Faso was lackluster in 2022. The recovery that began after the COVID-19 crisis was disrupted by political uncertainty and deteriorating security conditions. As a result, real GDP growth in 2022 is projected to have moderated to 2.5 percent, from 6.9 percent in 2021, with average annual inflation in 2022 rising to 13.7 percent, from 3.9 percent in 2021. High current transfers (9 percent of GDP) and investment in security-related equipment (4.6 percent of GDP) in 2022 have contributed to the widening of the fiscal deficit as a share of GDP to an estimated 10.3 percent in 2022, from 7.5 percent of GDP in 2021 and 5.1 percent of GDP in 2020.
“Economic growth may rebound in 2023 with the opening of new mines and efforts to improve domestic security conditions. Annual average inflation is projected to decline in 2023 to 1.5 percent, reflecting a decline in global oil and food prices. The overall fiscal deficit is projected to remain high at nearly 8 percent of GDP in 2023, partly reflecting elevated security spending and subsidies. Financing the deficit will be challenging. Foreign financing in 2023 is projected to decline compared to 2022 as major donors have withdrawn their support. In addition, tighter global financing conditions may increase the cost of funding on the WAEMU sovereign bond market. Downside risks to the outlook remain high, including a worsening of the security situation.
“Within this economic context, the mission encourages the authorities to intensify the dialogue with the international community to secure concessional financing in 2023 and beyond to create fiscal space while ensuring public debt sustainability. Progress on this dialogue, and continued reforms in the public finance domain, including efforts to strengthen tax collection, public investment efficiency, containing wage bill growth, and reforming energy subsidies, would support a recovery beyond the short term.
“The IMF mission would like to express its deep appreciation to the Burkinabé authorities for the frank discussions and the warm welcome it received.”
The mission met with Mr. A. Nakanabo, the Minister for Finance, Mr. C.L. Ki-Zerbo, National Director of the BCEAO, members of the diplomatic community, as well as representatives of the development partner community
Distributed by APO Group on behalf of International Monetary Fund (IMF).