R 081406Z JAN 09
FM AMEMBASSY OUAGADOUGOU
TO SECSTATE WASHDC 4530
INFO DEPT OF TREASURY WASH DC
DEPT OF COMMERCE WASHDC
MILLENNIUM CHALLENGE CORP
ECOWAS COLLECTIVE

UNCLAS OUAGADOUGOU 000010 
 
 
ACCRA FOR USAID WEST AFRICA 
DAKAR FOR USAID FOOD FOR PEACE AND OFDA 
DAKAR FOR FAS 
DEPT PASS TO USAID FOR AFR/DP 
STATE FOR AF/W 
 
E.O. 12958: N/A 
TAGS: EAID ECON SENV SOCI PGOV UV
SUBJECT: BURKINA FASO: 2008 MIDTERM REVIEW OF THE POVERTY REDUCTION 
STRATEGY PAPER (PRSP) 
 
Reftels: A) 08 Ouagadougou 020 B) 08 Ouagadougou 202; C) 08Ouagadougou 221; 
D) 08 Ouagadougou 235; E) 08 Ouagadougou 396; F) 08 Ouagadougou 602; G) 
08 Ouagadougou 835; H) 08 Ouagadougou 909; I) 08 Ouagadougou 1024 
 
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Summary 
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¶1. In October 2008, the Government of Burkina Faso (GOBF) met with 
domestic stakeholders and international donors to conduct a mid-term 
review to provide stakeholders with crucial updates on 
macroeconomic, structural, and social policies related to the 
country's Poverty Reduction Strategy Paper (PRSP).  PRSPs are 
prepared by International Monetary Fund (IMF) member countries and 
are updated every three years with annual progress reports, 
describing the macroeconomic, structural and social policies and 
programs that reduce poverty. 
 
¶2. According to the mid-term review of Burkina Faso's PRSP, despite 
soaring prices and a difficult economic climate, the country could 
experience relatively good economic performance in 2008.  The report 
also found, however, that strong economic performance could not 
reduce the nation's incidence of poverty, which is forecast to grow 
by more than two percentage points by the end of 2008.  Donors 
blamed this phenomenon on inequities in wealth distribution, the 
Government of Burkina Faso's (GOBF) inability to meet donor 
requirements, and anti-inflationary policies, which did nothing to 
help the nation's neediest groups.  End Summary. 
 
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PRSP DISBURSEMENTS BEHIND SCHEDULE 
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¶3. Burkina Faso's PRSP is based on four strategic objectives: i) 
accelerated and shared growth; ii) improved access to basic social 
services; iii) increased employment opportunities and income 
generating activities; and iv) the promotion of good governance. 
The midterm review of the PRSP evaluated the performance and 
disbursement of budgetary support and assessed the implementation of 
the Priority Action Program (PAP) during the first half of 2008. 
The purpose of the PAP is to provide an operational framework for 
the implementation of the PRSP, which translates guidelines into 
concrete actions and quantifiable measurements.  To date, three 
triennial rolling programs have been designed and implemented: 
2004-06, 2005-07 and 2006-08. 
 
¶4. 2008 donor budget support for the PRSP was 119 billion CFA (USD 
238 million). Seventy-seven percent of this budget (91 billion CFA 
(USD 182 million)) came from donations and 23 percent were loans (28 
billion CFA (USD 56 million)).  By the end of September 2008, actual 
budget disbursements were only 65 percent (77 billion CFA (USD 155 
million)) of the forecasted expenditures for 2008.  During the same 
period in 2007, 99 percent (112 billion (USD 224 million)) of the 
originally programmed amount had already been dispersed.  This means 
that in order to meet this year's goals, an additional USD 83 
million needed to be disbursed during the fourth quarter of 2008. 
 
¶5. According to the midterm report, this shortfall in expenditures 
"is due both to the GOBF's failure to comply with certain conditions 
required for disbursements as well as donors, such as the World Bank 
and Germany, who have been slow to institute new programs."  The 
report pointed out that the government's failure to meet good 
governance criteria, specifically the publication of the report of 
the High Authority for the Coordination of the Fight against 
Corruption (HALCL), has led to a major delay in donor 
disbursements. 
 
¶6. The government responded to this criticism by declaring that the 
midterm implementation of the PAP was "satisfactory" and claiming 
that the nation's poor now have better access to basic social 
services than ever before.  As further proof of its fight against 
corruption, the GOBF pointed to the newly created Autorite de 
Regulation des Marches Publics (ARMP), a regulatory oversight body 
to watch over the tender process for government contracts. (ref G). 
The ARMP is vested with the authority to impose sanctions, initiate 
lawsuits, and publish the names of fraudulent or delinquent 
businesses. 
 
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INEQUALITIES REMAIN DESPITE UPBEAT ECONOMIC FORECAST 
--------------------------------------------- ------- 
 
¶7. Despite a fiscal climate plagued by soaring food and energy 
prices, Burkina Faso's economic performance was relatively good. 
The latest study conducted by the IMF in late September, found that 
"there are signs that economic activity is recovering, and real GDP 
growth for 2008 is projected to increase to 4.5 percent."  The 
report attributed this sound performance to several factors 
including: favorable weather conditions, a marked increase in mining 
activity (refs F and H), and the continued implementation of fiscal 
and structural reforms.  Additionally, the mission mentioned that a 
favorable 2008 harvest was expected to reduce the average annual 
inflation rate, from 14.1 percent in August to 9.5 percent by the 
end of 2008 (ref I).  The report also found that the budget deficit 
would be reduced from 12.2 percent in 2007 to 11.4 percent in 2008. 
 
¶8. Despite economic improvements, the Ministry of Economy and 
Finance (MEF) admitted that the incidence of poverty could grow by 
more than two percentage points from 42.6 percent in 2007 to 44.8 
percent in 2008.  The deterioration in the incidence of poverty 
indicator was attributed to price increases of basic commodities 
during the first quarter of 2008, which greatly impacted the 
purchasing power of vulnerable households.  This situation led the 
GOBF to take steps to mitigate the impact of high food and oil 
prices on vulnerable populations.  These measures included the 
suspension of customs duties and Value Added Tax (VAT) on rice, 
milk, pasta, soap, oil and salt. (B)  In October, the independent 
newspaper, "Le Pays," quoted the Deputy Minister of Budget, 
Marie-Therese Drabo Keita, who reported that as of October 17, the 
national budget had lost nearly 4 billion CFA (USD 8 million) due to 
the six-month tax suspension. 
 
¶9. The International Monetary Fund (IMF) dismissed these tax 
reductions as "ineffective" because they did not target the neediest 
population segments.  The report added that, "temporary suspension 
of customs duties and VAT to mitigate the impact of price increases 
on the population has far less impact than social programs. 
Subsidies and transfers need to be better directed in order to more 
effectively reach the neediest segments of the population."  The IMF 
report added that shortfalls in tax revenue caused by the tax 
suspension were nominal, only 0.2 percent of Gross Domestic Product 
(GDP) for the first quarter.  In lieu of tax cuts, the IMF study 
advocated measures which directly target vulnerable groups, such as 
school feeding programs, reduced fees for basic health services, and 
cash transfer systems.  The report also proposed the full 
pass-through of international fuel prices to help eliminate national 
oil company losses which would ultimately have to be borne by the 
government. 
 
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OTHER STAKEHOLDERS WEIGH IN 
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¶10. During the PRSP review, donors praised the GOBF for progress in 
implementation of the Priority Action Program (PAP).  However, they 
claimed that an increased incidence of poverty, despite relatively 
good economic performance, suggested an inequitable distribution of 
wealth.  Donors were also concerned by ineffective government 
measures, such as the suspension of customs duties and VAT, which 
did not benefit the poor.  They also welcomed government initiatives 
to provide access to free education, basic health care and cheaper 
anti-retroviral medications (ARVs). Stakeholders promised to work 
closely with the GOBF to prepare a next generation PRSP that would 
more effectively target the issues surrounding vulnerable 
populations. 
 
¶11. Donors once again voiced concern that corruption continued to 
threaten the fight against poverty in Burkina Faso and insisted upon 
improvements in both public procurements and the judicial system. 
They also mentioned that transparent procedures for awarding public 
contracts were a central element of good governance on both national 
and local levels.  Donors agreed that improving government 
accountability through the timely publication of the report of the 
Public Account Court was essential, but expressed frustration that 
the promised 2007 report had not yet been published. 
 
¶12. Private sector spokesman, Issa Ouattara, expressed appreciation 
that his delegation had been involved in the PRSP review process. 
He also conveyed his satisfaction with the newly established 
dialogue between the GOBF and the private sector.  According to 
Ouattara, this dialog has resolved many longstanding issues and 
enabled Burkina Faso to be ranked in the World Bank's "2009 Doing 
Business Report" as one of the top ten reformers for 2009.  However, 
Ouattara reminded the GOBF that recurring problems such as high 
production costs, lack of access to financing, and fraud, continued 
to inhibit private sector gains. 
 
¶13. Representatives from Civil Society Organizations (CSO) debated 
whether the review of the PRSP was truly an open exercise.  While 
acknowledging the benefits of their engagement in public PRSP 
monitoring, the CSO raised concerns about limited access to official 
information.  They also argued that it was difficult for civil 
society organizations to play a valuable role in PRSP monitoring 
when their representatives received invitations and reports only one 
or two days prior to meetings.  CSOs claimed to have mentioned this 
issue several times, but have yet to receive a response. 
 
¶14. Comment: We concur with the analysis that poor households 
receive less benefit from the suspension of customs duties and value 
added tax (VAT) for basic products designed to alleviate the impact 
of high world food and oil prices. To be effective, government 
subsidies and donor programs need to institute targeted social 
transfer programs that will reach the neediest population segments. 
However, the issues raised in this report may not represent the most 
difficult challenges facing Burkina Faso's economy over the coming 
year.  Both food and energy prices have come down, which should have 
a positive impact on growth. The global economic crisis is 
nonetheless likely to exact a significant cost due to lower 
purchasing power in key markets and increased difficulty in access 
to credit by international investors. 
 
JACKSON