INTERNATIONAL DEVELOPMENT ASSOCIATION INTERNATIONAL MONETARY FUND BURKINA FASO JOINT WORLD BANK-IMF DEBT SUSTAINABILITY ANALYSIS November 2020 Prepared Jointly by the staffs of the International Development Association (IDA) and the International Monetary Fund (IMF) Approved by Marcello Estevão (IDA) and Catriona Purfield (IMF) Burkina Faso: Joint Bank-Fund Debt Sustainability Analysis Risk of external debt distress Moderate Overall risk of debt distress Moderate Granularity in the risk rating Substantial space to absorb shocks Application of judgement No Burkina Faso remains at moderate risk of external debt distress. The rating is unchanged from the April 2020 Debt Sustainability Analysis (DSA). The macroframework underlying this DSA accounts for Burkina Faso’s recent GDP rebasing and incorporates the impact of the Covid- 19 pandemic and the deteriorating security situation. The current debt-carrying capacity is consistent with a classification of ’medium’.1 The risk of overall and external debt distress in Burkina Faso remains moderate, with substantial space to absorb shocks. All external debt indicators remain below the relevant indicative thresholds under the baseline scenario. Under a standard stress test of a shock to exports, two of the thresholds for PPG external debt—debt service-to-exports and debt service-to-revenue ratios—are breached. Overall public debt breaches the relevant benchmark under one scenario. Burkina Faso would need to: (i) maintain a sound macro-fiscal framework in the midst of the pandemic shock; (ii) implement structural reforms to diversify its export base; (iii) exercise control over government guarantees and contingent liabilities; and (iv) limit non-concessional borrowing and strengthen the implementation of its medium-term debt strategy to contain its debt service and gross financing needs in order to prevent a deterioration of its debt sustainability outlook. 1Burkina Faso’s Composite Indicator is 3.01 based on the October 2019 WEO and the 2019 CPIA, corresponding to the medium debt-carrying capacity. BACKGROUND ON DEBT 1. Public debt levels have increased in the last few years following large fiscal deficits and a shift towards more expensive domestic borrowing (Text Table 1). The nominal stock of public debt as of end-2019 Text Table 1. Burkina Faso: Public Debt Stock, 2014-19 stood at 42.7 percent of (percent of GDP) GDP up by 5 percentage 2014 2015 2016 2017 2018 2019 points of GDP compared Public Debt 26.6 31.4 33.3 33.5 37.7 42.7 to the previous year. The External Debt 20.5 23.2 23.7 21.1 21.5 23.7 share (in percent to total debt) 77.1 73.9 71.1 62.8 57.0 55.6 increase in 2019 was Domestic Debt 6.1 8.2 9.6 12.4 16.2 19.0 driven by (i) an elevated share (in percent to total debt) 22.9 26.1 28.9 37.2 43.0 44.4 budget deficit due to higher than planned VAT Memorandum items: reimbursement and Overall fiscal balance -1.6 -1.9 -3.0 -6.8 -4.2 -3.2 GDP growth (in percent) 4.3 3.9 6.0 6.2 6.8 5.7 (ii) weaker than expected external disbursements. Sources: Burkinabe authorities; and IMF staff estimates. The composition of debt has continued to shift towards domestic debt, financed by the WAEMU regional market. External debt comprised 55.6 percent of the total debt stock at end-2019, down from 77.1 percent at end-2014. Text Table 2. Burkina Faso: Coverage of Public Sector Debt 1/ Subsectors of the public sector Sub-sectors covered 1 Central government X 2 State and local government 3 Other elements in the general government 4 o/w: Social security fund 5 o/w: Extra budgetary funds (EBFs) 6 Guarantees (to other entities in the public and private sector, including to SOEs) 7 Central bank (borrowed on behalf of the government) X 8 Non-guaranteed SOE debt 1/ The Central Bank is not allowed to borrow on behalf of the central government. Text Table 3. Burkina Faso: Combined Contingent Liability Shock 1 The country's coverage of public debt The central government, central bank Used for the Default analysis Reasons for deviations from the default settings 2 Other elements of the general government not captured in 1. 0 percent of GDP 1.5 Guarantees to private sector 3 SoE's debt (guaranteed and not guaranteed by the government) 1/ 2 percent of GDP 2.0 4 PPP 35 percent of PPP stock 0.0 5 Financial market (the default value of 5 percent of GDP is the minimum value) 5 percent of GDP 5.0 Total (2+3+4+5) (in percent of GDP) 8.5 1/ The default shock of 2% of GDP will be triggered for countries whose government-guaranteed debt is not fully captured under the country's public debt definition (1.). If it is already included in the government debt (1.) and risks associated with SoE's debt not guaranteed by the government is assessed to be negligible, a country team may reduce this to 0%. 2 2. The country’s coverage of public debt currently includes external and domestic obligations of the central government yet excludes guarantees and non-guaranteed SOE debt (Text Table 2). The authorities are taking steps to extend the coverage of debt to include guarantees to the public and private sectors for this current vintage. According to information provided by the authorities, the two main state-owned enterprises that are majority owned by the public sector do not borrow externally. 2 An audit of SOE debt too is underway, and under the World Bank’s Sustainable Development Finance Policy, an annual debt report and two quarterly debt bulletins aim to broaden the coverage of debt statistics to include domestic debt and contingent liabilities. Any additional information will be reflected in the upcoming DSA. Domestic debt of these state- owned enterprises, however, is not covered in the baseline DSA, but the standard SOEs’ 2 percent share of GDP is included in the contingent liability stress test (see Text Table 3 and ¶8). Domestic debt is defined as debt denominated in the regional currency, the FCAF. The choice of coverage is based on currency, rather than residency, due to the difficulty of monitoring the residency of creditors for debt traded in the regional market. Once the debt audit is finalized and the coverage and quality of the debt ensured, the data will be included in the DSA. BACKGROUND ON MACRO FORECASTS 3. Text Table 4 summarizes the main differences in macroeconomic assumptions between the previous DSA (April 2020) and the current DSA.3 Compared with the previous DSA, real GDP growth decelerated further, notably with a sharp contraction in 2020 owing to the external and domestic effects of the COVID-19 outbreak. The intensification of the security crisis also contributes to lower growth. Burkina Faso’s overall fiscal balance breaches the WAEMU convergence criterion for the period 2019-2023 but reverts back thereafter. This DSA includes for 2020 IMF disbursements (ECF/RCF), IMF debt relief (CCRT),4 G20 DSSI and additional external support (other donors), while the remaining financing gap is sought to be filled on the WAEMU’s regional market. The authorities have also requested the debt service suspension from official bilateral creditors and intend to adhere to the required commitments. While the current account has been revised sizably upwards to account for artisanal gold exports from 2019 onwards, the improvement in 2020 and 2021 is attributable to the increase in gold prices and decline in the oil bill. Gold price forecasts are sizably larger than the previous DSA in light of recent global developments. Gold exports maintain an upward path amid continued robust expansion in the domestic gold sector. The price of Burkina Faso’s other main commodity export, cotton, is largely stable relative to the previous DSA. 2 The two public enterprises are SONABHY, the state-owned oil-importing company, and SONABEL, the national electricity company. 3 IMF Country Report No. 20/130 of April 2020. 4 CCRT includes both the first 6 months of debt relief and potential debt relief provided for the next 18 months. The last 18 months of debt service relief is expected subject to availability of CCRT resources. 3 Text Table 4. Burkina Faso: Changes in Assumptions for Current DSA Compared with April–2020 DSA 2019 2020 2021 2025 2028 est. Current DSA 1,392 1,788 1,966 2,050 2,050 Gold (USD/ounce) Apr-2020 DSA 1,392 1,500 1,499 1,571 1,571 Current DSA 78 70 72 71 71 Cotton Prices (cts/lb) Apr-2020 DSA 78 70 71 70 70 Current DSA 24.3 25.8 24.8 20.4 17.7 Exports of goods (% of GDP) Apr-2020 DSA 24.3 22.8 22.2 19.6 17.0 Current DSA 5.7 -2.8 4.1 5.6 5.6 Real GDP Growth (y/y) Apr-2020 DSA 5.7 2.0 5.8 5.6 5.6 Current DSA -4.8 -3.5 -3.5 -5.2 -6.0 Current Account (% of GDP) Apr-2020 DSA -4.4 -4.3 -4.5 -5.3 -6.2 Overall Fiscal Balance Current DSA -3.2 -5.3 -5.5 -3.0 -3.0 (% of GDP) Apr-2020 DSA -2.7 -5.0 -3.5 -3.0 -3.0 Sources: IMF staff estimates and World Economic Outlook projections. 4. This DSA update is consistent with the macroeconomic framework underlying the Staff Report prepared for the fourth and fifth reviews of the three-year ECF program (Box 1). The macro framework estimates growth to contract by 2.8 percent in 2020 and recover to 5.6 percent over the medium term. The macro framework projects a relaxation of the deficit target until 2023 above the 3 percent threshold consistent with Burkina Faso’s WAEMU membership commitment. The authorities continue to provide provisions for the subsidies to the national oil company and are limiting cash adjustments, hence containing the off-budget debt creating flows. 4 Box 1. Macroeconomic Revisions and Assumptions Underlying this DSA Vintage Gold prices have been revised upwards throughout the projection period. WEO gold price projections have been raised since the previous DSA for 2020 onward, driven by global price developments in response to the economic impact of the pandemic. WEO cotton price projections have remained more or less stable since the previous DSA for 2020 onwards. Gold production growth is expected to drop moderately over the medium term, as a challenging security situation is weighing on exploration operations of mining companies. In November 2019, an attack on a road leading to a SEMAFO Boungou mine led to the suspension of production for 3 months which has also added contemporaneous pressure on total gold production. The coming on stream of new industrial gold mines represent a buffer, but continued escalation of security tensions could further hamper exploration, limit prospective mining, and depress export receipts. The COVID-19 outbreak could compound this challenging situation as an outbreak in mines could lead to suspension of production. Real GDP in 2020 is estimated to contract by 2.8 percent, sizably lower than the previous DSA projections. The growth projection for 2020 reflects the impact of COVID-19 shock and associated policy measures. The impact of the pandemic is projected to be widespread, with hotels, restaurants, commerce and transportation among the most hit sectors. Policies are envisaged to cushion the shock under the authorities’ economic recovery plan, which includes a partial guarantee fund for companies in hard-hit sectors. While growth is projected to rebound partially in 2021 to 4.1 percent, considerable downside risks remain due to a potential second wave of infections, further intensification of security challenges, and commodity price vulnerabilities. From 2022 onwards, real GDP growth is projected to stabilize at 5.6 percent. The overall fiscal deficit for 2020 has further worsened to 5.3 percent compared to the previous DSA. The widening deficit reflects the effort by the authorities to deal with the COVID-19 pandemic and the security crisis weighing on economic activity and public finances. The higher fiscal deficit in 2020 is financed in part by the Fund’s disbursements from the ECF and RCF and debt relief under the CCRT. The rest is assumed to be financed by an increased mobilization of external support including the World Bank, the African Development Bank, and the European Union, as well as on the WAEMU’s regional market leading to an increase in domestic financing and interest payments. Fiscal deficit is expected to be 5.5 percent of GDP for 2021, further improving to 4.8 and 4.0 percent in 2022 and 2023 respectively, and stabilizing at 3.0 percent going forward assuming the government undertakes efforts to meet the WAEMU convergence criteria. Over the medium-term, defense and security spending will continue to place a heavy burden on the budget. This warrants a more gradual return of the fiscal deficit to the regional convergence criteria of 3 percent of GDP in 2024. Domestic debt is assumed to continue to increase throughout the forecast horizon, reflecting the authorities’ financing needs over the medium-term. In 2020, domestic financing is expected to increase by 2.2 percentage points of GDP to 21.2 percent of GDP. In the medium term, the composition of domestic financing is assumed to be similar to that in 2019 with 45 percent in T-bills with an average interest rate of 5.4 percent, 30 percent in 3 to 5-year bonds with an average interest rate of around 6.5 percent, and 25 percent in 8-year bonds with an average interest rate of 7.6 percent. Beyond the medium-term, the authorities are assumed to mobilize greater amounts from longer-term instruments as the regional financial market develops. The remainder of the deficit is assumed to be financed via external debt, but on gradually less generous terms to reflect additional non- concessional financing and conservative assumptions about the availability of concessional financing in future years. The non-concessional external financing is assumed to increase from 1 percent in 2019 to one half of the total external financing in 2040. Fiscal consolidation over the medium term is expected to be achieved through: i) increased revenue mobilization underpinned by reforms to broaden the tax base and to reinforce the effectiveness of tax collecting agency (DGI) and customs administration (DGD); ii) better control of expenditures with reforms to bring the wage bill growth to a sustainable path and reduce energy subsidies. The current account deficit is estimated to have reached 4.8 percent of GDP in 2019 but it is then projected to drop to 3.5 percent of GDP in 2020 and 2021 driven by the external price conditions, primarily gold and oil. Upside and downside risks to the current account include volatility in key exports (e.g. gold, cotton) and imports (e.g. oil, fuel, machinery), increased imbalances in the trade of services, and a further deterioration of the security environment in the Sahel region. Current account is projected to worsen going forward with an average of 5.1 percent for the projection period through 2030. 5 5. The realism tools suggest that the baseline scenario is credible when compared to cross-country experiences and to Burkina Faso’s own historical experience (Figures 3 and 4). 1. Figure 3 shows that the contributions of past external debt creating factors remain relatively unchanged for the projection period. However, the contribution of prices and exchange rate is projected to decrease debt going forward and the magnitudes are projected to shrink in the future. Unexpected changes in external debt are near the median of the distribution across low- income countries. Total public debt projections improve compared with Burkina Faso’s historical experience, mostly due to a projected fiscal adjustment of about 3 percent of GDP beginning from 2024 to accommodate the covid shock response, as opposed to the unusually large fiscal deficits in the previous 5 years, especially in 2016 and 2017. Unexpected changes in public debt are near the upper quartile of the distribution across low-income countries. 2. Figure 4 shows the country's planned fiscal adjustment for the next 3 years average at 0 percent of GDP. This reflects the relaxation of deficit target during 2020-2023 to help the country better respond to the pandemic outbreak and escalating security threat. The DSA takes this into account while assuming a gradual return to the fiscal deficit convergence criterion of 3 percent of GDP, with the country back in full compliance starting in 2024. 3. Finally, Figure 4 also shows the contribution from government capital to real GDP growth is projected in line with the historical magnitude, while the contribution from other factors is expected to decline. 6. This DSA assumes an increase of non-concessional financing over the forecast horizon. The authorities’ debt strategy favors exhausting all options for concessional financing before exploring more expensive non-concessional options, including commercial ones. Nevertheless, since financing needs exceed the amount of expected available concessional financing, this DSA assumes that non-concessional borrowing will expand to an average of around 20 percent of total external borrowing over time starting from 2020 and through the DSA horizon. Consistent with this assumption, the grant element of new borrowing is assumed to decrease gradually over the forecast horizon. 6 COUNTRY CLASSIFICATION AND DETERMINATION OF STRESS TESTS Country Classification 7. Burkina Faso’s current debt-carrying capacity is consistent with a classification of ’medium’ (Text Table 5). The country’s Composite Indicator (CI) index, calculated based on the October 2019 WEO and the 2019 CPIA score, is 3.01, that is below the threshold of 3.05 for “strong,” hence the ‘medium’ classification. Moreover, the classification based on the previous vintage had been also ‘medium’. The relevant indicative thresholds for this ‘medium’ category are: 40 percent for the PV of debt-to-GDP ratio, 180 percent for the PV of debt-to-exports ratio, 15 percent for the debt service-to-exports ratio, and 18 percent for the debt service-to-revenue ratio. These thresholds are applicable to public and publicly guaranteed external debt. The benchmark for the PV of total public debt for medium debt carrying capacity is 55 percent of GDP. Determination of Scenario Stress Tests 8. Given the limited coverage of the country’s public debt, a stress test for a combined contingent liability shock of 8.5 percent of GDP was conducted (Text Table 3). A 1.5 percent of GDP shock is included as a contingent liability to account for the guarantees to the private sector. In the absence of SOE debt, a standard SOE debt of 2 percent of GDP is included as additional contingent liability to reflect potential guaranteed and unguaranteed external and domestic debt of public companies (e.g. SONABHY, SONABEL, SOFITEX). No shock is used to account for PPPs, as the stock is still less than 1 percent of GDP. For the financial sector, the default value of 5 percent of GDP is retained, representing the average cost to the government of a financial crisis. 9. A tailored stress test for commodity price shocks was also conducted given that commodities constitute around 80 percent of total exports in Burkina Faso. This shock is applied to all countries where commodities constitute more than 50 percent of total exports of goods and services over the previous three-year period. The scenario captures the impact of a sudden one standard deviation decline in the export prices of gold, grains, and cotton in 2020, corresponding to a decline in prices by 16 percent, 11 percent, and 15 percent, respectively, and incorporates macroeconomic interactions on the real GDP growth, inflation and primary balance. 7 Text Table 5. Burkina Faso: Debt Carrying Capacity and Relevant Indicative Thresholds 8 DEBT SUSTAINABILITY External Debt Sustainability Analysis 10. Under the baseline scenario, all external public and publicly-guaranteed (PPG) debt indicators remain below the policy-relevant thresholds for the next ten years (Table 1 and Figure 1). Having a 40 percent threshold, the present value (PV) of external debt-to-GDP ratio is expected to remain around 18 percent over the projection horizon. The ratio increases from 18.7 percent in 2020 to 19.4 in 2030, albeit after a reduction in initial years, reflecting the external and domestic impact of the COVID-19 outbreak and policy responses to mitigate.5 The PV of debt- to-exports ratio is expected to grow steadily from 66.2 percent in 2020 to 100.4 percent in 2030 yet remains below the 180 percent threshold. Neither of the debt service indicators causes any breach of their respective thresholds under the baseline scenario. The PV of debt service-to-exports ratio remains at around 5 percent for most of the next 10 years, increasing from 3.6 percent in 2020 reaching 6.9 percent in 2030; while the debt service-to-revenue ratio (excluding grants) increases from 5.6 percent in 2020 to reach 6.4 percent in 2030. 11. The standardized stress tests show that an export shock has the largest negative impact on the debt trajectory, triggering breaches to two of the external PPG debt indicators (Table 3). The PV of debt-to-exports ratio is significantly impacted by the export shock driven mostly by a high historical volatility in receipts in US dollar terms. The indicator reaches 212.4 percent in 2022 (against 66.0 percent under the baseline), and it remains above the threshold of 180 percent for the remainder of the projection period. The test highlights the need for a sustained effort to improve the economy’s potential in exporting goods and services by addressing the security situation, through policy reforms in the mining sector, and diversification efforts. Similarly, the PV of debt service-to-exports ratio breaches its threshold of 15 percent by reaching 19.5 percent in 2028 and remaining above for the remainder of the period. Other shocks, including to real GDP growth, the primary balance, a one-time 30 percent depreciation of CFAF and the tailored tests (for contingent liabilities and commodity prices) do not lead to any breach of the debt thresholds (Table 3). Public Sector Debt Sustainability Analysis 12. The baseline scenario projects a marginal downward trend of PPG public debt following a peak of 48.1 percent of GDP projected for end 2022 (Table 2 and Figure 2). An increase in public debt is projected in 2020 and 2021—to finance the pandemic response—with both domestic and external debt projected to rise. Over the longer-term, the planned fiscal adjustment allows the debt ratio to be under control. 13. Under the baseline scenario, the PV of public debt-to-GDP ratio does not breach the 55 percent benchmark. The ratio remains around 40 percent over the projection horizon reflecting the temporary impact of COVID-19 shock, long-term effects of fiscal consolidation in 5 External debt dynamics are highly driven by non-identified debt-creating flows (as illustrated by residuals in Table 1). These residuals are persistent and consistent with historical dynamics, and they are largely due to the definition of external debt on the currency-basis, in misalignment to the current account which is conducted on the residency-basis. 9 line with WAEMU commitments, and the limit imposed to off-budget debt creating operations. The PV of debt-to-revenue and grants ratio is expected to peak in 2023 at 194.7 percent and then gradually decrease to 168.9 percent by 2030. The PV of debt service-to-revenue and grants ratio escalates rapidly from 37.3 percent in 2020 to 50.9 percent by 2022, given the short maturity of domestic financing. The latter raises concerns over the medium to long term about liquidity risks to the service of total public debt, especially as domestic debt is driven up by cash flow management issues. 14. The standardized sensitivity analysis shows that the most extreme shock leading to the highest debt figures in the projection period is a shock to exports, which breaches the public debt benchmark (Figure 2, Table 4). The PV of debt-to-GDP ratio would peak at 56 percent of GDP, under the stress test of a shock to exports—the most extreme shock, crossing the benchmark of 55 percent. Although the breach occurs in the near future, the deviations are minimal. The exports shock is also the most extreme shock affecting the PV of debt-to-revenue ratio. The tailored test for the combined contingent liability shock also causes a deterioration in debt sustainability, featuring as the most extreme shock affecting the debt service-to-revenue ratio. RISKS AND VULNERABILITIES 15. A meaningful response to the COVID-19 fallout entails heightened fiscal risks. In the light of the COVID-19 outbreak, and the ongoing security crisis, the fiscal framework for 2020 projects a deficit of 5.3 percent of GDP, and it remains above the WAEMU fiscal deficit convergence criteria of 3.0 percent of GDP until 2023. Nevertheless, the baseline scenario assumes that Burkina Faso achieves the planned fiscal consolidation by 2024, stabilizing thereafter at 3.0 percent of GDP (see Policy Note). Although pre-COVID-19 this target seemed achievable, it now looks more challenging and could well not materialize. In addition, exports and overall GDP may develop less favorably than projected under the baseline in view of the vulnerability of primary exports (namely gold and cotton) and imports (oil) to price shocks, to a second wave of COVID- 19 infections that would trigger another severe lockdown, and a further deterioration in security conditions as highlighted in Box 1. 16. Burkina Faso would benefit from a more diversified export base of goods and services. For all external debt indicators, the most extreme shock is an export shock. This highlights the importance of diversifying exports of goods, which currently consist mainly of gold and, to a much lesser extent, of agricultural products. Moreover, this underlies the importance of strengthening the services export sector to address the imbalances in the trade of services. Burkina Faso has also a high risk of debt shocks arising from (present and future) contingent liabilities associated with various off-budget activities, including debt of state-owned enterprises, fuel subsidies, pre-financing of public investment projects and other potential PPPs. The materialization of these fiscal costs could lead to a deviation from the baseline path. 10 CONCLUSION 17. According to staff’s assessment, Burkina Faso’s risk of external debt distress remains moderate. The baseline scenario shows no breach of debt distress thresholds for any of the debt and debt service indicators. However, under a standard stress test of a shock to exports aimed at illustrating the potential impact of external risks, two thresholds of external PPG debt – debt service-to-exports and debt service-to-revenue ratios – sustainability are breached. Consequently, Burkina Faso’s risk of external debt distress is assessed to be ‘moderate’. The granularity in the risk rating (Figure 5) suggests that there is substantial space to absorb shocks without risk of downgrading to a ‘high’ risk of debt distress. 18. The DSA suggests that the overall risk of public debt distress remains moderate. The risk of overall debt distress remains moderate because the benchmark for the PV of public debt- to-GDP ratio is breached for three years under the exports shock scenario and also because the risk of external debt distress is moderate. To avoid a deterioration of the debt distress rating, several risks and vulnerabilities need to be addressed, particularly: (i) the fiscal response to COVID-19 and pressures to deviate from the agreed medium-term fiscal consolidation; (ii) a non-diversified export base and a weak services exporting sector; (iii) fiscal costs arising from contingent liabilities accounting associated with various off-budget activities, including SOE debts and potential future PPP arrangements; (iv) rollover risk related to domestic financing; and (v) limit non-concessional borrowing and strengthen the implementation of the MTDS. AUTHORITIES’ VIEW 19. The authorities concurred with the results of the current DSA. They agreed that fiscal response to COVID-19 remains the most important concern in the short run. In view of the increasing debt service of domestic debt, the authorities are considering expanding their external financing while giving priority to concessional financing.6 Semi-concessional financing sources with conditions that would be more favorable than the conditions on the domestic market are also being actively considered. The authorities reiterated their commitment to maintain prudent overall debt levels with a view to rebalancing debt composition and maintaining the assessed risk of debt distress at a ‘moderate’ rating. 6 Concessional loans are defined as loans with a grant element above 35 percent. Semi-concessional loans refers to loans that have a material positive grant element but that is lower than 35 percent. 11 Table 1. Burkina Faso: External Debt Sustainability Framework, Baseline Scenario, 2017–2040 (In percent of GDP, unless otherwise indicated) (In percent of GDP, unless otherwise indicated) Actual Projections Average 8/ 2017 2018 2019 2020 2021 2022 2023 2024 2025 2030 2040 Historical Projections External debt (nominal) 1/ 21.1 21.5 23.7 25.0 24.3 24.1 24.1 24.2 24.4 25.2 29.1 21.7 24.6 Definition of external/domestic debt Currency-based of which: public and publicly guaranteed (PPG) 21.1 21.5 23.7 25.0 24.3 24.1 24.1 24.2 24.4 25.2 29.1 21.7 24.6 Is there a material difference between the Yes two criteria? Change in external debt -2.6 0.4 2.3 1.3 -0.7 -0.2 0.0 0.1 0.2 0.3 0.4 Identified net debt-creating flows 2.7 2.7 6.6 4.5 3.6 3.4 4.2 4.4 4.5 5.6 6.7 5.4 4.6 Non-interest current account deficit 4.8 3.9 4.4 3.4 3.2 3.6 4.4 4.7 4.9 6.0 7.3 4.7 4.7 Deficit in balance of goods and services 5.0 4.0 5.1 4.4 3.6 4.2 5.0 5.5 5.9 7.4 9.0 6.6 5.7 Exports 27.6 27.8 27.6 28.3 27.7 26.5 25.2 24.4 23.6 19.4 13.4 Debt Accumulation Imports 32.7 31.9 32.6 32.7 31.3 30.7 30.2 29.9 29.5 26.8 22.4 7.0 35 Net current transfers (negative = inflow) -2.8 -2.9 -2.9 -3.6 -2.7 -2.7 -2.6 -2.6 -2.7 -2.4 -1.7 -3.6 -2.7 of which: official -0.9 -1.0 -1.0 -2.2 -0.8 -0.8 -0.8 -0.8 -0.8 -0.8 -0.8 6.0 30 Other current account flows (negative = net inflow) 2.6 2.8 2.3 2.7 2.3 2.1 2.0 1.8 1.6 0.9 0.0 1.7 1.7 Net FDI (negative = inflow) -0.1 1.2 1.2 0.3 0.9 0.6 0.7 0.6 0.5 0.4 0.2 1.5 0.5 5.0 25 Endogenous debt dynamics 2/ -2.1 -2.5 1.0 0.8 -0.6 -0.9 -0.9 -0.9 -0.9 -0.8 -0.8 Contribution from nominal interest rate 0.2 0.2 0.3 0.1 0.3 0.3 0.3 0.4 0.4 0.5 0.7 4.0 20 Contribution from real GDP growth -1.3 -1.3 -1.3 0.7 -0.9 -1.2 -1.2 -1.2 -1.3 -1.3 -1.5 Contribution from price and exchange rate changes -0.9 -1.4 1.9 … … … … … … … … 3.0 15 Residual 3/ -5.3 -2.3 -4.4 -3.2 -4.3 -3.6 -4.2 -4.3 -4.3 -5.3 -6.3 -5.1 -4.5 of which: exceptional financing 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.0 10 Sustainability indicators 1.0 5 PV of PPG external debt-to-GDP ratio ... ... 16.4 18.7 17.5 17.5 17.7 17.9 18.2 19.4 23.8 PV of PPG external debt-to-exports ratio ... ... 59.4 66.2 63.2 66.0 70.1 73.5 77.2 100.4 177.9 0.0 0 PPG debt service-to-exports ratio 3.5 3.5 4.3 3.6 4.3 4.1 4.2 4.5 4.6 6.9 13.5 2020 2022 2024 2026 2028 2030 PPG debt service-to-revenue ratio 5.7 5.7 6.3 5.6 6.4 5.7 5.5 5.6 5.5 6.4 7.7 Gross external financing need (Billion of U.S. dollars) 0.8 1.0 1.1 0.8 1.0 1.1 1.3 1.5 1.6 2.9 7.5 Debt Accumulation Grant-equivalent financing (% of GDP) Key macroeconomic assumptions Grant element of new borrowing (% right scale) Real GDP growth (in percent) 6.2 6.8 5.7 -2.8 4.1 5.6 5.6 5.6 5.6 5.6 5.6 6.0 4.7 GDP deflator in US dollar terms (change in percent) 4.1 7.1 -8.1 4.4 10.0 3.3 2.8 2.5 2.4 2.3 2.3 -0.4 3.4 Effective interest rate (percent) 4/ 0.9 1.0 1.5 0.5 1.5 1.4 1.5 1.6 1.6 2.1 2.6 1.0 1.6 External debt (nominal) 1/ Growth of exports of G&S (US dollar terms, in percent) 19.7 15.2 -3.9 4.2 12.2 4.4 3.1 4.7 4.7 3.9 4.3 17.8 4.8 of which: Private Growth of imports of G&S (US dollar terms, in percent) 13.8 11.7 -0.5 1.5 9.8 7.1 6.8 6.8 6.8 6.0 6.1 11.3 6.2 25 Grant element of new public sector borrowing (in percent) ... ... ... 31.4 31.2 30.6 30.0 29.3 28.7 25.7 19.6 ... 28.7 25 Government revenues (excluding grants, in percent of GDP) 16.9 17.0 18.9 18.0 18.5 19.0 19.2 19.5 19.8 21.0 23.4 15.9 19.7 Aid flows (in Billion of US dollars) 5/ 124.8 131.4 156.3 0.9 0.7 0.7 0.8 0.8 0.9 1.2 2.0 25 Grant-equivalent financing (in percent of GDP) 6/ ... ... ... 5.8 3.7 3.8 3.7 3.7 3.6 3.4 2.9 ... 3.8 25 Grant-equivalent financing (in percent of external financing) 6/ ... ... ... 67.4 70.7 68.1 67.1 66.2 65.2 60.4 49.7 ... 65.1 25 Nominal GDP (Billion of US dollars) 14 16 16 16 18 20 22 23 25 37 81 Nominal dollar GDP growth 10.5 14.4 -2.8 1.5 14.6 9.1 8.5 8.2 8.1 8.0 8.0 5.7 8.2 24 24 Memorandum items: 24 PV of external debt 7/ ... ... 16.4 18.7 17.5 17.5 17.7 17.9 18.2 19.4 23.8 24 In percent of exports ... ... 59.4 66.2 63.2 66.0 70.1 73.5 77.2 100.4 177.9 Total external debt service-to-exports ratio 3.5 3.5 4.3 3.6 4.3 4.1 4.2 4.5 4.6 6.9 13.5 24 PV of PPG external debt (in Billion of US dollars) 2.6 3.0 3.2 3.5 3.8 4.2 4.6 7.3 19.2 23 (PVt-PVt-1)/GDPt-1 (in percent) 2.6 1.3 1.6 1.7 1.7 1.8 1.9 2.3 2020 2022 2024 2026 2028 2030 Non-interest current account deficit that stabilizes debt ratio 7.4 3.5 2.2 2.1 3.9 3.8 4.4 4.6 4.7 5.7 6.9 Sources: Country authorities; and staff estimates and projections. 0 1/ Includes both public and private sector external debt. 2/ Derived as [r - g - ρ(1+g)]/(1+g+ρ+gρ) times previous period debt ratio, with r = nominal interest rate; g = real GDP growth rate, and ρ = growth rate of GDP deflator in U.S. dollar terms. 3/ Includes exceptional financing (i.e., changes in arrears and debt relief); changes in gross foreign assets; and valuation adjustments. For projections also includes contribution from price and exchange rate changes. 4/ Current-year interest payments divided by previous period debt stock. 5/ Defined as grants, concessional loans, and debt relief. 6/ Grant-equivalent financing includes grants provided directly to the government and through new borrowing (difference between the face value and the PV of new debt). 7/ Assumes that PV of private sector debt is equivalent to its face value. 8/ Historical averages are generally derived over the past 10 years, subject to data availability, whereas projections averages are over the first year of projection and the next 10 years. 12 Table 2. Burkina Faso: Public Sector Debt Sustainability Framework, Baseline Scenario, 2017–2040 (In percent of GDP, unless otherwise indicated) Table 2. Burkina Faso: Public Sector Debt Sustainability Framework, Baseline Scenario, 2017-2040 (In percent of GDP, unless otherwise indicated) Actual Projections Average 6/ 2017 2018 2019 2020 2021 2022 2023 2024 2025 2030 2040 Historical Projections Public sector debt 1/ 33.5 37.7 42.7 46.1 48.2 49.3 49.6 49.0 48.3 45.8 42.8 30.8 47.6 Definition of external/domestic of which: external debt 21.1 21.5 23.7 25.0 24.3 24.1 24.1 24.2 24.4 25.2 29.1 21.7 24.6 Currency-based debt of which: local-currency denominated Change in public sector debt 0.2 4.2 5.0 3.4 2.2 1.1 0.3 -0.7 -0.6 -0.4 -0.2 Is there a material difference Identified debt-creating flows 1.6 1.5 2.6 5.7 2.8 1.3 0.5 -0.6 -0.6 0.1 0.4 1.6 0.8 Yes between the two criteria? Primary deficit 6.0 3.3 2.2 4.1 3.9 3.1 2.1 1.1 1.1 1.2 1.4 2.7 1.9 Revenue and grants 19.2 19.4 20.4 22.5 21.5 22.0 22.2 22.4 22.7 23.7 25.6 19.3 22.7 of which: grants 2.4 2.4 1.5 4.5 3.0 3.0 2.9 2.9 2.8 2.6 2.2 Public sector debt 1/ Primary (noninterest) expenditure 25.3 22.7 22.6 26.6 25.4 25.1 24.3 23.5 23.8 24.8 26.9 21.9 24.6 Automatic debt dynamics -4.4 -1.4 0.7 1.6 -1.0 -1.8 -1.7 -1.7 -1.7 -1.1 -0.9 of which: local-currency denominated Contribution from interest rate/growth differential -1.9 -2.2 -0.8 1.6 -1.0 -1.8 -1.7 -1.7 -1.7 -1.1 -0.9 of which: foreign-currency denominated of which: contribution from average real interest rate 0.0 -0.1 1.2 0.4 0.8 0.8 0.9 1.0 0.9 1.4 1.3 of which: contribution from real GDP growth -1.9 -2.1 -2.0 1.2 -1.8 -2.5 -2.6 -2.6 -2.6 -2.5 -2.3 60 Contribution from real exchange rate depreciation -2.4 0.8 1.5 ... ... ... ... ... ... ... ... 50 Other identified debt-creating flows 0.0 -0.4 -0.3 -0.1 -0.1 0.0 0.0 0.0 0.0 0.0 0.0 -0.2 0.0 Privatization receipts (negative) 0.0 -0.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 40 Recognition of contingent liabilities (e.g., bank recapitalization) 0.0 -0.1 -0.3 -0.1 -0.1 0.0 0.0 0.0 0.0 0.0 0.0 30 Debt relief (HIPC and other) 7/ 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other debt creating or reducing flow (please specify) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 20 Residual -1.4 2.7 2.4 -2.3 -0.6 -0.2 -0.1 -0.1 -0.1 -0.5 -0.6 0.2 -0.6 10 Sustainability indicators 0 PV of public debt-to-GDP ratio 2/ ... ... 35.4 38.8 41.3 42.7 43.2 42.6 42.1 40.0 37.6 2020 2022 2024 2026 2028 2030 PV of public debt-to-revenue and grants ratio … … 173.7 172.5 192.0 193.9 194.7 190.2 185.6 168.9 147.0 Debt service-to-revenue and grants ratio 3/ 22.6 27.8 31.6 37.3 45.0 50.9 51.8 53.1 50.3 41.4 25.7 Gross financing need 4/ 10.3 8.3 8.4 12.4 13.4 14.3 13.6 13.0 12.5 11.0 8.0 of which: held by residents of which: held by non-residents Key macroeconomic and fiscal assumptions 1 Real GDP growth (in percent) 6.2 6.8 5.7 -2.8 4.1 5.6 5.6 5.6 5.6 5.6 5.6 6.0 4.7 1 Average nominal interest rate on external debt (in percent) 0.9 1.0 1.5 0.5 1.4 1.4 1.5 1.6 1.6 2.1 2.6 1.0 1.6 1 Average real interest rate on domestic debt (in percent) 2.1 1.9 8.0 3.0 4.9 4.0 4.3 4.3 4.3 4.5 4.6 3.8 4.3 1 Real exchange rate depreciation (in percent, + indicates depreciation) -11.0 4.0 7.4 … ... ... ... ... ... ... ... 3.3 ... 1 1 n.a. Inflation rate (GDP deflator, in percent) 2.0 2.4 -3.0 2.2 2.3 2.3 2.3 2.3 2.3 2.3 2.3 1.5 2.3 0 Growth of real primary spending (deflated by GDP deflator, in percent) 29.1 -4.2 5.3 14.5 -0.7 4.4 2.2 2.1 6.9 6.5 6.4 7.4 5.6 0 Primary deficit that stabilizes the debt-to-GDP ratio 5/ 5.8 -0.9 -2.8 0.7 1.7 2.0 1.8 1.8 1.7 1.6 1.6 0.7 1.6 0 PV of contingent liabilities (not included in public sector debt) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0 0 2020 2022 2024 2026 2028 2030 Sources: Country authorities; and staff estimates and projections. 1/ Coverage of debt: The central government, central bank . Definition of external debt is Currency-based. 2/ The underlying PV of external debt-to-GDP ratio under the public DSA differs from the external DSA with the size of differences depending on exchange rates projections. 3/ Debt service is defined as the sum of interest and amortization of medium and long-term, and short-term debt. 4/ Gross financing need is defined as the primary deficit plus debt service plus the stock of short-term debt at the end of the last period and other debt creating/reducing flows. 5/ Defined as a primary deficit minus a change in the public debt-to-GDP ratio ((-): a primary surplus), which would stabilizes the debt ratio only in the year in question. 6/ Historical averages are generally derived over the past 10 years, subject to data availability, whereas projections averages are over the first year of projection and the next 10 years. 7/ CCRT debt relief is included in the primary deficit and does not show up in“debt relief (HIPC and other)”. 13 Figure 1. Burkina Faso: Indicators of Public and Publicly Guaranteed External Debt Under Alternative Scenarios, 2020–2030 14 Figure 2. Burkina Faso: Indicators of Public Debt under Alternative Scenarios, 2020–2030 PV of Debt-to-GDP Ratio 60 50 40 30 20 Most extreme shock: Exports 10 0 2020 2022 2024 2026 2028 2030 PV of Debt-to-Revenue Ratio Debt Service-to-Revenue Ratio 300 70 60 250 50 200 40 150 30 100 20 50 Most extreme shock: Combined contingent liabilities Most extreme shock: Exports 10 0 0 2020 2022 2024 2026 2028 2030 2020 2022 2024 2026 2028 2030 Baseline Most extreme shock 1/ TOTAL public debt benchmark Historical scenario Borrowing assumptions on additional financing needs resulting from the stress Default User defined tests* Shares of marginal debt External PPG medium and long-term 23% 23% Domestic medium and long-term 44% 44% Domestic short-term 33% 33% Terms of marginal debt External MLT debt Avg. nominal interest rate on new borrowing in USD 2.3% 2.3% Avg. maturity (incl. grace period) 24 24 Avg. grace period 5 5 Domestic MLT debt Avg. real interest rate on new borrowing 4.7% 4.7% Avg. maturity (incl. grace period) 5 5 Avg. grace period 1 1 Domestic short-term debt Avg. real interest rate 3.1% 3.1% * Note: The public DSA allows for domestic financing to cover the additional financing needs generated by the shocks under the stress tests in the public DSA. Default terms of marginal debt are based on baseline 10-year projections. Sources: Country authorities; and staff estimates and projections. 1/ The most extreme stress test is the test that yields the highest ratio in or before 2030. The stress test with a one-off breach is also presented (if any), while the one-off breach is deemed away for mechanical signals. When a stress test with a one-off breach happens to be the most exterme shock even after disregarding the one-off breach, only that stress test (with a one-off breach) would be presented. 15 Table 3. Burkina Faso: Sensitivity Analysis for Key Indicators of Public and Publicly Guaranteed External Debt, 2020–2030 (In percent) Projections 1/ 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 PV of debt-to GDP ratio Baseline 19 18 18 18 18 18 18 19 19 19 19 A. Alternative Scenarios A1. Key variables at their historical averages in 2020-2030 2/ 19 20 22 24 25 26 27 27 28 28 28 0 #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A B. Bound Tests B1. Real GDP growth 19 18 18 18 19 19 19 19 20 20 20 B2. Primary balance 19 18 18 18 19 19 19 20 20 20 20 B3. Exports 19 23 33 33 33 33 32 32 31 30 30 B4. Other flows 3/ 19 19 21 21 21 21 21 21 21 21 22 B5. Depreciation 19 22 19 19 20 20 20 21 21 22 22 B6. Combination of B1-B5 19 23 23 23 23 23 23 23 23 23 23 C. Tailored Tests C1. Combined contingent liabilities 19 19 19 20 20 21 21 22 22 22 23 C2. Natural disaster n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C3. Commodity price 19 19 20 20 20 20 20 20 20 20 20 C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Threshold 40 40 40 40 40 40 40 40 40 40 40 PV of debt-to-exports ratio Baseline 66 63 66 70 73 77 81 85 90 95 100 A. Alternative Scenarios A1. Key variables at their historical averages in 2020-2030 2/ 66 74 84 94 102 110 118 125 132 139 146 0 66 57 52 48 42 37 31 27 23 21 21 B. Bound Tests B1. Real GDP growth 66 63 66 70 73 77 81 85 90 95 100 B2. Primary balance 66 64 68 73 77 81 85 90 95 100 106 B3. Exports 66 108 212 221 226 233 240 246 249 254 259 B4. Other flows 3/ 66 69 79 84 87 91 95 98 102 107 111 B5. Depreciation 66 63 57 61 65 68 72 76 81 87 93 B6. Combination of B1-B5 66 87 79 110 114 119 124 129 134 139 146 C. Tailored Tests C1. Combined contingent liabilities 66 68 73 79 83 88 93 99 104 110 117 C2. Natural disaster n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C3. Commodity price 66 69 76 80 83 86 89 92 96 100 104 C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Threshold 180 180 180 180 180 180 180 180 180 180 180 Debt service-to-exports ratio Baseline 4 4 4 4 4 5 6 6 6 7 7 A. Alternative Scenarios A1. Key variables at their historical averages in 2020-2030 2/ 4 5 5 5 6 6 8 9 9 10 11 0 4 5 4 4 3 3 4 3 2 0 -1 B. Bound Tests B1. Real GDP growth 4 4 4 4 4 5 6 6 6 7 7 B2. Primary balance 4 4 4 4 5 5 6 6 7 7 7 B3. Exports 4 6 8 11 11 11 13 16 19 20 20 B4. Other flows 3/ 4 4 4 5 5 5 6 7 8 8 8 B5. Depreciation 4 4 4 4 4 4 6 6 6 6 6 B6. Combination of B1-B5 4 5 6 6 6 7 8 9 10 10 10 C. Tailored Tests C1. Combined contingent liabilities 4 4 4 4 5 5 6 6 7 7 7 C2. Natural disaster n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C3. Commodity price 4 4 4 5 5 5 6 7 7 7 8 C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Threshold 15 15 15 15 15 15 15 15 15 15 15 Debt service-to-revenue ratio Baseline 6 6 6 6 6 6 6 7 7 6 6 A. Alternative Scenarios A1. Key variables at their historical averages in 2020-2030 2/ 6 7 7 7 7 7 9 9 10 10 10 0 6 7 5 5 4 4 5 3 2 0 -1 B. Bound Tests B1. Real GDP growth 6 7 6 6 6 6 7 7 7 7 7 B2. Primary balance 6 6 6 6 6 6 7 7 7 7 7 B3. Exports 6 7 7 8 8 8 9 10 12 11 11 B4. Other flows 3/ 6 6 6 6 6 6 7 7 8 8 7 B5. Depreciation 6 8 7 6 6 6 8 8 7 7 7 B6. Combination of B1-B5 6 7 7 7 7 7 7 8 8 8 8 C. Tailored Tests C1. Combined contingent liabilities 6 6 6 6 6 6 7 7 7 7 7 C2. Natural disaster n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C3. Commodity price 6 7 6 6 6 6 7 7 7 7 7 C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Threshold 18 18 18 18 18 18 18 18 18 18 18 Sources: Country authorities; and staff estimates and projections. 1/ A bold value indicates a breach of the threshold. 2/ Variables include real GDP growth, GDP deflator (in U.S. dollar terms), non-interest current account in percent of GDP, and non-debt creating flows. 3/ Includes official and private transfers and FDI. 16 Table 4. Burkina Faso: Sensitivity Analysis for Key Indicators of Public Debt, 2020–2030 (In percent) Projections 1/ 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 PV of Debt-to-GDP Ratio Baseline 39 41 43 43 43 42 42 41 41 40 40 A. Alternative Scenarios A1. Key variables at their historical averages in 2020-2030 2/ 39 40 41 42 43 44 45 46 47 48 49 0 #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A B. Bound Tests B1. Real GDP growth 39 42 45 47 47 47 47 47 47 48 48 B2. Primary balance 39 43 45 46 45 45 44 43 43 42 42 B3. Exports 39 46 56 56 55 54 53 52 51 49 48 B4. Other flows 3/ 39 43 46 47 46 45 45 44 43 43 42 B5. Depreciation 39 44 43 42 40 39 37 35 33 32 30 B6. Combination of B1-B5 39 41 42 42 41 40 40 40 39 39 38 C. Tailored Tests C1. Combined contingent liabilities 39 49 50 51 50 49 48 48 47 46 46 C2. Natural disaster n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C3. Commodity price 39 43 46 49 50 50 51 51 51 51 51 C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. TOTAL public debt benchmark 55 55 55 55 55 55 55 55 55 55 55 PV of Debt-to-Revenue Ratio Baseline 172 192 194 195 190 186 181 178 175 172 169 A. Alternative Scenarios A1. Key variables at their historical averages in 2020-2030 2/ 172 186 188 191 193 195 198 200 203 205 208 0 37 38 40 39 39 39 38 37 37 38 38 B. Bound Tests B1. Real GDP growth 172 197 205 209 208 206 204 203 202 201 201 B2. Primary balance 172 198 206 206 201 196 191 188 184 181 177 B3. Exports 172 215 255 253 246 239 232 225 218 210 204 B4. Other flows 3/ 172 200 210 210 205 200 195 190 186 182 178 B5. Depreciation 172 207 199 193 182 172 162 153 145 137 130 B6. Combination of B1-B5 172 190 193 190 184 179 174 172 169 165 162 C. Tailored Tests C1. Combined contingent liabilities 172 229 229 228 222 216 210 206 201 197 193 C2. Natural disaster n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C3. Commodity price 172 209 220 230 229 227 223 219 217 216 215 C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Debt Service-to-Revenue Ratio Baseline 37 45 51 52 53 50 49 46 44 43 41 A. Alternative Scenarios A1. Key variables at their historical averages in 2020-2030 2/ 37 45 50 51 53 52 53 51 51 52 52 0 37 38 40 39 39 39 38 37 37 38 38 B. Bound Tests B1. Real GDP growth 37 46 53 55 57 55 55 52 51 51 50 B2. Primary balance 37 45 53 56 56 53 52 49 46 45 44 B3. Exports 37 45 52 54 55 52 50 48 48 46 45 B4. Other flows 3/ 37 45 51 52 54 51 49 46 45 44 42 B5. Depreciation 37 43 49 48 50 48 47 43 42 41 39 B6. Combination of B1-B5 37 44 50 52 52 49 48 45 44 42 41 C. Tailored Tests C1. Combined contingent liabilities 37 45 65 61 62 60 59 53 51 49 47 C2. Natural disaster n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. C3. Commodity price 37 48 55 58 61 60 59 56 55 54 53 C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Sources: Country authorities; and staff estimates and projections. 1/ A bold value indicates a breach of the benchmark. 2/ Variables include real GDP growth, GDP deflator and primary deficit in percent of GDP. 3/ Includes official and private transfers and FDI. 17 Figure 3. Burkina Faso: Drivers of Debt Dynamics - Baseline Scenario Gross Nominal PPG External Debt Debt-creating flows Unexpected Changes in Debt 1/ (in percent of GDP; DSA vintages) (percent of GDP) (past 5 years, percent of GDP) Current DSA 60 Residual 20 80 Previous DSA proj. 70 DSA-2015 40 Interquartile 15 Price and range (25-75) 60 exchange rate 10 50 20 Real GDP growth Change in PPG 5 40 debt 3/ 0 Nominal 30 interest rate 0 20 -20 Median Current -5 10 account + FDI -40 -10 0 Change in 5-year 5-year 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 PPG debt 3/ Contribution of Distribution across LICs 2/ historical projected -15 unexpected change change Public debt Gross Nominal Public Debt Debt-creating flows Unexpected Changes in Debt 1/ (in percent of GDP; DSA vintages) (percent of GDP) (past 5 years, percent of GDP) Residual 40 Current DSA Previous DSA proj. 20 DSA-2015 Interquartile 80 Other debt range (25-75) creating 15 70 flows 20 60 Real Exchange 10 50 rate depreciation Change in debt 40 Real GDP 5 growth 0 30 20 Real interest 0 rate 10 -20 -5 Median 0 Primary Contribution of deficit 5-year 5-year 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 unexpected Distribution across LICs 2/ historical projected changes -10 change change 1/ Difference between anticipated and actual contributions on debt ratios. 2/ Distribution across LICs for which LIC DSAs were produced. 3/ Given the relatively low private external debt for average low-income countries, a ppt change in PPG external debt should be largely explained by the drivers of the external debt dynamics equation. 18 Figure 4. Burkina Faso: Realism Tools 3-Year Adjustment in Primary Balance Fiscal Adjustment and Possible Growth Paths 1/ (Percentage points of GDP) 8 1 14 Distribution 1/ Projected 3-yr adjustment 6 12 3-year PB adjustment greater In percentage points of GDP 0 than 2.5 percentage points of 4 10 GDP in approx. top quartile In percent 8 2 -1 6 0 -2 4 -2 2 -4 -3 2014 2015 2016 2017 2018 2019 2020 2021 0 Baseline Multiplier = 0.2 Multiplier = 0.4 more -4.5 -4.0 -3.5 -3.0 -2.5 -2.0 -1.5 -1.0 -0.5 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5 6.0 6.5 7.0 7.5 8.0 Multiplier = 0.6 Multiplier = 0.8 1/ Data cover Fund-supported programs for LICs (excluding emergency financing) approved since 1990. The 1/ Bars refer to annual projected fiscal adjustment (right-hand side scale) and lines show possible real size of 3-year adjustment from program inception is found on the horizontal axis; the percent of sample is GDP growth paths under different fiscal multipliers (left-hand side scale). found on the vertical axis. Public and Private Investment Rates Contribution to Real GDP growth (percent of GDP) (percent, 5-year average) 20 6 18 5 16 14 4 12 10 3 8 2 6 4 1 2 0 0 Historical Projected (Prev. DSA) Projected (Curr. DSA) 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Gov. Invest. - Prev. DSA Gov. Invest. - Curr. DSA Contribution of other factors Priv. Invest. - Prev. DSA Priv. Invest. - Curr. DSA Contribution of government capital 19 Figure 5. Burkina Faso: Qualification of the Moderate Category, 2020–2030 1/ PV of debt-to GDP ratio PV of debt-to-exports ratio 45 200 40 180 Threshold 35 160 140 (1-X)*Threshold 30 120 25 (1-Y)*Threshold 100 20 80 15 60 10 40 5 20 0 0 2020 2022 2024 2026 2028 2030 2020 2022 2024 2026 2028 2030 Debt service-to-exports ratio Debt service-to-revenue ratio 16 20 18 14 16 12 14 10 12 8 10 8 6 6 4 4 2 2 0 0 2020 2022 2024 2026 2028 2030 2020 2022 2024 2026 2028 2030 Threshold Baseline Limited space Some space Substantial space Sources: Country authorities; and staff estimates and projections. 1/ For the PV debt/GDP and PV debt/exports thresholds, x is 20 percent and y is 40 percent. For debt service/Exports and debt service/revenue thresholds, x is 12 percent and y is 35 percent. 20