Document of The World Bank FOR OFFICIAL USE ONLY Report No. 21285-BUR MEMORANDUM OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ONA COUNTRY ASSISTANCE STRATEGY OF THE WORLD BANK GROUP FOR BURKINA FASO November 3, 2000 Country Department for Burkina Faso AFC15 Africa Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS Currency Unit = CPA Franc (CFAF) US$1 = 782 CFAF (October 25, 2000) WEIGHTS AND MEASURES Metric System GOVERNMENT FISCAL YEAR January I - Decemnber 31 ACRONYMS AND ABBREVIATIONS AAA Analytical and Advisory Activities AflDB African Developnent Bank APL Adaptable Program Lending ARTEL Agence de Regulation des Telecommunications BCEAO Banque Centrale des Etars de I'Afrique de l'Ouest CAE Country Assistance Evaluation CAS Country Assistance Strategy CET Conmnon External Tariff CFAA Country Financial Accountability Assessment CFAF CFA Franc COGES Comites de Gestion CPI Consumer Price Index CPIA Country Policy and Institutional Assessment CPPR Country Portfolio Performance Review DAC Development Assistance Commnittee (OECD) ECOWAS Economic Conmiission for West Africaa States EMRSO Economnic Managenment Reform Support Operation EU European Union FIAS Foreign Investmnt Advisory Services FTA Free Trade Area GDP Gross Domestic Product GEF Global Environment Facility GEPRENAF Gestion Participative des Ressources Naturelles et de la Faune HIPC Highly Indebted Poor Countries HIV/AIDS Human hlinunodeficiency VirusAcquired Imenunodeficiency Syndrome ICR LIplenentation Conpletion Report IDA International Developrent Association IDG International Developrment Goals IFC Intemational Finance Corporation IMF International Monetary Fund INSD Institut National de Statistiques et Demographie MIGA Multilateral Investment Guarantee Agency MTEF Medium Term Expenditure Framework NGO Non-Governmental Organization ODA Official Developmnent Assistance OECD Organization for Economnic Cooperation and Developmnent OED Operations Evaluation Department (World Bank) OHADA Organisation pour I'Harmonisation du Droit des Affaires en Afrique ONEA Office National de l'Eau PASECT Projet dtAjustenrent Sectoriel des Transports PER Public Expenditure Review - PFP Poticy Framework Paper PNGT Programme National de Gestion des Te,roirs PNDRD Programme National de Developpement Rural D¢rafisi PROF Poverty Reduction & Growth Facility PRONAGEN Progranme National de Gestion de l'Ecoasteme Naturel PRSC Poverty Reduction Support Credit PRSP Poverty Reduction Strategy Paper PSM Public Sector Management PSAC Programnutic Strctural Adjustrent Credit RPTES Regional Programn for the Traditional Energy Sector SAC Structural Adjustment Credit SILEM Sahel Integrated Low Land Ecosystem Managerment SOFITEX Societe des Fibres Textiles du Burkina Faso SPA Special Program for Africa SWAP Sector Wide Approach UN United Nations WAEMU West African Economic & Monetary Union Vice-President Callisto Madavo Country Director Hasan Tuluy Sector Manager Charles Humphreys Task Team Leader Celestin Monga FOR OFFICIAL USE ONLY MEMORANDUM OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A COUNTRY ASSISTANCE STRATEGY FOR BURKINA FASO TABLE OF CONTENTS Page No. EXECUTIVE SUMMARY (i) INTRODUCTION 1 I. POLICY FRAMEWORK 1 A. BURKINA PASO'S DEVELOPMENT CHALLENGES AND THE GOVERNMENT'S PRSP 1 B. MEDIUM-TERM MACROECONOMIC FRAMEWORK 3 II. BANK GROUP ASSISTANCE STRATEGY 7 A. PROGRESS UNDER LAST CAS AND LESSONS LEARNED 7 B. CAS RATIONALE AND STRATEGIC APPROACH 8 C COUNTRY ASSISTANCE PROGRAM 10 D. VEHICLES FOR BANK ASSISTANCE, ALTERNATIVE SCENARIOS AND CONTINGENCIES 16 m. KEY ISSUES IN IMPLEMENTING THE CAS 23 MONITORING OF OUTCOMES 23 COLLABORATION WITH OTHER DEVELOPMENT PARTNERS 24 IV. RISKS 25 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not be otherwise disclosed without World Bank authorization. MEMORANDUM OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A COUNTRY ASSISTANCE STRATEGY FOR BURKINA FASO TABLE OF CONTENTS (cont'd) TEXT TABLES * Table 1: Selected Indicators * Table 2: Scenario of Moderate Growth - Selected Indicators, 1999-2005 * Table 3: High Growth Scenario - Selected Indicators, 1999-2005 * Table 4: Base Case Assistance Program, FY 2001-2003 • Table 5: Triggers and Main Assumptions for Lending Program Composition * Table 6: Proposed Core Benchmarks during CAS Period BOX TABLES * Box 1: OED Country Assistance Evaluation * Box 2: Client Feedback Survey • Box 3: Bank Group Portfolio (FY01) * Box 4: Inprovements in Governance and Fight Against Corruption * Box 5: Rationale for PRSC in Burkina Faso ATTACHMENTS * 1. Constraints to Growth and Poverty Reduction * 2. Burkina Faso's Poverty Profile * 3. Key Structural Reforms Implemented under Previous CAS * 4. Econometric Model for Macroeconomic Simulations i 5. CAS Formulation: A Participatory Process - 6. Burkina Faso's Gender Profile 7 7. Collaboration with Development Partners - 8. Performance Monitoring Framework - 9. Combating HIV/AIDS * 10. Core Labor Standards ANNEXES * A2: Burkina Faso at a Glance * B 1: CAS Matrix 2000-2003 * B2: Selected Indicators of Bank Portfolio Performance and Management * B3: Bank Group Program Summary: IDA * B3: IFC and MIGA Program * B4: Sunmmary of Nonlending Services B5: Social Indicators * B6: Key Economic Indicators B7: Key Exposure Indicators * B8: Status of Bank-Group Operations * B8: Statement of IFC's Held and Disbursed Portfolio MAP IBRD 28673 MEMORANDUM OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A COUNTRY ASSISTANCE STRATEGY FOR BURKINA FASO EXECUTIVE SUMMARY 1. Burkina Faso is a poor landlocked country with a limited resource base, high vulnerability to external shocks, and acute social needs. With a population of nearly 12 million growing at about 2.8 percent per annum, Burkina Faso's real GNP per capita was US$230 in 1999. Given its narrow tax base and structural Government budget deficit, the country has traditionally benefited from substantial external aid flows (official development assistance received represented about 13 percent of GDP over the last five years). Burkina Faso established a good track record on prudent macroeconomic management and structural reforms during the last CAS period (FY97-00). However, the country has been unable to attract levels of foreign direct investment necessary to increase employment and incomes, owing to poor economic infrastructure and high transaction and input costs, low labor productivity and a large social deficit, the limited size of the modern economy, and several important institutional weaknesses. 2. Objectives. Despite Burkina Faso's average GDP growth of 5.7 percent during 1996-99, 45 percent of the population remains poor and more than two-fifths live in extreme poverty.The central objective of the CAS is to support the Government's efforts as described in the PRSP to achieve sustained high growth rates, to reduce the high incidence of poverty, and to improve the nutrition, health, and education of the rural population, which constitutes the largest group among the poor. Specifically, the CAS seeks to help the Government reduce the poverty headcount ratio by at least 2 percentage points per year during 2000-2003. 3. Approach. While building on the positive development outcomes achieved over the last four years, this CAS * incorporates the results of intensive analytical work and discussions with the Burkinabe authorities on the causes of poverty and the challenges of higher, sustainable growth. * focuses on the areas critical for the poor (education, health, water supply, rural development) and on increasing their access to basic public services. * addresses key cross-cutting issues of capacity building, gender, decentralization, and the environment. * recommends a progressive shift from project support towards program support to further the strategic, efficient, and equitable use of public resources, regardless of source. * acknowledges that efficient use of IDA administrative resources implies high sectoral selectivity. 4. Proposed program. The CAS will focus on (i) supporting policies and programs aimed at improving the supply side of the economy to allow for sustained, broad-based and export-oriented growth; (ii) improving public finance management to ensure that Government revenues are mobilized without distorting the modern sector of the economy, and (iii) ensuring that the allocative process and the effectiveness of public spending will place special emphasis on social services. With respect to the latter, the CAS will contribute to closing the social deficit by supporting ten-year programs in education and health as well as efforts to aggressively fight HIWV/AIDS. -5. The proposed base case lending level of $400-420 million for 11 operations (compared to $205-260 million and 8 operations under the previous CAS) assumes: (i) continued maintenance of i good macroeconomic environment; (ii) satisfactory implementation of the reform program in the key poverty reducing sectors presented in the PRSP; (iii) enhanced external and internal competitiveness through concrete actions to liberalize utilities and reduce input and factor costs as outlined in the PRSP; (iv) improved transparency and accountability in public finance management as outlined in the PRSP; and (v) continued satisfactory portfolio performance. The high case lending would be triggered by: (i) major improvements in public finance management, including the implementation of institutional reforns and budgetary procedures that will make the system more efficient and budget management more expeditious, reliable, transparent, consistent, and accountable; (ii) swift implementation of the private sector development strategy, including completion of the utilities reform program; and (iii) increase in the absorptive capacity for public funds, as demonstrated by the speed and level of implementation of priority public expenditure programs. Triggers for low-case lending would include failure to effectively implement the reform agenda outlined in the PRSP and maintain macroeconomic stability, and sustained decline in portfolio performance. 6. CAS Risks. The implementation of the Bank's proposed assistance strategy faces three types of risks: (i) deterioration of the external environment; (ii) weak institutional capacity; and (iii) political risks. In our assessment, these risks are manageable. The Bank will take all necessary steps described in the CAS to mitigate them. 7. The following issues are suggested for Board discussion: * Are the scale and composition of the proposed program appropriate responses to Burkina Faso's development needs and do they reflect the Bank's comparative advantage? * Is the proposed set of core benchmarks for monitoring and evaluating the implementation of the CAS adequate? ii MEMORANDUM OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A COUNTRY ASSISTANCE STRATEGY FOR BURKINA FASO INTRODUCTION 1. The Government of Burkina Faso has been implementing since 1991 a wide range of economic reforms under a series of stabilization and structural adjustment programs supported by the Bank, the IMF and other donors. In 1995, it issued a Letter of Intent for Sustainable Human Development Policy, which laid down its vision of the country for 1995-2005. The vision consists of transforning Burkina Faso from one of the poorest countries in Sub-Saharan Africa into a middle- income one with a dynamic private sector open to the world economy. However, the authorities now recognize that, in spite of its stabilization record, Burkina Faso will not be able to reduce poverty and meet the 2015 International Development Goals (IDG), unless the country accelerates the pace of reforms to liberalize and open up the economy. The recently completed Poverty Reduction Strategy Paper (PRSP - IDA/Sec/M2000-313) discussed at the Board on June 30, 2000 presents the agenda for a new, more ambitious course of action that would lead to higher growth rates and substantial poverty reduction. 2. The last CAS was discussed by the Board in June 1996 (15740-BUR). This CAS is designed as the Table 1: Selected Indicators Bank business plan for FY01-03 to support Burkina Average Average Estimate Faso's PRSP. Thus, this CAS: (i) reflects the results of (199294) (1995-97) (1999) intensive analytical work and discussions with the Population (million): 9.8 10.6 11.6 Burkinabe authorities on the causes of poverty and Population Growth(%): 2.8 2.8 2.8 the challenges of higher, sustainable growth; (ii) GDP ($ billion): 2.6 2.4 2.8 focuses o the.areascriticalforthepoor(education, GNP per capita ($): 220 230 230 focuses on the areas critical for the poor (education, GDP Growth (%): 3.7 4.9 5.8 health, water, rural development) and on increasing Fiscal DeficiVGDP(%): -7.7 -7.9 -12.3 their access to basic public services; (iii) addresses Inflation (CPI)(%): 0.4 4.6 -1.1 the key cross-cutting issues of capacity building, Export Growth (%) 0.3 7.5 -16.2 gender, and the environment; and (iv) recommends a % of Population living below $1/day: 45% progressive shift from project support towards Litercy Rate: 19% in orderto furthr the stategic,Fenmale Literacy Rate: 9% program support in order to futher the strategic, Gross Primary Enrollment: 41% efficient, and equitable use of all public resources, Ferrle Prirary Enrollment: 34% whatever their source. The CAS incorporates Infant Mortality: 105 per 1000 quantitative, outcome- and results-oriented Life Expectancy at Bith (y33% benchmarks to better monitor and fine-tune the Prevalence of {IIV/AIDS: 6.4% assistance program and its effectiveness. I. POLICY FRAMEWORK A. BURKINA FASO'S DEVELOPMENT CHALLENGES AND THE GOVERNMENT'S PRSP 3. A Strong Analytical Base. Recently, considerable analysis has been undertaken and open debate has occurred over Burkina Faso's growth prospects. In 1999, the Government commissioned a comprehensive analysis of competitiveness and long-term sources of growth in the country. The findings served as the basis of a workshop in Ouagadougou in May 1999 with the participation of the Government, the Bank, donors, the private sector, and civil society. A special Cabinet meeting was later convened by the Head of State. The study Burkina Faso: Competitivite et Croissance Economique-Orientations, Strategies et Actions was completed in early 2000, and identified four major constraints to growth (see Attachment 1): (i) a depleted social and human capital base, low labor productivity, and high unemployment; (ii) weak physical infrastructure, high input costs, anda small modem private sector; (iii) severely constrained institutional capacity; and (iv) a relatively closed economy, exporting only small amounts of raw material and labor. 4. The PRSP is based on a solid understanding of the nature and locus of poverty in Burkina Faso. In 1996 and 2000, the Government issued two poverty profiles drawing from the results of Priority Surveys conducted in 1994 and 1998. Burkina Faso is one of the few francophone West African countries that have produced comparable surveys to analyze poverty trends over a five-year period. The availability of these data has allowed poverty outcomes to be measured and the relationship between poverty and key determinants-geography, family composition, gender, and occupation-to be better understood. 5. Poverty Profile. The survey findings indicate that poverty is a widespread phenomenon in Burkina Faso, and that 45.3 percent of the population (see Table 1) currently lives below the absolute poverty line of approximately CFAF 72,690 per year (compared to 44.5 percent in 1994 with a poverty line of CFAF 41,099)1. Poverty is particularly prevalent in rural areas, although its incidence in urban areas increased by five points from 1994 to 1998, reaching 16 percent in 1998 (see Attachment 2). 6. The participatory surveys of the perceptions of the poor regarding poverty reveal that the situation differs depending on where the respondents live. The key factors for the urban poor are, in order of importance, climate-related hazards, low purchasing power, old age, and large family size. Poor people in rural areas, however, attribute their situation mainly to lack of economic opportunities, physical handicaps, and social decay. The regional analysis of poverty shows that the poverty map in Burkina Faso changed between 1994 and 1998. Although the incidence of poverty decreased significantly (by nearly eight percentage points) in the southern, southeastern, and northern agro-climatic regions, the south-central region experienced an increase of four percentage points. The analysis of poverty among socioeconomic groups (based on source of income) shows that the incidence of poverty is increasing for all groups except cash crop farmers and inactive persons. It is highest among food crop farmers, who account for most of the population living in poverty. 7. Main Pillars of the PRSP and Staff Assessment. The PRSP acknowledges that sustainable poverty reduction requires not only rapid growth, but growth that offers increased access to economic opportunity by the poor and growth that is environmentally sound. It also depends on good governance that ensures transparency and the fair distribution of the benefits of growth. The PRSP outlines and prioritizes the Government's poverty reduction strategy that aims to intervene in four areas: (i) accelerating broad-based growth; (ii) ensuring that the poor have access to basic social services; (iii) expanding opportunities for employment and income-generating activities for the poor; and (iv) promoting good governance. In each area, the document describes the specific actions that the Govermnent intends to take over the medium term to overcome the severe constraints. The 1The poverty line per year and per capita, based on household expenditures, was estimated at CFAF 41,099 (equivalent to US$74) in 1994 and updated to CFAF 72,690 (equivalent to US$123) in 1998. In real terms, these two amounts of money allow the acquisition of the same basket of goods. The sizeable increase in the poverty line is due to the CFA franc devaluation in early - 1994, which has made the basic basket of goods more expensive (the 1994 poverty line was determined on the basis of 1993 costs). 2 action plan focuses on three priority sectors-education, health, and rural development-where public interventions traditionally have had the highest payoff in terns of fostering economic growth, increasing employment opportunities, and raising the Burkinabe standard of living. 8. The Government's core objectives for 2005 can be summarized as follows: * to raise GDP per capita, at a minimum, by 3 percent annually; * to reduce the headcount poverty index from 45.3 percent to less than 35 percent; * to raise the literacy rate from 19 to 40 percent; * to increase life expectancy to 57 years. 9. The Government's poverty reduction strategy is appropriate to Burkina Faso's current circumstances and provides a sound basis on which to elaborate the Bank's assistance strategy. It candidly identifies the causes of poverty, and correctly focuses on key sectoral strategies that would have the highest impact on poverty alleviation. The relationship between poverty and geography, family composition, gender, occupation and other key determinants are well understood. The action plan focuses on three priority sectors: health, education, and rural development. This emphasis is consistent with the finding of the competitiveness study that human capital and rural productivity are key constraints to growth. The monitoring and evaluation system put in place by the Government is appropriate. The costing of the PRSP action plan is considered reliable because it draws upon the long-term strategies under finalization in priority sectors and on the preliminary work done, in cooperation with Bank staff, on the 2001-2003 medium-term expenditure framework. New spending priorities are consistent with Burkina Faso's limited implementation capacity and with non- inflationary finance. The PRSP considers the scope for reallocation of spending, increasing its efficiency and raising new revenue in a non-distortionary manner, as well as scope for more extemal assistance. The use of HIPC resources is clearly presented. 10. While the poverty reduction strategy as the whole is considered sound, there are some elements of concem to staff, which are the topic of ongoing dialogue with the authorities: (i) the PRSP projects real GDP growth rates of over 7 percent a year in 2001-03, which would be unprecedented-the Burkinabe authorities acknowledge that they would have to implement swiftly an ambitious reform agenda to reach that goal; (ii) the PRSP contains limited analysis of why public service quality is low, unit costs high and outcomes disappointing-the Government recognizes this weakness and has just completed a series of PER studies in the social sectors and expects to use the findings to address these questions; and (iii) the need to ensure systematic consultation directly with the poor. This is to be completed through the preparation of a participatory poverty assessment, with technical assistance from the Bank in 2001. The Government plans to update the PRSP annually to take into account the lessons learned from the implementation of policies adopted, the findings of complementary studies carried out by various institutions to gain a better grasp of the poverty phenomenon, and the evolving resource framework. B. MEDIUM-TERM MACROECONOMIC FRAMEWORK Economic Performance under the Previous CAS 11. Between 1996 and 1999, real GDP grew on average by 5.7 percent annually despite a significant deterioration in the terms of trade over the period. The relatively strong growth performance is attributable to the competitiveness gains following the 1994 CFA franc devaluation, to the large public investment program, and to the financial and structural policies aimed at consolidating the market orientation of the economy and maintaining macroeconomic stability. Activity in the manufacturing sector, in particular the cotton ginning industry, was boosted in the 1996-98 period by a strong increase in cotton production from 150,000 tons in 1995/96 to 338,000 3 tons in 1997/98. In 1998/99, cotton production declined to 284,500 tons in response to unfavorable environmental conditions and remained broadly stable in 1999/2000. Despite a sharp decline in international prices in 1999, the ginning and marketing company (SOFITEX) was able to avoid losses by improving quality and reducing costs. Reflecting strong public investment (which averaged almost 14 percent of GDP in 1996-99), the construction and public work sectors also supported growth throughout the period, together with services, which grew on average by 6 percent annually. Inflation on an annual basis, as measured by the GDP deflator, declined from 6 percent in 1996 to 2 percent on average, between 1997 and 1999. 12. Govermment revenue rose during the last CAS period from 12.3 percent of GDP (1996) to 13.5 percent of GDP (1999) despite losses caused by the reduction of external tariff rates associated with the introduction of the West African Economic and Monetary Union (WAEMU) common external tariff (CET). For all three years, the current primary balance exceeded the PRGF targets, and efforts were made to redirect spending to social sectors. The level of public capital spending, mainly externally financed, hovered between 12 and 16 percent of GDP over the period. 13. After declining between 1996 and 1997, the external current account deficit, excluding grants, rose in 1998 and 1999 by 1.5 percentage points of GDP to 16 percent of GDP, due to an increase in imports in 1998 (the result of a rise in spending through the capital budget and private investment) and lower-than-expected cotton exports in 1999. This slightly higher deficit was financed by foreign reserves, without resorting to external arrears. Structural reforms undertaken in 1996-2000 are summarized inAttachment 3. Implementation of these reforms has not,however, led to any significant change in the structure of Burkina Faso's economy, which is still dependent on few primary product exports. 14. Sources of Growth. The key factors in building the growth momentum during the 1994- 99 period were the January 1994 devaluation, the public investment ratio, averaging 14 percent of GDP in 1996-99, and the sound macroeconomic policies and structural reforms under successive adjustment programs, which improved the environment for private sector activities. Recent studies indicate that in order for Burkina Faso to achieve its PRSP goals, the Govemment would need to continue to liberalize the economy, improve external competitiveness, and develop the country's economic and social infrastructure. 15. The agricultural sector, which contributes about 31 percent of GDP at current prices, was the main source of growth. It grew by 3.1 percent in 1999 in real terms (5.5 percent in 1998). Following a record increase of 17 percent in crop year 1998-99, the cereals output increased further by 1.6 percent in 1999 to reach 2.7 million tons. Growth in the primary sector was due to a combination of factors, including structural reforms and changes in sectoral policies that helped raise farrners' income and improved profitability-especially in the cotton sector. Livestock, numbering about 20 million heads of cattle, forestry and fishing continued to grow at a broadly stable rate. There is scope to increase production substantially in cotton and cereals, provided that farmers acquire essential tools and have access to financing. There is also scope to expand significantly production and exports of fruits and vegetables, including mangos, sesame, and sheanuts. 16. Cotton will remain Burkina Faso's main export commodity in the medium tern. Cotton exports, after a very rapid growth in 1995-98 when they more than doubled, reflecting improved incentives to producers, are projected to expand at a more moderate pace of 6 percent per year in 1999-2004. Export growth potential is present for fruits, vegetables, and products that can be used by the pharmaceutical industry. There is also a potential for development of the exports of hides, skins and leather, as well as of gold and other minerals. Gold exports are projected to increase substantially, owing to the intense explorations currently under way. The growth in export volume is predicated however on some price recovery. There should be scope for developing textiles and light 4 manufacturing directed to satisfy regional demand provided Burkina Faso improves its competitiveness. Non traditional exports are projected to grow rapidly from a low base. Linkages between Growth, Consumption, and Poverty 17. Burkina Faso's strong economic performance over the last six years has not translated into increased welfare and poverty reduction. Poverty incidence, as measured by the headcount index, has not been reduced during 1994-98 (45.3 percent in 1998, compared to 44.5 percent in 1994). Two important macro links between poverty, as measured by consumption-based welfare and income per capita, need to be considered. First, because inequalityis high in Burkina Faso, there are important distributional differences among income and socioeconomic groups. Also, little correlation exists between aggregate consumption indicators and consumption in the three lowest income quintiles- the poorest provinces. According to studies by the INSD, the 1994 devaluation and the subsequent structural reforms have raised living standards for cotton producers, especially in the South-West, but may have increased urban poverty. 18. Second, cross-sectional analyses indicate that, on average, increased consumption per capita of 1 percent is associated with a decline in the poverty headcount ratio of about 1 percent. This suggests that policies that lead to an increase in aggregate consumption are likely to lead to a decline in the poverty headcount ratio. In Burkina Faso, the link between aggregate output per capita and consumption per capita is complex. Therefore, the reform program under consideration will reflect analyses of (i) the determinants of aggregate consumption; (ii) the welfare effects of reforms; (iii) the impact of changes in relative prices, terms of trade, and domestic absorption of foreign financing; and (iv) the nature of savings and public expenditure policies in a country with high inequality in income distribution. The next stage of analysis will look at sector specific income distribution and the impact of different growth patterns on improving living standards. Modeling Growth Scenarios 19. An econometric model was built in close collaboration with the Government's economic team to design an appropriate mix of fiscal, monetary, and public investment policies that would bring the economy to a higher growth path while maintaining an adequate level of consumption. 20. Scenario of Moderate Growth. On the basis of the assumptions provided in Attachment 4, simulation results indicate that real GDP growth could average 4.5 percent per annum over the period 2000-05, while the GDP deflator will stabilize below the WAEMU target at about 2.4 percent on average. At the annual real GDP growth rate of about 4.5 percent and given the current elasticity of poverty reduction with respect to mean income (about 1.5), Burkina Faso's poverty will decrease only by 16 percent (about 7 percentage points) and the country will not meet the 2015 ODA-OECD targets.2 Also, this scenario carries with it a significant downside risk. Because cotton remains the main export crop, the Burkinabe economy will remain vulnerable to climatic and terms of trade shocks. In the case of a serious adverse external shock, real GDP growth rate may fall below the population growth rate, which could fuel poverty and worsen domestic and external imbalances. 2With its population growing at 2.8 percent a year, a real GDP growth rate of 4.5 imnplies an increase in GDP per capita of 1.7 percent. Assuming an elasticity of poverty with respect to income of 1.5, this would translate into a reduction of 2.6 percent per year of the headcount index, that is 1.2 points from the current 45.3 percent. 5 Table 2: Scenario of moderate growth: Selected Indicators, 1999-2005 19991(6cttial) 2001 2003 2005 Real GDP growth rate (annualpercentage change) 5.8 4.9 4.9 4.3 Population growth rate (annual percentage change) 2.8 2.8 2.8 2.8 Real GDP per capita (annual percentage change) 3.0 2.1 2.1 1.5 Poverty elasticity in Burkina Faso with respect to mean income 1,5 1.5 1.5 1.5 Expected reduction in headcount ratio (% per year) 3.1 3.1 2.2 Poverty headeount ratio 45.3 42.5 40.0 38.2 GDP deflator (annualpercentage change) I4.4 1.5 2.3 2.4 Fiscal deficit (in percentage of GDP, excluding grants) -1213 -12 -12 -12 Current account deficit (in percentage of GDP, excl grants) -165 -12 -11 -12 21. Rationale for a High Growth Scenario. The PRSP acknowledges that achieving the Government's poverty reduction objectives will require a new policy framnework. Keeping in mind that the Government's revenue capacity remains very low (and unlikely to change in the near future), donors would be called upon to maintain high aid flows to Burkina Faso (provided that the authorities keep their commitment to reform). To achieve higher growth rates over the medium- term-a GDP growth rate of 7 percent a year-the Burkinabe authorities recognize that they must implement an aggressive structural reform program to remove constraints to private sector development and to accelerate the pace of Burkina Faso's integration into the regional and world economy. This will include diversifying the economy; investing in human resources; reducing the high costs of electricity, telecommunications and transport; improving the taxation system; and deepening financial intermediation. 22. In this bold scenario, and on the basis of assumptions provided in Attachment 4, simulation results indicate that real GDP growth could rise steadily over the period 2000-2005 to reach 7.7 percent, while the GDP deflator is contained at about 2.6 percent. With a poverty elasticity of about 1.5, the poverty headcount ratio would be reduced by about 30 percent (15 points). Stronger export performance may also lead to a significant improvement in the overall deficit and the current account balance (excluding grants) between 1999 and 2005, as shown in Table 3 below. Table 3: High Growth Scenario: Selected Indicators, 1999-2005 : 199W(actual) I 2001 2003 2005 Real GDP growth rate (annual percentage change) 5.8 : 6.3 7.6 7.7 Population growth rate (annual percentage change) 2.8-7 2.8 2.8 2.8 Real GDP per capita (annual percentage change) 3.07 1 3.5 4.8 4.9 Poverty elasticity in Burkina Faso with respect to mean income L1.5l 1.5 1.5 1.5 Expected reduction in headcount ratio (% per year) 5.2 7.2 7.3 Poverty headeount ratio 4S.3: 40.5 34.7 29.6 GDP deflator (annual percentage change) -1.4 1.5 1 2.4 2.6 Fiscal deficit (in percentage of GDP, excluding grants) -12.3 -12 -10 -10.0 Current account deficit (in percentage of GDP, excl. grants) 16 -11 -10 -9.0 6 II. BANK GROUP ASSISTANCE STRATEGY A. PROGRESS UNDER LAST CAS AND LESSONS LEARNED 23. Progress towards Objectives in Previous CAS. The last CAS which was BoxE1: OED Country Assistance Evaluation (CAE) discussd by th Board n July 1, 1996 In 1999 OED comnpleted a Country Assistance Evaluation of IDA's discussed by the Board on July 11, 1996 program in Burkina Faso. (R96-140) supported three objectives: . While the focus of IDA's program over the past decade was maintaining a stable macroeconomic deemed generally appropriate, the overall outcome was rated environment, providing social services to marginally satisfactory despite somne iniportant successes, the poor and creating sustainable income, and key parastatals, reorientation of primary education employment, and growth opportunities. system, strengthening of capacity to build and mnaintain urban Progress was made under the first objective infrastructure, and of agricultural services, and the extent of as noted in paras 1 1-13. Data indicate a poor beneficiary participation. Support of structural adjustment with closely integrated record in the second objective: despite projects in key sectors was found broadly relevant, but too important economic achievements, and ambitious given institutional capacity and political instability, although much has been done to promote slow process in reaching consensus around private essential basic social services, Burkina Faso *participation in the economy. e Privatization, civil service reform, and trade and price still suffers from a large social deficit. In liberalization were judged to be partial successes Little reference to the third objective, some progress was noted however in private sector development, progress was made in liberalizing and rationalization of the pubLic investment program, decentralization of public health services and in support to dry opening up the economy. However, the land agriculture. population has grown faster than the . Coordination arnong Burkina Faso's main donors was judged economy's capacity to generate additional inadequate and a framework for integrating extemal assistance income. In addition, growth opportunities was absent which weakened the policy impact of the country dialogue. are still hampered by low labor productivity, . These fndings have been shared with the authorities and the now further threatened by HIV/AIDS, high lessons taken into account in preparing this CAS. input and factor costs, weak organizational and institutional settings for efficient social service delivery, and poor donor coordination. 24. What Worked Well. The Bank's adjustment operations-a one tranche Economic Management Reform Credit in FY99, followed by a one tranche SAC III in FYOO-worked well to improve Burkina Faso's public finance management and resource mobilization. The last three Public Expenditure Reviews (PERs) were successful and a medium-term expenditure framework is currently in place. The Public Institutional Development Credit (closed in FY00) supported the computerization and on-line management of public finance (including Treasury) and the civil service. Reforms under the Transport Adjustment Credit (closed in FY00) have led to the successful implementation of road maintenance with regular budget allocations. Two urban operations-Urban II (closed in FY97) and Urban Environment (under supervision) increased private sector participation and domestic resource mobilization. The Education IV Credit (closed in FY99), and the Post-Primary Education Credit (under supervision) contributed to the strengthening of institutions and infrastructure to promote quality and access, most notably in primary education. Progress was also made in liberalizing the telecommunications sector, with the issuance of two new cellular licenses and the creation of a regulatory agency (ARTEL). Privatization of Air Burkina is well advanced. 25. What Worked Less Well. Implementation of the privatization program under the Private Sector Assistance Credit (closed in FY00) moved slower than anticipated as the process focussed on transactions rather than on an articulation of a strategic context. However, the situation turned around in the last year of implementation, during which the project supported the preparation and dissemination of a major study on competitiveness and economic growth in Burkina Faso. 7 26. What Did Not Work Well. In several sectors, the Bank and the Government came to no agreement Box 2: Client Feedback Survey on the content and pace of reforms. For example, A survey was conducted in December 1997 and reforms to liberalize trade and prices of cereals, provided lessons that can help the Bank strengthen its relationship with the Governrnent and other donors. livestock, and cash crops (e.g., cotton) have still not The survey noted that Bank staff need to reach out and been agreed upon. The second Agriculture listen more. Feedback also suggests that Bank staff need to be mnore proactive in detecting and resolving Adjustment credit was cancelled during preparation imnplementation issues. The survey confirmed strong (March 98) due to continued disagreement with Bank-Government relations, especially at senior Government on the reform agenda. Rationalization of Government levels. During CPPR preparation, project Govemiment on the reform agenda. Rationalization of units recently noted long delays in processing of no- the public investment program, too, was incomplete objections, high level of Bank staff rotation at largely due to weak donor coordination. Utilities and Headquarters which has negative effect on project imnplementation, poor planning of Bank missions, and air transport costs have not been reduced; the too heavy reliance on consultants with limited economic benefits of slower population growth and experience. the challenge of AIDS were not sufficiently emphasized in the dialogue with the Government. 27. Portfolio Management. Gross IDA disbursements fell below planned levels in the late 1990s because of the failure to Box 3: Bank Group reach agreement on sectoral reforms in agriculture and in response Portfolio (FY01) 11AConmitmnents (UJS$m) 186 to weak implementation capacity. As of November 1, 2000, there Number of Projects 7 were seven active projects in the Bank's portfolio in Burkina Faso, Sectoral Composition (%) totaling $186 million, of which $87 million was undisbursed, Agriculture 25 Health 30 significantly lower than the 15 projects totaling US$372 million in Education 14 FY97. While a number of projects closed in the latter part of the Mining 11 1996-2000 CAS period, emphasis was placed on building the Urban 20 analytical base, with economic and sector work undertaken in IDA Undisbursed (US$m) 87 MIGA Outstanding (US$m) 0 education, health, decentralization, public finance and IFC Exposure (US$m) 2.05 infrastructure. Portfolio performance over the last several years IFC Number of Projects 3 has been mixed, but generally satisfactory. At the time of the __I second CPPR (May 1998), there were four problem projects in the portfolio and one at present (Private Irrigation). The disbursement ratio has been steady over the years at about 20 percent. The proactivity index was low (50 percent in FY98, 33 percent in FY99) but has improved and is currently at 100 percent. The realism index is at 100%. 28. Future Portfolio Actions. The following actions were discussed during the March 2000 CPPR to further improve portfolio management, to be implemented during the upcoming CAS period: * improve the pace of disbursements by moving conditions of effectiveness to conditions of negotiations during project preparation; * resolve the issue of repeated delays in transfer of funds by BCEAO and all commercial banks; and * improve the rate of timely submission of audit reports. B. CAS RATIONALE AND STRATEGIC APPROACH 29. Objectives. The thrust of the Bank's future program is to assist Burkina Faso in implementing its Poverty Reduction Strategy. The overriding objective will be to support the Government's efforts to achieve sustained high growth rates, to reduce the high incidence of income poverty, and to improve the nutrition, health, and education of rural population-poorest segment of the population. Specifically, the CAS seeks to help the Government reduce the poverty headcount ratio by at 8 least 2 percentage points per year during 2000-2003. To achieve this goal, the CAS will focus on the four objectives of the PRSP as noted in paragraph 7. There is no substantial divergence between the Bank's and the Government's development agendas, priorities, and policies. 30. Selectivity and Flexibility. Bank intervention in support of the PRSP is intended to be selective and complementary of activities supported by other donors. In line with the OED findings and recommendations, we have developed a strategy with two key prongs: bringing resources closer to the beneficiaries, where they are most likely to be productively used; and collective donor action to reduce mismanagement and inefficiencies. To these ends, the Bank will support: (i) greater participation of local stakeholders in program and project design and implementation; (ii) closer cooperation among donors to link improved governance and donor lending levels. 31. The Bank will work closely with other donors to ensure consistency in the country policy dialogue, and a division of labor in lending and nonlending services. For example in education, the Bank is taking the lead in the reform effort and in basic education, while some bilateral agencies are focusing more on physical rehabilitation of schools and secondary education; in health, the Bank is taking the lead in advising the Government on the preparation of the ten-year reform plan, with other development agencies complementing these efforts through physical investments and specific thematic programs. In transport, the Bank is not contemplating new operations in main road network development, but will support maintenance and rural roads development. On judicial reform, the Bank will work in parallel with others donors to help the Government finalize its action plan but the EU will take the lead in supporting the implementation phase. The priorities for the Bank's assistance program vis-a-vis other donors have been determined through our country dialogue with the Government, nonlending services, and intensive consultations with all development partners during the preparation of the PRSP and the CAS (see Attachment 5). 32. Linking Gender and Poverty Reduction. In Burkina Faso, as in most African economies, women play substantial economic roles (see Attachment 6). The implications for the CAS are as follows: Gmender should be considered an issue of economic growth and efficiency, not just a problem of equity, and not just limited to the social sectors. Gender-based asset inequality directly limits growth and poverty reduction. Men and women experience poverty differently, and different aspects of poverty (inequality, vulnerability, isolation, powerlessness) have gender dimensions. * Investments in the household economy have substantial pay-offs in increased efficiency and growth in the market economy, and will also contribute to improving the health and education status of the poor: (i) labor-saving technology relating especially to food processing is likely to have a greater immediate impact in raising the productivity and reducing the time burdens of women; (ii) domestic energy (fuelwood) is of great importance; (iii) transport interventions need to reflect the different needs of men and women, so as to improve women's access to transport services (including intermediate means of transport) commensurate with their load-carrying responsibilities. * Compared with men, women operate under severe time constraints, which limit their options and flexibility to respond to changing economic opportunities. 33. Of particular concern are the different HlV prevalence rates for young men and women aged 15 to 24 in Burkina Faso, respectively, 3.33 and 7.51 percent. In terms of access to productive resources, there remain key differences in earned income, in access to fmancial services, land, and agricultural services. Despite women's important role in agriculture, only around 15 percent of extension agents are female. Available data also indicate that the participation of men and women in public life and institutions, and in decision-making processes, are highly uneven. 9 34. Ensuring Environmental Protection. The PRSP has identified sustainable management of natural resources as a major principle for combating poverty. This is based on the fact that deforestation, land degradation, and to a lesser extent urban air pollution (mainly due to emissions by motorized transportation) are currently having a high economic and social cost. In particular, deforestation and land degradation not only constitute serious environmental problems, but are also a major constraint to sustained agricultural growth. The loss of biodiversity regarded valuable and threatened on a global basis is also a concern addressed by the Bank in Burkina Faso as part of its mandate as a GEF implementation agency. 35. Since low agricultural yields, food insecurity, and poverty both ultimately lead to and result from environmental degradation, the PRSP emphasizes agricultural intensification and modernization as an effective approach to protecting Burkina Faso's natural resource base, and expanding employment and income-generating activities for the majority of the poor. A number of appropriate agricultural technological packages have been identified to this end. Bank assistance will help achieve a widespread adoption of these technologies, and strengthen the capacity of the country to deal with any adverse impacts that could result from intensifying agricultural production. C. COUNTRY ASSISTANCE PROGRAM 36. The following section summarizes areas of emphasis for the Bank Group country program for FY01-03. The detailed presentation of lending and non-lending programs can be found in the CAS matrix in Annex B 1. 37. The program was prepared in close collaboration with the Burkinabe authorities and takes into account activities of other development partners (see Attachment 7). Many of the specific activities build upon Bank's previous work in Burkina Faso and represent areas in which the Government has particularly sought Bank expertise, and where the Bank can play a catalytic role in bringing technical know-how and mobilizing assistance from other donors. While the program represents proposed commitments and assistance for the period FY01-03, its actions are designed to be supportive of long-term programs (e.g., ten-year programs in education, health and community based rural development). Focus and Composition of Bank Assistance 38. Supporting the PRSP agenda will involve selective actions and programs on each of the four fronts defined by the Government (para 7). SUPPORTING THE ACCELERATED GROWTHSTRATEGYAND CLOSER INTEGRATIONINTO THE REGIONAL ECONOMY 39. Closer integration into the West African economy and the world economy can only be attained through improving Burkina Faso's competitiveness. As a member of the West African Economic and Monetary Union (WAEMU), Burkina Faso's recent macroeconomic stability is attributable to the macroeconomic convergence policy, which the Union and its Central Bank (BCEAO) have engineered over the past decade.3 Burkina Faso is also a member of the Economic Community of the West African States (ECOWAS), which has taken steps toward the implementation of a free trade area (FTA) for sixteen West African countries. 3Since 1996, the Union has accelerated the pace of economic integration, introducing a comwon external tariff (CET) in January 2000, and adopting a set of macroeconomic convergence criteria for member countries. 10 40. These developments constitute challenges and opportunities for Burkina Faso. As a small, poor, and landlocked country with tiny and fragmented markets, the country would improve its competitiveness through deeper involvement in the regional integration process. Implementation of a sound sub-regional strategy would help Burkina Faso accelerate its reform program, providing for joint commitment and consistency, scale and competition, and therefore, a higher policy multiplier effect. On the other hand, there is a risk that protectionist common policies within WAEMU or ECOWAS could reduce the sub-region's competitiveness in the global economy. This would lead to the concentration of industrial activities in the coastal countries (Cote d'Ivoire, Senegal) and make Burkina Faso and other smaller Sahelian countries captive markets. 41. As part of its ambitious plan to move Burkina Faso toward a 21st century service-export economy, the Government aims to decrease the mean tariff toward the lower end (O to 10 percent) range, and is considering reducing taxes on corporate income (from 35 percent to 20 percent), and eliminating import taxes on selected high-technology items-telecommunication and computers. The reform program adopted by the Burkinabe authorities combines national market liberalization and sub-regional market integration to develop a dynamic infrastructure service and human resource sector within limited public resources for large investments. (i) In air transport, Burkina Faso would benefit from regional market liberalization and unification, thanks to scale and competition effects. It would also benefit from reduced access costs and from attracting ground services, especially for freight, through market liberalization and using tax policy to lower airport fees and ground service costs. This would increase the country's chances of becoming a sub-regional hub. (ii) In energy, Burkina Faso has devoted considerable effort to improving interconnections with its neighbors, especially Ghana and Cote d'Ivoire. Its participation in the West-Africa Power-Pool would ensure a stable and cost-effective energy supply for the country. Current disparities in energy costs-CFAF 102 per kwh in Burkina Faso versus CFA 40 in CMte d'Ivoire-indicate that Burkina Faso would benefit from an integrated sub-regional energy market. (iii) In telecoimnunications, national market liberalization and sub-regional integration, including technical standardization, frequency management, regulatory systems, and establishment rights would all benefit the sector. Burkina Faso is accelerating its privatization and liberalization programs and is working with WAEMIU and ECOWAS toward telecom market integration. (iv) With regard to human and social capital development, Burkina Faso will design and implement its education and health policies (especially the fight against AIDS and the provision of specialized services) at the regional level. Labor market issues, including core labor standards call for continued Government's attention (see Attachment 10). 42. Regional integration will have transitional costs that will increase the Government's financing requirements in the short run, especially given the lower taxes on imports and the need to increase spending in education, health, and basic infrastructures. As only a small portion of these costs are likely to be met through intra-WAEMU fiscal transfers, greater assistance will be needed from the donor community. The Bank's support to Burkina Faso to benefit from greater regional integration would take two forms: (i) assisting the Government to improve the enabling macro-policy environment with more ambitious growth and poverty reduction targets; and (ii) supporting the private sector development program. 43. Improvements to the enabling macro-policy environment will be supported through the analytical work to update the PRSP, public expenditure reviews, various policy notes on key issues (labor market dynamics, monetary and fiscal policies in the WAEMU context), and the finalization 4 As an illustration, the CET irnplies a lower mean tariff level than what currently prevails in Burkina Faso which would suggest some degree of net trade creation. Yet, in light of the type of bold move needed to improve visibility and to close the comnpetitiveness gap, the CET appears still high by international standards. Moreover, the introduction of the taxe degressive de protection, means that tariff rates mnay rise to the upper end (15-30 percent) rather than the lower (0-10 percent) range, penalizing landlocked, resource poor countries such as Burkina Faso with small industrial production. 11 of important strategy papers-private sector development strategy, financial sector review, long-term plans for education and health, energy and transport sector strategy notes. Through analytical work on a regional assistance strategy, the Bank will also provide policy advice to help Burkina Faso meet the challenges and opportunities of deeper regional integration. 44. To support the private sector and financial development strategy, the Bank will emphasize the need for Burkina Faso to open up to new opportunities, domestically, regionally and globally, and to encourage private initiative to explore growth prospects in agriculture, mining and services, in particular by improving the business environment. The macroeconomic framework and objectives will have to reflect the paradigm shift and take into consideration the requirements for a bold private sector development strategy. Bank assistance will facilitate: * liberalization in critical sectors-air transport/handling services, power and telecommunications, introduction of competition in the cotton subsector, further retrenchment of public sector from agriculture and livestock productive activities-to create a unified subregional market and to secure cost reductions, economies of scale, and enhanced competition, * a divestiture program for telecommunications, power and petroleum distribution companies, airport storage facilities, slaughterhouses, farm equipment manufacturing and distribution, agricultural and livestock input supply systems; * legal reform, tax reform, reduction of transaction costs, harnonization to WAEMIU standards of import/export duties on agricultural and livestock inputs and products; * the development of alternative transport corridors and improvement in financial services to handle foreign exchange transactions. 45. The Bank will also support enterprise capacity building at the SMEand micro-enterprise level, with activities such as advisory services to agri-business, development of market information systems, promotion of joint ventures for agro-processing, and improvement of quality control systems. SUPPORTING ACCESS OF THE POOR TO BASIC SOCIAL SER VICES. 46. A crucial objective of the strategy is to support a more ambitious social sector reforrn to prepare Burkina Faso's labor force for the challenge of regional integration and increased competitiveness of its outward-oriented economy. To improve the quality and equitable access of social services, emphasis must be placed on improving managerial and implementation capacity, and increasing expenditure efficiency. The Bank plans to support primary health care for the neediest, basic education, and access to potable water. Support for access to primary health care will be attained through Bank involvement in a ten-year sector development program that will define actions to address existing problems. Specific strategies will include actions in three areas: * public expenditure will be targeted to cost-effective interventions addressing the health problems of the poor and vulnerable. Rural areas with the worst coverage and quality of basic primary health care services will receive priority for public investments and a larger share of current expenditure, including the wage expenditure. * the Bank will help improve the efficiency of service delivery through the following: review of the organizational structure of the Ministry of Health; review of its pricing policies in an effort to reduce the cost or render free of charge essential and preventive services to increase access and utilization of these services by the poor; availability of essential drugs will be improved to 90 percent or more; and continued monitoring of the availability and affordability of drugs to the poor and vulnerable is to be instituted. 12 * partnerships will be built with local service providers, and accountability to the poor will be reinforced. The capacities of decentralized managers and service providers, and of community management committees (COGES), will be strengthened, with a view to enable them to establish effective dialogue and partnerships, and provide ongoing monitoring and evaluation of performance. This is key to making public service providers more accountable to the communities they serve and to providing communities with the information they need to participate effectively in planning and budgeting of local-level health activity. A contractual approach to health service provision will also be developed, in an effort to encourage local partners in health care (NGOs, communities, private sector, and academia) to target their activities to underserved areas. 47. Bank support for education is designed to help raise enrollment and completion rates, as well as learning outcomes and literacy rates, while maintaining a reasonable pace of expansion at postprimary levels where the emphasis will be on improving the adequacy of learning outcomes for the labor market. For primary education, the Bank will help implement quality cost-effective programs that attain desired learning outcomes at affordable prices to the poor. Key levers to support these objectives include lowering the cost of education to the poor and girls, controlling expenditure at other levels of education, cutting the unit cost of education, and reducing repetition. 48. With respect to other levels of education, Bank assistance will serve three goals simultaneously within financial constraints: (a) to provide a chance for qualified primary school graduates to move on to higher levels of education; (b) to create a pool of candidates from which selection for higher education and recruitment of primary school teachers can be made; and (c) to supply workers with sufficient education to fill mid-level jobs in the modem economy. SUPPORTING OPPORTUNITIES FOR EMPLOYMENT AND INCOME-GENERATING ACTIVITIES FOR THE POOR. 49. Rural development of Burkina Faso is an important pillar to help expand economic opportunities for the poor. Recent evidence from many developing countries suggests that the sectoral composition of growth matters in terms of the impact on the incomes of the poor, given estimates of elasticities of poverty reduction with respect to growth-a 1 percent increase in the contribution of agriculture to GDP can yield a 1.6 percent increase in the incomes of the poor above the GDP increase in industry or services, which increases incomes of the poor by 1.2 percent and 0.8 percent respectively. 50. These differences are related to the linkages of agricultural growth on small-scale non- agricultural sector of the rural economy5 Rural household incomes in Burkina Faso are highly diversified-the average rural household derives about 39 percent of its income from cropping, 13 percent from livestock production, and the remaining 38 percent from non-agricultural activities. Agricultural growth arising from reduced transaction costs (rural infrastructure) and increased factor productivity (improved technology, health, education) reduces poverty more through indirect than direct processes. In addition to increasing employment and lowering food prices6,-both of which have an immediate poverty impact - increased farm incomes stimulate demand for goods and 5These linkages come from rural households spending their expanding income on locally produced non-tradable goods and services. In Burkina Faso, household-level data indicate that 45 percent of any increase in rural household incomes is spent on farm non-tradables (e.g. dairy products, millet) and 22 percent on non-farm non-tradables (e.g. locally processed foods, services, locally manufactured items). Growth multipliers for Burkina Faso indicate that for each dollar of income generated in the agricultural tradable sector $1.88 of additional income will be generated in the local non-tradable sector due to linkages. 6 The average and marginal budget shares for basic staples in rural Burkinabe households are 60 percent and 53 percent, respectively. 13 services in the large, employment intensive, rural and market-town based small-scale enterprise sector. 51. Judiciously chosen public investment will be needed to overcome these constraints. Specifically, public expenditure on rural infrastructure, technology generation, and institutional development/reform will be necessary for rural and agricultural growth to accelerate. Decentralized decision making and econornic empowerment of beneficiary communities is expected to improve the choice, relevance, cost effectiveness, and maintenance of rural infrastructure. In addition, to meet the demands of the local population, the deconcentration of sectoral ministries (and engaging in public/private partnerships where appropriate) will improve the delivery mechanisms of public goods and services and make them more demand-responsive. 52. The CAS will support this vision of sustainable agricultural growth and rural development. The main priorities are as follows: (i) support measures to open the economy and improve access to markets (both domestic and export) for agricultural products, farmers, and agro-enterprises (including investments in rural infrastructure); (ii) increase the productivity of rural assets (labor and land) through health, education, water, and the conservation and renewal of natural resources; (iii) support the rural decentralization process by transferring responsibilities and resources to those directly concerned by the development process and pursue the institutional reform necessary to refocus the role of the State; and (iv) initiate regional interventions centered on currently under- exploited regions and aiming at removing constraints that are specific to the Central Plateau region. SUPPORTING GOOD GOVERIVANCEAND INSTITUTIONAL REFORM Box 4: Improvements in Governance and Fight against Corruption Burkina Faso has made efforts over the past five years to improve governance and reduce corruption: . Burkina Faso has a unified budget system and a computerized expenditure management system (Circuit de la depense), which make it possible to track the States accounting and financial transactions (some ministries are currently decentralizing this facility). * In 1998, the Government launched a systematic review of public expenditure by a national team of experts under the supervision of an interministerial committee. * The 1999 and 2000 budget guidelines were significantly improved: in conformity with the HIPC social targets, the share of actual public expenditure for health and education in the budget has increased; a shift to performance budgeting was made for six key ministries (Health, Finance, Interior, Defense, Basic Education, and Secondary/Technical education), with outcome indicators to monitor efficiency, and increased accountability for line managers. * A Medium-term Expenditure Framework for 2001-2003 was prepared and presented to Parliament in October 2000 with the 2001 budget bill. The introduction of a medium-term framework was discussed both at the local and central level. The discussion has enhanced the capacity of the Government to formulate the annual budget within a dynamic perspective of medium-term objectives and strategies. • Major improvements were observed in public procurement procedures, such as the periodic publication of bids received in public tenders. * Trade liberalization and tariff reform have also reduced rents and increased revenues from customs administration. * The privatization program has removed a large source of rents and patronage from the public sector. The restructuring of the financial sector and related reforms have greatly reduced the role of Government in credit allocation decisions (delinquent borrowers are prohibited from obtaining new bank loans and from bidding on public procurement contracts and privatization. The Government has also carried out a major overhaul of its business laws by adopting new business laws under the OHADA treaty. . In 1999 and for the first time in over a decade, budget execution reports laws (lois de reglements) for fiscal years 1993 and 1994 were enacted by the National Assembly, the Government is committed to completing reports for the 1995-98 period by March 2001. * An independent Supreme Audit Court was created in 2000. It will be given a larger role in the preparation of audited budget laws. * An audit of military expenditures for fiscal year 1999 is currently being completed and will be transmitted to the Supreme Audit Institution and to Parliament. 53. Results from surveys carried out by Transparency International also indicate that Burkina Faso is considered one of the less corrupt countries in West Africa. The Government has made progress in improving governance and reducing corruption (see Box 4 above). Nevertheless, corruption continues to be perceived as a problem, undermining the effectiveness of public expenditure and the framework for negotiations between private sector operators and the Government. 14 54. The PRSP presents four guiding principles to improve governance: (i) adopting a more comprehensive approach to public finance management to ensure that public funds from all sources are managed according to a clear set of consistent and transparent rules, and in conformity with internationally accepted good practices; (ii) reducing Government intervention and discretion in economic activity; (iii) making the Government more accountable by increasing participation of electoral bodies, civil society groups and the private sector in policy design, policy implementation, and monitoring; and (iv) ensuring a more efficient use of public revenues by focusing public policy evaluation on results on the ground. Following these principles, the strategy developed by the Burkinabe authorities includes actions in the following areas: 55. Increasing awareness of the economic andpolitical costs of corruption. The national plan of good governance adopted in 1998 seeks to correct distortions in public administration by promoting such values as meticulousness, probity, and transparency in public affairs and among businessmen, and by intensifying the struggle against practices at odds with the general interest, especially corruption, nepotism, and patronage. A national anti-corruption network is currently being set up for comments and proposals regarding possible solutions. 56. Strengthening the judicial system. The judicial system still faces a number of issues: (i) insufficient number of judges and courts (most courts are concentrated in Ouagadougou and Bobo- Dioulasso); (ii) the slowness of decision making (long delays before judgements are rendered) and publication of decisions; (iii) lack of accountability and impartiality of judges; (iv) lack of equipment; and (v) lack of knowledge of the general public (including business people) of their rights and obligations. In addition, administrative procedures are very cumbersome for enterprise creation and contribute to high transaction costs. 57. Based on the recommendations of the National Forum on Justice held in October 1998, the Ministry of Justice has prepared a judicial reform strategy and national action plan covering the period 2000-04. The plan was approved by the Council of Ministers on April 12, 2000. Its objectives are: (i) to strengthen the institutional status of the judiciary by carrying out institutional reforms and measures; and (ii) to increase and strengthen judicial system infrastructure and the human, material, and financial resources at its disposal. Geared to these objectives, the plan proposes 11 action programs with an overall budget of CFAF 24 billion. The European Union has taken the lead in supporting these reforms. The Bank, however, will continue to work with both the Government and other donors to help implement the agenda. 58. Improvingpublic administration andpublicfinance management. With respect to reform of public administration in Burkina Faso, a restructuring process has been going on since 1992. The ministry responsible for the civil service has initiated systematic and forward-looking talks with several representatives of civil society and key players in the public administration in order to lay the foundations for a comprehensive reform. National conferences on the comprehensive reform of the civil service provided an opportunity to discuss and enrich draft texts that were subsequently adopted by the National Assembly. Essentially, they comprise laws establishing the forms of intervention and a distribution of spheres of competence between the State and other stakeholders in Burkina Faso's development; the legal framework governing employment in the civil service and government officials; and rules governing the creation, organization, and management of government bodies. To them should be added the decree on rules for drawing up public sector program and progress reports in the public administration and the decree ordering generalized use of manuals of procedures and performance charts in all branches of the civil service. 7For examnple, to create a company in Burkina Faso, a small entrepreneur would have to go through numerous steps and pay duties of up to 20 percent of its capital before he can even start activities. 15 59. The authorities have greatly improved their budgeting and expenditure practices over the past five years. But despite recent improvements in revenue collection, Burkina Faso continues to be faced with an inadequate tax structure. Fiscal revenue is highly dependent on a relatively high level of tariffs, which discriminates against exports and undermines the efficiency in the allocation of public resources. In the context of the implementation of the WAEMU's common external tariff, the Government has designed a reform program which includes: adopting measures aimed at shifting fiscal resource away from trade taxes and strengthening tax administration by broadening the tax base through curtailing tax and customs duty exemptions (in accordance with evolving WAEMU policy, in particular the envisaged regional harmonization of the investment code); reducing excessive regulation of private entities and adoption of preferential schemes; and strengthening tax administration through the computerization of all custom revenue collection offices. 60. Fostering decentralization. Convinced that a well-thought-out decentralization process, carried out in a pragmatic and discerning manner, enhances democracy inasmuch as it supports local initiatives and grassroots control by locally elected leaders, the Government has set in motion a process that began with the adoption in 1998 of written guidelines for decentralization (textes dorientation en matiere de decentralisation), which are currently being implemented Acceleration of the process requires: (i) continuation of the decentralization policy with the same pragmatism and graduality that have characterized it so far in order to allow the communities to organize themselves in a way that will allow them to respond to local expectations; (ii) adequate fnancing provisions designed to provide the communities with the means they need to be able to fulfill, from now on, the tasks that have been devolved to them, so that the retrenchment of the State does not bring with it a deterioration in indispensable basic social services (above all in education and health); (iii) training of regional representatives to prepare them for the management and supervision roles conferred on them by decentralization; (iv) implementation of an efficient and impartial local administration, responsive to the needs of the population; (v) efforts to achieve citizen participation through civil society organizations in local development, not only in the formulation of objectives and choice of means but also in execution and supervision of actions undertaken; (vi) the practice of decentralized, local cooperation, while respecting national development priorities; (vii) adoption of an official text to solve any anomalies resulting from the geographical remapping of administrative borders, while maintaining a sufficient degree of decentralization of services to make interventions more effective, improve citizens' access to public services, and install genuine grassroots government; and (viii) adoption of an official text allowing true decentralization of management of the State's human, material, and financial resources, by granting new powers to officials responsible for operations. D. VEHICLES FOR BANK ASSISTANCE, ALTERNATIVE SCENARIOS AND CONTINGENCIES 61. To support the operational objectives of the PRSP, the Bank envisages aprogram and related country budget allocation which will: (i) give priority to supervision of ongoing projects; (ii) acknowledge the important role of donors; (iii) consolidate lending operations into fewer, but broader resource transfer mechanisms that are more closely integrated with the Government's own budgetary allocation and execution processes; and (iv) include a share of nonlending services to foster a robust analytical base for consensus and partnership building. 62. To refocus its assistance prograrn with a consistent emphasis on rapid growth with poverty reduction, the Bank Group strategy will focus attention on: (i) key social sectors where there are viable long-termn strategies, or where they can be developed; (ii) longer-term economic reforms to improve competitiveness and reduce business costs; (iii) improving public resource management in the country; and (iv) adapting Bank programs to the sub-regional framework and potentials. In terms of instruments, there will be a continuation of analytical and advisory activities, as knowledge is the 16 critical input for progress in the substantive areas presented in the PRSP. The Bank will also support public spending increasingly through consolidated lending operations-results-driven programmatic credits, with separate projects for capacity building and infrastructure investments directly targeted to poverty alleviation and private sector development and where active institutional strengthening is required for improved service delivery. 63. Three lending scenarios are envisaged: base, high, and low cases. The base case lending/nonlending program is in the order of $400-420 million over FY01-03 (see Table 4). The base case is consistent with the present IDA allocation. Under the high case scenario, the Bank could increase lending to around $450-500 million over the three years, about 50 percent of which could be in the form of fast-disbursing credits in key sectors (see para 80). Under the low case scenario, lending would be limited to social sectors and rural development. CAS Base case Assistance Program FY01-03 64. The base case scenario would be contingent on: (i) continued maintenance of good macroeconomic performance; (ii) satisfactory implementation of the reform program in the key poverty reducing sectors presented in the PRSP; (iii) enhanced external and internal competitiveness through concrete actions to liberalize utilities and reduce input and factor costs, as outlined in the PRSP; (iv) improved transparency and accountability in public finance management, as outlined in the PRSP; and (v) continued satisfactory portfolio performance. SUPPORTING THE ACCELERATED GROWTH STRATEGY AND CLOSER INTEGRATION INTO THE REGIONAL ECONOMY 65. The Bank will help Burkina Faso consolidate recent gains in macroeconomic management and move beyond stabilization to deeper structural reforms and sustained economic growth. A poverty reduction support credit (PRSC) will be prepared in FY01, focusing on reforms to improve public finance management and the competitiveness of the economy, and to facilitate the country's integration into the regional and world economy. Should there be a continued need for fiscal adjustment and balance of payment support, the Bank could prepare another PRSC in FY03 to further support programs in key sectors where sectoral strategies and action plans are being defined as part of the implementation of the Government's poverty reduction strategy. 66. A technical assistance credit for Private Sector Development (Competitiveness and Enterprise Development project) will be prepared in FY02 to provide support in the implementation of the residual privatization program; improve the quality, access, and cost of telecommunications; promote the development of a strong indigenous private sector in Burkina Faso through a streamlined business environment and well-targeted financial and non-financial services to small and medium-size enterprises. 67. The Bank will support the Government efforts to improve quality and costs of infrastructure, notably in water, urban, energy and transport sectors. In the water sector, the Bank will support the preparation of the Ouagadougou Water Supply project (FY01) aimed at improving the living conditions of the population in the capital city by increasing, in the long run, the quantity and quality of potable water available and strengthening the management of the utility company (ONEA) by increasing autonomy and improving accounting, long-term planning and efficiency of operation and maintenance. 68. The Bank has been very successful in urban development, and the CAE suggested that the future program take into account the lessons learned. Under the ongoing Urban Environment operation the Bank will continue to support improvement of urban living conditions through priority urban works, participation of the urban population in urban services development and support to 17 Government's decentralization program. Supplemental financing for this project could be proposed in FY02. 69. In the energy sector, the Bank will assist the Government, through the preparation of a sector reform operation (FY02), aimed at introducing private sector participation to improve the efficiency of the provision of electricity services and the supply of hydrocarbon products to the economy, and increasing access to infrastructure services, especially to rural communities. This operation will include a capacity development component to strengthen management of the traditional energy sub-sector, capitalizing on ongoing work of the RPTES Program funded by Dutch, Danish, and Norwegian grants. 70. For a landlocked country like Burkina Faso, the efficiency of the transport system is critical to economic development and growth. Under the PASECT (closed in FY00) the Bank provided assistance for a large reform program, which included restructuring of national shippers council, public sector disengagement from road maintenance execution activities, liberalization of urban transport services, privatization of the national air transport company (ongoing) and concessioning of railway operations. The Government's strategy in the transport sector is to (i) increase public investment efficiency, (ii) improve road transport productivity, and (iii) strengthen management and policy implementation capacity of the public sector to ensure adequate knowledge and monitoring of sector performance. Given alternative sources of financing for this sector, the Bank is currently not considering additional lending for transport projects except for rural roads. 71. With Bank support, the Government has developed a program to build capacity and provide an attractive climate for investment in themining sector. The ongoing Mining Sector Capacity Building and Environmental Project provides assistance to strengthen and deepen the regulatory and fiscal reforms, build capacity in public and private sector agencies, complete geological and environmental databases and assist in the artisanal and small scale mining sector. SUPPORTING ACCESS OF THE POOR TO BASIC SOCIAL SER VICES. 72. In education, the new proposed Basic Education APL (FY02) will address issues such as the slow increase in primary enrollment and the unsatisfactory improvements in the quality of education, as well as inequality between boys' and girls' enrollments, and rural and urban areas, and teacher recruitment in local communities. Under the ongoing Post-Primary Education project, the Bank is supporting increased access to secondary education, increased enrollment of girls, and improved quality of post primary education. 73. In health, our analysis of the allocation and utilization of HIPC funds will provide an assessment on the need for increased IDA funding in the sector and a new Health SIP may be needed (FY03). The Bank would support the Govermment's ten-year health strategy (currently under preparation) to address issues of poor health and nutrition status, of rapid population growth and AIDS in Burkina Faso. An HIV/AIDS Disaster Response operation is being prepared in FY01 in support of the Government multi-sectoral 2001-05 HFV/AIDS medium-term strategic plan. The two ongoing projects, the Health and Nutrition operation and the Population and AIDS Control operation, are currently scheduled to close in FY01. SUPPORTING OPPORTUNITIES FOR EMPLOYMENT AND INCOME-GENERATING ACTIVITIES FOR THE POOR. 74. In the rural sector, the Government's long-term vision is one of participatory and representative local governments and institutions planning and managing their own development programs and mobilizing the necessary resources through increased local revenues and Government fiscal transfers. The Bank's main instrument is a Community-Based Rural Development APL which is being presented to the Board with this CAS and which would support Burkina Faso's 18 National Program for Decentralized Rural Development (PNDRD) to: (i) strengthen the capacity of villages and local governments to prioritize, plan, implement, and maintain community-based investments; (ii) provide decentralized funding for demand-driven and community-managed rural infrastructure and services; and (iii) support the ongoing decentralization process. The PNDRD intends to reach all rural communities and implement a harmonized, multi-donor funded, decentralized rural development framework. It will be implemented over a 15-year period, consisting of three 5-year phases. Each phase will be designed flexibly to adapt to the country's decentralization choices, the pace of institutional reforms, and the need to harmonize approaches of various donors. To enhance the impact of the Community-Based Rural Development APL on the national and global environment, two GEF 15-year operations will also be prepared: PRONAGEN APL (FY01 Natural Ecosystem Management Program; a follow up to the pilot GEPRENAF) and SILEM APL (FY02 Integrated Ecosystem Management Program). The Bank will also support strengthening of rural infrastructure through a proposed Rural Roads Project in FY03. 75. The portfolio of ongoing operations includes the Agricultural Services II operation in support of producers' organizations and the national program for agricultural research and extension. During the upcoming mid-term review (November 2000), the project will be restructured to: (i) improve the efficiency of services, by implementing progressively demand-driven mechanisms, and (ii) provide the framework for more rapid, sustainable, broad-based and export-oriented growth in the agriculture and livestock sectors. Under the ongoing Private Irrigation operation, the Bank supports strengthening of cost-effective systems to deliver demand-driven services for private irrigation. The ongoing GEPRENAF operation (Pilot Community-Based Natural Resources and Wildlife Management) introduces a new approach to biodiversity conservation that aims to find a common solution to both development and conservation concerns, by involving local communities in the sustainable management and profitable exploitation of natural resources. 76. Nonlending activities in the rural sector will focus on three priorities: (i) support implementation of the rural development strategy currently being adopted by the Government, and improve the sector knowledge base, as recommended by OED; (ii) improve the efficiency of public spending in the sector, through a full PER; and (iii) improve the quality of statistical data, particularly through support (in the form of advice and capacity building) for poverty monitoring and follow-up of PRSP implementation. 19 Box 5: Rationale for PRSCs in Burkina Faso Recent PER studies and other analytical work carried out in the framework of the 2001-2003 MTEF indicate that full imnplementation of sectoral strategies already adopted or currently being finalized in priority sectors (education, health, rural development) will require major improvements in public sector management. The CAE noted that Bank projects in Burkina Faso, while quite comprehensive in coverage and broadly consistent with one another, have too often been conceived independently, with little explicit analysis of potential trade-offs among themr In order to address the country's weak institutional capacity and to ensure sustainability of the reform program, "DA should focus chiefly on reforming govemance, particularly as it affects the environment for private sector development and the allocation of public resources." In the context of the four PRSP pillars-accelerating broad-based growth; ensuring that the poor have access to basic social services; expanding opportunities for employment and income-generating activities for the poor; and promoting good governance-, Bank Group's assistance will address cross-sectoral and public management issues. To be effective and to ensure better involvement of sectoral ministries and all key stakeholders in the dialogue, the shift from project lending towards program lending presented in paras. 77-79 will imply a gradual change in lending instruments. We envisage two Poverty Reduction Support Credits (PRSCs) over the period FY 2001-2003. The PRSC instrument would be consistent with the PSAC framework for progranmmatic adjustment lending*. It would provide an adequate framework for comprehensive public finance reforms that require simultaneous actions at the level of the Ministry of Economy and Finance, and at the level of line ministries. Its flexibility would also provide a more effective mechanism to address sector-wide issues that cannot be dealt with traditional, stand alone investment projects. The PRSC would also facilitate the dialogue on the Government's overall use of public resources, regardless of their sources. Finally, by focusing directly on the four main pillars of the PRSP, the PRSC would help strengthen donor coordination and Government ownership of the reform progratn While improvements are necessary to strengthen capacity in public fnancial management, public procurement, budget reporting, public disclosure, auditing, and accountability, the Government has made substantial progress in budget management over the past years (see Box 4). One lesson from the recent ICR for the Economic Management Reform Support Operation is that a broader instrument like the PRSC can itself be particularly effective in supporting the policy reforms and institutional changes needed to improve fiduciary management. * PRSC will be prepared within the PSAC framework as discussed in the Programmnatic and Emergency Adjustment Lending: World Bank Guidelines (R98-249), October 2, 1998 and Operational Memorandum Guidelines for Programmatic Adjustment Loans/Credits, February 11, 2000. See also Supporting Country Development: World Bank Role and Instruments in Low-and Middle Income Countries (DC/2000-19), September 8, 2000. SUPPORTING GOOD GOVERNANCE AND INSTITUTIONAL REFORM. 77. The Bank has supported efforts to improve governance in Burkina Faso through several operations (PID, SAC I, EMRSO, SAC III). Nevertheless, further reflection and additional steps are needed to ensure greater effectiveness and transparency in the management of public affairs. This was confirmed by studies recently conducted in connection with the public expenditure review, which underscored the importance of continuing work on problems related to budget execution capacity, above all in the social sectors. Moreover, given the intention to move toward a program support system, both a priori and a posteriori control mechanisms need to be strengthened. A country financial accountability assessment (CFAA) will be started in FYO1 and support for these activities could be provided under a Public Sector Management operation in FY03. 78. The dialogue that would underpin the shift from project lending to program support would be essential to increase the country's absorptive capacity and would provide a more effective way to build management capacity in the public service. By relying on Government systems, the Bank would necessarily focus attention on strengthening these, rather than setting up parallel structures that bypass national systems that divert scarce talent to handle donor procedures and reporting. Finally, it would help improve donor coordination as other donors are prepared to join this approach, such as the EU, the AfDB, and several others. 79. The Bank would be assessing and supporting strengthening Government's capability in three areas: (i) budget formulation to help assure that the process of formulating and arbitrating budgets is 20 as transparent and open as possible, with the expectation that this will lead to budgets that are more focused on poverty and development; (ii) budget implementation, including the capacity to track expenditures and to produce the financial information needed for internal audits and the monitoring and evaluation information needed to assess budgetary outcomes and impact; and (iii) external auditing, especially the capability and independence of the supreme audit authority to enhance its ability to carry out both fiancial and performance audits. The Bank intends to devote substantial resources to help strengthen Government performance in these areas and to monitor improvement. Beyond conditions dealing with managing public resources, others would include a sound macro- fiscal framework (no accumulation of arrears) and sectoral policies that are favorable to private investment. Table 4: Base Case Assistance Program, FY 2001-2003 FY 2001-F. 2002 FY 2003 --An:Alytical Work --_-_-_-_--_--_-_- _-- * CAS * Support for PRSP Monitor. (*) * Support for PRSP Monitor (*) * TA for PER (*) * HIPC Follow up * TA for PER (*) * Vocational training strategy * TA for PER (*) * Economic Monitoring * Technical assistance to the * Public Service Quality * Technical assistance to the National Statistics Institute Assessment National Statistics Institute (INSD) * Economic monitoring (INSD) * CAS Progress Report * Technical assistance to the * CPPR * Economic Monitoring National Statistics Institute * Client Feedback Survey (INSD) * Poverty Database * IDF Gender/Legal Reform * Support to EU Initiative * Country Financial Accountability Assessment (*) Lending (in millions of US$) * Community-based RD $67 (*) * Basic Education $30 (*) * Public Sector Mgt $10 * Ouagadougou Water Supply $70 * Energy $20 * Rural roads $40 (*) * PRSC (1) $60 * Competitiveness and Enterprise * PRSC (2) $60 * AIDS Disaster Response (*) $20 Development $25 *__ Urban environment suppl. $20 (*) Indicates Bank operations/non-lending that would be maintained in the low case scenario High Case Lending Scenario 80. A high case lending scenario could be envisaged if Burkina Faso accelerates and deepens reforms relative to targets set in the PRSP, with a focus on increasing transparency and accountability in policy implementation, and on managing external risks more effectively. The high case scenario assumes that the Burkinabe authorities are able to implement the new economic paradigm described in para. 21 swiftly and to a significant extent. This would provide the basis for increased private investment, and put Burkina Faso on a higher export-led path. It also assumes that the authorities have demonstrated through more efficient and effective use of public funds that domestic absorptive capacity for higher lending is in place. This would set the framework for faster poverty reduction and improvements in social indicators. Triggers for high case lending would be (in addition to the base case assumptions): (i) major improvements in public finance management, including the implementation of institutional reforms and budgetary procedures that make the system more efficient and budget management more expeditious, reliable, transparent, consistent, and 21 accountable; (ii) swift implementation of the private sector development strategy, including completion of the utilities reform program; and (iii) increase in the absorptive capacity for public funds, as demonstrated by the speed and level of implementation of priority public expenditure programs. Under this scenario, the Bank could increase lending to around $450-500 million over FY01-03, about 50 percent of which could be in the form of fast-disbursing loans to support the Government reform program in key sectors (human development, private sector and finance, transport, energy). Low Case Scenario 81. Failure to implement the reform program outlined in the PRSP, to maintain macroeconomic stability, and sustained decline in portfolio performance, would trigger a low case lending scenario. In this case, lending would be limited to support health, the fight against HITV/AIDS, education programs, the community-based development program and rural roads. There would be no adjustment lending. Policy dialogue and a limited nonlending program would continue (see Table 4). Table 5: Triggers and Main Assumptions for Lending Program Composition Low Case Triggers Base Case Assumptions High Case Triggers - Failure to implement effectively - Continued maintenance of good - All Base case assumptions, plus: the reform agenda outlined in the macroeconomic environment PRSP and maintain satisfactory to the Bank; - Major improvements in public finance macroeconomic stability; m nanagement, including implementation - Satisfactory implementahon of the of institutional reforns and budgetary - Sustained decline in portfolio reform program in the key poverty procedures that will make budget performance reducing sectors presented In the management more efficient, expeditious, PRSP; reliable, transparent, consistent, and - Enhanced extemal and intemal accountable; competitiveness through actions to - Swift implementation of the private liberalize utilities and reduce input sector development strategy, including and factor costs as outlined in the completion of the utilities reform PRSP; program; - Improved transparency and - Increase in the absorptive capacity for accountability in public finance public funds as demonstrated by the management as outlined in the speed and level of implementation of PRSP; priority public expenditure programs. -Continued satisfactory portfolio performance. Lending would be liniited to social Lending: $400-420 million Lending: $450-500 rmillion, about 50 sectors and rural development. No Focus on the education and health percent fast-disbursing. adjustment lending. Continued sectors, and actions to stimulate policy dialogue and limited equity-based growth. nonlending. Due Diligence Nonlending Services 82. In close collaboration with the Burkinabe authorities, IDA has gathered over the past three years enough due diligence information and knowledge to improve the dialogue on the reform program. IDA has relied on a combination of annual Policy Framnework papers (PFP), a second priority survey and two poverty profiles, public expenditure reviews, sectoral policy notes, and infornal papers on specific issues. IDA has also helped the Burkinabe authorities carry out a substantial amount of analytical work in key sectors (education, health, rural development, energy, transport, and private sector development). With IDA support, the Government has also carried out a comprehensive economic study on long-term sources of growth and competitiveness in Burkina Faso. The study has served as the basis for the preparation of the Poverty Reduction Strategy Paper 22 and has helped move forward the policy dialogue on the competitiveness of the economy and private sector development. A Country Procurement Assessment was completed in 2000. 83. Due diligence AAA will provide a thorough understanding of the country's development problems, of the analytical framework for designing and evaluating macroeconomic and sectoral strategies, and of the need for and availability of extemal financing. It will also help coordinate donor projects and harmonize IDA, Government and IMF perspectives, and generate public discussion of Burkina Faso's development options, with the aim of creating public support for the ambitious reform agenda ahead. It is expected that authorities will take the lead in carrying out these activities. The agenda includes a participatory poverty assessment (PPA), public expenditure reviews, fiduciary/institutional assessments for public finance accountability, and economic policy notes to provide an economy-wide view of the main challenges facing the country. The AAA program also includes studies on public finance management, including taxation; on macroeconomic performance and poverty alleviation; and on private sector participation in infrastructure. The Bank is proposing to use due diligence analytical and advisory activities (AAA) more intensively than in the past few years to provide a solid basis for policy dialogue and enhance the design of operations. The Bank program will include such activities as support to PRSP monitoring; technical assistance to PER processes, assistance to INSD; capacity building for economic monitoring. Other activities to be financed include a country financial accountability assessment (FY01), a public service quality assessment (FY01), and a vocational training strategy (FY03). Role of MIGA and IFC 84. Due to the limited size of the formal sector (only 80 enterprises employing more than 50 staff, including state enterprises), there has been relatively little private investment and consequently little activity by IFC (one small scale mining project and two financial sector investment projects totaling $2 million) and MIGA in the past. FIAS is currently assisting the Government in streamlining registration procedures to improve the business climate and make the country more competitive. lFC's role is expected to be limited in the near term, due to low demand, but could expand substantially in the context of the implementation of the new development agenda, especially in the infrastructure privatization area. III. KEY ISSUES IN IMPLEMENTING THE CAS MONITORING OF OUTCOMES 85. One of the key features in the CAS is the framework for monitoring: (i) country performance, to determine whether the conditions for the base case still exist, or whether there is justification for a change in the size or composition of the proposed assistance program (see Table 6, below); and (ii) Bank performance in delivering on the CAS objectives. 86. Country performance. Since 1997, Burkina Faso has been testing a new approach to development aid conditionality. This approach, known as the reformulated conditionality test and designed in the framework of the SPA, is geared mainly toward enhancing Government ownership of the policy identification, monitoring, and evaluation process; and toward enhancing the effectiveness of aid by monitoring programs on the basis of measurable and previously established performance indicators. The idea is for all donors and lenders to reach consensus on a series of performance indicators for Government activities in key sectors. Those indicators are then used as the basis for decisions regarding disbursement of financial assistance-preferably in the form of program support. Table 4 and Annex B4 list AAA activities funded under BB administrative resources, whereas Annex B 1 also includes AAA activities funded under Bank projects, and/or Trust Funds. 23 87. For each major policy domain and in addition to monitoring indicators from the SPA test, the Bank has, with the authorities, key stakeholders and donors, elaborated a detailed monitoring framework, based on agreed-upon indicators (see Attachment 8). These indicators are drawn from the PRSP. The main monitoring instruments would be the reviews of the structural reform program, carried out every six months with the IMF, and the public expenditure reviews, together with selected economic and sector work, and household surveys. Country portfolio performance reviews (CPPRs) will continue to be carried out every two years, and will be led by the Resident Mission. A CAS progress report will be prepared and discussed with the authorities in FY03. Table 6: Proposed Core Benchmarks9 during CAS Period 1999 2003 1. Poverty headcount ratio (*) 45-3 40 2. Infant mortality rate (per 1,000 live births) 105 85-80 - Rural 1 13 100-95 - Urban 67 55-50 4. Primary enrollrnent rate (percent) 41 53 5. Gross primary enrollment rate for girls/total enrollment :336 50 (percent) : _____ (S) Number of persons below the poverty line as a percent of total population. COLLABORATION WITH OTHER DEVELOPMENT PARTNERS 88. Burkina Faso enjoys broad donor support. A large number of bilateral and multilateral aid agencies and a significant number of local and international NGOs are active in the country. External aid flows are estimated to represent 13 percent of GDP (about the same as Government revenue), and some 90 percent of the public investment program is externally financed. 89. IDA partnership with the IMF has deepened over the last four years with joint work on HIPC, PERs, and the PRSP. The effectiveness of the Bank/Fund relationship has been critical, because in the absence of clearly defined strategies in some sectors and with the limited capacity of the Cooperation Directorate,10 overall aid coordination has been very uneven in recent years. Inconsistencies among donors have often led to intensive discussions and inefficiencies. Since 1999, the Government has shown an increased interest in fostering synergies among donor activities. It is now more determined to strengthen its aid management capacity and has started to adjust aid coordination mechanisms and practices, beginning with the formulation of an operational framework (sector strategies, public expenditure programs, harmonized project implementation arrangements) for activities supported by different donors in several sectors (education, health, community-based rural development). 90. The ambitious nature of Burkina Faso's development and poverty reduction strategy highlights the need for selectivity and greater use of complementarities among donors. The Bank will work closely with the Government and other donors to avoid duplication while helping build the country's limited institutional capacity. The challenge for the Bank will be to build on existing cooperative relationships and to focus on areas of its comparative advantage. During CAS preparation information was collected by donor and sector on donors' assistance, as well as projected 9 In setting benchmarks during CAS Period and monitoring indicators (see Attachment 8), we draw on the experience of Burkina Faso's pilot initiative on Reformulated Conditionality, under which the authorities and donors have agreed on specified outcomes as the measure of progress under adjustment operations. The targets set by the authorities reflect the OECD/DAC International Development Goals, although the target dates for universal enrollment in primary education and for eliminating gender disparity in education have been adapted in line with the low base from which Burkina starts and its limnited implementation capacity. to During FY00 CAS preparation, difficulties in gathering basic data and producing a summnary matrix of the nature and volume of aid from the various donors highlighted the administration's limited institutional capacity to manage foreign assistance on the basis of a properly informed decision-rnaking process. 24 commitments. Attachment 7 provides overall amounts&. The difficulty in carrying out this task suggests that both coordination and tracking of aid will require capacity building on the part of Government and simplification of procedures on the part of donors. 91. Consultation with the 1MF has been excellent and should continue to be so, with joint-missions twice a year as the main vehicle for macroeconomic policy dialogue with the Government. Greater efforts will be made to assure close coordination with the EU. In the coming years, consultation will be intensified and efforts will be made to harmonize policy advice, project design, and procedures among development partners (e.g., for the Basic Education Project now under preparation). A closer working relationship will also be sought with bilateral assistance agencies, given their increasingly heavy involvement in Burkina Faso. The Bank will strengthen the dialogue with all other development partners, including the UN agencies, the private sector, and representatives of civil society. Resident mission staffing policy will aim at having Bank experts more involved in sector and issues-oriented working groups in the field. 92. Another critical element in this effort will be to develop adequate mechanisms to monitor and evaluate the impact of external assistance. In this context, the Bank will have to take the appropriate steps to provide even greater support to the Government in the area of donor coordination. But ultimately, the key to success will be the Government's own coordination and rationalization of foreign aid. IV. RISKS 93. Implementation of the Bank's proposed assistance strategy faces three types of risks: (i) deterioration of the external environment; (ii) weak institutional capacity; and (iii) political risks and diplomatic tensions. 94. External Environment. Given the heavy reliance of Burkina Faso's economy on cotton, gold, and livestock exports, the greatest concern of Burkinabe policymakers is the depression of regional as well as global demand, which would slow export growth and delay implementation of the poverty reduction strategy. The PRSP sets a target of 7 percent real GDP growth, on average, for 2001-2003. The PRSP acknowledges that Burkina Faso's poverty reduction strategy is ambitious, and that success will substantially depend on external factors (demand for cotton, world prices, the dollar/CFAF exchange rate). The medium-term balance of payment projections for Burkina Faso, which will strongly influence the country's rate of economic growth, are subject to substantial uncertainties regarding export volumes and prices for cotton and gold. 95. Weak Institutional Capacity. The medium-term reforrn agenda presented in the PRSP, especially in the social sectors, constitutes a weighty program for the next three years. Its implementation will require full commitment from the authorities and significant mobilization of civil society groups. Given the scope of the action plan to be undertaken-and in light of past difficulties in reaching some targets in the education and health sectors--there is a risk that the reform program could falter because of pressures from vested interests and persistent institutional weaknesses. Moreover, there is a risk that even if reforms are fully implemented, there will be a long delay in supply response and direct investments. 96. Political Risks. Burkina Faso has enjoyed political stability under the leadership of President Blaise Compaore. The country has moved steadily toward political pluralism and has now organized several multiparty elections: presidential (1991 and 1998), parliamentary (1992 and 1997), and municipal (1995 and 2000). However, there have been signs of social instability and opposition since the assassination of a popular journalist in December 1998. To address the crisis, President Detailed informnation by donor and sector is available at Direction Generale de la Coop&ation. 25 Compaore has promised some major political changes over the coming months. So far, the Government has continued efforts to deepen economic and social reforms. Should a coalition Government be instituted in early 2001, there is a risk that the reform momentum could slow and that, in a worst case scenario, some reforms could be halted. Another risk would be a fall in external aid flows resulting from the perception on the part of some donors that Burkina Faso has governance and human rights problems and that it plays a role in regional conflicts. It should also be noted that political tensions in neighboring countries, and in particular C6te d'Ivoire, could have implications for the cross-border movement of migrant labor and the associated transfer of private international remittances, which up to now have added significantly to Burkina Faso's national disposable income. 97. In our assessment, these risks are significant but manageable. The Bank will take a number of steps to mitigate them. On the economic front, the Bank, together with other donors, is closely monitoring economic developments in Burkina Faso. Management of downside risks in the macroeconomic framework is a central element in the Bank's policy dialogue. The above-mentioned monitoring framework has been developed for that purpose. The Bank's exposure is low and Burkina Faso has consistently serviced its debt. On the institutional front, the risks are mitigated by the Government's commitment to decentralization and to ensuring full participation of all key segments of Burkinabe society in the implementation and monitoring process. Bank Group programs under consideration for the medium term will mainstream grassroots and women's participation in policy design and evaluation. On the political front, even if there is a change in Government, the probability of the worse case scenario-overall backtracking of the reform program-is considered moderate because there is growing awareness across Burkina Faso's political spectrum that without considerable foreign investment, the country will be unable to resist the challenges and grasp the benefits of deeper regional integration and achieve sustainable growth. Diplomatic tensions between Burkina and neighboring countries are mitigated by the Government's commitment to comply with UN resolutions about conflicts in the region. 98. On balance, therefore, there is a strong justification to assist Burkina Faso in the challenging times ahead. The base case program presented in the CAS, focusing on lending in priority sectors, has been designed to meet the client's needs while minimizing potential risks. James D. Wolfensohn President By Shengman Zhang Attachments Washington, D.C. November 3, 2000 26 Attachment 1 Constraints to Growth and Poverty Reduction In order to meet the challenging objectives of reducing poverty and increasing per capita income in rural areas where most of the population live, the Burkinabe authorities have identified four major constraints on the economy which they intend to tackle: (i) Large social deficit, low labor productivity, and high unemployment. Burkina Faso's population density is already the highest in the Sahel (40 inhabitants per km) and contributes to the high incidence of poverty. At the same time, dependency ratios are high. With close to half the population being under the age of 15, rapid population growth (2.8 percent) is not likely to diminish over the near term. Such high population growth rates will put a strain on extremely limited water resources. Water management is also a critical health issue as much of the population has no access to clean drinking water. Moreover, Burkina Faso also continues to have among the lowest gross primary school enrollment rates in sub-Saharan Africa: 44 percent for boys and 34 percent for girls. Similarly, the health status of the population is poor with life expectancy at birth reaching only 54 years, and AIDS prevalence is estimated to be about 6 percent. According to various growth accounting studies, Burkina Faso's labor productivity is one of the lowest in West Africa. And estimates of the unemployment rates across the 45 provinces of the country are high-about 20 percent in Ouagadougou, the capital city. (ii) Poor economic infrastructure, high input costs, and limited size of the modem private sector. Competition for new export markets is especially dependent on access to and adequate supply of reliable and competitively priced infrastructure services. Yet, the relatively poor quality and high costs of infrastructure in Burkina-including power, transport, telecommunication, and water- reduces the likelihood that private entrepreneurs, domestic and foreign, will increase their investment in response to policy reforms. Furthermore, the size of the modem private sector is limited. Burkina has a large informal sector of some 90,000 micro-enterprises that contributes 32 percent of GDP and accounts for 70 percent of non-agricultural employment. The informal sector contributes more than 50 percent of value added in certain industries. The formal sector that contributes 40 percent of GDP only employs 2 percent of the workforce. It comprises a rather large number of very small enterprises (about 6,300 enterprises accounting for 25 percent of GDP) and only 80 enterprises-including the 37 public enterprises-with more than 50 employees. More disturbing is the low public confidence in the equity and efficiency of the tax system: tax rates are high on the small modem sector, as illustrated by the importance of tax exemptions and tax evasion. (iii) Institutional capacity. Burkina Faso's public institutions are weak, especially in the implementation of the rule of law. Besides a major legal and judicial reform, the government needs to strengthen its capacity for revenue mobilization, and to ensure that public resources are allocated and spent in the most efficient and social equity oriented way. (iv) A relatively closed economy exporting labor. In spite of the strong export performance, particularly since the devaluation, the export rate remained the lowest in the region (11 percent of GDP on average between 1994 and 1999) which partially explains Burkina Faso's structural current account deficit (-16 percent of GDP in 1999). For the past decades, an important fraction of Burkina Faso's workforce has migrated to coastal neighboring countries-especially Cote d'Ivoire-to seize low wage job opportunities, a trend which also contributed to lower domestic labor productivity. 27 Attachment 2 Burkina Faso's Poverty Profile Poverty incidence increased slightly from 44.5 percent to 45.3 percent'2 during 1994-1998. Data used for this poverty assessment come from two national surveys on household living standards carried out in 1994 and 1998.'3 Depth of poverty (P1, defined as the percentage by which consumption remains below the one corresponding to the poverty line) remained broadly stable during the period, at 14 percent, which suggests that a large part of the poor population is close to the poverty line. Larger households of over ten people tend to be poorer. Poverty incidence increased in urban areas by more than 5 percentage points to 16 percent in 1998. In rural areas, poverty incidence decreased slightly, by less that 1 percent. However, poverty in Burkina Faso is still predomninately rural, accounting for 94.5 percent of national poverty. The incidence of regional poverty varies widely. The cotton-growing western region has the lowest incidence at 41 percent, and the center-north part of the country has the highest incidence. The poor in the remoter areas lack access and information about markets. The geographical pattern of poverty is changing as a result of the reduction of poverty in the south, southeast, and north, and the significant increase in the south-central region. Other research illustrates large differences in equity patterns within regions, and across provinces. Evidently, certain types of local-level institutions are associated with lower inequality across villages. This means that in the future the same level of growth could significantly accelerate poverty reduction for these groups of villages. Poverty Incidence (P0) and Poverty Depth (11) by Regions, 1994 and 1998' (In percent) 1994 1998 P0 P1 PO P1 Regions South Central 51.4 14.6 55.5 19.7 North Central 61.2 20.9 61.2 18.2 Southeast 54.4 18.7 47.8 12.2 North 50.1 18.7 42.3 9.5 South 45.1 14.0 37.3 12.0 West 40.1 11.9 40.8 12.0 Urban 10.4 2.5 15.9 4.0 Rural 51.1 16.1 50.7 15.8 National 44.5 13.9 45.3 13.9 Source: Burkinab6 authorities' Priority Survey I and Priority Survey II ' Povertv incidence is measured as the head count index PO (the percentage of a group below the poverty line);Pl represents the depth of poverty defined as the percentage by which consumption remains below the one conresponding to the poverty line. Poverty increased for public and private wage earners, craftsmen, and merchants, and for other employment. Between 1994 and 1998, poverty incidence decreased by 8 percentage points to 42 percent for cash crop farmers, but increased by 2 percentage points to 53 percent in 1998 for food crop farmners. It is likely that the CFA franc devaluation benefited some farmers, especially cotton farmers, but had a negative impact on the purchasing power of wage earners. 12 The method used to measure poverty was identical, and, therefore, it is possible to compare most of the data. However, the comparability of expenditure aggregates is weakened because the data were collected during two different periods of the year. In addition, other poverty estimates using different methodologies, and based on 1992 and 1998 demographic and health survey (DHS) data, show a slight decrease in poverty. 13 The household living standards were carried out in 1994 and 1998 based on a sample of about 8,500 households distributed across ten regions. The data are analyzed in the Burkina Faso poverty profile, finalized in May 2000. 28 Burkina Faso: Poverty Incidence by Economic Occupation, 1994 and 1998 (In percent) 1994 1998 Economnic occupations P0 Co P0 CO Public wage eamers 2.2 0.2 5.9 0.5 Privatewageeamers 6.7 0.4 11.1 0.7 Craftsmen and merchants 9.8 1.4 12.7 1.6 Other emnployment 19.5 0.3 29.3 0.4 Cash crop farners 50.1 11.8 42.4 15.7 Foodcropfarmers 51.5 78.9 53.4 77.1 Unemployed 41.5 7.1 38.7 4.0 Total 44.5 100.0 45.3 100.0 Source: Priority Survey I and Priority Survey II. ' Poverty incidence is measured as the head count indexP0 (the percentage of a group below the poverty line). The contribution of each group to the total number of people below the poverty line is captared by the index CO. The most vulnerable groups are children, women, unemployed, and the elderly. There are 100 women for every 95 men on the absolute poverty threshold. HIV/AIDS is also creating a new group of dependent poor and increasing the stress on traditional networks of support. 29 Attachment 3 Key Structural Reforms Implemented under Previous CAS Policy Measures Status Fiscal reforms Introduce WAEMU's product classification Done in April 1999 Eliminate special intervention tax and introduce WAEMU's CET, lowering maximum Done. Rate reduced to 20 percent in January 2000 tariff rate from 37 percent to 25 percent Eliminate special VAT payment procedures for importers of raw materials and for Done enterprises registered under the investment code Eliminate all remaining exemptions on public contracts and enhance monitoring of Done in June 1999 taxation for foreign-financed projects Complete computerization of tax revenue collection, enhance monitoring of large Done in 1999 enterprises, and improve recovery from defaulters Introduce a withholding tax at source on imports and purchases from wholesalers and Done in January 2000 producers Introduce a withholding tax at source on payment for services Done in January 2000 Reduce the business profit tax from 40 percent to 35 percent Done in 2000 Computerize wage and public investment expenditure Ongoing Conduct review of public investment Conducted in 1998-99 Haxmonize the budgetary system within the WAEMU framework Done Civil service reform Approve and implement law on civil service end- 1998 Approved in April 1998, and entered into force end-1998 Approve and implement master plan for institutional reforms and modemization of public administration including: Introduction of merit-based promotion system Done in January 1999 Larger recourse to contractual staff Ongoing since 1999 Approve law on decentralization and deconcentration Done in December 1998. Implementation ongoing Introduce a single personnel file, encompassing those of the Ministries of Finance Done in March 2000 and of the Civil Service Financial sector reform Complete restructuration of the postal checking system and savings fund (CCP- Done in June 2000. CNE), with separation of accounts from treasury and compensation between treasury and the national postal office (Sonapost). Strengthen the network of savings and loans cooperatives Yearly audit of main savings and loans network since 1998: unit responsible for enforcing PARMEC law strengthened. 1/ On the basis of new OHADA acts and the regulations of the banking commission, Done in 1997-99 strengthen rules applying to bank collateral, bank reserves, and effective capital Business environment, legal and regulatory framework Simplify business law in context of OHADA 1997-2000, ongoing Increase recruitment of magistrates and computerize courts and tribunals 1997-2000, ongoing Strengthen one-stop window (CPE) for private enterprises and streamline regulation Done in November 1997 by October 1997 Public enterprises and privatization Strengthen institutional framework for privatization, so as to speed up process Done Complete ongoing privatization of 41 enterprises Privatize 21 enterprises Done Put up for sale or liquidate by Dec. 1997 8 entelprises Done Put remaining 12 enterprises up for sale by March 1998 Done with some delays Review the strategy for the remaining enterprises in govemment portfolio Done Select four new companies for privatization in 1998 Done In telecommunications, grant two cellular phone licenses, and Done in April 2000 operationalize regulatory agency Done in March 2000 Approve privatization and liberalization of energy sector Done Agricultural policy Phase out activities of state rice import company Done in 1997-99 Adopt new agreement on producer price and profit-sharing mechanism for cotton Done in March 1998 Adopt plan to open up the capital of SOFITEX to cotton producers and others 30 percent of shares acquired by producers; interprofessional agreement signed in 1999 Complete reorganization of agricultural services of Ministry of Agriculture Done in December 1998 1/ The PARMEC law was adopted in 1994, in the context of the WAEMU, regulating savings and loan cooperatives and their networks. 30 Attachment 4 An Econometric Model for Macroeconomic Simulations 1. The model was built in close collaboration with the Burkinabe authorities. It is designed for policy simulation in the context of a small dependent economy facing short and long-term constraints to GDP growth. First, effective demand constitutes an important constraint on GDP growth. In addition, a significant part of the Burkinabe economy is informal and an equally large proportion of rural output - food products - is non-marketed. Second, foreign exchange availability is a major constraint to growth. This is because Burkina Faso is a natural resource poor agrarian country, particularly vulnerable to climatic shocks, which makes the economy very dependent on imports, especially foods, durable consumer goods, oil products as well as capital goods. Given that export propensity is very low (11 percent of GDP in 1999), the country is also dependent on workers' remittances and foreign aid. Finally, Burkina Faso is a member of the WAEMU. The fixed exchange rate system implies tight monetary policy, especially credit policy. This constitutes a third constraint on short-term output growth. As a result, in the short run, real income growth is constrained by foreign exchange availability and domestic credit. 2. These constraints affect the various components of aggregate demand. Specifically, consumption depends on disposable income, real credit to the private sector and import capacity because of food and durable consumer goods. Likewise, total investment depends on potential output as well as import capacity since most capital goods are imported. Public consumption, net transfer to the private sector and public investment are policy variables that are set according to growth and distribution objectives as explained later. Imports depend on income and on the country's relative competitiveness indicated by the real exchange rate, while exports are driven by competitiveness as well as potential output. In the long run, output is determined according to an endogenous growth model. Capacity depends on physical capital, human capital and total factor productivity growth. The price level is determined via cost-push factors (import and primary factor costs) and short-term demand pressure related to capacity utilization rate. 3. On the financial side, the model describes flows of funds for four economic agents, namely the private sector, the government, the monetary sector and the foreign sector. The public sector comprises the central government as well as the local administrations. The monetary sector comprises the central bank and deposit money banks and the private sector the rest of the economy (households and non-monetary financial institutions). The money market is described via supply and demand activities. The demand for money depends on real income and expected inflation. Policy targets on gross foreign reserves, bank credit to the private sector and to the government are specified, so that changes in net foreign liabilities clear the money market. As to the government sector, public consumption and investment are set as policy targets as indicated above. Meanwhile, Government revenue is derived from taxes and exogenously specified levels of grants. The variation in foreign loans to the public sector ensures the financing of the public sector resource gap. With a fixed nominal exchange rate, a target on gross foreign reserve of the Central Bank and all other foreign financing items pre-determined, balance of payments closure may require some short term borrowing, which is considered short term public liability. Scenario of Moderate Growth. 4. This scenario assumes the continuation of current adjustment policies in the context of low level worldwide inflation and moderate international interest rates (5 percent). We assume a moderate increase in export prices while import prices will remain stable around the inflation rate of OECD countries-as a whole there is a 2 percent improvement in the terms of trade over the projection period. We assume a slight depreciation of the exchange rate (2.5 percent) consistent with a strong dollar and low inflation in the zone. We assume that the BCEAO will adopt a cautious monetary policy to maintain inflation within the WAEMU's convergence target. 31 Attachment 4 Domestic credit is projected to expand by 2 percent above the inflation rate. We project an increase in net foreign assets aiming at maintaining gross foreign reserves at a minimum of 8 months of imports. Workers' remittances are expected to increase by 10 percent over the period 2000-03 and partly offset the deterioration of the current account balance. This trend is in line with sub-regional GDP growth. We assume the deepening of financial intermediation and a favorable environment which will create investment opportunities and attract external savings. 5. Fiscal policy remains prudent with direct and indirect tax rate of respectively 3 and 5 percent of GDP. By contrast, we have adjusted indirect tax import rates to take into consideration the implementation of the custom unions in WAEMU countries as of January 2000. We used as a benchmark the average import tariff in the zone estimated at 12 percent given product classification and the new CET structure. We project a steady increase of capital expenditure of 5 percent so that the government can continue its effort to improve basic infrastructure and human capital. Simultaneously, public consumption will rise by about 2 percent following additional recruitment in priority social sectors and extra recurrent costs generated by the increased volume of public investment. 6. Simulation results indicate that in this scenario, real GDP growth will average 4.5 percent per annum over the projection period (2000-2005). The inflation rate will stabilize slightly below the WAEMU target at around 2.4 percent. There will be a slight improvement of external and internal balances. At this annual rate of 4.5 percent of real GDP growth and given the current elasticity of poverty reduction with respect to mean income (about 1.5), the poverty headcount index will only decrease by about 1.5 points per year, which would not allow Burkina Faso to achieve the OECD 2015 development goals. High Growth Scenario. 7. Reducing poverty in Burkina Faso will require a more ambitious development scenario. The PRSP presents such a high growth scenario, with a target for the average annual real GDP growth rate in 2000-03 of 7.4 percent. To reach this target, the government of Burkina Faso plans to implement a two-pronged strategy: (i) a more flexible macroeconomic framework; and (ii) a structural reform program aiming at opening-up the economy to regional and world markets and to significantly reducing input and transaction costs. 8. A more flexible macroeconomic framework: The government has articulated the country's poverty reduction strategy and a comprehensive action plan that identifies priority sectoral policies to be pursued in support of poverty reduction, including in the areas of education and health. The first step should be afull costing of the envisaged poverty reduction strategy, both with regard to public spending requirements and to changes in the tax system. The second step would involve taking into consideration the scope for financing budgetary expenditure through net domestic borrowing in light of the need to maintain macroeconomic stability as prescribed by the WAEMU and BCEAO. The third step would be to assess thescope for externalfinancing be it in the form of grants, net external borrowing, or debt relief. After having carried out the assessment of the external and internal resources, policy makers could then determine whether the desired poverty reduction strategy can be financed in a manner consistent with the country's growth and stability objectives. 9. The model is a useful tool to conduct this iterative process. Policy targets on government spending (public consumnption and investment as defined in the PRSP) and policy targets on gross foreign reserves, bank credit to the private sector and to the government (as dictated by the WAEMU and BCEAO rules) are specified. The model calculates the changes in net foreign liabilities necessary to clear the money market and the public sector resource gap. Given the fixed 32 Attachment 4 norninal exchange rate, a target on gross foreign reserve of the Central Bank and all other foreign financing items pre-determined, the balance of payments closure may require some short term borrowing. If there remains an imbalance between expenditure and expected financing that jeopardizes the country's macroeconomic growth and stability objective as stipulated in the WAEMU treaty, one option would be to ascertain the extent to which the additional external financing may be available. If the desired poverty reduction program cannot be reconciled with the country's economic stability and growth objectives, then policy makers will need to reconsider the various parameters specified initially specified. 10. Implementing a Bold Structural Reform Agenda. The second pillar of the strategy is to remove all constraints to private sector development and accelerate the pace of Burkina Faso's integration into the regional and world economy. This includes diversifying the economy to establish a strong foundation for sustained growth in view of the vulnerability of the country to external shocks; investing in human resources: This will imply a boost in both current and capital expenditures over the horizon 2005;bringing down gradually the high costs of electricity, telecommunications, and transport; improving taxation of the informal sector, reducing corporate income tax and tightening of the exemptions under the investment code; deepening financial intermediation and increasing access to microfinance savings and loan institutions, especially for the poorest and for women. These reforms would lower transaction and input costs, enhance the competitiveness of the economy, attract foreign direct investment, increase exports, and stimulate private sector development. Such growth-enhancing and poverty-reducing policy agenda boosts private sector and partners' confidence. We assume an increase in foreign direct investment and portfolio investment growth over the projection period. Foreign transfers to the private sector will also improve. Foreign donors will also support the government strategy by providing additional current and capital grants. We project a slight CFA depreciation with respect to the dollar (as in the scenario of moderate growth) and an improvement in the terms of trade over the projection period. 11. Following the increase in public human capital expenditures and stronger private sector activity after the reduction in factor costs, corporate income tax, and increased productivityreal GDP growth rises steadily over the medium-term to reach 7.7 percent in 2005 and inflation is contained at about 2.6 percent, (slightly below the WAEMU target of 3 percent). With a poverty elasticity of about 1.5, the poverty headcount ratio would be reduced by about 30 percent (15 points). 33 Attachment 5 CAS Formulation: A Participatory Process In the process of CAS preparation and formnulation, we have organized throughout 1999 and early 2000 consultations with Burkinabe officials, academic experts, private businessmen, local UN agency heads, multilateral and bilateral program directors, and the representatives of many NGOs and community groups. To initiate the process, we held a Country team retreat in Washington in January 1999, opened to other donors working in Burkina Faso, and to two senior officials representing the Government. In the summer of 1999, we held workshops in Ouagadougou, Bobo-Dioulasso, and Tenkodogo to consult with representatives of the administration in the country side and civil society groups. We invited interested groups and individuals to advise the Bank on identification of development priorities and formulation of its assistance strategy for Burkina Faso. The agenda, participation, and conduct of the meetings were left to organizers. Written talking points, notes and other background material for these meetings were prepared by the Government. Finally, in September 2000, a French version of the draft of the CAS was shared with the burkinab6 authorities and the donors. Their views and recommendations were fully taken into consideration in the final version of the document. The meetings held throughout the preparation process of the CAS varied somewhat in quality, but the response was uniformly positive, the discussions were often lively but always constructive, and some ideas merging from these brainstorming sessions have been incorporated into this new CAS. While the discussion of priorities and suggestions for future Bank action in Burkina Faso tended to reflect the specific interests of each social group, there were some points in common. These have included an understanding of the need to improve the competitiveness of the Burkinabe economy through major reforms of the utilities (electricity, water, telecommunications), and to redefine the role of the state and to limit public expenditures to sectors where market failure cannot be corrected otherwise. High priority was given to reducing the human capital deficit-with particular emphasis on raising the health and education levels in the rural areas-and to improving governance through better public finance management, greater decentralization of decision- making and of control over program execution, and increased account ability of all Government officials. The process emnphasized the need to maintain flexibility in the implementation of the Bank program. During the various workshops organized in 1999, the joint Bank-Government teams agreed on strategic priorities and adopted three criteria to be used for defining the medium-term Bank program: (i) impact of the strategy on the overall growth and poverty reduction objective; (ii) institutional viability and degree of ownership; and (iii) comparative advantage of the Bank. It was agreed that these criteria would serve as guiding principles to design Bank assistance and to make adjustments to the program if circumstances change during the CAS implementation period. The CAS preparation process had clear benefits. Government officials and Bank staff were encouraged by the participants' awareness of the need for a faster pace of reforms. The discussions also revealed major information gaps and therefore, the need for well thought through communication strategies for privatization programs and public administration reform, for example. It has been agreed with Government that this CAS process should contribute to the information/comnnunication effort through further dissemination activities. The approved CAS document will be widely distributed and discussed in the country (all development stakeholders, local and international media, political parties, Economic and Social Council, economic commission of the National Assembly). Finally, these CAS discussions have shown that therelationship between the Government and the Bank has gained in confidence over the past three years. 34 Attachment 6 Burkina Faso's Gender Profile Indicator I Female Male 1. HUMAN CAPITAL ASSETS Health Life Expectancy at Birth 54 Crude Birth Rate (per 1,000 people) 45 Infant Mortality Rate (per 1,000 live births) 105 Maternal Mortality 484 Fertility Rate (women aged 15-49) 6.8 Prevalence of Female Genital Cutting (FGC) (%) 66 HIV/Aids Adult HIV Prevalence (% of population aged 15-49) 6.44 HIV Prevalence Rate in Young People (Age 15-24) High 7.51 3.33 Estimate (%) Adults (15-49) Living with HIV/AIDS 180,000 150,000 Total Number of People Cuwfently Infected 350,000 AIDS Orphans (Cumulative) 320,000 Women Attending Antenatal Clinics (% infected) 7.4 Female Sex Workers; Male SDT patients (% infected) 58.2 41.8 Education Adult Literacy Rate (15+) 12.9 24.8 Gross Primary Enrollnent Rate (% of age group) 34 46.7 Share of Secondary Enrollments (%) 35 65 Share of Tertiary Enrollments (%) 23 77 Progression to Grade 5 (% of cohort) 68 71 2. ECONOMIC ASSETS Adult Labor Force (%) 47 53 Agricultural Labor Force (%) >50 <50 Administrative & Managerial Labor Force (%) 14 86 Land Ownership (%) <6 >94 Household Headship, Rural (%) Total 7 93 3. SOCIAL CAPITAL ASSETS Representation in Parliament, 1999 (%) 8 92 Representation in Cabinet 1999 10 90 Representation in Local Government (%) 10 90 Mean Age at first marriage (years) 17 27 Sources: PRSP, Demographic and Health Survey 1999, LTNAIDS, UNDP, vauious studies. 35 Attachment 7 Collaboration with Development Partners During CAS preparation information was collected by donor and sector on past transfers, as well as projected conmmitments14. The difficulty in gathering basic data and producing a summary matrix of the nature and volume of aid from the various donors highlighted the administration's limited institutional capacity to manage foreign assistance on the basis of a properly informed decision-making process. It suggested that both coordination and tracking of aid will require capacity building on the part of Government and simplification of procedures on the part of donors. A critical element in this effort will be to develop adequate mechanisms to monitor and evaluate the impact of external assistance. For details, see donor activities in Annex B 1. Donors (excluding IDA) Total disbursements (1996-98) and Projected Commitments (1999-2002) ($ million) Sector Rural Dev/ Educatlon Health Transporti Energy Water Instit Other Total Environ Infrastructure Dvlpt 1996-1998 207.7 63.3 66.1 135.7 58.1 82.4 175.1 40.4 828.9 1999 62.1 14.1 14.9 30.2 15.3 69.9 42.3 10.2 258.9 2000 63.7 23.2 14.7 30.6 11.8 55.1 27.4 10.3 236.8 2001 49.2 21.9 10.6 45.7 21.6 24.8 29.8 6.4 210.0 2002 38.4 21.1 10.0 30.2 14.2 33.0 35.8 6.1 188.8 4 Detailed information by donor and sector is available at Direction Generale de la Cooperation. 36 Attachment 8 Performance Monitoring Frameworkl5 Policy Domain Key Monitoring Indicators Monitoring Instruments 1. Macroeconomic * Real GDP growth * Review of the structural reforn program every Framework and * Real exchange rate six months Poverty Reduction * Number of people below the * Review of public expenditure management poverty line every year Poverty profiles every two years 2. Education * Gross enrohnent rate for girls/total * Publication of the Annuaire scolairre every enrolment rate year; * Gross enrolrent rate in he least * Public expenditure review in 2000 and 2002 privileged rural areas * Incidence analyses every two years * Average cost per child in primary * Annual Surveys school 3. Health * Vaccination coverage ratio (in %) * Consolidated yearly reports by the MOH on - BCG vaccination rates and staffing for each calendar - DTCP3 year, to be audited and valdated by INSD - Measles * Public expenditure review in 2000 and 2002 * -Yellow fever * Incidence analyses every two years * Essential drugs breakdown rate (%) * Independent audit of CAMEO records on drug stocks every year 4. Governance * Cornpletion of year-end budget * Dissemination by March 31, 2001, to all execution reports (lois de district authorities, and organization of reglement) and transmission to the workshops with local authorities and civil Supreme Audit Court (Cour des society Comptes) and to Parliament. * Annual surveys * Share of budget effectively * Annual survey of decentralized units on the reaching the most decentralized status of allotted budget execution departments. * Half-yearly opinion polls: - of users of government services (Health education); -of economic agents on government tendors (procurement procedures, settlement delays) Private Sector * Public enterprise divestiture * Monitoring of the agreed program Development * Number of new ventures * Annual Reports from various sources * Foreign direct investtnent * Surveys 15The following table of monitoring indicators draws upon the PRSP indicators adopted in the framework of the SPA pilot initiative on Reformulated Conditionality. 37 Attachment 9 Combating HIV/AIDS Burkina Faso has the second highest HIV/AIDS infection rates in West Africa. The International Partnership for Action Against AIDS has identified Burkina Faso as one of the priority countries in the Africa region. With an overall HIV prevalence rate of 6.4 percent, the country is in the generalized phase of the epidemic. HIV infection rates amongst high-risk groups are dramnatically higher: TB patients: 34 percent; STD clinic patients: 23 percent; cormmercial sex workers: 35 percent. The age groups Cumulative Number of Reported AIDS most affected are adults in their most Cases, 1986-99 productive years and young girls (13- 24). The main mode of transmission is 20000 heterosexual intercourse with perinatal 16000 transmission on the rise. Geographic 14000 areas characterized by heavy internal 12000 and external migratory flows are 8000 disproportionately affected, to the 6000 l extent that there is a heavy 4000 concentration of individuals and 0 changes in sexual behavior. As can be , '99 ,pll l seen from the exhibit above the ~ ~ ~ cumulative number of reported AIDS Year cases has increased rapidly over the _ past decade, reaching about 18,000 in 1999. These AIDS cases are believed to represent only a fraction of the actual cases. The government of Burkina Faso realizes the gravity of the HIV/AIDS epidemic and has been proactive in implementing a series of national plans. Since the emergence of the first AIDS cases in 1986 there has been a growing political conmiitment, an intensification of the scope and range of interventions, and a substantial growth in the level of financial resources being channeled for the HIV/AIDS program. The government's own contribution rose from only US 10,000 during the first phase to close to US$2.5 million during the most recent plan. The IDA-funded Population and AIDS Control Project has provided one of the key sources of funding for the 1996-2000 HIV/AIDS Plan. The recently prepared 2001-2005 HlV/AIDS Multi-sectoral Plan emphasizes the need for strengthening partnerships, promoting participatory approaches, and empowering decentralized authorities to take a lead in the fight against this disease. The plan provides a sound basis for future Bank assistance. IDA has adopted the following strategies for providing support to the government in the fight against this devastating pandemic: (i) mainstreaming HIV/AIDS activities into all areas of IDA assistance, with a particular focus in the short-term on retrofitting on-going operations; (ii) continuing our policy dialogue with Burkinabe authorities to ensure that HIPC funds are targeted for critical HIV/AIDS activities; (iii) ensuring that funds from the on-going Population and AIDS Control Project are effectively used for priority interventions; and (iv) preparing a fast track HIV/AIDS Disaster Response Project. With regard to the latter, Bank management has expressed a strong commitmnent to supporting authorities in their effort to access the US$500 million Multi-Country HIV/AIDS Program for the Africa region (MAP) in an effort to scale up their national program. The HIV/AIDS Disaster Response operation would be used as the main vehicle for channeling funds for the multi-sectoral and community driven fight against HIV/AIDS. In addition, the Bank is supporting the Ministry of Health in undertaking a sector-wide approach for financing priority activities covered in its 10-year health sector development program, including priority HIV/AIDS activities. 38 Attachment 10 Core Labor Standards The 1962 Labor Code has been amended several times during the past decade, most recently in 1996. Under this legislation, workers, including civil servants, traditionally have enjoyed a legal right of association, which is recognized under the Constitution-essential workers, such as police, may not join unions. There are four major labor confederations and twelve autonomous trade unions linked together by a national confederal committee. They represent a wide ideological spectrum. Labor unions may affiliate freely with intemational trade unions. The National Confederation of Burkinabe Workers (CNTB) is affiliated with the Brussels-based World Confederation of Labor. Unions have the right to bargain for wages and other benefits, both directly and with employers and with industry associations. These negotiations are governed by minimums on wages and other benefits contained in the Interprofessional Collective Convention and the Commercial Sector Collective Convention, which are established with Government participation. If no agreement is reached, employees may exercise their right to strike. Either labor or management may refer an impasse in negotiations to labor tribunals. Appeals may be pursued through the Court of Appeal to the Supreme Court, whose decision is binding on both parties. Collective bargaining is extensive in the modern wage sector, but it encompasses only a small percentage of workers. The law prohibits forced labor and there are no reports of its use. The Labor Code sets the minimum age for employment at 14 years, the average age for completion of basic primary school. However, the Ministry of Employment, Labor, and Social Security, which oversees labor standards, lacks the means to enforce this provision adequately, even in the small wage sector. Children commonly work with their parents in family subsistence farms in rural areas or in small businesses and the informal sector in urban areas. The Labor Code mandates a minimum monthly wage, a standard workweek of 40 hours for nondomestic workers and 60 hours for household workers. The minimum monthly wage in the formal sector, about $45 (CFAF 27,089), does not apply to subsistence agriculture, which employs over 80 percent of the population. The law establishes safety and health standards at the workplace. However, the Government's Labor Inspector Corps does not have sufficient resources to fulfill its duties adequately. 39 Annex A2 Burkina Faso at a glance 1113/00 Sub- POVERTY and SOCIAL Burkina Saharan Low- Faso Africa Income Development diamond 1999 Population, mid-year (millions) 11.6 642 2,417 Life expectancy GNP per capita (Atlas method, US$) 230 500 410 GNP (Atlas method, US$ billions) 2.7 321 988 Average annual growth, 1993,99 Population (%f) 2.8 2.6 1.9 Labor force (%) 21 2.6 2.3 GNP Gross per primary Most recent estimate (latest year available, 199349) capita enrollment Poverty (Y. of population below nationalpoverty line) 45.3 Urban populabtion (% of total population) 17 34 31 Life expectancy at birth (years) 54 50 60 Infant mortality (per 1,000 live births) 105 92 77 Child malnutrition (% of children under 5) 33 32 43 Access to safe water Access to improved water source (% of population) 78 43 64 Illiteracy (% of population age 15+) 81 39 39 Gross primary enrollment (% ofschool-age population) 41 78 96 -Burkina Faso Male 46.7 85 102 Low-income group Female 34.7 71 86 KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1979 1989 1998 1999 Economic ratios* GDP (USS billions) 1.5 2.4 2.6 2.6 Gross domestic investmentUGDP 29.6 27.8 Trade Exports of goods and serviceslGDP 9.3 10.3 14.0 13.0 Gross domestic savings/GDP -3.1 7.1 12.7 9.8 Gross national savings/GDP 19.6 15.2 Current account balance/GDP -14.5 -16.0 Domestic Interest paymentsWGDP 0.3 0.7 0.2 Savings Investment Total debWGDP 19.0 30.4 54.7 59.9 Total debt service/exports 3.2 9.7 16.6 23.3 Present value of debtWGDP Present value of debt/exports 276.0 279.0 Indebtedness 197949 1989-99 1998 1999 1999403 (average annual growth) GDP 3.8 6.2 5.8 5.8 - Burkina Faso GNP per capita 1.0 3.4 2.9 2.4 Low-income group Exports of goods and services -2.1 1.2 44.7 -16.2 6.3 STRUCTURE of the ECONOMY 1979 1989 1998 1999 GrowthofinvestmentandGDPlI) (% of GDP) so Agricuiture 34.2 31.8 32.0 31.3 4 Industty 22.8 23.9 27.8 28.3 20 Manufacturing2 0 0 Services 43.0 44.3 40.1 40.4 Private consumption 90.9 78.9 73.0 76.7 o40 General government consumption 12.2 14.0 14.3 13.6 GDt e GDP Imports of goods and services 30.9 24.9 30.9 29.4 197949 1989-99 1998 1999 Growth of exports and imports (%) (average annual growth) Agriculture 3.6 3.3 5.5 3.1 so Industry 4.1 3.5 10.9 10.8 40.. Manufacturing 2.3 20. i _. Services 4.5 3.5 4.1 6.7 Private consumption 2.9 3.3 64 7.6 i0 95 98 8 General government consumption 7.0 2.8 8.2 -1.3 Gross domestic investment 5.9 23.5 -5.8 - Imports of goods and services 2.8 2.6 32.1 -5.7 Exports olmports Gross national product 3.8 6.3 5.8 Note: 1999 data are preliminary estimates. The diamonds show four key indicators in the country (in bold) compared wih its income-group average. If data are missing, the diamond will be incomplete. 40 Annex A2 Burkina Faso PRICES and GOVERNMENT FINANCE 1979 1989 1998 1999 InfiltIon (%) Domestic prIc s 30 (% change) 25 A Consumer prices -0.3 1.0 -1.1 20 Implicit GDP deflator 3.2 -1i4 Is Government fnance (% of GDP, excluding current grants) 0 Current revenue 10.0 13.1 15 0 -4 94 95 9f 97 98 99 Current budget balance -1.0 4.0 5 2 -GDP deflator 0 CPI Overall surplusldefick - -10.0 -12.0 TRADE (US$ millions) 1979 1989 1998 1999 Export and Import levels (USS mill) Total exports (fob) 325 255 700 Cotton 206 136 Bo0 Meat 46 48 5s0 Manufactures 400 Total imports (ci') 639 600 30* Food . .. 143 74 200d JJ Fuel end energy 72 102 100 Capital goods 196 221 0 Export price index (1995=100) .. .. 98 101 93 94 95 9 97 90 99 Import price index (1995=100) 104 105 a Exports UImports Termnsoftrade(1995=100) 95 97 BALANCE of PAYMENTS (US$ millions) 1979 1989 1998 1999 Current account balance to GDP (%) Exports of goods and services 174 244 364 292 o 1 101 1111 Imports of goods and services 491 587 803 760 -2 Resource balance -316 -343 -439 -467 Net income N/A N/A -12 -13 Net current transfers 83 140 190 155 -10 Current account balance N/A N/A -261 -326 -12 Financing items (net) 227 310 1 Changes in net reserves N/A NIA 33 15 -18 Memo: _ _ Reserves including gold (US$ millions) .. 266 373 407 Conversion rate (DEC, local/US$) 212.7 319.0 585.2 560.6 EXTERNAL DEBT and RESOURCE FLOWS 1979 1989 1998 1999 (UJS$ millions) Total debt outstanding and disbursed 295 717 1,358 1,452 Composffion of 1998 debt (US$ mill.) IBRD 0 0 IDA 65 255 710 753 Total debt service 9 39 74 IBRD 0 0 IDA 0 3 10 11 D:648 Composiion of net resoume flows B: 710 Official grants 137 116 240 13 Official creditors 49 79 Private creditors 13 3 Foreign direct investment 2 0 0 Portfolio equity 0 0 0 Word Bank program Commitments 14 63 15 30 Disbursements 19 25 58 63 A-IBRD E-Bilateral Prindpal repayments 0 1 11 6 B - IDA D - Other muftilateral F - Private Netflows 19 24 47 57 Interest payments 0 2 5 5 Net transfers 19 22 42 52 Deveiopment Economics 11/3100 41 BURKINA FASO: COUNTRY ASSISTANCE STRATEGY MATRIX 2000-2003 Diagnosis and Development Government's Strategy/Actions 1 Selecd Bank and Government Bank Group Instruments Activities of Other Donors objectives of the PRSP J efrmneIndicators jand Timing 0oNjctive 1: Aeceiate JRqilty-Baed Growth 1.1 Maintain a Stable Macroeconoxmic -Consolidate recent gains in -Maintenance of a stable LENDING Budgetary slupport and support to Framnework macroeconosnic management and move macroeconomice environment, that will - PRSC-1 (FY01) balance ofpayments (European Union, beyond stabilization to deeper ensure a sustained growth and a - PRSC2 (FY03) Denmiark, Switzerland, Netherlands) structural reforms and sustained sustanable fiscal and external position, economic growth. as evidenced by continued strong NON-LENDING perforsnance under a program - Capacity building for economfic - Focus on reforTms to improve the supported by an arrangement under dhe monitoring (miacro modeling and comipetitiveness of the economy and to PRGF forecasting techniques) (FYOI-02-03) facilitate the country's integration into -Technical assistance to the National the regional and world economny - Satisfactory assessment by Bank staff Statistics Institute (INSD) (FYOI-02- of the authorities' annual reports on 03) imiplementation of the PRSP 4j- 1.2 Increase the Competitiveness of (i) lower the unit labor cost by tQ the Econom and Reduce Factor Costs adjusting the minimum wage and LENDING reducing the welfare costs home by - Competitiveness and Enterprise fornal sector enterprises; Developmient (FY02) (ii) increase the efficiency ofpusblic investment by acting on the recommendations of the study on reform of the Public Investment Progra (PIP); (iii) accelerate development of financial markets; (iv) trade liberalization; (v) privatize existing state interests; (vi) strengthen the Governmnents regulatory capacity; (vii) liberalize the cotton rector and encourage new entrants I- ji 2:ji: :T: i E ii ESi:i: i iii ii f HiS)iS ii: g iS:E:: 7r i i:: ii iS Eig::fi:i:i: : ::::E iE i: ,E F Rii i ::: i iEiCEgi if E- .................................................................................... E i: L7 i ::: i: fiii77hRiLiFiSi i:i:iT:: ::::7:: ii:Ri L iL: ::: 0t;;lf 0|$ j 0 j 0 )\;; 0000 j00lllX0)$9));000t0juij ; j);Q;; 0Q0|9000|;lllllti ll} ). \QXji00i :$j);0X;;Q}29 t:0W83 Qi:000$t |)t}0X) :XQ e ive1 t e e .* w t T 0 tI-. BURKINA FASO: COUNTRY ASSISTANCE STRATEGY MATRIX 2000-2003 (continued) Diagnosbis and Devel P Goverunent's Strategy/Actions Seletemane andiaovere Rank Group Instruments Activities of Other Donors Objectives of the PRSP Performnance Indicators and Timing 1.3 Support to Improve the Growth Agriculture/Livestock Increase in the volume and value of PORTFOLIO Statistical surveys (Netherlands); Potential of Specific Productive Sectors (i) Create a legal framework conducive non-traditional agricultural exports - Agricultural Services II to the emergence of professional - Private Irrigation - Food Security (Germany); agricultural organizations LENDING . Community Development (Denmark; (ii) Support these organizations in - Conmunity-based Rural Genmany; AFDB; BOAD, Belgium and setting up an effective charnber of Development (FY01) IFAD; IDB; OPEC Fund); agriculture; NON LENDING (iii) Train organization members - Support to implementation of Rural - Water & Soil Conservation, Forestry (iteracy, management, rural trades) to Development Strategy (IFAD); improve their productivity; - Full PER (FY0 1) (iv) Create a framework designed to - Support for poverty monitoring and - Strengthening of animal health spur private investment in the follow up of PRSP implemenitation Serdces (Eupean Development agricultural sector, (FY0I-02-03) (v) Improve marketing channels for Sanitary control (EDF); inputs and agricultural products in order to boost the competitiveness of - Gounna Livestock Development sectors with a high potential for Project (BADEA) growth; (vi) Set up a regulatory fraznework favoring contract agriculture. Water Improving the living conditions of the LENDING population in the capital city by - Ouagadougou Water Supply (FY01) increasing, in the long run, the quantity and quality of potable water available in capital city and strengthening the utility company (ONEA) Urban PORTFOLIO Provision of priority uwban - Urban Environment infrastructure and services in urban LENDING centers and secondary cities - Usban Environment supplemental (FY02) XD tP4 BURKINA FASO: COUNTRY ASSISTANCE STRATEGY MATRIX 2000-2003 (continued) Diagosmband Development overnmesit's Strategy/Actions IActivities of Other Donors Dibgectivs othPRPPerformance Indicators and Timing Nbning PORTFOLIO Strengthen and deepen the regulatory - Mining Sector Capacity Building and and fiscal reforms, build capacity in Environment public and private sector agencies, complete geological and environmental databases. Energy Introduce private sector participaton to PORTFOLIO improve the efficiency of the provision - RPTES Program of electricity and rural telephony LENDING services and the supply of hydrocarbon - Energy Sector Reform Operation products to the economy, increasing (FY02) access to universal infrastructure services. Transport/Infrastructure (i) Increase public investment NON LENDING efficiency, (ii) improve road transport - Full PER (FY01) productivity and distribution mechanisms, (iii) strengthen management and policy 4- implementation capacity of the public sector to ensure adequate knowledge and monitoring of sector performance. Industry (i) Simplify the official procedures for LENDING investing and establishing an enterprise - Competitiveness and Enterpeise (ii) Revise the tax system Development (FY02) (iii) Create an infornation and documentation center to facilitate the gathering, processing, and dissemination of economic and business information (iv) Make private sector support programs more effec6ive (v) Reinforce judicial mechanisms to help comnbat fraud (vi) Consolidate the legal framework for business by creating and strengthening commercial tribunals. Tourism (i) Develop "Sea-Sahel" tourist circuits (ii) Develop specialized tours ( e.g. nature treks or hunting tours in the Paina, Arly, orNahouri reserves) _ : 7 7 77 7 7 : r 7 E 7 . r 7 7 7 r 7 t ? ? : es : t: 77 : r E dA; j : ::: f iS i iff S: ~~~Objetb'.2 iiC Guaidrant:E::::ditE0(E:iteeiiii i:tha0:::titL ::E.:yS :T VS tlsl'oo bam............................. :e:: tes itt Baste;-i- i L::Socia\Wll li)Serv4ices ! BURKINA FASO: COUNTRY ASSISTANCE STRATEGY MATRIX 2000-2003 (continued) Diagnosis and Development Government's Strategy/Actions Selected Bank and Government Bank Group Instruments Activities of Other Donors Objectives of the PRSP Performance Indicators I and Timing 2.1 Promote access ofthe poor to (i) Increase education's share of public - Progress towards PRSP's quantitative PORTFOLIO - Improving quality of education education expenditures and ensure the objectives for - Post Primary (Canada) decentralized hiring of primary school teachers * Gross enrollment rate for - School meals (Cathwel-CRS) (ii) Implement institutional refonns girls/total enrollment LENDING within the MEBA and increase - Basic Education (FY02) - Non formal education (UNICEF; efficiency in the use ofpublic funds in * Gross enrollment rate in the least - Community-Based Rural Netherlands) education privileged rural areas Development (FY01) (iii) Identify specific steps to benefit - Secondary School Infrastructures the poorest and most vulnerable groups * First-year enrollment rate (CP1) NON LENDING (AFDB) (iv) Establish permanent literacy and - Vocational training strategy (FY03) - Training of technical secondary traininig centers or non-formal basic - girls teachers (Austria) educational centers; and implement ruareas projects directed at women -20 poorest provinces - Support to Ouagadougou University (v) Incorporate literacy training in a (Belgium; Netherlands; France) wider set of activities and services (such * Literacy rate as health, education, credit, and - Construction ofclassrooms and extension services) - Women lodging for teachers, ENEP (AFDB; (vi) Achieve abetter balance between - Percentage of literate women in OPEC Fund; UNICEF; Netherlands; various levels of the education system the 20 poorest provinces IDB; Belgium) to lay the foundation for needs of Ln future workforce * Average cost per childin primary school 2.2 Promote Access of the Poor to (i) Grant top priority to the health Progress towards PRSP's quantitative PORTFOLIO - Family Planning and fight against Health Services problems of the poorest segments of the indicators: - Health and Nutrition STD-AIDS (US-AID, Germany; WHO; population (e.g. expansion of -Population and Aids UN-AIDS) vaccination program, promotion of * Vaccination coverage ratio (in %) women and child health, combating - BCG - Promotion of essential generic drugs tuberculosis and HIV/AIDS, optimize - DTCP3 LENDING (Netherlands; Germany; France) the use of human resources in rural - Measles - Aids Response (FY0 1) areas) -Yellow fever - Community-Based Rural - Targeted budgetary support (ii) Make essential health care Development (FY0 1) (European Union and Netherlands affordable (e.g. ensure availability of * Rate of use of health facilities: essential medications and vaccines in number of new contacts per - Rural Water (Denmark, Germany, the CSPS, lower the cost of person and per year in first level Netherlands; UNICEF preventative medicines, develop local health centers (CSPS, CMA) solidarity mechanisms by establishing a legal frarnework for mutual health * Essential drugs breakdown rate insurance mechanisms) (%) (iii) Support the participation of users and communities in the development * Cost ofmedical interventions in P and management of health care first level health centers to activities (e.g. develop community- X based strategies, strengthen the powers of local management committees) . . _ BURKINA FASO: COUTNTRY ASSISTANCE STRATEGY MATRIX 2000-2003 (continued) Diagnosis and Development Government's Strategy/Actions Selected Bank and Government Bank Group Instruments Activities of Other Donors Objectives of the PILSP Performance Indicators and Timiing 2.3 Promote Access of the Poor to (i) Boost access to drinking water by - Progress towards PRSP's quantitative LENDING Water developing 3,000 modern water points, objectives foT Drinking Wat.er supply - Comimunity-Based Rural Developmient (FY0 1) infissstnucture and in mnanaging the facilities, (iii) Establishing a legal and regulatory frameworkc covering all administrative levels and including principles to govern administratiou of the sector (ganting of usage perminits, used water discharge permnits, mates, standards, etc.). Objective 3: EPMandOpruiiarEpomnnd dIncme Generitlonfar. the Poor 3.1 Reduce the vulnerability, of (i) Soil fertility nmanagement (i) Increased adoption of soil PORTFOLIO Fight against Desertification, Soil 41 agricultural activities fertility/water conservation technologies - GEPRENAF (GEF) Erosion (European Union; Switzerland; C71 ~~~~~~~~(ii) Promote the development of small- - Private Inigation Netherlands) scale agricultural water supply/irrigation systema LENDING - Community-Based Rural (iii) Enhance land tenure security Development (FY01) - Sahel Lowland Ecosystemn ManaLgement (GEF) -Shallow Aquifer Initiative (GEF) -PRONAGEN (GEF) 3.2 Intensify' and modernize (i) Improve research and its linkages PORTFOLIO agricultr with extension (i) Farm mnechanization rate -Agricultural Services II -Private Irrigation (ii) Imiprove access to equipment and 2000 2010 inAputs 35%65%/ LENDING (iii) Support for producer's (ii) Increase in miillet/sorghum yields - Community-Biased Rural organizations and conmwodity Development (FY01) associations BURKINA FASO: COUNTRY ASSISTANCE STRATEGY MATRIX 2000-2003 (continued) Diagnosis and Development Government's Strategy/Actions Selected Bank and Government Bank Group Instruments Activities of Other Donors objectives of the PRSP Performance Indicators and Timing 3.3 Increase and diversify rural income (i) Expand the geographic reach of the (i) Increase in coverage of DISS LENDING decentralized financial system - Community-Based Rural (ii) Increase the monetarization of farm Development (FY01) output (iii) Increase the competitiveness of cash crops (iv) Promote income-generating activities 3.4 Open up Rural Areas - Rural roads LENDING - Rural electrification - Community-Based Rural Development (FY01) - Rural Roads (FY03) Objective 41 Promote Good Governance 4.1 Democratic Govemance (i) Continue implementation of the National Plan of Good Govemance (ii) Continue implementation of the National Decentralization Policy; BURKINA FASO: COUNTRY ASSISTANCE STRATEGY MATRIX 2000-2003 (continued) Diag nosis and Development Cvenen'StagyAtos Selected Bank and Government Bank Group Instruments Atvte fOhrDnr Objectives of the PRSP Goverment's Strategy/Actions Performance Indicators and Timing Activities of Other Donors 4.2 Local Governance (i) Provide adequate financing Share of budget effectively reaching LENDING Decentralization (Belgium; Canada; provisions to emerging communities; the most decentralized departments. - Community-Based Rural Netherlands; Switzerland; European Annual survey of decentralized units on Development (FY01 ) Union; France (ii) Preparc regional representatives for the status of allotted budget execution the management, supervision, and leadership roles conferred on them by decentralization; (iii) inmplement an efficient and impartial local administration, responsive to the needs of the population; (iv) Make efforts to achieve citizen participation through involving civil society organizations in all aspects of local development (planning, decision- making, execution, and monitoring) (v) Adopt an official text to solve any 4- anomalies resulting from the Co geographic re-mapping of administrative borders while maintaining a sufficient degree of decentralization of services to make interventions more effective, improve citizens' access to public services, and install genuine grass-roots government; (vi) Adopt an official text allowing true decentralization of management of the State's hunian, material, and financial resources, by granting new powers to officials responsible for operations W I- BURKINA FASO: COUNTRY ASSISTANCE STRATEGY MATRIX 2000-2003 (continued) Diagnosis and Development Government's Strateg/Actions Seletrmank andiaorn Bank Group L Activities of Other Donors Objectives of the PRSP Performance Indicators and Timing 4.3 Economic Govemance (i) Strengthening the management and Half-yeazly opinion polls: LENDING monitoring mechanisms of public - Competitiveness and Enterprise finances - of users of govemnment services Development (FY02) (Health education); - Public Sector Managenent (FY03) (ii) Carry out a review of public expenditure in all sectors -of economic agents on NON-LENDING government tendors - Public service quality assessment (iii) Enact the budget accounts law (loi (procurement procedures, (FY0 1) de reglements) by the National settlement delays) Assembly and create an independent Audit Office Gap between unit prices of a certin number of products obtained by publc (iv) Improve coordination of aid and bidding and those obtained by the focus on harmonization. private sector (v) Increase the national capacity to Timely coVpletion and release of elaborate strategies and prepare budget budget execution reports estimates (vi) Promote such values as meticulousness, integrity, and transparency in public affairs and among businessmen. (vii) Intensify the struggle against practices at odds with the public interest, especiatly corruption, nepotism, and patronage (viii) Setup a national anti-corruption network for comments and proposed solutions X Annex B2 CAS Annex B2 - Burkina Faso Selected Indicators* of Bank Portfolio Performance and Management As Of Date 11/0312000 Indicator 1998 1999 2000 2001 Portfolio Assessment Number of Projects Under Implementation a 12 11 7 7 Average Implementation Period (years) b 4.4 4.5 4.1 4.4 Percent of Problem Projects by Number a, c 25 27.3 14.3 14.3 Percent of Problem Projects by Amount a, c 19.7 22.2 2.8 2.8 Percent of Projects at Risk by Number a, d 25 36.4 14.3 14.3 Percent of Projects at Risk by Amount a, d 19.7 35.3 2.8 2.8 Disbursement Ratio (%) e 19.8 21 28.7 9.2 Portfolio Management CPPR during the year (yes/no) YES NO YES NO Supervision Resources (total US$) $2,189 $1,466 $880 $981 Average Supervision (US$/project) $156 $104 $97 $81 Memorandum Item Since FY 80 Last Five FYs Proj Eval by OED by Number 35 7 Proj Eval by OED by Amt (US$ millions) 557.5 150.5 % of OED Projects Rated U or HU by Number 31.4 14.3 % of OED Projects Rated U or HU by Amt 23.4 2.7 a. As shown in the Annual Report on Portfolio Perfommance (except for current FY). b. Average age of projects in the Bank's country portfolio. c. Percent of projects rated U or HU on development objectives (DO) and/or implementation progress (IP). d. As defined under the Portfolio Improvement Program. e. Ratio of disbursements during the year to the undisbursed balance of the Bank's portfolio at the beginning of the year: Investment projects only. * All indicators are for projects active in the Portfolio, with the exception of Disbursement Ratio, which includes all active projects as well as projects which exited during the fiscal year. 50 Annex B3 CAS Annex B3- Bank Group Program Summary Burkina Faso As Of Data 1110112000 Proposed IBRDIIDA Base-Case Lending Program a Implementation Fiscal year Proj ID US$(M) Strategic Rewards b Risks b 2001 COMMUNITY-BASED RURAL DEVELOPMENT 67.0 H H HIVIAIDS Disaster Response Project 20.0 H H OUAGADOUGOU WATER SUPPLY PROJECT 70.0 H L PRSC (1) 60.0 H L Sub-Total 217.0 2002 BASIC EDUC SECTOR 30.0 H M COMPETITIVENESS & ENTERPRISE DEVELOPM 25.0 H M ENERGY 20.0 H M URBAN ENVIRONMENT SUPPLEMENTAL 20.0 H L Sub-Total 95.0 2003 PUBLIC SECTOR MANAGEMENT 10.0 H M RURAL INFRASTRUCTURE 40.0 H L PRSC (2) 60.0 H L Sub-Total 110.0 TOTAL 422.0 a. This table presents the proposed program for the next three fiscal years. b. For each project, indicate whether the strategic rewards and implementation risks are expected to be high (H), moderate (M), or low (L). Template created on 11/3/00. 51 Annex B3 CAS Annex B3 (IFC & MIGA) for Burkina Faso Burkina Faso - IFC and MIGA Program, FY 1998-2001 1998 1999 2000 2001 IFC approvals (US$m) 0.30 1.50 Sector (%) FINANCIAL SERVICES 100 MINING & METALS 100 Total 100 100 0 0 Investment instrument(%) Loans 66 Equity 100 34 Quasi-Equity Other Total 0 0 0 0 MIGA guarantees (US$m) 0.00 0.00 52 Annex B4 CAS Annex B4 - Nonlending Services Burkina Faso As Of Date 1110312000 Product Compl. Cost Audiencea Objectiveb FY ($'000) this FY Underway CAS 1/ FY01 65 Bank Knowledge Generation Poverty Database FY01 20 Bank, Gvt knowledge Generation Public Service Quality Assessment FY01 81 Bank, Gvt Problem-solving, Knowledge Generation IDF Gender/Legal Reform FY01 13 Bank, Gvt knowledge Generation TA for PER 2/ FY01 70 Bank, Gvt Problem-solving, Knowledge Generation HIPC Follow up FY01 45 Bank knowledge Generation Support to EU Initiative FY01 20 Bank, Gvt, donors Problem-solving, Knowledge Generation Econ.Monitoring/Gen.EconWork 3/ FY01 50 Bank knowledge Generation Support for PRSP Monitoring FY01 50 Bank, Gvt knowledge Generation Country Fin. Account. Assessment FY01 30 Bank Knowledge Generation Planned CPPR FY02 50 Bank, Gvt Problem-solving, Knowledge Generation Client Feedback Survey FY02 20 Bank, Gvt Problem-solving TA for PER 2/ FY02 115 Bank, Gvt Problem-sharing, Knowledge Generation Econ.Monitoring/Gen.Econ Work 3/ FY02 80 Bank, Gvt Knowledge Generation Support for PRSP Monitoring FY02 50 Bank, Gvt, donors Knowledge Generation TA to INSD FY02 20 Bank, Gvt Knowledge Generation CAS Progress Report FY03 50 Bank Knowledge Generation TA to INSD FY03 20 Bank, Gvt Knowledge Generation Vocational Training Strategy FY03 40 Bank, Gvt Knowledge Generation TA for PER 2/ FY03 115 Bank, Gvt Problem-solving, Knowledge Generation Econ.Monitoring/Gen.Econ Work 3/ FY03 110 Bank, Gvt Knowledge Generation a. Govemment, donor, Bank, public dissemination. b. Knowledge generation, public debate, problem-solving. 1/ Total completion cost for CAS: $295k 2/ Includes support to National PER Committee, and dissemination 3/ includes TA for capacity building and informal background policy work 53 Annex B5 Burkina Faso Social Indicators Latest single year Same regionlincome group Sub- Saharan Low- 1970-75 1980-85 1993-99 Africa income POPULATION Total population, mid-year (millions) 6.2 7 9 11.6 627 3 3,5364 Growth rate (% annual average) 1.9 2.5 2.8 2.2 1.4 Urban population (% of population) 6.3 11.4 17.5 33.3 30.5 Total fertility rate (births per woman) 7.0 7.5 6.8 5.4 3.1 POVERTY (% of populabon) National headcount index 45.3 Urban headcount index 15.9 Rural headcount index .. .. 0. 7 INCOME GNP per capita (US$) 140 180 230 510 520 Consumer price index (1995=100) .. 76 114 128 136 Food price index (1995=100) 92 115 INCOME/CONSUMPTION DISTRIBUTION Gini index 48.2 Lowest quintile (% of income or consumption) 5.5 Highest quintile (% of income or consumption) 55.0 SOCIAL INDICATORS Public expenditure Health (% of GDP) 2.7 1.5 1.3 Education (% of GNP) 2.0 2.8 4.1 3.2 Social security and welfare (% of GDP) 0.6 0.8 Net primary school enrollment rate (% of age group) Total 10 23 32 86 Male 12 29 39 89 Female 7 17 25 82 Access to safe water (% of populabion) Total . 35 78 Urban . 50 Rural . 26 Immunization rate (% under 12 months) Measles 38 68 58 80 DPT 2 70 53 82 Child malnutriton (% under 5 years) . 33 Life expectancy at birth (years) Total 41 45 54 50 63 Male Female Mortality Infant (per thousand live births) 137 117 105 92 68 Under 5 (per thousand live births) 278 242 210 151 92 Adult (15-59) Male (per 1,000 population) 526 467 547 432 235 Female (per 1,000 population) 407 362 484 383 208 Maternal (per 100,000 live births) 2000 World Development Indicators CD-ROM, World Bank 54 Annex B6 Burkina Faso - Key Economic Indicators National accounts (as % of GDP) Groasdomedicproducta 100 100 100 100 100 100 100 100 Agriculture 34 35 32 32 31 30 30 29 Industry 26 25 27 28 28 30 31 32 Services 40 40 41 40 40 40 40 39 Total Consumption 91 91 89 87 90 88 87 87 Gross domestic fixed investnent 23 26 28 30 28 29 28 27 Govemment investment 10 12 14 14 16 14 14 13 Private investment 14 15 13 16 12 14 14 14 (includes increase in stocks) Exports(GNFS)b 13 11 11 14 13 11 11 11 Imports (GNFS) 28 29 28 31 29 28 26 25 Gross domestic avings 9 9 11 13 10 12 13 13 Gross national savingsc 18 17 17 20 15 18 19 19 Memorandum items Gross domestic product 2355 2536 2387 2599 2584 2685 2980 3245 (USS million at current prices) GNP per capita (USS, Atlas method) 220 240 230 230 230 250 250 260 Real annual growth rates (%/, calculated from 1985 prices) Grossdomesticproductatmarketprices 4.0 6.0 4.8 6.2 5.8 5.7 6.6 6.6 Gross Domestic Incomc 4.7 4.7 4.7 7.8 3.7 4.9 7.2 6.9 Real annual per capita growth rates (%., calculated from 1985 prices) Grossdomesticproductatmarketprices 1.1 3.1 1.9 3.3 2.9 2.8 3.7 3.7 Total consumption 0.2 -0.4 1.0 3.7 3.6 0.6 1.7 2.8 Private consumption 2.5 -04 1.0 3.5 4.7 0.4 2.1 2.9 Balance of Payments (USS millions) Exports (GNFS)b 306 276 267 364 292 292 340 368 Merchandise FOB 237 233 229 325 255 253 296 322 Imports (GNFS)b 666 724 661 803 760 745 783 819 Merchandise FOB 485 562 511 639 600 595 625 653 Resource balance -361 -448 -394 -439 -467 -453 -444 -451 Net current transfers 239 205 164 190 155 190 194 207 Cufrent account balance -31 -91 -104 -117 -135 -101 -90 -82 Netprivateforcigndirectinvestment 20 16 11 -13 13 17 19 21 Long-tenn loans (nct) .. .. .. Official 83 73 78 .. .. Private Other capital (net, incl. errors & ommissions) .. .. .. .. .. Change inreservesd -143 4 35 33 15 -5 -27 -32 Memorandwn items Resource balance (% of GDP) -15.3 -17.7 -16.5 -16.9 -18.1 -16.9 -14.9 -13.9 (Continued) 55 Annex B6 Burkina Faso - Key Economic Indicators (Continued) Public finance (as % of GDP at market prices)e Current revenues 13.1 14.4 13.8 13.1 15.0 14.4 14.5 14.8 Currentexpenditures 11.4 10.4 10.1 10.4 11.3 11.0 10.6 10.5 Current account surplus (+) or deficit (-) 1.7 4.0 3.7 4.0 5.2 4.9 5.0 5.3 Capital expenditure 9.7 10.9 13.1 125 16.0 14.3 13.6 12.8 Monetary indicators M2/GDP 25.5 25.0 26.7 24.8 25.3 24.9 - Growth of M2 (%) 23.7 8.2 14.2 1.7 6.5 6.3 Private sector credit growth -97.6 74.0 64.8 87.4 37.1 58.7 82.6 83.1 total credit growth (%/o) Real intaest rates Consumerpriceindex (%change) 7.8 6.1 -0.1 1.0 -1.1 1.5 2.0 2.0 GDPdeflator(%change) 9.8 4.2 2.2 3.1 -1.4 1.3 2.1 2.3 a. GDP atfactor cost b. "GNFS" denotes "goods sad nonfactor services." c. Includes net unrequited transfers excluding official capital grants. d. Includes use of 1vi resources. e. Consolidated central govermnment f. "LCU" denotes "local currency units." An increasc in USS/LCU denotes appreciation. 56 Annex B7 Page 1 of 1 Burkina Faso - Key Exposure Indicators Actual Estimate Projected Indicator 1995 1996 1997 1998 1999 2000 2001 2002 2003 Total debt outstanding and 1267 1294 1297 1358 1452 1533 1533 1533 disbursed (TDO) (US$m)' Net disbursements (US$m)f 124 81 69 63 126 Total debt service (TDS) 48 49 50 54 61 74 74 74 (US$m)' Debt and debt service indicators (%/6) TDOIXGSb 296.6 312.5 476.9 373.0 497.0 524.7 451.5 417.0 TDO/GDP 53.8 51.0 53.4 52.2 56.2 57.1 51.4 47.2 TDS/XGS 11.3 11.7 18.7 14.9 20.9 25.2 21.7 20.0 ConcessionallTDO 78.9 83.9 83.0 83.6 82.2 .. IBRD exposure indicators (%) IBRD DS/public DS 0.0 0.0 0.0 0.0 0.0 Preferred creditor DS/public 77.0 84.6 82.0 84.0 79.7 DS (%) IBRD DS/XGS 0.0 0.0 0.0 0.0 0.0 IBRD TDO (US$m)d 0 0 0 0 0 Of which present value of guarantees (US$m) Share of IBRD portfolio (e) .. .. .. .. .. IDA TDO (US$m)d 608 636 690 710 .. IFC (US$m) Loans Equity and quasi-equity kc MIGA MIGA guarantees (US$m) a. Includes public and publicly guaranteed debt, private nonguaranteed, use of 1MF credits and net short- term capital. b. "XGS" denotes exports of goods and services, including workers' remittances. c. Preferred creditors are defmed as IBRD, IDA, the regional multilateral development banks, the IM, and the Bank for Intemational Settlements. d. Includes present value of guarantees. e. Includes equity and quasi-equity types of both loan and equity instruments. 57 CA* Amxm m. _Brina Fr. Blain of Blank ~OeW Oparallma (Operalanas Paddisa) Am Og OshitriMSIS OmWdPro* 44 LanRLl,. pecind and Dda Supurviasin Ratng bi Odtdnia Ariiouna In UrnS nih WubuswAinfmd PrajactID Project "ame oleofiln IMI*t* Fisca Year ORD IDA OtANT Cacalle. -bdab. OrI* Frim Itmed ab-y .^ itQ ss",a P000296 A SERVICES I s 196 0 41.3 0 0 28.7 14.5 8.6 P000287 HEALTHNUTRTION a S 1994 0 29.2 0 0 4.5 4.8 2.4 P000283 8NMNW CAPACITY BULL S S 1997 0 21.4 0 0 15.6 7.4 0 P0003D8 POPULATKIOtAJDS CONT S S 1994 0 26.3 0 0 4.8 5.4 0 P000304 POST4PRIMARY EDUC. S S 1997 0 26 0 0 ISA 9.3 0 P05088S PRIVATE IRRIGATION U U 1999 0 5.2 0 0 3.8 1.1 0 P000297 URN ENV S S 1995 0 37 0 0f 12.7 12.2 12.2 SubTlht 0 1186.4 0 . 0 66.1 54. 23.2 L*WCrsdib Saunuy b UISD UaiW.i 5 9 4,J5151 4743,4g 0.~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~U a Inlanded dlsbtunmsns to date n*Ns actual disab[nmre s lo dala p4rct*d at aUMlhal. Annex B8 CAS Annex B8 (IFC) for Burkina Faso Burkina Faso Statement of IFC's Held and Disbursed Portfolio As of 8131/00 (In US Dollars Millions) Held Disbursed FY Approval Company Loan Equity Quasi Partic Loan Equity Quasi Partic 1999 AEF FasoMine 1 0.4 0 0 0 0 0 0 1997 Ecobank-Burkina 0 0.25 0 0 0 0.25 0 0 1998 SGBB 0 0.38 0 0 0 0.38 0 0 Total Portfolio: 1 1.03 0 0 0 0.63 0 0 Approvals Pending Commitment Loan Equity Quasi Partic 59 I MAP SECTION BURKINA FASO M A L I AA A_ .4 t ( NATIONAL CAPITAL ' ' INA L IGR CAPITALE D'ETAT BU , ',,oRKINA FASdoo;,JI RIVERS )' RIVIERES OUDALAN ? GUINEA r--E- - _ - -PROVINCE BOUNDARIES .-G(-'A- LIMITES DES PROVINCES * DIVoOI R j COTE 'GH '1 j _ _ - INTERNATIONAL BOUNDARIES .--- I ,-'' -ERIA) ( ,L FRONTIERES INTERNATIONALES D I GOJ'f -14' ~~~~~~~ ~ ~~~~~~~01 0Dori 14' 0 50 100 150 200 0 GoquM' ________________ OqU1SENO ArLANuc OCrEAN KILOMETERS / KILOMETRES YATEN GA'9 , I -- 0 7- N ( t, SOEJROU \° h :9 S (5 4 z ,^ f YAGHA C- ?--~ 0 X 4 S < (SANMATENGA ( . ( NIGER T- ~ oK'O GNAGNA G orO 4bi -< M A L I .KOSS PASSORE i> ~* 1 0 -2 f-t AYAA / ?- G KOMONDJAR1 %I.. - -O -",OUOAG)k~06uU Q -NIn~ ;> j g $ g* m , Rth Sjj 1 % \ \- 6Fd-N'oSO j °iwo\ BAN WA J MH N UWt OOU~ JKADIOM H M% Zorgho ; t/ BANWA PNGUIE ~~BOULKIEMWE -og0 0- AO - HOUE r 1 ru Y,j -' -~, r ' ,- &GANZOURGOUf/UR R> KOPOG MA 'C .0 Bcbo 0 _ wNHUI ' f . H;t 12' I I r -0 O B o \ L U j 5|.-s r BAEGA . , adorNGou1O DiapaB E12' / : O LES BALE , KENEDOUGOU) ~ \. "» -f ZIR -loulDe OULGOU ~ ~ f ~~~~~~~~~~~~TUYod \ 0e .0 E --'˘-~~ ,, "t9 - > ,'KUPEO KMPEG - ~~~~~~~~~~ K 0~~~~~~~~P r 0 Dioulsso SS L0 > NOUMB/ \' r (LERAOA ) 0 f"r N VE N I1 PONI Goou 10' >'-t M B Thi s nap p odo c.d by the i i DeisUni The World Bn /~~~~~~~~~~~~~~~J ~~~~~~~~~~~~~~ I ~~~~~~~~~~~~The -onoin,clors denominaions ,,,.,, '-I 05~~~~~~~~~~~~~.d anyother in formtion shown on this .nap do n,ot imnply, on the part of The World Book Groap, any j.dg,reW F, > G~~OT H NA N A ** 'ion th. legal taIs of any t-ritry, or COTE D 'IVO RE y TO GO \ osy endorsement or -rept.-nco of _. - 0Th ho°ndri Os '0 4 n ~~~~~~~~~ ~~~~~~~~~~~~~~~~~~~2' , o. 2' -