The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170934) Document of The World Bank FOR OFFICIAL USE ONLY Report No: PGD112 INTERNATIONAL DEVELOPMENT ASSOCIATION PROGRAM DOCUMENT FOR A PROPOSED DEVELOPMENT POLICY GRANT IN THE AMOUNT OF SDR 54.30 MILLION (US$73.975 MILLION EQUIVALENT) AND A PROPOSED DEVELOPMENT POLICY CREDIT IN THE AMOUNT OF EUR 67.60 MILLION (US$73.975 MILLION EQUIVALENT) TO BURKINA FASO FOR THE SECOND FISCAL MANAGEMENT, SUSTAINABLE GROWTH AND HEALTH SERVICE DELIVERY DEVELOPMENT POLICY FINANCING May 8, 2020 Macroeconomics, Trade and Investment Global Practice 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. . The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170934) BURKINA FASO GOVERNMENT FISCAL YEAR January 1 – December, 31 CURRENCY EQUIVALENTS (Exchange Rate Effective as of March 31, 2020) US$1.00 = CFA Franc (CFAF) 604.00 US$1.00 = Euro 0.913 US$1.00 = SDR 0.734 ABBREVIATIONS AND ACRONYMS AfDB African Development Bank ANEEMAS National Agency for Management of Mining and Semi-Mechanized Operations (Agence Nationale d'Encadrement des Exploitations Minières Artisanales et Semi-mécanisées) BCEAO Central Bank of West African States (Banque Centrale des Etats de l’Afrique de l’Ouest) BUNEE National Environmental Agency (Bureau National des Evaluations Environnementales) CAMEG Central Unit for Purchasing Essential Generic Medicines and Medical Supplies (Centrale d’Achat de Médicaments Essentiels Génériques et des Consommables Médicaux) CBPP Contagious Bovine Pleuropneumonia CFAF African Financial Community Franc (Franc de la Communauté Financière Africaine) CGAB Multi-donor Budget Support Group (Cadre Général d’Organisation des Appuis Budgétaires) CIDPH Inter-ministerial Committee for the Determination of Hydrocarbon Prices (Comité Interministériel de Détermination des Prix des Hydrocarbures) CMS Commercial Management System CNAMU National Fund for Universal Health Insurance (Caisse Nationale d’Assurance Maladie Universelle) CNT National Transition Council (Conseil National de Transition) COVID-19 Coronavirus Disease CPF Country Partnership Framework CSPS Health and Social Promotion Center (Centre de Santé et de Promotion Sociale) DANIDA Danish International Development Agency DGCOOP General Directorate in charge of Cooperation ( Direction Générale de la Coopération) DGD General Directorate for Customs (Direction Générale des Douanes) DGI General Directorate for Tax (Direction Générale des Impôts) DGMP General Directorate for Procurement Contracts (Direction Générale des Marchés Publics) DPF Development Policy Financing DPO Development Policy Operation DRD District Dispatcher Depots (Dépôts Répartiteurs de Districts) DSA Debt Sustainability Analysis ECF Extended Credit Facility EHP Emergency Health Plan EIA Environmental Impact Assessments ERP Emergency Response Plan ESIA Environmental and Social Impact Assessments EU European Union FAO Food and Agriculture Organization FDI Foreign Direct Investment FY Fiscal Year GDP Gross Domestic Product GNI Gross National Income GoBF Government of Burkina Faso GRS Grievance Redress Service HD Human Development ICT Information and Communication Technology IDA International Development Association IDP Internally Displaced Persons IFRS International Financial Reporting Standards IFU Unique Fiscal Identifier (Identifiant Fiscal Unique) IMF International Monetary Fund IPF Investment Project Financing ISA International Standards of Auditing IUTS Payment of the Single Tax on Wages and Salaries (Impôt Unique sur les Traitements et Salaires) LDP Letter of Development Policy M&E Monitoring and Evaluation MEFD Ministry of Economy, Finance and Development (Ministère de l’Economie, des Finances et du Développement) MoH Ministry of Health MPC Monetary Policy Committee MTI Macroeconomics, Trade and Investment NDC Nationally Determined Contribution OIE World Organization for Animal Health ONEA National Water Supply Utility PDO Program Development Objective PEFA Public Expenditure and Financial Assessment PFM Public Financial Management PIMA Public Investment Management Assessment PIU Project Implementation Unit PNDES National Plan for Economic and Social Development (Plan National de Développement Economique et Social) PPG Public and Publicly Guaranteed PPP Public-Private Partnerships PPR Small Ruminant’s Plague (Peste des Petits Ruminants) RCF Rapid Credit Facility SCD Systematic Country Diagnostic SDR Special Drawings Right SESA Strategic Environmental and Social Assessment SME Small and Medium Enterprises SONABEL State-owned Electricity Provider (Société Nationale d'Electricité du Burkina) SONAGESS National Society for Food Security Stock Management (Société Nationale de Gestion des Stocks de Sécurité Alimentaire) SORT Systematic Operations Risk-rating Tool SSA Sub-Saharan Africa SSN Social Safety Net SWEDD Sahel Women’s Empowerment and Demographics UHC Universal Health Insurance US$ United States dollar US$c United States cent VAT Value Added Tax WAEMU West African Economic and Monetary Union WBG World Bank Group WHO World Health Organziation WISN Workload Indicators of Staffing Need Regional Vice President: Hafez M. H. Ghanem . Country Director: Soukeyna Kane Regional Director: Elisabeth Huybens Practice Manager : Lars Christian Moller Task Team Leaders: Jose R. Lopez-Calix, Abdoul Ganiou Mijiyawa The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170934) BURKINA FASO BURKINA FASO SECOND FISCAL MANAGEMENT, SUSTAINABLE GROWTH AND HEALTH SERVICE DELIVERY DEVELOPMENT POLICY FINANCING TABLE OF CONTENTS SUMMARY OF PROPOSED FINANCING AND PROGRAM .......................................................................... 3 1. INTRODUCTION AND COUNTRY CONTEXT ...................................................................................... 5 2. MACROECONOMIC POLICY FRAMEWORK ....................................................................................... 8 2.1 RECENT ECONOMIC DEVELOPMENTS ......................................................................................... 8 2.2. MACROECONOMIC OUTLOOK AND DEBT SUSTAINABILITY ...................................................... 11 2.3. IMF RELATIONS ....................................................................................................................... 17 3. GOVERNMENT PROGRAM ............................................................................................................ 18 4. PROPOSED OPERATION................................................................................................................. 19 4.1. LINK TO GOVERNMENT PROGRAM AND OPERATION DESCRIPTION ......................................... 19 4.2. PRIOR ACTIONS, RESULTS AND ANALYTICAL UNDERPINNINGS ................................................ 21 4.3. LINK TO CPF, OTHER BANK OPERATIONS AND THE WBG STRATEGY......................................... 37 4.4. CONSULTATIONS AND COLLABORATION WITH DEVELOPMENT PARTNERS .............................. 38 5. OTHER DESIGN AND APPRAISAL ISSUES........................................................................................ 39 5.1. POVERTY AND SOCIAL IMPACT ................................................................................................ 39 5.2. ENVIRONMENTAL ASPECTS ..................................................................................................... 41 5.3. PFM, DISBURSEMENT AND AUDITING ASPECTS ....................................................................... 43 5.4. MONITORING, EVALUATION AND ACCOUNTABILITY................................................................ 45 6. SUMMARY OF RISKS AND MITIGATION ........................................................................................ 46 ANNEX 1: POLICY AND RESULTS MATRIX .............................................................................................. 49 ANNEX 2: IMF RELATIONS ANNEX ....................................................................................................... 555 ANNEX 3: LETTER OF DEVELOPMENT POLICY ........................................................................................ 57 ANNEX 4: ENVIRONMENT AND POVERTY/SOCIAL ANALYSIS TABLE .................................................... 68 ANNEX 5: PRIOR ACTIONS AND ANALYTICAL UNDERPINNING .............................................................. 70 ANNEX 6: CHANGES BETWEEN DPF1 INDICATIVE TRIGGERS and DPF2 PRIOR ACTIONS ....................... 73 ANNEX 7: BURKINA FASO: POTENTIAL IMPACTS OF COVID-19 ON POVERTY AND POLICY RESPONSE .. 77 ANNEX 8: THE HEALTH FINANCING SYSTEM AND GOVERNANCE………………………………………………………79 Page 1 The proposed operation was led by Jose R. Lopez-Calix (Lead Economist, EA2M1) and Abdoul Ganiou Mijiyawa (Senior Economist, EA2M1) under the guidance of Soukeyna Kane (Country Director, AFCW3) and Lars Christian Moller (Practice Manager, EA2M1). Alexandre Arrobbio (Practice Manager, EA2G1), Marianne Grosclaude (Practice Manager, SAFA1), Christopher Gilbert Sheldon (Practice Manager, IEEXI), Magnus Lindelow (Practice Manager, HAFH2), Jean-Pierre Chauffour (Program Leader, EA2DR), Christophe Lemiere (Program Leader, HAFD2), Pierre Xavier Bonneau (Program Leader, IAFDR) and Andrew Dabalen (Program Manager, EA2PV) also supported the team. The core team consists of Susana Sanchez (Senior Economist, EA2M1), Christophe Rockmore (Acting Country Manager and Senior Economist, HAFH2), Ernest Ruzindaza (Senior Agricultural Specialist, SAFA4), Prospere Backiny-Yetna (Senior Economist/Statistician, GPV07), Nga Thi Viet Nguyen (Economist, EA2PV), Boubacar Bocoum (Lead Mining Specialist, IEEXI), Sandrine Egoue Ngasseu (Financial Management Specialist, EA2G1), Adama Diop (Finance Officer, WFACS), Mary Lisbeth Gonzalez (Senior Social Development Specialist, SURLN), Fabienne Mroczka (Senior Financial Management Specialist, EA2G1), Kodzovi Abalo (economist, EA2M1), Michel Rangvald Maellberg (Senior Public Sector Specialist, EA2G1), Benoit Mathivet (Senior Economist, Health, HAFH3), Tina George (Senior Social Protection Specialist, HAFS2), Rebekka Grun (Senior Economist, HAFS2), Elisee Ouedraogo (Senior Agriculture Economist, SAFA4), Marouan Maalouf (Counsel, LEGAM), Mariam Diop (Senior Operations Officer, AFMBF), Leandre Yameogo (Senior Environmental Specialist, SAFE1). Peer reviewers were Daniel Pajank ( Economist, CROCR) and Moulay Driss Zine El Idrissi (Lead economist, HAFH2). Precious administrative support was received from Micky Ananth (Operations Analyst, EA2M1), Maude Jean-Baptiste (Program Assistant, EA2M1), and Catherine Compaore (Team Assistant, AFMBF). The peer reviewers were Daniel Pajank (Economist, CROCR), Christophe Lemiere (Program Leader, AFCW3) and Moulay Driss Zine El Idrissi (Lead Economist HAFH2). The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170 SUMMARY OF PROPOSED FINANCING AND PROGRAM BASIC INFORMATION Project ID Programmatic If programmatic, position in series P170934 Yes 2nd in a series of 3 Proposed Development Objective(s) The Program Development Objective (PDO) is to support the Government's efforts to: (i) strengthen fiscal management; (ii) improve natural resources management and raise mining and livestock productivity; and (iii) improve health service delivery and social spending efficiency. Organizations Borrower: BURKINA FASO Implementing Agency: MINISTERE DE L'ECONOMIE, DES FINANCES ET DU DEVELOPPEMENT PROJECT FINANCING DATA (US$, Millions) SUMMARY Total Financing 147.95 DETAILS International Development Association (IDA) 147.95 IDA Credit 73.98 IDA Grant 73.98 INSTITUTIONAL DATA Climate Change and Disaster Screening This operation has been screened for short and long-term climate change and disaster risks Overall Risk Rating Substantial Page 3 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170 . Note: There is a minor discrepancy in the details of the Summary Project Financing Table between the total and the sum of the financing credit and grant amounts. This is due to a rounding difference (to 2 decimal points) for the credit and grant financing amounts which require figures with 3 decimal points. In any case, the exact credit and grant amounts are US$73.975 m. equivalent each for the credit and grant, for a total financing amount of US$147.95 m. Results Indicator Name Baseline Target 1. Strengthening Fiscal Management Number of taxpaying firms and individuals recorded in the government’s 95,515 (2017) 150,000 (2022) taxpayer database Property taxes collected by general government 0.3% of GDP (2017) 0.5% of GDP (2022) Proportion of public investment projects included in the approved budget that have a feasibility study validated by the inter-ministerial 0% (2017) 80% (2022) committee Annual nominal wage bill growth rate 11.4% (2017) 4.5% (2022) 2. Improving Natural Resources Management and Raising Mining and Livestock Productivity Registered exports from artisanal gold mines (tons) 0.2 (2016) 2.0 (2022) Hectares of identified and delimited forested areas excluded from mining 206,000 (2017) 3,037,505 (2022) cadaster Number of cooperatives registered with ANEEMAS that have adopted 0 (2017) 20 (2022) natural capital preservation standards Share of small ruminant herd vaccinated against PPR 3% (2017) 45% (2022) 3. Improving Health Service Delivery and Social Spending Efficiency Proportion of rural primary health care facilities that meet minimum WISN 21.4% (2018) 35% (2022) standards Proportion of health facilities that experience shortages of listed essential 87% (2018) 75% (2022) medications (tracer medicines) per year. Proportion of indigent individuals, including eligible internally displaced persons, who have participated in an en masse “intake and registration” mechanism to determine potential eligibility for benefits and services. 0% (2017) 30% (2022) . Page 4 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170934) IDA PROGRAM DOCUMENT FOR A PROPOSED CREDIT TO BURKINA FASO 1. INTRODUCTION AND COUNTRY CONTEXT 1.1. The proposed Fiscal Management, Sustainable Growth and Health Service Delivery operation is the second in a programmatic series of three Development Policy Financing (DPF) operations. It is a single-tranche disbursement of IDA Credit for EUR 67.60 million (US$73.975 million equivalent) and IDA grant SDR 54.30 (US$73.975 million equivalent). The Program development objectives (PDOs) are to (i) strengthen fiscal management; (ii) improve natural resources management and raise mining and livestock productivity; and (iii) improve health service delivery and social spending efficiency. 1.2. The operation has been prepared in a highly challenging country context. Burkina Faso is experiencing a three-fold--security, humanitarian and, more recently, public health crisis linked to the Coronavirus disease (COVID-19) global spread. Increased security challenges, with attacks by armed extremist groups and conflicts between local communities have expanded from the northern and eastern border regions to other parts of the country. The spread of violent extremism is due to inequalities between and within communities, competition over access to land, and an eroded confidence in the state especially in rural areas. Inter-communal violence has emerged more recently, as a result of an increasing involvement of community-based militias in the conflict, with growing concerns about the need for a collective response to strengthen social and national cohesion. The conflict has led to a surge in fatalities and to an unprecedented humanitarian challenge: The number of internally displaced persons (IDPs) surged to 779,741 at the end of February 2020, a number seven times more the 101,415 IDPs already existing a year before. Similarly, the number of school closures reached 2,410 at end-February 2020, leaving 318,000 students without access to education; while 120 health centers were closed and 153 others were impaired, leaving 881,000 people with limited or no access to health. While the state of emergency remains in force in six out of the 13 regions of the country—per se a major obstacle to articulate an effective national response. On April 3, 2020, Burkina Faso was one of the top three most affected countries (alongside Cameroon and South Africa) by the COVID-19 in Sub-Saharan Africa (SSA). 1.3. On April 2, 2020 President Kabore unveiled the Government’s Plan to deal with COVID -19 as a rapid response to the outbreak is needed amidst upcoming elections and recurring social unease. Presidential and legislative elections are scheduled for November 22, 2020. Though there remain financial, legal and security questions to solve, the Government has already been facing a tense social climate, with severe pressure from unions and threat of strikes ahead of the elections. The projected economic downturn arising from the global economic slowdown from COVID-19 will have additional adverse social effects, and further impact on already deficient health and education outcomes in a fragile institutional setting. To face these challenges, the Government’s Emergency Response Plan (ERP of April 2, 2020, complements a national emergency health plan (EHP) issued on March 30, 2020. The DPF series timely supports some aspects of the ERP and EHP, while complementing other World Bank Group (WBG) operations in Burkina Faso, including the Emergency COVID-19 Preparedness and Response Project (P173858). 1.4. The COVID-19 outbreak may have mixed effects on the economy, but on balance biased downward. On the positive side, it may push oil prices downward, which would reduce the oil imports bill. Moreover, if gold becomes a safe haven for risk adverse global investors, the economy could benefit from higher gold prices and exports. In contrast, the COVID-19 outbreak may lower regional and global Page 5 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170934) demand for exports, slow down output as well as generate fiscal pressures to finance public health services, disease prevention and control as well as safety net for vulnerable households. Furthermore, on the external front, volatility in international commodity prices could hurt exports and tax revenue. 1.5. Responding to COVID-19 while preventing a major growth deceleration is critical to preserving poverty gains as well as social and institutional stability. COVID-19 is already slowing down economic activity. Projected gross domestic product (GDP) growth rate for 2020 is 2 percentage points below its pre-COVID-19 estimate. Growth slowdown will affect poverty gains. Poverty continues to be overwhelmingly concentrated in rural areas, which are home to 90 percent of poor households. Rural incomes are low due to low agricultural and livestock productivity. Their vulnerability is also high: in 2014, two thirds of households reported that they had been negatively impacted by shocks, mostly natural hazards related to or amplified by climate change. As a result, the share of the population living below the national poverty line was 40.3 percent in 2014. 1 With a Gross National Income (GNI) per capita of US$ 670 in 2018, Burkina Faso is among the 20 poorest countries in the world. 1.6. In the context of a fragile and poor country facing hard security, humanitarian and, most recently, COVID-19 shocks, the program supported by the DPF series has preserved modest but steady progress on structural reforms, while contributing to the response to the COVID-19 crisis. The series selectively addresses three binding constraints to growth of the Country Partnership Framework (CPF): scarce public resources, low agricultural and mining productivity, and inefficient health and social service delivery. These three critical areas of reform are supported by a solid macroeconomic framework and a public sector capable of creating fiscal and delivering social services to the extent of its possibilities. By creating fiscal space, providing key tools to redeploy health professionals, improving control of the distribution of medicines in COVID-19-affected areas, and setting the basis for a proper registration mechanism of indigents, including those testing positive to the virus and eligible IDPs, this DPF complements an emergency COVID-19 response investment project financing (IPF) supporting the Government’s efforts aiming to prevent, detect and respond to the threat posed by COVID-19, while strengthening national systems for public health preparedness. 1.7. Strengthening fiscal management (Pillar 1) is needed to support domestic revenue mobilization, contain wage bill growth, raise the quality of public investment and improve the efficiency of health and other social programs. The DPF series supports efforts to widen the tax base through improved identification of tax payers, streamlined and modern processes for filing and paying taxes, and simplification of taxes for micro-enterprises. It also supports reforms aimed at improving the collection of property taxes through better identification of property owners, and the development of a system for assessing property values. The program also improves the selection and preparation of public investment projects and supports the government’s efforts to contain public wage bill growth in a difficult context marked by insecurity (linked to terrorist attacks) leading to population displacements. and by the outbreak of COVID-19. 1.8. Improving natural resources management and raising artisanal mining and livestock productivity (Pillar 2) is a Government priority for raising productivity in two key sectors for rural incomes. Measures aim to limit environmental risks and damages and improve resilience to shocks, in 1The latest data available is for 2014. In the absence of new data, the impact of GDP growth on poverty in recent years is difficult to establish. A recently finished new household survey, done in collaboration with the WBG, will provide updated data in 2020. Page 6 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170934) particular those related to climate change. The DPF series supports growth of the artisanal mining sector while strengthening controls and providing incentives for formalization and technical upgrades that improve productivity and reduce adverse environmental impacts. It also aims to improve productivity in the livestock sector by supporting animal health service delivery, including through the adoption of mechanisms to develop animal vaccination. 1.9. Pillar 3: Improving health service delivery and social spending efficiency aims to guarantee the quality of services in a cost-effective manner during a critical period. Pressed by the need for a rapid and effective response to COVID-19, the program supports the planning and implementation of a more transparent system for allocating personnel across health centers and hospitals; and new management and distribution systems of pharmaceutical drugs, including those areas affected by COVID-19. It also supports the rationalization of social insurance and free health care schemes, and more efficient provision of social services to vulnerable populations, lately focusing on those affected by the spread. Finally, the program increases social spending efficiency by supporting the establishment of a concerted and harmonized data collection and eligibility assessment approach to target the chronically poor (“indigent”). 1.10. The three pillars of the DPF are closely interrelated . Fiscal management needs to be strengthened to maintain macroeconomic stability and to create fiscal space to finance higher productive spending, especially public investment and COVID-19 related health expenditure. Higher and more efficient public investment should create the conditions for more rapid private sector development and boost productivity gains, starting with the most important sectors of the economy: mining, crops and livestock. To translate these gains into higher standard of living, labor productivity should not be undermined by a too rapid population growth and exclusion; hence the need for improve public health-- especially in the areas of family planning, birth control and services for the most vulnerable groups, mainly those infected by the COVID-19. 1.11. The proposed DPF program remain highly relevant and closely aligned with Government and WBG strategy, especially in the context of the severe crisis. Implementation progress is broadly satisfactory with most results indicators on track despite the new and pressing challenges. The operation is closely aligned with the Government’s 2016-2020 National Development Plan for Economic and Social Development (Plan National de Développement Economique et Social, PNDES 2016-2020), the CPF (FY18- FY23), the Systematic Country Diagnostics (SCD), and WBG priorities related to poverty reduction, climate change mitigation and adaptation, fragility and conflict risk mitigation and human capital accumulation. Risks are, however, substantial, as described in the last section of this Program Document. 1.12. The macroeconomic policy framework is adequate for the purpose of this operation. While the economy will remain vulnerable to a range of severe shocks which might further decelerate growth in 2020, Burkina Faso should recover a positive trajectory of economic expansion as a result of countercyclical, but prudent fiscal and monetary policies and resilient reforms to counter their negative effects. This assessment is underpinned by positive private investment in the growing gold sector and in the cotton sector under rehabilitation, which will support good mining and agricultural outturns, and an adequate response to the COVID-19 crisis. The Government has committed to gradually regain the West African Economic and Monetary Union (WAEMU) 3 percent of GDP deficit target in 2022 while accommodating a temporary deviation owing to security and COVID-19 related spending. The policy framework is anchored in the Extended Credit Facility (ECF) and Rapid Credit Facility (RCF) arrangement with the International Monetary Fund (IMF) and membership of the WAEMU. Public debt is sustainable, and the risk of overall and external debt distress is moderate. Page 7 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170934) 2. MACROECONOMIC POLICY FRAMEWORK 2.1. RECENT ECONOMIC DEVELOPMENTS Table 2.1: Burkina Faso: Contributions to Growth, 2016-2023 (in percent) 2016 2017 2018 2019 2020 2021 2022 2023 Est. Projections GDP Growth (%) 6.0 6.2 6.8 5.7 2.0 5.8 5.6 5.6 Demand Side Private Consumption -0.1 -1.6 1.0 4.6 9.4 2.8 5.0 4.9 Public Consumption 1.9 2.7 1.1 1.7 0.6 0.9 0.6 0.5 Investment 2.1 4.3 4.1 -0.5 -6.9 3.0 0.9 1.0 Exports 2.7 4.8 1.6 -0.6 -1.8 1.1 1.0 0.9 Imports -0.7 -4.0 -1.2 0.5 0.7 -2.0 -2.0 -1.8 Supply Side Agriculture 1.1 -0.3 2.4 1.1 0.0 0.8 0.8 0.8 Industry 1.4 2.8 1.0 0.5 0.1 1.6 1.6 1.6 Services 3.5 3.7 3.4 4.1 1.8 3.3 3.1 3.1 Source: Burkinabe authorities; World Bank and IMF staff estimates and projections. Data as of end-March 2020. 2.1. Economic growth remained solid and resilient at 5.7 percent in 2019. Attacks only marginally affected mining production and were sporadic in areas of major economic activity. On the supply side, growth was mainly driven by dynamic information and communication technology (ICT) and financial services. The entry into production of a new mining company helped increase gold production by 13.4 percent. However, cotton production declined 29 percent due to difficulties related to the management of the sub-sector, including accumulation of arrears, late payments to producers and low quality of inputs. Thus, about 200,000 hectares of land for the cultivation of cotton were abandoned or converted into cereal production. However, the severe drop in cotton production was more than offset by a significant increase in cereal production, which rose 27.5 percent. The latter benefitted from good weather conditions and the expansion of land under cultivation. On the demand side, private consumption is estimated to have risen at around 7.2 percent, as credit growth to the private sector almost doubled to 11.1 percent. 2.2. The external current account deficit widened to 4.4 percent of GDP in 2019. Dampened import growth was more than offset by a sustained sizable contraction in cotton exports, which led to a trade deficit in goods and services of 4.7 percent of GDP (Table 2.2.). The current account deficit was largely financed by foreign direct investment (FDI) inflows (1.2 percent of GDP), capital grants, portfolio investment inflows and commercial bank loans (Table 2.3). Page 8 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170934) Table 2.2: Selected Economic and Financial Indicators, 2016-2023 2016 2017 2018 2019 2020 2021 2022 2023 Est. Projections Annual percentage change, unless otherwise indicated National Accounts and Prices GDP at constant prices 6.0 6.2 6.8 5.7 2.0 5.8 5.6 5.6 GDP deflator 2.5 2.0 2.4 -3.0 2.7 1.8 2.1 2.4 Consumer prices (average) -0.2 0.4 2.0 -3.2 3.2 2.1 2.5 2.8 Selected Monetary Accounts Banks' credit to the government -4.5 5.9 -0.2 2.6 10.6 6.4 3.1 2.8 Banks' credit to private sector 12.1 14.4 6.7 11.1 2.7 11.4 13.7 13.9 Broad money (M3) 11.8 21.6 10.4 8.8 12.6 15.7 13.4 13.0 Percent of GDP, unless otherwise indicated Fiscal Accounts Total revenue and grants 18.6 19.2 19.4 20.9 19.5 20.9 21.2 21.4 Total expenditure and net lending 21.5 26.1 23.6 23.7 24.5 24.4 24.2 24.4 Overall fiscal balance (with grants) -3.0 -6.8 -4.2 -2.7 -5.0 -3.5 -3.0 -3.0 Total public debt 33.3 33.5 37.7 40.0 43.0 43.3 43.1 42.8 External Sector Current account balance -6.1 -5.0 -4.1 -4.4 -4.3 -4.5 -4.6 -4.8 Good and service balance -6.2 -5.0 -4.0 -4.7 -4.4 -4.6 -4.9 -5.1 Foreign direct investment 2.7 -0.1 1.2 1.2 0.9 0.9 0.7 0.8 External public debt 23.7 21.1 21.5 22.6 22.8 21.7 21.6 21.6 Nominal GDP in CFAF billion 7,599 8,228 8,998 9,226 9,666 10,409 11,224 12,133 in US$ million 12,213 14,846 15,616 15,630 16,525 17,913 19,384 21,001 Source: Burkinabe authorities; World Bank and IMF staff estimates and projections. Data as of end-March 2020. 2.3. Monetary policy remained prudent, thus contributing to keeping inflation below the WAEMU target of 3 percent. Monetary and exchange rate policies are managed at the regional level by the Central Bank of West African States (Banque Centrale des Etats de l’Afrique de l’Ouest, BCEAO), which pools reserves and maintains a hard peg between the CFA Franc and the Euro. Burkina Faso continued issuing securities in the regional bond market at affordable rates during 2019. Eurobond issuances by Côte d’Ivoire and Senegal supported regional reserves, which reached 4.8 months of imports of goods and services at end-2019, up from 4.5 months at end-2018. In December 2019, the Monetary Policy Committee (MPC) kept its key policy rate and the reserve requirement ratio at 2.5 percent and 3 percent, respectively, consistent with its baseline inflation outlook and the WAEMU convergence criteria. Headline inflation dropped to -3.2 percent in 2019 as food prices fell to -6.1 percent after good harvests and despite rise in utility and fuel prices in the last quarter of 2019. Page 9 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170934) Table 2.3: Consolidated Operations of the Central Government, 2016-2023 2016 2017 2018 2019 2020 2021 2022 2023 Est. Projections Total revenue and grants 18.6 19.2 19.4 20.9 19.5 20.9 21.2 21.4 Tax revenue 14.2 15.0 15.1 16.0 15.2 16.5 16.8 17.1 Mining sector 0.3 0.5 0.5 0.6 0.6 0.7 0.8 0.8 Non-tax revenue 2.0 1.8 2.0 3.5 2.2 2.0 2.0 1.9 Grants 2.4 2.4 2.4 1.5 2.1 2.4 2.4 2.3 Expenditures and net lending 21.5 26.1 23.6 23.7 24.5 24.4 24.2 24.4 Current expenditures 14.7 16.0 15.4 17.9 19.0 18.2 17.6 17.1 Wages and salaries 7.3 7.5 7.8 9.2 9.3 9.1 8.8 8.4 Goods and services 1.7 2.1 2.2 2.2 2.5 2.4 2.3 2.2 Current transfers 4.9 5.6 4.3 5.3 5.9 5.3 5.0 5.0 Interest on debt 0.9 0.8 1.1 1.3 1.3 1.4 1.5 1.5 Capital expenditure 6.9 10.1 8.4 6.0 5.6 6.2 6.6 7.3 Domestically financed 4.5 7.1 5.9 4.6 3.0 3.4 3.8 4.4 Externally financed 2.4 3.0 2.5 1.5 2.6 2.8 2.8 2.8 Overall fiscal balance -3.0 -6.8 -4.2 -2.7 -5.0 -3.5 -3.0 -3.0 (commitment basis) Overall fiscal balance (cash basis) -1.8 -5.9 -5.3 -3.2 -5.0 -3.5 -3.0 -3.0 Financing 1.8 5.9 5.2 3.2 5.0 3.5 3.,0 3.0 Domestic Financing 0.4 5.0 4.4 2.1 2.2 2.4 1.4 1.3 External Financing 1.4 0.9 0.8 1.1 0.8 0.8 1.7 1.7 COVID-19 Added Financing* 0.0 0.0 0.0 0.0 2.0 0.3 0.0 0.0 Source: Burkinabe authorities; World Bank, IMF staff estimates and projections. Data as of end-March 2020. * See Table 2.5 for details. 2.4 The fiscal deficit (including grants) improved in 2019, reaching 2.7 percent of GDP (below the WAEMU target of 3 percent) despite rising challenges related to security and fuel prices. While tax revenue rose by 0.9 percent of GDP with improved tax collection measures and a hike in alcoholic beverages, non-tax revenue also rose by 1.5 percent of GDP due to the one-off sale of 4G licenses. On the expenditure side, the rise in current spending was offset by a decrease of 2.4 percentage points of GDP in capital spending, as a result of slowing down of infrastructure projects. Security- and humanitarian emergency-related spending, energy subsidies and subsidies to state-owned enterprises (SOEs) brought current spending up by 2.5 percentage points of GDP, including an additional 1.4 percentage points of GDP in the wage bill.2 The latter mainly reflects more security manpower and the introduction of an incentive scheme for security forces, retroactive to 2018. Security spending had long been very modest but ramped up quickly from just 0.8 percent of GDP in 2015 to 3.4 percent of GDP in 2019. 2.5 The fiscal deficit would have been larger had reforms to contain the wage bill not advanced in some important areas. Two key ministries—Education and Health—completed nominative and geographic censuses in 2019, which resulted in the redeployment of 11,757 education professionals for 2 The budget for Defense and Security alone, following a functional classification, rose by 2.3 percentage points of GDP. Page 10 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170934) need of service; the hiring of nearly 3,000 new health professionals assigned to understaffed regions using new WISN standards; and the reassignment of health staff within the Central Region (also on the basis of the WISN results). This helped to significantly reduce the number of new education employees by 45 percent, from 10,615 to 5,892. Furthermore, and as part of the Prior Action 4 of the DPF, the Government has adopted regulatory texts to adjust special bonuses (from fonds communs) to civils servants at the Ministry of Finance. 2.6 The Government also started addressing liabilities stemming from fuel price subsidies. The Government proceeded to a partial adjustment of fuel prices in November 2018. It initially raised retail gasoline and diesel prices by 12.5 and 14.3 percent, respectively; and later adopted a retail fuel price adjustment mechanism that adjusts domestic retail fuel prices on a quarterly basis to align them with international market prices3. Prices for electricity and butane gas (a fuel used for cooking) remained unchanged, but the new price mechanism capped butane gas subsidies at 40 percent. Overall, the new fuel price mechanism has been applied, and price adjustments have occurred, even if these have been slow and partial. 2.7 Public debt increased slightly with a changing mix favoring domestic debt. Total public debt rose to 40 percent of GDP in 2019. However, debt composition has shifted towards domestic debt as Burkina Faso benefited from favorable liquidity conditions on the regional market. The stock of domestic debt increased to 17.4 percent of GDP in 2019, up from 9.6 percent of GDP just three years ago, in 2016 (Table 2.6.). This brought interest payments from domestic debt to tax revenue to slightly increase from 0.6 percent of GDP to 1 percent over the same period. In exchange, and as a result of the high degree of concessionality, external debt remained steady at around 22.6 percent of GDP in 2019, with its interest payments to tax revenue rather falling from 1.7 percent in 2018 to 1.5 percent in 2019. 2.8 Burkina Faso’s financial sector remained sound but of limited scope. The domestic banking sector is healthy, with gross non-performing loans representing 7.7 percent of total loans in June 2019. The Central Bank has pursued its efforts to enhance compliance with regional prudential norms. Reflecting the economic growth acceleration, broad money supply grew by 8.8 percent in 2019. Likewise, credit to the private sector increased by 11.1 percent. However, credit to the private sector had only reached 28.9 percent of GDP in 2019, illustrating the low level of development of the financial sector. 2.2. MACROECONOMIC OUTLOOK AND DEBT SUSTAINABILITY 2.9 Burkina Faso’s economic outlook is plagued with uncertainty for 2020. On the downside, economic growth is projected to temporarily slow down to 2 percent in 2020 as the combined effects of COVID-19 and insecurity weigh on economic activity. The COVID-19 crisis will reduce regional and global demand for exports and negatively affect commerce, remittances and tourism, and generate strong fiscal pressures. Furthermore, volatility in international commodity prices will hurt exports. Imports, mainly from China, are projected to decrease by 4.5 percent in 2020 (in nominal CFA terms); while revitalized cotton production in 2019 should lead to higher output in 2020, but offset by lower prices. Overall, exports value will decrease by 2 percent in 2020 (nominal CFA terms). Tax revenue will decline to 15.2 percent of GDP in 2020 mainly due to the combined fall in the economic activity and in Customs taxes from reduced imports, as well as to tax deferrals and exemption related to the Government’s ERP. On the upside, if gold becomes a safe haven for risk adverse global investors, the local economy will benefit from higher gold 3Retail fuel prices for gasoline and diesel should be adjusted at least quarterly to converge to cost-recovery price. Adjustment will not exceed CFAF 75 per liter, triggered if the difference between market and retail price exceed CFAF 50 liters within a quarter. Page 11 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170934) prices and its exports. Moreover, as COVID-19 pushes global oil prices downward, this will improve terms of trade in support of real, fiscal and external sectors. Moreover, the ERP will also support private consumption through a mix of cash transfers, delayed payment of rents and utilities, temporary tax exemptions, deferred taxes, credit to small business, etc. On the fiscal balance, however, the mix of falling tax revenue and increased outlays will increase the fiscal deficit to 5 percent of GDP (see Box 1 for more details on the Plan). Box 1: Economic Implications for Burkina Faso of the COVID-19 Pandemic Burkina Faso is exposed to the economic impacts of the COVID-19 outbreak, but risks remain substantial as the virus continues to spread within local communities and the world economy enters a global recession.4 Burkina Faso is one of the countries the most hit by the pandemic outbreak in Africa. As of March 28, 222 people (152 males, 70 females) had been tested positive, including 181 in Ouagadougou, the capital city. Further, the death and recovery counts stand respectively at 12 and 235. With a weak health system, an expansion of the local outbreak can pose significant challenges to at humanitarian, economic and political levels. The pandemic might also have an impact on food security and nutrition. Containment measures recently taken by the authorities will be particularly detrimental to commerce and transport, and if extended for a long period the population may break them to survive. Although the crisis is still unfolding, global growth prospects are being downgraded on a continuous basis. The main transmission channels through which external shocks will spill over into the domestic economy in Burkina Faso are twofold: trade (commodity prices shocks), and the domestic real sector. • Commodity prices. On the positive side, Burkina Faso will benefit from declining global oil prices and rising gold prices as it is a net oil importer and gold exporter. However, its economy substantially depends on imports from heavily hit China, which is disrupting supplies, leading to declines in import volumes and custom tax losses. Additionally, its two main agricultural commodity exports (cotton and cashew nuts) are experiencing price declines given subdued demand in the European Union (EU), its main trade partner. • Domestic real sector. Real output will be impacted by demand-side shocks (final and intermediary consumption) and supply-side shocks (labor supply availability, labor productivity), both of which should originate from the containment and social distancing measures adopted: border closures, city quarantine, and domestic travel restrictions. Services output in transportation, tourism and travel-related industries will be negatively impacted. Finally, agricultural output is also likely to fall due to disruptions in both the supply chain, including logistics and transportation, and the labor supply, a direct consequence of social distancing. • Remittances. Remittances that originate mainly from Côte d’Ivoire and the Euro Zone might initially surge. However, as the economic crisis deepens in Europe and Côte d’Ivoire, the source of those remittances is likely to dry up. The Government is taking actions to contain the spread of the virus. As a first step, screening measures were introduced at the Ouagadougou Airport in early March 2020. A large-scale educational campaign was conducted as an additional preventive measure. In response to rising case numbers, the Government has gradually increased its containment measures. On March 26, Government announced a quarantine of all cities with positive cases: entry/exit will be prohibited (other than goods). In application of the President’s decision, 36 markets and yaars were closed in Ouagadougou, and Dori closed its main produce and livestock markets. As of March 30, other measures included: closure of schools, bars, restaurants, markets and other venues; cancelation of major public events; nationwide curfew from 7pm to 5am; suspension of commercial flights and closure of terrestrial borders (but not for goods transportation); suspension of government services; rigorous screening and sanitation procedures at buildings; suspension of biometric enrollment operations and national identity cards issuance. 4According to the IMF, the COVID-19 economic impact will be severe, at least as bad as Great Recession. 5The first sub-Saharan Africa COVID-19-related death was recorded in Burkina Faso on March 18th, 2020. Data are from the daily situation briefings from the World Health Organization (WHO). Page 12 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170934) Then, on April 2nd President Kabore unveiled the Government’s Plan to deal with COVID-19. The Government’s ERP for 2020 is holistic and adequately complements measures contained in a national EHP. ERP measures are grouped under five areas: (i) fiscal; (ii) access to finance for microbusinesses and individuals; (iii) social; (iv) commerce and yaars; and (v) communication to the public. These include, inter alia, the introduction of a number of tax exoneration, including those on medical equipment; price controls on basic drugs, agricultural inputs and necessity products (like food); suspension of payments of rents and utilities; the creation of a special fund for economic recovery; and direct food and health assistance to the indigents. BCEAO has also taken steps to provide liquidity support, expand collaterals and encourage banks to reschedule payments with small and medium enterprises (SMEs) in difficulty. For its part, the EHP is articulated around 6 areas of intervention: (i) surveilance; (ii) logistics; (iii) labs and research; (iv) post-epidemie prevention; (v) communication; and (vi) coordination). The Plan will pay, inter alia, all healthcare costs related to patients who test positive and are treated in government-approved facilities, as well as the reassignment of staff and materials to support the response effort. As the crisis unfolds, additional details of the governance and the financing of the Plans will be refined. A V-shaped downside scenario shows that Burkina Faso can enter into recession in 2020 and suffer a much slower growth recovery from the COVID-19 pandemic. Under a downside scenario, in 2020, oil prices would decrease by 50 percent, major economies would decelerate even further, and once the pandemic hits home even deeper than expected, a more widespread disruption in economic activity than anticipated would happen given the poor quality of health services and the partial enforcement of home-based work. Under those assumptions, economic growth would enter negative territory in 2020 (-1 percent). Such recession would be mainly driven by collapsing investment and a fall in private consumption on the demand side, and a more dramatic fall of output in the service sector than in the baseline on the supply side. A deeper decline in government revenue from negative growth and higher outlays would be warranted. As a result, the fiscal deficit (including grants) would further deteriorate to 5.7 percent of GDP in 2020, as the Government would implement measures to mitigate declining household incomes. The public debt ratio would further rise to 43.7 percent of GDP. Inflation would increase to 3.5 percent, due to tighter city shortages and stocks rationing for both imported and locally produced agricultural goods. In the same vein, from 2021 onwards, a longer and widespread outbreak would call for a more gradual growth recovery than in the baseline as the economic activity would get back to normal. Fiscal balances would recover in tandem with small recovery in domestic revenue, and timely mobilization of donor grants required to finance the phasing out of programs still aimed to support businesses and households income. Table B.1: Downturn Macro Outlook Indicators (percent of GDP unless otherwise indicated) 2017 2018 2019e 2020f 2021f 2022f Real GDP growth (percent change) 6.2 6.8 5.7 -1.0 3.4 5.5 Inflation (percent change) 0.4 2.0 -3.2 3.5 2.1 1.5 Current Account Balance -5.0 -4.1 -4.4 -4.5 -4.7 -4.8 Fiscal Balance -6.8 -4.2 -2.7 -5.7 -4.6 -3.0 Public Debt 33.5 37.7 40.0 43.7 44.7 44.7 Source: World Bank staff estimates based on global assumptions prepared by DEC PG on March 24, 2020. 2.10 Post-2020, the outlook projects a positive medium term trajectory amidst substantial downside risks. As the health crises gradually dissipates, the economy will rebound in 2021-2022 driven by industrial production, especially the mining sector,6 in which investment and gold exports are assumed to accelerate as well as the services sector. The latter will be mainly driven by the introduction of 4G services, the 6Up to February 2019, the Government had signed seven gold mining agreements with foreign investors; besides existing 14 gold mines and a 15th mine for zinc production. Page 13 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170934) implementation of the Northern Backbone project, the deployment of optical fiber and the development of new services by telecommunications and financial companies. Upon normalization of the economic activity, robust output is also expected in the agricultural sector as a result of scaled up irrigation efforts, the expansion of agricultural growth poles, and improved support for producers. Measures to support cotton production include improved quality control of inputs (seeds, fertilizers, and pesticides), lower fertilizer prices, a higher producer price and a reduction of arrears to producers. Reflecting a shrinking fiscal space, the growth contribution of government consumption will decline over time, and the contraction of public investment will affect its medium term growth prospects to a certain extent. Table 2.4: Balance of Payments Financing Requirements and Sources, 2016-2023 (Million US$) 2016 2017 2018 2019 2020 2021 2022 2023 Est. Projections Financing requirements -805.9 -834.2 -736.5 -780.5 -811.2 -909.7 -994.8 -1,131.3 Current Account deficit -743.1 -743.6 -640.9 -680.6 -705.2 -800.0 -885.8 -1,015.2 Amortization of loans -62.8 -90.6 -95.6 -99.9 -106.0 -109.7 -109.0 -116.1 Financial Sources 805.9 834.3 736.5 780.5 811.2 909.7 994.8 1,131.3 Capital grants 241.3 311.9 305.2 169.1 309.3 380.6 396.0 412.2 FDI (net) 323.9 -8.1 193.5 190.0 150.6 163.8 129.4 166.8 Portfolio investments (net) -380.0 125.9 567.7 341.8 97.8 194.9 180.3 181.5 Short-term debt disbursements -106.1 -141.9 36.8 80.7 17.1 -9.6 -9.7 -9.7 Long term debt disbursements 629.2 761.4 176.1 218.9 121.3 228.6 398.4 495.9 IMF credit (net) incl Prospective financing -11.4 19.4 9.0 -41.3 -105.3 27.3 23.4 17.7 Errors and Omissions -5.3 -8.1 -6.1 18.7 0.0 0.0 0.0 0.0 Change in reserves (decrease = +) 114.1 -226.2 -545.6 -197.4 220.4 -75.8 -123.1 -133.0 Source: Burkinabe authorities; World Bank and IMF staff estimates and projections. Data as of end-March 2020. 2.11 The external current account deficit is expected to increase from 4.3 percent of GDP in 2020 to 4.8 percent in 2023. Gold exports are expected to increase as a result of rising production or rising projected world prices. Import growth is projected to remain dynamic because of higher imports of equipment for mining companies and health equipment. Official transfers are expected to settle at around 1.2 percent of GDP partly offsetting the decline in net outflows of payments to nonresident workers and direct, portfolio, and other investment income. Gross financing requirements from the balance of payments, including the April 2nd Government’s Plan for dealing with COVID 19, are projected to be about US$811.2 millions in 2020. Project grants and concessional external borrowing are expected to be early financing sources, especially during 2020, later accompanied by FDI inflows to support mining investment, as well as portfolio investment (Table 2.4). 2.12 The fiscal deficit (including grants) is projected to temporarily deviate from WAEMU target of 3 percent of GDP in 2020-21. Before COVID-19, the fiscal deficit was already projected to deviate (rising to 3.5 percent of GDP) because of the need to finance the outlays of the security and humanitarian crises. In this regard, both WAEMU and the IMF were already allowing several Sahel countries--Mali, Niger and Burkina Faso--to temporarily run a fiscal deficit above 3 percent of GDP in 2020 because of intensification of insecurity. Post-COVID-19, such deviation from target will last longer as tax revenue gets hit and Page 14 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170934) expenditure to deal with the health emergency will go up. This raises the deficit as a shock absorber. Only in 2022, after the COVID-19 crisis phases-down, the country will return to its fiscal target. 2.13 Total revenue and grants are projected to settle at around 21.2 percent of GDP in 2021-2023. Tax revenue will gradually raise over 2021-2023, thanks to the normalization of economic activity and import flows at Customs, tighter controls, higher mining revenues, the successful introduction of e-filing and e-payment of taxes, an improved registration of taxpayers (supported by DPF1), and more transparent information based on the 2018 general census of taxpayers in Ouagadougou and Bobo Dioulasso. Collection of past-due taxes should also contribute to higher tax collection, supported by stronger sanctions and penalties. The interconnection of Burkinabe Customs with those of neighboring countries (Mali, Côte d’Ivoire and Ghana) and improved controls at the borders should help reduce fraud. Other tax administration measures include the creation of tax centers for medium-sized enterprises in Ouagadougou, the extension of standardized value-added tax (VAT) invoicing to all taxpayers, and continued efforts to streamline merchandise valuation at Customs. Grants will increase sharply to 2.1 percent of GDP in 2020 and remain steady at around 2.4 percent of GDP over 2021-2023 to finance COVID- 19, security and humanitarian emergency-financing. 2.14 On the expenditure side, current expenditure will increase initially to handle the COVID-19 emergency, and later manage security and humanitarian costs. Security spending is expected to rise broadly in line with nominal GDP. Subsidies to utilities and transfers to local governments will increase in tandem with outlays related to COVID-19. This will be offset by a mild reduction in the wage bill and cost- savings in rationalizing social programs will help reduce current spending. Moreover, delayed implementation of externally or domestically financed public investment, resulting in capital expenditure at 6.7 percent of GDP in 2021-2023. Table 2.5: Burkina Faso: Post COVID-19: Additional Fiscal Financing Requirements – 2020 US$ million % of GDP Post-COVID-19 Plan: Financing Gap 314.9 2.0 Expected to be covered by: IMF ECF 48.1 0.3 IMF RCF 115.3 0.7 World Bank Additional Financing 50.0 0.3 AfDB Additional Financing 27.0 0.2 BOAD Special Financing 41.4 0.3 EU and Other Donors Financing 33.1 0.2 Source: Staff Estimates based on information available on April 12, 2020. nd 2.15 The April 2 Government’s Plan to deal with the COVID-19 crisis unveiled the need for additional external financing to be included in a forthcoming revised Finance Law for 2020 . Fiscal financing requirements above those already budgeted in the Finance Law 2020 are estimated at US$314.9 million in 2020. IMF prospective contributions from the ECF and RCF are projected to be at US$163.4 million. Multilateral, including supplemental resources from the World Bank, and bilateral contributions from the EU, African Development Bank (AfDB), BOAD, France and other donors are expected to be at US$151.5 million (Table 2.5). Page 15 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170934) 2.16 Regional monetary policies are expected to keep inflation under the 3 percent WAEMU target. Following COVID-19-related slump in agricultural output in 2020, recovery in oil prices and moderate harvests will lead inflation to mildly rise to 2.5 percent in 2022 and 2.8 percent in 2023. Figure 2.1. Debt Sustainability Analysis, 2019-2029 Source: Joint World Bank – IMF LIC-DSA, March 2020. Table 2.6: Public Debt Trajectory 2016 2017 2018 2019p 2020p 2021p 2022p 2023p (In Billions of CFAF) Public and Publicly Guaranteed 2,528.6 2,756.2 3,388.1 3,688.5 4,152.6 4,502.6 4,835.7 5,199.1 (PPG) Debt External PPG Debt 1,797.6 1,732.0 1,931.7 2,083.7 2,203.5 2,261.3 2,425.7 2,619.6 Domestic PPG Debt 731.0 1,024.2 1,456.4 1,604.7 1,949.1 2,241.3 2,410.0 2,579.5 (in percent of GDP) Public and Publicly Guaranteed 33.3 33.5 37.7 40.0 43.0 43.3 43.1 42.8 (PPG) Debt External PPG Debt 23.7 21.1 21.5 22.6 22.8 21.7 21.6 21.6 Domestic PPG Debt 9.6 12.4 16.2 17.4 20.2 21.5 21.5 21.3 Source: Burkinabe authorities, World Bank-IMF DSA, December 2019 2.17 The Joint World Bank/IMF Debt Sustainability Analysis (DSA) of March 2020 concludes that Burkina Faso remains at moderate risk of debt distress with substantial space to absorb shocks . Using the new Debt Sustainability Framework for Low-Income Countries (LIC DSF), the country’s debt carrying capacity is medium at end-2019. The baseline scenario accounts for Burkina Faso’s recent GDP rebasing, which has caused downward revision to all debt to GDP indicators, and incorporates the impact of the virus and the deteriorating security situation. The risk of external debt distress in Burkina Faso remains moderate. All external debt indicators remain below the relevant indicative thresholds under the baseline scenario. Under a standard stress test of a shock to exports, two of the thresholds for PPG external debt are breached (Figure 2.1). Overall public debt does not breach the relevant benchmark under all scenarios. Burkina Faso remains at moderate risk of public debt distress, as the present value of external debt-to- exports and external debt service-to-exports ratios are vulnerable under a most extreme commodity price shock. The World Bank and IMF teams are working closely with the authorities to ensure sound macroeconomic policies and prudent debt management.7 7 While management of concessional debt has been broadly adequate, the capacity of the debt office needs to be strengthened Page 16 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170934) 2.18 The macroeconomic outlook is subject to substantial downside risks. External vulnerabilities are mainly related to exports and commodity price shocks resulting from a longer than expected impact of the COVID-19 crisis. Ensuing increases in security, humanitarian and, if extended beyond one year, COVID- 19-related expenditure might jeopardize fiscal discipline. High world fuel prices could lead to an increase in current transfers for fuel subsidies, a build-up of arrears and large liabilities, if consumer prices of electricity and retail gasoline are not adjusted in accordance with the recently established mechanisms. For their part, domestic risks are unfavorable weather, an unstable security and humanitarian situation, and the aggravation of the COVID-19 health crisis. The agricultural sector remains highly vulnerable to climatic conditions. Terrorist attacks may jeopardize expected investments, especially given their recent multiplication across the country. 2.19 The risks of policy reversals in fiscal consolidation are also substantial. Rising socio-political, security and humanitarian tensions, and the aggravation of the COVID-19 outbreak may put further pressure on the Government, preclude the implementation of reforms and threat the projected gradual return of the fiscal deficit in compliance with the WAEMU target. Tax collection could be much lower than projected, particularly if there is a lower activity due to depressed farming, services, gold exports or investment because of insecurity or the virus spread in productive areas, or if tax administration institutional capacity and tax audits are not effectively improved. In a context of crisis, further tax measures and wage bill cuts could in turn contribute to elevate social tensions and endanger the Government’s commitment to reforms , especially in the run up to the November 2020 elections. These policy risks will, however, be monitored and mitigated in part through the combination of the IMF program and WAEMU more flexible fiscal deficit target, the forthcoming Emergency COVID-19 Preparedness and Response Project (P173858), and the reforms and additional financing supported by this DPF series and grants by other donors. Together with technical assistance, these reforms will help preserve fiscal sustainability, while promoting sustainable productivity growth and poverty reduction. 2.20 Burkina Faso's macroeconomic policy framework is adequate for the proposed operation . While the economy will remain vulnerable to a range of severe shocks which might further decelerate growth in 2020, Burkina Faso should recover a positive trajectory of economic expansion as a result of countercyclical, but prudent fiscal and monetary policies and resilient reforms to counter their negative effects. This assessment is underpinned by positive private investment in the growing gold sector and in the cotton sector under rehabilitation, which will support good mining and agricultural outturns, and an adequate response to the COVID-19 crisis. The Government has committed to gradually regain the WAEMU 3 percent of GDP deficit target by 2022 while accommodating a temporary deviation owing to security and COVID-19 related spending. The policy framework is anchored in the ECF and the RCF arrangements with the IMF and membership of the WAEMU. Public debt is sustainable, and the risk of overall and external debt distress is moderate. 2.3. IMF RELATIONS 2.21 On April 14, 2020, the IMF Executive Board approved a RCF Arrangement. The RCF Arrangement provides a total of US$115.3 million (70 percent of quota at time of approval) to support the authorities’ measures of addressing the double shock of security and COVID-19 pandemic. In parallel, the Board rephased to July 20, 2020 the Fourth Review of Burkina Faso under the ECF Arrangement. The ECF aims as the Government implements its reform plan and medium-term debt management strategy with IMF and World Bank support. Page 17 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170934) at the creation of fiscal space for priority spending. Economic performance under the three previous reviews of the ECF has been satisfactory. The key staff conclusion of the third review included: focusing on a sustained revenue mobilization effort, containing current spending – in particular curbing the wage bill growth and reducing the burden of fuel subsidies – and improving the efficiency of public investment and spending by social safety net programs. 3. GOVERNMENT PROGRAM 3.1. The Government aims at maintaining macroeconomic stability while creating fiscal space for productive and social investment through increased domestic resource mobilization and improved public spending. As part of the PNDES, in the area of domestic resource mobilization, since 2019 it is implementing tax policy and administrative measures in internal revenue and customs to raise revenue, reduce fraud and expand the tax base. In the 2020 budget, tax policy changes envisage, inter alia, increased tax rates on tobacco and cigars, as well as in real estate property transfers, generalized use of online payments by large firms and other modern tools of tax administration, and reduced tax exemptions for diplomatic and consular missions. The main reform areas in expenditures management include the effective control of wage bill growth, the overhaul of public investment management procedures, and an improved framework for public-private partnerships (PPPs). 3.2. To reduce poverty and increase resilience to shocks, the PNDES aims to raise productivity in rural areas, while being complemented by ERP measures to face COVID-19. The agricultural sector (crop and animal production) accounts for a declining share of GDP (22.6 percent in 2018) but still employs about 80 percent of Burkina Faso’s workforce and constitutes the main source of income for the poor. While there are several opportunities to develop value chains in agriculture, the Government is developing the potential of the livestock sector, which can be harnessed to raise growth, exports, and the incomes of rural households, including those living in the poorest regions of the country. The livestock sector also contributes in a major way to food and nutrition security. Continued support to the agriculture sector is critical in a context where more than 10 percent of the Burkinabe population might be in need of food and nutritional assistance due to the COVID-19 crisis.8 Recent ERP measures include: (i) the acquisition of agricultural inputs and animal feed to support food and pastoral production; (ii) the reactivation of National Society for Food Security Stock Management (Société Nationale de Gestion des Stocks de Sécurité Alimentaire, SONAGESS) boutiques témoin; (iii) securing stocks of high consumption products; and (iv) strengthening economic control of prices on the national territory. 3.3. The Government also aims to improve the management of scarce natural resources to enable sustainable and inclusive private-sector-led growth. This has also been emphasized by the SCD and the CPF as a first-tier priority. Recent growth acceleration has in large part rested on mining, including industrial and artisanal mining. This activity is, however, related to environmental degradation and puts pressure on scarce resources, such as water, land and some non-timber forest products of great economic importance (e.g., felling of shea stands). Artisanal mining also suffers from high informality, with the associated limited productivity gains and low fiscal revenues. The Government is keen on formalizing the artisanal mining sector, to support the development of the sub-sector, improve security, and reduce adverse environmental and social impacts. 8 Per most recent projections made for June-August 2020 within the West Africa and Sahel Harmonized Food Security Framework, Burkina Faso might reach 2.15 million people identified under the Crisis/Emergency/Famine Phases. Page 18 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170934) 3.4. The PNDES also aims to provide coherent, efficient and sustainable health and social protection policies for the poor and vulnerable sectors of the economy. While Burkina Faso suffers from deficiencies in all human development (HD) indicators, the urgency of improved service delivery in the health sector has increased as a result of deficient outcomes (especially in infant and maternal health), rapid population growth, deep gender, spatial and social inequities, budget constraints and mounting social tensions. Moreover, social programs consist of a plethora of cash, subsidy and in-kind programs that use many different targeting approaches and eligibility criteria. Progressive (pro-poor) and regressive approaches coexist. The duplication of efforts for each program further exacerbates the cost of reaching the poor. The recent Social Safety Nets assessment9 shows that coverage of the chronically poor, i.e. the quintile of the population consuming the least, is critically low. The low coverage coupled with the multiplication of targeting methods calls for an integrated approach for the assessment of socioeconomic needs and conditions. In response, the Government has initiated in recent years various free health care programs, notably to improve access to family and reproductive health services, as well as made initial efforts to achieve efficiency gains. In so doing, the adoption of a coherent targeting approach is essential to improve social spending efficiency and HD indicators, while generating fiscal space. 3.5. The PNDES has been supplemented by a regional emergency plan to respond to its humanitarian, development and peacebuilding challenges. In 2017, the Government launched the Programme d'urgence pour le Sahel/BF (PUS-BF) to address governance and basic services deficits and strengthen economic resilience in the Sahel and North regions. In June 2019, the Government further expanded PUS-BF to cover four additional regions impacted by insecurity (PUS élargi). A Priority Action Plan was adopted by the Government in February 2020, prepared under the aegis of the Prevention and Peacebuilding Assessment (PPBA) conducted by the World Bank, the United Nations, the EU and the AfDB. 4. PROPOSED OPERATION 4.1. LINK TO GOVERNMENT PROGRAM AND OPERATION DESCRIPTION 4.1. The proposed operation is the second in a programmatic series of three single-tranche DPFs to support three closely interrelated strategic pillars of the PNDES 2016-2020: These are: Pillar 1: economic governance; Pillar 2: human capital development; and Pillar 3: structural transformation of the economy and private sector development. By the same token, the PDOs are to support the Government's efforts to: (i) strengthen fiscal management; (ii) improve natural resources management and raise mining and livestock productivity; and (iii) improve health service delivery and social spending efficiency. Stronger fiscal management will create fiscal space for further pro-poor and productive spending. An improved supply of essential medicines and spatial distribution of education and health workers will benefit human capital. The development of artisanal mines and increased livestock productivity will foster job creation and inclusion in rural areas. Furthermore, there are mutually reinforcing complementarities among these three pillars. Added fiscal space will finance higher productive spending, especially a more efficient public investment that creates conditions for more rapid private sector development and boosts productivity gains, starting with the most important sectors of the economy: mining, arable land and livestock. In addition, improved natural resources and livestock management will support growth and technological adaptation, and help collect additional revenues. And to translate productivity these gains into higher 9 The way forward for social safety nets in Burkina Faso, World Bank (2019), Washington DC, http://documents.worldbank.org/curated/en/822521567052802222/Main-Report. Page 19 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170934) standards of living, labor productivity should not be undermined by a too rapid population growth and exclusion; hence the need for improve public health--especially in the areas of family planning and birth control—and social services aimed at the most vulnerable groups. Finally, improving value-for-money in the health and safety net sectors will help contain spending, as required for fiscal consolidation. 4.2. This DPF series is well aligned with three key priorities identified by the WBG’s SCD and the CPF (FY2018-2023). The SCD identified three first-tier priorities for Burkina Faso to reduce poverty and promote shared prosperity: improved natural resources management, skills development, and greater gender equality. The SCD stressed that Burkina Faso needs to improve the management of its two main assets, land and mineral resources, as well as two scarce resources, water and sources of energy. With respect to land delimitation, aiming to exclude classified forests from mining activities, there is an urgent need to proceed with delimitation, followed by registration of classified forests, ensure land tenure and support land planning and management. With regard to land use the Government is kind at supporting the regularization process and specific participatory activities to protect the rights of all groups including women, elder, youth, pastoralists, farmers and rural and urban poor. With respect to gender equality, the SCD emphasized increasing girls' access to education, women's access to maternal health, nutrition, and family planning, access to productive assets and reduced domestic violence. The reform areas supported by this DPF series directly helps address these priorities (second pillar), as well as expanding poor and women access to basic health and social services (including free hospital deliveries and reproductive health services) (third pillar). Finally, the DPF series also supports improvements to fiscal management (first pillar) which, together with governance enhancement, was identified in the SCD as a cross-cutting requirement for effective policy-making. 4.3. Other World Bank operations are complementing the DPF series, using selectivity as a guiding principle. The determination of the specific areas has been made in close collaboration with the Government, and in consideration of the comparative advantage of the World Bank. Among ongoing IPFs, the DPF has benefitted from the Decentralized Management and Woodland Forest Project (P143993) for field work in the delimitation of classified forests; from the Agriculture Resilience and Competitiveness Project (P167945) for livestock-related issues; the Safety Net Project (P124015) for promoting consensus on poor targeting mechanisms; the Health System Reinforcement Project (P164696) for providing technical assistance in health sector reform; and the Emergency Recurrent Cost Financing Project (P169486) for COVID-19 needs. Among future IPFs, the DPF series has benefitted from the forthcoming Emergency COVID-19 Preparedness and Response Project (P173858), as well as the preparation of Burkina Faso Emergency Infrastructure and Burkina Faso Human Development Emergency Investment Projects (P173707) to appraise IDPs needs. The selection of actions was also based on the goal to achieve the maximum results over the proposed DPF’s timeframe, building on the Government’s own momentum a nd capacities. 4.4. The operation also builds on the previous DPF series (P157060 and P163283), which focused on energy sector reform, and fiscal management in 2016-2017. It continues reforms initiated in fiscal management which supported tax collection through policy and administrative reform. In the energy sector, the World Bank’s engagement continues through investment operations10. The World Bank team is closely monitoring developments in the energy sector that may have fiscal implications. 10 Energy sector reforms supported under the previous Energy and Fiscal Management DPF series have improved the financial Page 20 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170934) 4.5. Lessons from the implementation of previous DPFs and from similar operations in poor as well as fragile countries informed the design of the DPF series. The main lesson has been that in Burkina Faso, macroeconomic stability and social programs will not have a strong positive impact on poverty indicators in the absence of broad-based economic growth. Specific lessons include the need for: (a) strong and sustained commitment to and leadership for sensitive reforms such as tax reform and human resources management in the public sector; (b) greater realism to better reflect what can be achieved in a context of limited institutional capacity; (c) simple design to ensure effective and successful implementation; (d) sustained follow-up of prior actions that can have cascading effects on the follow-up triggers of the next operation; and (e) leverage parallel policy-based support through technical assistance and investment financing operations. In accordance with these lessons learnt, the proposed series addresses major bottleneck in labor-intensive sectors such as agriculture and mining and aims at upgrading the country’s human capital, which is the main determinant of inclusive growth in the longer term. It also supports a concerted donor approach to reforms (especially in fiscal, social and real estate reforms). 4.2. PRIOR ACTIONS, RESULTS AND ANALYTICAL UNDERPINNINGS 4.6. The content of the operation was stronger than envisaged under its original design in DPF1 (Annex 6). For most of the indicative triggers, the prior actions actually adopted by the Government were stronger than originally expected, following the principle of flexibility. Under the first pillar, the staff redeployment of education professionals for service needs and the reform of civil servants incentive payments, which was initially envisaged as part of DPF3 reforms, was advanced to this operation. Both measures, jointly with the passing of the payment of the single tax on wages and salaries (Impôt Unique sur les Traitements et Salaires, IUTS) reform, offset the delay in the passing of the Organic Law of the wage bill to DPF3. Under the second pillar, a prior action was added to support accelerated efforts for climate change mitigation through the identification of forests to be excluded from the mining cadaster, another reform initially envisaged as a potential area for DPF3. Moreover, improvements to the regulatory framework for organizing the artisanal mining sector were strengthened to include standards for the management of scarce natural capital. And under the third pillar, the policy matrix was adjusted to take into account the needs of COVID-19. It acknowledge efforts at completing the staff census and redeployment of new health professionals using a new methodology, as well as introduced the new targeting method for identifying the poor and vulnerable, including those infected by COVID-19. Finally, many DPF3 triggers and result indicators were adjusted to implementation delays. The eleven prior actions, revised triggers and associated result indicators are set out in the Policy and Results matrix provided in Annex 1. Analytical underpinnings for the design of this operation are referenced in Annex 5. Pillar 1. Strengthening Fiscal Management A. Strengthening Domestic Revenue Mobilization Challenges 4.7. Strengthening fiscal revenue mobilization is key to restoring fiscal sustainability as well as providing the fiscal space necessary for the Government’s ambitious public investment program. Burkina Faso’s tax revenue is at 16 percent of GDP in 2019, well below the WAEMU target of 20 percent. situation of the state owned electricity utility (Société Nationale d'Électricité du Burkina, SONABEL); and initiated the diversification of the energy mix towards cheaper sources, namely solar and imports through national and regional IPFs operations (P128768, P094919, P162933, P162580). Page 21 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170934) 4.8. Multiple weaknesses explain Burkina Faso’s modest tax performance, in particular the prevalence of tax exemptions and tax administration weaknesses. First, tax exemptions reduce revenue, with limited economic gains. The General tax code, the Investment code and the Mining code provide for numerous exemptions11, particularly on VAT, customs duties and the Corporate Income Tax. Second, tax administration weaknesses reduce the efficacy of domestic revenue mobilization. Similar to other SSA countries, inefficient tax filing and payment procedures12 raise the cost of tax compliance and prevent tax officers from focusing their efforts on controls. Also, technical and information constraints greatly limit the potential for property taxes. While the latter may not be among major revenue sources, they could be important for local governments’ own-source revenue mobilization. A key constraint in this respect is the absence of a fiscal cadaster. 4.9. The DPF series focus on broadening the tax base, improving tax administration and reducing transaction costs to facilitate tax payments. Under the previous operation, the Government simplified the system for registering taxpayers through the unique fiscal identifier (Identifiant Fiscal Unique, IFU) and launched a new electronic platform to allow online filing of all taxes as well as payments. To complement this, in the Budget Law 2019, e-filing was made mandatory for all large firms. And in the Budget Law 2020, the Government made e-payment of all taxes for large firms, and e-filling for medium- sized enterprises mandatory (Prior Action 1). The annual budget law makes these changes on an ongoing basis. Authorities also intend to pursue efforts for increased domestic revenue mobilization by simplifying the taxation of micro-enterprises and making e-payment mandatory for all medium-sized enterprises (Indicative Trigger 1). While revenue potential from micro-activities is small, simplifying the system for taxing the informal sector will help to reduce fraud. Overall, the number of taxpaying firms is expected to increase from 95,515 in 2017 to 150,000 in 2022. Prior Actions and Results Prior Action 1: To improve tax administration and reduce transaction costs, the Recipient’s Ministry of Economy, Finance and Development has made e-payment of all taxes for large firms, and e-filling for medium- sized enterprises mandatory through the adoption of the 2020 Budget Law. Prior Action 2: To broaden the property tax base, the Recipient’s Ministry of Economy, Finance and Development has strengthened the regulatory and institutional framework of the cadaster to increase the collection of property taxes through the adoption by the Recipient’s Ministry of Economy, Finance and Development of an arrêté establishing a modality to determine the value of land and housing property in Ouagadougou. Expected results: Indicator 1: Number of taxpaying firms and individuals recorded in the government’s taxpayer database. Baseline (2017): 95,515. Target (2022): 150,000. Indicator 2: Property taxes collected by general government. Baseline (2017): 0.3 percent of GDP. Target (2022): 0.5 percent of GDP. 11 According to the most recent government report on tax expenditures, 405 exemption categories were identified. Of these 405 categories, 286 were assessed in the government’s report, totaling an estimated 1.2 percent of GDP in revenues lost due to tax exemptions in 2017. This is an underestimate of total exemptions, as it does not account for exemptions considered as “normal” according to the country’s fiscal reference system (notably, VAT exemptions on final consumption goods). 12 With 45 taxes and an average annual time cost of 270 hours (compared to an average of 280 hours for SSA). Page 22 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170934) 4.10. The Government also expects to broaden the tax base by enabling a greater mobilization of property taxes.13 In February 2018, the MEFD laid out its strategy for establishing a fiscal cadaster. Then, it created an urban registry of the primary holders of rights to land plots14 in the cities of Ouagadougou and Bobo Dioulasso (a prior action of DPF1). The registry provides a basis for a database containing current information on holders of property titles. Authorities have now to establish a new system for valuing land and housing property in Ouagadougou that will replace the current self-declarative system15, as a basis for property taxes (Prior Action 2). Operationalization of this system will require investments in an information system for real estate in Ouagadougou and Bobo Dioulasso, which will be set up also with the assistance of Danish International Development Agency (DANIDA). This will facilitate identification of property tax payers, by providing detailed information on property owners, address, property details, tax details and geographical location. Outreach activities will also be undertaken to support a tax awareness campaign. Furthermore, the administration of property taxes will be reformed in the context of the reform of the fiscal decentralization framework, where local governments could play a greater role. In this regard, the tax Directorate will create and make operational new local cadaster services in Ouagadougou and Bobo Dioulasso (Indicative Trigger 2). The revenue impact from the implementation of simplified tax rates for properties at the local level is expected to raise property tax collection to 0.5 percent of GDP by 2022, up from 0.3 percent of GDP in 2017. B. Improving the Efficiency of Public Spending Challenges 4.11. In a context of reduced fiscal space, improving the management of public expenditure is a major policy challenge for Burkina Faso. On a shrinking capital spending side, there is an urgent need for the Government to improve public investment management. And on a rigid current spending side, the Government must regain control of a high share of public resources devoted to the wage bill, to the detriment of investment. 4.12. An improved public investment management will increase the development impact of its limited budget, and better manage its fiscal risks. The Government had to dramatically cut public investment levels down from an exceptional uncontrolled spike of 10.1 percent of GDP in 2017 to 5.7 percent of GDP in 2019. And to do so, the 2017 Burkina Faso Public Investment Management Assessment (PIMA) found multiple weaknesses, while stressing the need to adopt a standard methodology for appraising the costs and benefits of large projects. PIMA highlighted the need for an independent technical review of the quality of projects and of the readiness of projects prior to their execution. In addition, PPPs lacked proper oversight, notably to include analyses of value for money. Overall, there has been an urgent need to improve the selection, preparation and implementation of public investment projects. And given large financing needs in infrastructure, and a reduced budget, the Government is seeking to better harness private sector financing through PPPs. 13 See World Bank 2019, “Burkina Faso, Relever le Défi de la Mobilisation Fiscale,” World Bank, Washington DC. 14 The registry already has information on primary holders of rights to land plots ("attributaires de parcelles") in urban areas. Authorities will complete these data with updated information on property titles ("titres fonciers" and "permis urbain d'habiter"). 15 Currently property taxes are based on the voluntary (and frequently biased) declarations of property owners on the value of their land and dwellings (at the rate of 0.1 percent for residential buildings and 0.2 percent for other buildings or unbuilt land). Page 23 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170934) Figure 4.1. Contributions to Wage Bill Growth and Comparison of Wage Bill-to-Tax Revenue Ratio 4.13. Current spending has been affected by a rapid wage bill growth that resulted from increased public employment and higher wages in past years. Public sector wages reached 57.4 percent of tax revenue in 2019, up from 33.5 percent in 2012. This is well above the WAEMU convergence criterion of 35 percent. The high wage bill mainly reflects high average compensation rather than excessive employment levels (Figure 4.1). Indeed, the government-employment-to-working age population ratio in Burkina Faso estimated at 1.9 percent is paradoxically below the average for low income and SSA peers at 4.16 The number of public employees reached about 190,000 staff in 2019, from about 40,000 in 2012, increasing by a factor above four. This recruitment drive has aimed to fill the gaps in the education, health and security sectors; owing to rapid demographic growth and social pressures during the political transition, and to security and humanitarian challenges more recently. Since 2014, compensation increases have contributed about half of recent increases in the wage bill. In a context of long, recurrent strikes, the adoption of a new civil service code, and other sector-specific agreements that resulted in large increases in average salaries in 2014 and 2016, and new commitments in 2017 and early 2018. Available data suggests that government employees received a substantial wage premium over formal- private-sector peers, after accounting for differences in education and demographic characteristics 17. Also, the compensation system is fragmented as many particular statutes have specific scales for base salaries and allowances18, and large incentive premia are paid for certain categories, with limited transparency. 16 IMF 2018, Burkina Faso, Wage Bill Management and Civil Service Reform, Washington DC. 17 IMF staff estimates based on the 2014 Enquête Multisectorielle Continue. 18 Allowances and bonuses accounted for 41 percent of the central government wage bill in 2017. The reported wage bill does not include incentive premia (fonds communs) paid to staff in certain ministries (particularly the MEFD) and which are not transparently reported. Page 24 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170934) 4.14. The Government has started to curb the unsustainable wage bill growth. Its reform strategy initially includes the reduction in bonuses and pay disparities among civil servants at the ministry of finance, where distortions were larger; coupled with a promising substantial redeployment of its existing staff at the Ministry of Education and, to a lesser extent, Health (representing about 60 and 17 percent of civil servants respectively). Redeployment of education and health professionals has taken place from over-deserved to under-deserved schools and health posts located in less attractive areas; thus, contributing to significantly reduce new hiring by these two ministries. This change in redeployment policy will be permanent and followed by a comprehensive compensation reform. Prior actions and results Prior Action 3: To improve public investment management, the Recipient has improved the assessment of risks, including climate change risk and other risks for the selection, preparation and implementation of public investment projects, including public private partnerships, through: (i) the adoption in the Budget Law 2020 of an analysis of risks related to identified priority projects; and (ii) the adoption by the Ministry of Economy, Finance and Development of arrêté establishing a national committee to validate investment projects appraisal documents. Prior Action 4: To improve the management and control of the public wage bill, the Recipient has: (i) improved the transparency and rationalized the motivation of the Ministry of Economy, Finance, and Development staff’s bonuses through the adoption by the Recipient’s Council of Ministers of a decree and the adoption by the Recipient’s Ministry of Economy, Finance, and Development of an arrêté; (ii) imposed taxes on bonuses and allowances of public servants by the enactment of the Budget Law 2020; and (iii) completed a nominative and geographic staff censuses within the Ministry of National Education, Literacy and Promotion of National Languages and carried out its staff assignments for service needs through the adoption by the Recipient’s Ministry of National Education, Literacy and Promotion of National Languages of a general report of the assignments of its personnel. Expected results: Indicator 3 Proportion of public investment projects included in the approved budget that have a feasibility study validated by the inter-ministerial committee. Baseline (2017): 0 percent. Target (2022): 80 percent Indicator 4: Annual nominal wage bill growth rate. Baseline (2017): 11.4 percent. Target (2022): 4.5 percent. 4.15. The DPF supports improvements to public investment management. In line with the key recommendations of the PIMA report, the first operation supported improvements to the preparation and selection of public investment projects. The Government adopted in January 2018 new regulations for investment projects, notably to ensure that all new domestically-financed projects have benefitted from a feasibility study, and to improve processes for selecting, budgeting and implementing projects. It also produced a technical guide standardizing the methodology to be used in cost-benefit analyses for investment projects and for assessing project readiness. The methodological guide includes environmental and social impact criteria for the appraisal of public investment projects. In 2019, the Government established a national committee for validating project appraisal documents (including feasibility studies), which is contributing to improved public investment management and has created a list of priority investment projects (including PPPs) for which climate change risk and other risk analysis is annexed to the Budget Law 2020. nd as per article 3 of the arrêté of its creation, the inter-ministerial committee validates projects appraisal documents (Prior Action 3). The committee also considers environmental and social impact criteria; therefore contributing to environmental mitigation efforts. The framework for PPPs is to be further enhanced and made consistent with a recently adopted WAEMU Page 25 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170934) directive that will improve selection processes by assessing associated fiscal risks (Indicative Trigger 3). The Government has benefited in this respect from support from the IMF and PPIAF. By end-2022, public projects benefitting from a feasibility study should have reached 80 percent, up from 23 percent in 2017. 4.16. The DPF series supports the Government’s efforts to control and stabilize the growth of the public-sector wage bill, while improving human resource management in the public sector. In mid-June 2018, the Government organized a national conference with civil society and trade unions to build consensus around key options for reform (a prior action of the first operation). The conference concluded with the adoption of four main recommendations on the need to: (i) Revise the salary-setting system for civil servants (clarifying the right to strike and preventing sector-specific negotiations); (ii) rationalize the compensation system for civil servants (e.g. harmonizing the salary structure and rationalizing indemnities); (iii) review the productivity of civil servants and quality of service delivery; (iv) rationalize other advantages (in-kind benefits, rules on taxation of wage incomes, and capping incentive payments). 4.17. This operation focuses on the rationalization of incentive payments and increased transparency in their management. Such payments were currently not accounted for as wage expenditures, but as goods and services expenditures; and substantial amounts of compensation were given to some particular categories of civil servants, specifically in the MEFD. In response, by mid-2019, the Government introduced limitations to incentive payments to civil servants in such ministry and mandated their transparency (Prior Action 4). Moreover, the Government reformed the Impot Unique sur les Traitement des Salaires—IUTS, a direct tax on wages and incentive payments that has been subject to multiple modifications. Until December 2017, public servants were not explicitly excluded, but the floor on payments was so high that most of them did not qualify; and for those few public servants (high earners) who did qualify, the law was not enforced by fear of union strikes. The law was amended to explicitly account for high earners and to also include previously excluded allowances (primes) on function category, transportation and housing. However, the reform was still unenforced. Only in the 2020 Budget Law, the reform (extension) of the IUTS to public servants started to be enforced with a modified—more progressive—threshold that excluded a larger share of low earners (Prior Action 4).19 Finally, while the 2019 Budget Law also limited fonds communs (used to pay such incentives) to the amounts collected (from penalties and fines) in the previous year and to 25 percent of the base salaries of eligible civil servants; in the 2020 Budget Law, the fonds communs became explicitly recorded, thus enhancing their transparency. 4.18. The DPF also supports the significant reduction of staff hiring thanks to a massive redeployment of sub-optimal allocation of education professionals. Following nominative and geographic censuses of public servants at the Ministry of Education (accounting for about 60 percent of total public employment), the authorities were able to redeploy 11,757 education professionals nationwide during the 2019-2020 academic year (Prior Action 4). Such move allowed the ministry not only to reduce its projected annual hiring from 10,615 to 5,892 in the 2019/20 academic year, but to optimize and to reduce staff deficits in certain localities. As a result of all measures adopted and following 6 years of high wage bill growth rate, the Government budgeted a constant wage bill ratio at 8.7 percent of GDP in 2020, thereafter declining. 4.19. While initial steps are in the right direction and should be consolidated, a broader civil service pay and management reform still is needed. In 2020, the Government expects to complete staff surveys and functional audits, so as to continue optimizing staff redeployment-cum-reduced hiring by all 19For instance, on the prime allocated to function category, the tax will be 5 percent of gross salary with a 70,000 cap. Same percentage for housing and transport primes, with caps at respectively 50,000 and 30,000. Page 26 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170934) ministries. A new Civil Service Organic Law and revised salary scales to harmonize base pay among civil servants of the same qualification and reduce indemnities (Indicative Trigger 4) is being prepared for consultations with civil society and unions as its approval requires a constitutional amendment, and its implementation the adoption of accompanying decrees. Harmonization of base pay is a critical element of reform, as discrepancies between different categories of civil servants has historically been an important driver of wage demands by comparatively lower-paid groups. More centralized wage adjustments (instead of specific agreements for every branch of the civil service) are also expected to help contain wage bill growth over time. With respect to indemnities, their number should be reduced, and their amounts set to reduce inequality in total compensation across civil servants with the same qualifications and levels of responsibility. Overall, the annual nominal growth rate of the wage bill is expected to fall from 11.4 percent in 2017 to 4.5 percent in 2022. The World Bank and IMF teams will pursue the dialogue with the authorities on wage bill reform options. 4.20. Besides decelerating the growing trend of the wage bill, the overall gross fiscal space created by the DPF during FY19/20 is projected to be about 0.8 percent of GDP. This fiscal space is the result of the combination of employment attrition and reduced motivation bonuses with revenue measures announced by the Government as follows: (i) no new hiring of 4,723 teachers in the Budget 2020 should contribute to about 0.1 percent of GDP; (ii) implicit savings from redeployment (vs informal hiring) of no less than 11,750 education professionals should be equivalent to about 0.3 percent of GDP; (iii) savings from reduced motivation bonuses (initially estimated at CFA 55 billion., later reduced at CFA 30 billion) represent about 0.3 percent of GDP; and (iv) projected additional revenue from IUTS should be around 0.1 percent of GDP. In net terms, however, such fiscal savings will be at least partly offset by the additional outlays to be incurred by the Government in responding to the security, humanitarian and COVID-19 crisis. For instance, the Ministry of Education hired 2,594 new teachers among the beneficiaries of the Youth Employment Program for National Education (Programme Emploi Jeunes pour l'Education Nationale, PEJEN) which had completed three years of the program, as stipulated in the program’s framework document. The newly recruited teachers were assigned to several regions, includingthose located in conflict-prone areas. Similar exceptional hiring by the Ministry of Health (MoH) is also predictable to address the COVID-19 spread. Pillar 2. Improving Natural Resources Management and Raising Mining and Livestock Productivity A. Mining Challenges 4.21. The mining sector has been a growing major source of economic and social transformation in Burkina Faso over the past decade. According to the Burkina Faso Country Private Sector Diagnostic (CPSD), Burkina Faso is one of the most dynamic African countries in terms of mining activities. Gold production increased from 5.6 tons in 2008 to 52.6 tons in 2018. In that year, the mining sector accounted for 69.8 percent of the value of exported goods. Production is dominated by 15 industrial mines, which in 2017 already provided 9,200 direct jobs. In 2018, more than 20 percent of gold exploration budgets in Africa were invested in Burkina Faso, despite increasing security challenges. Several advanced gold projects and a large limestone quarry are expected to come into production over the next few years. The Government aims to increase the economic linkages of the sector at the national and local levels. To this end, a Mining Code was adopted in 2015 and completed by implementing regulations to provide a legislative and regulatory framework for the mining sector (industrial and artisanal). Page 27 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170934) 4.22. Artisanal mining represents a growing source of income in Burkina Faso 20, but most of the activity is informal. Artisanal gold production was estimated at 9.5 tons in 2016 21, with an estimated value CFA of 232.2 billion (3.5 percent of GDP). Yet, according to official figures, only about 200 kilograms of gold from artisanal mining were exported through formal or legal channels. In the same year, it was estimated that artisanal mining employed 140,196 workers (including 114,879 workers involved in well digging, sweeping, scraping or waste processing; 22,037 service providers; and 3,280 gold purchasers) on 448 sites across 12 of the country’s 13 administrative regions.22 However, this sub-sector, mainly comprising small scale operators, is characterized by low security and low productivity. Formalization (through the issuance of registration cards for artisanal miners, permits for gold commercialization, as well as the registration of cooperatives) is a key initial step to addressing the many challenges artisanal miners face. Productivity in artisanal and small-scale mining (ASM) is a function of several factors including knowledge of the geology, mining and recovery techniques, equipment, finance, etc. Formalization is also needed to create the basis for access to extension services (technical, environmental, health and safety), finance for equipment, and appropriate marketing channels. 4.23. Uncontrolled mining pose important threats to environmental sustainability that should be mitigated to avoid exacerbating an already high vulnerability to climate change. Artisanal mining is frequently associated with uncontrolled degradation of forests, wooded spaces and faunal areas. It is also associated with water pollution and the production of other wastes. This is an important concern in Burkina Faso, where water resources are scarce: Burkina Faso’s vulnerability to droughts and floods is projected to increase as the frequency and intensity of extreme weather events increases. The country’s vulnerability to available potable water will increase due to the unanticipated impacts of the COVID-19 pandemic on the National Water Supply Utility (ONEA), whose revenues revenues are already severely affected by the crisis and further decreasing. In addition, there are nearly CFAF 500 million of arrears from the hospitals and health centers due to ONEA whose payment by the MoH are likely to be further delayed given the current situation. Given the country’s high reliance on agriculture and livestock, droughts and floods create regular food security emergencies (with the most recent occurrence in 2017). The most vulnerable sectors to climate change in Burkina Faso are water, health, agriculture, pastoralism, and forestry23. Vulnerability to climate variability and change is compounded by high population growth, which raises demand for water resources and increases deforestation. Uncontrolled informal gold mining might also provide armed groups, potentially violent extremist groups, with a source of financing. 4.24. The Government aims to encourage formalization and promote sustainable growth of artisanal mining, by reducing security risks and minimizing environmental damage. In December 2015, the Government created the National Agency for Management of Mining and Semi-Mechanized Operations (Agence Nationale d’Encadrement et des Exploitations Minières et Semi -mécanisée-ANEEMAS). The mandate of ANEEMAS is to monitor and supervise artisanal and semi-mechanized gold mining activities 20 According to the 2015 Burkina Faso mining code, artisanal mining consists of all of the operations of extracting and concentrating mineral substances such as gold, diamond and other gems from flush or sub-outcropping primary and secondary deposits, and recover marketable products using manual and traditional methods and processes. Artisanal mining does not use equipment or mechanical energy and is not based on the highlighting of a deposit. 21 According to a 2017 survey by the institute of statistics and demography (Institut National de Statistique et de Démographie- INSD), in collaboration with the Ministry of mines and the Ministry of territorial administration and decentralization. 22 According to the 2017 survey, the number of workers in artisanal mining may have increased as the number of artisanal mines has almost doubled between 2016 and 2019, with about 800 artisanal mining sites currently identified in the country. 23 “Vulnerability, Risk Reduction, and Adaptation to Climate Change”. Burkina Faso: Climate Risk and Adaptation Co untry Profile, The World Bank, April 2011. Page 28 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170934) with the following objectives: (i) minimizing negative impacts of artisanal mining on the environment; (ii) contributing to better security on the sites; (iii) reducing fraud in the commercialization of gold from artisanal mining; and (iv) eradicating child labor on artisanal mining sites. ANEEMAS became operational in late 2017. Nowadays, it regulates the activity, provides extension services, encourages formalization, and helps mitigate environmental impacts (including with respect to the rehabilitation of mined land). Prior Actions and Results Prior Action 5: To encourage the development of the artisanal mining sector, the Recipient’s National Agency for the Supervision of Artisanal and Semi-Mechanized Mining has adopted and implemented a pricing policy for artisanal gold mining through the adoption of a deliberation. Prior Action 6: To reduce deforestation, the Recipient has regulated the determination of forest zones and wildlife areas as protected from any clearing and mining activities and implemented such protection to 17 classified forests through: (i) the adoption by the Ministry of Environment, Green Economy and Climate Change of an arrêté; and (ii) the adoption by the Ministry of Environment, Green Economy and Climate Change Regional Directorates of 17 minutes (procès-verbaux) providing the delimitation of 17 classified forests. Prior Action 7: To improve the management in artisanal mining areas of scarce natural capital (forests, water and land), the Recipient has regulated the management of gold mining sites by cooperatives of artisanal miners through the adoption of deilebarations on (i) enacting a standard model of specification for site management by artisanal mining cooperatives; and (ii) enacting the standard convention for the management of artisanal mining site. Expected results: Indicator 5: Registered exports of artisanal gold mines (in tons). Baseline (2016): 0.2. Target (2022): 2.0. Indicator 6: Hectares of identified and delimited forested areas excluded from mining cadaster. Baseline (2017): 206,000. Target (2022): 3,037,505. Indicator 7: Number of cooperatives registered with ANEEMAS that have adopted natural capital preservation standards. Baseline (2017): 0. Target (2022): 20. 4.25. The DPF series supports the government’s efforts to promote sustainable growth of the artisanal mining sector. The authorities have adopted and implemented a pricing policy for artisanal gold mining (Prior Action 5). The adoption of an adequate pricing policy aims at reducing intermediation margins and increasing prices for miners who use official commercialization channels. More specifically, through a participatory and inclusive approach, ANEEMAS set up and oversee a new price structure for artisanal gold mining, with better prices for miners. With the new price structure, it is expected that gold collectors will pay gold from miners with a maximum of 15 percent discount compared to international prices, while previously, in practice it happened that miners received payments that could be 30 percent lower than international prices. In turn, gold collectors are expected to sell gold to ANEEMAS with a maximum of 7 percent discount compared to international gold prices. Thus, together with the reduction of taxes on the exports of gold from artisanal mining (DPF1 Prior Action 5), the new pricing policy encourages a sustainable gold production and export activity through official channels. Registered exports of artisanal gold mining are expected to increase from 0.2 tons in 2016 to 2 tons in 2022. 4.26. The DPF series also supports the Government’s efforts to reduce deforestation. As part of DPF1, the Government had already issued regulations to prohibit mining activities in areas including natural preservation areas (including forests and wildlife areas), areas of pastoral or hydro-agricultural amenities, and natural or important waterways. The updated identification and demarcation of forests under this DPF will allow improving the enforcement of the exclusion of such areas from the mining cadaster (as Page 29 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170934) currently regulated in the mining code). Specifically, Authorities have completed the geo-referential delimitation of 17 classified forest (forêts classées) (Prior Action 6). And in the next DPF, two pilot forests will be excluded from the mining cadaster, and a shared management of pilot forests, also including local communities, will be promoted as supported by the Descentralized Forest and Woodland Management Investment Project (P143993) (Indicative Trigger 5). 4.27. The Government is also strengthening the management of scarce natural capital (forests, water and land). To this end, it is improving the regulatory framework for the artisanal mining sub-sector by initially encouraging artisanal miners to organize themselves into cooperatives24 (Prior Action 7). While water scarcity is expected to increase as a result of climate change, mining contributes to reducing water resources due to pollution. ANEEMAS is allowed to concede the management of artisanal mining sites under its control to cooperatives. It has adopted standard models for the management of artisanal mining sites and specifications with environmental standards to be enforced by cooperatives. Cooperatives that register with ANEEMAS will adopt natural capital preservation standards. Registration with ANEEMAS, provides several advantages for cooperative members, including : (i) pooling of the means of production and equipment; (ii) pooling of financial resources to meet legal obligations towards the State, the local authorities, and local population; (iii) improved opportunity to acquire mining titles and authorizations and to benefit from support and training; and (iv) pooling of financial resources to acquire efficient technologies with low impact on the environment. Going forward, the Government will also promote the adoption of improved gold extraction technologies (without mercury) in in the artisanal mining sub-sector that may increase output while reducing environmental degradation ( Indicative Trigger 6). Specifically, ANEEMAS will introduce new extractive technologies in pilot areas (with support from the World Bank’s forthcoming Sustainable Mineral Development Support Project (P167949) to be approved in July 2020, which will encourage provision of such technologies by the private sector; support tax collection with an updated mining cadaster; and bring technical assistance to increase the share of local content purchases from mining. B. Livestock Challenges 4.28. Nascent livestock production is carried out by pastoralists throughout the country, but it faces two structural constraints. The national herd is estimated at about 9.1 million cattle (of which about 1.0 million dairy cows), 23.2 million small ruminants, 33.7 million poultry, 2 million pigs and 18,000 camels. There are various production systems in the country,25 but two constraints limit the development of the sector. First, productivity is low because of lack of access to pasture lands, feed and water, and of poor 24 The creation and management of cooperatives are defined consistently with article 6 of the uniform Act of OHADA24, which states universal rules related to cooperatives, including: (i) voluntary membership and openness to all members; (ii) democratic power exercised by cooperative members; (iii) economic participation of cooperative members; (iv) autonomy and independence of cooperatives; (v) access to education, training and information for cooperative members; (vi) collaboration among cooperatives; and (vii) voluntary commitment of cooperatives to communities. 25 The transhumant livestock production system accounts for over 70 percent of the country’s cattle. The sedentary livestock production system is widespread among farmer-stock keepers and sometimes pastoralists who have become sedentary. The mixed livestock production system with an integrated stock-rearing is widespread in the South belt of the country and numerous are the interactions among livestock and crops. The urban and peri-urban dairying system is semi-intensive to intensive and comprises dairy farms on the margins of or in the urban centers. Fattening cattle and sheep farms are intensive and located in peri-urban zones, or semi-intensive, located in rural areas and primarily managed by women. Page 30 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170934) performance of local breeds and inadequate extension and veterinary services. Thus, pastoralists and sedentary herders are among the poorest groups of the rural population. Second, with the expansion of the crop areas, there is a growing competition for land and access to natural resources (pasture, water) between farmers and pastoralists. This phenomenon is one of the drivers of the conflict currently affecting Burkina Faso. 4.29. Other shortcomings need to be solved in order to exploit the full potential of the livestock sector and capitalize on its comparative advantage. These include: (i) institutional, legislative and regulatory constraints (including weak support services and often inadequate and/or insufficiently enforced regulations); (ii) limited access to quality inputs (feed supplies and veterinary inputs), and to grazing resources due to the marked fluctuations in the quantity and quality of pastures depending on rainfall; (iii) weak adaptive research, in particular a lack of adequate breeding programs in view of the need to improve the genetic potential of local breeds for more intensive production systems in the various value chains; (iv) insufficient productive infrastructure, weak technical support services and lack of access to financial resources; (v) absence or weakness of national mechanisms for preventing and managing climate-induced and other types of crises, including sanitary crises; and (vi) persistence and re-emergence of domestic and transboundary animal diseases such as the Small Ruminants Plague (Peste des Petits Ruminants, PPR); contagious bovine pleuropneumonia (CBPP); Newcastle disease, highly pathogenic avian influenza and low pathogenic avian influenza. 4.30. More specifically, vulnerable pastoralists do not have adequate access to veterinary services: most of livestock is not vaccinated and diseases, endemics or emerging ones, are widespread. Increased demand for veterinary services is stimulating the development of public and private animal health services. However, service fees are particularly high, and public and private actions are often competing rather than complementary. Access and affordability constraints must be alleviated to increase vaccination coverage levels. Herders face high vaccination costs. While theaverage PPR26 vaccine cost is CFAF 25, the end-price paid by the producer was CFAF 125 before the beginning of the vaccination campaign in 2019. This gap is due to transaction costs including the cold chain for maintaining the vaccine and fees of private veterinaries. As a result, although PPR vaccination is mandatory, coverage was only 3 percent in 2017. In response, the Food and Agriculture Organization (FAO) and the World Organization for Animal Health (OIE) have launched a global campaign for eradicating this disease within the next 10 years, which requires all member countries to undertake massive vaccination campaigns on their territory. 4.31. In view of the promising development of animal protein consumption in the sub-region, the Government assists the transformation of the livestock sector. Burkina Faso has a comprehensive livestock policy and strategy27. Strengthening animal health and veterinary services is an important part of the strategy to assist the transformation and the adaptation to climate change of the livestock sector while contributing to climate mitigation. Policies include interventions related to food hygiene, markets, 26 Peste des Petits Ruminants (PPR), also known as sheep and goat plague, is a highly contagious animal disease affecting small ruminants and transmitted via direct contact. The disease would mainly be transferred to infection-free areas by infected animals. Once introduced, the virus can infect up to 90 percent of an animal herd and kill up to 70 percent of infected animals. 27 Burkina Faso has a National Policy for Livestock Sustainable Development (Politique Nationale de Développement Durable de l’Elevage, PNDEL, 2010-2025). Its objective is to enhance the contribution of the livestock sector to environment-friendly economic growth, food and nutrition security, and thereby improve living standards. It aims at (a) building capacities of stakeholders; (b) securing land tenure and sustainable management of pastoral resources; (c) enhancing animal productivity, through investments in animal health, feeds and genetics; and (d) improving competitiveness and marketing of animal products. Page 31 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170934) breeding, feed availability, and natural disasters, including animal diseases. Given that climate change amplifies the risks of disease occurrence and expansion within animal populations, animal health needs to be supported, and capacity to manage sanitary crises strengthened. One objective is to prevent, control or eradicate prevailing transboundary diseases such as PPR.28 According to the National Rural Development Sector Program (PNSR), the estimated loss from PPR outbreaks amounted to about 180 billion CFAF in 2008 and 375 billion CFAF in 2016. To support the “one health approach” the Government revised and enacted in December 2017 its 1980 law on animal and public veterinary health. This revision included new diseases. i.e. avian flu, and incorporated WAEMU directives on animal disease control. Prior Actions and Results Prior Action 8: To improve the provision of vaccination services, the Recipient has implemented an Operational Vaccination Plan 2020 based on the strategy for Small Ruminants Plague (PPR) and set the public health mandate of private veterinarian to facilitate the implementation of the PPR strategy, through: (i) the adoption by the Recipient’s Ministry of Animal and Halieutic Resources the national strategic plan for PPR ; and (ii) the adoption of Council of Ministers decree. Expected results: Indicator 8: Share of small ruminant herd vaccinated against PPR. Baseline (2017): 3 percent. Target (2022): 45 percent 4.32. The DPF helps improve productivity in the livestock sector by strengthening animal health and veterinary services. DPF1 supported the Government’s efforts to finalize and enact needed application decrees for the effective implementation of the Law to make progress in animal and public veterinary health. This operation now supports the implementation of the 2020 operational vaccination plan based on the eradication strategy for PPR and sets the public health mandate of private veterinarians (Prior Action 8). The country features large arid and semi-arid areas of land where pastoral rearing systems are predominant. Livestock density is low in those areas and public veterinary services do not have enough resources to cover the entire territory. In this context, provision of veterinary services by private veterinarians is needed. The DPF will also support the adoption of a mechanism to subsidize PPR vaccination through private veterinarians operating under a legal veterinary public health mandate (Indicative Trigger 7). The policy reforms supported through this DPF series (including quality controls of vaccines, public health mandate of private veterinarians and subsidization of vaccination) complement other assistance from the World Bank29 and other development partners to fully eradicate the PPR. More importantly, these policy measures will contribute to reduce the risk of food security and malnutrition that could result from the COVID-19 crisis. Overall, the percentage of small ruminants vaccinated against PPR is expected to increase from 3 percent in 2017 to 45 percent in 2022. 4.33. An improved public service delivery in the livestock sector supported in this operation is expected to contribute to climate change adaptation and mitigation. Climate change (increasing the occurrence of drought, for example) has a detrimental impact on animal health: livestock is directly impacted through poorer nutrition, weaker general condition and lower resilience. Weakened small 28 Other diseases are the CBPP, the Foot-and-Mouth Disease (FMD), the African Swine Fever (ASF), and the New Castle Disease (NCD) for poultry. 29 For the World Bank, through the regional Sahel pastoralism support project (PRAPS-BF, P147674), livestock sector development support project (PADEL-B, P159476) and the regional disease surveillance systems enhancement (REDISSE) Phase III (P161163). Page 32 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170934) ruminants will be more likely to be infected with animal diseases, always less productive, and possibly die. Also, frequent droughts and flooding due to climate change lead to more frequent herders’ displacements, in search of new pastures. This increases the risks of disease spread like PPR. Immunization against PPR will reduce the spread of the disease and thus limit the impact of climate change on small ruminant production and the livelihoods of households. In addition, healthy animals are thriftier in natural resources (pasture, feed, water) use, leading to climate change mitigation. Pillar 3. Improving Health Service Delivery and Social Spending Efficiency Challenges 4.34. Burkina Faso has deficient health outcomes arising from an under-performing management. Morbidity is high, as well as maternal and infant mortality. Recent reforms such as the subsidization of hospital deliveries have improved the use of health care services. While significant progress has been achieved in reducing maternal mortality30, under-five mortality (at 81.6 per thousand live births in 2015) remained above the SSA average (75.5). Fertility is also very high at 5.4 births per woman compared to 4.8 in SSA in 2016. These outcomes are explained by multiple longstanding issues, including inefficient use of resources, poor governance and drug distribution misallocations and arrears (Annex 8). Further improvements in the health sector will depend on three elements: (1) a more equitable distribution of health personnel throughout the country; (2) availability of medical supplies and other inputs; (3) a financing strategy and mechanisms to ensure access of the poorest to health services. 4.35. Essential inputs for quality healthcare are often not available. The fragmented supply chain system for medicines and medical inputs causes frequent shortages. An evaluation of the national supply chain31 found shortages in essential medicines, limited access to data and low quality of the data used for quantifying needs, liquidity constraints throughout the supply chain, and flaws in product quality control systems. In 2017, 76.232 per cent of health facilities had experienced shortages of essential generic medicines. These supply problems are partly the consequence of a fragmented supply chain that is specific to each site, with various systems using autonomous software and different reporting formats. The current logistics management and information system does not allow efficient planning based on supply and demand. As such, it is a major obstacle to strategic decision-making, planning, control and programming. 4.36. The Government aims at achieving better access to healthcare through free healthcare and insurance schemes. It adopted a Law on Universal Health Insurance (UHC) in 2015 and introduced free healthcare for women in pregnancy and childbirth, precancerous cervical lesions screening and treatment, obstetric fistula care, under five children, and uterine cancer screening and care in 2016. Implementation, however has lagged, as these policies have raised the demand for health care services while public resources for health remain severely scarce. Its initial steps, however, aim to optimize its workforce, making the distribution of personnel consistent with the needs—including those from refugees and 30 Maternal mortality declined to 371 per 100,000 live births in 2015, down from 727 per 100,000 live births in 1990. Averages for SSA over the same period declined from 987 to 547 per 100,000 live births. 31 Evaluation de la Chaîne d'Approvisionnement du Burkina Faso Rapport Final. November 2017 Global Fund. 32 Statistical yearbook. 2017 Ministry of Health. Page 33 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170934) population affected by the corona virus--as well as to improve the availability and distribution channels of essential medicines. 4.37. Under a constrained fiscal context, the Government has already started responding to the COVID-19. In February, the Government with the support of WHO prepared a preparedness and response plan and started disseminating messages about protective behaviors. The plan outlines six specific objectives: (i) build the capacities of stakeholders in the surveillance of entry points, in case investigations, follow-up of contacts, collection of samples, laboratory diagnosis and case management of COVID-19; (ii) promote measures to prevent and control infection in health structures and in the community; (iii) ensuring effective risk communication; (iv) ensure the motivation of the teams; (v) promote research on COVID-19; (vi) strengthen coordination for the preparation and response to an epidemic of COVID-19. A proposed Emergency project, prepared in parallel to this operation, is fully aligned with the Government’s plan. Prior Actions and Results Prior Action 9: To better align the distribution of health personnel with human resource needs of healthcare facilities, the Recipient’s MoH has: (i) completed nominative and geographic staff censuses; and (ii) adopted an arrêté validating the Workload Indicators of Staffing Need (WISN) and instructing their use for the assignment of health workers in health centers and hospitals during the period 2020-2024. Prior Action 10: To ensure timely and adequate availability of essential drugs in health facilities, the Recipient’s MoH has operationalized the national information system for integrated logistics management of the supply chain through: (i) setting up and operationalizing a pilot tracking system for listed essential medications (medicaments traceurs) through the use of smart phones in eight districts; and (ii) adopting an arrêté on payment methods of CAMEG’s invoices by public structures to reduce delays of debt payment to CAMEG. Prior Action 11: To improve the efficiency of health and social services the Recipient’s Ministry of Women, National Solidarity, Family, and Humanitarian Action has defined, jointly with the Ministry of Economy, Finance and Development, the Ministry of Territorial Administration, Decentralization and Social Cohesion and the Ministry of Public Service, Labor and Social Protection, the criteria and mechanisms for identification of indigents through the adoption of an inter-ministerial arrêté . Expected results: Indicator 9: Proportion of rural primary health care facilities that meet minimum WISN standards. Baseline (2018): 21.4 percent. Target (2022): 30 percent. Indicator 10: Proportion of health facilities that experience shortages of listed essential medications (tracer medicines) per year. Baseline (2018): 87 percent. Target (2022): 75 percent. Indicator 11: Proportion of indigent individuals, including eligible internally displaced persons, who have participated in an “en masse intake and registration” mechanism to determine potential eligibility for benefits and services. Baseline (2017): 0 percent. Target (2022): 30 percent. 4.38. The DPF supports the Government’s efforts to address the challenge of suboptimal deployment of healthcare workers. A system for distributing staff based on the WHO’s Workload Indicators of Staffing Need (WISN)33 has been established (Prior Action 9), following a successful pilot in one health district in 33The WISN method is a human resource management tool. It provides a systematic way to make staffing decisions in order to manage human resources well. The WISN method is based on a health worker’s workload, with activity (time) standards applied for each workload component. The method: (i) determines how many health workers of a particular type are required to cope Page 34 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170934) 2017. The WISN methodology provides a tool for managing human resources by (i) assessing the workload of health care providers in the structure and (ii) determining the number of health agents of each category needed for a given health facility, based on the workload. This tool serves as an input for the planned functional review of the MoH. It has been integrated in the annual planning, budgeting and staff distribution of the MoH to help reduce disparities between urban and rural areas, and between different levels of health facilities. This will be complemented by efforts to improve transparency in human resources management in the health sector, through the development of an online platform to inform on health care staffing and needs (Indicative Trigger 8). It will be accessible to decision-makers, HR managers and the public. The target is that by 2022, at least 35 percent of rural primary health care facilities meet the minimum WISN standards. 4.39. Availability of medical supplies is being addressed through two channels: the reduction of debts to the country’s national supplier of pharmaceutical drugs, the Central Unit for Purchasing Essential Generic Medicines and Medical Supplies (Centrale d’achat de médicaments essentiels génériques et des consommables médicaux, CAMEG) and information systems. The first operation supported improvements to the governance of the CAMEG by strengthening management and oversight to ensure financial viability and continued supply of medicines. In this operation, government has focused on the problem of public debts to CAMEG through the development of an action plan and an arrêté on the monitoring and payment of debts (Prior Action 10). The arrêté institutes both quarterly review by the Secretary-General of the ministry and the right for CAMEG to cease supplying those customers who reach two months of arrears (payment delays of one quarter).34 Payments to CAMEG under the action plan totaled over 14 billion FCFA (over US$24 million) in the fourth quarter of 2019 compared to FCFA 21 billion in the first three quarters of 2019 and FCFA 6 billion in the fourth quarter of 2018. This operation supports the piloting of an integrated logistics information and management system that will improve planning by health facilities and districts dispatcher depots (Dépôts Répartiteurs de Districts, DRD), allowing government to better-estimate quantities needed and therefore CAMEG to efficiently plan deliveries and ensure continuous supply availability (Prior Action 10). Already, in 2018, CAMEG’s provision of essential inputs for gratuité increased. In addition, through the Sahel Women’s Empowerment and Demographics (SWEDD) project (P150080), approved in 2014, the Government is piloting a new strategy to improve the performance of the supply chain for reproductive, maternal, newborn, child and adolescent health medicine for the “last mile” in four regions.35 Such pilot exercise has been expanded to support CAMEG direct provision of medicines on the last mile both in the main cities and in areas officially considered at risk, including some fragile, conflict and violence (FCV)-sensitive covered by the Plan d’Urgence Sahel. – The generalization of such pilots countrywide is behind schedule and will only deliver its results at the end of 2020 (Indicative Trigger 9). with the workload of a given health facility; (ii) assesses the workload pressure of the health workers in that facility. “ WISNs”, WHO, 2015. 34 Private suppliers are paid on delivery and this gives CAMEG more latitude to enforce payment to public-sector customers rather than providing them what amounts to interest-free loans. 35 « Amélioration de la performance de la chaine d’approvisionnement des produits jusqu’au dernier kilomètre dans les régions sanitaires des Cascades, du Nord, des Hauts Bassins et du Sahel », Project Document, Projet SWEDD 2016. Page 35 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170934) 4.40. The DPF series will also support the Government’s efforts to expand access to healthcare by promoting efficiency gains in the management of its universal health insurance policy. The first operation supported the operationalization of National Fund for Universal Health Insurance (Caisse Nationale d’Assurance Maladie Universelle, CNAMU). Since budgetary allocations for the free healthcare scheme (“gratuité”) have neither been sufficient nor executed in time in 2018 and 2019, an analysis of lump-sum tariffs was planned but delayed by the labor actions and security constraints. This will be undertaken in 2020 as a part of an integrated approach to health financing (Indicative Trigger 10). The third operation will support the government's plans to adopt a mechanism for the participation of the informal sector in the CNAMU, and to subsidize coverage for the most vulnerable populations , including those tested positive to COVID-19 or confined at home (Indicative Trigger 10). Increasing coverage of the population under CNAMU is expected to increase equity in access through increased financial risk protection, especially of the poor. It is also expected to increase efficiency, as CNAMU will progressively become the strategic purchaser.36 While there have been delays in transferring free healthcare programs to CNAMU and in launching the evaluation of cost-effectiveness of free healthcare schemes, this operation will receive technical assistance under the Health Services Reinforcement Project (P164696). 4.41. The Government has also taken steps towards the adoption of a coherent multi-ministerial approach to identify the indigents. The DPF will support the process of finding, collecting data on, identifying and registering the poorest quintile of the population (‘indigents’) using harmonized criteria and mechanism (Prior Action 11). The recent Social Safety Nets—SSNs--assessment37 shows that social policies poorly cover those in need (the SSN coverage of the first quintile was 2.4 percent in 2014). It also highlighted the multiplicity of targeting methods and eligibility criteria of social programs, which enhances the cost of targeting and creates potential duplication and overlaps between programs. The nascent beneficiaries’ registry38 in Burkina Faso (covering 2 percent of the population in 2018) has the potential to increase social spending efficiency by keeping track of beneficiaries and their program eligibility. A new system that carries out “en masse” intake and registration of uniquely identified indigents (those located in the first quintile of poverty), also including those tested positive to COVID-19 or confined at home, and eligible (poor) internally displaced persons, will be set in place (Indicative Trigger 10). 4.42. DPF3 will also address needs from those directly affected by COVID-19 in at least three areas: (i) free healthcare to all patients who test positive for COVID-19 and use government-approved facilities; (ii) support to confined households thorough an inter-ministerial mechanism to provide food and first necessities to households that are confined as part of the COVID-19 containment measures; and (iii) strengthened human resource crisis allocation mechanisms through the evaluation of human resource needs (per WISIN standard) renewed conditions of staff redeployment. 4.43. On the results framework, some progress has been achieved toward the 2022 targets . As summarized in Table 4.1, out of the 11 result indicators defined at the concept note stage of DPF1, five 36 Setting up an independent purchaser can help improve efficiency by strengthening bargaining power to obtain greater quality and efficiency from providers; see, for instance, the evidence reviewed in the 2010 World Health Report, chapter 4. Costs related to the expansion of universal health insurance will be partly offset by efficiency gains that should come from having a purchaser applying health insurance methods and seeking cost-saving measures that may not be present when the functions of delivery and payment of care are combined. Increased coverage of the poor will, however, entail additional costs for which government intends to seek donor financing. 37 “Vandeninden, Frieda; Grun, Rebekka; Semlali, Amina. 2019. The Way Forward for Social Safety Nets in Burkina Faso. World Bank, Washington, DC. © World Bank. https://openknowledge.worldbank.org/handle/10986/32329 License: CC BY 3.0 IGO 38 Referring to the Management Information System of the Bank-financed Social Safety Net Project. Page 36 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170934) registered progress by end-2019, while five requiring 2019/20 policy actions (property taxes, hectares excluded, cooperatives registered, WISIN coverage and indigents registered under new mechanism) should start improving from 2020 onwards. On the other hand, as initially projected under DPF1, uncontrolled wage bill growth momentum peaked in 2019, reflecting the delayed impact of past wage agreements, but it is projected to decline over 2020-22. Table 4.1. Results indicators Result Indicators Baseline 2017 December Target in (unless indicated) 2019 2022 Indicator 1: Number of taxpaying firms and individuals recorded in 95,515 126,938 150,000 the government’s taxpayer database (October) Indicator 2: Property taxes collected by general government. 0.3% of GDP 0.3% of GDP 0.5% of GDP Indicator 3: Proportion of public investment projects included in the 0% 30.9% 80% approved budget that have a feasibility study validated by the national committee Indicator 4: Annual nominal wage bill growth rate 11.4% 14% 4.5% Indicator 5: Registered exports of artisanal gold mines (in tons) 0.2 (2016) 0.3 2.0 Indicator 6: Hectares of identified and delimited forested areas 206,000 NA 3,037,505 excluded from mining cadaster Indicator 7: Number of cooperatives registered with ANEEMAS that 0 0 20 have adopted natural capital preservation standards Indicator 8: Share of small ruminant herd vaccinated against PPR 3% 9% 45% Indicator 9: Proportion of rural primary health care facilities that meet 21.4% (2018) >21.4% 35% minimum WISN standards Indicator 10: Proportion of health facilities that experience shortages 87% (2018) 86% 75% of listed essential medications per year (tracer medicines) Indicator 11: Proportion of indigent individuals, including eligible 0% 0 30% internally displaced persons, who have participated in an “en masse intake and registration” mechanism to determine potential eligibility for benefits and services. 4.3. LINK TO CPF, OTHER BANK OPERATIONS AND THE WBG STRATEGY 4.44. The proposed operation is well aligned with Burkina Faso’s CPF for FY18-FY23. 39 The CPF draws on the WBG March 2017 SCD for Burkina Faso and feedback from in-country consultations with stakeholders. The CPF aims to support the PNDES goals in areas that are consistent with the WBG’s comparative advantage and three priorities identified in the 2017 SCD. By supporting human capital development, better fiscal management, and natural resources management and productivity, the proposed operation will help the country achieve sustainable growth and shared prosperity. By supporting adaptation to increasing risks of animal disease (through vaccination) and by supporting protection of forests and other environmentally-protected areas in a context of rapidly growing mining activities, the 39 Report No. 123712 – BF. Page 37 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170934) proposed operation will also contribute to the IDA Policy Commitment to “increase the use of development policy operations (DPOs) that support climate co-benefits”. 4.45. The proposed operation is an important complement to other IDA investment financing projects. The DPF is a complement to the Emergency Recurrent Cost Financing Project (P169486) approved in November 2018, which aims at providing immediate support to strengthen the country's resilience and avoid a fragility trap, while contributing to the sustainability of public sector effectiveness through technical assistance 40. The DPF series is also a complement to the on-going portfolio of WBG operations in Burkina Faso. Reforms under Pillar 1 are linked to activities supported by the Economic Governance and Citizen Engagement Project (P155121), approved in February 18, 2016, which seeks to enhance domestic revenue mobilization and improve the use of public resources by strengthening accountability mechanisms, revenue collection systems, and public expenditure management. The ongoing Public Sector Modernization Project (P132216), approved in July 2015, which aims at improving selected service standards in pilot ministries, is linked to civil service reforms supported under pillar 1. Reforms under Pillar 2 of the proposed operation are closely linked to activities supported by three projects. The regional Sahel Pastoralism Support Project for Burkina Faso (P147674) is currently supporting animal health, natural resource management, market access and crisis prevention for transhumant herds. The Burkina Faso livestock sector development support project (P159476; PADEL-B of US$60 million from IDA) which started supporting productivity improvement through improved access to livestock services and inputs, and private investment for value chain development. In the artisanal mining sector, the Sustainable Mineral Development Support Project (P167949) under preparation will also support sustainable growth. Likewise, the Health Services Reinforcement Project (P164696) and the Emergency COVID-19 Preparedness and Response Project (P173858) are linked to Pillar 3, as they aim at increasing the quality and utilization of health services. 4.4. CONSULTATIONS AND COLLABORATION WITH DEVELOPMENT PARTNERS 4.46. The proposed operation is based on reforms included in the PNDES, which benefited from broad stakeholders’ consultations in the country including a consultative group held in December 2016. Further to the wide consultations with the national stakeholders in June 2016 to ensure ownership of the new policy framework, with the support of the WBG, the Government presented the PNDES to the donor’s conference in Paris in December 2016, which resulted in mobilizing roughly US$36 billion for a financing gap of US$11.2 billion. 4.47. The World Bank collaborates with development partners in Burkina Faso, including through sectorial dialogue frameworks. In the context of the implementation of the PNDES, the Government has designed a new monitoring and evaluation (M&E) system consisting of 14 sectorial dialogue frameworks and set up the monitoring unit within the Prime Minister’s office. The World Bank leads the Economic Governance sectorial dialogue in charge of monitoring macroeconomic reforms and budget support programs. The World Bank actively participates in the other sectorial dialogue frameworks, including those related to fiscal management and cadaster, health, education, environment, water and sanitation and safety nets. Together with the United Nations, the AfDB and the EU, the World Bank is currently developing a Prevention and Peace Building Assessment (PPBA) that aims to identify opportunities to 40The project is an IPF with 4 components totaling US$100 million: (i) payment of recurrent costs in crisis-affected regions in 2018 and 2019 (US$74 million); (ii) support to the replenishment of the National Food Security Stock (US$21 million); (iii) targeted technical assistance for enhanced deployment of state resources; and (iv) project management. Page 38 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170934) promote peace and maintain social cohesion in Burkina Faso, while ensuring that increased support from international partners is aligned with an agreed strategy. In designing the proposed operation, the World Bank team has also kept regular consultation with other development partners with ongoing financial or budget support programs, including the IMF, AfDB, EU, French Agency for Development and DANIDA. 5. OTHER DESIGN AND APPRAISAL ISSUES 5.1. POVERTY AND SOCIAL IMPACT 5.1. The proposed operation is expected to have an overall significant beneficial impact on the poor through different channels. However, adverse effects from the global pandemic of the COVID-19 on the world economy may trickle down to Burkina Faso and dampen the Government’s efforts on poverty reduction (see Annex 7). In this regard, some of the priority actions can help contain the negative effects of COVID-19. 5.2. First, broadening the tax base and improving management of public investment would create fiscal space for social and investment expenditure and improve public service delivery. It is increasingly important to create fiscal space especially when the Government is likely to face more budget pressure from uncertainty of Customs and export revenue due to a combination of lower imports, volatility of gold prices and potentially low international cotton prices, and low aggregate demand from Europe and Asia, the two key export destinations of Burkina’s gold and cotton. In addition, promoting the development of small-scale mining while also improving the management of scarce resources of natural capital, together with supporting the delivery of animal health services will benefit two key sources of income for Burkina Faso’s rural population. Finally, improvements in the efficiency of health insurance and social progr ams as well as in the availability of important drugs in all health facilities are expected to benefit the poor across the country. 5.3. Moreover, adopting a valuation system of land and real estate in Ouagadougou might only have a minor negative impact on the poor. Once this system is put in place, about 60 percent of the few poor who have property titles in Ouagadougou might face marginally higher expenses on housing. In addition, as more owners of residential buildings will be paying taxes, and incur a higher tax payment due to proper land and housing valuation, the cost could be passed on to renters. This latter effect should also be small as the share of urban poor renting their dwelling is relatively small, at 6.4 percent. 5.4. The 2020 Budget Law extending the payment of the IUTS to civil servants is expected to have a minor but positive impact on the poor. As seen above, the public sector plays a relatively small role in the employment of the Burkinabe working-age population. Only 1.7 percent of the employed workforce is in the public sector, and out of this number barely 0.15 percent employed is poor, whose low income will benefit or remain unaffected due to the increased allowance threshold. This should be added to the positive indirect impact of the revenue collected by the extension of the IUTS to the public sector, through a broadened tax base and availability of fiscal resources for poverty-reduction programs, whose progressivity could be quantified when data become available. 5.5. While broadening tax base is essential to improve fiscal space, it is equally important to protect sectors that could be affected by COVID-19 outbreak, particularly the mining sector. Prior action on Page 39 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170934) formalization of artisanal miners could potentially protect workers, most of whom are poor, from complete loss of income by providing some benefits such as health and worker compensation. In this regard, the adoption of a new pricing structure for the purchase of gold from artisanal production and a regulatory framework for cooperatives of artisanal miners will no doubt help encourage investment, increase productivity, and raise income for the poor. Given its labor intensity and its role in job creation for the poor, the artisanal mining sector has the potential to have a positive impact on the welfare of rural households.41 Formalization of artisanal mines can also help improve enforcement of health and safety regulations as well as control of environmental damages. Increasing the price received by artisanal miners can also help reduce poverty. In this regard, a cautionary note is that the impact of child labor in artisanal mining on school outcomes are generally significant, but small in Burkina Faso. 42 Mitigation of the adverse social impacts of mining is among the missions of ANEMAAS. Specifically, the ANEEMAS creation decree stipulates that one of its objectives is to contribute to eradicate child labor on artisanal mining sites. Given that ANEEMAS is a relatively new institution, it may not have jet the necessary capacities to fulfill all its missions and achieve this goal. However, this series supports ANEMAAS efforts to improve controls in artisanal mining through formalization and organization of producers, and thereby strengthen its capacity to effectively carry out its social and environmental mandate 5.6. Amelioration of the delivery of animal health services is also expected to benefit the income of herders, many of whom are poor. The adoption and implementation of an operational plan vaccination 2020 and the veterinary public health mandate to implement the Peste des Petits Ruminants (PPR) strategy should reduce the risks of livestock depletion due to diseases. Since livestock is a valuable source of income, rural households should become less vulnerable to such animal health pandemics. 5.7. Improving health delivery service is expected to help mitigate potentially devasting effects of the COVID-19 on the healthcare system. It is difficult for the health system in Burkina Faso, as it is right now, to accommodate a large number of COVID-19-affected people, particularly in rural areas where availability of medicine and healthcare personnel is limited. Moreover, the pandemic will adversely affect the capacity to deliver other essential health services, such as vaccination for children under five and maternal care. The situation in rural areas will be acute. Prior action on increasing the availability of medicine and health workers in rural areas is expected to mitigate these negative effects. In addition, it is important to ease financial burden of healthcare cost on COVID-19 affected people by strengthening free healthcare and insurance scheme. The Government of Burkina Faso (GoBF) has been promoting better access to healthcare by adopting a Law on UHC and to introduce free healthcare for children under five and pregnant women. The optimal redeployment of education and health professionals, the latest applying recently adopted WISN new standards for the allocation of newly hired or reintegrated health workers, is expected to transfer excess personnel mainly based in Ouagadougou, to remote locations where most of the poor reside and human capital ratios feature worst ratings. The information developed to support WISN implementation will also serve to support the COVID-19 response through staff requisitions/reallocations. Furthermore, the operation of the integrated logistics management information of the supply chain for medication together with the adoption of targeting criteria for health insurance and social protection care are expected to enhance efficiency in the distribution of essential 41 Results are based on Bazillier and Girard (2018). “The Gold Digger and the Machine. Evidence on the Distributive Effect of the Artisanal and Industrial Gold Rushes in Burkina Faso.” 42 Stoeffler and Guirkinger (2019). “Artisanal Gold Mining, Child Labor and Education in Burkina Faso: Between Myth(s) and Reality”. Page 40 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170934) drugs and in the management of targeted social programs whose beneficiaries are likely to be the poorest. The expansion in coverage, at least temporarily, of demographic groups that are vulnerable to COVID-19 such as elderly aged 65 and above will also increase the effectiveness of the response to the crisis. 5.8. The DPF series is not directly focused on the promotion of gender equality, but it will provide indirect benefits to the extent it contributes to raising access to and the quality of education and health care, as well as to female participation in livestock production. The reforms supported in the education and health sectors should help improve the quality of their service delivery, including primary education, which features a majority of female teachers and maternal health care services. Availability of trained education and healthcare professionals and availability of essential medicines are indeed key inputs for improving gender to quality-services, and gender social outcomes. Furthermore, actions in the livestock sector could also have indirect benefits for gender equality. Small ruminants, poultry and milk production are mainly operated by women in Burkina Faso’s livestock production systems. Female producers will thus benefit from the promotion of good-quality livestock health and production services. This is expected to enhance production and improve household nutrition. It should therefore help strengthen the livelihoods of female producers, improve their revenue and increase their resilience to external shocks 43. 5.2. ENVIRONMENTAL ASPECTS 5.9. The reforms and policy actions supported by the proposed operation are not likely to have significant risks and negative effects on the country’s environment, forests and other natural resources, and some may have positive effects. As per policy, the World Bank assessed whether specific country policies supported by the DPF series are likely to cause significant positive effects on the country’s environment, forests, and other natural resources. The assessment concluded that the policies supported by the proposed DPF are not likely to have risks and negative impacts on the country’s natural assets. All the actions supported throughout the operation are policy-oriented; they do not support direct investment in environmentally impactful investments or involve policy actions with significant environmental risks and consequences. The institutional framework relating to the environment is underpinned by the Constitution promulgated on June 11, 1991 and its amendments. This institutional framework for environmental governance revolves around three main actors: (i) the State and its subdivisions, especially the Ministry of Environment, Green Economy and Climate Change as well as other ministerial departments and administrative divisions (provinces, departments, communes and villages); (ii) local communities including the internally displaced persons; (iii) the private sector and )iv) the civil society. Burkina Faso has a legal and regulatory framework governing the preparation of Environmental Impact Assessments (EIA)44, Environmental and Social Impact Assessments (ESIA) and Strategic Environmental and Social Assessments (SESA). 43 Complementary livestock health activities under the Bank’s investment operations in the sector (PRAPS and PADEL -B) will benefit women. PADEL-B is expected to benefit 300 000 producers of whom 30 percent (90 000) will be women, PRAPS-BF to 200 000 pastoralists of whom 30 percent (60 000) of women. 44 Decree 2001-342/PRES/PM/MEE of July 17, 2001 defines the scope, content, and procedures for undertaking EIA. This decree was improved upon by Law No 006-2013/AN of March 2, 2013 on the environment code in Burkina Faso, in particular its articles 5 sub-paragraphs 4 and 17 to 23, outlining the procedures for an ESIA and the importance of public consultations. Finally, the decree No 2015-1187 provides conditions and procedures for the preparation of SESA. The decree clarifies and classify civil works, installations, and activities that could be a subject of a SESA or ESIA including the three-tier classification of A, B, and C depending on the severity and magnitude of impacts. Page 41 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170934) 5.10. The assessment of potential risks and negative environmental impacts related to actions supported by the DPF relies on the existing national legal and regulatory framework and will be monitored and addressed through national procedures. If gaps exist, the ESF will serve as main instrument to supply theses gaps and lack of capacity. The national environmental protection agency (Bureau National des Evaluations Environnementales, BUNEE), is institutionally empowered to review and clear environmental assessment instruments such as EIA; ESIAs; Environmental Audits; and SESA. BUNEE is tasked with reviewing and approving environmental assessments instruments and ensuring the monitoring, evaluation and implementation of mitigating and compensation measures. Key challenges are enforcement and the weakness of the legal framework for management of environmental issues, although the SESA decree of 2015 addressed some of these weaknesses45. Through World Bank and other financial/donor agencies, progress has been made in enhancing both monitoring and enforcement functions. In addition, staff of BUNEE have benefited from several World Bank safeguards trainings for Project Implemention Units (PIUs). Eventually, vaccination services may result in hazardous medical waste (syringes, cannulas, vaccine containers) with a direct impact on the environment and humans if not properly managed. This is also relevant to medical waste associated with COVID-19 treatments. While national regulations and capacities pertinent to the environmentally safe management of medical waste will prevail, this risk will also be mitigated by the Emergency Health IPF. 5.11. Prior actions designed to improve the sustainability of natural resources management are significantly positive for the environment. The reform program will have significant positive effects by improving the institutions for controlling environmental degradation in artisanal mines46, discouraging the expansion of mines onto protected areas (impacting biodiversity), and promoting environmentally- friendly available technologies and proven practices. Also, the requirement to conduct feasibility studies for public investments should allow better assessment of environmental risks and potential negative impacts. The new regulatory framework for improving the process for public investment projects appraisal includes provisions on the conditions and procedures for the assessment of social and environmental risks and impacts (negative, positive) of public investment projects in Burkina Faso, including new issues like security, safety and road security. 5.12. While actions to improve livestock health are expected to have climate change adaptation benefits, resulting increases in livestock herds could also have mixed impacts by leading to additional pressures on natural resources. It should be recognized that due to poor data, Burkina Faso has very limited quantitative assessments of livestock-related impacts in terms of water, land/soil, biodiversity and GHG emissions, undertaken at the landscape scale.The impact of the livestock sector on the degradation of natural resources has been documented in the National Policy for Sustainable Livestock Development and the Green Economy Scoping Study prepared under the scope of United Nations Environment Program’s Green Economy Initiative, which was launched in 2008. The policy and the study pointed out 45 In addition, there are challenges in terms of qualified staff, vehicles for field visits and sometimes funds to pre-finance field missions or laboratory analysis to confirm some facts. 46 The reforms supported in the DPF do not specifically address the rehabilitation of mined land. The rehabilitation of mined land is provided for under Burkina Faso’s legislation. However, land is regularly abandoned, and rehabilitation remains a serious concern. This operation supports formalization and better control of artisanal mines through ANEEMAS. The mandate of this agency includes the mitigation of environmental problems associated with artisanal mines with chemicals use, lands and forests degradation. The authorities are taking steps to make operational a Fund for rehabilitating mining sites. The Fund will be constituted with mining royalties and other related taxes, and a levy on all permits granted to certain artisanal miners (“exploitants miniers artisanaux”). Page 42 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170934) the need to find a balance between the farming system and natural resources with a view to sustainable development. Promotion of ranching and the development of Animal Production Intensification Zones have been proposed as adaptation/mitigation measures. Furthermore, two IPF operations in the sector (PRAPS (P147674) and PADEL-B (P159476)) promote, in line with the Burkina Faso Nationally Determined Contribution (NDC), natural resources management. This includes investments in pastoral-hydraulics and good practices in animal production (intensification supported by health and feed quality improvements in particular) to reduce impacts on the environment. Burkina Faso is also part of the Global Agenda for Sustainable Livestock (GASL), which promotes engagement in stakeholders’ policy dialogue, production of tools, sharing of experiences, and agreed on action. It recognizes the multiple social, economic, and environmental dimensions, their contributions, synergies and trade-offs, and advocates an integrated perspective to problem-solving. 5.3. PFM, DISBURSEMENT AND AUDITING ASPECTS 5.13. The Government has adopted a public financial management (PFM) reform strategy to address PFM challenges highlighted in recent PFM assessments. Based on the 2017 Public Expenditure and Financial Assessment (PEFA), which highlighted significant progress made in the areas of comprehensiveness and transparency of budgets, policy-based budgeting has been implemented. This involves the introduction of multi-year programmatic budgets for all sectoral ministries, as well as compliance with good practices in budget preparation, approval, and amendment procedures. In addition, some key PFM reforms i.e. transition to accrual accounting and implementation of the single treasury account are in progress. However, the assessment identified a few areas for improvement, particularly in strengthening effectiveness in collection of tax payment, monitoring of arrears, budget comprehensiveness , procurement, internal controls and external audits. Unpredictable revenue inflows mean that Burkina at times use the availability of cash as the de facto mechanism for trying to keep expenditure within set limits, with budget execution managed through “cash rationing”. Spending may be limited by reducing the amounts that ministries are authorized to spend below the amounts set in the budget law. 5.14. The Economic Governance and Citizen Engagement Project (P155121) which became effective in October 2016 supports implementation of the PFM reforms and assists the GoBF in improving core areas of economic governance and citizen engagement, including (a) developing mechanisms for social accountability, transparency, and access to information on the management of public funds, including strengthening capacities of audit institutions, the judiciary, and civil society to fight fraud and corruption; (b) increasing fiscal space through the modernization of tax and customs systems and the improvement of revenue collection capacities; and (c) strengthening public expenditure management, including the procurement system efficiency and predictability and control in budget execution. Overall, the World Bank has assessed implementation performance of the PFM reform program to date and Government’s commitment to its improvement as satisfactory. 5.15. The design and scope of this operation exploits important synergies with both the Government program and other donor activities, to improve the overall financial management system. While the IMF’s program supports the authorities’ efforts with respect to fiscal consolidation and debt and cash management, the World Bank’s Economic Governance and Citizen Engagement project is supporting the upgrade of information systems for budgeting and core treasury operations as well as interfacing with core systems including revenue management systems. The EU and Switzerland are also supporting the Page 43 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170934) institutional development of the authorities notably through enhancement to SINTAX, support to improve controls and training. Overall, the Multi-donor Budget Support Group provides technical support including for the elaboration of strategic plans and the production of statistics to inform public policies. 5.16. The Government is aligning its PFM systems with current WAEMU directives. Overall, the legislative and institutional framework for PFM as well as for governance and anti-corruption in place in Burkina Faso are generally considered acceptable. The Government has adopted the WAEMU Transparency Code and is aligning its national legislation with WAEMU’s six new PFM directives. The National Transitional Committee (Conseil National de Transition, CNT – Parliament) enacted the directive on the Finance Act (Loi organique relative aux lois de finances – LOLF) in November 2015. The operationalization of the WAEMU directives transposed into Burkina Faso national laws, such as the budget program and the new procurement code, is on-going despite some challenges. Alignment with the directives will ensure convergence of the system with international standards of public finance. Expected outcomes of this comprehensive reform include realistic and sustainable budget forecasts; overall spending amounts determined on the basis of a multi-year budget and economic planning; resources allocated more logically in order to achieve objectives; and better accountability from main authorizing officers (ministers and presidents of institutions). 5.17. The IMF carried out an updated safeguards’ assessment of the BCEAO in 2018 and found that progress has been made in strengthening the BCEAO’s safeguards framework since the last assessment in 2013. The central bank retains a strong control system, and all recommendations from the assessment have been implemented. The audit procedures are globally compliant with international standards and the financial statements are prepared in accordance with International Financial Reporting Standards (IFRS). The Central Bank has recently enhanced the oversight role of its audit committee as recommended by the 2013 assessment. The FY18 external audit was performed by an external audit firm with International Standards of Auditing (ISA) experience. The external auditor issued a clean opinion on FY18 financial statements. The central bank annual financial statements and external audit reports are publicly available on its external website. The flow-of-funds arrangements between the BCEAO and Burkina Faso’s Treasury have been reviewed based on an annual audit funded by the Multi-donor Budget Support Group (Cadre Général d’organisation des Appuis Budgétaires, CGAB). 5.18. Fiduciary risk: Overall, the fiduciary risk of the proposed second operation is rated “moderate”. This rating is based on the current status of the PFM system and improvements observed in the central bank’s safeguard framework, accounting systems and auditing arrangements. The Government has made progress in strengthening multiple aspects of public financial and budgetary management since the 2017 PEFA assessment, and its continuing efforts are supported by most of the donors in CGAB. Regarding budget transparency, annual budgets, quarterly budget execution reports, and mid-year budget reviews, are made available online at www.dgb.gov.bf. 5.19. The proposed second operation would consist of a single-tranche IDA credit of EUR 67.60 million (US$73.975 million equivalent) and IDA grant of SDR 54.30 million (US$73.975 million equivalent) to be made available upon effectiveness and disbursed based on a withdrawal application. The Recipient is the GoBF, represented by the Ministry of Economy, Finance and Development (Ministère de l’Economie, des Finances et du Développement, MEFD). The credit will follow IDA’s disbursement procedures for DPF Page 44 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170934) and would not be linked to specific expenditures.47 The resources will be disbursed against satisfactory implementation of the development policy program and maintenance of a satisfactory macroeconomic framework. 5.20. Proceeds of the IDA credit and grant. Once the financing agreement becomes effective, and upon receipt of a withdrawal application, and provided IDA is satisfied with the program being carried out by the Government and with the appropriateness of the country’s macroeconomic policy framework, the proceeds of the grant will be deposited by IDA into an account dedicated by the GoBF at the BCEAO, where they will form part of the country’s official foreign exchange reserves48. The Government will credit the local currency equivalent in its budget using the prevailing exchange rate. As a due diligence measure, IDA will obtain confirmation from the Government that: (i) the sum of the proceeds was received into an account of the government that is part of the country’s official foreign exchange reserves (including the date and the name/number of the government’s bank account in which the amount has been deposited); and (ii) an equivalent amount has been accounted for in the country’s budget management system (including the Chart of Accounts name/account number, the date of transfer, and the exchange rate used). Confirmation will be expected within 30 days of disbursement. If, after being deposited in this account, the proceeds are used for excluded expenditures as defined in the Financing Agreement, IDA will require the Recipient to refund directly to IDA an amount equal to the amount of the ineligible payment promptly upon notice. Amounts refunded to the World Bank upon such a request will be canceled. The Word Bank reserves the right to seek an audit of the dedicated account by an independent auditor acceptable to The World Bank. 5.21. The closing date for the operation is June 30, 2021. 5.4. MONITORING, EVALUATION AND ACCOUNTABILITY 5.22. Strengthening M&E is critical for the successful implementation of the PNDES objectives as well as for this DPF series. The MEFD is the designated implementing agency and has the responsibility for monitoring the overall execution of the measures outlined in the DPF series. MEFD has experience in coordinating and implementing DPF operations. Day-to-day monitoring of the program will be the responsibility of the Directorate in charge of Cooperation (Direction Générale de la Coopération, DGCOOP) within the MEFD. 5.23. The MEFD will be responsible for coordinating and reporting to the World Bank on progress for the proposed operation. The World Bank multi-sectoral team will undertake supervision missions and provide technical assistance where needed. The institutional arrangements for the preparation and execution of this operation are within the established framework of the M&E mechanism under the PNDES performance matrix. Recently, the dialogue on the PNDES has been escalated to the Prime Ministry through a unit of coordination covering the fourteen sectorial dialogue frameworks. This operation is incorporated into the ongoing policy reform dialogue, including regular discussions with the IMF and other 47 The credit will be financed under standard IDA terms, with a 38-year maturity and a six-year grace period. 48 The use of a dedicated account is a common feature of budget support operations in WAEMU member states and mitigates fiduciary risk. Overall the World Bank has assessed implementation performance of the public financial management reform program to date and Government’s commitment to its improvement as moderately satisfactory. The fiduciary risk associated with the proposed operation is rated as moderate. This rating is based on the status of the PFM system and the central bank’s internal control framework, accounting systems and auditing arrangements . The BCEAO publishes a full set of audited financial statements, and improvements have been made to move financial reporting closer to IFRS. The external auditors have issued an unqualified opinion (clear opinion) on the 2017 financial statements of BCEAO. Page 45 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170934) development partners. PFM and tax reforms will be implemented by the respective technical units in the MEFD and the General Directorate of Taxes (Direction Générale des Impôts, DGI), with overall coordination provided by DGCOOP. Sectoral ministries will furnish relevant information and documentation on the status of their respective reforms to the DGCOOP, which will monitor progress against program objectives. Monitoring of achievements under the DPF will also benefit from leveraging the M&E systems in place for ongoing technical assistance and investment operations in tax administration and public-sector management, mining, livestock development, and health service delivery (see section 4.3 above for a list of the related World Bank projects). 5.24. The results matrix that tracks the three operations in the series has concrete indicators and empirical benchmarks to monitor progress and facilitate ex-post evaluation following the end of the program in June 2022. The World Bank is currently supporting Burkina Faso and other WAEMU countries to harmonize poverty assessment methods, which will help monitor this DPF series results framework. 5.25. Grievance Redress. Communities and individuals who believe that they are adversely affected by specific country policies supported as prior actions or tranche release conditions under a World Bank DPO may submit complaints to the responsible country authorities, appropriate local/national grievance redress mechanisms, or the WB’s Grievance Redress Service (GRS). The GRS ensures that complaints received are promptly reviewed in order to address pertinent concerns. Affected communities and individuals may submit their complaint to the WB’s independent Inspection Panel which determines whether harm occurred, or could occur, as a result of WB non-compliance with its policies and procedures. Complaints may be submitted at any time after concerns have been brought directly to the World Bank's attention, and Bank Management has been given an opportunity to respond. For information on how to submit complaints to the World Bank’s corporate Grievance Redress Service (GRS), please visit http://www.worldbank.org/GRS. For information on how to submit complaints to the World Bank Inspection Panel, please visit www.inspectionpanel.org. 6. SUMMARY OF RISKS AND MITIGATION 6.1 The overall risk rating for the proposed operation is substantial. High macroeconomic and political and governance risks and substantial institutional capacity and environmental and social risks could adversely impact the PDO and justify the overall substantial risk rating. Furthermore, the COVID-19 crisis will weigh on these risks because it could induce a longer than expected disruption of economic activity, higher than budgeted public spending, and limited effectiveness than required from public administration interventions. Despite the overall substantial risk rating, World Bank team believes that the potential benefits of the proposed operation outweight the risks involved and warrant IDA’s assistance to the implementation of critical reforms and policy actions contained in the document, in coordination with other donors, along with appropriate risk mitigation actions. The risk ratings in Table 6.1 follow the four-point rating scale from low (L), to moderate (M), substantial (S), and high (H). 6.2 Political and governance risks (H): As Burkina Faso continues its political transition announcing Presidential and Legislative elections in November 2020, security threats have heightened with the recent terrorist attacks that struck the capital Ouagadougou and the northern and eastern parts of the country. Security risks could directly affect the attainment of some results in this program, notably the improved control, formalization, and sustainable expansion of artisanal gold mining, the vaccination of small Page 46 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170934) ruminants, the implementation of an integrated national system for managing the COVID-19 crisis, slowing down the distribution of pharmaceutical drugs and equipment, and the deployment of health care personnel to rural areas in greater numbers. Also, to a lower extent, recurrent strikes in the civil service before COVID-19 were affecting the government’s willingness and ability to implement reforms and social tensions remained high. The proposed operation will contribute to monitoring the above issues and address them in close collaboration with the IMF through its focus on fiscal and health sector management reform. In addition, the Emergency COVID-19 Preparedness and Response Project (P173858), complementary to other Bank’s and development partners’ interventions in humanitarian, fiduciary and local governance needs are expected to help the government carry on a well coordinated response ensuring an effective delivery of targeted essential services, while strengthening public sector capacity in those risky sectors and regions of the country (see section 4.45 for a list of Bank-related projects). 6.3 Macroeconomic risks (H): External and domestic shocks and policy slippages constitute a high source of risks. Shocks and election-prone outlays could divert resources away from priority needs and reduce the government’s efforts and ability to sustainably implement the planned fiscal adjustment. It could also reduce resources for improving public service delivery. The country is vulnerable to external shocks which could threaten the attainment of tax collection objectives. A larger than expected decline in cotton ,and eventually gold, prices, a larger than expected increase in oil imports and high oil prices, as well as higher security, humanitarian and corona virus-related expenses with rising flows of internally displaced population may put further pressure on Burkina Faso’s macroeconomic framework. This would translate into a further slowdown in growth, reduced fiscal revenues, larger outlays and larger fiscal and current account deficits. The operation is designed to help mitigate fiscal risks by supporting measures designed to improve tax collection and make public spending more efficient. Prudent fiscal management would lessen the effects of those shocks. 6.4 Institutional capacity for implementation and sustainability (S ): Lack of capacity at the Ministries of Health, Mining, Animal and Halieutic Resources, and at the MEFD may delay the implementation of some measures supported by this- operation, including improvements in investment policies, in human resources management and in tax administration. On the health front in particular, given the poor quality of health services and the risk of a bigger than expected spread, the country may incur into substantive exceptional health outlays, which will require emergency actions to respond quickly to local needs and reprioritize outlays to accommodate added health spending and donor grants. As mitigation, the World Bank is working to articulate with most donors an emergency response. Overall, the proposed WBG response to COVID-19 will include emergency financing, policy advice, and technical assistance. World Bank-supported investment project financing operations will also help to mitigate this risk. And regarding the MEFD, the World Bank in collaboration with the IMF, the ADB as well as the EU will continue to provide technical assistance to support the strengthening of the Recipient’s capacity in the area of tax administration and fiscal management, public sector reform, health systems strengthening, land administration, mining development and water resources management (see section 4.45 for a list of World Bank-related projects). 6.5 Environmental and social risks (S): Climatic shocks could reduce economic activity, jeopardize domestic revenue mobilization and narrow fiscal space. Climate shocks represent a serious threat to the agriculture sector, both food crops and cotton production, and consequently to rural livelihoods and food security. COVID-19 may aggravate food insecurity. As a landlocked country in an environmentally Page 47 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170934) vulnerable Sahel region, Burkina Faso suffers from an extremely variable climate, with the possibility of both flooding and drought occurring within a few months of each other. Weather-related shocks may affect the pace of reform implementation. The realization of such kind of shocks could reduce the fiscal space and efforts to contain current expenditures. While IDA’s mining sector support project is strengthening capacity to assess, mitigate, manage and monitor environmental and social risks associated with investments in the mining sector, IDA’s Agricultural Resilience and Emergency projects are mitigating food insecurity. Table 6.1: Summary Risk Ratings Risk Categories Rating 1. Political and Governance ⚫ High 2. Macroeconomic ⚫ High 3. Sector Strategies and Policies ⚫ Moderate 4. Technical Design of Project or Program ⚫ Moderate 5. Institutional Capacity for Implementation and Sustainability ⚫ Substantial 6. Fiduciary ⚫ Moderate 7. Environment and Social ⚫ Substantial 8. Stakeholders ⚫ Moderate 9. Other Overall ⚫ Substantial . Page 48 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170 ANNEX 1: POLICY AND RESULTS MATRIX DPF1 – Prior Actions DPF2 – Prior Actions DPF3 – Indicative Triggers Result indicators I. Strengthening Fiscal Management Prior Action 1. To improve tax administration and Prior Action 1. To improve tax Trigger 1. To broaden the tax base Indicator 1: Number of reduce transaction costs, the Recipient’s Ministry of administration and reduce transaction and facilitate tax payment, the taxpaying firms and Economy, Finance and Development has: (i) audited costs, the Recipient’s Ministry of Recipient’s Ministry of Economy, individuals recorded in the electronic taxpayer identification system; (ii) Economy, Finance and Development has Finance and Development has: (i) the government’s simplified registration and monitoring of taxpayers made e-payment of all taxes for large simplified the taxation of micro- taxpayer database. through the unique tax identification number; and firms, and e-filling for medium-sized enterprises; and (ii) made e-payment Baseline (2017): (iii) implemented a new electronic platform that enterprises mandatory through the of all taxes mandatory for medium- 95,515 allows online filing and payments of taxes. adoption of the 2020 Budget Law. sized enterprises in the 2021 Budget Target Law. (2022): 150,000 Prior Action 2. To increase the collection of property Prior Action 2. To broaden the property Trigger 2. To increase the collection of Indicator 2: Property taxes, the Recipient’s Ministry of Economy, Finance tax base, the Recipient’ Ministry of property taxes and strengthen own- taxes collected by and Development has established and made Economy, Finance and Development has source revenue mobilization at the general government. operational an urban registry of the primary holders strengthened the regulatory and local level, the Recipient has: (i) Baseline (2017): 0.3% of land plots in Ouagadougou and Bobo-Dioulasso. institutional framework of the cadaster reformed the administration of of GDP to increase the collection of property property taxes; and (ii) created and Target (2022): 0.5% of taxes through the adoption by the made operational new local cadaster GDP Recipient’s Ministry of Economy, Finance services in Ouagadougou and Bobo- and Development of an arrêté Dioulasso. establishing a modality to determine the value of land and housing property in Ouagadougou. Prior Action 3. To strengthen public investment Prior Action 3. To improve public Trigger 3. To strengthen the Indicator 3: management, the Recipient’s Ministry of Economy, investment management, the Recipient management of PPP projects, the Proportion of public Finance and Development has adopted: (i) through has improved the assessment of risks, Recipient has adopted a new Law on investment projects decree n° 2018-0092/PRES/MINEFID dated February including climate change risk and other PPPs, consistent with the WAEMU included in the 15, 2018, a regulatory framework for preparation, risks for the selection, preparation and Directive. approved budget that selection and implementation of public investment implementation of public investment have a feasibility study projects; and (ii) by decision of its council of minister projects, including public private validated by the inter- on January 9, 2019 a guide to project readiness partnerships through: (i) the adoption in ministerial committee. Page 49 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170 assessments and appraisal. the Budget Law 2020 of an analysis of Baseline (2017) : 0% risks related to identified priority Target (2022) : 80% projects; and (ii) the adoption of the Ministry of Economy, Finance and Development of arrêté establishing a national committee to validate investment project appraisal documents. Prior Action 4. To improve the management of the Prior Action 4. To improve the Trigger 4. To improve human Indicator 4: Annual public wage bill, a national consultation convened by management and control of the public resource management in the public nominal wage bill the Recipient from June 12 to June 14, 2018 and wage bill, the Recipient has: (i) improved sector the Recipient has: (i) growth rate. including representatives of the Recipient's the transparency and rationalized the submitted to Parliament a Civil Baseline (2017): 11.4% government has adopted a plan that identifies key motivation of the Ministry of Economy, Service Organic Law (Loi Organique Target (2022): 4.5% directions to reform the compensation system for Finance, and Development staff’s portant principes fondamentaux de la civil servants. bonuses through the adoption by the fonction publique) and adopted Recipient’s Council of Ministers of a related decrees that harmonize pay decree and the adoption by the scales and reduce indemnities Recipient’s Ministry of Economy, (indemnités); and (ii) continued to Finance, and Development of an arrêté; implement reforms to strengthen (ii) imposed taxes on bonuses and systems for an optimal civil servant allowances of public servants by the redeployment. enactment of the Budget Law 2020; and (iii) completed a nominative and geographic staff censuses within the Ministry of National Education, Literacy and Promotion of National Languages and carried out its staff assignments for service needs through the adoption by the Recipient’s Ministry of National Education, Literacy and Promotion of National Languages of a general report of the assignments of its personnel. Page 50 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170 II. Improving Natural Resource Management and Raising Mining and Livestock Productivity Prior Action 5. To encourage sustainable Prior Action 5. To encourage the Indicator 5: development of the artisanal mining sector and to development of the artisanal mining Registered exports of contain associated environmental damages, the sector, the Recipient’s National Agency artisanal gold mines Recipient has adopted decrees N°2017- for the Supervision of Artisanal and Semi- (in tons). 0023/PRES/PM/MEMC/MINEFID, N°2018-0249 Mechanized Mining has adopted and Baseline (2016): 0.2 PRES/PM/MMC/MINEFID/MCIA, N°2018-0969 implemented a pricing policy for Target (2022): 2.0 PRES/PM/MMC/MINEFID/MCIA, N°2018-0970 artisanal gold mining through the PRES/PM/MMC/MINEFID and N°2018-1017 adoption of a deliberation. PRES/PM/MMC/MINEFID/MIEEVCC/MCIA/MATD/M SECU/MFPTPS respectively dated January 23, 2017, March 29, 2018, October 24, 2018, November 16, 2018 which decrees: (i) encouraged exports through official channels by reducing taxes on the exports of the artisanal mining sector; and (ii) restricted artisanal mining activities in areas including natural preservation areas. Prior Action 6: To reduce deforestation, Trigger 5. To reduce deforestation, Indicator 6: Hectares the Recipient has regulated the the Recipient has (i) registered two of identified and determination of forest zones and pilot forests to be excluded from the delimited classified wildlife areas as protected from any mining cadaster; and (ii) promoted a forested areas clearing and mining activities and shared management of pilot forests, excluded from mining implemented such protection to 17 also including local communities. cadaster. classified forests through: (i) the Baseline (2017): adoption by the Ministry of 206,000 Environment, Green Economy and Target (2022): Climate Change of an arrêté; and (ii) the 3,037,505 adoption by the Ministry of Environment, Green Economy and Climate Change Regional Directorates of 17 minutes (procès-verbaux) providing the delimitation of 17 classified forests. Page 51 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170 Prior Action 6. To encourage formalization and Prior Action 7. To improve the Trigger 6. To reduce environmental Indicator 7: improve management and control of artisanal management of scarce natural capital in risks and degradation, the Recipient Number of mines, the Recipient has adopted decrees N°2018- artisanal mining areas (forests, water has promoted the use of improved cooperatives 0967/PRES/MMC/MSECU/MDNA/MJDHPC/MINEFI and land), the Recipient has regulated gold extraction technologies (without registered with D/MCIA/MEEVCC andN°2018- the management of gold mining sites by mercury) by cooperatives of artisanal ANEEMAS that have 0968/PRES/MINEFID/MSECU/MCIA/MJDHPC/MDN cooperatives of artisanal miners through miners. adopted natural AC/MEEVCC both dated October 24, 2018 and the adoption of deilebarations on (i) capital preservation decree N°2018-1017 enacting a standard model of standards. PRES/PM/MMC/MINEFID/MIEEVCC/MCIA/MATD/M specification for site management by Baseline (2017): 0 SECU/MFPTPS dated November 16, 2018: (i) artisanal mining cooperatives; and (ii) Target (2022): 20 simplified procedures for registration of artisanal enacting the standard convention for the miners; (ii) strengthened the national anti-fraud management of artisanal mining site. brigade (BNAF). Prior Action 7. To improve delivery of animal health Prior Action 8. To improve the provision Trigger 7. To increase animal Indicator 8: services, the Recipient has adopted through its of vaccination services, the Recipient has vaccination rates, the Recipient has Share of small council of ministers decrees N°2018- implemented an Operational adopted a mechanism to subsidize ruminant herd 0729/PRES/PM/MRAH/MS/MATD/MSECU/MCIA, Vaccination Plan 2020 based on the PPR vaccination through veterinary vaccinated against N°2018- strategy for Small Ruminants Plague services, including private PPR. 0730/PRES/PM/MRAH/MINEFID/MATD/MSECU/MC (PPR) and set the public health mandate veterinaries under their veterinary Baseline (2017): 3% IA, 2018 and N°2018- of private veterinarian to facilitate the public health mandate. Target (2022): 45% 0731/PRES/PM/MRAH/MS/MATD/MSECU/MCIA, all implementation of the PPR strategy, dated August 9, 2018 to respectively strengthen: (i) through: (i) the adoption by the the quality controls for import and distribution of Recipient’s Ministry of Animal and veterinary pharmaceutical products; (ii) the Halieutic Resources the national regulatory framework for its animal health policy to strategic plan for PPR; and (ii) the better contain animal pandemics; and (iii) veterinary adoption of the Council of Ministers public health rules and inspections to reduce the risk decree. of disease transmission between humans and animals. III. Improving Health Service Delivery and Social Spending Efficiency Prior Action 9. To better align the Trigger 8. To better align the Indicator 9: distribution of health personnel with distribution of health personnel with Proportion of rural Page 52 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170 human resource needs of healthcare human resource needs of healthcare primary health care facilities, the Recipient’s Ministry of facilities, the Recipient’s Ministry of facilities that meet Health has: (i) completed nominative Health has established an open online minimum WISN and geographic staff censuses; and (ii) platform to ensure greater standards. adopted an arrêté validating the transparency in the human resources Baseline (2018): 21.4% Workload Indicators of Staffing Need management, and consistent with the Target (2022): 35% (WISN) and instructing their use for the optimization of budgetary resources assignment of health workers in health of the public health system. centers and hospitals during the period 2020-2024. Prior Action 8. To ensure timely and adequate Prior Action 10. To ensure timely and Trigger 9. To improve the distribution Indicator 10: availability of essential drugs in health facilities, the adequate availability of essential drugs in of medicines to the last-mile, the Proportion of health institutional and financial controls at the health facilities, the Recipient’s Ministry Recipient’s Ministry of Health has facilities that organization for purchasing generic medicines of Health has operationalized the generalized the use of new experience shortages (CAMEG) have been strengthened through the national information system for distribution systems. of listed essential creation of new articles of association and bylaws on integrated logistics management of the medications (tracer April 11, 2018 that create a general assembly and an supply chain through: (i) setting up and medicines) per year. audit committee. operationalizing a pilot tracking system Baseline (2018): 87% for listed essential medications Target (2022): 75% (medicaments traceurs) through the use of smart phones in eight districts; and (ii) adopting an arrêté on payment methods of CAMEG’s invoices by public structures to reduce delays of debt payment to CAMEG. Prior Action 9. To efficiently expand national health Prior Action 11. To improve the Trigger 10. To improve the efficiency Indicator 11: insurance coverage, the Recipient has established efficiency of health and social services, of health and social services the Proportion of indigent through decree N°2018- the Recipient’s Ministry of Women, Recipient has adopted (i) a new individuals, including 0265/PRES/PM/MINEFID/MFPTS dated April 9, 2018 National Solidarity, Family, and harmonized tariff system; (ii) a system eligible internally and made operational through decrees N°2018- Humanitarian Action has defined, jointly that carries out “en masse intake and displaced persons, 331/PRES/PM/MFPTPS/MINEFID dated April 24, with the Ministry of Economy, Finance registration” of uniquely identified who have participated 2018 and N°2018-0724/PRES/PM/MFTPS dated and Development, the Ministry of indigents; and (iii) subsidy in an “en masse intake Page 53 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170 August 7, 2018 the national fund for universal health Territorial Administration, mechanisms to cover the needs of and registration” insurance (CNAMU). Decentralization and Social Cohesion and most vulnerable populations, mechanism to the Ministry of Public Service, Labor and including those tested positive to determine potential Social Protection, the criteria and COVID-19 or confined at home, and eligibility for benefits mechanisms for identification of eligible internally displaced persons. and services. indigents through the adoption of an Baseline (2017): 0% inter-ministerial arrêté. Target (2022): 30% Page 54 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170 ANNEX 2: IMF RELATIONS ANNEX Press Release 20/156 International Monetary Fund FOR IMMEDIATE RELEASE Washington, D.C. 20431 USA April 14, 2020 IMF Executive Board Approves a US$115.3 Million Disbursement to Burkina Faso to Address the COVID-19 Pandemic • The COVID-19 pandemic has taken a major toll on Burkina Faso economy, with the near-term outlook deteriorating quickly. • To address the urgent balance-of-payments needs, the IMF approved US$115.3 million emergency assistance for Burkina Faso under the Rapid Credit Facility. The country will also benefit from IMF debt service relief under the Catastrophe Containment and Relief Trust. • The immediate challenge is to contain the spread of COVID-19, strengthen medical care, implement the social distancing and other containment measures, and mitigate the socio-economic impact of the pandemic, especially on the most vulnerable. Washington, DC – The Executive Board of the International Monetary Fund (IMF) today approved a disbursement of SDR 84.28 million (about US$115.3 million or 70 percent of its SDR quota) for Burkina Faso under the Rapid Credit Facility (RCF). The financing provided under the RCF will help finance the health, social protection and macroeconomic stabilization measures, meet the urgent balance of payments needs arising from the COVID-19 outbreak and catalyze additional support from the international community. The economic impact of the COVID-19 pandemic in Burkina Faso is rapidly unfolding, with the short-term outlook worsening quickly. The pandemic comes at a time when Burkina Faso was already gripped by a heightened security crisis. The authorities responded by putting in place measures to help contain the spreading of the virus, including by closing schools and universities, banning mass gatherings, and suspending international travel. Though absolutely needed to contain the outbreak these measures, together with the global response, have significantly worsened the economic outlook in the near term, with real economic growth declining substantially, and both the fiscal and balance of payments deficits widening significantly. Burkina Faso has also benefited from the IMF Executive Board decision of April 13, 2020 to provide debt service relief to all countries eligible for support from the Page 55 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170 International Development Association (IDA) in the form of grant assistance under the Catastrophe Containment (CC) window of the Catastrophe Containment and Relief Trust (CCRT). As a result, Burkina Faso will receive relief from the CCRT on debt service falling due to the IMF in the next 6 months (about US$11.9 million). This relief could be extended for up-to 2 years, subject to the availability of resources under the CCRT. The IMF continues to monitor Burkina Faso’s situation closely and stands ready to provide policy advice and further support as needed. Following the Executive Board discussion, Mr. Mitsuhiro Furusawa, Deputy Managing Director and Acting Chair, issued the following statement: “Burkina Faso has been adversely impacted by the COVID -19 pandemic. The near-term economic outlook has deteriorated quickly, compounding existing challenges posed by the security crisis in the Sahel region and the associated high number of internal displacements and humanitarian assistance needs. The authorities’ measures to contain and mitigate the socio-economic fallout of the pandemic have given rise to substantial and urgent fiscal and balance of payments needs. With uncertainties surrounding the duration and scope of the pandemic, the fallout could intensify further. The IMF emergency support under the Rapid Credit Facility will provide much-needed resources to support the authorities’ response to the crisis and help catalyze further donor support. “A widening of the fiscal deficit in 2020 is warranted to create room for health care spending, social safety nets and for the mitigation of the economic impact of the shocks. Prioritized, well-targeted and cost-effective spending would be critical. Fiscal measures introduced as a response to the shocks should also be temporary to ensure medium- term debt sustainability. Once the impact of the COVID-19 pandemic has abated, fiscal policy should be rebalanced toward a more growth-friendly composition, including scaling down current transfers to increase space for domestically financed development spending. “Additional external support, preferably in the form of grants, is urgently required to meet Burkina Faso’s elevated financing needs, ease the financial burden of the pandemic and preserve recent macroeconomic stability and development gains.” Page 56 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170 ANNEX 3: LETTER OF DEVELOPMENT POLICY (draft) A Monsieur David Malpass, Président du Groupe de la Banque mondiale -Washington DC, USA- Object : Lettre de Politique de Développement Monsieur le President, Je voudrais vous traduire toute la satisfaction du Gouvernement burkinabè pour l'engagement de votre auguste institution à soutenir le Burkina Faso dans la mise en œuvre de son Plan National de Développement Economique et Social (PNDES) à travers les instruments financiers disponibles dont votre programme d'appui budgétaire. La présente Lettre de politique de développement (LPD) retrace, d'une part, l'évolution économique récente du Burkina Faso et, d'autre part, présente les perspectives économiques et financières du pays à court et moyen termes. Elle décrit également l'état de mise en œuvre du PNDES et met l'accent sur les réformes du Gouvernement que la Banque mondiale soutient à travers la mise en œuvre de la deuxième opération de la série d'appuis budgétaires. l. Situation économique en 2019 1. L'activité économique en 2019 s'est déroulée dans un contexte national marqué par une campagne agricole défavorable, la persistance des attaques terroristes entrainant d'importants déplacements internes de populations et par la poursuite des revendications sociales dans le secteur public. 2. Sur la base des dernières estimations, elle a enregistré une décélération de son rythme de croissance. En effet, le taux de croissance du PIB réel est ressorti à 5,7% en 2019 contre 6,8% en 2018. Cette évolution a été imprimée principalement par le secteur tertiaire (+9,8%), les autres secteurs ayant connu des décélérations notables. 1. S'agissant de la valeur ajoutée du secteur primaire, elle a connu une croissance de 2,1% en 2019 après 7,7% enregistré en 2018. Cette croissance est principalement imputable à Page 57 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170 l'agriculture de rente (+19,0%). Quant à l'agriculture vivrière, elle a enregistré une décrue de 3,5%. Concernant le secteur secondaire, sa valeur ajoutée a enregistré un ralentissement de croissance en se situant à 1,0% en 2019, contre 7,5% en 2018. Ce ralentissement est principalement dû à la baisse de l'activité dans les sous-secteurs de l'industrie extractive et des Bâtiments et travaux publics (BTP). Quant au secteur tertiaire, il a enregistré une accélération de la croissance qui s'est située à 9,8% en 2019 après 6,0% en 2018. Cette croissance est portée aussi bien par le sous-secteur des services non marchands (+1 1 ,5%) que par celui des services marchands (+8,3%). 2. Pour ce qui est de l'évolution du niveau général des prix dans le pays, le taux d'inflation s'est établi à 3,2% en fin décembre 2019 contre 1,9% en 2018, La baisse du niveau général des prix s'expliquerait, entre autres, par le fléchissement des prix des « produits alimentaires et boissons non alcoolisées » et des tarifs des services de « communication » ainsi que par la poursuite des mesures gouvernementales de lutte contre la vie chère (la vente des céréales à prix social dans les zones déficitaires, le contrôle des prix des produits de grande consommation, l'ouverture de point de vente de céréales aux personnes vulnérables). 3. S'agissant des échanges extérieurs en 2019, les transactions courantes avec le reste du monde se sont soldées par une aggravation de 308,4 milliards de FCFA du déficit courant qui s'est situé à 8,0% du PIB en 2019 contre 4,6% en 2018. Hors dons officiels, les transactions courantes ont affiché un déficit de 9,3% en pourcentage du PIB en 2019 contre 6,2% en 2018. Les échanges avec l'extérieur se sont caractérisés par une dégradation du solde global de la balance des paiements qui est passé d'un excédent de 121,8 milliards de FCFA en 2018 à un déficit de 153,7 milliards de FCFA en 2019. 4. En matière de finances publiques, les recettes totales et dons se sont situés à fin décembre 2019, à 1 931, 97 milliards de FCFA contre 1 745,95 milliards de FCFA à la même période en 2018, soit un accroissement de 186,02 milliards de FCFA. Cette progression est due à la hausse des recettes propres de 266,83 milliards de FCFA (+17,43%), les dons ayant connu une contraction de 80,82 milliards de FCFA (-37,57%). S'agissant des dépenses totales et prêts nets, ils ont été exécutés à 2 184,42 milliards de FCFA à fin décembre 2019 contre 2 127,61 milliards de FCFA à la même période en 2018, soit une hausse de 56,82 milliards de FCFA. Cette progression est imputable essentiellement à l'augmentation des dépenses courantes de 268,12 milliards de FCFA, les dépenses en capital ayant connu une contraction de 197,55 milliards de FCFA. Le solde global "base engagement" des opérations financières de l'Etat quant à lui, est ressorti déficitaire à fin décembre 2019 dans une ampleur moindre qu'en 2018. En effet, le déficit global « base engagement » s'est établi à 252,7 milliards de FCFA à fin décembre 2019 contre un déficit de 381,8 milliards de FCFA à fin décembre 2018 en amélioration de 129,1 milliards de FCFA. En pourcentage du PIB, il s'est situé à 3,0% en 2019 contre 4,9% en 2018. Etat de mise en œuvre du Plan National de Développement Economique et Social (PNDES) en 2019 5. En dépit du contexte national difficile, la mise en œuvre du PNDES met l'accent sur certaines réformes du Gouvernement que la Banque mondiale soutient, de façon directe Page 58 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170 ou indirecte, à travers la deuxième opération de la série d'appuis budgétaires. L'état de mise en œuvre du PNDES en 2019 est ci-après présenté, suivant les trois axes stratégiques : Axe 1 : Réformer les institutions et moderniser l'administration 6. Concernant ce pilier, des actions importantes ont été réalisées. On peut noter (i) la finalisation de la mise en place de la Caisse de Dépôt et de Consignation (CDC) et de la Banque pour le financement de l'agriculture, (ii) et la poursuite de la mise en œuvre du Programme d'Urgence pour le Sahel (PUS-BF), afin de renforcer la résilience des populations des zones touchées par le terrorisme. 7. Dans le domaine de la justice et des droits humains, des acquis majeurs ont été réalisés tels que : la poursuite de construction des Tribunaux de Grande Instance (TGI) et des Etablissements Pénitentiaires (EP), le recrutement du personnel qualifié (850 Gardes de Sécurité Pénitentiaire (GSP), 178 magistrats), la mise à disposition d'une assistance judiciaire au profit de 750 personnes vulnérables. 8. Dans le cadre de la lutte contre le terrorisme, les efforts du gouvernement ont permis de porter le taux de maillage en services de sécurité opérationnels de 65,81% en 2018 à 68,38% en 2019 et de poursuivre le renforcement des capacités opérationnelles et organisationnelles des forces de sécurité. Ces efforts se sont traduits par le recrutement additionnel du personnel, la construction d'infrastructures, la dotation en équipements stratégiques et en matériel spécifiques au profit des FDS ainsi que l'élaboration de la politique de sécurité nationale. Aussi, les actions de mise en œuvre du plan de prise en charge des victimes et déplacés internes et autres personnes vulnérables se poursuivent. Axe 2 : Développer le capital humain 9. Au niveau de ce deuxième pilier, la mise en oeuvre du PNDES a permis d'engranger des acquis dans plusieurs domaines. En effet, on relève dans le domaine de la santé, les réformes d'opérationnalisation de la Fonction publique hospitalière (estimée à 34 milliards de FCFA en 2019) ; l'implémentation d'une phase pilote de la gratuité des services de la planification familiale en juin 2019 dans les régions des Cascades et du Centre Ouest et la poursuite de la gratuité des soins au profit des femmes et des enfants de moins de 05 ans (évaluée à 27,16 milliards de FCFA). Concernant les infrastructures, le Centre Hospitalier Régional (CHR) de Ziniaré et le centre d'hémodialyse de Ouahigouya ont été achevés, 59 Centres de Santé et de Promotion Sociale (CSPS) ont été construits et 67 normalisés. Face au défi sécuritaire, une stratégie de résilience du système de santé en zone de sécurité précaire et un plan d'urgence pour la continuité des soins ont été élaborés, ainsi qu'un plan national d'approvisionnement en produits de santé dans les situations d'urgence et de catastrophe. 10. Dans le domaine de l'éducation, les efforts conjugués de l'Etat et de ses partenaires ont permis entre 2017/2018 et 2018/2019, une hausse du nombre de structures fonctionnelles dans les différents ordres d'enseignement, à l'exception du primaire où le nombre d'écoles a baissé de 2,6% suite à la fermeture de certaines écoles dans les zones touchées par le phénomène de l'insécurité. Les réalisations en 2019 ont porté notamment sur la construction : de salles de classe pour la résorption des classes sous paillotes, de 4 lycées scientifiques régionaux (Bobo-Dioulasso, Koudougou, Ouahigouya et Tenkodogo), de lycées professionnels de Manga, Tenkodogo, Kaya, Zorgho et d'infrastructures Page 59 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170 universitaires. Par ailleurs, on note que ce sont environ 9000 enseignants et formateurs qui ont été recrutés et/ou formés. 11. Concernant l'eau potable et l'assainissement, le taux d'accès national à l'eau potable est passé de 74% en 2018 à 75,4% en 2019 grâce aux réalisations en termes de (i) construction 171 Adductions d'eau potable (AEP) de 1843 forages neufs; de (ii) réhabilitation de 11 AEP et de 511 forages, ainsi que (iii) l'extension de 20 km du réseau collectif d'assainissement de Ouagadougou. 12. En matière de promotion de l'emploi décent et de la protection sociale pour tous, notamment pour les jeunes et les femmes, on peut relever que les fonds nationaux (FAIJ, FASI, FAPE) ont financés plus de 3000 projets au profit de 1531 hommes et 1420 femmes pour un coût total de 2, 214 milliards de FCFA. Axe 3 : Dynamiser les secteurs porteurs pour l'économie et les emplois 13. Des résultats substantiels sont également enregistrés au niveau de ce pilier. Dans le domaine agro-sylvo pastorale, le taux de couverture des besoins céréaliers s'est établi à 102% et la production de poisson a été de 28 952 tonnes, grâce aux efforts consentis par l'Etat en matière d'intrants et d'équipements mise à la disposition des producteurs. L'ensemble des opérations à bénéficié à 276 652 producteurs (164 116 producteurs dont 42% de femmes pour les semences améliorées, 91 788 personnes dont 30% de femmes pour les engrais minéraux). Aussi, il a été mis à disposition des acteurs de l'élevage, à prix subventionné, 9 474 tonnes de sous-produits agro-industriels (SPAI), 179,4 tonnes de semences fourragères et 5 880 équipements de transformation. On note également l'accroissement du taux de vaccination contre la maladie de New Castle qui a été porté à 53,7%, contre 52,78 0/0 en 2018. 14. En matière de dynamisation de l'industrie manufacturière en vue d'une plus grande création de richesses, d'emplois et d'exportations, le projet d'implantation de l'usine d'égrainage de coton bio à Koudougou, a abouti avec le démarrage effectif des activités d'égrainage. 15. En matière d'infrastructures routières, les résultats sont tangibles malgré le contexte sécuritaire difficile et les difficultés opérationnelles de certaines entreprises. Ainsi, sur 860,52 km de routes en travaux, 148 km ont été achevés, portant la proportion de routes bitumées à 26,72%. 16. Dans le domaine de l'énergie, la puissance nationale raccordée au réseau est en constante augmentation passant de 359,55 MW en 2018 à 410 MW en 2019. Cet accroissement a été renforcé par la construction de nouvelles centrales en 2019, notamment celle thermique exploitée par la société AGGREKO d'une puissance de 50 MW, l'achèvement de la centrale thermique de Fada-N'Gourma pour une capacité additionnelle de 7,5 MW et l'importation de 1 024,87 Gw/h d'énergie électrique dans le cadre des projets d'interconnexion avec le Ghana (519,947 GW/h) et la Côte d'Ivoire (504,923 Gw/h). 17. En matière d'amélioration de l'accès à Internet, les résultats sont relatifs à l'amélioration de la capacité de la bande passante dont le débit a atteint 44,3 Gbps en 2019 contre 39,3 Gbps en 2018 et du taux de pénétration à l'internet estimé à 30,41 % en 2019 contre 29,18% en 2018. Ces progrès Ont été possibles grâce aux efforts de maillage du territoire en fibre optique dont 861 ,8km déployés grâce aux efforts conjugués de l'administration publique et des opérateurs de téléphonie. Page 60 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170 Mesures de réformes convenues dans le cadre de la deuxième opération de la série d'appuis budgétaires 18. La série d'appuis budgétaires financée par la Banque Mondiale est étroitement liée à certains acquis importants du PNDES, et comprend des actions sur trois (03) composantes : (i) Renforcer la gestion budgétaire, (ii) Améliorer la gestion des ressources naturelles et augmenter la productivité minière et agricole, et (iii) Améliorer la fourniture des services de soins de santé. Composante 1 : Renforcer la gestion budgétaire 19. L'amélioration de la gestion budgétaire requiert des réformes aussi bien en matière de dépenses que de recettes. A cet effet, en plus de la maitrise de la masse salariale, l'accroissement des recettes fiscales et l'amélioration de l'efficacité des dépenses publiques sont des priorités à court et moyen termes. Ainsi, au niveau de cette composante, le Gouvernement s'est engagé à : (i) renforcer l'administration fiscale et réduire les coûts de transaction, (ii) renforcer le cadre réglementaire et institutionnel du cadastre, (iii) améliorer la gestion des investissements publics et enfin (iv) améliorer la gestion et la maîtrise de la masse salariale. 20. La mise en œuvre de la télédéclaration et du télépaiement permettra d'accroître l'efficacité de l'administration fiscale, tout en réduisant les coûts de transaction pour le paiement des impôts par les contribuables. Ainsi, dans le cadre de la seconde opération d'appui budgétaire, il est convenu que le Ministère de l'Économie, des Finances et du Développement (MINEFID) rende obligatoire le télépaiement de tous les impôts pour toutes les grandes entreprises et la télédéclaration pour les moyennes entreprises. A cet effet, cette obligation a été consacrée dans la Loi de Finances 2020 à travers l'Article 38. Cet article est un amendement de l'article 561.1 du Code des Impôts. 21. L'amélioration de la mobilisation des ressources intérieures nécessite également l'élargissement de la base imposable à travers une évaluation et la taxation des biens fonciers et immobiliers. Il est prévu que le Gouvernement renforce le cadre réglementaire et institutionnel du cadastre par l'instauration d'un système d'évaluation financière et immobilière. Un consultant a été recruté pour l'élaboration de la méthode d'évaluation des biens imposables et la base de données cadastrales. Sur la base de ces informations, le système de valorisation de la propriété foncière a été adopté par l'Arrêté N 0 2020- 0136/MlNEFlD/SG/DGl/DC du 12 mars 2020. Cet arrêté définit les modalités de détermination de la valeur cadastrale des immeubles bâtis et non bâtis. 22. L'amélioration de l'efficacité des dépenses publiques est aussi un objectif poursuivi par le Gouvernement, en particulier dans un contexte de consolidation budgétaire et d'accroissement des dépenses de sécurité. Ainsi, dans le cadre de la deuxième opération d'appui budgétaire, il est prévu des mesures visant à améliorer l'efficacité des dépenses d'investissement et des dépenses du personnel de l'État. 23. De façon spécifique, pour ce qui est de l'amélioration de l'efficacité des dépenses de l'investissement public, la deuxième opération d'appui budgétaire prévoit: (i) la soumission à l'Assemblée nationale du projet de Loi de Finances 2020, incluant l'analyse de risques liés aux projets prioritaires, y compris les PPP, et (ii) la mise en place par arrêté, et l'opérationnalisation d'un Comité interministériel de validation des études de faisabilité et des documents des projets d'investissement public. Des dispositions ont été prises pour Page 61 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170 annexer au projet de LFI, l'analyse des risques des grands projets d'investissements publics au Burkina Faso et la mise en place du comité sus mentionné par Arrêté N O 2019- 000289/MlNEFlD/SG/DGEP du 12 juillet 2019. Le Comité est opérationnel comme l'illustrent les observations qu'il a rendues sur plusieurs projets d'investissement public. 24. La gestion de la masse salariale est un défi majeur pour le Burkina Faso. Il est prévu dans la deuxième opération d'appui budgétaire : (i) d'approuver un décret et un arrêté visant à rationaliser le paiement des primes de motivation des agents du Ministère en charge des finances, et à améliorer leur transparence ; (ii) d'adopter dans la Loi de Finances 2020, l'extension du paiement de l'impôt unique sur les traitements et salaires (IUTS) aux primes et indemnités des agents de la fonction publique ; et (iii) de compléter le recensement géographique et nominatif du personnel, permettant le redéploiement d'au moins 11 500 agents de l'éducation nationale au cours de l'année académique 2019-2020. Pour respecter ces engagements, un décret portant règlementation de la prime de motivation a été adopté en Conseil des Ministres le 24 avril 2019. Ce décret définit la prime de motivation et détermine les bénéficiaires et les modalités de répartition de cette prime de motivation. Pour ce qui est de l'IUTS, son extension aux primes et indemnités a été prévue dans la Loi de Finances 2020 en son article 15. Cet article est un amendement de l'article 561.1 du Code des Impôts. Aussi, des actions contribuant à la maitrise de la masse salariale ont été engagées telles que : le redéploiement de 11 757 enseignants en 2019 au niveau du Ministère de l'Education Nationale, l'Alphabétisation et de la Promotion des Langues Nationales (MENA/PLN), la réduction du recrutement à la fonction publique en 2018 et 2019 et l'application du logiciel « Workload Indicators of Staffing Needs » (WISN) par le Ministère de la Santé pour les affectations de 2019. Composante 2 : Améliorer la gestion des ressources naturelles et augmenter la productivité minière et agricole 25. L'amélioration de la productivité des mines artisanales et de l'élevage est de nature à contribuer à la réduction de la pauvreté. Cependant, la hausse de la productivité dans ces deux sous-secteurs ne doit pas se faire au détriment de la dégradation de l'environnement. Ainsi, les actions à mettre en oeuvre au niveau de cette composante portent sur : (i) l'adoption d'une structure des prix pour l'achat de l'or issu de la production artisanale (ii) la mise à jour de l'identification des forêts classées à exclure du cadastre minier ; (iii) l'adoption d'un cadre réglementaire et des normes de gestion des sites par les coopératives d'exploitations minières artisanales ; et (iv) l'amélioration de la fourniture de services de vaccination en adoptant une stratégie de contrôle de la Peste des Petits Ruminants (PPR) et les décrets sur l'exercice du mandat sanitaire vétérinaire. 26. L'amélioration de façon durable de la productivité de l'artisanat minier requiert, entre autres, des prix suffisamment attractifs mais également l'organisation et la responsabilisation des acteurs pour la protection de l'environnement. Dans cette perspective, l'Agence Nationale d'Encadrement des Exploitations Minières Artisanales et Semi-mécanisées (ANEEMAS) à travers son Conseil d'Administration a adopté une structure des prix pour l'achat de l'or issu de la production artisanale. De même, des actions ont été entreprises pour permettre une meilleure organisation des acteurs de l'artisanat minier en coopérative. Elles se sont concrétisées par des délibérations prises par le Conseil d'Administration de I'ANEEMAS. Il s'agit des délibérations N O I 9-006 et N O I 9007 du 22 janvier 2019 portant respectivement adoption d'un modèle type de cahier de charges applicable aux titulaires de convention de Page 62 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170 gestion des sites d'exploitation artisanale sous contrôle de I'ANEEMAS et convention de gestion de sites d'exploitation minière artisanale. Pour ce qui est de la délimitation des forêts classées à exclure du cadastre minier, le Ministère en charge de l'environnement a pu identifier et délimiter 17 forêts classées sur les 76 existantes. Des Procès - verbaux de délimitations dûment signés et certifiés de même qu'un arrêté ministériel ont été produits à cet effet. Il est important de signaler qu'un nombre important de forêts classées aurait pu être identifié, n'eût été la situation sécuritaire du pays qui n'a pas permis l'accès à certaines zones. Néanmoins, le Gouvernement poursuivra ses efforts afin d'assurer la protection des forêts classées et préserver la viabilité environnementale au Burkina Faso. 27. Afin d'assurer l'accroissement de la productivité de l'élevage à travers une bonne couverture vaccinale, il était prévu l'adoption d'une stratégie de contrôle de la peste des petits ruminants (PPR), et des décrets sur l'exercice du mandat sanitaire vétérinaire. Cette mesure est effective avec l'adoption du plan stratégique national (PSN) pour le contrôle et l'éradication de la peste des petits ruminants (PPR) ainsi que la prise des décrets N 0 20190547 portant attributions et exercice du mandat sanitaire vétérinaire et N O 2019-0461 portant autorisation et organisation d'exercice de la médecine vétérinaire à titre libéral. Composante 3 : Améliorer la fourniture des services de soins de santé. 28. Dans un contexte de restrictions budgétaires, il importe de relever l'importance de l'amélioration de l'efficacité, de l'efficience et de l'équité de la dépense dans les secteurs sociaux, notamment dans celui de la santé. L'efficacité et l'efficience de l'accès aux services de soins de santé requiert entre autres : (i) une répartition spatiale adéquate du personnel de santé à l'échelle nationale, (ii) une bonne disponibilité des médicaments essentiels dans toutes les structures de santé, et (iii) l'efficience des programmes de gratuité de soins. C'est l'essence des réformes soutenues dans le cadre de cette deuxième opération d'appui budgétaire. 29. Afin de mieux aligner la distribution du personnel de santé sur les besoins spécifiques en ressources humaines des structures de santé, il est prévu l'adoption et la mise en œuvre des standards Workload Indicators of Staffing Needs (WISN). Le WISN est un outil permettant d'évaluer la charge de travail des agents de santé dans les différentes structures de santé et de déterminer le besoin en personnel en fonction de la charge de travail. Autrement dit, il s'agit d'un outil qui permettra une meilleure allocation du personnel de santé sur des bases objectives et de renseigner au mieux sur le besoin et le type du personnel de santé qu'il est nécessaire de recruter. 30. De ce fait, le Ministère de la Santé a effectué un recensement nominatif et géographique du personnel dont les résultats obtenus ont permis les affectations des nouvelles recrues pour 2019 dans les Centres de Santé et de Promotion Sociale (CSPS) et Centres médicaux avec Antennes chirurgicales (CMA). Aussi, pour refléter l'adoption des normes WISN, utilisées dans l'affection de nouvelles recrues, le Ministère de la Santé a adopté un arrêté validant lesdites normes et instituant leur utilisation pour l'affectation des agents de santé dans les centres de santé et les hôpitaux au cours de la période 2020-2024. A titre illustratif, en application des normes WISN, la commission nationale d'affectation n'a pas agrée les demandes d'affectation vers Ouagadougou introduites par des agents de santé. En lien aussi avec cette norme, les recrues sur mesures nouvelles au nombre de 900, et les sortants des écoles et centres de formation professionnelle, au nombre de 1963, ont tous été affectés dans les régions. Page 63 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170 31. L'amélioration des conditions de santé des populations nécessite également la disponibilité des médicaments essentiels dans toutes les structures de santé. A cet effet, le Ministère de la Santé a opérationnalisé le système national d'information de gestion logistique intégré de la chaine d'approvisionnement par la mise en place d'un système de suivi des médicaments traceurs, à travers l'usage de smart phones dans quatre (04) régions (8 districts que sont : Mangodara, Banfora, Séguénéga, Titao, N'Dorola, Dandé, Sébba et Gorom-Gorom). Dans ce sens, une autre mesure complémentaire a été prévue pour faire face au cumul de créances de l'État et de certains centres hospitaliers vis-à-vis de la Centrale d'Achat de Médicaments Essentiels Génériques et des Consommables Médicaux (CAMEC) qui pourrait mettre à mal l'approvisionnement en médicaments. Pour corriger cette situation, le Ministère a adopté par Arrêté N 0 2020-101/MS/CAB DU 16 MARS 2020 un nouveau mécanisme qui permet de réduire les délais de paiement des créances à la CAMEC. Ce mécanisme devrait pérenniser le paiement à temps des commandes de médicaments. 32. Dans le cadre de l'opération, il est prévu que le Gouvernement adopte un arrêté interministériel définissant les critères et mécanismes d'identification des indigents pour améliorer l'efficacité des dépenses sociales, y compris l'assurance maladie aux couches les plus défavorisées. 33. En 2015, le Gouvernement a adopté la Loi portant assurance maladie universelle. La mise en œuvre de la politique de couverture d'assurance maladie universelle a commencé par l'enrôlement et la subvention des soins de santé pour les personnes indigentes. Une telle démarche nécessite la définition de l'indigence, du mécanisme d'identification et d'enrôlement de ces populations. A cet effet, pour ce qui est du recensement des indigents, un décret relatif à l'identification des indigents a été adopté. Deux (02) arrêtés d'application de ce décret étaient prévues à savoir : un arrêté interministériel pour définir les critères et conditions de l'identification de routine et de masse et un arrêté conjoint de délivrance de la carte d'indigence. L'arrêté interministériel a été pris le 13 mars 2020, le second arrêté sera pris lors de la troisième et dernière opération du programme d'appuis budgétaires. Perspectives pour 2020 A) Au plan macroéconomique 34. Les perspectives économiques du Burkina Faso pour 2020 se sont détériorées notablement en raison de l'impact négatif de la pandémie liée au COVID-19. Depuis le premier cas confirmé le 9 mars, le nombre d'infections est passé à 542 au 14 avril, avec 32 décès. Pour maîtriser l'épidémie, le gouvernement a pris plusieurs mesures urgentes, notamment un couvre-feu sur tout le territoire national, la fermeture des écoles et des universités, l'annulation des grands événements publics, la fermeture des frontières terrestres, l'interdiction du transport interurbain de personnes, la fermeture des principaux marchés dans les grands centres et la mise en quarantaine (interdiction des entrées et sorties) des villes touchées, etc. Ces mesures ont des impacts négatifs sur l'activité économique du pays. 35. Les conséquences du Covid 19 viennent se greffer à une situation socioéconomique déjà mise à rude épreuve par les défis sécuritaires qui se traduisent notamment par une crise humanitaire engendrée par l'accroissement exponentiel du nombre de personnes déplacées internes qui est passé de 87 000 en janvier 2019 à près de 800 000 en février 2020 dont plus de 25% d'enfants de moins de 18 ans. Page 64 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170 36. Ainsi, selon nos dernières estimations, la croissance réelle du PIB pourrait chuter à 2,0 % en 2020, soit 4 points de pourcentage de moins que les 6 % de la projection initiale. 37. Bien que la durée de la pandémie reste très incertaine, nous avons établi un plan de riposte et de mitigation des effets du COVID-19 sur l'économie nationale, dont le coût total est estimé présentement à 394,05 milliards de francs CFA (4,4% du PIB) en 2020. Notre plan de riposte sanitaire, d'un coût de 177,9 milliards de FCFA (1,8% du PIB) vise à répondre aux besoins médicaux immédiats ainsi qu'aux actions visant à renforcer la résilience de notre système de santé. Les mesures comprennent à court terme l'achat de fournitures et de matériels médicaux, ainsi que des ressources additionnelles visant à accroître la capacité d'analyse des laboratoires et la disponibilité des lits d'hôpitaux. A moyen terme, le plan envisage un investissement massif et une revalorisation des plateaux techniques des Centre hospitaliers universitaire nationaux et régionaux. Le gouvernement a aussi pris des mesures budgétaires pour limiter les effets économiques néfastes du COVID19 sur les entreprises ainsi que sur les travailleurs et des mesures fiscales et de financement ont été activées. En plus de ces mesures, d'autres actions fortes sont déployées en faveur des populations vulnérables et des acteurs du secteur informel fortement touchés. Le gouvernement réexaminera et ajustera continuellement son plan de riposte et de mitigation des effets du COVID-19, tenant compte de l'évolution de la situation. 38. Dans un tel contexte, dans le cadre de la 2 ème opération de l'appui budgétaire en cours, le Gouvernement a adressé à votre Institution une requête en vue de bénéficier de l'augmentation d'environ cinquante millions (50 000 000) de dollars US nécessaires pour assurer une meilleure mise en œuvre du plan de préparation et de riposte au Burkina Faso et garantir une stabilité macroéconomique. B) Au titre de la troisième opération de la série d'appui budgétaire 39. Les actions à réaliser au titre de la troisième opération pourront être modifiés pour prendre en compte les besoins des ministères en charge de la santé et de l'action humanitaire en réponse à la crise sanitaire. 40. Selon les trois composantes, les actions suivantes doivent être réalisées: Composante 1 : Renforcer la gestion budgétaire ✓ élargir l'assiette fiscale et faciliter le paiement des taxes, dans la Loi de Finances 2021, en simplifiant la fiscalité des micro-entreprises et en rendant le télépaiement des impôts obligatoire pour les moyennes entreprises ; ✓ améliorer le rendement des impôts fonciers et renforcer la mobilisation de ressources propres au niveau local, par l'adoption d'une réforme de l'administration des impôts fonciers et par la création et l'opérationnalisation de nouveaux services du cadastre dans la commune de Ouagadougou et à Bobo Dioulasso ; ✓ améliorer la gestion des PPP, par l'adoption d'une nouvelle loi sur les Partenariats Publics Privés, en adéquation avec la Directive UEMOA y afférente, ✓ améliorer la gestion des ressources humaines de la fonction publique, en soumettant à l'Assemblée Nationale le projet de loi organique relative à la fonction publique, en adoptant les décrets d'application harmonisant les grilles Page 65 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170 salariales et réduisant les indemnités et en poursuivant la mise en oeuvre de l'optimisation du personnel de la fonction publique moyennant le redéploiement des agents. Composante 2 : Améliorer la gestion des ressources naturelles et augmenter la productivité minière et agricole ✓ réduire la déforestation, en procédant à l'immatriculation des deux forêts pilotes à exclure du cadastre minier ; ✓ réduire la dégradation et les risques environnementaux, en promouvant des technologies améliorées d'extraction de l'or (sans mercure) par les coopératives d'exploitations minières artisanales ✓ améliorer les taux de couverture vaccinale par l'adoption d'un mécanisme pour subventionner la vaccination contre la PPR à travers les services vétérinaires, y compris les services vétérinaires privés en ce qu'ils relèvent de leur mandat sanitaire. Composante 3 : Améliorer la fourniture des services de soins de santé. ✓ améliorer la distribution du personnel de santé sur les besoins spécifiques en ressources humaines des structures de santé, en établissant une plateforme informatisée ouverte permettant d'assurer une meilleure transparence de la gestion des ressources humaines, compatible avec l'optimisation des ressources budgétaires, dans le système de santé public ; ✓ améliorer la distribution des médicaments au dernier kilomètre par l'introduction de nouveaux systèmes de distribution ; ✓ améliorer l'accès aux soins de santé moyennant l'assurance maladie universelle par l'adoption et la mise en application d'un : (i) mécanisme pour la participation du secteur informel à la Caisse Nationale d'Assurance Maladie Universelle (CNAMU) ; (ii) système biométrique d'enregistrement des indigents et (iii) mécanisme de subvention pour la couverture des plus vulnérables, y compris ceux affectés par le COVID19. Cadre institutionnel de mise en œuvre 41. Le Ministère de l'Economie, des Finances et du Développement assumera la responsabilité de l'exécution du programme. A cet effet, il veillera à ce que les Ministères et les structures concernés de l'Administration burkinabé jouent pleinement leur rôle respectif dans la mise en œuvre des réformes et des mesures qui relèvent de leurs domaines de compétences. L'organe technique d'exécution sera la structure au sein du Ministère en charge des Finances chargé du suivi des programmes d'appuis budgétaires. 42. Le Gouvernement reste convaincu qu'avec le soutien de ses partenaires, notamment la Banque Mondiale, la mise en œuvre de ce programme d'appui budgétaire à travers les actions prévues contribuera à promouvoir le développement des secteurs concernés, à consolider le cadre macro-économique et à soutenir une croissance économique forte et inclusive traversant une période difficile à cause des chocs externes et internes très sévères, pour achever une réduction significative et durable de la pauvreté. Page 66 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170 Conclusion Je saisis l'occasion qui m'est offerte pour vous réitérer l'engagement du Gouvernement à renforcer notre coopération avec la Banque Mondiale et vous remercier pour votre disponibilité et celle de votre institution à accompagner le Burkina Faso dans ses efforts de développement. Aussi, voudrais-je solliciter le décaissement de la somme de 150 millions de dollars pour cet exercice. Cette opération viendra en soutien à la mise en œuvre du PNDES et du plan de riposte au Covid 19. Je vous prie d'agréer, Monsieur le Président, l'expression de ma considération distinguée. Page 67 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170 ANNEX 4: ENVIRONMENT AND POVERTY/SOCIAL ANALYSIS TABLE Prior Actions Significant positive or Significant poverty, social negative environment or distributional effects effects (yes/no) positive or negative (yes/no) Pillar 1 – Strengthening fiscal management Prior Action 1: To improve tax administration and reduce transaction costs, the Recipient’s Ministry of No No Economy, Finance and Development has made e-payment of all taxes for large firms, and e-filling for medium-sized enterprises mandatory through the adoption of the 2020 Budget Law. Prior Action 2: To broaden the property tax base, the Recipient’s Ministry of Economy, Finance and No No Developmen has strengthened the regulatory and institutional framework of the cadaster to increase the collection of property taxes through the adoption by the Recipient’s Ministry of Economy, Finance and Development of an arrêté establishing a modality to determine the value of land and housing property in Ouagadougou. Prior Action 3: To improve public investment management, the Recipient’ improved the assessment of risks, Positive No including climate change risk and other risks for the selection, preparation and implementation of public investment projects, including public private partnerships through: (i) the adoption in the Budget Law 2020 of an analysis of risks related to identified priority projects; and (ii) the adoption of the Ministry of Economy, Finance and Development of arrêté establishing a national committee to validate investment projects appraisal documents. Prior Action 4: To improve the management and control of the public wage bill, the Recipient has: (i) No No improved the transparency and rationalized the motivation of the Ministry of Economy, Finance, and Development staff’s bonuses through the adoption by the Recipient’s Council of Ministers of a decree and the adoption by the Recipient’s Ministry of Economy, Finance, and Development of an arrêté; (ii) a imposed taxes on bonuses and allowances of public servants by the enactment of the Budget Law 2020; and (iii) completed a nominative and geographic staff censuses within the Ministry of National Education, Literacy and Promotion of National Languages and carried out its staff assignments for service needs through the adoption by the Recipient’s Ministry of National Education, Literacy and Promotion of National Languages of a general report of the assignments of its personnel. Pillar 2 – Improving natural resource management and raising mining and livestock productivity Prior Action 5. To encourage the development of the artisanal mining sector, the Recipient’s National No Positive Agency for the Supervision of Artisanal and Semi-Mechanized Mining has adopted and implemented a pricing policy for artisanal gold mining through the adoption of a deliberation. Page 68 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170 Prior Action 6. To reduce deforestation, the Recipient has regulated the determination of forest zones and Positive No wildlife areas as protected from any clearing and mining activities and implemented such protection to 17 classified forests through: (i) the adoption by the Ministry of Environment, Green Economy and Climate Change of an arrêté; and (ii) the adoption by the Ministry of Environment, Green Economy and Climate Change Regional Directorates of 17 minutes (procès-verbaux) providing the delimitation of 17 classified forests. Prior Action 7. To improve the management of scarce natural capital in artisanal mining areas (forests, Positive Positive water and land), the Recipient has regulated the management of gold mining sites by cooperatives of artisanal miners through the adoption of deilebarations on (i) enacting a standard model of specification for site management by artisanal mining cooperatives; and (ii) enacting the standard convention for the management of artisanal mining site. Prior Action 8. To improve the provision of vaccination services, the Recipient has implemented an No Positive Operational Vaccination Plan 2020 based on the strategy for Small Ruminants Plague (PPR) and set the public health mandate of private veterinarian to facilitate the implementation of the PPR strategy, through: (i) the adoption by the Recipient’s Ministry of Animal and Halieutic Resources the national strategic plan for PPR; and (ii) the adoption of the Council of Ministers decree. Pillar 3 – Improving health service delivery and social spending efficiency Prior Action 9. To better align the distribution of health personnel with human resource needs of No Positive healthcare facilities, the Recipient’s Ministry of Health has: (i) completed nominative and geographic staff censuses; and (ii) adopted an arrêté validating the Workload Indicators of Staffing Need (WISN) and instructing their use for the assignment of health workers in health centers and hospitals during the period 2020-2024. Prior Action 10. To ensure timely and adequate availability of essential drugs in health facilities, the No Positive Recipient’s Ministry of Health has operationalized the national information system for integrated logistics management of the supply chain through: (i) setting up and operationalizing a pilot tracking system for listed essential medications (medicaments traceurs) through the use of smart phones in eight districts; and (ii) adopting an arrêté on payment methods of CAMEG’s invoices by public structures to reduce delays of debt payment to CAMEG. Prior Action 11. To improve the efficiency of health and social services the Recipient’s Ministry of Women, No Positive National Solidarity, Family, and Humanitarian Action has defined, jointly with the Ministry of Economy, Finance and Development, the Ministry of Territorial Administration, Decentralization and Social Cohesion and the Ministry of Public Service, Labor and Social Protection, the criteria and mechanisms for identification of indigents through the adoption of an inter-ministerial arrêté. Page 69 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170 ANNEX 5: PRIOR Actions and Analytical Underpinnings Prior Actions Analytical Underpinnings Pillar 1: Strengthening Fiscal Management Prior Action 1. To improve tax administration and reduce “West Africa Tax Study”, The World Bank. (June transaction costs, the Recipient’s Ministry of Economy, Finance 2019). and Development has made e-payment of all taxes for large • Generalizing electronic procedures for filing firms, and e-filling for medium-sized enterprises mandatory and paying taxes is key to improving tax through the adoption of the 2020 Budget Law. administration, notably reducing fraud. With fewer resources devoted to cumbersome administrative tasks (entering and checking fiscal data), tax authorities could devote more time to control and collection. Prior Action 2. To broaden the property tax base, the Recipient’s “West Africa Tax Study”, The World Bank. (June Ministry of Economy, Finance and Development has 2019). strengthened the regulatory and institutional framework of the • Simplifying the system for property taxation cadaster to increase the collection of property taxes through the and improving administration could help by adoption by the Recipient’s Ministry of Economy, Finance and increasing resources for local governments. Development of an arrêté establishing a modality to determine • Better information on properties (through the value of land and housing property in Ouagadougou. registries and ultimately, a fiscal cadaster) is needed to distinguish between buildings/areas with a promising tax potential vs. other areas where simplified systems could be established. Prior Action 3. To improve public investment management, the “PIMA”, Joint IMF and World Bank Report, 2017. Recipient has improved the assessment of risks, including • The main weaknesses of Public Investment climate change risk and other risks for the selection, preparation Management in Burkina Faso relate to: multi- and implementation of public investment projects, including year programming, ex ante appraisal, project public private partnerships through: (i) the adoption in the selection, and the management of PPPs. Budget Law 2020 of an analysis of risks related to identified • The report recommends strengthening the priority projects; and (ii) the adoption of the Ministry of framework for managing PPPs as a priority. It Economy, Finance and Development of arrêté establishing a also recommends (i) improving investment national committee to validate investment projects appraisal programming and budgeting; (ii) improving documents. project readiness by conducting ex ante project appraisals and putting in place processes to have such appraisals reviewed at the central level; (iii) selecting more rigorously the projects to be included in the budget; (iv) improving expenditure and commitment programming. Prior Action 4. To improve the management and control of the “Staff Report, Selected Issues”, IMF, Country public wage bill, the Recipient has: (i) improved the transparency Report No. 16/391, December 2016. and rationalized the motivation of the Ministry of Economy, Finance, and Development staff’s bonuses through the adoption by the Recipient’s Council of Ministers of a decree and the adoption by the Recipient’s Ministry of Economy, Finance, and Development of an arrêté; (ii) imposed taxes on bonuses and allowances of public servants by the enactment of the Budget Page 70 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170 Prior Actions Analytical Underpinnings Law 2020; and (iii) completed a nominative and geographic staff censuses within the Ministry of National Education, Literacy and Promotion of National Languages and carried out its staff assignments for service needs through the adoption by the Recipient’s Ministry of National Education, Literacy and Promotion of National Languages of a general report of the assignments of its personnel. Pillar 2: Improving Natural Resources Management and Raising Mining and Livestock Productivity Prior Action 5. To encourage the development of the artisanal « Note sur le secteur des mines » in Policy notes mining sector, the Recipient’s National Agency for the for the new government of Burkina Faso, The Supervision of Artisanal and Semi-Mechanized Mining has World Bank, 2016. adopted and implemented a pricing policy for artisanal gold • Fraudulent exports of gold to other countries mining through the adoption of a deliberation. that offer better trading conditions reduce tax revenue. • Artisanal mining has adverse social and environmental impacts, including deforestation. • Increased control of artisanal mining activities requires concerted action to limit the use of environmentally-harmful products such as mercury. Prior Action 6. To reduce deforestation, the Recipient has “Vulnerability, Risk Reduction, and Adaptation regulated the determination of forest zones and wildlife areas as to Climate Change”. Burkina Faso: Climate Risk protected from any clearing and mining activities and and Adaptation Country Profile, The World implemented such protection to 17 classified forests through: (i) Bank, April 2011. the adoption by the Ministry of Environment, Green Economy • The most vulnerable sectors to climate and Climate Change of an arrêté; and (ii) the adoption by the change in Burkina Faso are water, health, Ministry of Environment, Green Economy and Climate Change agriculture, pastoralism, and forestry Regional Directorates of 17 minutes (procès-verbaux) providing the delimitation of 17 classified forests. Prior Action 7. To improve the management of scarce natural « Note sur le secteur des mines » in Policy notes capital in artisanal mining areas (forests, water and land), the for the new government of Burkina Faso, The Recipient has regulated the management of gold mining sites by World Bank, 2016. cooperatives of artisanal miners through the adoption of • Concerted actions and collaboration deilebarations on (i) enacting a standard model of specification between the State and the actors involved in for site management by artisanal mining cooperatives; and (ii) the artisanal mining activities are required to enacting the standard convention for the management of contain negative social and environmental artisanal mining site. impacts of artisanal mining activities. Prior Action 8. To improve the provision of vaccination services, “Burkina Faso- Study on Agro-processing the Recipient has implemented an Operational Vaccination Plan Opportunities”, The World Bank, 2018. 2020 based on the strategy for Small Ruminants Plague (PPR) and • Burkina Faso meat exports are marginal, set the public health mandate of private veterinarian to facilitate although the country is a major exporter of the implementation of the PPR strategy, through: (i) the live animals to coastal countries. Several adoption by the Recipient’s Ministry of Animal and Halieutic factors severely constrain the ability to Resources the national strategic plan for PPR; and (ii) the increase meat exports (including the absence of a cold chain, cold transport costs, better Page 71 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170 Prior Actions Analytical Underpinnings adoption of the Council of Ministers decree. valorization of slaughtering by-products in coastal countries). Developing meat exports would also require control of transboundary diseases. Pillar 3: Improving Health Service Delivery and Social Spending Efficiency Prior Action 9. To better align the distribution of health personnel “Workload Indicators of Staffing Needs”, WHO, with human resource needs of healthcare facilities, the 2015. Recipient’s Ministry of Health has: (i) completed nominative and • The Workload Indicators of Staffing Need geographic staff censuses; and (ii) adopted an arrêté validating (WISN) method is a human resource the Workload Indicators of Staffing Need (WISN) and instructing management tool. It provides a systematic way their use for the assignment of health workers in health centers to make staffing decisions in order to manage and hospitals during the period 2020-2024. human resources well. Prior Action 10. o ensure timely and adequate availability of « Burkina Faso Supply Chain Assessment ». essential drugs in health facilities, the Recipient’s Ministry of Global Fund, November 2017. Health has operationalized the national information system for • The supply chain suffers from: weak execution integrated logistics management of the supply chain through: (i) of orders, poor planning/ weaknesses in the setting up and operationalizing a pilot tracking system for listed integrated logistics system, financial essential medications (medicaments traceurs) through the use of constraints, and governance problems. smart phones in eight districts; and (ii) adopting an arrêté on • Digitizing standard processes would help payment methods of CAMEG’s invoices by public structures to to improve efficiency. Integrating the various reduce delays of debt payment to CAMEG. information systems would improve coordination to improve timeliness and completeness of demand data. Prior Action 11. To improve the efficiency of health and social “The Way Forward for Safety Nets In Burkina services, the Recipient’s Ministry of Women, National Solidarity, Faso”, Safety Net Assessment, World Bank 2019; Family, and Humanitarian Action has defined, jointly with the « Registres sociaux pour l’aide sociale et au- Ministry of Economy, Finance and Development, the Ministry of delà: une note d’orientation et un outil Territorial Administration, Decentralization and Social Cohesion d’évaluation”, Banque Mondiale, 16 mai 2017 and the Ministry of Public Service, Labor and Social Protection, "Couverture sanitaire universelle et secteur the criteria and mechanisms for identification of indigents informel en Afrique de l'Ouest Francophone: through the adoption of an inter-ministerial arrêté. Etat actuel, perspectives et propositions d'orientations stratégiques", Note de Politique, Banque Mondiale, Juin 2018. The study recommends : (i) analyzing the integration of free health care policies within Universal Health Insurance ; (ii) scaling up results-base financing at the country level and integrating it to Universal Health Insurance to improve the quality of health care ; (iii) integrating the private sector in the health sector to the implementation of free health care policies and implementing all the other measures in social protection for healthcare. Page 72 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170 ANNEX 6: Changes Between DPF1 Indicative Triggers and DPF2 Prior Actions Prior Actions and Indicative Triggers Descriptions of Changes Indicative Triggers for DPF2 Prior Actions for DPF2 Pillar 1 – Strengthening Fiscal Management Indicative Trigger 1: To improve Prior Action 1: To improve tax administration Strengthened to emphasize tax administration and reduce and reduce transaction costs, the Recipient’s the obligation for large firms transaction costs, the Recipient’s Ministry of Economy, Finance and to make e-payment of all Ministry of Economy, Finance and Development has made e-payment of all taxes and e-filling obligation Development has made e-filing of taxes for large firms, and e-filling for medium- for medium-sized all taxes mandatory for all large sized enterprises mandatory through the enterprises, as firms. adoption of the 2020 Budget Law. institutionalized in the Budget Law 2020. Indicative Trigger 2: To broaden Prior Action 2: To broaden the property tax Minor change to reflect the the tax base, the Recipient’s base, the Recipient’s Ministry of Economy, establishment of a system for Ministry of Economy, Finance and Finance and Development has strengthened valuing land and housing Development has strengthened the regulatory and institutional framework of property in Ouagadougou. the regulatory and institutional the cadaster to increase the collection of framework of the cadaster by property taxes through the adoption by the adopting a system for valuing land the Recipient’s Ministry of Economy, Finance and housing property. and Development of an arrêté establishing a modality to determine the value of land and housing property in Ouagadougou. Indicative Trigger 3: To improve Prior Action 3: To improve public investment Strengthened to emphasize public investment management, management, the Recipient improved the the consideration of climate the Recipient’s Ministry of assessment of risks, including climate change change in the risk analysis of Economy, Finance and risk and other risks for the selection, investment projects appraisal Development has: (i) submitted to preparation and implementation of public documents. Parliament a 2019 Budget Law that investment projects, including public private includes an analysis of risks related partnerships through: (i) the adoption in the to identified priority projects, Budget Law 2020 of an analysis of risks related including PPPs; and (ii) established to identified priority projects; and (ii) the an inter-ministerial committee to adoption of the Ministry of Economy, Finance validate project appraisal and Development of arrêté establishing a documents. national committee to validate investment projects appraisal documents. Page 73 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170 Prior Actions and Indicative Triggers Descriptions of Changes Indicative Triggers for DPF2 Prior Actions for DPF2 Indicative Trigger 4: To improve Prior Action 4: To improve the management Modified to include the the management of the public and control of the public wage bill, the reform of incentive wage bill, the Recipient has Recipient has: (i) improved the transparency payments, initially envisaged submitted to Parliament a Civil and rationalized the motivation of the Ministry as part of DPF3 reforms. Service Organic Law (“Loi of Economy, Finance, and Development staff’s Changes also include Organique portant principes bonuses through the adoption of a decree and strengthening the: (i) fondamentaux de la fonction the adoption by the Recipient’s Ministry of extension of the payment of publique”) and adopted related Economy, Finance, and Development of an the IUTS to bonuses and decrees that harmonize pay scales arrêté; (ii) imposed taxes on bonuses and allowances of civil servants; and reduce indemnities allowances of public servants by the and (ii) the nominative and (indemnités). enactment of the Budget Law 2020; and (iii) geographic censuses for completed a nominative and geographic staff redeployment of education censuses within the Ministry of National professional. In exchange, Education, Literacy and Promotion of National submission of Organic Law Languages and carried out its staff assignments was transferred to DPF3. for service needs through the adoption by the Recipient’s Ministry of National Education, Literacy and Promotion of National Languages of a general report of the assignments of its personnel. Pillar 2 – Improving Natural Resource Management and Raising Mining and Livestock Productivity Indicative trigger 5: To encourage Prior Action 5: To encourage the development Minor change to specify the development of the artisanal of the artisanal mining sector, the Recipient’s adoption of the pricing policy mining sector the Recipient has National Agency for the Supervision of through a deliberation of adopted a pricing policy for gold Artisanal and Semi-Mechanized Mining has ANEEMAS. mining. adopted and implemented a pricing policy for artisanal gold mining through the adoption of a deliberation. Prior Action 6: To reduce deforestation, the Strengthened to include the Recipient has regulated the determination of identification of 20 classified forest zones and wildlife areas as protected forests, initially envisaged as from any clearing and mining activities and a potential action for DPF3. implemented such protection to 17 classified forests through: (i) the adoption by the Ministry of Environment, Green Economy and Climate Change of an arrêté; and (ii) the adoption by the Ministry of Environment, Green Economy and Climate Change Regional Directorates of 17 minutes (procès-verbaux) providing the delimitation of 17 classified forests. Page 74 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170 Prior Actions and Indicative Triggers Descriptions of Changes Indicative Triggers for DPF2 Prior Actions for DPF2 Indicative Trigger 6: To improve the Prior Action 7: To improve the management of No change. Except added organization, management and scarce natural capital in artisanal mining areas emphasis on instruments for control of artisanal mines, the (forests, water and land), the Recipient has improved management of Recipient has adopted a regulatory regulated the management of gold mining scarce natural capital, and to framework for setting up sites by cooperatives of artisanal miners support efforts for climate cooperatives of artisanal miners. through the adoption of deilebarations on (i) change mitigation and enacting a standard model of specification for adaptation efforts. site management by artisanal mining cooperatives; and (ii) enacting the standard convention for the management of artisanal mining site. Indicative Trigger 7: To improve the Prior Action 8: To improve the provision of Minor change to emphasize provision of vaccination services, vaccination services, the Recipient the implementation of the the Recipient has: (i) adopted the hasmplemented an Operational Vaccination PPR strategy. control strategy for Small Plan 2020 based on the strategy for Small Ruminants Plague (PPR) and (ii) Ruminants Plague (PPR) and set the public adopted the decree on the health mandate of private veterinarian to veterinary public health mandate of facilitate the implementation of the PPR private veterinaries to facilitate the strategy, through: (i) the adoption by the implementation of the PPR Recipient’s Ministry of Animal and Halieutic strategy. Resources the national strategic plan for PPR; and (ii) the adoption of the Council of Ministers decree. Pillar 3 – Improving Health Service Delivery and Social Spending Efficiency Indicative Trigger 8: To better Prior Action 9. To better align the distribution Strengthened to emphasize: align the distribution of health of health personnel with human resource (i) the effort towards a better personnel with human resource needs of healthcare facilities, the Recipient’s assessment of available needs of healthcare facilities, the Ministry of Health has: (i) completed health personnel through Recipient’s Ministry of Health has nominative and geographic staff censuses; and nominative and geographic adopted and applied the Workload (ii) adopted an arrêté validating the Workload censuses, a complementary Indicators of Staffing Need (WISN) Indicators of Staffing Need (WISN) and element for successful use of to adequately staff all health care instructing their use for the assignment of WISN; and (ii) formalization facilities. health workers in health centers and hospitals of the use of WISN for during the period 2020-2024. assignment of health personnel, through an arrêté. Page 75 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170 Prior Actions and Indicative Triggers Descriptions of Changes Indicative Triggers for DPF2 Prior Actions for DPF2 Indicative Trigger 9: To ensure Prior Action 10: To ensure timely and Strengthened by timely and adequate availability of adequate availability of essential drugs in highlighting: (i) the essential drugs in health facilities, health facilities, the Recipient’s Ministry of operationalization of the the Recipient’s Ministry of Health Health has operationalized the national national information system has adopted an integrated information system for integrated logistics for integrated logistics national information system for management of the supply chain through: (i) management of the supply logistics management of the setting up and operationalizing a pilot tracking chain of essential drugs supply chain for medications. system for listed essential medications through the setup of a (medicaments traceurs) through the use of tracking system for listed smart phones in eight districts; and (ii) essential drugs (tracer adopting an arrêté on payment methods of medicines) through the use CAMEG’s invoices by public structures to of smart phones; and (ii) the reduce delays of debt payment to CAMEG. adoption of a mechanism that reduces the risk of debt accumulation for CAMEG. Indicative Trigger 10: To efficiently Prior Action 11: To improve the efficiency of Modified to accommodate expand national health insurance health and social services, the Recipient’s delays in efficiency measures, coverage, the Recipient’s Ministry Ministry of Women, National Solidarity, while emphasizing the need of Health has completed an Family, and Humanitarian Action has defined, for prior adoption of criteria assessment of the cost-efficiency jointly with the Ministry of Economy, Finance for identifying indigent of targeted free health care and Development, the Ministry of Territorial populations and their programs and adopted corrective Administration, Decentralization and Social targeting. measures. Cohesion and the Ministry of Public Service, Labor and Social Protection, the criteria and mechanisms for identification of indigents through the adoption of an inter-ministerial arrêté. Page 76 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170 ANNEX 7. Burkina Faso: Potential Impacts of COVID-19 on Poverty and Policy Responses49 1. The WHO officially declared the COVID-19 (COVID-19) outbreak a global pandemic on March 11, 2020. The outbreak has now spread to more than 200 countries. Total infections are accelerating with the global number of newly confirmed cases surpassing 45,000 per 24 hours. The virus has already spread to about two thirds of SSA countries. Burkina Faso has the second-highest number of cases in SSA, behind South Africa. 2. Governments around the world have enacted strict policies to manage the spread of the disease. These measures include: sealed borders, movement restriction, and stringent limits on assembly that results in the closure of schools and businesses. Burkina Faso is no exception. Initially, the authorities introduced screening measures at the Ouagadougou Airport and initiated a preventive communication campaign against the spread of the virus. After the country recorded its first death on March 18 th and observed a significant rise in the number of COVID-19 cases, the Government ramped up its containment emergency action plan, which includes more rigorous procedures for screening and sanitation50, temporary closures of road, railroads and air borders51, a prohibition of public gatherings of 50+ people, a national curfew from 7pm to 5am, school closing, bars, clubs, cinemas, sports and shows venues, markets, restaurants closing (or with restricted hours), a suspension of biometric enrollment operations and issuance of national identity cards. On March 26, Government announced a quarantine of all cities with positive cases: entry/exit will be prohibited (other than goods). In application of the President’s decision, 36 markets and yaars have been closed in Ouagadougou and Dori has closed its main produce and livestock markets. 3. The COVID-19 crisis will affect household welfare in Burkina Faso through direct and indirect channels. The direct impact of the pandemic could manifest through increased out-of-pocket (OOP) healthcare expenditure. Severe symptoms of COVID-19 could lead to a wipe out of OOP health expenditure to at least 5 percent of the poor’s income which is already at a vulnerable level. The COVID - 19 crisis could also lead to a loss of earnings directly linked to illness. The crisis could also disrupt health services, which will largely affect poor and aged people, particularly those living in rural area. Indeed, the COVID-19 will put great strain on already weak healthcare system. The health system in Burkina Faso, will not be able to accommodate a large number of affected people. Moreover, availability of medicine, facilities, and health personnel is extremely limited in rural and remote areas where most poor reside. Burkina Faso has about 662,000 people aged 65 or older; the spread of COVID-19 will increase the vulnerability of this demographic group, as most them live in rural area where current stage of health services is already dire. 4. Indirect impacts of the crisis on the poor would manifest through a loss of labor income . It is expected that those working in the mining sector (artisanal miners, small businesses around mining areas), and cotton sector (cotton producers, distributors) will be among the first to suffer significant loss in labor income, because of lower demand for commodity products, which represent a large share of the country’s 49 This annex is based on ongoing efforts by the Poverty Global Practice to analyze the potential impacts of COVID-19 on the poor in Africa. The note on Burkina Faso has been prepared by Nga Thi Viet Nguyen. 50 Government is also progressing increasing the number of facilities that will be used to treat patients. 51 Except notably for goods (freights). Page 77 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170 exports. The compound effects not only result in loss in labor income of those working in the affected sectors but also put budgetary pressure on the Government to sustain basic service delivery and social protection programs. The crisis is also likely to induce a loss of labor income for urban self-employees. With nearly two-thirds of income deriving from informal self-employment, Burkinabe in urban cities are likely to be hit hard by containment measures or fear-induced behavioral changes. Most of them is already survivalist with median daily revenue per worker being CFAF 1,400 (an equivalent of US$2.3). 5. The decline of urban self-employment could lead to a decline of urban demand for agricultural and animal products, which will affect the income of poor rural households. Rural households depend on domestic markets to sell their products and generate income. In 2019, about 36 percent of agricultural production and 18 percent of livestock production was sold in domestic markets. The closure of domestic markets and national curfew to contain the spread of the COVID-19 are likely to severely halt rural household income. Moreover, uncertainty of prices and inputs availability (seeds, fertilizers, animal feeding, veterinary services) and.scaled-back assistance programs (agricultural input subsidy program, public investment in soil and water, vaccination) could aggravate the impact of the crisis on rural poor. 6. Poor households will also be affected by the crisis though a loss of non-labor income, disruption of market and supply chains, as well as disruption in basic service delivery. The crisis could lead to reduced remittance inflows, which is an important source of income for Burkinabe households. In 2019, about a third of poor households received either domestic or international remittances. However, remittance inflows rely heavily on the economic situation of neighboring Côte d’Ivoire, a key destination for the majority of Burkinabe migrant workers. If economic activities in Côte d’Ivoire come to a standstill due to the COVID-19 outbreak, the Burkinabe migrants will be likely to face a decline in income or even lose their jobs all together. This will result in a loss of income for Recipient households at home. High food prices combined with potential food shortages due to disruption in production are detrimental to the welfare of urban households, especially the poor who spend a high share of their income on food. Such effects aggravate households’ loss of income and will push many households deeper in poverty. 7. The COVID-19 pandemic is likely to cause a setback to government efforts for improving human capital. The outbreak will put severe pressure on the healthcare system because of an increasing number of new confirmed cases. It will adversely affect the capacity to delivery other essential health services, such as vaccination for children under-5 and maternal care. It may also put nearly 4 million currently- enrolled children at risk of failing to attain quality education; it would put at risk early childhood interventions, health check-ups, and nutrition programs, which will have long-term negative effects on productivity. 8. To mitigate the immediate adverse effects of the COVID-19 outbreak, the following emergency responses are being considered: (i) Strengthening free healthcare and insurance schemes; (ii) Deploying healthcare personnel to Ouagadougou and, as the spread unfolds, rural areas; (iii) Expanding current safety net programs; (iv) Distributing basic food items and providing meal programs; and (v) Providing public awareness on the importance of virus-prevention mechanisms and continuation of education for children. Most of these measures are supported under the third pillar of the current World Bank DPF series as well as under the complementary Emergency Health operation. Page 78 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170 ANNEX 8. The Health Financing System and Governance 1. Resource mobilization: The fiscal space for health in Burkina Faso is atypical in that there are resources, yet results are not moving in lockstep for reasons of allocative and technical efficiency. Government has gradually been raising its expenditure to health since 2004, reaching about 6 percent of GDP in most recenbt years. In 2017, Burkina Faso’s per-capita expenditure of US$44 was above the average for low income countries (US$41). And in the period 2000-2017, the average financing levels show that households (33 percent of total current health expenditure) pay the largest share, followed by government (32 percent), external financing (30 percent)and other sources (5 percent). Its share of external financing is higher than the average for a low-income country at 27 percent. 52 The private sub- sector covers 17 percent of facilities, with a strong concentration in Ouagadougou (56 percent of facilities) and Bobo-Dioulasso (26 percent), but there are very few facilities that provide elements of the free healthcare package (“gratuité”) at the government-set prices. The obligatory universal health insurance scheme instituted in 2016 planned for a four percent contribution of wages (active) or pensions (retirees), a contributory tax of three percent, and approximately US$41/year for the non-salaried, but it is not functional for the general population.53 2. Pooling: Government financing for health runs nearly exclusively (93.5 percent) through the MoH, which transfers some resources to regional and district management teams. The ministry also manages the resources for the gratuité program despite its planned transfer to the National Health Insurance Fund (“CNAMU”). Local governments receive funds to support the functioning, maintenance, and construction of the lowest-level facilities,54 but this faces administrative problems. There is no broader programmatic framework where donors channel support through multiple channels, except funds for the Global Fund, which are earmarked. In the private sector, there are 133 social health insurance providers with unknown coverage rate. 3. Purchasing: There are two major and non-performance based systems that are currently uncoordinated:55 gratuité and universal health insurance. Some challenges and rigidities are next. a. The gratuité program covers all possible services for under-fives, pregnancy-related considerations for pregnant women (no preexisting conditions), and all phases of uterine cancer screening and care. It has its reporting, verification, and flow of funds arrangements which do not merge with those of the MoH. b. The CNAMU has developed a basket, which is very broad and covers curative care at the primary and secondary with a few tertiary services. Their vision is to purchase through social health insurance agencies, who will act as the risk pooling agents. However, with 133 social heath insurance providers in existence and limited national coverage, CNAMU has only started a 67,000- 52 Global spending on health: a world in transition. Geneva: World Health Organization; 2019. (WHO/HIS/HGF/HFWorkingPaper/19.4). Licence: CC BY-NC-SA 3.0 IGO 53 Loi n°60-2015/CNT on the « Régime d’assurance-maladie universelle », which also created the “Caisse nationale d’assurance maladie universelle” (Universal Health Insurance Fund) to administer the resources. 54 Décret N°2009-108-/PRES/PM/MATD/ MS/MEF/MFPRE du 3 mars 2009 portant transfert des ressources et des compétences de l’Etat aux communes dans les domaines de la santé. 55 This analysis omits immunization, tuberculosis, malaria, and HIV/AIDS, which have important external financing and are vertical rather than transversal. Page 79 The World Bank Burkina Faso Second Fiscal Management, Sustainable Growth and Health Service Delivery Development Policy Operation (P170 person pilot in November 2019 focusing on the indigent.56 This system is still in development and is separate from what the MoH is doing. DPF2 added actions to identify the indigent in response to CNAMU’s change of focus away from the civil servants and private sector. This will enable Government and donors to provide them with targeted and more efficient support. c. The Central Government moved to a programmatic budget in 2017, but it is more in form than in practice. The assumption of a three percent annual growth rate of resources seems inconsistent with actual allocations. There is no explicit prioritization of activities and the process of budgetary reallocations is quite cumbersome, thus making programmatic budgets unresponsive to needs. 4. Drug payment bad governance: Over the 2016-2018 period, the situation of the Centrale d’achat de médicaments essentiels génériques et des consommables médicaux (CAMEG) deteriorated substantially due to institutional shortcomings. Simultaneously, supervision of the management of pharmaceuticals at sub-national levels and free health care (“gratuité”) were instituted, creating risks and space for mismanagement of resources. DPF1 supported measures to strengthen CAMEG governance including new articles of association and an audit committee in April 2018. This created a foundation on which to rebuild the system, yet the MoH at the central, district, and autonomous hospital levels had large outstanding debts. To address this, two steps were taken: the MoH worked with Treasury and its entities to make overdue payments and CAMEG financed an evaluation of the stocks and pharmaceutical situation undertaken by the MoH. Between September and December 2019, CAMEG received over five billion FCFA in outstanding debts, which improved its financial situation. However, certain hospitals and subnational entities have not yet paid, and this led to the decision to include new instructions and monitoring mechanisms as a prior action in DPF2. Challenges remain: government is about a quarter behind on gratuité payments, which has a rollover effect on CAMEG payments, some hospitals and districts are egregious debtors, and the Logistics Management Information System and last mile delivery pilots are a year behind their unfolding schedule. These will be the focus of triggers on DPF3. 5. Human resource misallocations: Health professionals are excessively concentrated in cities. A parliamentary commission found that 53.5 percent of doctors, 57 of midwives, 59 percent of pharmacists, and 33 percent of nurses were in Ouagadougou or Bobo-Dioulasso. The WISN exercise has created the conditions for MoH to use the results in the reallocation of staffing. This information, which will be extended to hospitals, has opened the possibility to hire more specifically according to needs rather than the present practice of hiring a fixed amount of health professionals annually. MOH is following the Ministry of Education in this process. 56 “Régime d’assurance maladie universelle (RAMU) : 44 084 personnes indigentes couvertes gratuitement dans la Boucle du Mouhoun à compter de décembre 2019“, https://lefaso.net/spip.php?article93466. Page 80