Burkina Faso - Overview of economy

Burkina Faso is estimated to be one of the 20 poorest countries in the world. The gross national product (GNP) per capita , as measured by the exchange rate conversion, is estimated at approximately US$240. The purchasing power parity conversion (which makes allowance for the low price of many basic commodities in Burkina Faso) estimates per capita income at US$1,000 (2000 est.). This amount can be compared with an average per capita income of US$36,200 in the United States in the same year.

The economy depends very heavily on agriculture, which accounted for 26 percent of the GDP in 1998. Approximately 90 percent of the population depend on subsistence agriculture, as even urban dwellers maintain strong links to the countryside. The main food crops are sorghum, millet, maize, and groundnuts. The Burkinabe economy also relies on the export of gold, cotton, and livestock. Industry, although it provides 27 percent of the GDP, is not extensive and consists mainly of mining and some manufacturing (soap, soft drinks, beer, and

household utensils). In 1998 retail and wholesale trade generated about 12 percent of the GDP and transport and communications approximately 10 percent, and the total contribution to the GDP by the service sector stood at 47 percent. Despite major fluctuations, Burkina Faso's GDP growth has kept pace with population growth over the past decade. The GDP growth rate was estimated at 5 percent in 2000.

Following a coup that brought Thomas Sankara to power in 1983, Burkina Faso instituted a centralized economy. The Burkinabe government eventually succumbed to international pressure and agreed to a structural adjustment program with the International Monetary Fund (IMF) in 1991. This agreement led to the implementation in 1993 of the first of 3 Enhanced Structural Adjustment Facilities (ESAFs), the last of which started in 1999. The programs call for privatization of the state run sector, liberalization of the major trading sectors, reform and rationalization of banking, greater incentives for private sector development, and tighter controls on public spending and revenue collection.

The IMF has been pleased with Burkina Faso's progress. A further ESAF was granted for 1999 to 2002 to allow for more civil service restructuring , increased privatization, the liberalization of the cotton sector, strengthening of the judiciary, the implementation of the common external tariff with other West African Economic and Monetary Union (UEMOA) states, and the improvement of health-care and education provisions. By May 2000, 22 state enterprises had been privatized, 8 were up for sale, and a further 12 had been liquidated.

Burkina Faso's taxable capacity is very low due to the limited extent of commercial activity. Many past governments have tried to cut spending, but the unavoidable expenditure on development, the high cost of debt servicing , and rising wages have proved obstacles. Fiscal reform is thus a priority under the ESAFs, and the government will attempt to widen its tax base, rationalize direct taxes , reinforce value-added tax (VAT) collection, and reform custom duties . The government has pledged to stabilize current spending while improving spending on priority areas—health, education, and social services.

Burkina Faso's economic performance depends very much on agriculture, which in turn depends upon the weather, all of which means that the nation's economy tends to fluctuate. Inadequate and unreliable data also restrict proper analysis of the macro economy, although the situation is improving.

The Ministry of Finance indicated real GDP growth at 2.6 percent in the years 1986 to 1990, which was close to the rate of population growth. The strong economic expansion of 1991 was reversed in the years 1992 to 1994. The devaluation of the CFA franc in 1994 did not boost growth that year, but the economy grew by 4 percent in 1995, by 5.7 percent from 1996 to 1998, and by 5.8 percent in 1999.

Investment has been consistently high in recent years. The World Bank estimated investment to be 29 percent of the GDP in 1998, marking an increase from 17 percent since 1980. The public sector provides half to two-thirds of all investment, much of which is financed by aid, mostly from France. Economic aid totals 16 percent of the GDP.

Prices rose by 25 percent in 1994, but inflation fell rapidly the following year to 5.3 percent and remained at that rate until the end of 1998, and then dropped even further to-1.1 percent in 1999. Normally domestic price levels are determined by harvests, and import prices have been kept down by the strong CFA franc. Nonetheless higher prices for certain goods, such as medicines, have hit the population hard.

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