IMF Executive Board Completes First Review Under Extended Credit Facility Arrangement, Approves
In completing the first review, the Executive Board also approved the authorities' requests for a waiver for nonobservance of the
Following the Executive Board's discussion on
"The authorities have reaffirmed their strong commitment to the program against the backdrop of a more challenging policy environment. Three macroeconomic challenges have been identified to set the foundation for progress over the longer term. First, ensuring that the quality and composition of spending allows scaling up critical investment, both in infrastructure and people, needed to support private sector-led growth. Second, accelerating investments for increased and more reliable electricity supplies to meet growing demand, while putting the energy sector on a more financially-sustainable footing and scaling down untargeted subsidies. Finally, updating the mining code to harness natural resource revenues, and creating mechanisms, such as a fiscal rule, to direct them toward growth-enhancing spending over a multi-year horizon."
The Executive Board also completed the 2014 Article IV consultation with
Over the past two decades,
Growth remained robust in 2013 at 6.6 percent, although slightly lower than average due to the impact of erratic rain on agricultural yield and weaker terms of trade. Inflation hovered around zero, reflecting low food prices. The fiscal deficit was 3.5 percent, slightly higher than expected, mainly due to revenue shortfalls. The current account deficit worsened, due to lower gold prices and sustained imports.
For this year, the authorities have submitted a supplemental budget reflecting an increase in the wage bill (0.6 percent of GDP) and increased social transfers (0.6 percent of GDP). However, to maintain an unchanged fiscal deficit, the new spending will be financed by additional grants and reduced non-priority spending, mainly in investment, also reflecting a reprioritization in favor of energy projects and more "shovel-ready" projects.
Going forward, growth is expected to remain around 7 percent, inflation around 2 percent, and the fiscal deficit (including grants) at around 3 percent of GDP. The current account deficit is expected to stabilize at 7 per cent of GDP as terms of trade improve over the medium term. Risks to the outlook are weather, further terms of trade deterioration, pressure to spend more on untargeted subsidies and public wage increases, and political transition.
Executive Board Assessment2:
Executive Directors commended the authorities for their long track record of sound macroeconomic management and structural reforms that have led to robust growth. Good progress has been made towards achieving the development goals, supported by increased investment and poverty-reducing spending. Performance under the Fund-supported program has been satisfactory. While the medium-term outlook is favorable, significant challenges are posed by public spending pressures, energy constraints, and liabilities associated with public enterprises. Directors emphasized that continued strong ownership and commitment to prudent policies and structural reforms will safeguard the macroeconomic gains and foster long-term sustainable and inclusive growth.
Directors underscored the need to contain fiscal expenditure, including by bringing the wage bill back in line with WAEMU rules, while maintaining priority spending in the areas of infrastructure, health, and education. Directors supported plans to continue improving revenue collection through new administrative measures. While welcoming the planned audit of key public enterprises, Directors encouraged the authorities to give consideration to gradual adjustments of retail fuel prices. At the same time, and recognizing the complexity of this issue, they also called for addressing energy supply constraints through planned acceleration of projects to increase power generation and operational efficiency which are critical to alleviating growth constraints. Noting that energy supply shortages are an issue throughout the region, Directors encouraged more focus on regional approaches to help address the problem.
Directors stressed the importance of harnessing natural resource revenues to finance development. They welcomed
Directors welcomed the authorities' commitment to enhance spending in key priority areas, as outlined in their development program. In scaling up investment spending for human and infrastructure capital, Directors encouraged a strong focus on the quality of spending, through careful project selection and results-monitoring. In particular, they called for more attention to higher education and job training programs. Directors supported the authorities' efforts to expand access to financial services.
Directors encouraged the authorities to continue efforts to update the base year for national accounts statistics, in order to better assess evolving sources of economic growth and structural transformation.
View table here (http://www.imf.org/external/np/sec/pr/2014/pr14330.htm)
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