Burkina Faso

Country Summary

Macroeconomic performance: Real GDP growth continued at an estimated 7.0% in 2018, compared with 6.7% in 2017. Key contributors were food agriculture (up 14.2% in 2018), extractive industry (20.5%), and cotton ginning (8.0%). Final consumption was the main component of domestic demand. The tax burden rose to approximately 18.0% of GDP in 2018 from 16.5% in 2017, while total out- standing public debt declined from 36.6% of GDP to 33.4%. Inflation increased to an estimated 1.4% in 2018, reflecting higher food prices. The current account defi- cit improved to an estimated 7.2% of GDP in 2018 from 7.6% in 2017.

Tailwinds and headwinds: Real GDP growth is projected to be 6.0% in 2019 and 5.9% in 2020, driven mainly by cotton ginning, cash crop farming, and financial services. As cooperation with China resumes, anticipated investment in such sectors as energy should strengthen economic growth —installed electricity generation capacity is projected to reach 1,000 MW in 2020, up from 650 MW in 2018. On the demand side, final consumption and investment will remain the key drivers of GDP growth in 2019. Bud- getary policy will aim to reduce the fiscal deficit below 3% from the estimated 4.9% in 2018. Key interventions will aim to improve agro-sylvo-pastoral productivity and raise the manufacturing sector’s contribution to GDP to 12% in 2020 from 8% in 2018.
Burkina Faso is pursuing reforms in several sec- tors. In the energy sector, 2017 legislation broadened the powers of the Energy Regulatory Authority, and the construction of eight additional solar power plants is expected to add 100 MW to the country’s installed capacity. In the agricultural sector, Burkina Faso is pur- suing development of growth poles, following the suc- cess of the Bagré Growth Pole Project. Establishing a cotton ginning unit in Koudougou should contribute to local transformation. The mining sector expected 15,000 new jobs and 3.5 billion CFA francs in invest- ment in 2018. On the social front, about 10.8 million instances of illness in children under age 5 were treated under the free health care policy.
Burkina Faso is a member of the Economic Com- munity of West African States (ECOWAS) and the West African Economic and Monetary Union (WAEMU). But trade with regional partners remains weak, due partly to nontariff barriers. Interconnecting Burkina Faso’s customs system with Togo’s in May 2018 is expected to reduce the time spent at the Cinkansé checkpoints from a few days to about two hours. The free move- ment of goods and people faces racketeering and other obstacles, which have increased with the jihadist threat in the region. The banking system is integrated into the WAEMU payment system. Regional banking groups have quickly established their subsidiaries in the country.
Burkina Faso is a cultural crossroads in the ECOWAS region. It hosts such flagship events as the Panafrican Film and Television Festival of Ouagadougou and the International Handicrafts Fair of Ouagadougou.
Risks weighing on the country’s outlook come from social tensions, deteriorating security conditions, and price shocks due to rainfall and global commodity prices for oil, gold, and cotton. Burkina Faso is land- locked and depends heavily on its neighbors for transit, so that transportation costs can account for up to 60% of the cost of goods—a situation aggravated by poor infrastructure.

Source: African Economic Outlook 2019

Fixed Income

Issuance strategy 

The West African Economic and Monetary Union (WAEMU) comprises eight countries: Benin, Burkina Faso, Cote d’Ivoire, Guinea Bissau, Mali, Niger, Senegal and Togo.. Bond issuance strategies vary from one state to another but most use the MTDS tool to develop their issuance strategy. Generally, most programs are focused on short-term tenor and characterized by securities with repayments by amortization and deferred coupon. Recently, with the advent of the AUT, the zone has progressed towards lengthening and standardizing securities. 

Benchmark issues 

For the moment, there is no benchmark maturity in the WAEMU. The region is in the assessment phase of developing a yield curve. WAEMU countries understand that issuance policies need to evolve towards considering the need for a yield curve. 

Yield curve 

Yield curve calculation models 

There is no benchmark yields curve in the WAEMU Zone. 

Interpolation methods 

As there is no yield curve in the WAEMU, no method for interpolation is in use. 

Yield curve managed by

Agence UMOA-Titres is responsible for the yield curve. 

Display platform 

There is no yield curve in the WAEMU. 

Challenges in building an efficient yield curve 

  • Market fragmentation: fragmented securities market and non-standardized securities. 
  • Price discovery issue
  • Narrow investor base: comprising homogeneous investors such as banks. 
  • Limited and illiquid secondary market: nonexistent secondary market where the securities are acquired for "buy and hold”. 
  • Coexistence of two agencies for issuing bonds and bills: The “Conseil Régional de l’Epargne Publique et des Marchés Financiers” (CREMPF) is in charge of monitoring the syndication. The Agence UMOA-Titres is responsible for auctions.

 

Guide to Buying Bonds

Procedures for market participation

The frequency of auctions is determined by the states, together with the Central Bank. Each state cannot hold T-Bills and Government bonds auction more than once a week.

For Treasury Bills, a calendar program specifying the instruments and their amounts and maturities, is published quarterly by the Minister of Finance in consultation with the Central Bank, and in consideration mainly the foreseeable revenue and government spending. Whereas Treasury bonds, an indicative issuance calendar specifying the instruments and their amounts and maturities, is set annually by the Minister of Finance in consultation with the Central Bank.

Each issuance should be advertised at least 7 days before the auction by describing the issuance characteristics.

Bidders submit to the Central Bank, sealed in a ballot box reserved for this purpose, a submission form specifying the amounts and the interest rates or the price offered. Submissions may also be made electronically in the conditions defined by the Central Bank.

Later than one hour after the deadline for bids submission, the National Directions of the BCEAO transmit electronically, by fax or any other means of rapid communication accepted by the Central Bank, the main submissions to the principal agency of the BCEAO, which is organizing the auction.

Treasury bills are eligible for refinancing by the Central Bank. Investors and the Central Bank may buy or sell Treasury bonds on the secondary market, awarded by private treaty. In this context, they are required to post the purchase price and sale which they are willing to transact.

Treasury bonds can be traded on the secondary market. As such, they can be exchanged at the Regional Stock Exchange (BRVM) or outside the BRVM.

Settlement cycle

The settlement date is T+1 for domestic operations and T+3 for operations between Members of the Union. This period can be modified by BCEAO. However, the contracting parties are free to agree on a minimum term above to unwind their operations. If the instructions given by the two parties are identical, the operation is definitely offset the value date agreed. In case of discrepancy between the evidences, the Central Bank suspends the transaction and notifies this decision to both parties for correction. Central Bank ensures the existence of adequate provisions before executing the compensation requested. Transmission to the Central Bank of notifications occurs in the selection of speakers, fax, telex, ordinary mail or any other means of rapid communication accepted by the BCEAO.

Taxation

Treasury bills and Treasury bonds incomes are tax-free throughout the territory of the Member States of the WAEMU. But for non-members, the tax rates are different from one country to another. In Burkina-Faso, the tax rate one securities income is equal to maximum 6%.

Rating

Rating Agency Current rating Outlook
Moody’s B Stable
Fitch No rating No outlook
Standard and Poor’s No rating No outlook

Primary Dealers

There is no appropriate Primary Dealers System in the WAEMU zone.

Subscription of Treasury bills is reserved to banks, financial institutions as well as regional financial institutions with an ordinary current account in the books of the Central Bank. Other investors, physical or legal persons, whatever their country of origin can also purchase Treasury bills in the primary market through banks located in the territory of the Union.

The primary subscription of Treasury bonds is restricted to banks, financial institutions, regional organizations and financial management company and intermediation (IMS). Other investors, physical or legal persons, whatever their country of origin may also purchase Treasury bonds on the primary market through banks and brokerage firms (SGI) located on the territory of the Union.

Market restrictions

Openness to international investors

The members of the zone are actively encouraging foreign investment. Foreign companies are free to invest and list on the regional stock exchange (BRVM), which is based in Abidjan and is dominated by Ivorian and Senegalese firms. 

Capital controls

There are no significant limits on foreign investment nor are there generally differences in treatment of foreign and national investors, either in terms of the level of foreign ownership or sector of investment.

Restriction on FX and profit repatriation

WAEMU has unified foreign exchange regulations. Under these regulations, there are no restrictions for transfers within the community, and designated commercial banks are able to approve routine foreign exchange transactions inside the community. The transfer abroad of the proceeds of liquidation of foreign direct investments no longer requires prior governments approval.

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