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 outstanding 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 deficit 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. Budgetary 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 sectors. 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 pursuing development of growth poles, following the success 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 investment 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 Community 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 movement 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 landlocked 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 

In 2018, the domestic public debt was 6111.56 million $ (43.27% of GDP). The objective of debt management is to meet the government’s financing needs while enabling it to meet its payment obligations at the lowest possible cost in the long term, maintaining risks at an acceptable level, and supporting the development of the subregional financial market . In 2019, the deficit will be covered by the issuance of government securities on the regional financial market and by a combination of concessional and nonconcessional loans. Moreover, the government remains determined to meet the program objectives for the fiscal deficit, 5 percent and 3 percent of GDP, respectively, in 2018 and 2019.In the context of its debt management strategy, the authorities may seek to replace domestic debt falling due with concessional external borrowing. The proceeds of such operations will only be used for debt and cash management purposes and not to increase overall spending beyond that implied by the program fiscal deficit limits of 5 percent and 3 percent of GDP in 2018 and 2019, respectively.[ IMF, 2018 Article IV Consultation ].

Yield curve

As part of its market development activities, the UMOA Titres Agency has carried out a project to set up issuers' yield curves of the Public Securities Market of the UEMOA zone (MTP) with objective:

  • to improve transparency on the MTP
  •  to contribute to better price formation during the auctions
  • to make investors aware of the relationship between primary and secondary markets
  • to provide local / international investors with a reference of price for securities issued by the States

The conditions for  yield curves constructions  have not yet all been observed on the (MTP). It was thus retained:

  • in the short term, to develop a first version of yield  curves taking into account the specificities of the MTP, while being sufficient evolutionary to support its development;
  • in the medium / long term, define the necessary ways and means to Continuous improvement yield curves models following the evolution of the MTP.

Burkina Faso government securities yield curve extends to 6 years.

Yield curve calculation models 

The yield curve is constructed on the basis of primary market returns. The model used is the Nelson-Siegel Svensson .  

Interpolation methods 

Linear interpolation. 

Yield curve managed by

Agence UMOA-Titres is responsible for the yield curve. 

Display platform 

Agence UMOA-Titres website 

Challenges in building an efficient yield curve 

  • Fragmentation of the market

  • Narrow investor base: comprising homogeneous investors such as banks. 

  • Low liquid secondary market

 

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.

The primary subscription of Treasury bonds and bonds is reserved for credit institutions, management and intermediation companies (SGI) as well as regional financial institutions with a settlement account in the books of the Central Bank.

Other investors, natural or legal persons, irrespective of the State in which they are established, may also subscribe to Treasury bonds and bonds on the primary and secondary market through credit institutions and SGI. located in the territory of the Union.

Emissions on the primary market of the MTP (Marché des Titres Publics) are made by auction.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.

Bond issues can be done by  syndication  managed by CREPMF.[http://www.crepmf.org/Wwwcrepmf/Reglementation/pdf/Instructions/INSTRUCTION_N36_2009.pdf]

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

On the primary market by auction, the settlement date is T+1 of the issue date.On the secondary market, the payment of purchases of Treasury bonds and bonds by the primary subscribers is made by debiting their settlement account with the Central Bank on the value date of the issue of these securities. settlement date is the first business day following the conclusion of the transaction for domestic transactions and the third business day following the conclusion of the transaction for transactions between two (2) Member States. The Contracting Parties are free to agree on a term greater than these minima for the settlement of transactions, IF the instructions given by both parties are identical, the transaction is directly offset on the agreed value date. In the event of a discrepancy, the Central Bank suspends the transaction and notifies both parties of this decision for correction.

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 No rating Stable
Fitch No rating No outlook
Standard and Poor’s B Stable

Primary Dealers

The securities market has a system of Specialists in Treasuries. The credit institutions and the SGIs  may be approved as SVT under the conditions specified by an Instruction of the Central Bank. As such, they must respect certain commitments that confer special advantages. These commitments and benefits are specified by an instruction from the Central Bank.

List of Primary Dealers

BANK OF AFRICA BURKINA

770 AVENUE DU GENERAL SANGOULE LAMIZANA

+22625308870

BANQUE REGIONALE DE MARCHES

IMMEUBLE LA ROTONDE RUE DR THEZE X ASSANE NDOYE

+221338896080

BIBE FINANCES AND SECURITIES

Avenue Jean-Paul II, Immeuble SIB, 5ème étage

+22921324875

CORIS BANK INTERNATIONAL

1242 AVENUE DU DR KWAME N’KRUMAH

+22625312323

ECOBANK BURKINA

49, RUE DE L’HOTEL DE VILLE,

+22625496400

SOCIETE BURKINABE D’INTERMEDIATION FINANCIERE

AV.DU PRESIDENT ABOUBACAR SANGOULE LAMIZANA, IMMEUBLE CGP

+22625330491

UNION TOGOLAISE DE BANQUE

BOULEVARD DU 13 JANVIER NYEKONAKPOE

+22822234300

Market restrictions

Openness to international investors

No restrictions prevent foreign investors from trading in the public securities market. They may subscribe to Treasury bonds and bonds on the primary and secondary markets through credit institutions and SGI located within the Union.  

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.

Documents & Resources

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