Macroeconomic performance and outlook
Real GDP growth is estimated at 6% for 2019 (6.8% in 2018), driven primarily by dynamic secondary sector (8.3% growth) and services (6.6%), as well as by sus- tained growth in private consumption (7.5%) and public consumption (6%).
The inflation rate, estimated at 0.3% in 2019, is pro- jected to rise to 1.6% in 2020 and 2% in 2021. The fiscal deficit was reduced from 7.8% of GDP in 2017 to 3% in 2019, thanks mainly to a reduction in investment from the government’s own resources, which seems to be the key adjustment variable. This investment fell from 11.6% of GDP in 2017 to 7% in 2019. Additional revenue generated by telecom licensing (about 1.4% of GDP) could mitigate the fall in public investment.
Tax revenues improved from 16.7% of GDP in 2018 to 17.8% in 2019. The current account deficit dete- riorated slightly from 5.8% of GDP in 2018 to 6.3% in 2019. The IMF’s debt sustainability analysis concluded in 2018 that Burkina Faso continues to present a mod- erate risk of debt distress. The debt ratio is estimated at 42.5% of GDP for 2019 (the WAEMU limit is 70%), with external debt the largest component (23.1%).
Tailwinds and headwinds
GDP is projected to grow by around 6% in 2020 and 6.1% in 2021. Despite the very challenging security sit- uation, the authorities do have options—improving agri- cultural returns and implementing strategic investments
in energy and infrastructure. They initiated action in the agricultural sector with the irrigation of 25,000 hectares planned in 2019–20, provision of 150,000 animal traction units to producers, and construction of a tractor and tiller assembly unit. To promote access to agricultural produc- tion areas, the proportion of upgraded rural roads is pro- jected to increase from 32.6% in 2018 to 43% in 2020.
On the energy front, the construction of new solar power plants is expected to supply 155MW of electric- ity. Gold production is expected to reach 55.3 tons in 2020 (52.9 tons in 2019).
The security situation, which affects the main mining and agricultural regions, is likely to have a severe impact on the country’s economy. Total budget alloca- tions to the security and defense sector increased by 34% between 2018 and 2019 to 3.9% of GDP in 2019. Moreover, the increase in public spending to address the security challenge and the continued high wage bill (projected to be 9.5% of GDP in 2020) will weigh on the country’s growth outlook.
The poverty rate in 2014 was 47.5% in rural areas and 40.1% at the national level. Humanitarian problems related to population displacement indicate that poverty has risen in the Sahel and the North, regions affected by the insecurity.
On human development, almost 75% of the labor force has received no schooling. The unemployment rate among women (9.3% in 2014) is higher than the national rate (6.6%), while the unemployment rate among 15–24 years old is 8.6%. The fertility rate was estimated at 5.4 children per woman in 2015.
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 ].
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 .
Yield curve managed by
Agence UMOA-Titres is responsible for the yield curve.
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.
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.
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 Agency||Current rating||Outlook|
|Fitch||No rating||No outlook|
|Standard and Poor’s||B||Stable|
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
BANQUE REGIONALE DE MARCHES
IMMEUBLE LA ROTONDE RUE DR THEZE X ASSANE NDOYE
BIBE FINANCES AND SECURITIES
Avenue Jean-Paul II, Immeuble SIB, 5ème étage
CORIS BANK INTERNATIONAL
1242 AVENUE DU DR KWAME N’KRUMAH
49, RUE DE L’HOTEL DE VILLE,
SOCIETE BURKINABE D’INTERMEDIATION FINANCIERE
AV.DU PRESIDENT ABOUBACAR SANGOULE LAMIZANA, IMMEUBLE CGP
UNION TOGOLAISE DE BANQUE
BOULEVARD DU 13 JANVIER NYEKONAKPOE
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.
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.