Burkina Faso - Economic Recovery Credit

 Economic recovery credit Report No: ; Type: Report/Evaluation Memorandum ; Country: Burkina Faso; Region: Africa; Sector: Macro/Non-Trade; Major Sector: Economic Policy; ProjectID: P035593 Burkina Faso: Economic Recovery Credit (Credit 2590-BUR) The Implementation Completion Report (ICR) for the Burkina Faso Economic Recovery Credit (ERC, Credit 2590-BUR) was prepared by the Africa Regional Office. The Borrower's comments are included in the ICR. The credit in the amount of SDR 18 million (equivalent to US$25 million) was approved in March 1994, shortly after the CFA franc devaluation. The credit, disbursed in a single tranche, was closed in June 1995. The ERC had two major objectives: to provide financial assistance in the aftermath of the devaluation of the CFA franc, and to support the Government's post-devaluation reform program (specifically designed to limit inflation and restore external competitiveness, reduce the current account deficit, and promote private sector- led growth and poverty alleviation). Major reforms included prudent demand management to reduce public sector demand, limits on public sector wages, measures to attenuate the negative social effects of the devaluation, an increase in the producer price of prime cotton, and measures to increase the coverage and quality of primary education and health services. Though performance fell short of the Government's 1994 growth objective, other macroeconomic goals were met. The current account deficit was reduced, inflation was curbed, public spending declined (as a ratio to GDP) and the fiscal deficit was held below the targeted level, price controls were lifted, public spending on education and health was increased, and, in agriculture, increases in the producer price of cotton provided an incentive to cotton producers and improved the financial performance of the cotton parastatal. The ICR rates outcome as highly satisfactory, sustainability as likely, institutional development as negligible, and Bank performance as highly satisfactory. OED agrees with these ratings. The ICR points out that the credit was a successful operation largely because of its simple design. Another lesson is that ERCs (and one- tranche operations in general) are well suited to the support of reforms that require concrete policy decisions and short implementation periods. The comments from the cofinancier note that the expectations for sustained growth may be excessively optimistic and that excessive lending volumes should be avoided to prevent overindebtedness. The cofinancier also questions the emphasis on the mining sector for future growth and notes the importance of improvements in rainfed agriculture for sustainable growth and poverty alleviation. The ICR is of satisfactory quality. No audit is planned.