1. Benin Burkina Faso Cape Verde Cte dIvoire Gambia Ghana Guinea Guinea-Bissau Liberia Mali Niger Nigeria Senegal Sierra Leone Togo Regional edition Western Africa African Economic Outlook 2013 AFRICAN DEVELOPMENT BANK GROUP

2. Regional Edition African Economic Outlook 2013 Regional Edition Western Africa AFRICAN DEVELOPMENT BANK DEVELOPMENT CENTRE OF THE ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT UNITED NATIONS DEVELOPMENT PROGRAMME ECONOMIC COMMISSION FOR AFRICA AFRICAN DEVELOPMENT BANK GROUP DEVELOPMENT CENTRE 3. WesternAfrica The opinions expressed and arguments employed in this publication are the sole responsibility of the authors and do not necessarily reflect those of the African Development Bank Group, its Board of Directors, or the countries they represent; the OECD, its Development Centre or the governments of their member countries; the United Nations Development Programme; the Economic Commission for Africa; the European Union; or those of the Secretariat of the African Caribbean and Pacific Group of States or its member states. This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. Corrigenda to the African Economic Outlook may be found on line at: www.africaneconomicoutlook.org/en African Development Bank, Organisation for Economic Co-operation and Development, United Nations Development Programme, Economic Commission for Africa (2013). You can copy, download or print the content of this publication for your own use, and you can include excerpts from it in your own documents, presentations, blogs, websites and teaching materials, provided that suitable acknowledgment of AfDB, OECD, UNDP, and UNECA as source and copyright owners is given. All requests for public or commercial use and translation rights should be submitted to rights@oecd.org. Requests for permission to photocopy portions of this material for public or commercial use shall be addressed directly to the Copyright Clearance Center (CCC) at info@copyright.com or the Centre franais dexploitation du droit de copie (CFC) contact@cfcopies.com. 2 African Economic Outlook - Regional Edition / Western Africa AfDB, OECD, UNDP, ECA 2013 4. 3African Economic Outlook - Regional Edition / Western Africa AfDB, OECD, UNDP, ECA 2013 WesternAfrica This is a complementary edition to the African Economic Outlook 2013 Other regional editions are available for : African members of the CPLP - Community of Portuguese-speaking countries Central Africa Eastern Africa Northern Africa Southern Africa Table of Contents Overview ........................................................................................................ Benin .................................................................................................................. Burkina Faso .............................................................................................. Cape Verde .................................................................................................. Cte dIvoire .............................................................................................. Gambia ............................................................................................................ Ghana ................................................................................................................ Guinea .............................................................................................................. Guinea-Bissau .......................................................................................... Liberia ............................................................................................................... Mali ....................................................................................................................... Niger ................................................................................................................... Nigeria .............................................................................................................. Senegal ............................................................................................................ Sierra Leone ............................................................................................... Togo ..................................................................................................................... 4 7 23 37 51 65 81 97 113 125 141 155 169 187 201 217 5. WesternAfrica Overview West Africa is expected to continue its rapid growth with rates of 6.7% in 2013 and 7.4% in 2014. It has be- come the fastest growing region of the continent. Growth in the region is not only driven by oil and mineral sectors but also by agriculture and services and on the demand side often by consumption and investment. Nigeria is expected to continue growing by between 6.7 and 7.3% in 2013 and 2014 respectively. In Ghana and Cte dIvoire average growth in 2013/14 is likely to exceed 8% and 9% respectively. In most countries of the region growth is expected to pick up in 2013/14, exceeding 5%. But in a few countries, such as Benin, Cape Verde and Guinea-Bissau, growth will remain more subdued. In 2012, Africas monetary authorities had to cope with emerging inflationary pressures stemming from high- er food prices and exchange rate depreciation. The depreciation of exchange rates helped to boost exports but added to inflation through higher import prices. At the same time, the deepening of the crisis in Europe increased risks of a new economic downturn in Africa. Monetary policies responded quite differently depend- ing on the balances of these risks. In a number of countries, including Nigeria and Ghana monetary policies were tightened to reduce inflation. Monetary policies of the WAEMU and of the CEMAC continued their prudent stance with priority given to controlling inflation with fixed exchange rates tied to the euro. The countries of the East African Community (EAC, including Burundi, Kenya, Tanzania, Uganda and Rwanda) plan to create a monetary union with a single currency by 2015. Adopting a common currency in this region will have benefits but also entails costs, which need to be considered. As individual countries lose monetary policy as a stabilization tool, fiscal policy and flexibility of the private sector will become even more important for macroeconomic stabilization. Given the risk of another economic downturn due to lower global demand several countries continue to pursue expansionary fiscal policies. But many other countries follow fiscal consolidation strategies to ensure debt sustainability. This is particularly important in countries, which are already at risk of debt distress. Burkina Faso also increased public spending, notably for social support including for refugees from Mali. By contrast, other countries saw little fiscal space or need for an expansionary policy and tightened the fiscal stance. Ghana increased taxes, including corporate tax and mining taxes. In 2012 West Africa remained the region that attracted the largest FDI volumes, estimated at USD 15.1 bil- lion and sustained mostly by resource-seeking money. Nigeria, Guinea, Ghana and Nigers resource sector attracted an estimated 88% of total FDI to the region. Nigerias largest announced greenfield project in 2012 amounted to nearly USD 2 billion to increase oil production. The other large greenfield projects for Nigeria were in manufacturing and information and communications, signalling some diversification. Portfolio inflows to Nigeria picked up in 2012 and surpassed FDI flows, which are on a downward trend. Lower transaction charges in Nigerias stock market could have a further beneficial impact on portfolio investment. If this trend continues it might expose Nigeria to the risk of sudden capital flow reversals. Ghana is likely to see further investment in oil exploration and exploitation. The oversubscription of Ghanas bond issuance in January 2012 signals strong investor confidence in the country. Privatization prospects in Togo are likely to raise investment for the country. Serious risks emanate from instability in the Sahel region and in northern Nigeria. Africas economic prospects depend on global and domestic factors, which are highly uncertain. One of the downside risks is continued weakness of the global economy. The main channels of transmission of weaker global growth would be lower commodity export earnings, shrinkages in export volumes of other goods, tourism receipts, official development assistance (ODA), foreign direct investment inflows (FDI) and workers remittances. On top of external uncertainties, downside risks also exist within Africa. In Mali, the political situation has im- proved after military intervention by France and regional forces from ECOWAS. However, as long as security is not restored, the economies of the region remain vulnerable. 4 African Economic Outlook - Regional Edition / Western Africa AfDB, OECD, UNDP, ECA 2013 6. 5African Economic Outlook - Regional Edition / Western Africa AfDB, OECD, UNDP, ECA 2013 WesternAfrica Real GDP Growth (%) 2004-08 2009 2010 2011 2012(e) 2013(p) 2014(p) Western Africa 6,1 5,5 7,1 6,8 6,6 6,7 7,4 Benin 3,9 2,7 2,6 3,5 3,6 4,1 4,6 Burkina Faso 5,9 3,0 8,4 4,4 8,0 6,7 6,8 Cape Verde 7,2 -1,3 1,5 2,1 2,4 4,3 4,6 Cte dIvoire 1,6 3,8 2,4 -4,7 8,6 8,9 9,8 Gambia, The 3,3 6,4 6,5 -4,4 1,0 4,3 5,1 Ghana 6,6 4,0 8,0 14,4 7,1 8,0 8,7 Guinea 2,9 -0,3 1,9 3,9 4,2 4,8 5,6 Guinea-Bissau 3,0 3,4 4,5 5,3 -1,5 4,2 3,5 Liberia 7,7 5,4 6,1 8,2 8,9 7,7 5,4 Mali 4,6 4,5 5,8 2,7 -1,5 5,4 5,1 Niger 5,0 -0,7 8,2 2,1 13,1 5,5 6,5 Nigeria 7,1 7,0 8,0 7,4 6,6 6,7 7,3 Senegal 4,5 2,4 4,3 2,1 3,7 4,3 5,1 Sierra Leone 6,8 3,2 5,3 6,0 16,7 7,2 12,1 Togo 2,4 3,4 4,0 4,9 5,0 5,3 5,5 AFRICA 6,13,1 5,0 3,56,6 4,85,3 Consumer Prices (Inflation)(%) 2004-08 2009 2010 2011 2012(e) 2013(p) 2014(p) Western Africa 10,0 10,1 10,4 9,3 9,8 8,0 7,8 Benin 3,9 0,9 2,2 2,7 6,7 3,1 3,0 Burkina Faso 3,8 2,8 -0,6 2,8 3,6 2,2 2,1 Cape Verde 2,9 1,0 2,1 4,5 2,5 2,4 2,5 Cte dIvoire 3,2 4,7 1,7 4,9 2,1 2,2 2,3 Gambia, The 6,2 4,6 5,0 4,8 4,2 5,0 5,1 Ghana 13,4 19,3 10,8 8,7 9,2 8,9 8,5 Guinea 25,0 4,7 15,5 21,4 13,1 10,6 8,5 Guinea-Bissau 4,2 -2,4 2,3 5,0 2,1 3,3 2,5 Liberia 10,1 7,4 7,5 8,3 6,9 5,1 4,9 Mali 3,1 2,2 1,4 3,0 5,3 2,9 3,3 Niger 4,0 1,1 0,9 2,9 3,9 1,8 1,4 Nigeria 11,7 12,0 13,6 10,9 12,0 9,7 9,5 Senegal 3,2 -2,2 1,2 3,4 2,5 1,6 1,8 Sierra Leone 11,7 9,2 17,8 18,5 11,6 7,1 6,9 Togo 3,8 1,9 1,4 3,6 2,3 2,4 2,7 AFRICA 7,410,0 7,2 8,5 9,1 7,4 7,2 Overall Fiscal Balance, Including Grants (Percent of GDP) 2004-08 2009 2010 2011 2012(e) 2013(p) 2014(p) Western Africa 1,8 -7,4 -4,6 -1,3 1,3 2,0 3,1 Benin -1,1 -4,3 -1,6 -1,8 -1,5 -2,3 -2,3 Burkina Faso -5,0 -4,8 -2,9 -1,4 -0,5 -1,5 -2,3 Cape Verde -1,7 -5,9 -10,6 -10,2 -13,8 -14,5 -16,2 Cte dIvoire -0,2 2,0 -0,5 -1,8 -3,5 -4,0 -3,1 Gambia, The -3,4 -3,0 -3,9 -4,6 -6,0 -5,2 -4,0 Ghana -3,8 -5,8 -7,4 -3,9 -4,9 -3,5 -3,0 Guinea -1,5 -7,9 -14,0 -0,3 -1,4 -0,6 -0,3 Guinea-Bissau -3,5 4,3 1,3 0,7 -2,3 -0,8 -1,0 Liberia 1,5 -0,4 -0,1 -2,0 -4,7 -6,4 -6,6 Mali 2,8 -4,2 -2,1 -3,3 -6,4 -5,8 -4,0 Niger 7,1 -5,3 -2,4 -6,8 -2,8 -2,0 -2,5 Nigeria 3,8 -9,8 -4,8 -0,1 3,7 4,4 5,7 Senegal -4,1 -5,2 -5,4 -6,6 -7,0 -7,9 -7,4 Sierra Leone 3,9 -2,0 -4,8 -4,5 -1,8 -2,3 -2,0 Togo -0,8 -0,6 0,3 -1,2 -3,1 -3,6 -3,9 AFRICA 2,0-5,2 -3,0 -3,1-2,5 -2,4-1,9 Source: Authors calculations e: estimates; p: projections 7. WesternAfrica External Current Account, including grants (Percent of GDP)2004-08 2009 2010 2011 2012(e) 2013(p) 2014(p) Western Africa 17,3 17,1 -1,1 -0,7 4,0 5,0 7,1 Benin -7,7 -8,9 -7,3 -10,0 -9,5 -10,4 -10,6 Burkina Faso -10,3 -4,6 -2,0 -1,2 -3,5 -5,0 -4,4 Cape Verde -10,5 -14,6 -12,9 -15,4 -15,5 -14,8 -15,9 Cte dIvoire 1,2 7,0 1,1 6,7 -3,3 -3,8 -1,9 Gambia, The -9,3 -10,7 -17,1 -14,8 -11,3 -13,0 -12,9 Ghana -6,8 -6,6 -8,6 -9,6 -11,2 -14,4 -14,9 Guinea -8,3 -9,1 -6,8 -24,2 -25,4 -25,0 -28,7 Guinea-Bissau -2,7 -5,7 -8,3 -1,6 -6,3 -4,7 -4,3 Liberia -23,7 -29,2 -32,7 -34,0 -52,4 -65,6 -72,0 Mali -9,7 -7,3 -12,6 -10,0 -0,8 -6,8 -9,9 Niger -9,4 -20,1 -20,0 -22,7 -22,7 -21,5 -17,8 Nigeria 30,5 30,4 1,8 3,2 10,4 11,8 14,6 Senegal -9,8 -6,7 -4,5 -7,7 -8,6 -9,3 -10,0 Sierra Leone -5,5 -6,5 -19,3 -52,3 -44,0 -11,6 -12,0 Togo -12,7 -5,6 -6,3 -6,4 -6,2 -3,9 -4,7 AFRICA 6,4 0,3 -0,6 -1,1-0,4 0,0 0,7 Trade Balance (Percent of GDP) 2004-08 2009 2010 2011 2012(e) 2013(p) 2014(p) Western Africa 11,37,5 7,06,310,211,312,6 Benin -11,8 -11,3 -9,5 -12,2 -12,1 -12,3 -12,7 Burkina Faso -9,5 -5,8 -1,6 0,2 -0,9 -1,4 -0,2 Cape Verde -41,0 -39,5 -41,0 -45,8 -48,5 -49,3 -50,5 Cte dIvoire 15,2 18,4 14,5 20,4 10,4 10,2 10,4 Gambia, The -20,8 -22,3 -22,6 -23,9 -23,5 -23,2 -22,5 Ghana -14,8 -8,6 -9,2 -8,3 -9,7 -12,6 -13,7 Guinea 1,5 -0,2 1,4 -14,0 -17,1 -16,2 -17,3 Guinea-Bissau -6,0 -9,8 -8,2 -1,2 -4,2 -4,1 -3,1 Liberia -30,5 -36,5 -35,5 -40,7 -49,5 -53,5 -52,0 Mali -3,0 -2,4 -7,2 -3,6 6,4 1,8 -1,2 Niger -6,9 -14,9 -14,3 -14,9 -13,7 -13,4 -11,7 Nigeria 21,1 14,4 13,2 12,5 18,0 19,2 20,9 Senegal -18,4 -15,9 -14,9 -17,0 -18,1 -18,2 -18,4 Sierra Leone -6,6 -7,8 -14,6 -43,2 -35,5 -4,0 -2,6 Togo -17,6 -13,0 -14,3 -13,4 -12,6 -11,0 -11,5 AFRICA 6,6-0,1 2,9 2,7 4,1 4,3 4,5 Source: Authors calculations e: estimates; p: projections 6 African Economic Outlook - Regional Edition / Western Africa AfDB, OECD, UNDP, ECA 2013 8. Benin 2013 www.africaneconomicoutlook.org El Hadji Fall / el.hadji.fall@undp.org Daniel Ndoye / d.ndoye@afdb.org 9. Benin Benin Sections Benins economy is slowly recovering after experiencing a dicult period in 2009 and 2010; growth is estimated to have reached 3.6% in 2012 and is projected to consolidate in 2013 and 2014. To reach its growth targets, the country will have to step up reforms of the port of Cotonou as well as its eorts in the management of public nances, modernisation of the administration and improvement of the business climate to nurture development of the private sector. Benin will also have to remove constraints weighing on the exploitation of its agricultural and mining natural resources and on its geographical location; the main target here is the country's deciencies in the infrastructure and services needed for exploiting these resources. Overview Benins economic activity seems to have begun to recover since 2011, after having come under severe pressure in 2009 and 2010 from the combined eects of the global economic crisis and the oods that hit the country. The growth rate of the real economy increased from 2.6% in 2010 to 3.5% in 2011, then to 3.6% in 2012. The recovery in growth has been the result of combined eorts to revive agriculture and repair the infrastructure after the oods of 2010. The country has also beneted from good rainfall. These elements of positive growth were partially oset by the impact of a sharp increase in January 2012 in the price of adulterated petrol called kpayo. The economic outlook for 2013 and 2014 is positive and should conrm growth recovery, supported by good results from the 2012/13 cotton season and recovery in port activities. An important growth factor will, nonetheless, be the maintenance of macroeconomic stability by sustaining progress in the countrys reform of public nances and in its administrative modernisation in 2013 and 2014. Benin is facing here a threefold objective: to further mobilise its domestic resources; to make public spending consistent with its poverty-reduction strategy; and to improve the countrys business climate in order to help develop the private sector. The government, which has stated its determination to put an end to illegal trading in petroleum products, is expected take corrective measures to oset the impact of the short-term rise in prices likely to result from this action, in particular on the most vulnerable sections of the population. On the social front, the government needs to maintain its eorts through its 2011-15 growth and poverty-reduction strategy (GPRS), as the country is suering from persistent poverty and serious backlogs in reaching the Millennium Development Goals (MDGs) by 2015. More than 36% of the Beninese population are still living below the poverty line. Benin has strong agricultural potential, an opening to the sea and a small amount of raw materials (limestone, sand, granite and timber). Its limited exploitation of these assets has, however, prevented the country from initiating needed structural changes in its economy. To achieve better management of its natural resources Benin still needs to overcome several structural constraints, namely poor water management, inadequate agricultural modernisation, and antiquated infrastructure and services associated with the exploitation of these resources. For structural transformation and continued growth, Benin faces two main challenges: rst, to implement its strategic plan for the revival of the agricultural sector (PSRSA), which is expected to further diversify the economy and increase processing of agricultural products; second, to transform Benin from being a transit country to becoming a logistics and export hub, in particular thanks to an integrated and ecient infrastructure and transport services system. Benin Sections Benins economy is slowly recovering after experiencing a dicult period in 2009 and 2010; growth is estimated to have reached 3.6% in 2012 and is projected to consolidate in 2013 and 2014. To reach its growth targets, the country will have to step up reforms of the port of Cotonou as well as its eorts in the management of public nances, modernisation of the administration and improvement of the business climate to nurture development of the private sector. Benin will also have to remove constraints weighing on the exploitation of its agricultural and mining natural resources and on its geographical location; the main target here is the country's deciencies in the infrastructure and services needed for exploiting these resources. Overview Benins economic activity seems to have begun to recover since 2011, after having come under severe pressure in 2009 and 2010 from the combined eects of the global economic crisis and the oods that hit the country. The growth rate of the real economy increased from 2.6% in 2010 to 3.5% in 2011, then to 3.6% in 2012. The recovery in growth has been the result of combined eorts to revive agriculture and repair the infrastructure after the oods of 2010. The country has also beneted from good rainfall. These elements of positive growth were partially oset by the impact of a sharp increase in January 2012 in the price of adulterated petrol called kpayo. The economic outlook for 2013 and 2014 is positive and should conrm growth recovery, supported by good results from the 2012/13 cotton season and recovery in port activities. An important growth factor will, nonetheless, be the maintenance of macroeconomic stability by sustaining progress in the countrys reform of public nances and in its administrative modernisation in 2013 and 2014. Benin is facing here a threefold objective: to further mobilise its domestic resources; to make public spending consistent with its poverty-reduction strategy; and to improve the countrys business climate in order to help develop the private sector. The government, which has stated its determination to put an end to illegal trading in petroleum products, is expected take corrective measures to oset the impact of the short-term rise in prices likely to result from this action, in particular on the most vulnerable sections of the population. On the social front, the government needs to maintain its eorts through its 2011-15 growth and poverty-reduction strategy (GPRS), as the country is suering from persistent poverty and serious backlogs in reaching the Millennium Development Goals (MDGs) by 2015. More than 36% of the Beninese population are still living below the poverty line. Benin has strong agricultural potential, an opening to the sea and a small amount of raw materials (limestone, sand, granite and timber). Its limited exploitation of these assets has, however, prevented the country from initiating needed structural changes in its economy. To achieve better management of its natural resources Benin still needs to overcome several structural constraints, namely poor water management, inadequate agricultural modernisation, and antiquated infrastructure and services associated with the exploitation of these resources. For structural transformation and continued growth, Benin faces two main challenges: rst, to implement its strategic plan for the revival of the agricultural sector (PSRSA), which is expected to further diversify the economy and increase processing of agricultural products; second, to transform Benin from being a transit country to becoming a logistics and export hub, in particular thanks to an integrated and ecient infrastructure and transport services system. 8 African Economic Outlook - Regional Edition / Western Africa AfDB, OECD, UNDP, ECA 2013 10. 9African Economic Outlook - Regional Edition / Western Africa AfDB, OECD, UNDP, ECA 2013 Benin http://dx.doi.org/10.1787/888932804966 http://dx.doi.org/10.1787/888932807949 Figure 1: Real GDP growth 2013 (West) Figures for 2012 are estimates; for 2013 and later are projections. Table 1: Macroeconomic indicators 2013 2011 2012 2013 2014 Real GDP growth 3.5 3.6 4.1 4.6 Real GDP per capita growth 1 1.1 1.6 2.1 CPI inflation 2.7 6.7 3.1 3 Budget balance % GDP -1.8 -1.5 -2.3 -2.3 Current account % GDP -10 -9.5 -10.4 -10.6 Figures for 2012 are estimates; for 2013 and later are projections. Real GDP growth (%) Western Africa - Real GDP growth (%) Africa - Real GDP growth (%) 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 0% 2% 4% 6% 8% 10% RealGDPGrowth(%) 11. http://dx.doi.org/10.1787/888932808937 Recent Developments & Prospects Table 2: GDP by Sector (percentage of GDP) 2007 2012 Agriculture, forestry & fishing - - Agriculture, hunting, forestry, fishing 34.9 36 Construction 4.6 4.9 Electricity, gas and water 1.2 1.2 Electricity, water and sanitation - - Extractions - - Finance, insurance and social solidarity - - Finance, real estate and business services 2.1 2 General government services - - Gross domestic product at basic prices / factor cost 100 100 Manufacturing 8.4 8.4 Mining 0.3 0.3 Other services 8.4 8.4 Public Administration & Personal Services - - Public Administration, Education, Health & Social Work, Community, Social & Personal Services 11.9 11 Public administration, education, health & social work, community, social & personal services - - Social services - - Transport, storage and communication 9.4 9.4 Transportation, communication & information - - Wholesale and retail trade, hotels and restaurants 18.9 18.5 Wholesale, retail trade and real estate ownership - - Economic growth began to recover in 2011 and 2012 after a very dicult situation in 2009 and in 2010 linked to the global economic crisis and the oods. The growth rate of the real economy increased from 2.6% in 2010 to 3.5% in 2011, then to 3.6% in 2012. Improvement in 2011 was mainly the result of eorts made to revive agriculture and rehabilitate infrastructure after the floods of 2010. In 2012, the pace of economic recovery was maintained thanks to good crops and the recovery of port activities. According to initial estimates and thanks to good rainfall and to an increase in sown acreage, production of cotton, the countrys leading export product, more than doubled, reaching more than 400 000 tonnes for the rst time in eight years. Although the cotton season was disrupted because the framework agreement between the government and the inter-branch cotton association (Association interprofessionnelle du coton) governing the management of the sector was abrogated, the sharp increase in cotton production was made possible by various government measures that were taken to allow the 2012/13 cotton season to perform well. These measures included: setting up an inter-ministerial commission to manage the transition of the sub- Benin 10 African Economic Outlook - Regional Edition / Western Africa AfDB, OECD, UNDP, ECA 2013 12. 11African Economic Outlook - Regional Edition / Western Africa AfDB, OECD, UNDP, ECA 2013 sector; involving state and local structures; and raising the purchase price paid to farmers for seed cotton. On the other hand, food crops are estimated to have declined by nearly 3% in 2012 due to insucient inputs in a number of places and, to a lesser extent, to the years floods, which swept away part of the rice crop. Activity in the tertiary sector, which generates more than 40% of gross domestic product (GDP), is estimated to have increased in 2012 thanks to recovery in port operations, supported by several measures taken by the government after trac at the Port of Cotonou had declined by more than 2% in 2011 against a backdrop of disturbances generated by reforms. These measures helped to decongest the port and restore its competitiveness and included authorising unloading inside the Port of Cotonou and in the adjacent dry docks, removing the monopoly situation in transit to and from Niger, and establishing a one-stop shop at the Port of Cotonou. In 2012, economic growth did, however, suer from the eects of the increase in the price of black-market petrol, which accounts for nearly 70% of the domestic market of oil products. The increase in its price was the consequence of the Nigerian governments decision, in January 2012, to remove subsidies to petroleum products in Nigeria, before re-establishing them, but only partially. This measure immediately resulted in a more than doubling of the price of petrol in Benin, before moving back to a 30% increase. The impact of this measure on the Beninese economy is estimated to have entailed the loss of 0.4 points in overall growth. This episode reects Benins signicant vulnerability to Nigerias economic environment due to the countrys strong dependence on cross-border trade, which is mainly informal and mainly with its Nigerian neighbour. On the demand side, growth in 2012 was mainly fuelled by nal consumption, accounting for about 90% of GDP, with its contribution estimated at 2.2 percentage points. The weight of nal consumption in growth was mainly due to an increase in household income resulting from higher farm incomes and an increase in the wage bill. The volume of investments increased by 5%, thanks in particular to the rehabilitation of the infrastructure damaged by the oods of 2010. The economic outlook for 2013 and 2014 is favourable and should bolster growth recovery. Projections put the growth rate at 4.1% in 2013 and at 4.6% in 2014 despite a slowdown in economic activity seen in the short term and the increase in the price of petrol expected from measures to curb trade in kpayo adulterated petrol. The primary sector is expected to remain an important driver of growth in Benin thanks to the continuation of the governments sector-based policy, intended to modernise and diversify agriculture and to promote agricultural-product processing. To this end, two main lines of policy implementation are under way: the 2011-15 PSRSA strategy for the revival of the agricultural sector (Plan stratgique pour la relance du secteur agricole) and the PNIA-Benin national agricultural-investment programme (Programme national dinvestissement agricole du Bnin). The framework policy for cotton producers, coupled with incentives to grow cotton, will be continued and this should also support growth of activity in the sector. For the next few years, the governments major challenges will be to make the PSRSA operational and to examine, with all the stakeholders in the cotton sector, the implementation of a new management framework by the private sector, while also drawing lessons from the past. Ecient implementation of reforms in the agricultural sector should have a strong ripple eect on the secondary sector, with in particular the expected entry into production in 2013 of six new plants to process agricultural products (tomatoes, pineapples, cashew nuts, citrus fruits, mangos). The tertiary sector should benet from the dynamism of the commercial activity driven by the increase in agricultural production, the continuation of port reforms and the commissioning of two new docks at the autonomous Port of Cotonou. Following the suspension of the contract with the service provider in charge of implementing the import-verication programme, the government should issue an invitation to tender and select a new provider. This latters task will be to support customs services in modernisation eorts, ensure customs-revenue security and increase the competitiveness of the port. Nonetheless, a possible decline in cotton prices, tensions that could result from the 2013 municipal elections, trade liberalisation in Nigeria and the institution of a customs union in the Economic Community of West Africa States (ECOWAS) zone could change the growth projections for 2013 and 2014. In addition, while the government measures to ght against black- market petrol are benecial and should raise tax revenues, in the short run they could also have negative eects on ination and consumption, hence on growth. The government will therefore need to accompany this policy with supportive measures for the most vulnerable. Benin 13. Macroeconomic Policy Fiscal Policy The budget policy implemented in 2011 and 2012 was overall in line with the targets adopted as part of the Extended Credit Facility (ECF) programme nalised with the International Monetary Fund (IMF) on 14 June 2010. In 2011 revenues increased only slightly in respect of the targets, as they were aected by diculties in implementing port and customs reforms. Regulation of expenditure, however, which is aligned with available resources, made it possible to contain the primary balance and the overall decit within the limits imposed by the economic and nancial programme. The government's measures in 2012 to decongest the port, added to the assignment of a licence for third-generation mobile telephones amounting to XOF 44 billion (CFA Franc BCEAO), made it possible to increase government revenues. Non-grant government revenues thus went from 17.6% of GDP in 2011 to an estimated 18.5% in 2012. Tax revenues are nonetheless estimated to have been stable at 15.4% of GDP in 2012, below the 17% target set by West African Economic and Monetary Union (WAEMU). Public expenditure was stabilised at 21.9% of GDP between 2011 and 2012. Signicant improvement was noted in the execution of priority social expenditure, with an execution rate higher than 100% in 2012, as against 75% in 2011, thanks to stronger measures taken by the ministry of nance to track public expenditure. The wage bill, however, remained high compared to the threshold of 35% of tax revenues set by the WAEMU, even though the country stopped recruitment into the public service and improved its monitoring of the workforce through a census of public sector employees. The overall budget decit was slightly reduced and amounted to 1.5% of GDP in 2012, as compared to 1.8% in 2011. It was nanced by domestic debt and external support of a primarily concessionary nature. The base budget balance became positive again in 2012, thus allowing the country to comply with the main budgetary criterion of the WAEMU Convergence, Stability, Growth and Solidarity Pact. The scal policy proposed for 2013 is in line with the economic guidelines laid down for 2012-16, which are focused on the development of entrepreneurship and private initiative. Five priority areas are to be covered: i) building human capital; ii) developing infrastructure to support production; iii) agricultural modernisation; iv) promoting the agro-food sector; and v) strengthening local development. Despite the generalisation of single tax account numbers and the reinstatement of a reformed import-control programme, PVI (Programme de vrication des importations), total revenues are projected to decline in 2013 to 19.6% of GDP after the exceptional 2012 revenues from the sale of the mobile-telephone licence. Public expenditure should stabilise at 21.8% of GDP, used largely, for nearly 70% of it, for current expenditure, in which the wage bill should remain equal to more than 45% of tax revenues. 12 African Economic Outlook - Regional Edition / Western Africa AfDB, OECD, UNDP, ECA 2013 Benin 14. 13African Economic Outlook - Regional Edition / Western Africa AfDB, OECD, UNDP, ECA 2013 http://dx.doi.org/10.1787/888932809925 Table 3: Public Finances 2013 (percentage of GDP) 2009 2010 2011 2012 2013 2014 Total revenue and grants 21.7 20 20.1 20.5 19.6 19.4 Tax revenue 16.1 16.2 15.5 15.4 15.4 15.3 Oil revenue - - - - - - Grants 3.2 1.5 2.5 2 2.1 2.1 Total expenditure and net lending (a) 26 21.6 21.9 21.9 21.8 21.7 Current expenditure 15.9 15.5 15 15.3 15.2 15.1 Excluding interest 15.4 15 14.5 14.7 14.6 14.5 Wages and salaries 7.3 7.3 7.4 7.3 7.2 7.1 Interest 0.5 0.5 0.4 0.6 0.6 0.6 Primary balance -3.8 -1 -1.4 -0.9 -1.7 -1.7 Overall balance -4.3 -1.6 -1.8 -1.5 -2.3 -2.3 Figures for 2012 are estimates; for 2013 and later are projections. Monetary Policy As member of the WAEMU, Benin applies the monetary policy decided by the Central Bank of West African States (CBWAS), aimed explicitly at price stability in order to foster sustainable economic growth in the union. This goal was rearmed in the institutional reform of the CBWAS, which came into force in 2010. In 2012, the CBWAS lowered its key interest rates to help economies facing various economic shocks in their nancing. Thus, the minimum bid rate of open-market operations and the marginal lending rate were lowered in June 2012 by 25 basis points to 3.0% and 4.0%, respectively. The ination rate is estimated to have increased in 2012 as a result on the one hand, of Nigerias having reduced its subsidy to fuel in January, and on the other, of the campaign against the sale of black-market petrol begun in November. Ination was thus estimated at 6.7% in 2012, up from 2.7% in 2011, exceeding for the rst time since 2008 the 3% ceiling set by the WAEMU. Despite the accommodating monetary policy conducted regionally, growth in the money supply was suciently contained in Benin for it not to become an additional source of ination. The money supply is estimated to have grown in 2012 by 2.3%, compared with an 8.1% rise in 2011. This slowdown in the growth of the money supply is due to a decline in credit to the government. For 2013 and 2014, projections show a sharp decline in ination to about 3%. Price increases might, however, be observed in the rst few months of 2013 as a result of government measures to combat the illicit trade in petroleum products. The government and the CBWAS should therefore keep a close watch on the evolution of prices in order to take the necessary corrective measures to soften the impact of this increase, particularly on the most vulnerable. Economic Cooperation, Regional Integration & Trade Benin's foreign trade suers from a structural decit and little diversication of its exports, reecting the poor level of agricultural and industrial development. Exports are mainly of cotton and its derivatives to Europe and Asia, re-exports of petroleum products to the landlocked countries of the sub-region, and rice, meat, edible oal and worn clothing to Nigeria. The foreign-trade situation improved in 2012, and the current-account decit declined accordingly, from 10.0% of GDP in 2011 to 9.5% in 2012, thanks to an increase in cotton exports, which beneted from good crop yields Benin 15. http://dx.doi.org/10.1787/888932810913 in 2011/12. The increase in current transfers, including budgetary support, also helped to reduce the external current-account deficit. The current-account decit was nanced by net inows of public and private capital for about 40% and 60%, respectively, in 2010 and 2012. Foreign direct investment (FDI), which is mainly from Europe, is still relatively low, accounting for less than 3% of GDP, compared to an average of 4% across the continent. It has been concentrated on port infrastructure, trade and telecommunications. The current-account decit should increase in 2013 and 2014 to 10.4% and 10.6% of GDP, respectively. Foreign trade should benet from a continued rise in exports thanks to sustained eorts in support to the cotton sector and to diversification of the agricultural sector through the PSRSA strategy. In terms of regional integration, Benin plays an important role in sub-regional trade. Thanks in particular to the Port of Cotonou, Benin is a transit country for the transport of goods to and from Niger, Burkina Faso, Mali, Chad and Nigeria. In 2011, 51% of the goods received at the Port of Cotonou were thus intended for transit, and more than half of those to Niger. As a member of WAEMU and ECOWAS, the country applies the WAEMU Common External Tari (CET), which has four bands between 0% and 20%. Discussions are continuing at ECOWAS for the establishment of a CET expanded to ve bands. Entry into force of the CET at the ECOWAS level, however, could considerably slow down re-export trading from Benin to Nigeria, which accounts for nearly half of Benins external sales. In this regard, the government needs to accelerate the diversication process of the production and export base, in particular by developing agricultural sub-sectors that have been identied as promising: rice, maize, market gardening and pineapples. Table 4: Current Account 2013 (percentage of GDP) 2004 2009 2010 2011 2012 2013 2014 Trade balance -11 -11.3 -9.5 -12.2 -12.1 -12.3 -12.7 Exports of goods (f.o.b.) 8.5 11.2 13.8 9.1 9.1 8.9 8.6 Imports of goods (f.o.b.) 19.5 22.5 23.3 21.2 21.2 21.2 21.3 Services -1.2 -2 -1 -0.5 -0.6 -1.1 -0.7 Factor income -1 -0.5 -0.8 -0.5 -0.5 -0.5 -0.5 Current transfers 6 4.9 4.1 3.2 3.7 3.5 3.3 Current account balance -7.2 -8.9 -7.3 -10 -9.5 -10.4 -10.6 Figures for 2012 are estimates; for 2013 and later are projections. Debt Policy The updated 2012 analysis of debt sustainability indicates that Benin has a low risk of over-indebtedness thanks to its debt strategy, which sets the terms and conditions for new loans (concessional borrowing to nance the decit) and is supervised by the countrys technical and nancial partners. In addition, the criteria for the performance of non-concessional loans and for non-accumulation of arrears, as dened under the programme supported by the ECF, have been complied with since 2011. The stock of total external debt amounts to 17.0% of GDP, well below the 70% threshold set for all the WAEMU countries and is made up, in respect of nearly 70%, of multilateral debt and, in respect of more than 90%, of concessional loans. The ratio of debt service to exports of goods and services was estimated at 5.7% for 2012, up from 5.0% in 2011. The stock of domestic debt fell from 8.2% of GDP in 2011 to 6.7% of GDP in 2012 owing to the reimbursement of a portion of the Caisse autonome damortissement debenture bonds and of securitised wage arrears. Projections put the debt stock at 17.3% and 17.7% of GDP in 2013 and 2014, respectively, and resistance tests for 2031 indicate that debt will continue to be sustainable but will require a prudent debt policy to be maintained, in particular in the regional financial market. Figure 2: Stock of total external debt and debt service 2013 14 African Economic Outlook - Regional Edition / Western Africa AfDB, OECD, UNDP, ECA 2013 Benin 16. 15African Economic Outlook - Regional Edition / Western Africa AfDB, OECD, UNDP, ECA 2013 http://dx.doi.org/10.1787/888932804966 for 2031 indicate that debt will continue to be sustainable but will require a prudent debt policy to be maintained, in particular in the regional financial market. Figure 2: Stock of total external debt and debt service 2013 Figures for 2012 are estimates; for 2013 and later are projections. Debt/GDP Debt service/Exports 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 0% 10% 20% 30% 40% 50% Percentage Benin 17. Economic & Political Governance Private Sector The Beninese economy enjoys relative political stability but suers from a gloomy business climate, which is adversely aected by excessive bureaucracy. Benins overall ranking in the World Bank report Doing Business 2013 is 175th out of 185 countries, up one position from the previous year. The country is lagging signicantly behind, particularly in the categories of starting a business, protecting investors, paying taxes and in the time needed for enforcing contracts. It takes an average number of 42 procedures to execute a contract and an average of 795 days, against 39 procedures and 654.8 days on average, respectively, in sub-Saharan Africa. This is the longest time observed in the WAEMU and ECOWAS countries. The justice sector is still hampered by many constraints, including insucient human and material resources. The legal framework is also still impaired by its texts, some of which are obsolete when brought to court, while others are inconsistent with the country's constitution. There is still poor exibility in the labour market, which also suers from a mismatch between training and the needs of enterprises. The private sector is dominated by individual enterprises engaged in informal activities. The informal sector also accounts for 94% of the working population, and involves more than nine out of ten businesses. Easier access to land titles is still a challenge in Benin. The number of procedures for registering property has remained stable, at four (or four steps), but Benins ranking in this area has gone down from 129th to 133rd in the 2013 Doing Business report. In 2012, the government continued its eorts to improve the business climate and boost the private sector. Amongst these eorts, an on-line one-stop shop for enterprises to deal with formalities was launched in March 2012, which should reduce the time needed for starting a business from 29 days to one day for individual businesses and to three days for limited liability companies, thanks to a separation of the formalities for starting a business from the requirements for business activity. Also in 2012, the government put in place a one-stop shop for port activities (SEGUB) which has helped to reduce the time needed for goods to leave the port, notably thanks to a single invoice document. The government also wishes to encourage greater involvement of the private sector in implementation of the 2011-15 SCRP strategy. It has thus made it a priority to promote public-private partnerships (PPPs) to nance development programmes, as well as to step up discussions with the private sector. In this regard, the government is getting support from the African Development Bank (AfDB) in setting up a framework for the development of PPPs. Financial Sector As in all WAEMU countries, Benins nancial sector remains relatively stable as it is governed by community regulations and supervision. The capital adequacy ratio stood overall above the 8% threshold in 2011. Net outstanding claims stood at around 6% in 2011, two points better than in 2009. The nancial sector is, however, poorly developed, consisting of 13 banks mainly geared to nancing trade- related activities. Banking activities are strongly concentrated in three main banks, which in 2011 had 60% of the market share and 70% of the total balance of all banks. Access to nance remains a major concern for the private sector. The stock of credit to the economy amounts to about 20% of GDP, well below the 40% average in sub-Saharan Africa, and the interest rates proposed by the Beninese banks on loans granted to businesses and households are still amongst the highest of the WAEMU countries. These interest rates averaged 11.1% over 2010-12, against an 8.3% average in the WAEMU countries. The diculties encountered by banks in terms of risk management and collateral, diculties that are related to the inadequacy of the legal environment and of the land-management framework, aect access to credit adversely. It is therefore important for eorts to be made to remove these constraints in order to reduce the cost of credit and to promote better access by businesses and households to nancial services and resources in the long term. The nancial sector is marked by a strong presence of micronance institutions, which are facing signicant challenges in terms of governance, internal control and information systems. The micronance sector, which is predominantly patronised by women, is characterised by a high proportion (80%) of institutions operating without ocial approval. It would therefore need to be put on a proper footing and professionalised in order to 16 African Economic Outlook - Regional Edition / Western Africa AfDB, OECD, UNDP, ECA 2013 Benin 18. 17African Economic Outlook - Regional Edition / Western Africa AfDB, OECD, UNDP, ECA 2013 strengthen its relationship to the banking sector, always from the perspective of facilitating SME access to credit. In this regard, the government adopted in January 2012 a law laying down the principles for the regulation of decentralised financial systems. In particular the law places under the supervision of the CBWAS all decentralised financial systems that take deposits or have a loan portfolio amounting to more than XOF 2 billion. Public Sector Management, Institutions & Reform Despite progress made in recent years, the countrys economic and nancial governance indicators are mixed. The government wishes to spread a culture of evaluation and results in public administration and to do so has adopted a strategic framework to generalise results-based management (RBM) since 2011. In addition, the authorities have committed themselves to ghting corruption, in particular by adopting in August 2011 a new draft law on corruption and a decree for the institution of a national authority to combat corruption specifying its powers, organisation and operation. The level of perceived corruption is still high, however, with the country placed 94th out of 176 countries in Transparency Internationals 2012 ranking. To promote local development, the government adopted a national decentralisation and devolution policy in 2009, which serves to channel all eorts and actions. More than 87% of the performance targets set out in the 2011-15 SCRP strategy were reached in 2011. In particular, expenditure by local authorities rose from 5.9% of the total national budget in 2010 to 6.3% in 2011, above the 5.5% target. The level of transfers to local government in the national budget increased to 3.9% in 2011, up from to 3.2% in 2010. Successful implementation of the decentralisation process, however, still hinges on the lifting of two major constraints: the dierent ministries have not truly embraced the issues involved in decentralisation; and the resources of local communities, despite the progress in transfers, are still not enough to meet the investment requirements needed to achieve the Millennium Development Goals (MDGs). For its part, the programme set up to build up eciency in public enterprises through increased participation of the private sector did not make signicant progress in 2012. The invitation to tender for the privatisation of the national telecommunications enterprise, Bnin Tlcoms, for example, was unsuccessful. Nor has there been any progress in the rehabilitation of railways through private partnership with the Benin-Niger Railway and Transport Organisation. This pending project continues to be a major constraint to consolidating Benins position as a trade corridor and transit area in the sub-region. Natural Resource Management & Environment Benin suers from deterioration of its natural environment with rampant deforestation, soil degradation and rapid erosion of the coastal zone of the Gulf of Guinea. The country's main environmental problems are related to rapid population growth and an exploitation of natural resources outstripping their renewability possibilities. Benin has, however, initiated a variety of policies, in particular to improve energy eciency and the sustainable management of forest resources, which has also helped to reduce greenhouse-gas emissions. The country nalised its forestry policy in 2011 and was able to extend waste pre-collection services to 33.7% of the population in 2011, up from 32.0% in 2010, though still under the initial 35% target. Progress in access to drinking water has been conrmed by growth in the coverage rate, from 57.2% in 2010 to 61.0% in 2011 in rural areas and from 58.5% to 62.1% in urban areas, the target being 67.3% by 2015. Improvement in access to basic sanitation facilities, on the other hand, remains a major challenge. The share of households with latrines stood at 46.5% in 2011 and at less than 24% in rural areas, to be compared to the 2015 target of 80.5%. The framework of support for environmental issues suffers singularly from the poor consideration paid among all sectors to climate issues and their impact on development. Political Context Benin has been politically stable for more than 20 years. Following the March and April 2011 elections, the re- elected president, Yayi Boni, has the majority he needs to carry out the scheduled reforms. The country has also been able to maintain security at the national scale. According to the 2012 Mo Ibrahim Index, Benin ranked 10th out of 52 countries in Africa in the Safety & Rule of Law category. There was, however, some social tension in 2012, including a long teachers strike for higher wages. Economic activity also suered from tensions in 2012 between the presidents oce and an important economic operator who virtually controlled the two key sectors of the economy, namely cotton and port activities, which ended in the private sectors breaching of PVI agreements on management of the cotton chain, something that Benin 19. temporarily clouded relations between the government and private operators. Discussions resumed, however, following a round table in October 2012 on talks between the public sector and the private sector to revive the economy in Benin. Municipal and local elections in the rst quarter of 2013 are expected to mobilise a good part of the countrys political leaders and population. 18 African Economic Outlook - Regional Edition / Western Africa AfDB, OECD, UNDP, ECA 2013 Benin 20. 19African Economic Outlook - Regional Edition / Western Africa AfDB, OECD, UNDP, ECA 2013 Social Context & Human Development Building Human Resources Human development remains poor despite signicant progress achieved in improving basic care and social services. According to the Human Development Report 2013, the composite Human Development Index (HDI) for Benin in 2012 came out at 0.436, below the 0.475 average in sub-Saharan Africa. The HDI did, however, rise slightly, reflecting efforts in education and health (free-schooling policy and an increase in health facilities). Education made signicant progress in terms of access and enrolment. The gross enrolment rate in primary schools increased from 110.6% in 2010 to 111.5% in 2011, reaching the targets that had been set. The number of pupils in lower secondary school rose sharply and the number of students nearly doubled in recent years. Unfortunately, this quantitative progress has not come with improvement in quality and eciency. The system has been stagnating in the rate of completion of primary education at around 64% over the past ve years, against the 88% target, making it unlikely that Benin will reach MDG 2 on achieving universal primary education. In addition, the percentage of repeaters in primary education is still rising as a result of recurrent strikes and of underequipped classrooms. Five years into the implementation of its ten-year development plan for the education sector, Benin will upgrade the plan. Health in the country is marked by high morbidity, predominance of endemic and epidemic diseases and acute respiratory infections. There has been some improvement, however, in moving towards MDGs 4 and 5 on reducing child mortality and improving maternal health, respectively. Such progress has nonetheless been insufficient to meet these MDGs by 2015. In the area of combating priority diseases, the country is continuing its eorts, in particular through programmes to ght malaria and HIV/AIDS. The HIV/AIDS prevalence amongst pregnant women was stabilised below 2% in 2011, heralding that MDG 6 may be met. Nonetheless, frequent breaks in the supply of antiretroviral drugs and reagents are putting continuity of progress in this area at risk. Lifting the constraints weighing on the health sector therefore constitutes a major challenge for the country. These are mainly bad construction planning, inadequate infrastructure and equipment upkeep, and a decline in human and nancial resources. Poverty Reduction, Social Protection & Labour Despite progress made in improving basic social services, the social situation is still marked by persistent poverty. Poverty has remained a major concern in Benin, where 36.2% of the population lived below the poverty line in 2011. Poverty is increasingly concentrated in cities, as the countrys high urbanisation rate has not been supported by an urban-management plan. The 2011-15 SCRP strategy is being implemented in compliance with the priority-action programme, which itself is consistent with the public-investment programme and allows the preparation of programme budgets. These, along with the implementation of monitoring, assessment and performance-reporting frameworks in all the ministries, are making significant progress in generalising RBM in Benin. In addition, implementation of priority social expenditure is a monitoring criterion under the economic and nancial programme supported by the ECF. The rate of implementation of this expenditure was above 100% in 2012, after a low of 75% in 2011 due to technical and administrative difficulties in the relevant ministries. In terms of social protection, a good part of the population is still deprived of access to basic social services. About 10% of the population are covered by the existing formal social-security systems, while social-assistance programmes (aid to the indigent) and food programmes targeting children and persons aected by HIV/AIDS are poorly developed. The main challenge in Benin therefore remains to extend social security to those who do not benet from it, i.e. more than 85% of the population. To this end, the government is working on the eective implementation of the universal health-insurance scheme that was ocially launched in 2011 and aims to improve the populations financial accessibility to quality health services and care. With regard to childrens rights, the government has ratied the conventions against child labour and signed several regulatory provisions and programmes to raise awareness to combat the tracking of children. Notwithstanding, respect of childrens rights is still a challenge in Benin, which has become a hub for the tracking of children in West Africa. Priority actions to ensure respect of childrens rights are dened in the 2011-15 SCRP strategy. These include integrating child protection focal points across the board in the ministries in charge of basic social services, implementing the national action plan against tracking for child labour and setting up a fund for the protection of children and adolescents. Benin 21. Gender Equality The government adopted a national gender-promotion policy in March 2009, which is intended to achieve equality and equity between men and women by 2025. Nonetheless, Benin still has many challenges ahead in this area. Inter alia, according the 2013 Human Development Report, the female-to-male ratio in the population with at least secondary education stood at 0.438 in 2012. The 2012 Mo Ibrahim Index also shows that in gender issues, Benin suffered a setback between 2009 and 2011, ranking 34th out of 52 countries in this area. In addition, gender inequalities are persistent in terms of access to resources and opportunities. Only 25% of the public-service workforce are women, and women occupy only 11.5% of positions with responsibility. The activity of women is developing mainly in the informal sector and is conned to trade and catering, where they hold about 80% and 90% of the jobs respectively. Women also face dicult access to bank loans for lack of collateral, so they constitute the majority of clients in microcredit institutions. As regards the protection of women, Benin introduced gender equality in its constitution in 1990 and has ratified many international and regional instruments, including the Convention Eliminating All Forms of Discrimination against Women. Focal points in charge of gender issues are appointed in all the ministries. 20 African Economic Outlook - Regional Edition / Western Africa AfDB, OECD, UNDP, ECA 2013 Benin 22. 21African Economic Outlook - Regional Edition / Western Africa AfDB, OECD, UNDP, ECA 2013 Thematic analysis: Structural transformation and natural resources The structure of the Beninese economy, which is poorly diversied and mainly agricultural, has not changed signicantly over the past 20 years. It is dominated by agricultural production starting with cotton, its main export crop. But cotton production, which had yielded more than 400 000 tonnes a year in the early 2000s, fell to about 200 000 tonnes for the 2011/12 crop. There are three main reasons for this sharp decline in production: i) bad governance of the cotton chain compounded by falling cotton prices; ii) the pre-eminence of informal activities, which are 68% of the GDP and in which the majority of jobs are concentrated; and iii) the countrys heavy dependence on re-export trade to its neighbouring countries (50% of total exports), especially Nigeria, which weakens the Beninese economy. Although the country has enormous potential, especially in the agricultural sector, only 17% of the usable agricultural areas is exploited annually. Similarly, out of more than 205 000 hectares of available lowlands and 117 000 hectares of available ood plains, only 7 000 hectares are exploited. Regarding water resources, Benin has a large water network consisting of 2 000 hectares of rivers, 1 900 hectares of lakes and a lagoon system covering more than 2 800 hectares. Of the surrounding areas of this water system, 1 500 hectares have been developed for partial exploitation and there are 20 000 hectares of river banks that can still be used. The main agricultural products are cotton, cashews, pineapples and lumber. Cotton, however, is currently the only truly organised sector, generating about 8% of the GDP. Cashew nuts and timber, mainly exported to China and India, account for about 3% and 1% of exports respectively. Production of these two products went into accelerated development in the early 2000s thanks to foreign private investments that allowed small processing units to be introduced, and thanks to strong demand from India and China. In addition to the agricultural sector, Benin has mining resources including limestone, sand, granite and gravel. These resources are exploited primarily for the local market. Limestone, sand and granite are raw materials for cement factories and for enterprises producing building materials. Exploitation of lagoon sand was developed after the marine-sand quarries were closed in 2007, and this helped to attract some investment to the sector. Nonetheless, the contribution of mining to government revenues is low at approximately XOF 1 billion per year, i.e. 0.1% of government revenues. Benin is still at the exploration stage for fossil fuels, both oil and gas. Five companies have signed agreements with the government for more intensive exploration. The terms of these exploration contracts provide for revenue sharing as follows: for 100 barrels of oil, the government is to collect 10%, 70% to 75% are to be allocated to the repayment of exploration-related loans and 15-20% are to be shared between the company and the state. Once the bank loans are reimbursed, new terms for sharing are to be dened between the government and each company. The various oil-exploration operations have led to the identification of sites that could hold enormous potential for hydrocarbons, both onshore and oshore. These discoveries are all the more important that Benin exported crude oil until 1995, with production at 653.6 million barrels per year, before stopping its oil production in 1999 because the oil elds were exhausted. According to the Beninese hydrocarbons bureau, exploitation of these new sources could begin in 2013, with oil reserves currently estimated at around 5 billion barrels. The poor exploitation of Benins agricultural potential and natural resources has made it impossible to undertake a structural change in the economy. The country is facing signicant obstacles to developing the exploitation of its natural resources: i ) dependence of the agricultural sector on the vagaries of the weather and non- management of water; ii) poor organisation of the supply chain for agricultural inputs, and little use of specic inputs and of adequate mechanised agricultural equipment; iii) absence of public funding to carry out further exploration of existing and new resources; iv) the advanced age of the infrastructure and services required for the exploitation of resources; v) low competitiveness of local rms, especially in the eld of mining; vi) absence of a framework favourable to policy making; and vii) insuciency of basic skills and lack of innovation in local industries. Seeking to remedy the weak exploitation and processing of natural resources, the Government of Benin has built its structural-transformation policy around a key strategy: modernising and diversifying agriculture, coupled with establishing value chains in agriculture and mining. To this end, several goals have been set to help these activity sectors: i) improvement of the business climate to attract investments; ii) establishment of an institutional and legal framework to facilitate PPPs for building and running major infrastructure projects; and iii) provision of appropriate services such as direct nancing for physical infrastructure, support in nding renancing, tax incentives, or consulting services on access to domestic, regional and international markets, to technology and to training of human resources. The government would also like to take advantage of the country's geographical position, in particular its access to the sea, to accelerate its strategic transformation. The medium-term objective is to turn Benin into a regional hub for trading and services with a high added value, complete with an upgraded and extended port infrastructure, a rehabilitated and lengthened railway system, newly built dry ports and a second deep-water port at Sm. Benin 23. Burkina Faso 2013 www.africaneconomicoutlook.org Richard Antonin Doffonsou / r.doffonsou@afdb.org 24. Burkina Faso Sections According to preliminary estimates, GDP growth in real terms in 2012 will be 8%, driven by a good harvest and a favourable international environment. A similar economic trend of 7-8% is projected for 2013, thanks to strong performances by the primary and tertiary sectors. Nevertheless, the possibility of climatic shocks, volatile commodity prices (oil, gold) and regional insecurity, resulting from the Mali crisis, pose a threat. The country is slowly recovering from the social crisis of 2011, and the fact that the joint general and local elections held in December 2011 took place without any major incidents is a positive sign of the normalisation of the social and political situation. In terms of social progress, poverty persists despite a decade of sustained growth and programmes for vulnerable groups. Most of the indicators of the Millennium Development Goals (MDGs) will be unachievable by 2015. The economy still depends heavily on agriculture, forestry and livestock farming as well as the exploitation of mineral resources. In addition to mining, which keeps growing year-on-year, the pressure of the 3.1% population growth (one of the highest in West Africa) on extensive farming creates a major risk of accelerated degradation of the environment in a context of recurring climatic vagaries. Overview The economic outlook for 2013 is good, with provisional forecasts predicting growth of 6.7% or higher, compared with 8.0% in 2012. Growth will remain in the 6-8% range thanks to the vitality of the primary and tertiary sectors, which are the driving forces of the economy. The primary sector is the cornerstone of Burkina Fasos economy, driven by food crops (11.0% of GDP), cash crops (3.5% of GDP) and livestock (11.3% of GDP). These three sub-sectors inuence the secondary and tertiary sectors. The primary sectors strong vulnerability to climatic vagaries makes the pillars of Burkina Fasos economy fragile. Gold production the main pillar of the secondary sector experienced a sharp slowdown in 2012, with negative growth of 0.7% compared with strong growth of 39.4% in 2011. This downturn was caused by delays in opening the Bissa Gold mine. Growth should pick up again in 2013, with production expected to increase by at least 10.4%. Inationary pressures will be contained at 2.2% in 2013 (down from 3.6% in 2012), and therefore below the convergence of the Economic and Monetary Union of West Africa (UEMOA). Burkina Faso is involved in an economic-growth acceleration programme. It intends to implement a new growth model based around the growth poles, including the Bagr pole, the rst of its kind. The aim is to ensure that natural resources are exploited eciently, especially in the agricultural sector, by growing the value chain of certain promising sectors (livestock goods, fruit and vegetables, shea butter, sesame) through agribusiness to reduce the countrys dependence on gold and cotton. To enhance its competitiveness and promote intra- regional trade, Burkina Faso is also developing infrastructure to integrate roads, energy and information and communication technologies (ICTs). The political sphere in 2012 was marked by simultaneous municipal and general elections in December. The general election brought about a new distribution of roles between the opposition and coalition led by the President, which took a majority of seats (70 out of 127). However, it is a slim majority, which prevents the coalition from unilaterally removing the constitutional restriction (particularly Article 37) limiting the president to two terms of oce. Political observers believe this constitutional matter will remain a major concern for the countrys short- and medium-term stability. In the midst of this, government measures taken in 2011 to tackle the social crisis have had mixed results. The Mali crisis presents a new threat that could damage social stability. The government is faced with three main political and economic challenges: rapidly resolving the Mali crisis, which could aect budgetary decisions, resulting in greater spending on security and defence (and consequently lower spending on other items); improving the functioning of institutions, especially the judicial system; and implementing good governance. Burkina Faso Sections According to preliminary estimates, GDP growth in real terms in 2012 will be 8%, driven by a good harvest and a favourable international environment. A similar economic trend of 7-8% is projected for 2013, thanks to strong performances by the primary and tertiary sectors. Nevertheless, the possibility of climatic shocks, volatile commodity prices (oil, gold) and regional insecurity, resulting from the Mali crisis, pose a threat. The country is slowly recovering from the social crisis of 2011, and the fact that the joint general and local elections held in December 2011 took place without any major incidents is a positive sign of the normalisation of the social and political situation. In terms of social progress, poverty persists despite a decade of sustained growth and programmes for vulnerable groups. Most of the indicators of the Millennium Development Goals (MDGs) will be unachievable by 2015. The economy still depends heavily on agriculture, forestry and livestock farming as well as the exploitation of mineral resources. In addition to mining, which keeps growing year-on-year, the pressure of the 3.1% population growth (one of the highest in West Africa) on extensive farming creates a major risk of accelerated degradation of the environment in a context of recurring climatic vagaries. Overview The economic outlook for 2013 is good, with provisional forecasts predicting growth of 6.7% or higher, compared with 8.0% in 2012. Growth will remain in the 6-8% range thanks to the vitality of the primary and tertiary sectors, which are the driving forces of the economy. The primary sector is the cornerstone of Burkina Fasos economy, driven by food crops (11.0% of GDP), cash crops (3.5% of GDP) and livestock (11.3% of GDP). These three sub-sectors inuence the secondary and tertiary sectors. The primary sectors strong vulnerability to climatic vagaries makes the pillars of Burkina Fasos economy fragile. Gold production the main pillar of the secondary sector experienced a sharp slowdown in 2012, with negative growth of 0.7% compared with strong growth of 39.4% in 2011. This downturn was caused by delays in opening the Bissa Gold mine. Growth should pick up again in 2013, with production expected to increase by at least 10.4%. Inationary pressures will be contained at 2.2% in 2013 (down from 3.6% in 2012), and therefore below the convergence of the Economic and Monetary Union of West Africa (UEMOA). Burkina Faso is involved in an economic-growth acceleration programme. It intends to implement a new growth model based around the growth poles, including the Bagr pole, the rst of its kind. The aim is to ensure that natural resources are exploited eciently, especially in the agricultural sector, by growing the value chain of certain promising sectors (livestock goods, fruit and vegetables, shea butter, sesame) through agribusiness to reduce the countrys dependence on gold and cotton. To enhance its competitiveness and promote intra- regional trade, Burkina Faso is also developing infrastructure to integrate roads, energy and information and communication technologies (ICTs). The political sphere in 2012 was marked by simultaneous municipal and general elections in December. The general election brought about a new distribution of roles between the opposition and coalition led by the President, which took a majority of seats (70 out of 127). However, it is a slim majority, which prevents the coalition from unilaterally removing the constitutional restriction (particularly Article 37) limiting the president to two terms of oce. Political observers believe this constitutional matter will remain a major concern for the countrys short- and medium-term stability. In the midst of this, government measures taken in 2011 to tackle the social crisis have had mixed results. The Mali crisis presents a new threat that could damage social stability. The government is faced with three main political and economic challenges: rapidly resolving the Mali crisis, which could aect budgetary decisions, resulting in greater spending on security and defence (and consequently lower spending on other items); improving the functioning of institutions, especially the judicial system; and implementing good governance. 24 African Economic Outlook - Regional Edition / Western Africa AfDB, OECD, UNDP, ECA 2013 BurkinaFaso 25. 25African Economic Outlook - Regional Edition / Western Africa AfDB, OECD, UNDP, ECA 2013 http://dx.doi.org/10.1787/888932805004 http://dx.doi.org/10.1787/888932807987 Figure 1: Real GDP growth 2013 (West) Figures for 2012 are estimates; for 2013 and later are projections. Table 1: Macroeconomic indicators 2013 2011 2012 2013 2014 Real GDP growth 4.4 8 6.7 6.8 Real GDP per capita growth 1.3 4.9 3.6 3.7 CPI inflation 2.8 3.6 2.2 2.1 Budget balance % GDP -1.4 -0.5 -1.5 -2.3 Current account % GDP -1.2 -3.5 -5 -4.4 Figures for 2012 are estimates; for 2013 and later are projections. Real GDP growth (%) Western Africa - Real GDP growth (%) Africa - Real GDP growth (%) 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 -2% 0% 2% 4% 6% 8% 10% RealGDPGrowth(%) BurkinaFaso 26. http://dx.doi.org/10.1787/888932808975 Recent Developments & Prospects Table 2: GDP by Sector (percentage of GDP) 2007 2011 Agriculture, forestry & fishing - - Agriculture, hunting, forestry, fishing 32.7 33.7 Construction 6 4 Electricity, gas and water 1.2 0.9 Electricity, water and sanitation - - Extractions - - Finance, insurance and social solidarity - - Finance, real estate and business services 6.2 5.5 General government services - - Gross domestic product at basic prices / factor cost 100 100 Manufacturing 11.1 7.5 Mining 0.5 12.9 Other services 2.4 2.1 Public Administration & Personal Services - - Public Administration, Education, Health & Social Work, Community, Social & Personal Services - - Public administration, education, health & social work, community, social & personal services 22 17 Social services - - Transport, storage and communication 12.1 12.6 Transportation, communication & information - - Wholesale and retail trade, hotels and restaurants 5.8 3.7 Wholesale, retail trade and real estate ownership - - Burkina Fasos economy is slowly recovering from the social crisis that occurred in the rst six months of 2011. The authorities believe the crisis aected the economy throughout 2012, making growth 0.5 percentage points lower than it should have been. However, thanks to good rainfall real GDP growth in 2012 is estimated to have almost doubled from 4.4% to 8.0%. The economy is dominated by the tertiary sector (43.2% of GDP). However, the vitality of the primary sector, which employs most of the workforce and contributed 31.3% to GDP in 2012, determines the rate of growth of the secondary and tertiary sectors. Cereal and cotton production still inuence the economic activity of the cotton ginning, transport, trade and nancial services. The fastest-growing sectors are agriculture (14.5% of GDP), the extractive industries (30.6% of GDP), livestock (11.3% of GDP) and trade (11.0% of GDP). These four sectors account for almost half of GDP. Thanks to better rainfall in 2012, agriculture performed well, growing by 23.7% (compared to the previous year's crops). These results have been achieved thanks to ongoing eorts by the government to support small farmers (distribution of higher quality seeds, provision of compost pits, farming equipment). Thanks to these 26 African Economic Outlook - Regional Edition / Western Africa AfDB, OECD, UNDP, ECA 2013 BurkinaFaso 27. 27African Economic Outlook - Regional Edition / Western Africa AfDB, OECD, UNDP, ECA 2013 eorts and adequate rainfall, cereal production grew by 8% in 2013. The cotton sector is also recovering from the internal crisis of 2011 thanks to government incentives for producers, including continued subsidies for agricultural inputs, a rise in prices paid to cotton producers to XOF 245 (CFA Franc BCEAO) per kg over the last two seasons, and the settlement of arrears owed to them. As a result of these incentives the area of planted land rose by an estimated 38%. Cottonseed production was estimated at 572 000 tonnes in 2012, a 38% rise on the 2011 gure. The upward trend in production should continue in 2013 and 2014, with annual growth of at least 5%. The main threats to this sub-sector will remain climatic shocks, a decline in international cotton prices and a big rise in the cost of inputs. The livestock sector should continue growing at an average rate of 3.8% a year in 2013, thanks especially to the ongoing vaccination initiatives, insemination and spread of a high-performance cattle breed and incoming animals belonging to Malian refugees. Mining (25.3% of GDP) forms the backbone of the secondary sector, and its strong growth is boosting all other sectors. Gold production was estimated at 32.4 tonnes in 2012, with seven of the countrys eight operational mines extracting gold. However, growth in the sector slowed considerably in 2012 to just 0.7% from 39.4% the previous year. This slump probably occurred because the reserves of some mines depleted and the Bissa Gold mine did not begin operations. The tertiary sectors vitality was boosted by market services, especially trade, which recorded 9.2% growth in 2012. Market services will continue to grow strongly in 2013, beneting from the knock-on eects of reforms to improve the business climate and events such as the Pan-African Film and Television Festival of Ouagadougou. But the security risk, marked by the crisis in Mali, will be the main risk to market services. On the demand side, growth in GDP in 2012 was mainly attributable to nal consumption (81.3% of GDP) and investments. According to estimates, they respectively contributed 5.4 and 1.7 percentage points to growth. Foreign trade contributed very little to growth (0.1 percentage points) because the country relies so heavily on imports (petroleum products, food products and equipment linked to public investment). Final consumption grew by an estimated 11.1% in 2012, driven mainly by the private sector (63% of the total). Public consumption also grew by 14.8%, thanks to government aid to disadvantaged groups (social measures and support for Malian refugees), election costs and the cost of managing the 2012 food crisis. Investment growth of 6.7% in 2012 was helped by a 10.1% increase in private gross xed-capital formation (GFCF). The outlook for 2013 and 2014 is positive. Growth should remain strong thanks to investment in infrastructure envisaged as part of the Strategy for Accelerated Growth and Sustainable Development (SCADD) and private consumption. Several major investment projects will continue: Donsin Airport, the Bagr Growth Pole, new roads under the Millennium Challenge Account and the electrification programme. Consequently, real GDP growth should remain strong, at 6.7% in 2013 and 6.8% in 2014. Burkina Fasos economy has always been vulnerable to adverse climatic conditions (lack of rainfall), a drop in gold prices and a sharp rise in international oil prices. But now it is faced with a new threat in the shape of the Mali crisis. BurkinaFaso 28. http://dx.doi.org/10.1787/888932809963 Macroeconomic Policy Fiscal Policy The government continued with an expansionary scal policy in 2012 as it tried to manage the eects of the 2011 social crisis while taking care of Malian refugees and vulnerable people aected by the 2012 food crisis. To ensure enough ressources are available to tackle these issues, sta costs rose by 13.7% in 2012. Social spending also increased sharply, from XOF 298.2 billion in 2011 to XOF 391.2 billion in 2012, as the government intensied its eorts to support the most vulnerable groups following the food crisis and the inux of refugees. This represents an increase of just over one percentage point over the previous year (from 6.2% to 7.3% of GDP). Subsidies for petroleum products are relatively low, amounting to less than 1% of GDP. The subsidies primarily focus on the price of hydrocarbons from the state electricity rm, the Socit nationale de production et de commercialisation de llectricit. To help contain subsidies for hydrocarbons the government raised the price at the pump by XOF 50 in 2012. Overall, current expenditure is estimated to have increased from 12.4% of GDP in 2011 to 13.2% in 2012. There was also a slight increase in total public expenditure in 2012, which rose to an estimated 23.6% of GDP from 22% in 2011. Government revenue, including donations, showed strong growth of 19% in 2012. Total revenue and donations, meanwhile, stood at an estimated 23.1% of GDP, up from 20.6% the previous year. Tax revenue surged by 22.7%, reaching 14.2% of GDP in 2012, up from 13.7% in 2011. This strong growth was fuelled by taxes on trade and international transactions, the tax on goods and services and income taxes. Non-tax revenue, meanwhile, could be up by 24.8% thanks to increased dividends and taxes on mining licences. Burkina Fasos good overall performance for generating revenue stems from government measures to simplify and modernise the tax and customs system, combat fraud and forgery, strengthen the performance of tax-collection agencies, etc. However, the tax burden (14.2%) is still below the regional WAEMU criterion (17%). The low tax burden is largely explained by the size of the still-untaxed primary sector and the prevalence of the informal economy in the tertiary sector. The governments cautious management policy helped reduce the overall budget decit (commitment basis, including grants), which was reduced from 1.4% of GDP in 2011 to 0.5% in 2012. The decit was nanced by disbursements from the International Monetary Fund (IMF) under the Extended Credit Facility and the issue of bond loans on the WAEMU market. In the coming years, the budget decit is likely to grow to 1.5% in 2013 and 2.3% in 2014. Table 3: Public Finances 2013 (percentage of GDP) 2009 2010 2011 2012 2013 2014 Total revenue and grants 19.6 19.8 20.6 23.1 22.5 22.3 Tax revenue 12.5 12.7 13.7 14.2 14.3 14.1 Oil revenue 5.9 4.5 5 7 6.3 6.3 Grants - - - - - - Total expenditure and net lending (a) 24.3 22.7 22 23.6 24.1 24.6 Current expenditure 12.7 11.9 12.4 13.2 13.4 13.8 Excluding interest 12.2 11.4 11.8 12.7 12.9 13.3 Wages and salaries 5.8 5.5 5.5 6 5.8 6 Interest 0.4 0.5 0.6 0.5 0.5 0.5 Primary balance -4.3 -2.4 -0.9 0 -1 -1.8 Overall balance -4.8 -2.9 -1.4 -0.5 -1.5 -2.3 Figures for 2012 are estimates; for 2013 and later are projections. 28 African Economic Outlook - Regional Edition / Western Africa AfDB, OECD, UNDP, ECA 2013 BurkinaFaso 29. 29African Economic Outlook - Regional Edition / Western Africa AfDB, OECD, UNDP, ECA 2013 http://dx.doi.org/10.1787/888932810951 Monetary Policy In the context of the xed exchange rate of the CFA Zone, the regions monetary policy in 2012 supported economic growth and price control. However, given the volatility of food prices and the direct and indirect impact of the XOF 50 rise in fuel prices at the pump, ination rose to 3.6% in 2012, which is above the WAEMU target. In the event of a good harvest, inationary pressures should subside in 2013 and 2014. From 2013 onward, ination is expected to average at less than 2% a year, and therefore below the WAEMU threshold of 3%. The money supply grew by 11.3% in 2012, thanks to the 17.3% increase in credit to the economy. This trend is expected to continue in 2013 and 2014, growing by an average of 11.3% a year. Economic Cooperation, Regional Integration & Trade Burkina Faso is a member of nearly all West African institutions and is home to the WAEMU headquarters. For trade, WAEMU of which Burkina Faso is a member implemented a common external tari to simplify trade and reduce tari protection among member countries. There are four tari bands: 0%, 5%, 10% and 20%. The average for Burkina Faso is less than 16%. The WAEMU tari also includes a statistical fee (1%) and a community solidarity levy (1%). Cases of discriminatory domestic taxation are rare and temporary and there is no export tax. Nevertheless, prior authorisations are needed for certain imports (sugar, cement, etc.) and are not issued systematically. Burkina Faso is not very open to international and regional trade. Although it is a member of WAEMU and the Economic Community of West African States (ECOWAS) and is strategically located at the geographical centre of both organisations, Burkina Faso trades mainly with Asia and Europe rather than with its neighbours. Trade with other WAEMU and ECOWAS countries is limited to raw materials. Overall exports grew by 10.4% in 2012 thanks to growth in cotton and gold production. However, this growth was much lower than the 43.9% recorded in 2011. Exports fell slightly to 21.9% of GDP in 2012, down from 22.2% in 2011. Similarly, the current-account balance deteriorated in 2012, with the deficit having expanded from 1.2% of GDP in 2011 to an estimated 3.5%. There is a mixed outlook for 2013 and 2014, with the external decit expected to widen in 2013 to 5.0% of GDP before contracting in 2014 to 4.4%. To improve foreign trade, the country will have to remove constraints on trading across borders and implement WAEMU community directives on the free circulation of goods and people. For cross border trade, the number of documents required for export and import transactions remains high at ten, compared to a sub- Saharan average of eight for exports and nine for imports. Costs per container are higher than the sub-Saharan African average, at USD 2 412 for export containers (compared to the average of USD 1 990) and USD 4 030 for import containers (compared to the average of USD 2 567). To facilitate trade within WAEMU, adjacent border posts have been set up at the borders with Ghana, Togo and Niger. The country should become more open over the next few years through exports in mining and agriculture (gold, manganese, cotton, sesame, etc.). The export share of GDP should thus remain at around 21.7% in 2013. Table 4: Current Account 2013 (percentage of GDP) 2004 2009 2010 2011 2012 2013 2014 Trade balance -9.4 -5.8 -1.6 0.2 -0.9 -1.4 -0.2 Exports of goods (f.o.b.) 10 10.8 17.6 22.2 21.9 21.7 23 Imports of goods (f.o.b.) 19.4 16.6 19.2 22 22.8 23 23.2 Services -4.7 -4.9 -5.9 -6.7 -7.4 -7 -7.4 Factor income -0.6 -0.1 -0.1 -0.1 0.1 0.1 0.1 Current transfers 3.9 6.2 5.5 5.3 4.6 3.3 3.1 Current account balance -10.8 -4.6 -2 -1.2 -3.5 -5 -4.4 Figures for 2012 are estimates; for 2013 and later are projections. BurkinaFaso 30. http://dx.doi.org/10.1787/888932805004 Debt Policy The World Bank-IMF debt sustainability analysis of 2012 downgraded Burkina Fasos long-term risk of debt distress from high to moderate. This improvement was mainly driven by strong growth in gold exports. Thus in 2012 all the indicators were below their respective critical thresholds. The ratio of net present value of debt to exports should continue to fall due to the positive eect of gold exports. In 2012 this ratio fell to an estimated 55.6%, from 56.1% in 2011. However, the debt distress rating could be upgraded if there is a reversal in the trend of commodity prices. It is also worth noting that in 2012 the country had no arrears in external-debt payments. The country's government has appointed a team responsible for debt management and macroeconomic policy. The debt data is readily available and the legal framework of public borrowing is clearly dened. In the past, government policy was to limit borrowing to concessional loans in which the grant share was higher than 35%. Since the countrys debt distress ranking was changed, the government is exploring new nancing options to fund infrastructure projects with a high economic return. It is also currently drafting a bill on publicprivate partnership. Debt analysis and management skills still need improving. This could be achieved through technical assistance used to draw up a medium-term debt strategy and through training technicians responsible for analysing debt sustainability. Figure 2: Stock of total external debt and debt service 2013 Figures for 2012 are estimates; for 2013 and later are projections. Debt/GDP Debt service/Exports 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 0% 5% 10% 15% 20% 25% 30% 35% Percentage 30 African Economic Outlook - Regional Edition / Western Africa AfDB, OECD, UNDP, ECA 2013 BurkinaFaso 31. 31African Economic Outlook - Regional Edition / Western Africa AfDB, OECD, UNDP, ECA 2013 Economic & Political Governance Private Sector The private sector is dominated by the informal sector. Most businesses are very small or medium sized, and operate in retail or construction. Improving the business climate to attract investment remains a major challenge with much at stake. The current investment code helps streamline and control licensing requirements for most activities. This code provides accredited rms with various benets, depending on the accreditation scheme, both in the investment phase and in the operational phase. Despite these benets, small- and medium-sized companies struggle to take advantage of the opportunities available to them in a wide range of sectors, including agriculture, agribusiness, mining and tourism. Concerning the protection of shareholders rights, Burkina Fasos legislation complies with the relevant legislation of the African Business Law Harmonisation Organisation (OHADA). However, this legislation has certain weaknesses, which are currently being examined. Thus, in the strength of investor protection index (where countries score between 0 and 10 according to how much protection investors receive), Burkina Faso has a relatively low score of 3.7 out of 10, which is below the sub-Saharan African average of 4.5 and the OECD average of 6.0. All in all, the business environment deteriorated slightly in 2012 according to the World Bank report Doing Business 2013. Burkina Faso slipped three places in the rankings from 150th to 153rd. For business start-up it also lost two places. The regulatory framework on competition in Burkina Faso is determined by national legislation. All public-sector bodies are free to