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Burkina Faso - Economy

Burkina Faso is a landlocked country which is poor in natural resources and therefore which industrial base is fragile. Agriculture and livestock are the main industries, accounting for at least 37.6% of the gross domestic product as of 2002 and at least 85% of employment. However, these industries are subject to the weather so that its growth is quite unstable. The country’s main crops are raw cotton, sorghum, pearl millet, corn and peanuts; raw cotton accounts for at least 60% of exports.

Faced with these conditions, the government embarked on a program of economic reform as part of economic stabilization and structural adjustment policies following the transition to civilian rule in 1990. These reforms have been applauded by donor organizations. For the decade from 1997 to 2006, the gross domestic product (GDP) marked an average growth rate of 6%.

The government of Burkina Faso quickly adopted a poverty alleviation strategy and was the second sub-Saharan African country to complete drafting a poverty reduction strategy paper (PRSP/Cadre Stratégique de Lutte contre la Pauvreté, CSLP) in 2000. In July of that year, a 700 million dollar debt reduction was set. A second PRSP/Cadre Stratégique de Lutte contre la Pauvreté, CSLP was devised in 2003 as a continuation of the first PRSP, setting four priorities for the period of 2004 to 2006: the promotion of economic growth, improving access to basic social services among the poor, improving income and expanding employment at the poverty level, and enhancing governance.

Between the 1960s and 2000s, Burkina Faso’s crop yields doubled, an increase unmatched in any other Sahelian country. Over the same period, the amount of farmland per person declined by 36 percent; however, the overall trajectory appears favorable, and 2025 projections based on these trends suggest that Burkina Faso will continue to produce about the same amount of cereal crops per person (236 kilograms per person per year).

Burkina Faso produces some of the best mangoes and papayas in the world, but the mangoes are seasonal. Garlic, onions, tomatoes, and a local variety of eggplant are available year-round in many locations. Other fruits and vegetables grown in the country, depending on the season and location, include oranges, limes, grapefruits, bananas, strawberries (available in January in Ouagadougou), melons, carrots, cabbages, potatoes, sweet potatoes, pumpkins, bell peppers, hot peppers, beets, lettuce, broccoli, cauliflower, and cucumbers.

Burkina Faso remains one of the world’s poorest countries, ranking 161 out of 169 countries in the 2010 UNDP Human Development Index, with a per capita gross domestic product (GDP) of $580. About 80% of the population relies on subsistence agriculture, with only a small fraction directly involved in industry and services. Drought, poor soil, lack of adequate communications and other infrastructure, a low literacy rate, and an economy vulnerable to external shocks (such as rising oil and food prices and the now-abating Ivoirian political crisis) are all longstanding problems.

Burkina Faso ranks 143 out of 189 economies in the World Bank's Doing Business 2016 survey, below Tanzania, Malawi and Côte d’Ivoire but above Ethiopia, Sierra Leone and Togo. Infrastructure deficiencies (landlocked country), a weak legal system, perceptions of widespread corruption and low literacy rates are obstacles to private investment. The banking sector remains concentrated, with limited competition, and is over-exposed to a few large borrowers, including in the cotton industry.

Burkina’s economic and financial outlook offer reason for cautious optimism. Real GDP growth reached 7.9% for 2010, compared with 3.2% in 2009, but was expected to slow to 5.2% in 2011. The mining and the agricultural sectors (primarily cattle and cotton) are the main sources of growth. Despite popular perception that the cost of living has risen, inflation was -0.7% in 2010 and was expected to increase only slightly in 2011. The budget deficit increased from 4.8% of GDP in 2009 to 5.6% in 2010 because of an increase in investment spending.

The government faces pressure to increase spending to encourage calm following the social unrest that began in spring 2011. Burkina remains committed to the structural adjustment program it launched in 1991, and it has been one of the first beneficiaries of the World Bank/International Monetary Fund (IMF) debt-relief and poverty reduction programs for heavily indebted poor countries.

Burkina Faso is recognized as a good development performer and partner. From 2008 to 2009, annual assistance amounts more than tripled to $1.3 billion, and annual per capita assistance was estimated in 2009 at $81. About 3 million to 4 million Burkinabe are migrant workers, many of whom work on cocoa farms in Cote d’Ivoire. Their remittances provide a contribution to the economy's balance of payments that is third only to gold and cotton as a source of foreign exchange earnings. Political and economic problems in Cote d'Ivoire have had a direct impact on this source of revenue for millions of Burkina households.

Burkina attempted to improve the economy by developing its mineral resources, particularly gold, improving its infrastructure, making its agricultural and livestock sectors more productive and competitive, and stabilizing the supplies and prices of food grains. Staple crops are millet, sorghum, maize, and rice. The cash crops are cotton, peanuts, karite (shea nuts), and sesame. About 80% of the population relies on subsistence agriculture. Livestock, once a major export, has declined.

Burkina Faso increased its gold exports substantially over the past 3 years, with 7.8 tons exported in 2009; it was projected that up 20 tons could be exported in 2010. Burkina Faso is Africa’s largest producer of cotton, which employs 17% of the population and accounts for 5% to 8% of GDP and 60% to 70% of export earnings. In 2010, almost 80% of the cotton planted in Burkina Faso was grown from genetically modified seeds. Burkina is second only to South Africa as Africa’s largest producer of biotech crops (100% of it cotton), and had the world’s second-fastest growing acreage of biotech crops after Australia. The Monsanto Company remains a major partner in this endeavor. Manufacturing is limited to cotton and food processing (mainly in Bobo-Dioulasso) and import substitution heavily protected by tariffs. Some factories are privately owned, and others are set to be privatized. Burkina Faso's investment code has helped to promote foreign investment. In the International Finance Corporation’s (IFC) Doing Business 2010 report, Burkina Faso ranked at 147 out of 183 countries, up from 155 in 2009 and 164 in 2008; this improvement reflects the country's successful efforts to create an environment conducive to business growth.

Reforms include the adoption of a labor code in May 2008, improving the process to transfer property, the elimination of commune authorization requirements, the creation of a one-stop shop to facilitate construction permits, a decrease of the corporate tax rate from 35% to 30%, and a decrease on dividend taxes from 15% to 12%. Foreign investors, particularly in the mining sector, have taken note of this development; since 2007, four commercial gold mines and a manganese mine have been opened. Several others are slated to follow in the next few years. A railway connects Burkina with the port of Abidjan, Cote d'Ivoire, 1,150 kilometers (712 mi.) away. Primary roads between main towns in Burkina Faso are paved. Domestic air service and flights within Africa are limited. Phones and Internet service providers are relatively reliable, but the cost of utilities is very high.

In a country known mainly for cotton and livestock exports a decade ago, gold mining is now the biggest economic sector, producing more than 36 metric tonnes in 2014 and earning $1.6 billion in foreign sales that year. But the previous government’s rapid mining push also brought major problems, including water contamination and persistent social conflicts around mining sites.

Gold continued to be Burkina Faso’s most valuable mineral commodity in terms of its contribution to the country’s gross domestic product (GDP) and to Government revenues. In 2013, the country ranked fifth among Africa’s leading gold producers. The International Monetary Fund estimated that gold production from six of the country’s seven industrial gold mines, together with production from small-scale and artisanal gold miners, accounted for about 71% of the country’s total exports by value in 2013 and for about 16% of Government revenues. Artisanal gold production, however, was thought to be underreported. Mining taxes and royalties from industrial gold mining operations accounted for about 65% of reported Government revenues. The mineral sector as a whole, however, accounted for only 4.3% of the GDP in 2013.

Other mineral commodities produced in the country included cement, lead, manganese, silver, and zinc. Industrial minerals, such as dolomite, granite, marble, phosphate rock, salt, and sand and gravel, were also produced, but information was inadequate to make reliable estimates of output. Burkina Faso was a participant in the Extractive Industries Transparency Initiative (EITI) and has been compliant with EITI standards since it became a candidate country in 2009.

The government will begin implementing a new mining code, adopted in 2015 as required by the World Bank, for the release of $100 million in budget support for the West African country. It abolishes a previous 10% tax break on mining company profits and obliges firms to pay into a local development fund. The new code is intended to strengthen environmental safeguards, ensure higher revenues for the state and oblige companies to invest much more in local health, education and other community facilities.

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