Burkina Faso: Economy

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. Official corruption is high but not extreme. 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. The government also 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 is attempting 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 has 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.

Sources:

CIA World Factbook (February 2012)
U.S. Dept. of State Country Background Notes ( February 2012)

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