Country Economic Memorandum for Burkina Faso: Making Growth More Efficient, Sustainable, and Inclusive

According to the latest Country Economic Memorandum for Burkina Faso, rapid economic growth in the past two decades has not been enough to bring about the structural transformation it needs to equip itself for future success.

• Despite output tripling in real terms in the past two decades, population growth has meant GDP per capita has not even doubled, and the number of people in poverty has remained virtually unchanged. The fruits of economic growth have not been evenly distributed across regions, while inequality, which had been falling, is now on the rise. Industrial gold mining has emerged as a driver of growth, but the sector creates few jobs and has limited linkages with local businesses. It has also led to windfall profits, raising political tensions in a context of worsening domestic and regional instability which culminated in two coups in 2022.
• Growth has been neither efficient, sustainable, nor inclusive. Most of the increases in output across all sectors of the economy have been based on the accumulation of labor and capital, rather than improvements in productivity. The ballooning public sector absorbs most of the limited supply of better-educated workers and is contributing to a widening fiscal deficit, leaving little headroom for public investment. Deforestation for fuel and agricultural expansion has led to the loss of almost half the country’s forests in the past two decades. The labor market has not kept pace with demographic growth leaving a burgeoning population of young people struggling to find their place in society.
• Low agricultural productivity growth has not allowed the sector to fulfil its poverty-reducing potential. Most of the growth has been due to increasing the area under cultivation rather than improved yields. The sector is dominated by small-scale subsistence farming with limited access to input, capital, and machinery. Violence and instability, combined with the lure of artisanal mining, have fueled an exodus to the cities leaving the sector short of labor. Heavy dependence on rainfall leaves the country highly exposed to climate change, with about one-third of its land already impacted by desertification.
• Low levels of technological sophistication are preventing Burkinabe firms from increasing their productivity and creating more and better jobs. The main barriers to more widespread and intensive use of modern technology are lack of information, inadequate skills among both managers and workers, poor infrastructure—leading to unreliable electricity supplies and limited access to the internet—and underdeveloped financial markets.
• Inefficient resource allocation and poor transport connections are preventing the most productive firms from reaching their full potential. Market distortions are driven by poor transport connectivity and rapid urbanization which has led to unplanned sprawl and disconnectedness within cities, reducing the agglomeration effects which would otherwise increase productivity in more densely populated areas.
• Greater gender parity would boost growth in a more equitable and inclusive way. Although the gender gap in school enrolment has recently been reversed, at least at primary level, Burkinabe women live in a highly unequal society, facing early marriage, a high burden of care, and lack of control over their reproductive health needs. Women farmers, entrepreneurs, and employees earn less than their male counterparts, with the differences driven by women’s lack of capital and control over income, lower use of male workers, lower adoption of farming technology, and less commercialization of women-owned farms. Closing these gaps would expand the supply of skilled labor and enhance productivity.
• Far-reaching reforms to tackle these drivers of low productivity could bring about a decisive structural transformation. Three growth scenarios show that continuing a low or medium growth path, with limited attempts at structural reforms, would mean continuing high levels of poverty, especially after factoring in the effects of climate change.

The report offers recommendations that could create the efficient, sustainable, and inclusive growth needed to propel Burkina Faso into the ranks of the lower middle-income countries and improve its resilience to climate change. These are as follows:

• Diversify within and outside agriculture by: i) creating demand for agricultural products with stronger linkages between agriculture and processing, ii) improving livestock productivity through improvements to husbandry and enhanced value addition, iii) and diversifying the rural economy with more off-farm jobs, strengthened human capital and better rural/urban linkages.
• Enhance domestic and international market access and promote moves away from subsistence farming.
• Mitigate and manage agricultural risks by promoting climate-smart agriculture, irrigation, land restoration, and insurance and de-risking, and supporting the displaced and vulnerable.
• Strengthen the enabling environment for private firms by reducing barriers to accessing electricity, digital services, and finance.
• Develop firm-level capabilities to make greater use of technology by i) promoting access to external knowledge and promote exposure to international experience and global value chains, ii) supporting collaborations to help businesses upgrade their technology and iii) reducing tariffs and regulations hampering the adoption of technology.
• Increase the human capital base by developing digital skills, especially among the younger generation.
• Invest in more resilient transport infrastructure.
• Improve the enabling environment for transport logistics to reduce trading costs for businesses.
• Design policies to overcome informality.
• Increase women’s engagement in higher-value sectors by improving their skills and their involvement in management and reducing occupational segregation.
• Increase women’s access to productive inputs by improving their financial inclusion and access to business capital, increasing their use of and returns to labor and modern agricultural inputs, and increasing their returns to land.

Source: https://www.worldbank.org/en/