Basic GDP arithmetic for Burkina Faso

I’ve been reading the latest IMF report on Burkina Faso, and thought I would share some of the numbers. Here’s what you see in the report:

  • GDP is about $12 billion at market exchange rate of 500 FCFA per USD.  This is about $750 per capita.
  • Gold production is 15-20% of GDP.  Production is about 40 tons, and each ton is 32,000 ounces, and an ounce, say, sells for $1350. So total value of gold production is about $1.7 billion (the IMF report estimates about $2b).
  • So that means that excluding gold production, GDP per capita is is only about $600 per person.  The average working person, let us say, has two dependents, so income per worker must be about $1800 per year.  Or about $150 per month.
  • Income distribution is quite skewed, with urban  and government workers earning much more than rural villagers.  So a typical village worker is earning maybe $75 per month, about 35,000 FCFA per month.  This corresponds with my experience, where village wages are on the order of 500-1000 FCFA per day.  Artisanal gold mining has been causing those wages to rise, but primarily for young men.
  • Total annual government spending is about $2 billion, or about $130 per person.
  • Mining revenue is about 150 billion FCFA, or about $300 million.  About 15% of the government’s budget.  This has been a huge factor in macroeconomic stability for 2011, 2012 and 2013.  The government continues to borrow, however, and there seems to be little provision for “rainy day” fund or for a longer term “cash transfer’ plan to distribute gold mining revenues to households.

Most maddening sentence in the report: “However, there still exist data problems that impede the ability to evaluate the direct and indirect impact of mining activity on the broader economy. One issue is that the national accounts are derived with a base year of 1999, when mining activity was very limited.”  What the heck does this mean?  I could see how measuring real GDP with base year price of gold from 1999 would seriously underestimate the sector.  But why would mining activity being limited possibly matter? The whole point of real GDP is that a rise in production is what is being measured.

About mkevane

Economist at Santa Clara University and Director of Friends of African Village Libraries.
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