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AFRICAN DEVELOPMENT BANK AFRICAN DEVELOPMENT FUND
FIFTH ECONOMIC REFORM SUPPORT PROGRAMME
(PARE-V)
REPUBLIC OF BURUNDI
APPRAISAL REPORT
OSGE
MAY 2012
Appraisal Team
Team Leader: Michel Mallberg, Chief Macroeconomist, OSGE.2 Team Members:
- M. YARO, Principal Public Finance Specialist, ORPF.2 - M. FALL, Principal Procurement Specialist, ORPF.1 - J. TOKINDANG, Principal Country Economist, BIFO - A. EYEGHE, Principal Social Protection Specialist, OSHD.1 - M. DIOMANDE, Senior Financial Management Specialist, ORPF.2 - A. BYLL-CATARIA, Senior Social Protection Specialist, OSFU - L. BASSOLE, Macroeconomist, OSGE.2 (Co-Team Leader) - A. TARSIM, Senior Economist, OSGE.2 - A. DIALLO, Senior Economist, OSHD.1
- R. LAKOUE, YP Economist, OSGE.2
Sector Director: - I. LOBE NDOUMBE, OSGE Country Director: - G. NEGATU, EARC
Peer Reviewers
Nadège Yameogo (EDRE), Carina Sugden (OSGE), Catherine Baumont-Keita (ORNB), Laurette Dade (ORPF.2), Hamacire Dicko (MLFO), Richard Doffounsou (ORWA)
TABLE OF CONTENTS
I. THE PROPOSAL………………………………………………………………………… 1
II. COUNTRY AND PROGRAMME CONTEXT…………………………………………. 1
2.1. Government’s Overall Development Strategy and Medium-Term Reform
Priorities ...................................................................................................................1
2.2. Recent Political and Socioeconomic Developments, Prospects, Constraints and
Challenges ................................................................................................................2
2.3. Status of Bank Group Portfolio................................................................................5
III. KEY PROGRAMME DESIGN ELEMENTS AND SUSTAINABILITY 5
3.1. Linkages with the CSP, Country Readiness Assessment and Analytical
Underpinnings ..........................................................................................................5
3.2. Donor Collaboration and Coordination ...................................................................6
3.3. Results and Lessons Learned from Similar Completed or Ongoing Operations .....7
3.4. Linkages with Ongoing Bank Operations ................................................................8
3.5. Bank’s Comparative Advantages .............................................................................8
3.6. Application of Good Practice Principles on Conditionalities ..................................8
3.7 Application of the Bank's Non-Concessional Debt Policy………………………..9
IV. PROPOSED PROGRAMME AND EXPECTED OUTCOMES…………………………9
4.1. Programme Goal and Objectives .............................................................................9
4.2. Pillars, Specific Objectives and Expected Outcomes ..............................................9
4.3. Financing Requirements and Arrangements ..........................................................13
4.4. Programme Beneficiaries .......................................................................................14
4.5. Impact on Gender ...................................................................................................14
4.6. Environmental Impact ............................................................................................14
V. IMPLEMENTATION, MONITORING AND EVALUATION 14
5.1. Programme Implementation Arrangements ...........................................................14
5.2. Monitoring and Evaluation Arrangements.............................................................15
VI. LEGAL INSTRUMENTS AND AUTHORITY 16
6.1. Legal Instruments...................................................................................................16
6.2. Conditions associated with Bank Group Intervention ...........................................16
6.3. Compliance with Bank Group Policies ..................................................................16
VII. RISK MANAGEMENT 16
VIII. RECOMMENDATION 17
Tables
TABLE 1: Results-Based Logical Framework .............................................................................. vi
TABLE 2: Key Macroeconomic Indicators 3
TABLE 3 : Conditions for Programmatic Support Operations (PSO) in Accordance with Bank
Policies .................................................................................................................... 5
TABLE 4: Progress made under the Bank's Previous Budget Support Operations …………... 7
TABLE 5 : Breakdown of Budget Support Areas of Intervention ................................................. 9
TABLE 6 : Financing Requirements ............................................................................................ 13
TABLE 7: Financing Arrangements ............................................................................................. 13
Annexes
ANNEX 1 : Letter of Development Policy and Matrix of Operational Policies
ANNEX 2 : Relations with the IMF
i
CURRENCY EQUIVALENTS
(April 2012)
UA 1 = US$ 1.55
UA 1 = €1.16
UA 1 = BIF 2,167.44
FISCAL YEAR
1 January to 31 December
PROGRAMME TIMEFRAME – MAIN MILESTONES
Milestones Timeframe
PCN Approval by OpsCom 23 March 2012
Programme Approval by the Board July 2012
Programme Effectiveness July 2012
Disbursement of 1st Tranche August 2012
Disbursement of 2nd
Tranche June 2013
Programme Completion December 2013
ii
ACRONYMS AND ABBREVIATIONS
ABEJ Burundi Youth Employment Agency
ADB : African Development Bank
ADF : African Development Fund
API Investment Promotion Agency
ARMP : Public Procurement Regulatory Authority
BIF Burundi Franc
BIFO The Bank’s Burundi Country Office
FL : Finance Law
BRA: Burundi Revenue Authority
BRB : Bank of the Republic of Burundi
CAR : Commitments at Risk
CdC : Court of Auditors
CDI Investment Code
CED : Expenditure Commitment Control
CGIT General Tax and Excise Duties Code
CM Council of Ministers
CMP Public Procurement Code
CNCA : National Aid Coordination Committee
CNMP : National Public Procurement Commission
CPIA : Country Policy and Institutional Assessment
CPPR : Country Portfolio Performance Review
CSI Core Sector Indicators
CSP : Country Strategy Paper
DNCMP : National Public Procurement Control Directorate
DSA : Debt Sustainability Analysis
EAC : East African Community
EC : European Commission
ECCAS: Economic Community of Central African States
ECF : Extended Credit Facility
EU: European Union
EUR Euro
FIJ Youth Insertion Fund
FSF : Fragile States Facility
GAP Governance Action Plan
GBS : General Budget Support
GBSP : General Budget Support Programme
GDP : Gross Domestic Product
GoB Government of Burundi
HIPCI Heavily Indebted Poor Countries Initiative
HIV : Human Immunodeficiency Virus
ICGLR : International Conference on the Great Lakes Region
IGE : General State Inspectorate
IMF : International Monetary Fund
LI Labour Intensive
LOLF : Organic Budget Law
LR : Loi de règlement (Audited Finance Law)
iii
LVAT Loi relative à la taxe sur la valeur ajoutée (Law on Value Added Tax)
MDG : Millennium Development Goals
MDRI: Multilateral Debt Relief Initiative
MFPDE: Ministry of Finance and Economic Development Planning
NCB : National Competitive Bidding
NGO Non-Governmental Organization
NPSDS National Private Sector Development Strategy
NPV: Net Present Value
OECD/DAC Organization for Economic Cooperation and Development/Development
Assistance Committee
ONEF : National Employment and Training Observatory
OTBU : Burundi’s Payment Authorizing Officer and Public Accountant
PAP : Priority Action Plan
PAR : Projects at Risk
PARE : Economic Reform Support Programme
PCN Programme Concept Note
PEFA : Public Expenditure and Financial Accountability
PEMFAR : Public Expenditure Management and Financial Accountability Review
PER : Public Expenditure Review
PF Partnership Framework
PFM : Public Financial Management
PFMS: Public Financial Management Strategy
PIU : Project Implementation Unit
PNE National Employment Policy
PPP : Purchasing Power Parity
PPP : Public-Private Partnership
PPPF : Public Private Sector Partnership and Consultative Framework
PRSP : Poverty Reduction Strategy Paper
PSO : Programmatic Support Operations
RGGB: General Regulation on Public Budget Management
SICI : Inspection and Internal Control Service
SIGEFI : Integrated Financial Management System
SME : Small and Medium Enterprises
SYGADE : Debt Management and Analysis System
TFP : Technical and Financial Partners
UA : Unit of Account
UNDP : United Nations Development Programme
UNO United Nations Organization
USD United States Dollar
VAT : Value Added Tax
WB : World Bank
WHO : World Health Organization
iv
GRANT INFORMATION SHEET
BENEFICIARY INFORMATION
Donee Republic of Burundi
Executing Agency
Partnership Framework Support Unit at the
Ministry of Finance and Economic
Development Planning (MFPDE)
Programme Name Fifth Economic Reform Support Programme
(PARE-V)
GRANT CONDITIONS
Modalities ADF Grant from the Fragile States Facility
Resources
Amount 12 million Units of Account
Number of Tranches
Two (2) tranches of UA 7 million and UA 5
million to be disbursed in 2012 and 2013
respectively after fulfillment, by the Donee, of
the specific conditions precedent to each
tranche
PARALLEL FINANCING OF THE PROGRAMME
World Bank (2012 and 2013) : US$ 25 million in 2012 and US$ 25 million in
2013
European Union (2012 and 2013) :
EUR 14 million as a fixed tranche in 2012
EUR 7 million as a variable tranche in 2013
EUR 7 million as a fixed tranche in 2013
v
EXECUTIVE SUMMARY
Context
Over the past few years, Burundi has enjoyed a period of relative political
stability and organized elections regularly, but the situation remains fragile.
Some progress has been made, but the country remains fragile from the
economic, social and institutional points of view. Its economic growth
(4.2% in 2011) remains inadequate compared to the challenges it faces.
Consequently, Burundi is implementing the Poverty Reduction Strategy
Paper II (PRSP-II) and has embarked on a reform process aimed at
modernizing its administration and private sector. The implementation of
these reforms will help to boost economic growth, promote social
development, and build institutional capacities which could ultimately help
the country to emerge from its fragile situation.
Programme
Overview
The Programme’s overall goal is to create conditions conducive to rapid
and inclusive growth. The specific objectives are to: (i) enhance
Government efficiency in the management of its public resources; and (ii)
promote private sector development and job creation.
Programme
Beneficiaries
The programme’s end beneficiary will be the population of Burundi as a
whole and, more particularly, the poorest segments. The improved quality
of public spending will increase supply and facilitate access to basic social
services. Furthermore, Government services will also benefit from the
Programme, which will help to build their capacity to provide higher
quality public services.
Needs Assessment
This programme addresses the Burundi Government need for public
finance stabilization. By financing part of the budget deficit, the
Programme will contribute to easing social tension and reinforcing the
country’s stability. It will therefore, like the other four previous operations,
continue to support the country in its modernization process aimed at
achieving strong, inclusive and job-creating growth
Bank’s Added Value
The Bank has acquired considerable budget support experience from the
first four programmes implemented in the country, as well as from similar
operations in other Fragile States. Since 2009, the Bank has adopted a
programmatic approach for its budget support operations, which is
appropriate for the type of reform policy adopted by the country.
Institutional
Development and
Knowledge Building
This operation will further consolidate the Bank’s intervention aimed at
building the capacities of the Burundi Government services. The analytical
work, as well as the different draft texts considered for the Programme’s
formulation, will contribute to knowledge building.
Recommendations
The Boards are invited to consider and approve the budget support
programme of UA 12 million, broken down into two tranches of UA 7
million and UA 5 million for Burundi for 2012 and 2013 respectively,
under the conditions stipulated in this report.
vi
Table 1: Results-Based Logical Framework
PROGRAMME RESULTS-BASED LOGICAL FRAMEWORK
Country and Programme Name: BURUNDI : Economic Reform Support Programme Phase V (PARE V)
Programme Goal: Contribute to the promotion of accelerated economic growth by enhancing efficiency in the management of Government resources and promoting
private sector development and job creation.
RESULTS CHAIN
PERFORMANCE INDICATORS
MEANS OF
VERIFICATION
RISKS
/MITIGATION
MEASURES Indicators
(including the
CSI)
Baseline
Situation Target
IMP
AC
T
The conditions for rapid and inclusive
growth are created.
Real growth rate ; Implementation
rate of pro-poor
investments ; Private investment
rate % GDP
4.2% in 2011
60% in 2011
7.6% in 2011
4.8% in 2012 and 5% for 2013 and 2014
75% in 2013
10% in 2013
MFPDE and API data ;
IMF reports
Risks:
- The post-electoral
transition which could
lead to deterioration in political and security
stability. This could
weaken ownership and delay implementation of
the reforms. There is an
additional risk of political instability at the regional
level. - A slowdown in the
implementation of the
reforms due to social pressure (the recent
increase in electricity
prices triggered social protests) which could
undermine the efforts
made. The recent law on privatization is being
questioned in Parliament.
- Institutional and
technical capacities are
too weak for
implementation of the reforms
-Vulnerability of
Burundi’s economy to exogenous shocks,
including the impact of
the international financial crisis, weather conditions
and international oil price
hikes; risk of debt unsustainability due to a
narrow export base.
- Fiduciary risk for operation, as well as the
risk of governance
incidents.
Mitigation Measures: - Support from
international and regional organizations, including
UNO and ICGLR;
integration into EAC, maintenance of TFP
support, continuing
implementation of reforms aimed at
improving governance,
pursuance of policy dialogue, especially
through Government
seminars and ongoing dialogue with the private
sector and civil society.
- Pursue public debate
and sensitization
campaigns to explain the rationale for the reforms
EF
FE
CT
S
I. Government efficiency in managing its resources is enhanced
PEFA Indicators P-19
PI-20 PI-21
PI-26
Revenue/GDP ratio
P-19: C+ (2011) PI-20: D+ (2011)
PI-21: D+ (2011) PI-26 : D+
(2011)
14.4% in 2011
P-19: B (2013) PI-20: C (2013)
PI-21: C (2013) PI-26 : C (2013)
15.1% in 2012 and
15.4% in 2013
Analysis on the basis of PEFA methodology
for 2013
MFPDE Data
II. Conditions for promoting private
sector development and job creation
have improved
Number of direct
and indirect jobs
created (all sectors)
6000 in 2011 15 000 in 2012 and
15 000 in 2013
API data
OU
TP
UT
S
Component I. Enhancement of Government Efficiency in Managing its Public Resources
I.1 Improve revenue mobilization
Adopt the revised Bill on the Value Added Tax (LVAT)
Minutes of the meeting on the
adoption of the
revised LVAT Bill
Previous Law LVAT Bill adopted by the Cabinet
Meeting (CM) before
mid-2013 and tabled
before Parliament
The LVAT Bill ; minutes of the
adoption by CM
Letter tabling the Bill
before parliament
Simplify direct taxation: Revise the
General Tax and Excise Duties Code
(CGIT) and the Tax Procedures Manual
Minutes of the
Cabinet Meeting
(CM) on the adoption of the
revised CGIT
Previous Law Draft revised CGIT
adopted by CM
before end 2013 and tabled before
Parliament
Draft CGIT ; minutes
of adoption by CM
Letter submitting the CGIT to Parliament
I.2 Strengthen the National Public Procurement System
Adopt the draft Public Procurement
Code (CMP) revised in accordance with
the recommendations of the country procurement assessment report
Minutes of the CM
meeting on the
adoption of the revised CMP
adopted
2008 CMP Draft CMP adopted
by CM and tabled
before Parliament before end 2013
Draft CMP ; Minutes
of adoption by CM
Letter submitting the revised draft code to
Parliament
Conduct an external audit of public
contracts in accordance with the provisions of the Public Procurement
Code and publish the results on the
Website of the Ministry of Finance or
the ARMP once it is operational). The
audit will concern 2010, 2011 and 2012.
The scope of the audit must cover a minimum of 25% of the annually
awarded number of contracts
Public contract
audit reports
No public
contracts audit
Audit reports
prepared and published. The
reports for 2010 and
2011 will be
available at end 2012
and the report for
2012 will be available by mid-
2013
Copy of the audit
reports; reports available on the
MFPDE Website
(screen copy)
Allocate adequate budget resources to
ARMP in the 2013 and 2014 FL to enable ARMP to fulfill its functions in
compliance with the laws and
regulations
ARMP Budget in
accordance with the FL
2012 BL (BIF
233 M)
25% annual increase
in 2013 budget (available end 2012)
and 2014 budget
(available end 2013)
Copy of 2013 and
2014 FL
As from 1 June 2012, systematically publish the final contract awards (on the
Ministry of Finance website or once it is
operational, on the ARMP Website)
% of public contracts
0 (2011) At least 50% of public contracts in
2012 and 100% of
contracts published in 2013
ARMP Report
I.3-Strengthen Internal and External Controls on Budget Execution
Prepare a classification of supporting
documents for all payments in the form
of an Order, and ensure application of the classification by the OTBU
Classification of
supporting
documents is applied
No classification Classification
available and applied
by end 2012
Reports of OTBU and
Court of Auditors
(CdC)
vii
RESULTS CHAIN
PERFORMANCE INDICATORS
MEANS OF
VERIFICATION
RISKS
/MITIGATION
MEASURES Indicators
(including the
CSI)
Baseline
Situation Target
The CdC, in accordance with the RGGB, carries out control of
compliance with the classification of
supporting documents for all payments as part of the personal and pecuniary
responsibility of the payment
authorizing officer and public accountant (OTBU)
% of expenditure controlled by the
CdC
The CdC does not carry out
controls of this
type
+ 50% of expenditure controlled from 2013
CdC report - All the technical and financial assistance
provided by partners in
the partnership framework to build
institutional capacities
and implement PRSP II. -Establishment of the
Burundi Revenue
Authority, - Strengthening of public
financial management and
implementation of the good governance and
anti-corruption strategy.
-Implementation of reform to improve the
business climate and
investments -Implementation of
programmes to improve
agricultural productivity and economic
diversification
-Implementation of budgetary and monetary
policies aimed at
achieving macroeconomic stability while
implementing pro-poor
public programmes and targeting the most
disadvantaged social
segments of society. -Implementation of
projects financed by the Bank and other Technical
and Financial Partners
(TFP) in the employment, education, health
infrastructure (energy,
transport, etc.), agriculture, private sector
development and
institutional capacity building sectors.
The MFPDE prepares a monitoring
report on implementation of the
recommendations made by the CdC on budget execution relating to the audited
budget laws for 2009, 2010 and 2011
and published on the MFPDE website
Monitoring Report
on CdC
recommendations and publication of
the report
No monitoring
carried out
A report is published
for 2009, 2010 and
2012 and published on the MFPDE
website
Copy of reports and
screen copy of the
website page where the reports are
published
Establish a mechanism to monitor the implementation at the Ministry of Good
Governance of the recommendations
made by the IGE during its inspections
Monitoring report on the
recommendations
and % of recommendations
followed up
Little follow-up carried out
The percentage of recommendations
implemented is above
30% in 2012 and above 50% in 2013
IGE monitoring report on the implementation
of the
recommendations
Ministerial inspectorates submit their
annual control programmes and reports to the IGE to strengthen their
coordination
% of Ministerial
inspectorates which submit their
control
programmes and reports to IGE
Few Ministerial
Inspectorates submit their
annual control
programmes and reports to IGE
60% of inspectorates
submit their reports and programmes in
2012 and 80% in
2013
Annual IGE Report
Adoption, by Ordinance, of the Public
Expenditure Rationalization Manual and
the text on Expenditure Commitment Control (CED) and implementation of
the texts
Ordinance on the
adoption of the
Public Expenditure Rationalization
Manual and on the
CED
No Ordinance
on the adoption
of the Public Expenditure
Rationalization
Manual and on the CED
Ordinances adopted
by end 2012
Copies of Ordinances
Component II. Promotion of Private Sector Development and Job Creation
Prepare, adopt and implement the
National Private Sector Development Strategy (NPSDS)
Copy of NPSDS No strategy Strategy adopted by
the CM end 2012 and implemented in 2013
NPSDS; CM minutes
Prepare and adopt a Bill on Public-
Private Partnerships (PPP)
Copy of the PPP
Bill to CM
No legal
framework
Adoption of the PPP
Bill by the CM
before end 2013
PPP Bill ; CM minutes
Establish a public-private dialogue framework (PPDF) to serve as
consultation and decision-making
platform
Number of meetings organized
No dialogue framework
Dialogue framework is operational before
mid-2013 ; quarterly
meetings organized
Annual report of PPDF secretariat
Adopt Bill amending the Investment
Code (CDI)
Copy of the Bill
amending the CDI
Previous Code New Code adopted
by the CM before end
2013 and tabled before Parliament
Copy of CDI ;
Adoption minutes and
letter of transmittal to Parliament
Recruit 12 senior staff for API and
install API in offices suitable for its mission
Number of senior
staff recruited
21 senior staff
have assumed duty (2011)
At least 33 senior
staff have assumed duty at API by 3rd
quarter of 2012
API Report;
Prepare National Employment Policy
(PNE), propose the related sector priority action plans (PAP), and
implement this policy
Copy of policy and
sector PAPs
No policy PNE prepared by end
2012, adopted and implemented from
2013
PNE ; PNE Adoption
minutes
Establish a formal framework to revise
education curricula for closer balance
between employment supply and demand among the different partners
Copy of text
establishing the
framework and number of
meetings
No framework Framework
operational by end
2012; at least 4 meetings organized
per year
Copy of text
establishing the
framework, minutes of meetings
ADB Financing (in UA million): FSF = 12 ; WB: US$ 35 million for 2012 ; EU: EUR 44 million for 2012-2014 period
1
REPORT AND RECOMMENDATION BY MANAGEMENT TO THE BOARDS OF DIRECTORS
ON A PROPOSED GRANT TO THE REPUBLIC OF BURUNDI TO FINANCE
THE ECONOMIC REFORM SUPPORT PROGRAMME, PHASE V (PARE-V)
I. THE PROPOSAL
1.1. Management submits the following proposal and recommendation concerning the
award of a grant of UA 12 million under Pillar 1 of the Fragile States Facility (FSF) to the
Republic of Burundi to finance the Economic Reform Support Programme - Phase V (PARE-
V) over two fiscal years (2012 to 2013). Burundi meets the conditions of eligibility for the FSF as
regards its fragility, and is thus considered as a fragile State1. This will be the Bank’s fifth General
Budget Support (GBS) operation in Burundi, and follows a request by the Government of Burundi
(GoB) made in November 2011. The Programme was appraised in March 2012, and has taken into
account good practices on conditionality and the FSF Operations Guidelines. One of the main
features of this fifth budget support operation is that it broadens the scope of the Bank’s
intervention in Burundi to target private sector development and job creation, and deepens reforms
to enhance Government efficiency in managing public resources so as to ensure inclusive and
sustainable growth.
1.2. PARE-V is aligned on the Poverty Reduction Strategy Paper, Phase II (PRSP-II),
adopted in January 2012 for the 2012-2016 period. PRSP II seeks to create an environment that
will foster Burundi’s sustainable development and allow for achievement of the Millennium
Development Goals (MDG). It is also aligned on the country’s long-term vision ‘Burundi 2025’.
Furthermore, PARE-V is in keeping with: (i) the 2012-2016 Country Strategy Paper (CSP) adopted
in November 2011; (ii) the Bank’s Governance Strategic Directions and Action Plan (GAP) for
2008-2012; and (iii) the governance thrust of the Bank’s Medium-Term Strategy (2008-2012).
PARE-V, which is described in the Letter of Development Policy (Annex 1), will support the
ongoing reform programme in Burundi, consolidate the achievements, and deepen reforms
supported by the Bank in its previous Programmes (PARE I-IV).
1.3. PARE-V’s development objective is to contribute to the promotion of accelerated
economic growth by enhancing Government efficiency in the management of public resources,
promoting private sector development, and creating jobs. In this context, PARE-V’s main
operational objectives are to: (i) enhance Government efficiency in the management of public
resources (Component 1); and (ii) promote private sector development and job creation (Component
2). PARE-V’s expected outputs are: (i) increased tax revenue; (ii) a more efficient procurement
system underpinned by a Public Procurement Code, which will guarantee greater transparence,
fairness and competition; (iii) an improved and more efficient internal and external control system
which will contribute to sounder management of Government’s financial resources; (iv) an increase
in the level of private investment; and (v) the creation of more youth employment opportunities.
II. COUNTRY AND PROGRAMME CONTEXT
2.1. Government’s Overall Development Strategy and Medium-Term Reform Priorities
2.1.1. The overall development framework and long-term social and economic development
objectives are set out in the ‘Burundi 2025’ vision, adopted by Parliament in October 2010.
This Vision is a development planning instrument, which guides sustainable development policies
and strategies in order to meet the needs of the present generations without damaging or
undermining the prospects for future generations. To that end, the Vision identifies eight (8) closely
linked pillars: (1) good governance and building of Government capacities; (2) human capital; (3)
economic growth and poverty reduction; (4) regional integration; (5) demography; (6) social
cohesion; (7) regional development and urbanization; and (8) partnership. The Burundi 2025 vision
is supported, in the medium-term, by the second generation PRSP II adopted in January 2012.
1 See 2012-2016 CSP for Burundi ADB/BD/WP/2011/200 - ADF/BD/WP/2011/133
2
2.1.2. PRSP II gives top priority to sustained and job-creating growth, which requires a
sound macroeconomic framework, higher productivity in the growth-enhancing sectors,
especially agriculture, economic infrastructure, private sector promotion, and youth
employment. The four (4) strategic thrusts identified following broad-based consultations between
the Government, the civil society and development partners are: (1) strengthening of the rule of law,
consolidation of good governance, and promotion of gender equality; (2) transformation of
Burundi’s economy to ensure sustained and job-creating growth; (3) improved accessibility and
quality of basic social services and strengthening of national solidarity; and (4) land and
environmental management in harmony with development.
2.2. Recent Political and Socioeconomic Developments, Prospects, Constraints and
Challenges
2.2.1. At the political level, Burundi has, over the past few years, enjoyed a period of
relative stability and organized elections regularly, but the situation remains fragile. In the
wake of the 2010 elections2 which were boycotted by the Opposition, the country experienced a
period of fairly high tension which the Authorities are trying to ease with support from international
and regional organizations. The Law on Political Parties, adopted in April 2011, which tightens the
conditions for registration and also applies to already registered parties, has fanned fears of a return
to a single party system. To contribute to the reconciliation process, a Truth and Reconciliation
Commission will be established in 2012.
2.2.2. At the economic level, Burundi has experienced volatile growth. Over the 2006-2011
PRSP I implementation period, real Gross Domestic Product (GDP) growth averaged 3.9% per year
compared to a forecast of almost 7% in PRSP-I. This was due to the importance of agriculture in
GDP (about 43.9% in 2010), which is dependent on weather conditions. The poor performance of
the coffee sector, which is undergoing restructuring, also impacted negatively on economic growth.
In 2011, as a result of the contraction in global demand largely due to inflationary pressure, the
GDP growth rate was 4.2 %, which was below the forecast rate of 4.5%3. Frequent power cuts also
impacted negatively on industrial activity and other sectors of the economy.
2.2.3. The external shocks due to soaring food and oil product prices heightened
inflationary pressure in Burundi in 2011. Headline inflation thus rose by about 10 percentage
points between 2010 and 2011 from 4.1% (end of period) to 14.3% (end of period). This
inflationary surge prompted the Central Bank to tighten monetary policy. Indeed, to remedy this
situation, it raised interest rates to contain private sector demand for credit. Thus, according to the
forecasts, the level of consumer prices should fall to 10.3% (end of period) in 2012 and then
stabilize at 8.4% (end of period) in 20134.
2.2.4. Fiscal management was prudent over the 2010-2011 period so as to contain the
Government finance deficit. 2011 was marked by a sharp increase in tax revenue and the early
disbursement of budget supports for 2012. The improvement in tax revenue by 14.4% of GDP in
2011, compared to 13.7% in 2010, was mainly due to the tax system reform, operationalization of
the Burundi Revenue Authority (BRA) in July 2010 and greater centralization of Government
revenue. Despite the negative impacts of the oil and food shocks, the Burundi Authorities were able
to contain the level of budget expenditure in 2011 at 40.1% of GDP compared to 41% in 2010.
Control of public expenditure, coupled with an increase in domestic revenue and budget aid, helped
to maintain the overall budgetary deficit (on a cash basis, including grants, excluding HIPC) at an
average level of 3.4% of GDP over the 2010-2011 period5 compared to an average of 4.2% of GDP
over the 2008-2009 period. The estimated overall budget deficit for 2011 is 2.5 % of GDP.
2 The elections were held from 24 May to 8 September 2010. 3 IMF Reports No.11/199 of July 2011 and No.12/28 of February 2012. 4 IMF Report No.12/28, February 2012. 5 Idem
3
Table 2: Key Macroeconomic Indicators
2010 2011 2012 2013
Real GDP Growth (%) 3.8 4.2 4.8 5.0
Inflation (end of period) (%) 4.1 14.3 10.3 8.4
External Debt (end of period) (% of GDP) 37.0 35.9 35.6 34.7
Overall Balance of Payments (% of GDP) 0.7 -0.8 -0.2 1.9
Monetary Reserves (months of imports) 4.7 4.4 4.4 4.0
Expenditure (% of GDP) 41.0 40.4 35.6 36.0
Revenue including Grants (% of GDP) 37.3 37.9 32.1 32.0
Tax Revenue (% GDP) 13.7 14.4 15.1 15.4
Net Financing (% GDP) -3.7 -2.5 -3.5 -4.0
2.2.5. The debt sustainability analysis (DSA) for 2011 shows that, despite the budget
reforms, Burundi presents a high risk of debt distress, mainly due to the narrowness of its
export base as well as weak institutional capacity6. The debt to exports ratio was 174.4% in
2011, which is above the 100% threshold for the entire DSA analysis period (2011-2031). However,
the net present value (NPV) of external debt to GDP ratio remained below the 30% threshold over
the same period, settling at 13.9% in 2011. However, the level of public debt to GDP fell by 0.8%
between 2010 and 2011 to 37% of GDP in 2011. This improvement was linked to a fall in public
sector borrowing requirements, which reflects a widening of the revenue base and a gradual decline
in public expenditure. To mitigate the debt sustainability risks, Burundi should only use grants and
highly concessional loans (at least a 50% grant element).
2.2.6. However, the medium-term macroeconomic prospects remain fairly positive.
According to the IMF, real GDP growth should increase slightly to 4.8% in 2012 compared to 4.2%
in 2011. It should also rise at an average annual rate of 5.2% over the 2012-2014 period. This
positive trend will be sustained by stronger agricultural sector performance, especially in the wake
of the coffee sector reform, sustained activities in the construction sector, and increased investment
in the energy and tourism sectors.
2.2.7. However, there are still substantial risks of a short-term deterioration. The security
situation and external environment, characterized by high oil prices, are creating persistent risks for
Burundi’s economy with negative impacts on inflation and budget execution. Indeed, the
uncertainties surrounding the current international situation could result in a sharp fall in
development assistance with a negative impact on the country’s growth potential.
2.2.8. The Government aims to build its domestic resource mobilization capacity and
control budget expenditure in order to offset the fall in foreign aid. Tax revenue is expected to
increase from 14.4% of GDP in 2011 to about 15.1% and 15.4% in 2012 and 2013 respectively as a
result of the widening of the tax base, the strengthening of the tax and customs administrations,
control of tax exemptions and the combat against corruption and fraud. The restructuring of
expenditure should be continued with greater budget rigour through improvement in effectiveness
and transparency of public financial management. The efforts to control current expenditure will
create a fiscal space which will allow for improvement in the proportion of expenditure channelled
towards poverty reduction. Concurrently, the Government has undertaken to control the wage bill.
Thus, recruitments will only be made in the priority sectors of education and health, and the wage
bill will be reduced from 8.7% of PIB in 2011 to 8.3% and 8.2% of GDP in 2012 and 2013
respectively. However, the drop in external assistance in the form of grants, coupled with
exceptional expenditure on infrastructure (the Authorities intend to invest heavily in electric power
6 IMF Report, No.12/28 of February 2012, Annex 1 ‘Debt Sustainability – Joint IMF/World Bank Analysis, December 2011’
4
generation infrastructure) should widen the budget deficit to 3.5% and 4.0% of GDP in 2012 and
2013.
2.2.9. With regard to governance, the indicators for Burundi show mixed results. The
governance7 indicators published by the World Bank are weak, but with a slight improvement
between 2009 and 2010 in the 6 areas concerned. The country was ranked between the 7th and 21st
centile in 2010, with a better result for ‘voice and accountability’ and a poor performance for
‘political stability and absence of violence’. The Mo Ibrahim Foundation Index of African
Governance showed that, between 2009 and 2010, Burundi slipped 2.4 points to 45.1 in 2010
compared to 47.5 in 2009, resulting in its overall ranking fall to 37th
in 2010 compared to 32nd
in
2009. Burundi was ranked 172th out of 182 countries in Transparency International’s Corruption
Perceptions Index in 2011 compared to 170th
out of 178 countries in 2010 (refer to Technical
Annexes 5 and 6). This situation reflects the country’s fragility and underscores the importance of
pursuing efforts to deepen the scope of governance reforms.
2.2.10. The private sector remains embryonic with about 3,000 enterprises registered8,
mainly small and medium-sized, employing about 40,000 people. The share of private
investment in GDP remains limited even though it increased from 2.2% in 2000 to 13% in 2010.
The infrastructure gaps, especially the lack of an adequate road network and the weak electric
power generation and distribution capacities, represent major constraints. This situation is
exacerbated by political and security instability, corruption, a weak judicial system, shortage of
labour and qualified human resources, as well as difficulties for the private sector in accessing
financing. The country is ranked 169th out of 183 countries in the 2012 ‘Doing Business’ report and
140th
out of 142 in the Global Competitiveness Report. The main constraints on private sector
development and the promotion of investments are: (i) energy and transport costs; (ii) an
inappropriate regulatory, legal and institutional business framework, (iii) low agricultural
productivity; (iv) gap between the skills of the labour force and private sector demand; (v) poor
quality of public services, and (vi) lack of access to financing (see Technical Annexes 5 and 7).
2.2.11. Poverty reduction remains the main challenge to Burundi’s social development. In
the wake of the social progress made as a result of the policy of free education and health care, the
country has improved its human development index ranking since 2005, but remained at 185th
out
of 187 countries in 20119. According to the most recent household survey in 2006, 67% of the
population lives below the poverty threshold. Rural poverty is extremely high at 69% compared to
34% in urban areas. Furthermore, gender disparities, exacerbated by the crisis, have had a
disproportionate impact on women and girls, who are economically fragile and subjected to gender-
related socio-cultural pressures and violence10
. Thus, despite the efforts made to improve the
population’s living conditions, Burundi, like most fragile States, will be unable to achieve the
MDGs by 201511
.
2.2.12. The major challenge for Burundi is to gradually emerge from its fragile situation,
especially by encouraging a shift towards a diversified economy, driven by the private sector
which will generate inclusive growth. Despite the progress made, Burundi remains fragile from
the economic, social and institutional standpoint. The country’s economic development has created
sufficient growth and jobs to significantly reduce poverty. The unemployment situation is a cause
for concern and affects young people and women. In order to address these challenges, Burundi
must pursue its reform programme and implement policies aimed at:
Easing constraints on private sector development so as to boost investment and
sustainable economic development;
7 World Governance Indicators, 2011
8 Investment Climate Assessment, World Bank, 2008 9 UNDP 2011 Human Development Report 10 See Gender Profile for Burundi prepared by ORQR 4 in November 2011. 11 This situation is mainly due to the fact that reference year is 1990, whereas since 1993, the country has experienced a major political and military
crisis which has seriously affected the living conditions.
5
Improving access to education and health care for the population, especially the
disadvantaged and vulnerable segments, in order to ensure inclusive economic
growth; and
Leveraging more domestic resources in order to reduce dependence on external aid,
while enhancing expenditure effectiveness and the quality of public services.
2.3. Status of Bank Group Portfolio
2.3.1 The Bank’s portfolio in Burundi comprises 14 ongoing operations for a total amount of
UA 266.5 million. These operations are broken down as follows: 56% for road infrastructure, 7%
for agriculture, 13% for water and sanitation, 16% for the social sector, and 8% for the energy
sector. The overall portfolio disbursement rate is 29.4%.
2.3.2 According to the 2010[1]
portfolio review, the overall performance was considered
satisfactory, with a score of 2.3 in 2010 (on a scale of 0 to 3, with 3 being highly satisfactory),
compared to a score of 2.1 in 2008. As at 31 March 2012, projects at risk (PAR) and commitments
at risk (CAR) represented 23% and 14% of the portfolio respectively, while the Bank’s averages are
26.8% and 16.7% respectively (Source: Outliers and Exceptions Report, March 2012 edition).
III. KEY PROGRAMME DESIGN ELEMENTS AND SUSTAINABILITY
3.1. Linkages with the CSP, Country Readiness Assessment and Analytical Underpinnings
3.1.1. Linkage with the CSP: PARE-V is aligned on the Pillar 1 of the 2012-2016 CSP:
“Strengthening of State institutions”. Its implementation will contribute to the achievement of the
expected outcomes under this CSP Pillar, namely improved public resource management and
sustained private sector development to ensure sustainable creation of jobs for inclusive growth.
3.1.2. Linkage with Bank Group Strategies: The two components of PARE-V are in harmony
with the 2008-2012 Governance Action Plan (GAP) for 2008-2012. They are also consistent with
the Bank’s Private Sector Development Strategy12
and its Medium-Term Strategy for 2008-2012.
3.1.3. Compliance with then General and Technical Conditions Precedent: As indicated in the
Table below, Burundi meets the main eligibility criteria for a budget support operation.
Table 3: Conditions for Programmatic Support Operations (PSO) in accordance with Bank Policies
Condition Key Points
Government’s
Commitment to
reduce poverty
The Government has made a strong commitment to reduce poverty in Burundi. This commitment is
in the long-term development vision “Burundi 2025”. The Government has also prepared a medium-
term strategy, the Poverty Reduction Strategy Paper, Phase II. PRSP II gives top priority to sustained
and job-creating growth which requires a sound macroeconomic framework, higher productivity in
the growth-enhancing sectors, in particular agriculture, economic infrastructure, private sector
promotion and youth employment. A mechanism has been established to coordinate the
implementation and monitoring of PRSP-II, and the National Aid Coordination Committee (CNCA)
is responsible for aid coordination.
Macroeconomic
Stability
As also confirmed by the IMF, the economic results achieved under the Extended Credit Facility
(ECF) for 2011 were satisfactory overall. The 7th Review of the IMF ECF was approved by the
IMF’s Executive Board in January 2012. Since 2000, the country has experienced slow economic
recovery with an average growth rate of 3%. This trend was confirmed with a growth rate of 3.9% in
2010 and 4.2% (estimated) in 2011. Inflation remains a major problem with an estimated rate of 14%
for 2011 (9.5% in 2010 and 4.6% in 2009) due mainly to hikes in global oil and food prices. Burundi
reached the Heavily Indebted Poor Countries Initiative (HIPCI) completion point and became eligible
for debt relief under the Multilateral Debt Relief Initiative (MDRI) in 2009. In March 2010, the Paris
Club cancelled outstanding debts. Given the high risk of the country becoming debt distressed and its
weak capacities, external budget financing is limited to grants and highly concessional loans. The
medium-term economic framework and financial sector are considered viable.
[1] African Development Bank: Mid-Term Review of 2008-2011 Country Strategy Paper and Country Portfolio Review.
ADF/BD/WP/2010/151/Rev.1 12 Ref: ADB/BD/WP/2004/71/Rev. 1, November 2004.
6
Condition Key Points
Political Stability
A power-sharing agreement was signed in 2008 with the last group of rebels. The organization of
municipal, presidential and legislative elections in 2010 was deemed satisfactory by independent
observers. Although tensions appeared in the wake of the elections, the authorities have kept the
political and security situation under control, but it remains fragile.
Satisfactory
Fiduciary Risk
Assessment
Major fiduciary risks were identified in the different recently conducted studies (PEMFAR in 2008, a
PEFA in 2009, PER in 2010). The Government has implemented a public financial management
reform strategy to correct the shortcomings identified. A PEFA assessment in 2012 revealed a
positive Public Financial Management (PFM) trend, which demonstrates the Government’s
commitment to improving PFM within a reasonable timeframe. The progress made includes: an
improved legal and regulatory framework, the budget preparation process, budget quality,
particularly regarding information contained in the Finance Law and the multi-year perspective in
budget planning, improved revenue collection, especially through the establishment of the Burundi
Revenue Authority, access by the general public to budget information, introduction of competition
and control of public procurement, accounting and recording of information and financial reports.
Strong overall budget credibility and a satisfactory budget classification exist. The voted and
promulgated budget, as well as the budget execution reports, are published on the Website of the
Ministry of Finance and Economic Development Planning. Civil society organizations, including the
Government Action Observatory, review and comment on the budget and its execution. The Court of
Auditors produces timely budget law reports. In accordance with the 2012 PEFA report, the
Government is preparing a second phase of the Public Financial Management Reform Strategy in
order to consolidate and deepen the results achieved. The Bank has carried out an assessment of the
fiduciary risk, which was considered moderate. Measures have been identified to mitigate the
fiduciary risk (see Technical Annexes 2 and 3)
Harmonization
A donor partnership framework (PF) exists, involving the MFPDE and donors intervening in the area
of public financial management reform. This PF organized its first annual joint review in September
2010. The joint review will be pursued under PARE-V. Harmonization efforts will be maintained,
especially among the WB, EU and ADB, which are the three main donors providing the country with
budget support. Joint studies have been conducted, and there are coordination efforts to organize joint
supervision missions. Dialogue has also been initiated between donors and the Authorities to develop
a joint matrix of reforms. The opening of BIFO will enable the Bank to play an active role in this
process.
3.1.4. Analytical Work and Underpinnings: Preparation of the budget support operation was
backed up by studies and reports, including: (i) the 2009 PEMFAR; (ii) the 2012 PEFA being
finalized, (iii) the internal and external control study, (iv) the Bank’s internal control study, (v) the
study on the transformation of Burundi economy financed jointly by the Bank and World Bank
(2011), (vi) the joint economic memorandum to the Bank and World Bank (2010), (vii) assessment
of the business environment (2012), and (viii) the gender profile prepared by the Bank in 2011. The
recommendations of these different analytical works included: (i) the need to diversify the economy
to ensure sustained and inclusive growth with a significant impact on improving the living
conditions of the population, (ii) a reduction in vulnerability to exogenous shocks, and (iii)
enhancement of public financial management efficiency to support domestic resource mobilization,
ensure smooth implementation of PRSP II and better resource allocation to the priority sectors and
reduce dependency on external financing.
3.2. Donor Collaboration and Coordination
3.2.1 The Bank is a member of the Partners Coordination Group (PCG), which is the formal
framework for dialogue between the different development partners and the Government13
.
Under this operation, consultations were held with the TFPs to strengthen the harmonization of
interventions and heighten their impact on the country’s development. Non-Governmental
Organizations (NGOs) and the private sector through the Chamber of Commerce were also
consulted. A partners' consultative group has been set up for which the CNCA provides secretariat
services and whose objective is to coordinate development aid. A budget support partnership
framework has also been established, and coordination meetings are regularly organized14
.
13 The Bank signed the PCG in September 2008. 14 The African Development Bank, the World Bank, and European Union are financing budget support operations in Burundi for the 2012-2013
period.
7
Discussions are ongoing for the preparation of a joint matrix with the EU and World Bank. It should
be noted that with the opening of the Bank’s Country Office in Burundi (BIFO), the Bank now has
an entry point which will enable it to strengthen its role in dialogue with the Government and in the
coordination of activities with the other TFPs.
3.2.2 Significant efforts have been made by the donors and the Authorities concerning
implementation of the Paris Declaration. Thus, the systematic gathering of financial information
on development projects from donors has resulted in the inclusion of a higher proportion of external
aid in the Finance Law. A development assistance database was compiled for that purpose in 2008,
and will contribute to the gradual improvement of development aid statistics. However, further
progress is required regarding aid predictability and the use of national procedures. Apart from
budget aid, the very nature of which assumes the use of national systems, only Belgium uses the
Burundi procurement system in its interventions. According to the 2011 report on international
engagement in Fragile States – Republic of Burundi, the objectives were achieved for 3 of the 15
indicators established by the Paris Declaration on Aid Effectiveness (for 2 indicators progress was
made, while for 10 other indicators there was practically no movement). In the second half of 2011,
the Bank fielded a mission to assess the national procurement procedures in comparison to the
Bank’s rules and procedures. Recommendations will be made under a General National Public
Procurement Action Plan to allow for the eventual use of national competitive bidding procedures
in Bank projects.
3.3. Results and Lessons Learned from Similar Completed or Ongoing Operations
3.3.1 Recently completed or ongoing operations: The Bank has financed four budget support
operations since 2004 (PARE I to IV). All the completion reports have been finalized. While the
implementation of PARE I was unsatisfactory, PARE II, III and IV were better implemented and
their results are satisfactory. The previous operations have shown that it is necessary to consider the
following aspects to ensure a stronger impact of budget support in Burundi: (i) pursue the
programmatic and multi-year approach; (ii) step up reform-focused dialogue with the Authorities,
(iii) strengthen coordination with the other donors; and (iv) ensure that financing is available for
measures requiring the conduct of a study. The design of this project takes into account these
different lessons learned from the previous programmes.
3.3.2 Progress made under the Bank’s previous budget support operations: The Bank’s previous
operations have, in addition to financing the State budget which contributed to the implementation
of the PRSP, supported the national public financial management strategy. They have therefore
contributed to the achievement of some of the objectives of the PFM National Reform Strategy (see
Technical Annex 8).
Table 4: Progress in the Bank’s Previous Budget Support Operations
Objective of the
National PFM
Reform Strategy
Expected Outcomes
Objective 1 of the
Strategy: “Reform of
the Legislative and
Regulatory
Framework”
PARE I to IV have contributed to the adoption and implementation of the new Organic
Public Finance Law (LOLF), preparation of the General Regulation on Public Budget
Management (RGGBP), as well as the establishment and operationalization of the
structures set up under the new Public Procurement Code (namely ARMP, DNCMP
and CNMP) and the adoption of a Public Procurement Action Plan. The progress in
public procurement is reflected in the improvement of the related PEFA indicator (PI-
19) from D+ to C+ between 2008 and 2012. Nevertheless, efforts must be made to
further improve public procurement. The budget support operations have also helped
to enhance the quality of budget reporting as indicated by the related PEFA indicator
(PI-24) which rose from D in 2008 to C+ in 2012. Public access to budget information
has also improved as indicated by the related PEFA indicator (PI-10) from C in 2008
to B in 2012.
8
Objective 2:
“Improvement of
public expenditure
monitoring”
The Bank’s operations have supported the preparation and implementation of a three-
year rolling cash flow plan and the progressive establishment of a single treasury
account. This is reflected in improved monitoring and management of cash flow, debts
and guarantees as indicated by the related PEFA indicator (PI-7) which improved from
D+ in 2008 to C+ in 2012.
Objective 3: “More
efficient and
transparent public
resource
management”
The Bank’s interventions have supported the preparation of the macroeconomic
framework and budget priorities within the timeframes stipulated by the LOLF,
identification of poverty reduction expenditures in the budget, the conduct of a census
of Government employees and use of the results of this census in budget preparation,
more exhaustive leveraging of external funding, improvement of budget
documentation accompanying the Finance Bill and the preparation of a circular setting
the deadlines for commitment, authorization to pay and payments. Overall, these
interventions have led to improvement in budget monitoring efficiency as reflected in
the related PEFA indicator (PI 24) which rose from D+ in 2008 to C+ in 2012.
Objective 4:
“Improvement of
control systems”
The Bank’s operations have supported capacity building of audit institutions, in
particular, the General State Inspectorate (IGE) and the Court of Auditors (CdC), as
well as establishment of the Inspection and Internal Control Service at MFDPE (SICI).
These institutions have reduced the time taken to present audit reports to Parliament as
indicated by the related PEFA indicator (PI-26 ii), which improved from C in 2008 to
B in 2012.
3.4. Linkages with Ongoing Bank Operations
3.4.1. The Bank intends to finance technical support under the FSF Window III in order to build
budget programming and macroeconomic framework capacities. This new capacity building project
aims to implement reforms that would improve public financial management and support private sector
development. Finally, the programme will improve the business environment and thereby create
synergies and complementarities with Bank operations in the area of infrastructure (transport,
energy, social infrastructure and water and sanitation) and job creation in Burundi, as well as
address some of the constraints identified in paragraph. 2.2.12. Furthermore, strengthening the
effectiveness of the public financial management system will facilitate implementation of the
Bank’s other operations.
3.5. Bank’s Comparative Advantages
3.5.1 Following the first four programmes implemented for the country, the Bank is now one of
Burundi’s leading partners and has acquired solid reform support experience. PARE-V is a continuation
of the previous operations, and aims to prioritize the consolidation and deepening of the reform
achievements. The results obtained under these different programmes are significant (see paragraph
3.3.2), and should be consolidated and sustained. The Bank also has sound experience in the
implementation of complementary institutional support operations of other TFPs, as well as the
implementation of similar operations in other fragile States. It has also conducted several studies in
Burundi and contributed to financing the preparation of PRSP-II, which gives it a comparative
advantage in terms of partnership with the country. This experience has enabled the Bank to contribute
actively to the Government’s reform programme. The opening of BIFO and establishment of the
Regional Resource Centre nearby (in Kenya) will also help to strengthen country dialogue and
ensure closer monitoring of all the Bank’s portfolio activities.
3.6. Application of Good Practice Principles on Conditionalities
3.6.1. Good practice principles on conditionalities have been applied: The programme was
designed to support implementation of PRSP-II and sector strategies relevant to PARE-V. PRSP-II
was prepared using a participatory approach. A mechanism involving the civil society and private
sector has been established to monitor its implementation. Monitoring of PARE-V’s
implementation will benefit from the Partnership Framework, which will serve as a coordinated
framework for accountability. The operation was adapted to the country context taking into account
its fragility aspects and aligning the programme on its priorities. The number of conditions
precedent to disbursement of each tranche has been limited to relevant actions required to achieve
the expected programme outcomes. The Bank is also strengthening collaboration and coordination
9
with the other development partners involved in budget support operations in order to create
synergy and consistency among their respective interventions.
3.7. Application of the Bank’s Non-Concessional Debt Policy
3.7.1. Burundi is classified as an ADF country eligible for ADF resources only. The country has
benefited from debt relief under the HIPCI and MDRI. Consequently, the public sector is only
eligible for concessional loans. This programme is therefore in compliance with the Bank’s Non-
Concessional Debt Accumulation Policy adopted in 2008 and revised in 2010.
IV. PROPOSED PROGRAMME AND EXPECTED OUTCOMES
The Burundi Authorities attach the highest priority to sustained and job-creating growth15
, which
requires a macroeconomic framework based on sound public financial management and private
sector development. The Government’s commitment to implementation of the reforms and its
determination to emerge from the situation of fragility have made it possible, with the Bank’s
support under the previous PARE phases (see paragraph 3.3), to strengthen the management of
Burundi’s public finances. However, despite this significant progress, much remains to be done in
light of the challenges specified in paragraph 2.2.12. The aim of this programme is therefore to
consolidate the public financial management achievements of the previous four PARE phases. It
also intends to focus on reforms for the development of the private sector, the main creator of jobs
and the conditions for inclusive growth. Furthermore, consolidation of the public procurement
reform is expected to have a positive impact on businesses. The same applies to the revision of tax
and investment laws which will have a positive impact on tax revenue, starting a business and job
creation.
4.1 Programme Goal and Objectives
4.1.1 The overall project goal is to create conditions conducive to rapid and inclusive
growth. The specific objectives are to: (i) improve Government efficiency in the management of its
resources; and (ii) promote private sector development and job creation.
4.2 Pillars, Specific Objectives and Expected Outcomes
4.2.1 The programme is divided into the following two components: (i) enhancement of
Government efficiency in the management of public resources; and (ii) promotion of private
sector development and job creation. The measures retained under this programme are identified
in PRSP-II and its Priority Action Plan (PAP). The first component seeks to consolidate the
achievements of the previous PARE phases and is based on the Public Finance Reform Strategy
(2012-2014)16
as well as the interim results of the 2012 PEFA assessment, which highlight the
persistent public financial management weaknesses. The second component will aim to improve the
investment environment and create an enabling environment for job creation. The selection of
reform areas has also taken into account other donors’ interventions (see Table 3) so as to ensure
complementarity and synergy between the support operations.
15
See the Strategic Thrusts of PRSP-II Paragraph 2.1.2 16
This strategy is being finalized with AFRITAC/IMF support.
10
Table 5: Breakdown of Budget Support Areas of Intervention
ADB
European
Union World Bank
Improve revenue mobilization X X
Strengthen the public procurement system X
Improve external and internal control X X X
Improve the SIGEFI system X X
Improve budget preparation and planning X
Strengthen public financial management transparency X X X
Improve payroll and wage bill management X
Facilitate restructuring and privatization of public
enterprises and reform of the coffee, energy and mining
sectors
X
Prepare a private sector strategy X
Establish a public-private dialogue framework X
Build API capacities and revise the Investment Code X
Prepare and adopt a PPP Law X
Prepare and adopt a National Employment Policy X
Establish a public-private framework to revise
education curricula
X
Promote the development of the health, basic education
and justice sectors
X
Component 1: Enhancement of Government Efficiency in the Management of Public Resources
4.2.2 Implementation of the 2009-2011 Public Financial Management Strategy (PFMS) has
led to considerable progress in Public Financial Management. The 2012 PEFA thus indicates
progress in 13 of the 2617
indicators assessed (excluding TFP-related indicators). The PFM progress
made include improvement in the legal and regulatory framework, the budget preparation process,
budget quality, especially information contained in the Finance Law and the multi-year perspective
in budget planning, improvement in revenue collection, particularly through the establishment of
the BRA, the general public’s access to budget information, the use of competitive procedures and
control of public procurement, accounting and recording of information and financial reports.
4.2.3 The Government of Burundi has assumed ownership of the results of the different
analytical studies on public financial management and has established a Support Unit in charge
of Reforms and the Partnership Framework with donors to steer and coordinate implementation of
the reforms. Despite the headway made, a number of PFM shortcomings have been identified: (i)
delays in the adoption and implementation of new tax reform texts (texts on the Value Added Tax
(VAT) and on tax procedures); (ii) insufficient streamlining of the expenditure chain with redundant
control procedures and the absence of a budget execution procedures manual; and (iii) internal and
external control weaknesses. Furthermore, the Government has not yet established a system to
monitor implementation of the recommendations of the IGE and Court of Auditors.
4.2.4 The objective of emerging from its fragile situation will require the country to obtain
substantial financial resources and strengthen domestic resource mobilization. Tax revenue in
Burundi rose gradually from 2007 to 2011 due to the general increase in taxes and the establishment
of the BRA. However, it is still necessary to implement tax reforms in order to create an effective
and cohesive framework which will leverage more resources for the priority sectors. It is also
important to increase tax revenue, which will lead to gradual reduction in the State budget’s
financing requirements in terms of development assistance.
4.2.5 The proposed programme seeks to support tax reforms and simplify tax payment procedures.
This will be done through the finalization, adoption and implementation of the Law on VAT and the
17 The PEFA assesses 28 indicators of the national system but 2 of the indicators could not be assessed (PI-27 and 28)
11
Revised General Tax and Excise Duties Code and the Tax Procedures Manual. The objective of
reform of the Law on Direct Taxes is to establish a simple, transparent and fair tax system that will
be easy to understand and implement. With regard to the VAT, the revision will be mainly
parametric, particularly in terms of the threshold for those liable to pay VAT, and confined to the
declaratory system with, however, the introduction of VAT certification for all those liable to pay in
order to improve and simplify control. The direct taxation reforms aim to introduce two taxes, a tax
on individual incomes of natural persons and a corporate profit tax. The reform also aims to replace
previous investment incentive arrangements with general tax incentives that are non-discretionary,
and consequently more transparent and attractive. These revisions are also closely linked to the
revision of the Investment Code (see Paragraph 4.2.14). The ongoing activities of the BRA as well
as revision of the texts on taxation will have a positive impact on taxation. The revenue to GDP
ratio was expected to rise in 2011 to 14.4% of GDP and to 15.1% and 15.4% of GDP in 2012 and
2013 respectively. Similarly, the effectiveness of the taxpayer registration measures and assessment
of taxes, excise and customs duties as measured by PEFA indicator PI 14 will improve from C in
2011 to C+ in 2013. It is also expected that the recovery of taxes and customs duties will become
more efficient, with PEFA indicator PI-15 up from B+ in 2011 to A in 2013.
4.2.6 The annual accounts, the report on the implementation of the Finance Law, as well as the
Audited Finance Laws for 2008, 2009 and 2010 were produced and presented to the Court of
Auditors within the stipulated timeframes, and are of satisfactory quality. However, the same cannot
be said of the interim execution reports which require improvement in terms of exhaustiveness and
quality of information. These different reports are based on a public expenditure chain which has
not been reviewed by the Court of Auditors. However, this circuit is affected by (i) bottlenecks at
the commitment and verification of services rendered stages, (ii) the lack of budget predictability
and transparency during the year, (iii) shortcomings in the verification of the use of funds namely
salaries, (iv) insufficient formalization and effectiveness of internal control procedures, and (v) no
audits of accounts prepared by public accountants. This situation reveals difficulties encountered by
the Court of Auditors in the performance of its jurisdictional duties, particularly in the area of
human and material resources. The resulting risks are: (i) delays in the processing of files of
expenditure supporting documents, (ii) the diversion of voted credits and funds to other expenditure
items, (iii) major payroll anomalies, and (iv) the inability of internal control to prevent or detect the
major irregularities, the diversion of resources, and inefficient use of public funds.
4.2.7 Progress has been noted in the area of internal control, especially regarding the building of
the General State Inspectorate’s (IGE) capacities. However, the internal control system is impaired
by the weak monitoring of recommendations made by the IGE and by the lack of coordination
between the IGE and inter-Ministerial inspectorates.
4.2.8 The programme will support pursuance of the reform to improve internal and external
control. Thus, the following measures will be supported under PARE-V: (i) establish classification
of supporting documents for all payments in the form of an Ordinance and ensure it is implemented
by the OTBU; (ii) adopt the Public Expenditure Manual by Ordinance and implement it; (iii)
finalize and adopt the text on Expenditure Commitment Control (CED) and implement it; (iv) the
Ministry of Finance and Economic Development Planning is preparing a monitoring report/Table
of the CdC recommendations formulated in the CdC Report on budget execution and relating to the
2009 and 2010 Audited Finance Laws and publishes it on the Ministry’s website; (v) have the study
and recommendations on the internal and external control system in Burundi technically validated
by the Cabinet Meeting and start to implement the recommendations; (vi) establish a mechanism for
implementation of the recommendations made by the General State Inspectorate at the Ministry of
Good Governance pursuant to its inspection missions; and (vii) ensure that Ministerial inspectorates
submit their annual control programmes and reports to the General State Inspectorate to strengthen
their coordination. The reforms are expected to improve PEFA indicators PI-20, 21 and 26 from D+
in 2011 to C in 2013.
12
4.2.9 Procurement: As regards the adoption of the 2008 Public Procurement Code, the
Government’s efforts have focused on the effective establishment of instruments or structures to
ensure operation of the legal and regulatory framework with the finalization of the institutional
organization. Thus the institutions responsible for regulation (ARMP, Public Procurement
Regulatory Authority by Decree No. 100/119 of 7 July 2008) and audit of public procurement
contracts (DNCMP, National Public Procurement Directorate by Decree No. 100/120 of 8 July
2008) have been established and are operational. This is also the case for the public procurement
management units (CGMP by Decree 100/123 of 11/07/2008) which have also been set up within
the contracting authorities (Ministries).
4.2.10 However, since the end of the 2010 fiscal year, the ARMP no longer has the means to
perform its different duties since its budget allocation is highly inadequate (45% of the needs
expressed (see ARMP 2011 annual report). The financial autonomy of the main institution in charge
of training programmes, accessibility of information to strengthen the transparency of the system
and independent public procurement audits is no longer guaranteed. Indeed, the Code provides for
the conduct of annual independent audits by ARMP, which may also carry out controls on its own
initiative in the event of a breach of the public procurement regulations. Furthermore,
communication tools (website, public procurement bulletin) and archiving systems have not yet
been established due to insufficient budget allocations. Training programmes to ensure
dissemination and operationalization of the legal framework tools are postponed from one year to
another. An assessment of this new 2008 legal and regulatory framework among the stakeholders
and operators concerned in October 2011 showed inconsistencies and shortcomings, as well as
fiduciary-type discrepancies requiring an overhaul of the public procurement code.
4.2.11 In order to address the above-mentioned shortcomings, the national system will be
strengthened by implementing the following measures: (i) submission, to the Cabinet Meeting and
Parliament, of the Bill on the revision of the public Procurement Code in accordance with the
recommendations of the national public procurement system assessment; (ii) conduct of an external
audit of public contracts for 2010, 2011 and 2012 in accordance with the provisions of the Public
Procurement Code and publication of the findings on the website of the Ministry of Finance (or on
the ARMP site once it is operational); (iii) allocation to ARMP of adequate budget resources in the
2013 and 2014 FL to enable it to perform its duties in accordance with the laws and regulations in
force; and (iv) systematically publish as from 1 June 2012, the final award of contracts (on the
Ministry of Finance’s website or on the ARMP website once it becomes operational). It is expected
that these measures will improve the PEFA PI-19 indicator from C+ in 2011 to B in 2013.
Component 2: Promotion of Private Sector Development and Job Creation
4.2.12 With regard to the business climate, there are many inadequacies that hamper the
emergence of a private sector able to support the State on its path towards economic development
and job creation. These constraints mainly concern the inflexible regulations and cumbersome
procedures, as well as the absence of a partnership culture. Consequently, as described in the 2011
Bank-financed study on the Transformation of the Burundi Economy, the country has adopted many
reforms over the past decade, and is implementing them with the support of its partners. These
efforts include the clearance of Government arrears, reform of the trade and company laws, and
establishment of the Investment Promotion Agency (API). The progress has been significant,
especially in light of the existing weak capacities; however, in order to attract investors and
facilitate the effective emergence of a buoyant private sector, it is necessary to pursue reforms,
particularly in the area of good governance. The country is ranked 169th out of 183 countries in the
2012 ‘Doing Business’ report and 140th
out of 142 by the Global Competitiveness Report. It should
be noted that Burundi climbed 9 places in the Doing Business ranking for 2012 compared to 2011.
This sends a strong signal of commitment to reforms, which must be consolidated. However, the
absence of a legal framework for public private partnerships (PPP) is a constraint on infrastructure
co-financing.
13
4.2.13 Little is still known of the employment and underemployment situation in Burundi due to
lack of reliable and recent data. However, the employment situation, especially youth employment,
is a cause for concern. Urban unemployment and rural underemployment are among the major
challenges to be met as indicated in PRSP-II. While the urban unemployment rate is 11.67% (2009),
15.24% of young people are affected and 60% of the unemployed are youths. In rural areas, the
situation is mainly characterized by underemployment. Young people seeking their first job account
for 59% of the unemployed. Despite recent significant contribution by the private sector with the
emergence of private training facilities, the quality of education remains low with very little
technical or scientific focus. This has resulted in a mismatch between supply and demand on the
labour market. In terms of strategy, the Government has included the promotion of employment as
one of the key pillars of PRSP-II. The policies implemented to address these challenges include: (i)
the Burundi Youth Employment Agency (ABEJ) under the oversight of the Ministry of Youth
Affairs aimed at building entrepreneurship capacities, as well as gathering information on youth
unemployment; (ii) the National Observatory on Employment and Training (ONEF) under the
oversight of the Ministry of Labour aimed at collecting data on the labour market. The Authorities
have also pursued a policy of labour intensive (LI) works for the implementation of infrastructure
projects.
4.2.14 The programme measures aimed at enhancing the efficiency of State expenditure, improving
transparency and controlling public expenditure will indirectly contribute to private sector
development. To support the implementation of reforms directly targeting the private sector and
promotion of employment, the programme will contribute to the preparation of a National Private
Sector Development Strategy and its implementation through: (i) the preparation of a private sector
development strategy, (ii) support for the revision of the Investment Code, (iii) adoption of a legal
and institutional framework for public-private partnerships (PPP), (iv) the establishment of a public-
private dialogue framework to serve as platform for consultation and decision-making between the
two sectors, and (v) building API’s capacities through the recruitment of 12 additional senior staff.
These measures, especially the strengthening of API and revision of the Investment Code, should
also impact on job creation through private sector investment. In order to further promote job
creation, especially youth and women’s employment, PARE V will also support the adoption of a
National Employment Policy (PNE), as well as the creation of a public-private sector consultative
framework for the revision of school curricula. The implementation of its measures is expected to
help increase the private investment rate from 7.6% in 2011 to 10% in 2013. With regard to job
creation, it is expected that almost 15,000 jobs will be created in 2012 and 2013 respectively
compared to the creation of 6,000 jobs in 2011.
4.3 Financing Requirements and Arrangements
Table 7: Financing
Arrangements 2012 2013
(Percentage of GDP) B- Total Financing 21.9 23.5
Net Domestic Financing 1.8 1.0
Net External Financing 20.1 22.5 External Grants 15.9 15.5
Programme Support 2.6 2.0
World Bank 1.0 0.9 European Commission 0.8 0.7
ADF/FSF 0.5 0.3
Other Budget Aid 0.3 0.1 Project Support/Other Grants and
Transfers 13.3 13.5 Other External Financing 4.2 7.0
C-Residual Financing Gap C= (B-A) 0.0 0.7
Source: IMF Country Report, No.12/28, 2012
Table 6 : Financing Requirements
2012 2013
(Percentage of GDP)
Total Revenue and Grants 32.1 32.0
Total Revenue excluding Grants 16.2 16.5
Tax Revenue 15.1 15.4
Non-Tax Revenue 1.1 1.1
Grants 15.9 15.5
Total Expenditure 35.6 36.0
Wages 8.3 8.2
Current Non-Wage Expenditure 13.2 12.7
Investment Expenditure 14.1 15.1
Overall Balance excluding Grants -19.4 -19.5
Overall Balance including Grants -3.5 -4.0
Change in Arrears 2.5 3.3
A- Financing Gap on a Cash Basis
(excluding grants) -21.9 -22.8
Financing Gap on a cash basis
including Grants (excluding HIPC) -6.0 -7.3
Source: IMF Country Report, No.12/28, 2012
14
4.3.1 Financing Requirements: Table 6 presents the Government’s financing requirements for the
2012 and 2013 fiscal years. These requirements (financing gap on a cash basis excluding grants)
represent 21.9% and 22.8% respectively for 2012 and 2013.
4.3.2 Financing Arrangements to Finance the Gap: Table 7 shows that 91% and 95.7% of the
financing gap (on a cash basis excluding grants) will be financed externally in 2012 and 2013
respectively. The development partners will provide the required general budget support resources
to the tune of 2.6% of GDP in 2012 and 2% of GDP in 2013. Bank financing under this programme
will represent 0.5% of GDP in 2012 and 0.3% of GDP in 2013.
4.4 Programme Beneficiaries
The end beneficiary of the programme is the population of Burundi as a whole, especially the
poorest segments. Indeed, improvement of the quality of public spending will increase supply and
facilitate access to basic social services. The health and education sectors, in particular, will benefit
from an improvement in the quality of public spending. Furthermore, by helping to create
conditions for stronger, more sustainable and evenly distributed growth, the programme will also
improve the living conditions of the population in the longer term. The other beneficiaries are
Government services (Ministry of Finance and partner Structures) whose technical and operational
capacity to provide public services will be strengthened through the implementation of reforms.
4.5. Impact on Gender
4.5.1. The programme has no specific actions targeting women. However, improvement of the quality of
public spending through more effective and efficient public resource management will help to increase
the share of pro-poor expenditure in the budget. This should benefit in priority the vulnerable segments
of the population, namely women and children. By financing the State budget, the programme will help
to promote the policy of free education and health care for mothers and under-5 children.
4.6. Environmental Impact
4.6.1. The programme is a budget support operation which exclusively targets economic reforms. It is
therefore classified under Category III, and will have no impact on the physical environment. However,
it will have a positive impact on the social environment because it will help to transform the budget into
an instrument for attaining PRSP-II goals in the areas of poverty reduction and improvement of the
living conditions of the population. It will also have a positive impact on civil society’s access to PFM
information.
V. IMPLEMENTATION, MONITORING AND EVALUATION
5.1. Programme Implementation Arrangements
5.1.1. Executing Agency: Budget support management falls within the institutional framework for
steering and coordinating the PFM reform programme agreed upon under the PF. It is reliant on three
structures: (i) a Steering Committee chaired by the Minister of Finance, Planning and Economic
Development (MFDPE); (ii) a Technical Steering Committee bringing together the Directors-General of
the Ministries concerned; and (iii) a support structure for day-to-day programme management
comprising senior officials from the MFDPE and supported by technical assistance. This unit organizes
regular monitoring meetings with partners present in the field, as well as an annual review of
progress made in implementing the public finance reform strategy. Furthermore, it also organizes
validation meetings with IMF review missions and other important economic and financial missions.
From its management of previous Bank operations as well as its management of IMF, World Bank and
European Union operations, the structure has proved its ability to manage budget support operations.
Like the previous operations, this programme will fall within this framework.
15
5.1.2. Disbursement Arrangements: The financing proposed under the programme is UA 12 million
under Pillar 1 of the FSF. The grant will be disbursed in two tranches of UA 7 million in 2012 and UA 5
million in 2013. The disbursement in two tranches is contingent on fulfillment of the following
conditions precedent. A special account will be opened at the Bank of the Republic of Burundi (BRB) as
for previous operations, and will receive the grant resources. When requesting for payment, the
Authorities will provide evidence that there is a zero balance on the account for the payment of the ADF
resources. These resources will then be transferred from the BRB to the General Treasury Account. The
BRB will make no charge for this operation, in accordance with the agreement signed between the BRB
and the MFDPE, and the applicable exchange rate on the date of transfer from the BRB to the General
Treasury Account will apply. The MFDPE will submit written confirmation of receipt of the transfer.
5.1.3 Procurement Arrangements: The Bank has assessed the results of procurement awards at
national level and defined safeguard measures in Technical Annex 8 [see Assessment of national
procurement system; General Plan of Measures] for weaker aspects of the system in order to
mitigate the fiduciary risk in procurement. Taking into account these mitigation measures described
in Technical Annex 8, resources will be utilized in accordance with national public finance regulations.
5.1.4. Financial Management and Audit Arrangements: PARE-V resources will be utilized within the
public expenditure chain in accordance with national public finance regulations. The MFPDE will be
responsible for the administrative, financial and accounting management of PARE-V resources.
Resources for the first tranche of PARE-V have been included in the General State Budget for 2012
under the item relating to budget support entitled “Current Grants”. The PARE-V funds will be
held in the State Treasury Singe Account at the Bank of the Republic of Burundi (BRB). The
Governor of the BRB and the Burundi Authorities have undertaken to implement the
recommendations of the IMF and external auditors on improving mechanisms to safeguard the
assets of the BRB.
5.1.5 The Court of Auditors has, in general, presented its audit reports to the National Assembly
within the deadlines stipulated under the existing regulations, and is firmly committed to the
process to build its capacities. PARE V will be audited during consideration of the budget execution
reports and draft Audited Finance Laws by the Court of Auditors concerning the 2012 and 2013
fiscal years. In this connection, PARE-V and the Capacity Building Project under preparation both
contain measures aimed at strengthening the external control function. The Government annual
financial statements will be available in 2013 and 2014 within the deadlines stipulated in the
existing Organic Finance Law. In compliance with Bank policy, an audit will also be conducted by
an independent firm in accordance with terms of reference to which Bank will give its no-objection
opinion.
5.2. Monitoring and Evaluation Arrangements
5.2.1. Competent Institutions: The MFDPE will be responsible for programme monitoring/evaluation.
This Ministry has already been involved in monitoring/evaluation of previous economic reform support
programmes (PARE I, II and III and IV). The MFPDE will take measures to provide the human
resources and equipment needed for programme monitoring/evaluation.
5.2.2. Monitoring/Evaluation: The reform support unit within the MfDPE will be responsible for the
day-to-day monitoring of PARE-V. Coordination among donors operating in the area of PFM will be
used as a monitoring/evaluation tool for the programme, through joint supervision of the progress made
in implementing the reform programme. The logical framework presented in this document constitutes
the performance evaluation framework.
16
VI. LEGAL INSTRUMENTS AND AUTHORITY
6.1. Legal Instruments
6.1.1. The legal instrument to be concluded under this programme is the Grant Agreement. The
parties to this Agreement are the African Development Bank and the Republic of Burundi.
6.2. Conditions for Bank Group Intervention
6.2.1. Conditions precedent to grant effectiveness: Grant effectiveness shall be subject to the
signing of the Grant Agreement between the Bank, the Fund and the Republic of Burundi.
6.2.2. Conditions precedent to disbursement of the two tranches: Maintain a stable
macroeconomic environment as mentioned in the IMF assessments or publications.
6.2.3. Conditions precedent to disbursement of the first tranche:
1) Provide the Bank and Fund with evidence of the submission of the Bill on the Value Added
Tax to the Cabinet Meeting;
2) Provide the Bank and Fund with evidence of the adoption of the Text on Public Expenditure
Control (CED).
6.2.4. Conditions precedent to disbursement of the second tranche:
1) Submit to the Bank and Fund: (i) audit reports of procurement contracts for 2010, 2011 and
2012, which should concern at least 25% of all contracts awarded each year (number of
contracts based on ARMP statistics); and (ii) a screen copy of the website page where the
audits are published;
2) Submit to the Bank and Fund the report prepared by the Ministry of Finance and Economic
Development Planning on the monitoring of the table of recommendations made by the
Court of Auditors (CdC) in the CdC report on budget execution and relating to the Audited
Finance Laws for 2009 and 2010; and
3) Provide the Bank and Fund with evidence of the submission of the Bill amending the
Investment Code to the Cabinet Meeting.
6.3. Compliance with Bank Group Policies
6.3.1. This programme complies with applicable policies and guidelines, in particular: (i) the
Bank’s PSO policy; (ii) Burundi’s Country Strategy Paper for 2011-2016; (iii) Bank Group Strategy
for Enhanced Engagement in Fragile States; and (iv) FSF Operations Guidelines.
VII. RISK MANAGEMENT
Risks Mitigation Measures
The post-electoral transition which
could lead to the deterioration of
political and security stability. There is
an additional risk of political instability
at the regional level.
Support from international and regional organizations, including
UNO and ICGLR; integration into EAC, maintenance of TFP
support, continuing implementation of reforms aimed at improving
governance, pursuance of policy dialogue, especially through
Government seminars and ongoing dialogue with the private
sector and civil society.
Slowdown in the implementation of
reforms due to social pressure (the
recent increase in electricity prices
triggered social protests) which could
undermine the efforts made.
Pursuance of public debate and sensitization campaigns to explain
the rationale for the reforms. Implementation of policies aimed at
creating jobs and pursuance of poverty reduction policies
17
Risks Mitigation Measures
Institutional capacities weak and
inadequate for reform implementation
All the technical and financial assistance provided by partners in
the partnership framework to build institutional capacities and
implement PRSP II.
Vulnerability of Burundi’s economy to
exogenous shocks (impact of the
international financial crisis, fall in
external financial support, weather
conditions and international oil and
food price hikes).
Implementation of fiscal and monetary policies aimed at achieving
macroeconomic stability while implementing pro-poor public
programmes and targeting the most disadvantaged social segments
of society. Continuing implementation of structural reforms aimed
at promoting development and economic diversification, boosting
of private sector investments, and pursuance of reforms aimed at
increasing tax revenue. Continue to implement reforms to improve
the business and investment climate
Fiduciary risk for the operation, as well
as the risk of governance incidents.
Strengthening public financial management and public
procurement through implementation of the good governance and
anti-corruption strategy and Phase 2 of the Public Financial
Management Reform Strategy. Continuation of TFP support to
PFM reforms and institutional capacity building.
VIII. RECOMMENDATION
In light of the foregoing, it is recommended that the Boards of Directors should approve the award of a
grant of UA 12 million from FSF resources to the Republic of Burundi to implement the Programme
under the conditions stipulated in this report.
Annex I Letter of Development Policy
REPUBLIC OF BURUNDI Bujumbura, ……….../…….../2012
MINISTRY OF FINANCE
MINISTRY OF FINANCE AND ECONOMIC DEVELOPMENT PLANNING
OFFICE OF THE MINISTER
N°540/………….…/2012
I
To Mr. Donald KABERUKA
President of the African Development Bank
Group
Temporary Relocation Agency
TUNIS - TUNISIA
Subject: Letter of Development Policy for the Fifth Phase of the Economic Reform Support Programme (PARE V)
Mr. President,
We are pleased to send you the attached Letter of Development Policy agreed upon in the new Budget Support Programme
between Burundi on the one hand, and the African Development Bank and African Development Fund, on the other, for the
financing from Pillar I resources of the Fragile States Facility of a Fifth Economic Reform Support Grant (PARE V).
The Government of Burundi successfully implemented its 2011 Programme supported by the Fourth Economic Reform
Support Programme (PARE IV). During that period, significant progress was made regarding stabilization and economic
reforms, as well as in the implementation of the Poverty Reduction and Growth Strategy Paper, especially the human
development thrust. Considerable improvement was also made in the education and public health sectors under the
implementation of the previous PAREs. The reform measures backed by this programme were satisfactorily implemented.
This letter of Development Policy is submitted at a time when the Government has just prepared its PRSP-II and when it is
turning to its partners to mobilize financing for this PRSP.
PRSP-II is based on the results of PRSP-I and its objective is to trigger accelerated growth by creating an environment that
will foster sustainable development and job creation, the redistribution of the fruits of this growth, and the rapid and profound
transformation of Burundi’s economy. To that end, the programmes selected seek to close the energy gap, increase
agricultural sector productivity, consolidate the human development programmes already initiated, and provide more
sustained support to the private sector.
At the political level, democratic general elections (Presidential, legislative, municipal and hillside) based on direct universal
suffrage were organized over the May to August 2010 period. Security has been restored throughout the national territory,
which is a positive environment and a prerequisite for successful implementation of the programmes presented in PRSP-II.
Furthermore, the establishment of the Truth and Reconciliation Commission has reached a satisfactory stage. Members of
Government are making visits to share with the population the conclusions of the committee responsible for proposing the
establishment of this Commission, which is of critical importance for the country.
The main priority of the Government’s new programme is consolidation of the achievements of PRSP-I, while laying solid
foundations for economic growth to lift a large part of the population out of extreme poverty. The programmes are mainly
Annex I Letter of Development Policy
REPUBLIC OF BURUNDI Bujumbura, ……….../…….../2012
MINISTRY OF FINANCE
MINISTRY OF FINANCE AND ECONOMIC DEVELOPMENT PLANNING
OFFICE OF THE MINISTER
N°540/………….…/2012
II
focused on: (i) peace consolidation, (ii) security and national reconciliation, (iii) the development of agro-pastoral activities to
achieve food security, (iv) improvement of the quality of service delivery in the health and education sectors to achieve the
Millennium Development Goals, (v) promotion of employment to reduce unemployment and poverty, (vi) pursuance and
implementation of the public financial management strategy, (vii) good economic and financial governance, and (vii) regional
integration. Despite the fairly satisfactory human development results achieved in the implementation of PRSP- I, the
challenges of economic growth and poverty reduction remain immense and require considerable resources.
For these reasons, the Government of Burundi is requesting a new ADB support grant to facilitate the implementation of an
economic reform programme over the 2012 to 2013 period under PARE V, in an amount equivalent to 12 million Units of
Account (ADF UA).
This Programme is consistent with our long-term ‘Burundi 2025’ vision, our Poverty Reduction Strategy Paper (PRSP-II), as
well as our Public Financial Management Strategy (second generation) being finalized and which will be adopted in 2012.
This new strategy will focus on the entry into force of the implementing texts relating to the recently signed Decree on the
General Regulation on Public Budget Management.
In particular, it will adopt a Decree on Fiscal Governance, sign the Ordinance governing Expenditure Commitment
Comptrollers, and prepare Procedures Manuals to streamline the expenditure chain.
The Programme is also fully consistent with the budget support programmes of the World Bank (IDA) and the European
Commission. Funding for 2012 in the form of budget support grants from its donors is as follows: 25 million US dollars from
IDA, 14 million Euros from the European Commission, and 7 million Units of Account from the ADB.
The attached Letter of Development Policy presents the Government’s objectives and the policies it intends to implement
under the grant so as to reinforce poverty reduction actions with support from all its development partners.
The policies and measures described in the Letter of Development Policy will help to strengthen the implementation of the
programmes set out in PRSP-II relating to the promotion of growth, peace consolidation, private sector development, and
environmental protection through sustainable and well-balanced management, while ensuring the irreversibility of the progress
made in health and education. However, the Government is ready to consider any additional measures that the ADB or ADF
may deem necessary to ensure the Programme’s success. Finally, in order to facilitate monitoring of progress made in
implementing the policies and measures contained in the programme, the Government will respond favourably to any request
for information from the ADB and ADF.
The Burundi Authorities express the wish that the Letter of Development Policy and the accompanying Programme document be made public. It therefore authorizes their publication and posting on the African Development Bank website following agreement by the Board of Directors. The Government of Burundi will also post these documents on its official websites. Please accept, Mr. President, the assurances of our highest consideration.
Tabu Abdallah MANIRAKIZA
MINISTER OF FINANCE AND ECONOMIC DEVELOPMENT PLANNING
REPUBLIC OF BURUNDI
Annex I Letter of Development Policy
REPUBLIC OF BURUNDI Bujumbura, ……….../…….../2012
MINISTRY OF FINANCE
MINISTRY OF FINANCE AND ECONOMIC DEVELOPMENT PLANNING
OFFICE OF THE MINISTER
N°540/………….…/2012
III
ECONOMIC REFORM SUPPORT PROGRAMME
(PARE V)
LETTER OF DEVELOPMENT POLICY (LDP)
May 2012
Annex I Letter of Development Policy
REPUBLIC OF BURUNDI Bujumbura, ……….../…….../2012
MINISTRY OF FINANCE
MINISTRY OF FINANCE AND ECONOMIC DEVELOPMENT PLANNING
OFFICE OF THE MINISTER
N°540/………….…/2012
IV
I. GENERAL INTRODUCTION
1. In the implementation of its Poverty Reduction and Growth Strategy Paper and in support of its
economic reform programme for 2012, the Government is requesting support from the ADB. This
policy paper aims to safeguard the achievements of the first PRSP, while focusing on programmes
likely to promote growth. It will also build on the progress made under PARE II, PARE III and PARE IV
which have produced satisfactory macroeconomic results, even though they remain unsatisfactory
with respect to poverty reduction. This Policy Letter summarizes the social context and recent
economic developments.
It describes the policies set out under the 4 thrusts of PRSP-II which the Government undertakes to
pursue in the areas relating to: (i) strengthening of the rule of law, consolidation of good governance
and promotion of gender equality; (ii) transformation of Burundi’s economy so as to achieve lasting
and sustainable growth; (iii) improvement of accessibility to and quality of basic services, and (IV)
management of land and a well-balanced environment.
2. The long-term national development policy is set out in the Burundi 2025 Vision, the four priority
thrusts of which are: (i) good governance and building of the Government’s capacities; (ii) human
capital; (iii) economic growth and poverty reduction; (iv) regional integration; (v) demography; (vi)
social cohesion; (vii) regional development and urbanization; and (viii) partnership. This Vision is
broken down into medium-term strategies (PRSP), the first of which aims to culminate in positive
outcomes in terms of: (i) improvement of governance and security, (ii) promotion of sustainable and
evenly distributed economic growth, (iii) development of human capital, and (iv) HIV/AIDS control.
PRSP-II focuses on the promotion of growth-enhancing sectors and support for the private sector, and
is organized around the 4 thrusts mentioned in Point 1 above.
3. The main challenge in implementing PRSP-II consists in triggering sufficient momentum to create new
jobs and revenue, especially for young people who are hardest hit by unemployment, which could be a
source of insecurity. This new strategy focuses on development concerns and the orientations
expressed by the population, namely : strengthening of the justice system and the rule of law ;
consolidation of good governance and improvement of the performances of public institutions ;
improvement of productivity in the growth-enhancing sectors, private sector development,
improvement of the accessibility and quality of economic infrastructure, regional integration, increase
in the intake capacities and quality of education, building the capacities and strengthening the
performance of the health care system, population control and fertility reduction, as well as rational,
well-balanced regional development, environmental protection and sustainable water resource
management.
4. The primary sector plays the key role in the structure of Burundi’s economy with a very small amount
of processing despite the promising results achieved in recent years. The Government remains aware
of the many challenges facing Burundi’s economy. However, it is confident that there are great
opportunities that Burundi must seize in order to diversify its sources of economic growth which are
still dominated by the agricultural sector, especially the traditional export sectors such as coffee,
cotton and tea. The Authorities will endeavour to ensure that the reforms to be initiated in these
agricultural sectors increase the sector’s productivity with: (i) a higher contribution to growth; (ii) and
higher incomes for farmers, particularly those in rural areas. With support from partners, reforms
have already been initiated in marshland development which is a major lever that can be used to
increase agricultural production. Furthermore, a National Agricultural Investment Plan has been
Annex I Letter of Development Policy
REPUBLIC OF BURUNDI Bujumbura, ……….../…….../2012
MINISTRY OF FINANCE
MINISTRY OF FINANCE AND ECONOMIC DEVELOPMENT PLANNING
OFFICE OF THE MINISTER
N°540/………….…/2012
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adopted, the strategic objectives of which include: increased production and food security,
professionalization of producers, and development of the sub-sectors and agri-business including
livestock and fisheries, as well as institution building. In view of Burundi’s tourism potential, the
Government intends to make tourism one of the pillars of the economy. To that end, the adopted
tourism strategy is aimed at promoting this sector by attracting private investors and stimulating
demand, as well as by developing new tourist sites. Large-scale projects to increase energy supply
have been initiated in 2012 in order to promote the private sector and support growth.
5. Burundi is also seeking other contributions from donors to implement the programmes set out in the
PRSP, and will need a reference framework to facilitate harmonization of donors’ policies.
To this end, the Government wishes to obtain increased coordination from ADB and garner the
support of all the financial partners around PRSP-II which has been disseminated at all levels. The
process of seeking financing has been initiated. In this context, the Second Vice-President of the
Republic recently visited the headquarters of the World Bank, European Union, United Nations and
the International Monetary Fund in order to involve these different partners in the financing of this
strategy.
6. This Letter of Development Policy reflects the Government’s reform agenda for the next two years, and
also presents the performance indicators which will guide the assessment of the quality of its
implementation. In order to maximize its success, the Authorities will continue to take all appropriate
measures to involve all the stakeholders and draw on past experiences.
II. RECENT ECONOMIC DEVELOPMENTS
7. The country has recorded positive growth in recent years, even though the growth rate remains too
low for achievement of the MDGs. The GSP growth rates in 2009, 2010 and 2011 were 3.5%, 3.8%
and 4.2% respectively. The average growth rate over the period was about 3.83%. While this result is
undoubtedly encouraging, higher growth rates are necessary to achieve PRSP-II and MDG objectives,
as well as reduce poverty which remains high. Even though there are no updated data on the
phenomenon of poverty, none of the indicators point to its reduction. Indeed, almost 2/3 of Burundi’s
population live below the poverty line. However, growth is trending upwards, since GDP is expected to
reach 4.8% in 2012, and a higher rate of 5% over the 2013-2014 period. Rigorous implementation of
PRSP-II is expected to improve the business environment which, in turn, will create massive Foreign
Direct Investment inflows in support of growth. Recently, the Government has pursued its efforts to
improve the quality of public spending by increasing the share of the budget allocated to education,
health and socioeconomic infrastructure. To this end, considerable progress has been observed in
agriculture since the budget share allocated to it hovers around 7%. However, in order to launch the
economy on the path of strong, sustainable growth, and significantly reduce poverty, the Government
is determined to tackle the many challenges already identified, including the need to: (i) improve the
business climate, (ii) invest in the development of human capital and close the existing production
support infrastructure gap, (iii) increase agricultural productivity and diversify agricultural production
and the structure of the economy. Thrust 2 of PRSP-II outlines the actions which the Government
should prioritize to increase the growth rate, which has remained low.
8. According to recent data, the structure of the economy is dominated by agriculture which accounted
for about 45% of GDP over the 2004-2009 period. It is followed by the services sector (with 37% of
GDP in 2004-2009), ahead of industry (17%). Agriculture therefore still plays a key role in the
economy in terms of its contribution to GDP and export earnings (an average of more than 60% over
Annex I Letter of Development Policy
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the 2006-2009 period), but also because of its impact on employment. There is no denying that
agricultural sector productivity and production have declined in recent years mainly due to weather
conditions and a long period of conflict, as well as a downturn in the prices of export commodities.
This downturn has continued in 2012, and will lead to a drop in export earnings despite high
production. On the other hand, the contribution of the services sector has risen steadily. There has
also been an increase in the construction sector’s contribution to GDP.
9. Burundi had succeeded in maintaining single-digit inflation levels up to 2007. However, fueled by the
exponential rise in global oil and food prices, inflation soared to 14.7% by the end of that year and to
22 % by the end of 2008, by far exceeding the Government’s revised target of about 14%. In 2009,
inflation fell to about 9% at year end with an estimated rate of 9.5% for 2010, compared to the
original forecast of 7.5%.
Annual inflation for 2011 was about 9% compared to an initial forecast of 7%. Despite difficulties
caused by the upsurge in commodity prices in 2012 which will result in double-digit inflation in 2012,
the Government is determined to take appropriate measures through the implementation of prudent
fiscal and monetary policies to contain inflation. The new BRB/Ministry of Finance Convention limits
the use of bank financing of the budget. A nation-wide household consumption survey will be
conducted in 2012 to update and adjust the basket used in calculating the consumer price index.
10. The budget deficit is in line with the Government’s macroeconomic stabilization objectives, despite its
widening in 2010 as a result of the recent global crises, temporary losses of revenue related to the
implementation of certain tax reforms (VAT and CET), and election-related expenditure. To try to
reduce the deficits, the Authorities pursued their policy of fiscal stringency with satisfactory results in
2007 and 2008. The primary budget deficit was below forecast, due to strong resource mobilization
and a cutback in non-priority primary expenditure of about 2.6% of GDP in 2007 and 1.2% in 2008.
On the other hand, in compliance with the PRSP and MDG objectives, the Authorities have been able
to steadily increase spending on poverty reduction from 6.3% of GDP in 2005 to about 9.3% in 2006,
11.2% in 2007, 12.1% in 2008, 12.3% in 2009, 14.8% in 2010 and almost 18% and 17% in 2011
and 2012 respectively.
11. The 2012 Budget is consistent with the macroeconomic objectives agreed under the Extended Credit
Facility (ECF). The preparation of this budget was marked by the desire to reduce operating
expenditure in order to ensure adequate margins to finance investments. Consequently, salaries were
increased by 1% without the transposition decision. It should be noted that the payment of salary
arrears relating to the transposition decision was completed in 2011. However, preparations for 2012
were made in a difficult context of budget support cutbacks. Against this backdrop, the Government
will endeavour to mobilize domestic resources to offset this loss of budget support.
12. Following a worsening of the external position in 2007 as a result of a 23.4% deterioration in the
terms of trade, there was a fairly significant improvement in the terms of trade by 3.4% and 39.8% in
2008 and 2009 respectively, linked to a substantial increase in coffee exports (+34%) and an
improvement in global coffee prices. However, 2010 was marked by another deterioration of over
20%.
Official foreign exchange reserves, which had risen since 2006 from 3.6 months of import coverage,
fell slightly again in 2009 to 6 months of imports. Burundi’s currency has remained fairly stable and
Annex I Letter of Development Policy
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MINISTRY OF FINANCE AND ECONOMIC DEVELOPMENT PLANNING
OFFICE OF THE MINISTER
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according to estimates, the Real Effective Exchange Rate (REER) depreciated by 5.7% in 2007. It rose
slightly by 1.2% in 2008, but depreciated again slightly by 2% in 2009.
13. The external position has continued to improve, with an increase in current transfers despite the
worsening trade balance. Over the coming years, the current external deficit is expected to settle at
about 10% of GDP. Moreover, the terms of trade are expected to improve by 7.8% in 2011 and 0.5%
in 2012. The business climate improvement reforms helped the country to increase its ranking in the
recent Doing Business report. This will improve the financial account, as a result of massive inflows of
Foreign Direct Investment.
14. Several reforms have been implemented to mitigate the negative impacts of global food prices on the
most disadvantaged segments of the population. Temporary and targeted price reductions have been
applied to imports of food and oil products consumed by the poorest segments of the population.
Furthermore, the Government has strengthened the social safety nets, especially through
programmes relating to food security, school canteens, transfers to farmers, rural agricultural
microcredit, and assistance to refugees and people displaced by war. Finally, in order to increase
agricultural production, the Government has provided smallholders with seeds and fertilizer, initiated
the rehabilitation of the Imbo plain irrigation system and basic infrastructure, as well as cattle
restocking. Furthermore, a vast marshland development programme was recently launched, and will
undoubtedly increase production so as to address the problem of food insecurity. The Government
wishes to thank all the donors that have backed these initiatives financially, in particular, the African
Development Bank, World Bank, Netherlands, Norway, the European Union, and many others.
III. KEY LESSONS FROM THESE REFORM PROGRAMMES AND CHALLENGES
3.1 LESSONS FROM THE REFORM PROGRAMMES
15. The following key lessons have been learned from implementation of earlier programmes and reforms
under PRSP-I and the programme concluded between Burundi and the International Monetary Fund:
(i) strengthening of macroeconomic stabilization, (ii) structural reforms aimed at improving the public
financial management system, monetary and exchange rate policy, and (iii) enhancement of the
efficiency of the productive system, especially the privatization of public enterprises and restructuring
of the coffee sector. Implementation of the PRSP-I produced positive results in the areas of
governance and human development.
16. Implementation of these programmes and reforms has required the mobilization of significant
resources. Progress has been made in the health and education sectors mainly due to the financing
received by the country on reaching the completion point in January 2009. Despite a crisis exit
context and an unfavourable international environment, the country has continued to post positive
growth, and it can be readily seen that the donors support operations have effectively facilitated the
strides made by the Government in implementing its reform programme. Over the past few years, the
country has been largely spared by the international financial crisis. However, only in 2012 did it
experience a sharp cutback in budget support equivalent to about 3.5% of GDP or half the estimated
amount for 2011. Against this difficult backdrop, the Government, in collaboration with its technical
and financial partners, will consider how to extend the SAB procedure to health care, statistics and
other areas of interest to donors so as to offset dwindling budget support. The African Development
Bank’s support through PARE II, PARE III and PARE IV paid particular attention to the strengthening of
internal and external control and improvement of public expenditure management, in particular,
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better budget preparation and public procurement reform. World Bank support, through ERSP-II and
ERSP III, gave high priority to improving the transparency of public financial management, enhancing
the business environment and ensuring efficiency of the productive system.
17. Significant progress has been made in public financial management as a result of implementation of
the planned reforms. Several implementing texts on the new Organic Finance Law have been
published or are being finalized, including the promulgation of the General Regulations on Public
Budget Management, the Decree on Fiscal Governance, the new Public Financial Management
Strategy and its 2012-2014 Action Plan, the BRB/Ministry of Finance Convention and Medium-Term
Budget framework letters.
With regard to revenue collection, the past few years have been marked by the establishment and
operationalization of the Burundi Revenue Authority, with very strong collection performances. Several
measures have been implemented to improve the performance of the collection services and
broaden the tax base, including the replacement of the Transactions Tax by Value Added Tax and the
application of the Common External Tariff to ensure harmonization with the East African Community.
Several other measures have been implemented aimed at broadening the tax base, bringing the
single taxpayer identification number into general use, computerization of the collection services,
payment of arrears, and updating of some Laws. Income tax will be extended to the other categories
which did not pay this type of tax. With regard to internal control, IGE has continued to conduct its
internal control activities, and the re-establishment of the Inspection and Control Service at the
Ministry of Finance has helped to strengthen internal control. The Court of Auditors is operational, is
issuing opinions on all Finance Bills tabled before Parliament, and has produced Budget Execution
reports that have been submitted to Parliament. The adoption of a new Public Procurement Code
compliant with international standards and the entry into force of the said code has contributed
significantly to enhancing budget execution efficiency. The Government has obtained new payroll
management software on World Bank financing.
18. In order to consolidate all the available resources, the Government has continued to streamline its
accounts culminating in the establishment of a single Treasury account, and has consolidated the
progress already made in rechanneling public expenditure towards the priority poverty reduction
sectors. A decree on fiscal governance, which is being adopted, will address issues relating to the
terms and conditions for implementing the principle of legality of revenue and expenditure, the
definition of objectives and formulation of fiscal and economic and improvement of economic and
fiscal policies. It will also define rules relating to Finance Laws, in particular their structure and
improvement of budget procedures at both government and parliamentary levels. An Ordinance on a
new classification in compliance with international standards has also been signed and will soon
enter into force. The deployment of Expenditure Commitment Comptrollers in two pilot Ministries is
envisaged in 2012. The finalization of the expenditure chain streamlining project aims at ensuring
compliance with international best practices for the modulation of controls. In order to empower
actors and instill a culture of budget accountability, the payment authorization system will be
decentralized in 2014. The programme budget will be introduced into Burundi’s budget process as
from 2004.
19. With regard to improvement of the business climate, considerable progress has also been made in
boosting the private sector, including the adoption of several texts aimed at simplifying business start-
up procedures as well as reducing the time taken to obtain a building permit. These texts aim
particularly at improving the regulatory framework. They also include the new Code for Private
Companies and Companies with Mixed Ownership, preparation of the Bankruptcy Law, and
Annex I Letter of Development Policy
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preparation of a Decree implementing the Competition Law. The private sector promotion strategy will
be strengthened through entrepreneurship support, with special focus on young people and
harmonization of Burundi’s tax laws with those of the EAC countries.
A coordination and monitoring unit will be established to implement and monitor the financial
development strategy and its action plan. It will also provide strategic directions for accelerating the
financial sector reform. The Central Bank has embarked on a vast project to computerize and
modernize its payment system by setting up a single window. The Central Bank is conducting a survey
on financial inclusion so as to improve poor people’s access to formal financial systems. The Central
Bank has also implemented significant measures to strengthen its internal control and risk
management systems in accordance with the IMF staff report on financial safeguards assessment.
20. The year 2011 was marked by the continuing privatization of the 104 remaining washing stations.
The launching of the bidding procedure concerned 104 washing stations and 2 plants. Of these lots,
28 washing stations and 1 plant have been sold, and competitive bidding for the 76 remaining
stations and the plant will be launched.
21. Thus, despite the various external shocks, in particular the post-conflict situation, weather conditions
and the international financial crisis and global recession, the implementation objectives of PARE II, III
and IV were achieved. PARE II, III and IV, which supported the PRSP implementation, aimed to assist
the Government in the implementation of specific measures to improve public resource management
and strengthen internal and external control of public financial management. Here below is a
summary of the prerequisites fulfilled by the Government before disbursement of PARE II, III and
PARE IV:
Submission of the draft audited finance law for the 2007 fiscal year by the Ministry in charge of
Finance to the Court of Auditors;
Adoption of the new Organic Public Finance Law by Parliament in 2008;
The adoption of Decrees and Ministerial Orders relating to the structures defined in the Public
Procurement Code: (1) Public Procurement Regulatory Authority (ARMP), (2) National Public
Procurement Control Directorate (DNMP), and (3) Public Procurement Management Unit (CGPM).
The adoption of a Decree defining the budget preparation timetable, the responsibilities of the
different actors, and the content of the framework letter to improve the schedule and efficiency of
the budget preparation procedures;
Conduct of an audit of oil sector/government cross-debts;
Maintain an International Monetary Fund Staff-Monitored Programme following the completion of
the ECF programme for 2008 and 2009.
Submission of the draft Audited Finance Law for the 2008 fiscal year by the Ministry of Finance to
the Court of Auditors;
Clearance of government debt owed to the oil sector, as indicated in the audit of government/oil
sector cross debts, and adoption of the text on the recovery of customs duties owed by the oil sector
as indicated in the audit of government/oil sector cross-debts;
The adoption, no later than June 2009 and by the Ministry of Finance, of the text recalling the
deadlines for the commitment, verification, payment authorization and payment of budget
expenditure.
Annex I Letter of Development Policy
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Finalization and submission of the draft General Regulations on Public Budget Management
(RGGBP) to the Cabinet Meeting for consideration;
Submission of the 2008 draft Audited Finance Law to Parliament for discussion;
Finalization and adoption of an action plan for the implementation of public procurement reforms;
Submission of the 2009 Management Account and the 2009 draft Audited Finance Law by the
Ministry of Finance to the Court of Auditors.
3.2 THE NEW CHALLENGES
22. The country is still facing major political and economic challenges before it can embark on the path to
sustainable and evenly-distributed growth. In light of the implementation of PRSP-I, these challenges
are at the core of the PRSP-II process, which aims to achieve sustainable and well-balanced
development. This process is underpinned by the pursuance of a macroeconomic framework, and the
consolidation of peace, security and the rule of law.
23. Even though the outcomes of the PRSP-I are generally satisfactory, there are still some challenges.
With a population of almost 8 million inhabitants in 2010, the country has a high population which
puts the demographic issue to the forefront of the country’s concerns. Similarly, the country’s HDI
rating was low for the same year at about 0.282, and it is ranked 166th out of 169 countries
according to the 2010 UNDP report. The country’s civil war destroyed much property and
infrastructure, and this could be the reason for the slow growth achieved over the period. However,
the restoration of peace and security and other factors were identified in PRSP-II, and represent
challenges which must be addressed in order to put the economy back on the right track of growth.
These challenges, which represent objectives and must be overcome if PRSP-II is to succeed, are:
control of population growth, intensification of agricultural production systems, public expenditure
efficiency, private sector development, the energy challenge, and building the capacity to steer
development programmes.
Annex I Letter of Development Policy
REPUBLIC OF BURUNDI Bujumbura, ……….../…….../2012
MINISTRY OF FINANCE
MINISTRY OF FINANCE AND ECONOMIC DEVELOPMENT PLANNING
OFFICE OF THE MINISTER
N°540/………….…/2012
XI
Article I. BURUNDI: Economic Reform Support Programme – Phase V (PARE V) MATRIX OF POLICY MEASURES
Data Sources: DS; the measures in bold and marked with an asterisk (*) are conditions precedent to first disbursement; and the measures in bold letters and marked with two
asterisks (**) are conditions precedent to disbursement of the second tranche.
Objectives
2012 Measures
2013 Measures
2014 Measures18
Target Output Indicators Target Impact
Indicators19 Data Sources
Component 1 – Enhancement of Government’s Efficiency in the Management of its Resources
IMPROVE
REVENUE
MOBILIZATION
I.1.1. Adoption of the Bill on
Value-Added Tax* by the
Cabinet Meeting
I.2.1 Operationalize the
provisions of the Code
I.3.1 Operationalize the
provisions of the Code
The VAT Bill is adopted by
the Cabinet Meeting before
July 2012
PEFA PI 14 (Baseline 2012 :
C
DS : MFPDE certified
copy transmitting the
certified copy of the
minutes of the Cabinet
Meeting indicating the
18 For information, the measures could form part of a possible future budget support operation 19 Since a full PEFA is not planned before 2015, the indicators for 2013 will be assessed by the Bank’s services)
Annex I Letter of Development Policy
REPUBLIC OF BURUNDI Bujumbura, ……….../…….../2012
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Objectives
2012 Measures
2013 Measures
2014 Measures18
Target Output Indicators Target Impact
Indicators19 Data Sources
2013 Target: C+
PEFA PI 15
2012 Baseline:
B+
2013 Target: A
Revenue to
GDP Ratio
2011 Baseline:
14.4%
adoption of the VAT
Bill; copy of the draft
Code; PEFA indicator
assessment by the Bank’s
services; IMF reports for
the revenue/GDP ratio
I.2.2. Adoption of the revised
General Tax and Excise Duties
Code and the Tax Procedures
Manual by the Cabinet Meeting
I.3.2 Operationalize the
provisions of the Code and
Manual
The Revised General Tax and
Excise Duties Code are
submitted to the Cabinet
Meeting for consideration
before end 2013
DS: MdFPDE certified
copy transmitting a
certified copy of the
minutes of the Cabinet
Meeting indicating the
adoption of the Revised
Code and Tax
Procedures Manual.
copies of the Code and
Manual
Annex I Letter of Development Policy
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OFFICE OF THE MINISTER
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Objectives
2012 Measures
2013 Measures
2014 Measures18
Target Output Indicators Target Impact
Indicators19 Data Sources
2012 Target:
2012 : 15.1%
2013 Target :
15.4%
STRENGTHEN
THE NATIONAL
PUBLIC
PROCUREMENT
SYSTEM
I.2.3- Submission to the Cabinet
Meeting and forwarding to
Parliament of the Bill on the
revision of the Public
Procurement Code in accordance
with the recommendations of the
ongoing assessment of the
national procurement system by
ADB/COMESA; and preparation
of the related implementing texts
(procedures manual, standard
bidding documents and code of
I.3.3 Operationalize the
provisions of the new Code
The Bill is submitted for
adoption by the Cabinet
Meeting and forwarded to
Parliament before end 2013
PEFA PI-
192012 Baseline
2012 : C+
2013 Target : B
DS: MFPDE certified
copy forwarding a
certified copy of the
letter forwarding the Bill
to the Government
General Secretariat
(SGG); assessment of the
PEFA indicator by the
Bank’s services. copies
of the revised texts
Annex I Letter of Development Policy
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Objectives
2012 Measures
2013 Measures
2014 Measures18
Target Output Indicators Target Impact
Indicators19 Data Sources
penalties)
I.1.2- Conduct an external
audit of public contracts in
accordance with the
provisions of the public
procurement code and publish
the results on the website of
the Ministry of Finance (or on
the ARMP site once it is
operational). The audit will
concern 2010, 2011. The
scope of the audit must cover
a minimum of 25% of the
number of annually awarded
contracts
I.2.4- Conduct an external audit
of public contracts in accordance
with the provisions of the public
procurement code and publish the
results on the website of the
Ministry of Finance (or on the
ARMP site once it is operational).
The audit will concern 2012. The
scope of the audit must cover a
minimum of 25% of the number
of annually awarded contracts
Condition precedent to
disbursement**: Submit to the
Bank the public procurement
audit reports for 2010, 2011 and
2012. The audits must cover a
minimum of 25% of annually
awarded contracts according to
I.3.4 Conduct an external
audit of public contracts in
accordance with the
provisions of the public
procurement code and publish
the results on the website of
the Ministry of Finance (or on
the ARMP site once it is
operational). The audit will
concern 2013. The scope of
the audit must cover a
minimum of 45% of the
number of annually awarded
contracts
Conduct an external audit of
public contracts in accordance
with the Public Procurement
Code and publish the results
The external audits of public
contracts for 2010, 2011 and
2012 are conducted and
published on the website of
the Ministry of Finance (or on
the ARMP site once it is
operational).The scope of the
audits must cover a minimum
of 45% of the number of
annually awarded contracts
DS : MdFPDE letter
forwarding the copy of
the audit report and
confirming the
publication of the
findings: copies of audits
made; copies of web
screens of sites where
audits are published
Annex I Letter of Development Policy
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Objectives
2012 Measures
2013 Measures
2014 Measures18
Target Output Indicators Target Impact
Indicators19 Data Sources
ARMP statistics) and a screen
copy of the website page where
the audits are published
on the website of the Ministry
of Finance (or on the ARMP
site once it is operational).
The audit will concern 2013.
The scope of the audit must
cover a minimum of 45% of
the number of annually
awarded contracts
I.1.3 Allocate adequate
budget resources to ARMP in
the 2013 and 2014 FL to
enable ARMP to fulfill its
functions in compliance with
the existing laws and
regulations (especially
I.2.5 Allocate adequate budget
resources to ARMP in the 2014
BL to enable ARMP to fulfill its
functions in compliance with the
existing laws and regulations
(especially concerning audits).
The Budget allocated to ARMP
I.3.5 Allocate adequate
budget resources to ARMP
under the 2015 FL to enable
ARMP to fulfill its functions
in compliance with the
existing laws and regulations
(especially concerning
ARMP is financially
autonomous
BF indicating that the
mechanism has been
established and budget
execution report stating
that the resources have
been provided to ARMP
Annex I Letter of Development Policy
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XVI
Objectives
2012 Measures
2013 Measures
2014 Measures18
Target Output Indicators Target Impact
Indicators19 Data Sources
concerning audits). The
Budget allocated to ARMP
under the 2013 FL must be
higher than the budget for the
2012 FL (MBIF 233)
under the 2014 BL must be higher
than the budget for the 2013 BL
audits). The Budget allocated
to ARMP under the 2015 FL
must be higher than the
budget for the 2014 FL
I.1.4 As from 1 June 2012,
systematically publish the
final contract awards (on
the Ministry of Finance
website or once it is
operational, on the ARMP
website)*
Disbursement Condition:
screen copy of the website
page where the final
contract awards for the 1
January 2012 to 30 June
I.2.6 Systematically publish the
final contract awards (on the
Ministry of Finance website or
once it is operational, on the
ARMP website)
I.3.6 Systematically publish
the final contract awards (on
the Ministry of Finance
website or once it is
operational, on the ARMP
website)
The contract awards are
published in a website/
DNCMP/ARMP report
– certified copies of the
website page where the
final contract awards are
published
Annex I Letter of Development Policy
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OFFICE OF THE MINISTER
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XVII
Objectives
2012 Measures
2013 Measures
2014 Measures18
Target Output Indicators Target Impact
Indicators19 Data Sources
2012 are published*
STRENGTHEN
INTERNAL AND
EXTERNAL
BUDGET
EXECUTION
CONTROLS
I.1.5 Prepare a classification
of supporting documents for
all the payments in the
form of an Order**
I.2.7 The OTBU strictly applies
the classification of supporting
documents for all payments.
I.3.7 The OTBU strictly
applies the classification of
supporting documents for all
payments.
A classification of supporting
documents for all payments in
the form of an Order is
available and applied by the
OTBU
PEFA PI-20
2011 Baseline:
D+
2013 Target: C
PEFA PI-21
2011 Baseline:
D+
2013 Target: C
DS: Certified copy of the
Order concerning the
classification of
supporting documents
for payments and Court
of Auditors report
I.2.8 The Court of Auditors, in
accordance with the RGGB,
carries out an annual control of
compliance with the classification
of supporting documents for all
payments as part of the personal
and pecuniary responsibility of
the payment authorizing officer
and public accountant (OTBU)
I.3.8 The Court of Auditors,
in accordance with the
RGGB, carries out an annual
control of compliance with
the classification of
supporting documents for all
payments as part of the
personal and pecuniary
responsibility of the payment
authorizing officer and public
The Court of Auditors carries
out controls on the OTBU’s
payments
DS : Copy of Court of
Auditors Report
Annex I Letter of Development Policy
REPUBLIC OF BURUNDI Bujumbura, ……….../…….../2012
MINISTRY OF FINANCE
MINISTRY OF FINANCE AND ECONOMIC DEVELOPMENT PLANNING
OFFICE OF THE MINISTER
N°540/………….…/2012
XVIII
Objectives
2012 Measures
2013 Measures
2014 Measures18
Target Output Indicators Target Impact
Indicators19 Data Sources
accountant (OTBU)
PEFA PI-26
2011 Baseline:
D+
2013 Target : C
I.1.6 The Ministry of Finance
and Economic Development
Planning prepares a monitoring
report/table of
recommendations made by the
Court of Auditors (CdC) on
budget execution relating to the
Audited Finance Laws for 2009
and 2010. The monitoring
report/table presents the
recommendations,
implementation status of the
recommendations and
MdFDPE’s related comments.
The Table/Report is published
on the Ministry of Finance
website. **
I.2.9 The Ministry of Finance and
Economic Development Planning
prepares a monitoring report/table
of recommendations made by the
Court of Auditors (CdC) on
budget execution relating to the
Audited Finance Laws for 2011.
The monitoring report/table
presents the recommendations,
implementation status of the
recommendations and MdFDPE’s
related comments. The
Table/Report is published on the
Ministry of Finance website.
I.3.9 The Ministry of Finance
and Economic Development
Planning prepares a
monitoring report/table of
recommendations made by
the Court of Auditors (CdC)
on budget execution relating
to the Audited Finance Laws
for 2012. The monitoring
report/table presents the
recommendations,
implementation status of the
recommendations and
MdFPDE’s related comments.
The Table/Report is published
on the Ministry of Finance
website.
Monitoring of the
implementation of the
recommendations is initiated
and operational in 2012 and
continues to be operational in
2013
DS: Certified Copy of
the MFPDE report and
certified screen copy of
the website page where
the report is published
Annex I Letter of Development Policy
REPUBLIC OF BURUNDI Bujumbura, ……….../…….../2012
MINISTRY OF FINANCE
MINISTRY OF FINANCE AND ECONOMIC DEVELOPMENT PLANNING
OFFICE OF THE MINISTER
N°540/………….…/2012
XIX
Objectives
2012 Measures
2013 Measures
2014 Measures18
Target Output Indicators Target Impact
Indicators19 Data Sources
I.1.7 Have the study and
recommendations on
Burundi’s internal and
external control system
technically validated by the
Cabinet Meeting and start to
implement the
recommendations
I.2.10 Continue to implement the
recommendations of the study
and recommendations on
Burundi’s internal and external
control system.
I.3.10 Continue to implement
the recommendations of the
study and recommendations
on Burundi’s internal and
external control system
Technical validation of the
study and recommendations
on Burundi’s internal and
external control system by the
Cabinet Meeting.
Copy of the minutes of
the Cabinet Meeting on
the technical validation
of the study
I.1.8 Establish a mechanism
to monitor the
implementation at the
Ministry of Good Governance
of the recommendations made
by the General State
Inspectorate in the context of
its inspections
1.2.11 Ensure the monitoring of
the recommendations made by the
General State Inspectorate in the
context of its inspections
I.3.11 Ensure the monitoring
of the recommendations made
by the General State
Inspectorate in the context of
its inspections
The percentage of
recommendations
implemented is above 30% in
2012 and above 50% in 2013
DS: - Letters from the
General State
Inspectorate forwarding
copies of the
recommendation
monitoring evaluation
reports
Annex I Letter of Development Policy
REPUBLIC OF BURUNDI Bujumbura, ……….../…….../2012
MINISTRY OF FINANCE
MINISTRY OF FINANCE AND ECONOMIC DEVELOPMENT PLANNING
OFFICE OF THE MINISTER
N°540/………….…/2012
XX
Objectives
2012 Measures
2013 Measures
2014 Measures18
Target Output Indicators Target Impact
Indicators19 Data Sources
1.2.12 Ministerial inspectorates
submit their annual control
programmes and reports to the
General State Inspectorate to
strengthen their coordination
Ministerial inspectorates
submit their annual control
programmes and reports to
the IGE before end 2013
DS : IGE letter
acknowledging receipt of
the annual programmes
and reports prepared by
the Ministerial
Inspectorates
I.1.9 Adoption, by Ordinance,
of the Public Expenditure
Rationalization Manual
I.2.13 Entry into force of the
Public Expenditure
Rationalization Manual
Public Expenditure
Rationalization Manual is
adopted and applied
DS: Copy of the
Ordinance concerning
the Public Expenditure
Rationalization Manual
I.1.10 Finalize and adopt
the text on Expenditure
Commitment Control
(CED)*
I.2.14 Implement the text on CED The text on CED is adopted
and applied
DS : Copy of the text on
the adoption of the text
on CED
Annex I Letter of Development Policy
REPUBLIC OF BURUNDI Bujumbura, ……….../…….../2012
MINISTRY OF FINANCE
MINISTRY OF FINANCE AND ECONOMIC DEVELOPMENT PLANNING
OFFICE OF THE MINISTER
N°540/………….…/2012
XXI
Objectives
2012 Measures
2013 Measures
2014 Measures18
Target Output Indicators Target Impact
Indicators19 Data Sources
1.1.11 Submission of the
annual management report
on revenue and expenditure
operations on the Treasury
Current Account and the
2011 HIPCI Account by the
Ministry of Finance and
Economic Development
Planning to the Court of
Auditors *
1.2.15 Submission of the annual
management report on revenue
and expenditure operations on the
Treasury Current Account and the
2011 HIPCI Account by the
Ministry of Finance and
Economic Development Planning
to the Court of Auditors
Component II – Promotion of Private Sector Development and Job Creation
IMPROVE THE
INVESTMENT
AND BUSINESS
ENVIRONMENT
IN ORDER TO
II.1.1. Adoption of the private
sector development strategy
by the Cabinet Meeting
II.2.1 Implement the Strategy in
accordance with its annual Action
Plan
II.3.1 Implement the Strategy
in accordance with its annual
Action Plan
The private sector
development strategy is
adopted before end 2012
Private
investment/GD
P ratio
SD : Letter forwarding
the strategy ; certified
copy of minutes of the
Council of Ministers
meeting mentioning the
Annex I Letter of Development Policy
REPUBLIC OF BURUNDI Bujumbura, ……….../…….../2012
MINISTRY OF FINANCE
MINISTRY OF FINANCE AND ECONOMIC DEVELOPMENT PLANNING
OFFICE OF THE MINISTER
N°540/………….…/2012
XXII
Objectives
2012 Measures
2013 Measures
2014 Measures18
Target Output Indicators Target Impact
Indicators19 Data Sources
CREATE JOBS 2011 baseline:
7.6%
2013 target:
10%
Number of jobs
created:
2011 baseline:
6000 jobs
created
2012 Target:
15,000 jobs
created
adoption of the strategy
II.1.2. Establishment of a
public-private dialogue
framework (PPDF) to serve as
a consultation and decision-
making platform between the
two sectors
II.2.2 Public-Private Dialogue
Framework is operational and
meets regularly
II.3.2 Public-Private Dialogue
Framework is operational and
meets regularly
The Public-Private Dialogue
Framework is set up before
end 2012. Meetings of the
Public-Private Dialogue
Framework are held at least
once in 2012 and twice in
2013
DS : the annual report
prepared by the
Permanent Secretariat of
the Public-Private
Dialogue Framework
II.1.3 Recruit 12 senior staff
for API and install API in
offices suitable for its mission
II.2.3. Adoption, by the Cabinet
Meeting, of the Bill amending
the Investment Code
Disbursement Condition:
Submission of the Bill
amending the Code to the
II.3.3 Implement the
provisions of the new
Investment Code
The Bill amending the
Investment Code is submitted
to the Cabinet Meeting and
adopted by the Cabinet
Meeting before end 2013. 12
senior staff are recruited for
API, and API is installed in
offices suitable for its
DS: Certified copy of the
forwarding letter on the
Bill amending the
Investment Code to the
Cabinet Meeting
Annex I Letter of Development Policy
REPUBLIC OF BURUNDI Bujumbura, ……….../…….../2012
MINISTRY OF FINANCE
MINISTRY OF FINANCE AND ECONOMIC DEVELOPMENT PLANNING
OFFICE OF THE MINISTER
N°540/………….…/2012
XXIII
Objectives
2012 Measures
2013 Measures
2014 Measures18
Target Output Indicators Target Impact
Indicators19 Data Sources
Cabinet Meeting.
Condition precedent to
Disbursement: submission of
the Bill amending the
Investment Code to the Cabinet
Meeting **
mission.
2013 Target:
15 000 jobs
created
II.2.4. Submission of the Bill on
public-private partnerships(PPP)
to the Cabinet Meeting
II.3.4 The Cabinet Meeting
adopts the Bill on PPP
The Bill on PPP is submitted
to the Cabinet Meeting before
end 2013
DS Forwarding letter to
the Cabinet Meeting and
certified copy of the
minutes of the Cabinet
Meeting adopting the
draft Law
Annex I Letter of Development Policy
REPUBLIC OF BURUNDI Bujumbura, ……….../…….../2012
MINISTRY OF FINANCE
MINISTRY OF FINANCE AND ECONOMIC DEVELOPMENT PLANNING
OFFICE OF THE MINISTER
N°540/………….…/2012
XXIV
Objectives
2012 Measures
2013 Measures
2014 Measures18
Target Output Indicators Target Impact
Indicators19 Data Sources
II.1.4. Prepare the National
Employment Policy (PNE),
propose the sector action
plans (youth, social
protection, etc.)
II.2.5 Adoption of the
employment policy by the
Cabinet Meeting and
implementation of the policy
II.3.5 Implementation of the
employment policy
The National Employment
policy is prepared before end
2012, adopted by the Cabinet
Meeting in 2013 and
implemented
DS: Copy of the policy
and copy of the minutes
of the Cabinet Meeting
adopting the policy
Annex I Letter of Development Policy
REPUBLIC OF BURUNDI Bujumbura, ……….../…….../2012
MINISTRY OF FINANCE
MINISTRY OF FINANCE AND ECONOMIC DEVELOPMENT PLANNING
OFFICE OF THE MINISTER
N°540/………….…/2012
XXV
Objectives
2012 Measures
2013 Measures
2014 Measures18
Target Output Indicators Target Impact
Indicators19 Data Sources
II.1.5 Establishment of a
formal framework to revise
the education curricula to
ensure a closer match
between employment supply
and demand among the
different partners (Ministry of
Basic Education, Ministry of
Higher Education, civil
society and the private sector)
II.2.6 At least 5 curricula are
revised under the formal
framework
The formal framework to
revise the education curricula
is established before end 2012
and 5 curricula are revised in
2013
DS: Copy of the minutes
of formal framework
meetings; Copies of
revised curricula
XXVI
V. PROGRAMME MONITORING
24. The Government will be responsible for monitoring the programme and matrix of measures of the
structural reforms. To do so, it will use the institutional framework set up to monitor and evaluate the
reforms backed by all budget support programmes financed by the technical and financial partners.
25. The inter-Ministerial team includes the focal points of the Ministries of Finance and Economic
Development Planning, Trade, Youth and Sports, the SCEP and the Coffee Sector Committee. The
technical committees focus on the public finance reforms, the business climate and the coffee sector
and youth employment. The Reform Support Unit at the Ministry of Finance and Economic Development
Planning will coordinate the Monitoring Committee, which is composed of members from the Ministries
and Institutions involved in this Programme.
VI. PRELIMINARY LIST OF THE MAIN AREAS TO WHICH FUTURE BUDGET SUPPORT GRANTS COULD BE
MADE
26. PARE-V is the fourth phase of a programme of four budget support grants, which started with the
PAREG. The PAREG defined the programme’s areas of intervention. PARE-II, PARE-II and PARE-IV were
mainly aimed at consolidating and building on reforms initiated under the PAREG, while PARE V will seek to
complete implementation of reforms already initiated under previous programmes. The ADB programme
has been closely harmonized with the budget support programmes of the other technical and financial
partners.
27. Capitalizing on the Government’s continuously satisfactory performance, the ADB, in collaboration with
other technical and financial partners, including the World Bank and the European Commission, should
launch the preparation of a new series of budget support grants to foster implementation of PRSP-II. The
priority actions, which are based on a diagnosis of the country’s problems and priorities, are defined in
PRSP-II.
28. The future programme will comprise different measures in public finance, private sector development
and improvement of youth employment with programmes to ensure a close match between supply and
demand for jobs. Consideration might also be given to mainstreaming of reforms related to transparency in
natural resource management and the revenue it generates, since recent prospecting has revealed that
the country has enormous mining potential.
6.1 PUBLIC FINANCE
29. As regards public finance, medium-term measures will continue to focus on: (i) reform of the
budget process through the introduction of programme budgets, (ii) strengthening of the culture of
performance and budget accountability; and (iii) strengthening of control institutions, and (iv) reform of the
procurement system.
30. As concerns reform of the budget process, the implementing texts of the General Regulations on
Public Budget Management include: (i) the budget procedures manual; (ii) simplification of the expenditure
chain; (iii) the Ordinance on the operation of Expenditure Commitment Comptrollers. Finally, the next
programme could be guided by the recommendations of the ongoing PEFA.
Furthermore, the implementation of these reforms will require capacity building to train Government
personnel on new budget practices.
31. With regard to the strengthening of control institutions, future operations will continue to target
capacity building for both internal and external control. The measures to be implemented will draw on the
recommendations of the study on control conducted in 2011.
32. As for reform of the procurement system, priority could be given to increasing transparency in
public procurement management, as well as gradual upgrading of the national system to ensure
compliance with international standards in order to encourage the use of the national system in
development projects financed with external resources. The focus will be on the publication of
procurement notices in newspapers and on the websites of the Ministry in charge of Finance and the
Procurement Regulatory Agency once it becomes operational.
XXVII
6.2 PROMOTION OF THE PRIVATE SECTOR
33. As concerns the promotion of the private sector, future reforms could target the creation of a legal and
regulatory framework that is more conducive to investment. Potential measures relate mainly to
implementation of the new investment code, the new commercial code or enhancement of the efficiency of
the commercial court and arbitration centres.
34. Reforms could also target the establishment of a consultative framework between the public and
private sectors to which private enterprises attach great importance. Such reforms could specifically relate
to the application of principles instituted through adoption of the Presidential Decree of 2008 to create a
consultative framework between the public and private sectors.
Strengthening of dialogue between the Government and Burundian businesses is critical to ensuring that
Burundi’s private sector benefits from the regional integration process within the EAC. With regard to the
promotion of employment, priority will be given to the establishment of youth-oriented programmes.
35. The private sector could also be promoted by supporting financial sector reform to facilitate greater
access to financing for small and medium enterprises.
VII. CONCLUSION
VII. CONCLUSION
43. Such are some of the policies that will dominate Government action in the years ahead. This
programme, which was discussed with African Development Bank experts, will be very closely monitored by
the authorities. *************************
XXVIII
Annex II Relations with the IMF
Press Release No. 12/35
3 February 2012
IMF Executive Board Approves New US$46.5 Million Extended Credit Facility
Arrangement and US$1.6 Million Disbursement for Burundi
The Executive Board of the International Monetary Fund (IMF) approved on January 27,
2012 a new three-year, SDR 30 million (about US$46.5 million) arrangement for Burundi
under the Extended Credit Facility (ECF) aimed at consolidating the gains made in terms of
macroeconomic stability and further reducing poverty. The approval enables the immediate
disbursement of an amount equivalent to SDR 1 million (about US$1.6 million). The Board's
decision was taken on a lapse of time basis1.
A previous ECF arrangement for Burundi expired on January 23, 2012, following the Board’s
completion on January 13, 2012 of the seventh and final review which allowed the
disbursement of an amount equivalent to SDR 5 million (about US$7.8 million), bringing
total disbursements under that arrangement to an amount equivalent to SDR 51.2 million
(about US$79.4 million – see Press Release No. 12/9).
Economic Outlook
Real GDP growth in 2011 is projected at 4.2 percent, somewhat lower than previously
envisaged, owing to a weakening in aggregate demand related to the food and fuel price
shock and persistent electricity shortages. The overall deficit in 2011 is projected to be 2.5
percent of GDP or 0.5 percent of GDP lower than programmed. Revenue collection through
end-October was about 34 percent higher than in the same period in 2010, as the result of
improvement in revenue administration and better collection of non-tax revenue.
Economic growth is projected to reach 6.0 percent in 2014, supported by improved
productivity and diversification of agricultural activity, and by increased investment in the
electricity and tourism sectors. As a result of a prudent demand policy, inflation is expected
to decline gradually to single digits. In the external sector, exports of coffee and other
agricultural products should increase strongly and offset the expected increase in imports.
Consequently, the external current account deficit is expected to improve and stand at 9.1
percent of GDP in 2014.
However, downside risks remain. Growth could be affected because of the security situation
and the external environment characterized by high petroleum products prices, with
International Monetary Fund
Washington, D.C. 20431 USA
XXIX
negative consequences for inflation and budget execution. Moreover, the euro zone crisis
could increase the uncertainties surrounding budget support.
Program Summary
The program for 2012–14 draws on the lessons from the Ex Post Assessment (EPA) and
builds on the new poverty reduction and growth strategy (PRSP-II). It will seek to
consolidate the gains made in terms of macroeconomic stability from implementation of
previous economic programs and to further assist the government to continue its poverty
reduction policy in the framework of the PRSP-II. The EPA highlighted the importance of
greater exchange rate flexibility to better absorb external shocks, the rebuilding of fiscal
buffers, and the safeguarding of debt sustainability. A key pillar of the new PRSP emphasizes
the transformation of the Burundian economy for sustained growth and job creation by
alleviating key bottlenecks to growth.
The program aims at: (i) further improving tax revenue collection; (ii) strengthening public
financial management and developing a debt management policy; (iii) permitting greater
exchange rate flexibility; and (iv) improving the business climate.
The ECF program dovetails with initiatives of key development partners, in particular the
World Bank in the electricity, education, coffee, and health sectors, the African Development
Bank in infrastructure, bilateral donors in revenue mobilization and governance. The program
envisages consolidating quick wins secured under previous arrangements such as social
safety net programs in the health and education sectors.