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TRANSCRIPT
Document of
The World Bank
FOR OFFICIAL USE ONLY
Report No. 61132-BI
INTERNATIONAL DEVELOPMENT ASSOCIATION
PROGRAM DOCUMENT
FOR A
PROPOSED GRANT
IN THE AMOUNT OF SDR 22.1 MILLION
(US$35 MILLION EQUIVALENT)
TO
THE REPUBLIC OF BURUNDI
FOR A
FIFTH ECONOMIC REFORM SUPPORT GRANT (ERSG V)
November 15, 2011
Poverty Reduction and Economic Management 2
Country Management Unit AFCE1
Africa Region
This document has a restricted distribution and may be used by recipients only in the performance of their official
duties. Its contents may not otherwise be disclosed without World Bank authorization.
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REPUBLIC OF BURUNDI
Government Fiscal Year January 1–December 31
Currency Equivalents Exchange Rate Effective as of October 31, 2011
Currency Unit Burundi Franc
US$1.00 Fbu 1234.00
Weights and Measures Metric System
ABBREVIATION AND ACRONYMS
ADC Alliance Démocratique pour le Changement (Democratic Alliance for Change)
AfDB
API
African Development Bank
Investment Promotion Agency
APR PRSP Annual Progress Report
ARFIC Autorité de Régulation de la Filière Café (Coffee Regulatory Authority)
BINUB United Nations Integrated Office in Burundi
BOP Balance of Payments
BRB Central Bank of Burundi (Banque de La République du Burundi)
CAS Country Assistance Strategy
CASA Conflict Affected States in Africa
CEM Country Economic Memorandum
CENI Commission Electorale Nationale Indépendante (Independent National Electoral
Commission)
CIP Comité Interministériel de Privatisation (Interministerial Privatization Committee)
CNDD-FDD National Council for the Defense of Democracy-Forces for the Defense of Democracy
CFAA Country Financial Accountability Assessment
COMESA Common Market of Eastern and Southern Africa
COTEBU Complex Textile de Bujumbura (Textile Industries)
CP Completion Point
CWIQ Core Welfare Indicator Questionnaire
DBC Directorate of Budget and Control
DC
DeMPA
Directorate of Accounting
Debt Management Performance Assessment
DGP Planning Directorate
DFID Department for International Development (UK)
DPO Development Policy Operation
DRC Democratic Republic of the Congo
DTIS Diagnostic Trade Integration Study
EAC East African Community
EC European Commission
ECF Extended Credit Facility
ECOSAT Encadrement des Constructions Sociales et Aménagements des Terrains (Land Protection
for Social Habitat)
EERC Emergency Economic Recovery Credit
EMSP Economic Management Support Project
ERC Economic Rehabilitation Credit
ERSG Economic Reform Support Grant
EU European Union
EXIM Export-Import
FAO Food and Agriculture Organization
Fbu
FDI
Burundi Franc
Foreign Direct Investment
FNL Front National pour la Libération
FPSDP Finance and Private Sector Development Project
FIAS Foreign Investment Advisory Service
GDP Gross Domestic Product
GER Gross Enrollment Ratio
GIZ German International Cooperation
GNP Gross National Product
GoB Government of Burundi
HIPC Heavily Indebted Poor Countries (Initiative)
HIV/AIDS Human Immunodeficiency Virus/Acquired Immune Deficiency Syndrome
HRMIS Human Resource Management Information System
ICA Investment Climate Assessment
ICAS Investment Climate Advisory Services
ICR Implementation Completion Results Report
IDA International Development Association
IFMIS Integrated Financial Management Information System
IFRS International Financial Reporting Standards (Normes Comptables du Secteur Privé)
IGE Inspection Générale de l’Etat (State Inspectorate General)
IMF International Monetary Fund
JSAN Joint Staff Advisory Note
LNBTP Laboratoire National de Bâtiments et Travaux publics (National Laboratory for Public
Work and Building)
LDP Letter of Development Policy
MCM Monetary and Capital Markets
MDG Millennium Development Goal
MDRI Multilateral Debt Relief Initiative
MOCI Ministry of Commerce and Industry and Tourism
MFEDP Ministry of Finance and Economic Development Planning
MTEF Medium-Term Expenditure Framework
MTFF Medium-Term Fiscal Framework
NIF Numéro d’Identification Fiscale (Tax Identification Number)
NGO Non Governmental Organization
NPV
NTB
Net Present Value
Non Tariff Barriers
OBR Office Burundaise des Recettes (Burundi Revenue Authority)
OCIBU Office de Café du Burundi (Burundi Coffee Board)
OECD/DAC Organization for Economic Cooperation and Development/Development Assistance
Committee
OHADA Organisation pour l'Harmonisation en Afrique du Droit des Affaires (Organization for the
Harmonization of Business Law in Africa)
ONATEL Office National des Télécommunications (National Office of Telecommunication)
OTBu Ordonnateur Trésorier du Burundi
OTB Office du Thé du Burundi (Tea Board)
OTRACO Office du Transport en Commun (Public Transport Company)
PAGE Projet D’appui à la Gestion Economique (Economic Management Support Project)
PEMFAR Public Expenditure Management and Financial Accountability Review
PE Public Enterprise
PER
PETS
Public Expenditure Review
Public Expenditure Tracking Survey
PFM Public Finance Management
PRGF Poverty Reduction and Growth Facility
PRSP Poverty Reduction Strategy Paper
PSD Private Sector Development
REFES Technical Committee for Monitoring of Economic Reforms.
REGIDESO Régie des Eaux (National water and electricity enterprise)
RTFP Regional Trade Facilitation Project
SCEP Service Chargé des Entreprises Publiques (Public Entreprises Directorate General)
SDR Special Drawing Rights
SDRI Société Régionale de Dévéloppement de l’Imbo (Imbo Regional Development Company)
SIGEFI Système d’Information de Gestion Financière (Financial Management Information
System)
SIP Société Immobilière Publique (Public Mortgage Company)
SOGESTAL Société de Gestion des Stations de Lavage de Café (Coffee Washing Stations
Management Corporation)
SODECO Société de Déparchage et Conditionnement (Coffee Milling and Processing Company)
SOSUMO
SME
Société Sucrière de MOSO (Sugar processing enterprise)
Small and Medium Enterprise
SSA Sub-Saharan Africa
TF Trust Fund
UN United Nations
UNDP United Nations Development Program
UNOB United Nations Operation in Burundi
UPRONA Union pour le Progress National (Union for National Progress)
USAID United States Agency for International Development
VAT Value Added Tax
WBI World Bank Institute
WFP World Food Programme
WHO World Health Organization
Vice President: Obiageli Katryn Ezekwesili
Acting Country Director: Mercy Miyang Tembon
Country Manager: Mercy Miyang Tembon
Sector Director: Marcelo Giugale
Sector Manager: J. Humberto Lopez
Task Team Leader: Jean-Pascal N. Nganou
REPUBLIC OF BURUNDI
FIFTH ECONOMIC REFORM SUPPORT GRANT (ERSG V)
TABLE OF CONTENTS
I. INTRODUCTION ................................................................................................................ 1
II. COUNTRY CONTEXT ....................................................................................................... 3
A. Political and Security Context .................................................................................... 3
B. Poverty Outlook and Social Development ................................................................. 4
III. RECENT ECONOMIC DEVELOPMENTS ..................................................................... 5
A. Recent Economic Performance .................................................................................. 5
B. Food and Fuel Prices Crisis ........................................................................................ 9
C. Medium Term Macroeconomic Outlook .................................................................. 10
IV. GOVERNMENT PROGRAM AND PARTICIPATORY PROCESSES ...................... 13
V. BANK SUPPORT TO THE GOVERNMENT’S PROGRAM AND LESSONS
LEARNED........................................................................................................................... 14
A. Linkages to the CAS program, Africa Strategy, and previous operations and lessons
learned ...................................................................................................................... 14
B. Collaboration with the IMF and Other Donors......................................................... 15
C. Analytical Underpinnings ......................................................................................... 16
VI. THE PROPOSED OPERATION (ERSG V).................................................................... 16
A. Rationale for the Grant ............................................................................................. 16
B. Policy Areas .............................................................................................................. 17
C. Agreed Prior Actions for ERSG V and Areas for Discussion for the Next
Programmatic Series ................................................................................................. 29
VII. GRANT FEATURES ......................................................................................................... 33
A. Poverty and Social Impacts ...................................................................................... 33
B. Implementation, Monitoring and Evaluation ............................................................ 34
C. Fiduciary Aspects ..................................................................................................... 35
D. Disbursement and Auditing ...................................................................................... 36
E. Environmental Arrangements ................................................................................... 37
F. Risks and Risk Mitigation ........................................................................................ 38
LIST OF TABLES
Table 1: Economic Trends, 2006-2010 ........................................................................................... 9 Table 2: Economic Outlook - Main Economic Indicators, 2011-2013 ......................................... 11 Table 3: Structure of Public Finance and Financing Sources, 2011-2013 (Percent of GDP) ........ 11 Table 4: Indicators for PFM Reforms (ERSG IV-V Series) ......................................................... 22 Table 5: Indicators for Reforms in PSD and Measures to cope with the effects of Food and Fuel
Crisis (ERSG IV-V Series) ............................................................................................. 28 Table 6: Summary of Agreed Prior Actions for ERSG V ............................................................. 29 Table 7: Proposed Areas for Future Dialogue with the Authorities .............................................. 32
LIST OF BOXES
Box 1: Provision of Program-Related Information to the Bank .................................................... 35
LIST OF CHARTS
Chart 1: Selected Macroeconomic Aggregates, 2001-2010 ............................................................ 8
LIST OF ANNEXES
Annex 1: Burundi ERSG V - Good Practice Principles on Conditionality ................................... 41 Annex 2: Burundi ERSG V – Lessons Learned from Other IDA operations ................................ 42 Annex 3: Burundi ERSG V – Analytical Underpinning – Key Recommendations ...................... 45 Annex 4: Burundi ERSG V - National Institutional Structure for the Monitoring and Evaluation
of the Reforms ............................................................................................................... 47 Annex 5: Burundi ERSG V - Letter of Development Policy ........................................................ 48 Annex 6: Burundi ERSG V – Targeting Performance of Electricity Subsidies in Burundi .......... 72 Annex 7: Burundi ERSG V - Prospects for Achieving the MDGs by 2015 .................................. 76 Annex 8: Burundi ERSG V - IMF Staff’s Assessment of Recent Economic Performance .......... 77 Annex 9: Burundi ERSG V - Policy Matrix: Objectives and Prior Actions (2010-2012) ............. 78 Annex 10: Burundi at a Glance (including Country Map) ............................................................ 83
The Burundi ERSG V was prepared by a IDA team consisting of : Jean-Pascal N. Nganou (TTL,
S.r Country Economist, AFTP2), Paolo Zacchia (Lead Economist, AFTP2), Jacques Morisset
(Lead Economist/Sector Leader, AFTP2), Maximillien Queraynne (Financial Management
Specialist, AFTFM), Nneoma Nwogu (Counsel, LEGAF), Aissatou Diallo (Sr. Financial
Officer, CTRLA), Aurelien Beko (Poverty Economist/Consultant, AFTP2), Nicaise Ehoué (Sr.
Agriculture Specialist, AFTSD), Bella Diallo (Sr. Financial Management Specialist, AFTFM),
Peggy Mischke (Energy Engineer, AFTEG), Sherri Archondo (Senior PSD Specialist, AFTFE),
Sulaiman Wasty (Consultant, AFTP2), Ferdinand Bararuzunza (Economist, AFTP2), Aurore
Simbananiye (Team Assistant, AFMBI), and Senait Yifru (Program Assistant, AFTP2). Useful
comments were received from Yutaka Yoshino (Senior Economist, AFTP2), Steffi Stallmeister
(Sr. Country Officer/Acting CPC, AFCE1), and Andrew Osei Asibey (Sr. Monitoring and
Evaluation Specialist, AFTDE) on the results framework. The team also benefitted from the
overall advice of J. Humberto Lopez (Sector Manager, AFTP2) and Mercy Tembon (Acting
Country Director, AFCE1), whose country knowledge and advice were extremely useful.
i
REPUBLIC OF BURUNDI
FIFTH ECONOMIC REFORM SUPPORT GRANT (ERSG V)
GRANT AND PROGRAM SUMMARY
Borrower Republic of Burundi
Implementing Agency Ministry of Finance and Economic Development Planning
Financing Data IDA Grant
Terms: IDA standard grant
Amount: SDR 22.1 million (US$35 million equivalent).
Co-Financing Trust Fund (TF) Grant in an initial amount of NOK 54.29 million
(US$9.8 million equivalent, prior to administration fees of the TF) to be
contributed by Norway.
Operation type Single tranche to be disbursed upon effectiveness; second in a series of two
programmatic Development Policy Operations. The first operation was approved by the
Board on December 8, 2010 (Report No. 53720-BI).
Main Policy Areas (i) Public finance management (PFM) through improvements in budget
credibility, planning and controls;
(ii) Private sector development (PSD) through reforms to the legal and regulatory
framework, promotion of private investment and reforms in the energy, coffee
and tea sectors;
(iii) Specific actions toward social sectors are supported to assist the government
efforts to cope with the impact of the food and fuel prices crisis.
Key outcomes indicators I. Public Finance Management Reforms
(i) Percentage of national budget that has followed the medium term expenditure
framework (MTEF) process;
(ii) Amount of arrears toward suppliers (over 60 days) as a percent of total
expenditures;
(iii) Amount of civilian wage bill paid through newly installed human resources
information management system;
(iv) Public wage bill as a percent of GDP;
II. Private Sector Development Reforms
(v) Number of dossiers and amount of investment registered with the Investment
Promotion Agency (API);
(vi) Average time taken by the Investment Promotion Agency to process a
dossier;
(vii) Percentage of REGIDESO subscribers participating in the prepayment
program;
(viii) Average unplanned interruptions frequency in Bujumbura (number/year);
(ix) Number of restructuring and privatizations of public enterprises initiated;
(x) Number of publicly-owned coffee washing stations sold;
III. Food and fuel prices crisis related measures
(xi) The share of budget allocated to the school feeding program in the primary;
(xii) The share of budget allocated to the free health care program for children
under five and pregnant women during delivery.
Program Development
Objective(s) and Contribution
to CAS
The program aims at: (i) consolidating reforms already underway in public finance
management with the objective to improve budget credibility, planning, and controls,
and (ii) reenergizing the reform process in private sector development, including
through improvements in the legislative framework and competitiveness in the coffee
subsector. ERSG V will also lay the groundwork for reforms in future budget support
operations in the energy sector, which is critical to support private sector led growth.
Moreover, in a context of increasing international food and fuel prices, this operation
will support the authorities’ efforts to cope with the effects of an ongoing food and fuel
ii
price crisis on the poor in the landlocked Burundi.
The program is aligned with the Bank’s Country Assistance Strategy (CAS), which is
based on Burundi’s PRSP. It aims to help reinforce a medium-term vision of
sustainable development, assisting Burundi’s transition from a post-conflict economy
to a developing economy. It provides a framework for World Bank Group support for
four years, from fiscal year (FY) 2009 through FY 2012. The CAS focuses on two
strategic objectives: (i) promote sustainable and broad-based economic growth; and (ii)
improve access to social services and consolidate social stability. Governance is a
cross-cutting CAS objective.
Risks and Risks mitigation
The main risks to the program, along with identified mitigation measures, are:
(a) On-going post-election transition (including the possible deteriorating political
and security situation) might delay or derail progress on reforms. This risk will be
mitigated by: (i) focusing on maintaining continuity of ongoing reforms (i.e., PFM and
PSD); (ii) building on high-level Cabinet seminar commitment and concrete action
planning to cement ownership of reforms; and (iii) maintaining dialogue with civil
society and the private sector to ensure demand-side pressure.
(b) Burundi’s ability to maintain macroeconomic stability might be under minded
by weak performance in the agricultural sector or a volatile external environment. The
country’s narrow export base creates risks for future debt distress. In the face of the
recent oil price shock, this operation supports the government efforts to cope with its
impact on poor households. Further, many public enterprises are in poor financial
shape creating risks of direct and contingent liabilities. IDA, IMF, and other
development partners have worked closely with the government to help with
monitoring macroeconomic performance and in taking corrective actions in a timely
manner. The government will need to ensure more grant funding and concessional
borrowing, and foster continued economic and export growth to avoid debt distress. In
the medium term, diversification of the economy through improvements in the business
environment and reforms in the mining sector will mitigate the vulnerability of the
economy to these shocks.
(c) Lack of technical capacity could lead to delays. The risk of weak technical
capacity is mitigated by: (i) focusing reforms on a limited (but key) number of
themes/areas; (ii) leveraging technical support from on-going IDA projects; and (iii)
working with other donors in the context of the partnership framework (Cadre de
Partenariat) to reduce the number of activities and better target technical assistance.
(d) Economic governance slippages could disrupt donor support. Recent reforms
in Procurement and other PFM areas, supported in part by ERSG II and III, have
helped to mitigate this risk. The proposed operation will attempt to continue this
progress with PFM reforms. The recent adoption of a national governance strategy
demonstrates the government’s commitment to improve governance. This commitment
will be further strengthened by the implementation of the recently adopted governance
strategy.
(e) Weather conditions strongly influence the performance of the agricultural
sector, as demonstrated in 2003 and 2005. This might impact the future ability of the
authorities to implement reforms in the export crop sector, and to maintain macro-
stability. In addition to the support provided by other development partners in Burundi
(e.g., USAID), the World Bank has an ongoing agro-pastoral project that aimed to
improve the resiliency of the agriculture sector to external shocks through technology
acquisition, small scale irrigation and improved market access.
(f) Policy reversal risk. Two recent instances have led to the possibility of this
risk. First, the recent decision to increase electricity tariffs, which triggered massive
protests, could be reversed. Second, the draft Privatization Law adopted by the Council
of Ministers is being questioned in the Parliament. This risk is mitigated through the
promotion of public debates to explain the merits of reforms. The Bank and other
interested development partners could provide technical assistance, if available.
Operation ID Number P119324
1
PROGRAM DOCUMENT FOR A
PROPOSED FIFTH ECONOMIC REFORM SUPPORT GRANT (ERSG V)
TO THE REPUBLIC OF BURUNDI
I. INTRODUCTION
1. The proposed Fifth Economic Reform Support Grant (ERSG V) is the second in a
programmatic series of two operations (the first operation of the series, ERSG IV, was
approved in December 2010), designed to help the Government of Burundi (GoB) to
consolidate recent efforts to transform Burundi’s economy from a post-conflict to a sustainable
development oriented economy. In practice, these efforts consist to formulate and implement
policies to accelerate growth and promote human development, including through private sector
development. The new ERSG series builds on a series of two operations (ERSG II and III), and
draws further lessons from the Emergency Economic Recovery Credit (EERC, 2000), the
Economic Rehabilitation Credit (ERC, 2002), and ERSG I (2006).
2. The proposed ERSG V operation aims at reinforcing and operationalizing reforms,
which began during ERSG II and III and pursued under ERSG IV. It will support
government efforts to continue reforms in: (i) the public finance management system to
improve accountability and transparency in public spending; and (ii) the business
environment to foster private sector-led growth, particularly in the export crop subsector.
It proposes to: (i) consolidate reforms already underway in public finance management (as
identified in the 2008 Public Expenditure Management and Financial Accountability Review
(PEMFAR) and planned in the Public Finance Management (PFM) action plan for 2009-2011);
and to (ii) reenergize the reform process in private sector development (specifically through
improving the legal, and regulatory framework for the general business environment, and
through accelerating the coffee reform process). In addition, based on the knowledge
accumulated under the previous programmatic DPO series, the proposed operation will support
actions aimed at developing a strategic approach to the liberalization of the Burundian economy,
including public enterprises reforms, and the promotion of private investment.
3. The proposed ERSG V operation also assists the government efforts to cope with the
impact of the food and fuel prices crisis. In a context of increasingly volatile international food
and fuel prices and in response to a request from the authorities to the World Bank, this operation
provides further support to key policy measures aimed at protecting essential social programs
against the effects of major variations in international food and fuel prices on the most
vulnerable households.1 The authorities have initiated fiscal and social safety net measures aimed
to protect the poor while maintaining fiscal stability. Key social initiatives (about 0.7 percent of
GDP) targeting vulnerable groups include school feeding programs and free health care policy
for children below five and pregnant women during delivery. On the fiscal side, the authorities
introduced a fuel subsidy (primarily on diesel products which have a direct incidence on
transport costs). This action, which will lead to an erosion of revenues estimated at 0.3 percent of
GDP, envisages a full pass-through of fuel prices in the event of further increases in international
1 In 2008, a combination of short term interventions in Burundi included a temporary removal of all tariffs and taxes
on basic food items and a reduction of the tariffs on diesel to further ease up transportation costs of food imports. As
a result, government revenue was reduced while spending pressures increased.
2
prices.2 To help finance these initiatives, the IMF’s Extended Credit Facility (ECF) program,
whose sixth review was approved by the IMF’s Board on July 13, 2011, accommodates a higher
level of domestic financing representing about 0.5 percent of GDP (assuming no additional
donor financing), a higher-than-expected tax revenue collection (0.4 percent of GDP) thanks to
an improved performance of the recently established Burundi Revenue Office (OBR)3 and the
use of the reserve fund (0.1 percent of GDP). However, support from the World Bank is essential
to relieve excessive pressure on domestic financing.
4. The program structure aims to maintain a balance between the need for essential
reforms and the simplicity dictated by the weak institutions and implementation capacity.
This balance is maintained with a particular bias toward deepening the reform process in areas
already supported by predecessor operations, where the government’s buy-in has already been
established. Overall, the program continues to support the establishment of new legal and
institutional frameworks to implement essential reforms.
5. The ERSG V operation is a single tranche operation in the amount of SDR 22.1
million (US$35 million equivalent). The disbursement of additional support provided through a
trust fund (TF) administered by the International Development Association (IDA), initially in the
amount of NOK 54.29 million (US$9.8 million equivalent, prior to trust fund administration
fees) to be contributed by Norway is expected to accompany this operation.4 Indicative policy
areas where progress will be monitored for a potential follow-up programmatic series (ERSG VI-
VII) are suggested in this document. These policy areas, which benefited from the conclusions of
the Cabinet Seminar (Bujumbura, March 22-23, 2011) and the findings of the Country Economic
Memorandum (CEM) report, were discussed with the authorities during the pre-appraisal
mission of the proposed operation and in the context of the preparation of a new Poverty
Reduction Strategy Paper (PRSP) during the course of 2011. Progress in the overall reform
program will be tracked under the new ERSG grant series through the prior actions of the
proposed ERSG V, developments pertaining to the already completed prior actions of ERSG IV,
indicative triggers for eventual new programmatic series, and other related measures in the
policy matrix.
6. While the ERSG series are risky operations, they are needed to support a politically
fragile country with important institutional weaknesses. Burundi is highly dependent on
budget support to enhance its transition out of a post-conflict to growth and human economic
development. The risks associated to this operation are counter balanced by potential rewards of
macroeconomic stabilization, which would be sustained through financial external support of the
budget and substantial fiduciary facilitation of core policy reforms. The fiduciary section of this
document outlines the measures that will be taken to mitigate the risks attached to these
operations.
2 If international fuel prices begin to decline, the subsidy will be reduced accordingly and in any case unwound by
end-2011. 3 The OBR formally began operations in July 2010. Preliminary data from September 2011 suggest that revenue
collection is about 29 percent higher than in the same period in 2010, as the result of improvement in revenue
administration and the collection of non-tax revenue. 4 Subject to the terms of the TF Grant Agreement to be signed between IDA and Burundi. This amount is also
subject to currency fluctuations between NOK and US$ as of the date of the receipt of Norway contribution.
3
7. Following the successful experience of the first programmatic series of ERSG II-III,
the new ERSG series will attempt to mitigate risks through maintaining continuity in the
reforms and by leveraging on-going technical assistance and capacity building programs.
The design of the ERSG series as a two-operation programmatic series has maintained continuity
in the policy dialogue and reform agenda, and has been therefore a major way of mitigating the
risks associated with budget support operations. This effort has been further bolstered by
technical assistance and capacity building from the Economic Management Support Project
(EMSP), the Financial and Private Sector Development Project (FPSDP), and the newly
established Conflict Affected States in Africa (CASA) of the International Finance Corporation
(IFC), in partnership with the Investment Climate Advisory Services (ICAS) or Private Sector
Development (PSD)/Doing Business program, which contribute to strengthening institutional
capacity and support crucial reforms. The alignment of the ERSG series with the budget cycle is
expected to be completed under the next programmatic series (ERSG VI-VII) with release
planned for Q1 of FY13 (July 2012-June 2013), once the constitutional technicality5, which has
delayed the implementation of the budget alignment to the East African Community (EAC)
budget calendar, has been resolved.
8. The second programmatic series (ERSG IV-V) is consistent with the main objectives
identified by the Bank Strategy for Africa and the Country Assistance Strategy (CAS). The
proposed operation is aligned with the main themes of the Bank Strategy for Africa focused on
competitiveness, reduced vulnerability and improved governance and public sector capacity. It is
also consistent with the CAS objectives that focused on broad-based economic growth and social
stability.
9. At the conclusion of the proposed ERSG IV-V programmatic series, tangible
progress with respect to each component of the proposed reform program is expected,
including: (i) measurable improvements in public finance management; (ii) measurable
improvements in the environment for private sector development, with a focus on improved
performance of the energy sector; (iii) progress in the liberalization of the productive sector,
including the execution of the reform program in the coffee sector; and (iv) measurable progress
towards coping with the effects of an ongoing fuel and food crisis.
II. COUNTRY CONTEXT
A. POLITICAL AND SECURITY CONTEXT
10. Since the Arusha Agreement signed in August 2000, Burundi has experienced both
great strides and major setbacks on the road to lasting peace. The following initial political
steps were taken, including the formation of a transitional government in 2002, a new
constitution in February 2005, and presidential and parliamentary elections in August 2005. In
2006, a cease-fire accord was reached with the last hold-out rebel movement, the Front National
pour la Libération-Parti pour la Libération du Peuple Hutu (FNL-PALIPEHUTU), but sporadic
fighting continued. Two additional years of negotiations were necessary to reach a cessation of
5 According to the current national constitution of Burundi, the budget cycle follows a calendar year. Adoption of a
new cycle may require a constitutional amendment. The authorities are currently collecting all the issues, which may
require a constitutional amendment including the proposed changes in the schooling years. They plan to present
these in one legislative package to the Parliament.
4
hostilities. In 2008 and 2009, FNL-PALIPEHUTU renewed its commitment to negotiated peace,
and was reintegrated into the political system. In April 2009 Front National pour la Liberation
(FNL) became Burundi’s 42nd
political party after removing the ethnically charged part of its
name PALIPEHUTU. Disarmament, demobilization, and reintegration efforts have continued
over the recent years. On July 28, 2011, the president of Burundi, President Nkurunziza launched
a transitional justice campaign promoting the formation of a Truth and Reconciliation
Commission and a Tribunal as stipulated in the 2000 Arusha peace accords.
11. Burundi's second democratic elections in 2010 represented a milestone in its
political transition. A second round of democratic elections under the new constitution of 2005
took place from May 24 to September 8, 2010. According to international observers, the
elections conformed to international standards despite minor irregularities during the local
council elections. However, thirteen opposition parties, alleging fraud and vote-rigging, formed a
coalition to boycott the presidential election, leaving President Nkurunziza to stand unopposed
who was re-elected for a second term, with 92 percent of the votes, in June 2010. Three political
parties, notably the Union pour le progress national (Uprona) and the Front pour la démocracie
au Burundi (Frodebu-Nyakuri branch), decided to participate in the legislative elections, which
took place in July 2010, and are now represented in the Parliament.
12. The security situation remains calm but fragile. The controversies over the election
results sparked violence that sometimes led to loss of life. The self exile of the FNL president
and former rebel leader Rwasa Agathon along with other opposition leaders in a consortium of
opposition parties, known as the Democratic Alliance for Change (ADC), created an atmosphere
of uncertainty. Although Rwasa denied any intention to return to armed struggle, sporadic and
targeted attacks on the population have continued such as a recent incident when gunmen killed
41 people in a town near the capital. A reform of the police is underway and expected to make
the force more professional.
13. In this divisive environment, the ruling party has made some efforts to reach out to
other parties. While the ruling party gained the majority in the parliamentary elections, the two
opposition parties who did not boycott the polls gained representation. The authorities appointed
members of these two parties in the government. While this step can only be seen as
preliminary, it indicates that the new government is willing to include other groups in the
decision-making process. Opposition parties that boycotted elections have alleged an absence of
political dialogue and persecution of opposition leaders. In addition to rendering the Ombudsman
Office fully operational, the government has also accelerated the creation of two other
institutions: the National Committee for Reconciliation and the National Council for Human
Rights, as a step to consolidating peace and reconciliation among different political interests.
B. POVERTY OUTLOOK AND SOCIAL DEVELOPMENT
14. For many years the conflict displaced a large portion of the rural population and
destroyed important economic and social infrastructure. As a result, poverty is particularly
widespread in rural areas. About 80 percent of the population suffers from food insecurity.
Surveys estimate that national poverty incidence stood at about 67 percent in 2006, a notable
5
drop from 81 percent in 1998,6 yet far from the 2015 MDG target of 18 percent.
7 Rural poverty is
estimated to be twice that of urban areas. Regional differences are particularly acute, with
poverty rates fluctuating between a low 28.7 percent in Bujumbura to a high 82.3 percent in the
province of Kirundo. The intensity of poverty also varies among groups. Households living in
urban areas whose head or spouse has a better education and who benefit from better
employment are less likely to be poor.
15. Available social indicators show progress, but Burundi still ranks at the bottom (185th
out
of 187 countries listed) in the 2011 UNDP’s Human Development Index. Life expectancy rose
from 43 years in 2000 to 50.4 years in 2011. Vaccination rates have improved. In 2006, the
government announced that health services would be free to children under five and pregnant
women during delivery. As result, the proportion of children and pregnant mothers accessing
medical services increased from about 28 percent in 2006 to 69 percent in 2009 while under-five
mortality declined from 153.9 per thousand in 2005 to 141.9 per thousand in 2010.8 However,
the lack of essential medicine and qualified staff still severely affects service delivery. Limiting
the spread of HIV/AIDS continues to be one of the priorities of the government (the prevalence
rate in the general population was 2.9 percent in 2007). Although recent cases of Cholera are
blamed on the lack of availability of potable water, about 71 percent of the total population
benefit from safe water (above the Sub-Saharan Africa’s average of 58 percent). In education,
recent progress has to be consolidated to contribute to future growth. Education at all levels
suffers from a lack of qualified teachers, teaching materials, and adequate infrastructure.
Disparities in education outcomes among gender and regions are large. Since the ―free school‖
policy was introduced in September 2005, primary education gross enrollment rate significantly
improved from 80 percent in 2003-04 to 146.6 percent in 2009. However, quality is low and the
completion rate is only 46 percent. It is unlikely that will reach the second MDG target (primary
completion rate of 100 percent). Enrollments in secondary and tertiary education are much
lower.
III. RECENT ECONOMIC DEVELOPMENTS
A. RECENT ECONOMIC PERFORMANCE
16. Economic growth rates have been lower than PRSP projections (average real GDP
growth of 4 percent instead of the projected 7 percent in 2006-2009). Burundi’s economic
performance has been affected by a number of economic crises. Growth is volatile due to the
country’s dependence on widely fluctuating agricultural output. Agriculture accounts for about
46 percent of GDP and employs more than 90 percent of the work force. The service sector,
which is dominated by the public sector, accounts for 37 percent of GDP. The industrial sector is
6 The 1998 household survey was less exhaustive than the 2006 survey, and poverty figures cannot be compared, as
the earlier survey is likely to have overestimated poverty. The 1998 survey only included food consumption for
purchased products and self-consumption, but excluded food grants from government and non-governmental
organizations, such as the World Food Program (WFP), as well as private gifts. Both the 1998 and 2006 surveys
used cost of basic needs for estimating poverty rates (see 2008 PEMFAR for details). 7 According to data from the official World Development Indicator, the percentage of the population living below
the national poverty line in 1990 was 36.4 percent. This figure had roughly doubled by 1998 to 68.0 percent. 8 To achieve these results, the government raised the budget share of the health sector from about three percent of
the total budget in 2005 to 11.6 percent in 2010. Despite notable progress on the under-five mortality rates, their
level remains above the sub-Saharan Africa average (121.2 per thousand in 2010).
6
still small (17 percent) but growing. Burundi’s economic growth rates have been modest
compared to other EAC countries. This difference is mostly explained by the low productivity in
agriculture due to insufficient modernization (low technology) and underinvestment during
several years of conflict. The lack of basic infrastructure (including feeder roads), poor
organization of farmers, and poor governance also affected the performance of the agriculture
sector and overall economic growth in Burundi.
17. In 2008, despite increases in food and fuel prices and energy shortages, Burundi’s
economy grew by 4.5 percent of GDP, owing to improved agriculture performance, an expansion
of manufacturing and increased donor financing to support the efforts of the government to cope
with the impact of a major food and fuel prices crisis. In 2009, Burundi felt the impact of the
global economic and financial crisis; real GDP growth slowed to 3.5 percent, mainly because of
lower than expected private transfers and foreign direct investment as well as continued energy
shortages.9 However, economic growth increased to 3.9 percent in 2010 as the economy was able
to emerge from the effects of the global crisis.
18. Recent developments in the domestic and international economies have created
upward pressure on local prices. Rates of inflation first, increased then decreased and now are
expected to remain in single digits beyond 2012 assuming the absence of new global shocks. In
2008, in the wake of an international food and fuel price crisis, inflation rose to 24.4 percent
(period average). In 2009, period average inflation decreased to 10.7 percent and declined further
to 6.4 percent in 2010.
19. Prudent monetary policy meant that credit to the economy has continued to recover
but at slow pace, rising from 10 percent in 2007 to about 19 percent on average in 2008-2009
(despite the global financial crisis). This was essentially driven by bank financing of the coffee
crop and business development, as well as the desire of the Central Bank to accommodate the
impact of higher oil and food prices in 2008. The managed floating exchange rate regime has
served Burundi well so far (the real effective exchange rate depreciated against the US dollar by
about 2 percent in 2009) but the authorities should move toward more flexibility in the exchange
rate policy to reduce the country’s current account deficit. Ongoing reforms in liquidity and
foreign exchange markets could help increase flexibility in the exchange rate. IMF’s Monetary
and Capital Markets (MCM) technical assistance is expected to deliver improvements in the
areas of Treasury bill and foreign exchange auctions, and coordination between the Treasury and
the Central Bank to strengthen liquidity management.
20. Despite some slippage in 2009, the authorities generally pursued prudent fiscal
policies during 2006–10 and contained the fiscal deficit. Stronger expenditure management,
accompanied by increased domestic revenue and foreign aid inflows helped maintain the fiscal
deficit (on a commitment basis before HIPC grants) to an average of 3.5 percent of GDP in
9 Previously anticipated strong growth in the agriculture and service sectors may have been dampened by the effects
of the financial crisis through the following channels: (i) a reduction in projected foreign direct investment, notably
in the coffee sector (e.g., limited response of foreign investors to the bidding invitations for the sale of coffee
washing stations); (ii) a decline in private transfers (e.g., worker remittances), which would affect households’
ability to maintain their level of both consumption and/or investment in productive activities; and (iii) a decline in
world coffee prices.
7
2007-08, from an average 4.5 percent of GDP in 2005-06.10
Domestic revenue stabilized in 2010
at 19.1 percent of GDP (from 18.6 percent in 2009), reflecting improved collection of income
and other taxes. This level is higher than the average of 17.3 percent of GDP for post-conflict
countries. Overall fiscal outturn in 2010 (commitments basis after grants; excluding HIPC
grants) significantly improved to 3.2 percent of GDP from 5.2 percent in 2009.
21. A narrow export base and the reliance on oil and capital goods imports have
generated permanent current account deficits. In 2008, the current account deficit (including
official transfers) declined slightly to 15.0 percent (from 15.7 percent in 2007). In 2009,
however, the deficit increased to 16.1 percent mainly due to lower donor assistance, which
represents more than 60 percent of net current transfers. Even though Burundi’s trade balance
improved in 2009, it still reflects the country’s narrow range of exports, which consists almost
entirely of coffee and tea, and its dependence on imported oil and capital goods. The external
current account deficit is estimated to have declined to around 13.4 percent of GDP in 2010,
because of higher exports and official transfers.
22. The private sector’s contribution to growth remains limited. Foreign direct
investments (FDI) remain low in Burundi (less than one percent of GDP), despite a significant
improvement from US$0.5 million in 2007 to US$13.6 million in 2010, as a result of renewed
involvement of foreign firms in the banking and telecommunication sectors. Domestic private
investments remain low at about 7.6 percent of GDP (on average in 2005-2008).
23. Burundi’s external debt situation has improved, but remains vulnerable to debt
distress due to its narrow export base. In January 2009, Burundi reached the Highly Indebted
Poor Countries (HIPC) Completion Point (CP) and became eligible to US$833 million (net
present value) in debt relief, including US$425 million from IDA and US$38 million from the
IMF. This reduces the country’s public and publicly guaranteed debt by more than 90 percent in
net present value terms, and scheduled debt service by some US$30-40 million per year for the
next 30 years. Debt forgiveness will provide much relief to the country’s balance of payments.
Having reached the HIPC CP, Burundi was also granted further debt relief under the Multilateral
Debt Relief Initiative (MDRI). However, Burundi’s external public debt burden indicators are
expected to remain high over the medium term even after HIPC relief and MDRI assistance.
24. The authorities recently contracted a US$80 million line of credit with a 31.6
percent grant element to finance key energy infrastructure. On May 24, 2011, the
Government of Burundi and the Export-Import (Exim) Bank of India signed an agreement to
finance the Kabu 16 hydropower plant, which is considered as a priority project for the country.
An assessment undertaken by Bank staff indicated that the project is economically viable. To
limit budget risks, the authorities are implementing Bank supported measures to strengthen the
financial operations of the electricity company. Because the grant element of the line of credit is
less than the minimum of 50 percent agreed as part of the IMF program, Burundi requested a
modification of the zero limit on non-concessional external debt in the country’s arrangement
10
The authorities have shown restraint in adjusting their fiscal program to changing circumstances. Given the
volatile nature of foreign aid to Burundi, the 2008 and 2009 budget laws put more emphasis on the prioritization of
public expenditures and make the provision of non-priority expenditures contingent upon assured disbursement of
external budget support.
8
under the Extended Credit Facility (ECF), to accommodate it. On October 21, 2011 the IMF
Board approved the request.11
Chart 1: Selected Macroeconomic Aggregates, 2001-2010
Source: IMF
11
See IMF Country Report No. 11/315 ―Request for Modification of Non-concessional External Debt Limit
Under the Extended Credit Facility‖, October 13, 2011.
-2
-1
0
1
2
3
4
5
6
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Real GDP growth (percent)
-5.0
0.0
5.0
10.0
15.0
20.0
25.0
30.0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Inflation (percent)
-45
-40
-35
-30
-25
-20
-15
-10
-5
0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Fiscal Deficit (percent of GDP)
Fiscal Deficit (Commitments basis; Excl. grants)
Fiscal Deficit (Commitments basis; after grants; excl. HIPC)
-50
-45
-40
-35
-30
-25
-20
-15
-10
-5
0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Balance of Payments (percent of GDP)
Current Account Balance (Incl. Official transfers)
Current Account Balance (Excl. Official transfers)
Trade Balance
9
25. Gross official reserves (in months of imports) continuously increased during 2005–
10, partly as the result of higher donor disbursements. Burundi’s foreign exchange position
fluctuated widely in the last decade, (starting with a low level of US$18 million in 2001)
depending on export performance and volumes of aid flows. Aid assistance is provided mainly
by the African Development Bank (AfDB), European Commission (EC), IDA, and bilateral
donors such as Belgium, France, Netherlands, Norway, and the United States. Increased
macroeconomic stability and increased donor funding (HIPC and MDRI relief, and IMF’s SDR
allocation, in particular for 2009) resulted in a build-up of foreign reserves. Gross international
reserves are estimated to have increased from US$323 million at end-2009 to US$332 million in
2010, i.e., about 4.9 months of imports on average.
Table 1: Economic Trends, 2006-2010
2006 2007 2008 2009 2010
Population (million) 7.5 7.7 7.9 8.2 8.4
Population growth (%) 3.8 3.1 3.0 2.9 2.6
GDP (current prices, US$ billion) 0.9 1.0 1.2 1.3 1.5
GNI per capita (Atlas method, current prices, US$) 100.0 120.0 140.0 150 n.a
Real GDP growth (%) 5.1 3.6 4.5 3.5 3.9
Inflation (average CPI, %) 2.8 8.3 24.4 10.7 6.4
Real effective exchange rate (% change) -2.7 -5.7 16.0 2.0 n/a
Terms of trade (% change) -2.9 -23.4 3.4 38.5 -8.7
Gross investment (% of GDP) 16.3 17.5 19.4 20.8 n/a
Gross national savings (% of GDP) 1.8 1.8 7.1 6.3 n/a
Overall fiscal balance (Excluding grants, % of GDP) -19.3 -19.8 -25.6 -32.1 -34.9
Overall fiscal balance (after grants, Excl. HIPC, % of GDP) -1.8 -3.3 -3.7 -5.2 -3.2
Current account balance (Incl. official transfers, % of GDP) -14.5 -15.7 -15.0 -16.1 -13.4
Overall balance of payment (% of GDP) 1.5 3.0 7.4 4.1 0.9
Gross international reserves (months of imports) 3.3 3.8 5.0 5.0 4.8
Export growth (f.o.b; US$; % change) 2.6 -9.7 15.1 21.5 37.7
Share of coffee in exports (%) 67.7 59.8 65.8 63.9 72.2
Debt service to exports ratio (%) 11.1 6.8 3.2 1.7 1.2
External debt stock (% of GDP) 165.1 155.0 129 27 28
Source: Burundi authorities; World Bank; IMF.
B. FOOD AND FUEL PRICES CRISIS
26. Burundi is highly vulnerable to external shocks and so has been severely hit by
recent food and fuel price increases. In 2008, the IMF listed Burundi among the 18 world’s
most vulnerable countries to balance of payments shocks caused by food and oil price increases.
Burundi is a net importer of food and oil products, and its landlocked position raises significantly
import costs. Indeed, food price increase in Burundi mainly reflects higher petroleum and
transport costs. Together, food and fuel imports represent an estimated 43 percent of total
imports.
27. From October 2010 to February 2011, the price of fuel in Burundi increased by at least
12 percent for gasoline and 15 percent for diesel, and, more importantly, by 17 percent for
kerosene, a source of energy mostly used by poor households. Transport costs increased by 7.4
10
percent within cities and 20 percent from cities to the interior of the country. Fuel price increases
were accompanied by soaring domestic food prices. The price of rice increased by 3.5 percent
and the price of green bananas rose by 17.9 percent. Inflation is now projected to rise at 14
percent against the original target of 9 percent at end 2011.
28. The surge in food prices is expected to negatively impact the Burundian economy,
exacerbating the country’s food insecurity and chronic malnutrition rates that are among the
highest in the world. The authorities are addressing the situation through a combination of
measures. On the one hand, they are increasing spending (by 0.7 percent of GDP) on social
safety net programs targeting vulnerable groups notably school feeding programs and health care
for infants and pregnant women. On the other hand, they reduced excise taxes on: (i) kerosene by
96 percent; (ii) diesel by 55 percent; and (iii) gasoline by 17 percent. These measures are
expected to lower fiscal revenues by 0.3 percent. Thus, the fiscal impact of government actions
to address the food and fuel crisis is estimated at about one percent of GDP.
C. MEDIUM TERM MACROECONOMIC OUTLOOK
29. The proposed medium term macroeconomic outlook (2011-2013) is based on the
framework presented in the sixth review of IMF’s ECF program adopted by the IMF’s
Board on July 13, 2011. The IMF’s Board confirmed that Burundi’s performance under the
ECF-supported program has been satisfactory, and its economic outlook is broadly positive.
However, IMF’s Board recognized that the most imminent policy challenge is to preserve
macroeconomic stability while cushioning the impact of rising commodity prices. It also takes
into account the budget framework letter for the 2012 budget prepared by the authorities that is
based on a central medium term expenditure framework (MTEF). The budget framework letter
was approved by the Council of Ministers in June 2011.
30. The proposed medium term macroeconomic framework for 2011-2013 is adequate.
It projects that: (i) after some softening in 2009 following the global financial crisis, the
economy will continue to recover during 2011, but at a slower pace than previously anticipated;
(ii) after a peak of 12.5 percent in 2012, because of higher international food and oil prices, the
rate of inflation (period average) will gradually decline to about 10 percent in 2013 due to the
efforts of the Central Bank to gear monetary policy toward stabilizing prices while allowing
sufficient scope for improved economic growth; (iii) fiscal policy will remain prudent and
supportive of economic growth and poverty reduction, with stable government revenue (as a
ratio of GDP) and gradually declining public expenditure; (iv) export growth (US$ value) will
improve in 2011-13 (averaging about 5.5 percent), reflecting the impact of coffee reforms, while
import growth (US$ value) will slow down averaging about 7.6 percent for 2011-2013, despite a
peak of 23 percent in 2011 following the surge in global food and fuel prices; (v) the current
account deficit remains constant around 16 percent in 2011-2013; and (vi) external financing will
continue to be in form of grants and highly concessional loans in the medium term. The medium
term macroeconomic framework is summarized in table 2.
11
Table 2: Economic Outlook - Main Economic Indicators, 2011-2013
Actual Projections Average
2009 2010 2011 2012 2013 2011-13
(annual percent change)
Real GDP growth 3.5 3.9 4.5 4.8 5.0 4.8
Consumer prices (period average) 10.7 6.4 8.2 12.5 10.2 10.3
Exports, f.o.b (change in US$ value) 21.5 37.7 3.9 20.7 -8.0 5.5
Imports, f.o.b (change in US$ value) -19.6 42.9 23.0 -0.3 0.0 7.6
(percent of GDP)
Current account deficit (incl. grants) -16.1 -13.4 -16.5 -16.9 -15.1 -16.2
Revenue (excl. grants) 18.6 19.8 19.4 19.8 20.0 19.7
Total expenditure and net lending 50.7 54.7 47.4 42.2 39.9 43.2
Overall balance (excl. grants)a -32.1 -34.9 -28.0 -22.4 -19.8 -23.4
Overall balance (incl. grants)b -5.2 -3.2 -3.1 -2.4 -0.9 -2.1
Gross international reserves c 5.0 4.8 4.7 5.0 5.5 5.1
Source: IMF. Note: a commitment basis,
b excluding HIPC,
c in months of imports.
Table 3: Structure of Public Finance and Financing Sources, 2011-2013
(Percent of GDP)
Actual Projections Average
2009 2010 2011 2012 2013 2011-13
Domestic revenue 18.6 19.8 19.4 19.8 20.0 19.7
Tax revenue 17 18.6 18.2 18.6 18.8 18.5
Non-tax revenue 1.6 1.2 1.2 1.2 1.2 1.2
Total Expenditure and net lending 50.7 54.7 47.4 42.2 39.9 43.2
Current expenditure 25.8 26.7 27.4 23.5 22.6 24.5
Wages and salaries 11.7 11.7 11.8 11.6 11.2 11.5
Other current expenditure 14.1 15.0 15.5 11.9 11.4 12.9
Externally-financed special programs12 7.9 11.6 4.5 2.9 2.6 3.3
Capital and net lending 17 16.3 15.5 15.8 14.7 15.3
Overall balance, commitment basis
Excluding grants -32.1 -34.9 -28.0 -22.4 -19.8 -23.4
After grants, excluding HIPC -5.2 -3.2 -3.1 -2.4 -0.9 -2.1
Change in arrears 0.0 -1.0 -1.0 0.0 0.0 -0.3
Overall balance, cash basis
Excluding grants -32.1 -35.9 -29.1 -22.4 -19.8 -23.8
After grants, excluding HIPC -5.2 -4.3 -4.1 -2.4 -0.9 -2.5
Financing 30.4 35.2 29.1 21.6 18.2 23.0
Foreign grants 90.6 31.0 25.0 19.3 17.3 20.5
External borrowing -64.4 2.3 1.8 2.0 1.7 1.8
Privatization proceeds 0.0 0.0 0.1 0.0 0.0 0.0
Domestic financing 4.2 2.0 2.2 0.4 -0.9 0.6
Financing gap/Errors and omissions 1.7 0.7 0.0 0.8 1.6 0.8
Source: IMF.
31. The medium-term outlook of growth should improve because of anticipated
agricultural productivity improvements. The rate of growth is projected to rise from 3.9
percent in 2010 to 4.5 percent in 2011 and to an average of 4.9 percent in 2012-2013. These
projections assume that growth would be supported by productivity improvements in the
12
Special programs are externally financed expenditures and include spending on elections (in 2010),
demobilization, technical assistance, and temporary social safety net programs. The decline in 2011 is due to the
withdrawal of one-off spending (elections, crisis related spending on social programs).
12
agriculture sector (including coffee) and the secondary sector (mostly agro-industry, mining and
energy, and construction). In addition, a renewed impetus in the service sector, including
banking and telecommunications, within the East Africa Community (EAC) should have a
positive effect on Burundi’s economic growth. Finally, planned investments in the energy sector
should relieve a major constraint to economic growth.
32. Burundi will remain dependent on external assistance, both in the form of budget
support and project grants, to meet projected financing requirements over 2011-13. Aid
pledges (mostly grants) are projected to be at least 23 percent of GDP in the next three years,
unless some bilateral donors stop providing budget support. In recent years, overall, budget
support (excluding special programs) accounted for about 28 percent of total assistance to
Burundi.13
33. Should the recent increase in international fuel and food prices continue, the
medium term macroeconomic outlook may not be realized. First, in the absence of additional
financing, the overall fiscal deficit (including grants) may increase if the government carries out
new fiscal measures aimed at coping with the impact of rising international food and fuel prices.
These fiscal measures could include exempting a series of imported basic food staples (mostly
consumed by the poor) from excise taxes. At the same time government payments for food and
fuel would increase. This situation could jeopardize implementation of key social programs such
as school feeding and free health care for vulnerable populations. Second, a possible
underperformance of the newly created Burundi Revenue Office, due to its capacity constraints,
could disrupt the above framework. Third, the impact on Burundi of the ongoing European debt
crisis could materialize if its major trade partners are severely affected. In fact, Europe is the
premier trade partner of Burundi (destination for 60 percent of export and origin for 24 percent
for imports), current account balance for Burundi is vulnerable to the situation in Europe. As a
result, lower than projected foreign direct investment is also possible, notably in the privatization
of the tourism industry and coffee sector (e.g., limited response of foreign investors to the
bidding process for the sale of coffee washing stations, as was the case during the first bidding in
2009). Moreover, the amount of aid prospects could decline should an increased number of
development partners cut on their assistance to the country as a result of the Euro debt crisis.
Finally, and not the least, the prospect for another food and fuel crisis could put the program off
track given the vulnerability of Burundi’s economy to such external shocks.
34. The Burundian authorities are committed to take proactive measures to mitigate the
impact of the crises.
a. To prevent the potential adverse effects of a food and fuel crisis, the authorities plan to
take advantage of their experience in dealing with the 2008 crisis and will continue to
implement effective measures (tax exemption, supply-side measures and safety nets)
proposed at that time.
b. Implementing those measures may require that the authorities continue their efforts to
improve the prioritization/efficiency of public expenditure (through MTEF tool) in line
13
When special programs are considered, budget support accounts for about 50 percent of total assistance to
Burundi. Starting from 2012 Norway will no more provide budget support.
13
with poverty reduction objectives. On the financing side, the combination of improved
tax collection and additional donor contribution will be needed. Although the recent
Cabinet’s adoption of the financial sector strategy and the national governance strategy
are important steps forward that may convince donors to continue or even increase their
support, effective implementation of these strategies will be key in reinforcing donors’
assistance to Burundi in the longer term.
c. The authorities are taking steps to improve the diversification of the economy by
reducing key constraints to investment and private sector development, including energy
bottlenecks. At the same time, the government has decided to accelerate implementation
of the regional integration agenda.
IV. GOVERNMENT PROGRAM AND PARTICIPATORY PROCESSES
35. The priorities of the government’s economic development program are clearly described
in the first Poverty Reduction Strategy Paper (PRSP) that was formally approved by the
government in September 2006, and discussed together with the Joint Staff Advisory Note
(JSAN) by the Boards of the Bank and the IMF in March 2007. The first PRSP emphasized four
strategic objectives: (i) governance and security; (ii) equitable growth; (iii) developing human
capital; and (iv) controlling HIV/AIDS.
36. Security and good governance are the highest priorities of Burundi’s PRSP. The
security objectives of the government include: (i) negotiating and implementing a permanent
cease-fire agreement with all rebel groups; (ii) demobilizing and reintegrating ex-combatants;
and (iii) maintaining the size of military and police forces at an appropriate – fiscally sustainable
– level, compatible with the country’s perceived security requirements. The governance
objectives include: (i) promoting a culture of democracy; (ii) strengthening transparency and
accountability in the management of public resources; and (iii) strengthening the rule of law and
the judicial system.
37. Equitable growth and developing human capital dominate the economic and social
development agenda of the government. According to the PRSP, promoting equitable growth
depends mainly on developing the rural sector, where more than 90 percent of Burundi’s poor
live. It also means: (i) improving the business environment and stimulating private sector activity
through economic liberalization and state divestiture; and (ii) rehabilitating economic
infrastructure – notably roads and power plants – devastated by thirteen years of civil war.
Developing the country’s human capital means increasing access to and improving the quality of
basic social services, notably primary health care and primary education.
38. The last objective of the PRSP is to fight HIV/AIDS, i.e., not only to stem the spread
of the disease, but also to reduce its impact on individuals, families, and communities.
39. The authorities continued to consult key stakeholders when preparing annual
reports on implementation of the first PRSP. The government has completed two annual
progress reports through participatory discussion with the civil society and the private sector.
The preparation of an overall evaluation of the PRSP followed a similar participatory process.
The dialogue with the private sector was intensified through a consultation framework (Cadre de
14
dialogue public-privé) between the government and private sector, which was developed with
the support of the last ERSG series. Additional information on how the proposed operation
leverages available consultative frameworks and widens the policy dialogue can be found in the
section below devoted to implementation, monitoring, and evaluation.
40. Preparation of a second PRSP – based on the same participatory process – is
underway and expected to be completed in January 2012. While the second PRSP will
emphasize the same priorities as the first (governance and security, developing human resources
and the fight against HIV/AIDS), a new key pillar will emphasize the transformation of the
Burundian economy for sustained growth and job creation by alleviating key bottlenecks to
growth. These key development issues remain at the center of policy objectives of the country’s
leadership.
V. BANK SUPPORT TO THE GOVERNMENT’S PROGRAM
AND LESSONS LEARNED
A. LINKAGES TO THE CAS PROGRAM, AFRICA STRATEGY, AND PREVIOUS OPERATIONS AND
LESSONS LEARNED
41. The proposed operation is consistent with the main objectives of the Country
Assistance Strategy. Bank support to the government’s program is described in the FY09-FY12
Country Assistance Strategy (CAS) that was discussed by the Board on August 4, 2008. Based
on Burundi’s PRSP, the CAS aims to assist the country’s transition from a post-conflict to a
stable developing economy. It is focused on two strategic objectives: (i) promoting sustainable
and broad-based economic growth; and (ii) improving access to social services and consolidating
social stability.
42. The proposed operation is fully consistent with the Bank’s Strategy for Africa,
which mentions Burundi as a case of country extreme vulnerability to external shocks. The
proposed operation gives a high priority to (i) improving the competitiveness of Burundi’s
productive sector, (ii) reducing the country’s vulnerability to external shocks and (iii)
consolidating ongoing effort to strengthen PFM and governance.
43. To increase the competitiveness of Burundi's economy and reduce its vulnerability,
the proposed operation gives a high priority to increasing and diversifying production and
exports and improving the business environment through legal and regulatory reform and
infrastructure development. The introduction of central and sector MTEFs and their influence
on the budget framework letter (Lettre de Cadrage Macroéconomique et Budgétaire) will
improve the structure and the quality of public expenditures and in particular increase the share
of priority economic and infrastructure sectors in line with the key objectives of the second
PRSP under preparation. The revision of REGIDESO's tariffs is aimed to improve the
performance of the company and the supply of electric energy. The reform of the coffee sector
will increase production, export prices and farmers' income. A law on pre-cooperatives will
prepare a major restructuring of government support to agricultural development.
44. To reduce the vulnerability of the poor, notably to major changes in international
food and fuel prices, the proposed operation increases social protection expenditures (school
15
feeding programs free health care for children under five and pregnant women) and reduces taxes
on fuel consumed by the poor and diesel used for transportation.
45. Improvements in public finance management include measures aimed at
streamlining budget execution and increasing the transparency of the voted budget and its
execution through publication on the website of the Ministry of Finance and Economic
Development Planning. Triggers for a future programmatic series will include evaluations by
users of the performance of basic services, will organize access to information, and will begin to
address the cost and the structure of the wage bill.
46. Previous operations and lessons learned. Five previous development policy operations
(DPOs)— the Emergency Economic Recovery Credit (EERC) in 2000, the Economic Recovery
Credit (ERC) in 2002, the first Economic Reform Support Grant (ERSG I) in 2006 and the
second and third (ERSG II and III) in 2008 and 2009 respectively—had two main goals: (i)
improving public sector governance and public finance management; and (ii) sustainable
economic growth, by stimulating private sector development. The Implementation Completion
Results Reports (ICRs) of the first three operations rated outcome and government performance
satisfactory or moderately satisfactory. Their lessons are summarized in Annex 2.
B. COLLABORATION WITH THE IMF AND OTHER DONORS
47. Most policy reforms supported by the Bank program are also supported by all the
major multilateral and bilateral donors operating in Burundi, including the African
Development Bank, the European Commission, USAID, Belgium, France and Canada. The
Netherlands and Norway co-financed the ERSG I and II grants, as well as ERSG III-IV.14
Norway will provide co-financing to the proposed operation (see Grant and Program Summary
Sheet and Sections VII.D-E). Meanwhile, the Netherlands opted to earmark its assistance for
2011 to the payment of arrears to civil servants due to the implementation of the 2006 civil
servant status (transposition decision). Several of the policy actions of the new programmatic
series will require technical assistance, which is provided in coordination with AfDB, EU, other
development partners and the IMF. Bank staff will continue to work closely with the IMF and
the donor community, and in particular, will use joint missions (whenever possible) and the
Cadre de Partenariat (Partnership Framework) involving all institutions providing budget
support with a view to improving consultations between development partners and better
coordinating programs both at the planning and implementation stages. A joint mission with
participation of donors interested/involved in PFM issues and/or budget support, organized by
the authorities, was conducted in September 2010. Another joint mission with the IMF was also
organized in June 2011. The main objectives of these missions included: (i) providing an
assessment of the PFM reform in the context of the PFM strategy; and (ii) evaluating future
prospects for PFM reform based on lessons learned.
14
Belgium also co-financed the second tranche of the ERSG I.
16
C. ANALYTICAL UNDERPINNINGS
48. The Bank and other donors carried out various studies on Burundi. These studies
include: (i) the 2008 PEMFAR report;15
(ii) the 2009 PEFA report; (iii) the 2004 Diagnostic
Trade Integration Study (DTIS); (iv) the 2007 report on Sources of Rural Growth; (v) the 2008
Investment Climate Assessment (ICA); (vi) the 2008 EMSP-financed study on options for the
divestiture of assets in the coffee sector; (vii) the 2009 report on the legal and institutional
framework for privatization; (viii) the 2009 study on the options for pay reform which is being
updated; (ix) the 2010 Country Economic Memorandum; (x) the 2010 Public Expenditure
Review that focused on public investment; (xi) the background materials and the conclusions of
the October 2009 Consultative Group Meeting; and (xii) the policy notes prepared in the context
of the March 2011 cabinet seminar that provided additional inputs for the formulation of the
proposed new programmatic series. Annex 3 summarizes how recommendations from relevant
Economic Sector Work (ESW) reports informed the design of the proposed programmatic series.
VI. THE PROPOSED OPERATION (ERSG V)
A. RATIONALE FOR THE GRANT
49. To reinforce progress made over the course of the first ERSG series (II and III), and
ERSG IV, the proposed operation (ERSG V) focuses on: (i) improving budget credibility,
planning and controls (PFM component); and (ii) promoting private sector development
(PSD component). In addition, ERSG V will support government efforts to cope with the
international food and fuel prices crisis to maintain fiscal sustainability.
50. Public finance management reforms are complex, and require sustained effort over
time to take root and induce changes. For this reason, ERSG IV-V will consolidate measures
initiated under the earlier ERSG series while extending these reforms in scope and depth. The
PFM component of ERSG V has three main sub-components: (a) strengthening strategic and
budget planning to improve the quality of public spending; (b) reinforcing PFM systems and
their transparency; and (c) improving the management of the public wage bill.
51. Creating a basis for a strong private sector led growth requires good legal and
regulatory reforms, and specific actions to unleash growth in under-performing sectors
such as the export crop sector. As in ERSG III and ERSG IV, the PSD component of ERSG V
contains three main sub-components: (a) improving the legal and regulatory framework for
private sector development; (b) promoting private investment through improvements in the
economic infrastructure (including operations in the energy sector, the success of which is
critical to support a private sector led growth); and (c) restructuring the export crop sector. In
addition, ERSG V will support the authorities in their efforts to cope with the effects of
extremely volatile international prices of food and oil.
15
In addition to the recommendations of the 2008 PEMFAR report prepared jointly by the Government of Burundi
and World Bank, a study by the World Bank currently under preparation would update and revise, based on recent
payroll and staffing data, the recommendations of the 2009 study on pay reform options and those already made in
this area in several other reports.
17
B. POLICY AREAS
52. The following section provides a more detailed description of the policy reforms
envisaged in each sector and sub-sector of the ERSG series. It identifies prior actions for this
operation as well as proposes indicative triggers for a possible next series. A number of
indicators are also described with the objective to monitor progress over time.
1. Public Finance Management
53. Background. Burundi has made significant progress toward sound public finance
management systems and practices. The basic legal framework for public finance (Loi
Organique) was overhauled in 2008 and the Ministry of Finance and Economic Development
Planning is determined to use the new law to bring about major changes in public finance
management.
54. The structure of approved budgets has improved and better reflects the PRSP
objectives. As a result of the HIPC process and other on-going reforms in the area of public
finance, fiscal expenditures are better allocated toward priority sectors, which remain a core
element of Burundi’s growth strategy. Since 2006, more than 70 percent of HIPC resources have
been allocated to social sectors (education and health). However, other domestically-financed
priority spending sectors (e.g., the infrastructure sector) continue to be underfunded.
55. Budget execution has been mixed over the past several years, but is beginning to
improve as reforms take root. Rates of budget execution in priority sectors were very low in
2006 but improved significantly in recent years rates following the creation of new entities
planned under the new procurement code and implementation of training programs on the code
for staff in ministries. While training on procurement should continue, the government must also
strengthen the units responsible for preparing investment projects. During the Cabinet Seminar
of March 2011, the participants reacted positively to two recommendations of the recent Bank’s
PER on: (i) more systematic use of cost-benefit analysis for the preparation of investment
projects; and (ii) mandatory project monitoring and evaluation reports. Rules on commitments
have been tightened and exceptional public spending procedures (Paiements sans
ordonnancements préalables), which were widely used in the past, have been brought under
control. Finally, most off-budget accounts have been closed.
56. Efforts to improve oversight institutions are beginning to have an effect. The
strengthened Cour des Comptes has begun to play a major role in auditing executed budgets and
reviewing critical public finance issues. Its special audit on off-budget accounts, performed at the
request of the Parliament, was instrumental in the closure of eight of the nine off-budget
accounts and integration of corresponding transactions in the 2009 budget. The capacity of Cour
des comptes was also reinforced with the appointment of 34 new magistrates in April 2011 for
six-year mandates.
18
a. Strengthening government strategic planning to improve the quality of public spending
57. Following the adoption of a central MTEF16
and the institutionalization of the
MTEF process under ERSG IV, the gradual extension of medium-term expenditure
frameworks is expected to consolidate the link between strategic policy objectives and
budget allocations. This will done through three main measures: (i) improving the reliability of
macroeconomic and revenue projections in order to set credible spending caps, (ii) validation by
the Council of Ministers of multi-year inter-sector allocations reflecting the objectives of the
PRSP, and (iii) empowering line ministries to propose intra-sector allocations based on their own
strategies and priorities. With the help of donors, the government prepared sector MTEFs in
health, education, and agriculture. The development of three-year rolling MTEFs in key sectors
will address longstanding weaknesses in the link between recurrent and investment spending,
and will improve the prioritization of intra-sector expenditures.
58. Following the institutionalization of the MTEF process in 2010, at both central (Ministry
of Finance and Economic Development Planning) and sector levels, a large number of ministries
have begun to prepare sector MTEFs, notably in the context of the preparation of the second
PRSP. An agreed prior action for ERSG V is the use of the central MTEF for the preparation
of the budget framework letter (lettre de cadrage) requested for the 2012 budget. The
preparation of the second PRSP will also provide an opportunity to refine sectoral strategies, to
place these strategies within a medium term framework, and to define targeted outcomes for
service delivery. ERSG V will support this effort by reinforcing the role of the MTEF process.
59. The efficient allocation of expenditures to priority sectors also depends on the use of a
sound budget classification consistent with international guidelines (2001 Government Finance
Statistics Manual). The World Bank has continuously supported this measure, notably to
improve the tracking of pro-poor spending. A ministerial regulation of August 10, 2010 adopted
a new budget classification, which unifies budget and accounting classifications, simplifies the
structure of the budget, and plans to introduce (as of 2014) a program classification that will
better reflect the Government’s policy objectives and how these policies will be implemented.
An area for future policy dialogue in the context of a future programmatic series will be the
preparation of the next two draft budget laws on the basis of this new regulation, including
administrative, economic and functional classifications in the 2012 budget, and additional
classifications (beneficiaries of government transfers and subsidies, sources of financing and
counterpart funds) in the 2013 budget. Another area for future policy dialogue would be the
launching of public expenditure tracking survey (PETS), including beneficiary assessments of
service delivery in social sectors to better monitoring poverty-reducing expenditures.
60. Finally, an additional area for future policy dialogue will be the budget preparation’s
timetable. ERSG II and III already addressed this issue, and provided for an earlier submission of
the draft budget law to the Parliament. Since then, a number of constraints and circumstances
(the food crisis in 2008, the international financial and economic crisis in 2009, and presidential
16
A central MTEF (in contrast to sector MTEF) is a tool developed by central ministries such as the Ministry of
Finance and the Ministry of Planning (now combined into a single ministry: Ministry of Finance and Economic
Development Planning following recent government reshuffle), which indicates the global envelop of resources
expected based on macroeconomic projections and provides expenditures ceiling for each institutions financed
through the budget.
19
and legislative elections in 2010) delayed the submission of draft budget laws to the Parliament
and the Cour des comptes, thus making it impossible to fulfill correctly their constitutional
mandate. For example, the 2011 draft budget law was received on December 21, 2010, more
than two months after the legal deadline and just before the beginning of the next fiscal year. The
timely submission of the draft budget will therefore be an area of reform and constant
improvements will be expected throughout the next programmatic series.
b. Reinforcing Systems for Transparent Public Finance Management
61. Improving public finance management procedures and practices is essential to make
the budget an effective instrument for growth and poverty reduction, and to demonstrate to
the donor community that the government is fully committed to continue and intensify the fight
against corruption.
62. The development of quarterly commitment plans initiated in March 2010 was
institutionalized in the context of ERSG IV when the Minister of Finance determined, for each
line ministry, commitment ceiling consistent with quarterly cash management plans. In addition,
the functionalities of Integrated Financial Management System (SIGEFI, in French) were
improved to accommodate the possibility of blocking automatically commitments in excess of
agreed quarterly commitments ceilings. Those actions will prevent the recurrence of excess
spending beyond the agreed threshold, as it occurred in 2007-08 leading to the accumulation of
large arrears (defined as invoices still unpaid 60 days after their due date).17
In the same vein, the
authorities have emphasized the need to extend the functionalities of SIGEFI and so include a
feature that blocks awards of public contracts to private entities, which do not hold a tax
registration number (numéro d’immatriculation fiscale - NIF), and/or have not paid their debt to
the government.
63. A culture of access to information will progressively improve the transparency of
public finance management. During the Cabinet Seminar of March 2011, the participants
recognized the need for a law on access to information regarding the management of public
affairs. The first step will be the publication of budget documents on government websites. An
agreed prior action is the publication on the website of the Ministry of Finance and Economic
Development Planning of the 2011 Budget Law and the budget implementation report for the
first and second quarter of 2011. While the number of Internet users remains limited in Burundi,
the agreed prior action will demonstrate the commitment of the government to increase
transparency and give the civil society adequate access to public finance information.
64. The next programmatic series will follow-up in this area, with the proposed publication
on the website of the Ministry of Finance and Economic Development Planning of the 2012 draft
Budget Law, in accordance with international best practices (Open Budget Index) to improve
Parliamentary oversight and better inform the civil society. The transmission of medium term
fiscal frameworks (MTFF) and MTEF to the Parliament before the review of the 2012 draft
budget law will also reinforce its ability to control the Government’s budget strategy and will
facilitate the organization of a pre-budget debate of the main orientations of the future budget
17
This definition is the IMF definition of payment arrears, which measures invoices that have not been paid 60 days
after their due date.
20
proposals for the upcoming fiscal years in line with the provisions of the Budget Framework
Law (Loi Organique) No. 1/35 of December 4, 2008. Another action would be the adoption of a
decree on budget preparation (already under preparation) that would institute a non-binding
opinion of Cour des comptes over MTFF and of Conseil économique et social over MTEF
submitted to the Parliament for the pre-budget debate. This reform, which is based on the
practice of South Africa’s Fiscal Commission, and takes into account Burundi’s institutional
framework and weak capacities, would facilitate and clarify future Parliamentary pre-debates on
the government’s fiscal strategy.
65. The Cabinet Seminar also recognized the need for a law on access to information and a
whistleblower policy (to protect those who reveal corruption cases). This would be a possible
area for future policy dialogue for the next programmatic series.
66. In the context of the implementation of the public finance Loi Organique, a high
priority should be given to streamlining the chain of public expenditures. A decree on
budget execution, accounting and control, which was prepared and adopted by the Council of
Ministers in April 2011, introduces major changes in public spending procedures. It provides for
the elimination of redundant BRB controls, the progressive devolution of the budget authority to
line ministries, and the strengthening of internal control, through stronger oversight of
commitments and strict separation between the budget and accounting functions and the
suppression of OTBU (Ordonnateur Tresorier du Burundi). This decree also introduces elements
of accrual accounting and reinforces cash management. An agreed prior action for ERSG V
was the signing of this Presidential Decree, which should be in force for the execution of the
2012 Budget Law. This prior action was completed as the said decree was signed on October 18,
2011 under Decree No. 100/255.
67. External and internal oversight institutions have been strengthened, but virtually
nothing has been done so far to coordinate their programs, eliminate unnecessary
duplications and focus their activities on high priority objectives. The Inspection Générale
de l’Etat (State General Inspectorate) is the most appropriate institution to initiate a dialogue
with existing internal oversight departments and institutions, with a view to developing
consistent, risk-based audit work plans. The General Inspectorate of State (IGE) Decree No.
548/061 of January 25, 2010, creates within the IGE a new "division for the management and
coordination of sectoral inspections." This new division, however, has not yet helped IGE
exercise its coordination role. Staff has been appointed and a work program for the division is
under preparation. An area for future policy dialogue during the preparation of the next
programmatic series would be the provision by IGE of audit training for line ministries and the
adoption of a common work program, including a timetable for future coordination meetings
between the ministerial inspections and IGE. At the same time, the professional capacity of the
of the Cour des Comptes should be strengthened and its operational independence reinforced,
since the Court has a major role to play in enhancing the transparency of public finance
management and the accountability of the executive. The legal framework for the Court should
also be revised to secure its operational independence. The adoption by the Council of Ministers
and the submission to the Parliament of a legislation reinforcing the operational independence of
the Cour des Comptes, which is also included in the EC’s budget support program, has been
delayed due to recent changes in the leadership of the supreme audit institution. The EC provides
technical assistance for the preparation of this reform. An assessment report of audit and control
21
institutions currently underway with EC support is expected to provide an updated diagnostic of
these institutions. In this context, the proposed prior action for ERSG V has been postponed and
would be an area for future policy dialogue during the preparation of the next programmatic
series.
c. Improving the Management of the Public Wage Bill
68. The rapid growth of the public wage bill remains an important PFM issue. The share
of the government wage bill in current expenditure steadily increased during the past decade,
from an average of about 37 percent of total recurrent spending in 2001-04 to an average of
about 45 percent over the past two years. At about 12.2 percent of GDP in 2010 (2010 Revised
Budget), the wage bill is significantly higher than the level of 6-7 percent of GDP in many other
low income countries.18
The government needs an effective human resource management
strategy, which should include: (i) adequate training, hiring and retaining of personnel with key
technical skills, such as doctors and nurses whose current salaries are relatively low; (ii)
substantial restructuring aimed at reducing the wage bill while improving the delivery of
services; (iii) appropriate institutional arrangements for managing the staffing and the salaries of
public employees; and (iv) improved coherence of recruitment and human resource planning
with the objectives of ministerial sector strategies.
69. A few key measures can facilitate the launching of reforms in the public
administration. First, ERSG IV introduced the installation and exploitation of software for
human resource management interfaced with SIGEFI. The software has been operational since
January 2011 and has already produced significant savings. Secondly, it is important that the
authorities validate the census of public employees to facilitate an updating of this database. This
updating has been postponed because of delays in mobilizing the funds necessary to finance it
but it is proposed to become a key trigger for future DPOs.
70. The government should set up within the Minister of Public Administration a technical
support unit (cellule d’appui) similar to the cellule created within the Ministry of Finance and
Economic Development Planning. Its role would be to design action plans aimed at improving
the management of the wage bill (in line with the ongoing MTEF process). The objective would
be to stabilize the level of the wage bill and eventually to bring it down to a more sustainable
level in terms of the share of public expenditure (say, 10 percent of GDP and 40 percent of
recurrent expenses), while at the same time creating more incentives for key professional staff
with a view to improving service delivery. The bureau of Amélioration des Structures de
l’Administration Publique (ASAP) should be restructured to serve as the proposed cellule
d’appui. This will be an area for future policy dialogue during preparation of future DPOs.
18
As in Burundi: Options for Reforming Staffing, Pay and the Management of Staff and the Wage Bill (January
2009), a report prepared for the Economic Management Support Project (EMSP) with financial support from the
Japanese Policy and Human Resources Development (PHRD) grant.
22
Table 4: Indicators for PFM Reforms (ERSG IV-V Series)
Sub-Objective Indicator and Target Value
1. Strengthening strategic planning and
budget preparation
0 percent of national budget has followed the MTEF process. [8-31-2010]
50 percent of national budget has followed the MTEF process. [5-30-2011]:
The budget framework letter based on MTEF for 2012 budget was
approved by the Council of Ministers in May 2011.
100 percent of national budget has followed the MTEF process. [5-30-2012]
2. Improved Cash Management and
reduction in domestic payment arrears Peak arrears19 reduced by 50 percent compared to 2009.
[12-31-2010]: Done, no arrears.
Arrears reduced to 0. [12-31-2011] and [12-31-2012]: Done, no arrears as
of October 2011.
4. Improved transparent budget
execution* Budget is executed based on the disposition of a decree relative to the
management of public budget and budget execution manual.
[12-31-2011]: Not done but expected in December 2011.
5. Improved access to information
relative to public finance management* The 2011 budget is available on the website of the Ministry of Finance and
Economic Development Planning. [1-30-2011]: Done
Four quarterly budget execution reports for 2011 are available on the
Ministry of Finance and Economic Development Planning website.
[12-31-2011]: In progress- three quarterly budget execution reports for
2011 have been posted as of November 4, 2011.
6. Improving the human resource
planning and the management of the
public wage bill.
Software for the management of the wage bill (HRMIS) is designed and
installed. [1-31-2010]: Done: Since January 2011, the software is being
used for payroll management.
100 percent of the public civilian wage bill can be effectively managed
through HRMIS-SIGEFI. [12-31-2011] and [12-31-2012]: the
management is not yet fully effective due partly to delays in the
preparation of an implementation manual.
Note. * New indicators
2. Private Sector Development
71. Background. The development of the private sector is handicapped by cumbersome
regulation, low productivity, and other constraints. While many of the key laws governing
private sector activity have been recently modernized, appropriate implementing regulations
have not been prepared and approved and this leads to limited and arbitrary implementation.
However, since the country remains keen on reforming the business climate in order to promote
a private sector-led economic growth, development partners, including the Bank’s financial and
private sector development (PSD) project and IFC programs are supporting the government in
these efforts. According to the 2012 Doing Business report, Burundi was listed among the top 10
investment climate reformers and its ranks improved from 177th
in the 2011 report to 169th
.20
Although such rankings only give an indication of the overall enabling business environment, it
has signaled the government’s commitment.
72. Historically, investment promotion has always been limited in Burundi and the
dialogue between the public and private sectors has been weak. As a result of limited
consultation and cooperation with the private sector, decision-makers in the public sector are not
well informed and often do not foresee how their decisions will impact the private sector. In
addition, when the government implements reforms that might benefit private enterprises, such
19
Defined as invoices not paid 60 days after due date. 20
Significant improvements in the ―protecting investors‖ indicator largely explain the change in Burundi ranking.
23
as the recent Investment Code, many private sector operators are not informed about the benefits
from these reforms.
73. A 2007 study found that the government owned shares in 48 entities (40 enterprises and 8
financial institutions), with many of them facing a dire financial situation and major governance
problems typically found in many low income countries, including political interference. ERSG I
promoted a progressive approach to the reform of the public enterprise sector, which a few
simple privatization operations that did not require extensive preparatory work, while helping the
government prepare more complex privatization programs. The results were mixed and the
proceeds of privatization transactions remained modest. The government liquidated several
bankrupt enterprises, sold some public properties, re-launched bids for the sale of its shares in
some companies and banks, and—with the Economic Management Support Project (EMSP)
funding—finalized studies on the financial condition of seven major public enterprises. Under
ERSG II, the government launched a study of available institutional capacity for the management
of public enterprise reform and ERSG III supported the completion of audits for eight public
enterprises, including Air Burundi, Société Régionale de Développement de l’Imbo (SRDI),
Société Immobilière Publique (SIP), Hôtel Source du Nil, Agence de Location de Matériels
(ALM), Laboratoire National de Bâtiments et Travaux Publics (LNBTP), Encadrement des
Constructions Sociales et Aménagement des Terrains (ECOSAT), and Office du Transport en
Commun (OTRACO). The privatization of the Hôtel Source du Nil and Hôtel Novotel is being
discussed with international companies.
74. The progress of coffee sector reform has been subject to many delays and reversals.
Reforms began in 1992, but were interrupted by the civil war. They were resumed in 2005,
setback in 2007 and accelerated in 2008. The government still owns most of the sector’s assets
(120 washing stations and two large dry mill factories), which are operated by local enterprises
(Sociétés de Gestion de Stations de Lavage (SOGESTAL) and Société de Deparcharge et de
Conditionnement (SODECO)) under a lease agreement with the government, which was
amended in 2009 (see below). In 2009, the government launched the bidding for the privatization
of 117 washing stations, but only 13 coffee washing stations have been sold.
75. An effective private sector development strategy will require actions on many
fronts. The reforms being targeted within the ERSG IV-V framework are: (i) promoting private
investment and private sector development through improvements in the legislative framework
and economic infrastructure; (ii) facilitating the restructuring or privatization of public
enterprises; and (iii) modernization of the export sectors. The ERSG IV-V program also includes
reforms aimed at mitigating the impact of fuel and food prices crises. Full implementation of the
measures proposed under this new programmatic series should lead to measurable improvements
in the business environment and accelerate the development of the private sector, as described in
Table 5.
a. Promotion of Investment and Private Sector Development
76. Energy sector reforms. Weak energy supply is a major obstacle to private sector
activity. In the 2007 Investment Climate Assessment (ICA), electricity was identified as a major
constraint by 72 percent of the firms interviewed (much more that the 55 percent average for all
African countries). Since September 2009, Burundi experienced an unprecedented energy crisis,
24
which paralyzed much of the country’s productive sector. Not only electricity was not available
to households, but small businesses, the agro-industrial sector, trade and industrial activities were
severely affected by the energy crisis. According to the Ministry of Energy and Mining and
Régie de Production et de Distribution d’Eau et d’Electricité (REGIDESO) (a public utility
company) the crisis had several causes including the obsolescence of available equipment, the
drought, and the lack of investment and maintenance in this vital sector.
77. A number of reforms have been initiated to improve the financial viability of
REGIDESO. First, to improve cost recovery, REGIDESO has begun to use a pre-paid system for
both public and private subscribers. About 50 percent of ministries (mainly ministries whose
electricity consumption is limited) have already subscribed to the pre-payment system.
Additionally, to reduce operational losses, the government should review tariff levels, which date
back to the 1980s. The completion of an on-going tariff study for water and electricity is
important to initiate critical policy and institutional reforms. In addition, this tariff study should
be accompanied by an assessment of the poverty impact of the proposed tariffs to ensure that the
changes envisaged will not put undue pressure on the poor although they don’t have access to
electricity (See Annex 6 for details of an impact analysis of tariff changes on the poor). An
agreed prior action is that the Council of Ministers should adopt a revised tariff structure based
on the results of the tariff study and the poverty impact analysis, and put in place appropriate
measures (including accelerating the ongoing prepayment program) to improve the financial
viability and operational performance of REGIDESO. The authorities should also launch a
campaign to sensitize the public and make it aware of the revised tariffs and the schedule for
their application. Following a series of communication campaign and debates with the civil
society initiated by the government and the Parliament, this prior action was completed. The new
tariff structure will be in force starting from January 2012.
78. In fact the proposed changes in electricity tariffs are not likely to have a negative
impact on the poor. Annex 6 provides a detailed analysis of the impact analysis on the poor of
subsidized electricity tariffs both in typical low income countries and in Burundi. Based on the
Core Welfare Indicator Questionnaire (CWIQ) survey of 2006, it estimates that current
electricity subsidies in Burundi have virtually no impact on the condition of the poor especially if
that impact is compared to that of other programs like food transfers and public spending on
education and health. This is largely explained by the fact that connection rates to the network
are small (three percent at the national level) and are concentrated on households located in the
top deciles of per capita consumption. In the case of Burundi, one could even argue that an
increase in electricity tariffs could benefit the poor if it enables REGIDESO to extend
connections to a larger segment of the population or to reduce current subsidies to this company.
It should also be noted that the proposed increase in electricity tariffs will keep a ―social tranche‖
(tarif social, in French) providing electricity at a lower unit price for consumers with the least
electricity consumption. These consumers tend to be poorer than the average residential
consumer.
79. These reforms should help to improve the financial viability and efficiency of public
utility services. Following the validation of the tariff study through a participatory process (e.g.,
consultations with various stakeholders including private sector and households), the Bank
advised the government to introduce appropriate measures (a combination of tariff adjustments
and government subsidies) to improve the financial viability and the operational performance of
25
REGIDESO. In the context of ERSG IV, the government helped expand the prepayment system
to cover at least 25 percent of subscribers (of a total of 45,000 subscribers) including public
institutions. There are currently more than 50 percent of REGIDESO customers who subscribed
to the prepayment system.
b. Facilitating the Restructuring or Privatization of Public Enterprises
80. Revision of the Privatization Law. A new Privatization Law has been prepared,
approved by the Parliament and promulgated by the government, but is considered unsatisfactory
by the private sector, donors, and many public institutions. One of the provisions in this law
requires that all the privatizations, regardless of their size, should be approved by the Parliament.
Implementation of this provision would politicize the process and make progress in this area
extremely cumbersome. A revised draft law was approved by the Council of Ministers and
submitted to the Parliament in November 2010. The objective of the new law would be to
modernize the legislative framework and to ensure that the withdrawal of the state from
productive sectors will not result in uncompetitive market outcomes (creation of private
monopolies). Adoption of the new Privatization Law by the Council of Ministers and submission
to the Parliament was a condition of effectiveness for ERSG IV. The draft law seems to be facing
some challenges in the Parliament and could be subject to modifications, which could change the
spirit and pertinence of the document. Further delays in Parliamentary approval of the draft law
may complicate implementation of the privatization program of the government.
81. Restructuring of public enterprises. To ensure the continuity of the reform process, the
2005-07 audits of Air Burundi, SRDI, SIP, Hôtel Source du Nil, ALM, LNBTP, ECOSAT, and
OTRACO were published on a government website of the government in the context of ERSG
IV. The action plans for the restructuring or privatization of these enterprises should be adopted
by the Council of Ministers. This is an agreed prior action for ERSG V. This prior action is
completed as of February 2011 when the Council of Ministers approved the global action plan of
the ministry in charge of privatization, which included the road map for the
restructuring/privatization of these public companies. For the reform to be successful, it is
equally important that this process be accompanied with a communication campaign, as is being
done for the coffee sector reforms (described below). The communication issue will be
considered among the policy areas to be discussed in the context of the next DPO programmatic
series.
c. Modernization of Export Sectors
82. Continuing reforms of the coffee sector. Coffee accounts for more than 60 percent of
Burundi’s export earnings and is the main source of cash income for more than 600,000 rural
families that are among the poorest in the country. The Burundian coffee sector is increasingly
inefficient and suffers from low and declining productivity due to: aging plantations, high
intermediary costs, and an inadequate incentive framework. Yields are approximately half those
in neighboring countries (250/250 grams per tree, versus 450/500 grams in Kenya). Production
follows a cyclical pattern and declines significantly from year to year.21
These large variations in
21
From 42,000 tons in the early 2000s, production dropped to 6,500 tons in 2007-08, recovered in 2008-09 to reach
about 25,400 tons, but is expected to decline again to 12,000 tons or less in 2009-10.
26
coffee output are one of the factors that explain the recent fluctuations in the country’s GDP
growth rates.
83. Reforming the coffee sector is of high priority. The country’s ecological conditions are
favorable to the production of high quality coffee that could sell at premium prices on specialty
markets. Despite a market structure that allows direct contracting with international coffee
buyers, most of the production is sold on the commodity market at relatively low prices due to an
ill-adapted processing strategy that does not foster specialty coffee. As a result, fully-washed
coffee, which commands premium prices, accounts for only 60 percent of the production versus
more than 75 percent when the washing stations were built in the 90s. Declining and volatile
production also affects buyers’ perceptions on the reliability of Burundi as a supplier. Inefficient
intermediation under the present ownership structure and marketing rules further increases costs
and reduces returns to farmers, which are among the lowest in the sub-region.
84. The ERSG IV-V program, the Financial and Private Sector Development project as
well as the Agro-Pastoral Productivity and Market Development Project will support
implementation of the strategy. The ultimate objective is to improve the competitiveness of the
filière, to align the long term interests of the private sector and smallholders operating in the
vicinity of the washing stations, and to provide added value by adequately financing the sector,
modernizing washing stations and other factories and promoting high quality products in a
growing world market of coffee specialty.
85. The risk exists that political, institutional, financial, and technical factors may derail
implementation of the strategy. Local institutions responsible for planning and monitoring
privatization schemes (Service Chargé des Entreprises Publiques, SCEP) may lack the necessary
expertise to complete the operation, and the lack of credit may endanger the financing of the next
crop. So far, however, the government seems determined to fully implement the reform. The
ministry responsible for governance and privatization has undertaken a communication campaign
aimed at informing the general public and engaging all the stakeholders in the reform as
evidenced by recent actions. Moreover, a conference of potential investors was organized in June
2009, and a Presidential Decree established the regulatory authority for the coffee filière.
Subsequently, the publication of the bidding documents for the sale of coffee washing stations
was undertaken. The signing of amendments (August 21, 2009) by the relevant parties put an end
to the main clauses of a 30-year lease agreement between the companies managing washing
stations (SOGESTALs) and the Burundi Coffee Board (OCIBU), thus paving the way for the
sale of the first 13 washing stations to an international investor in August 2009. In the context of
the 2010 elections, the government decided to postpone the launching of the second phase of the
bidding process for the remaining washing stations until after the coffee harvest (after August
2010). The Comité Interministériel de Privatisation (Inter-Ministerial Privatization Committee,
CIP) has approved the launching of the second phase of the sale of washing stations. However,
the Coffee Reform Committee and other institutions involved in the reforms decided to conduct
an evaluation of the first phase before launching the second phase. This evaluation has been
completed and its recommendations are being integrated in the new draft bidding documents for
the second phase. While the authorities have demonstrated a strong commitment to launching the
second phase for the remaining 104 state-owned coffee washing stations before the end of 2011,
the appointment by ministerial ordinance of a commission in charge of preparing these bidding
documents for the sale of those washing stations in addition to the preparation of a work program
27
with a clear timetable and deliverables by the Commission is an agreed prior action for ERSG
V. This prior action has been completed on October 5, 2011 through Ministerial Ordinance No.
214/CAB/14 that setup the Commission and after the preparation by the Commission of a work
program. As of November 4, 2011, the commission transmitted their final draft report to the CIP
for the final decision to launch the bidding process.
86. The adoption by the Council of Ministers of a draft law on the organic framework for
pre-cooperative groups also is an agreed prior action for ERSG V. This action is necessary for
the successful continuation of the reform, as the reform strategy calls for cooperative
organizations22
to take a 25 percent stake in the coffee washing stations. Existing legislations
such as the 1992 Law on Non-Profit Organizations and the 1996 law on cooperatives are not
appropriate to regulate these organizations. These legislations include a minimal capital
requirement, which is much higher than the capital of what could be called agriculture
cooperatives in Burundi. Rather than undertaking a complete revision of existing texts, which
will be done in due course, the Food and Agriculture Organization (FAO) recommended the
preparation of a legislation focused on agriculture pre-cooperative groups. The draft bill prepared
in February 2010 is based on several EAC examples including Rwanda and Tanzania. It provides
for a transitional period of three years to allow a pre-cooperative to migrate to the status of a
cooperative as defined by the law. This prior action was completed as the Council of Ministers
adopted the draft legislation on May 11, 2011.
87. Modernization of the Mining Sector. The mining sector represents a good opportunity
to diversify the Burundian economy, which depends largely on the highly variable production of
the agricultural sector. In the past, gold used to be one of the main export products, reaching up
to 30 percent of exports in the early 1990s. Since then, the civil conflict hampered the
development of the mining sector, and the technology and infrastructure under-pinning the sector
have become out-dated. To attract investment to leverage the country’s large deposits of several
minerals, such as nickel, coltan, and cobalt, which until now have not been exploited
commercially, the country will need to improve the regulatory environment for the sector. The
Mining Code23
currently in force dates back to the mid 1970s and is no longer consistent with
international practices. In 2008, the government launched a comprehensive study of the sector
including the mining legislation and regulation and safety and environmental concerns. A draft
law has been prepared and is being revised by the authorities. The adoption of a new mining
code by the Council of Ministers and its submission to Parliament was a proposed prior action
for ERSG V but was postponed to the next programmatic series due to the need for further
consultations as requested by the authorities.
3. Food and fuel prices crisis
88. Coping with rising food and fuel prices. As discussed earlier, the authorities are taking
a number of measures to mitigate the impact of the increasingly volatile international food and
fuel prices, including (i) increasing (by 0.7 percent of GDP) public spending on social safety net
programs targeting vulnerable groups, notably school feeding programs and heath care for
22
Referred to as ―pre-cooperative‖ groups in the draft law, the term cooperative was judged to be inappropriate to
these entities as the size of their capital base remains relatively small. 23
Code Minier et Pétrolier de la République du Burundi (Decree-Law No 1/138 of July 17, 1976).
28
infants and pregnant women; and (ii) reducing excise taxes compared to their 2009 levels by at
least (a) 70 percent on kerosene, (b) 60 percent on diesel, and (c) 34 percent on gasoline. The
temporary reduction of excises on petroleum products is an agreed prior action for ERSG V.
This prior action is completed as Ministerial Ordinance No. 750/346 of March 25, 2011 enacted
a temporary reduction of excise taxes on kerosene, diesel, and gasoline.
Table 5: Indicators for Reforms in PSD and Measures to cope with the effects of Food and Fuel
Crisis (ERSG IV-V Series)
Sub-Objective Indicator and Target Value
1. Strategy for promotion of
investment Number of dossiers registered with the API in the second half of 2010
is 30 percent higher than in the first half of 2010 – and - the average
dossier takes no more than 2 weeks to process. [12-31-2010]: Done
Number of dossiers registered with the API as well as the value of
investments in 2011 is 15 percent higher than in 2010 - and - the
average dossier takes no more than 1 week to process. [12-31-2011]:
Done
Number of dossiers registered with the API in 2012 as well as the
value of investments is 20 percent higher than in 2010 – and - the
average dossier takes no more than 3 days to process. [12-31-2012]
2. Financial viability of
REGIDESO and improved
reliability of electricity
provision
More than 25 percent of non industrial subscribers enrolled in prepay
program. [12-31-2010]: Done
More than 75 percent of non industrial subscribers are covered under
the prepayment program. [12-31-2011]: Not done but expected to
be done in 2012. Currently 50 percent of customers are covered.
100 percent of non industrial subscribers are covered under the
prepayment program. [12-31-2012]
2 fewer days of blackouts per month in Bujumbura compared with
2007. [12-31-2012]
3. Effective reform of public
enterprises (PEs).
8 Audits are finalized and published on the SCEP’s website.
[12-31-2010]: Done
Action plans and audits for 8 PEs are publicly available. [12-31-2011]: Done
Restructuring/ privatization of at least 3 PEs has begun.
[12-31-2011]
Restructuring/ privatization of at least 5 PEs has begun.
[12-31-2012]
4. Private sector led growth in
the coffee sector. At least 30 washing stations are sold to private investors.
[12-31-2011]: Not yet done. Realistic assessment to be done early
in 2012.
The majority (at least 60) washing stations are sold to private
investors. [12-31-2012]
5. Coping with the impact of a
food and fuel crisis Kerosene and diesel exempted from excises given their impact on
households. [12-31-2011]: Done
Expenditures increased toward gratuity program for pregnant women
and children under five. [12-31-2011]: Appropriations not reduced
toward this program.
Expenditures increased toward school feeding programs.
[12-31-2011]: Appropriations not reduced toward this program.
29
C. AGREED Prior Actions for ERSG V and Areas for Discussion for the Next
Programmatic Series
89. Table 6 provides a summary of the ERSG V agreed prior actions (description and
implementation status as well as the adjustments to triggers formulated in ERSG IV).
These actions have been discussed with the authorities during the preparation missions for the
proposed operation in December 2010, March 2011 and June 2011. More details on each prior
action have been provided earlier under the policy areas section.
Table 6: Summary of Agreed Prior Actions for ERSG V
Triggers Agreed prior actions Status
PRIORITY 1: TRANSPARENT SYSTEM OF PUBLIC FINANCE MANAGEMENT ALIGNED
TO PRSP OBJECTIVES
Objective 1.1: Strengthening strategic and budget planning to improve the quality of public spending
1 The Recipient has adopted a budget
framework for the preparation of its 2012
budget law, consistent with its medium
term expenditure framework for the
period 2011-2014 (MTEF), consequently
bringing the spending thresholds for its
ministries’ budget allocations in line with
the MTEF.
Same. Completed. Approved
by the Council of
Ministers in June 2011.
The MTEF report is
being finalized.
Objective 1.2: Reinforcing systems for transparent public financing
The Council of Ministers adopts and
submits to Parliament a bill, which
reinforces the operational independence of
the Cour des Comptes and internal
procedures.
Replaced by agreed prior
action #2. Kept among possible
measures of future
DPOs. A diagnostic
study is underway
supported by E.U.
2 The Recipient has issued a
decree to establish the general
regulations on public budget
management designed to
improve the management of
its budget execution and
public accounting.
Completed. The decree
was discussed and
adopted by the Council
of Ministers in April
2011. The decree was
signed by the President
on October 18, 2011.
Objective 1.3: Improving the management of the management of the public wage bill
The process of updating information on
staff turnover since April 2007 is
concluded and the database is validated by
the Council of Ministers.
Replaced by agreed prior
action #3. Kept among possible
measures of future
DPOs. Postponed due to
delays in support to
undertake this exercise.
Additional financing now
secured to support action
in the next series.
3 The Recipient has disclosed
to the public its budget law
for 2011 and the
corresponding report on the
implementation of said law
for the first two quarters of
said year.
Completed. The 2011
budget law has already
been released on the
website of the Ministry
of Finance and Economic
Development Planning.
First and second
quarterly Budget
execution reports are
30
Triggers Agreed prior actions Status
now posted on the
website of the Ministry
of Finance and Economic
Development Planning
(www.finances.gov.bi).
PRIORITY 2: IMPROVING BUSINESS ENVIRONMENT AND PROMOTING THE
DEVELOPMENT OF PRIVATE SECTOR
Objective 2.1: Promoting private investment through improvements in the legislative framework and
economic infrastructure
4 The Recipient has (i) completed a water
and electricity tariff study and, on the
basis of the study, (ii) has revised said
tariffs in order to improve the financial
viability and operational performance of
REGIDESO and (iii) has launched a
campaign to sensitize the public and make
it aware of the revised tariffs and the
schedule for their application.
Same. Completed. Tariff study
has been completed. The
Council of Ministers
adopted on June 1 the
revision of tariffs. The
details for the
implementation of this
decision were specified
in September 2011 after
a communication
campaign by the Second
Vice President and the
support of the measure
by the Parliament.
Objective 2.2: Facilitating the restructuring or privatization of public enterprises
5 The Recipient’s Council of Ministers has
adopted, on the basis of technical and
financial audits, a draft action plan with a
timetable for the privatization and/or
restructuring of eight pre-identified state-
owned enterprises,24
so as to rationalize
their operations.
Same. Completed. The SCEP
prepared the exposé de
motif (rationale) to
accompany the action
plan, which was adopted
as a part of the global
action plan of the
Ministry. The audits of
these SOEs for 2008-10
are underway with
EMSP/FPSD financing.
Objective 2.3: Restructuring of the export sector
6 The Interministerial Privatization
Committee (CIP) launches application for
tender (CAD) for the 104 washing stations
remaining in the coffee sector.
The Recipient has appointed,
by ministerial ordinance, a
commission responsible for
the preparation of the bidding
documents for the sale of 104
state-owned washing stations
in the coffee sector and the
aforementioned commission
has established its work
program with a clear
timetable and deliverables.
Completed. Evaluation
of the first phase was
completed. A
commission was recently
appointed by ministerial
ordinance to prepare the
documents for the call
for sale. The commission
has concluded its work
and the revised bidding
documents have been
transmitted to the CIP.
The CIP will authorize
the launch of the tender
for sale process once
24
The eight state-owned enterprises (SOEs) include Air Burundi, SRDI, SIP, Hotel Source du Nil, ALM, LNBTP,
ECOSAT, and OTRACO,
31
Triggers Agreed prior actions Status
they approved the
revised bidding
documents.
7 The Recipient’s Council of Ministers has
approved and submitted to the Recipient’s
parliament a draft law on agricultural Pre-
cooperatives Groups consistent with the
Recipient’s coffee sector privatization
strategy.25
Same. Completed. Draft law
was adopted by the
Council of Ministers in
May 2011.
The Council of Ministers adopts and
submits to Parliament a mining code
which respects international best
practices.
Postponed. Postponed. On track but
could not be completed
by the planned Board
date of ERSG V. A draft
code is available. The
oversight committee
completed its last
revisions of the draft
code. A second round of
consultations involving
the OBR and the
Ministry of Finance and
Economic Development
Planning is planned for
the fiscal aspects of the
draft code.
PRIORITY 3: COPING WITH THE EFFECTS OF FOOD AND FUEL CRISIS
8 The Recipient has temporarily
reduced excise taxes on the
following petroleum items
from their levels as listed in
the 2009 Ministerial
Ordinance, to a minimum of
70 percent on kerosene, 60
percent on diesel and 34
percent on gasoline.
Completed. This is a
new agreed prior action.
90. The current operation lays the groundwork for continued reforms in the targeted priority
areas. The preparation missions of ERSG IV-V have also identified with the authorities a list of
critical areas and triggers that could be considered during the preparation of next programmatic
series. Those triggers are indicative and assume that the next series will also focus on the same
priority areas as the current series.
25
The key aspect of the draft Law on Pre-Cooperative Groups is that the draft law is consistent with the reform
strategy for the coffee sector, as per the advice of a local lawyer.
32
Table 7: Proposed Areas for Future Dialogue with the Authorities
PRIORITY 1: TRANSPARENT SYSTEM OF PUBLIC FINANCE MANAGEMENT ALIGNED TO PRSP
OBJECTIVES
Objective 1.1: Strengthening strategic and budget planning to improve the quality of public spending
1. Prepare the 2012 draft budget law according to the new budget classification (main classifications).
2. Prepare the 2013 draft budget law with additional classification (beneficiaries and sources of funding).
3. Submit the 2012 draft budget law to Parliament earlier than the submission date for the 2011 draft budget law.
4. Submit the 2013 draft budget law to Parliament by the end of October 2012.
5. Conduct PETS in social sectors including beneficiary assessments and a household expenditure/income survey.
6. Submit to Parliament the MTFF and MTEF for 2013-2015.
7. Organize a pre-budget debate in line with the PFM Loi Organique.
Objective 1.2: Reinforcing systems for transparent public financing
8. The Council of Ministers adopts a law on the access to information relative to public affairs.
9. The draft budget law and enacted budget are available on the website of the Ministry of Finance and Economic
Development Planning.
10. The General Inspectorate of State (IGE) conducts training for ministerial inspection and adopts a joint audit work
plan.
11. The Council of Ministers adopts and submits to Parliament a draft law reinforcing the independence of Cour des
comptes and its magistrates.
12. Signing of the decree on budget preparation creating a non biding opinion of Cour des comptes over MTFF and
Conseil Economique et Social (CES) on MTEF.
13. Transmission to Parliament of the opinions of Cour des comptes over MTFF and CES over MTEF.
Objective 1.3: Improving the management of the management of the public wage bill
13. Creation within the Ministry of Public Administration of a technical support unit (Cellule d’appui) whose responsibility
includes among others, the preparation of action plans for improving the efficiency of public service and wage bill
management.
14. Prepare the execution manual for users of new payroll and human resource (HR) management software
PRIORITY 2: IMPROVING BUSINESS ENVIRONMENT AND PROMOTING THE DEVELOPMENT OF
PRIVATE SECTOR
Objective 2.1: Improving the legal and regulatory framework for private sector development
15. Adoption by the Council of Ministers of an action plan aimed at reforming business regulation and the practice of
creating and operating businesses through a substantial reduction (minimum 10 percent) of the time and costs associated
with these procedures.
16. The action plan should be based on the implementation texts of the major business codes recently enacted (Investment
code, Commerce code, and Corporations code).
Objective 2.2: Promotion of private investment through improvements in the economic infrastructure
17. The Council of Ministers adopts an action plan for the application of those measures needed to improve the investment
climate and to promote competition in the petroleum sector taking into consideration the recent experiences using the quasi-
automatic price adjustment mechanism for petroleum products.
Objective 2.3: Restructuring of the export sector
18. The authorities continue to follow the reforms in the coffee sector.
19. The Council of Ministers adopts a reform strategy for the tea sector (liberalization, creation of appropriate institutions,
and revitalization of the sector).
20. The Interministerial Privatization Committee (IPC) prepares and publishes bidding documents for the sale of SOSUMO.
21. The Council of Ministers adopts and submits to Parliament a mining code which respects international best practices.
PRIORITY 3: IMPROVING THE RESILIENCY OF THE ECONOMY TO EXTERNAL SHOCKS
22. Increased budget allocation toward various measures aimed at improving agricultural productivity (feeder roads,
irrigation, fertilizers and access to technology).
23. Adequate sufficient budget allocation to protect vulnerable groups (health care, and school feeding programs).
24. Issue regulations related to the mandatory preparation of municipal land-use plans.
25. Implement a capacity-building program for coffee cooperatives and the private sector.
33
VII. GRANT FEATURES
A. POVERTY AND SOCIAL IMPACTS
91. The proposed ERSG series is expected to support the development and poverty
reduction program of the government. Improvements in the management of scarce public
finance resources will make more funds available to finance PRSP priorities and to achieve the
government’s poverty reduction objectives. The 2010 CEM provides indicative results of higher
growth and lower poverty incidence under an accelerated reforms scenario that includes a
substantial increase in public spending for infrastructure.26
Such an effort could lead to an
acceleration of economic growth, up to nine percent over the period 2010-15, which in turn
would lead to a reduction in the poverty rate by more than 11 percentage points to 27 percent in
2015, compared to 38 percent in the baseline. These results, however, would still be insufficient
to achieve the MDG targets by 2015.
92. Three measures supported by this operation could have a significant distributional
impact. First, as mentioned above and in Annex 6,27
an increase in water and electricity tariffs
will not have a significant impact on the poor. Higher electricity tariffs will not affect directly the
poorest households who do not have access to electricity, but indirectly by helping increase
connections to a larger segment of the population. Such an increase will also hurt current
consumers even though lower tariffs will be used for the first tranche of consumption. Second,
similarly, privatization of public enterprises and coffee washing stations will transfer assets from
the public sector to the private sector. And third, finally, measures to protect the most vulnerable
households against the impact of the food and fuel prices crisis is expected to have a positive
poverty impact. The government and the Bank will monitor the distributive impact of the
supported reforms. Among the alternatives being considered by the government is the possibility
to conduct a poverty assessment with the support of the Bank. The Bank will also support the
efforts of the authorities to undertake an effective communication campaign on the ongoing
reforms.
93. Business climate reforms are expected to have long-term positive growth and poverty
implications. The CEM posits that the successful implementation of structural reforms (e.g.,
privatization, regulatory reforms), required to improve the overall business climate, along with
PFM reforms and the necessary investments in infrastructure (including energy) would
ultimately result in accelerated growth in human capital, infrastructure, and private investment.
Consequently, a faster pace of poverty reduction may well be within reach and depends primarily
on the authorities’ commitment, willingness and ability to forcefully deepen reforms and swiftly
implement policies.
26
This increase is justified by the reallocation of nonproductive expenditure toward socio-economic priority
expenditures following the consolidation of peace and therefore the reduction of military expenditure as well as
continued rationalization efforts of the national budget. 27
This annex provides, based on a CWIQ survey of 2006, a poverty and social impact analysis (PSIA), which gives
the rationale for a tariff structure change and compares various subsidies.
34
94. The coffee sector reforms aims at accelerating long-term growth by increasing production
factors and the income of producers. In particular, the regulatory reform is expected to give
farmers additional options for selling their crop, thus should increase their bargaining power and
therefore producer prices. . The proposed ERSG V also supports a reform of the cooperative
system to ensure that the collective interests of coffee producers will be taken into account
during the liberalization of the coffee filière. Finally, the Autorité de Régulation de la Filière
Café (ARFIC), the coffee sector regulator, will continue to monitor the impact on the growers of
the first sale of 13 coffee stations. ARFIC considers that, so far, despite minor problems, things
are moving in the right direction.28
Webcor in particular has designed a good business plan,
which includes training and other incentives for the farmers.29
B. IMPLEMENTATION, MONITORING AND EVALUATION
95. Monitoring and evaluation arrangements for this operation will continue to rely on
government arrangements with the aim of strengthening government capacity and institutions,
with particular attention to the regularity and quality of the M&E process and its outcomes.
Sector or subject specific technical units who work on the details of the reform program
(including prior actions and triggers) feed information to the Coordinating Technical Unit, which
includes a representative from the Secretariat Permanent pour le Suivi des Reformes
Economiques et Sociales (Permanent Secretariat for Economic and Social Reforms, REFES).
REFES is the technical committee that follows up the progress in the implementation of the
PRSP as well as the global reform programs of the government, provides regular progress reports
to national policy makers (such as the second vice presidency and the inter-ministerial committee
for the follow up of the reforms located at the second vice presidency), and seek policy guidance.
Strengthening the institutional and technical capacity of REFES would endow both the
government and donors with a better M&E system.
96. The Coordinating Technical Unit in turn reports to the Policy Committee, mandated by
the Second Vice-President and presided by the Minister of Finance. This Policy Committee
includes representation by different relevant ministries and representation by the second Vice-
Presidency. This committee supervised the implementation of the economic reforms included in
the first ERSG programmatic series (II-III) and will supervise the development and
implementation of the ERSG V reform program (see Annex 4).
97. The operation benefits from the consultation mechanism established for the PRSP,
among others. The Comité des Reformes at the Ministry of Finance and Economic
Development Planning works closely with the Permanent Secretariat for economic reform in the
PRSP secretariat, and it is with these institutions that the operation was designed and prepared.
The new PRSP is being prepared, including the launching of consultations with civil society and
28
These problems are the result of different pricing structures. The coffee growers who sell their coffee to the 104
washing stations that have not been sold to Webcor and are managed by the SOGESTALS receive first an advance
payment (72 percent) and then a bonus when the washed coffee is sold. Webcor opted for a different system and
pays immediately the totality of the crop on the basis of world prices at the time of the purchase. This should
normally be beneficial to the farmers who like to be paid as soon as possible. However, as a result of the recent
increase in international coffee prices, the coffee growers selling their coffee to SOGESTALS received a slightly
higher price. 29
The private Swiss company that purchased the 13 coffee washing stations following the 2009 bidding process.
35
other stakeholders, the team will continue to work with these entities to ensure that the proposed
reform program is in line with their discussions. The operation further consults with the chamber
of commerce on private sector issues and on the public-private consultations.
98. The M&E structure takes into account the scope of the proposed reform in each
sector or area in defining the nature and complexity of the national intervention. The
existing technical units at the MFEDP, Ministry of Public Administration and Labor (MFP) and
Ministry of Commerce remain primary interlocutors for the development and follow up of
reform program in PFM and PSD. The technical unit at the Ministry of Commerce is
complemented by representatives from private sector (petroleum sector reform) and other
relevant ministries (such as the Ministry of Finance and Economic Development Planning,
MFEDP) to ensure inter-ministerial coordination and development of a unified vision for the
PSD reforms and their expected outcome. For reforms in the coffee, sugar and tea sectors, public
enterprises and energy sectors, the contact for technical monitoring and evaluation is directly
with the related institutions.
99. The World Bank will work closely with the government and other international partners
within the Cadre de Partenariat to monitor the reform agenda under the proposed grant.
100. To facilitate the monitoring of program implementation, the authorities will prepare and
forward to the Bank a bi-monthly progress report on the program, within two weeks of the end of
the period. The following box summarizes the type of information to be included in the
monitoring report.
Box 1: Provision of Program-Related Information to the Bank
1. Table of quarterly implementation of the 2011 national budget (economic and administrative
classification);
2. Comparison table of budget execution in the priority sectors (health, education, agriculture,
infrastructure, social protection) and of pro-poor spending (following the 2008 revised methodology)
in 2009 and 2010-12, reported on a quarterly basis;
3. Total public expenditures without prior authorization recorded in 2009, 2010, 2011 and 2012;
reported on a quarterly basis;
4. Total public expenditures on extra-budgetary accounts (excluding National Road Fund) in 2009,
2010, 2011 and 2012;
5. On a quarterly basis during the course of program implementation a quarterly basis over the course
of the program a table with (a) the average time, maximum and minimum between the following
dates: (i) legal commitment; (ii) commitment accounting; (iii) receipt of bills; (iv) liquidation; (v)
authorization; and (iv) payment by ministry; and (b) the total amount of bills in arrears by
Department (defined as invoices unpaid 60 days after due date);
6. Quarterly assessment of government arrears vis-à-vis REGIDESO;
7. MFEDP and REFES will also provide the Bank with any information that is deemed necessary to
ensure effective monitoring of the program.
C. FIDUCIARY ASPECTS
101. Like many low-income countries, Burundi’s financial management systems suffer from
serious weaknesses in budget formulation and execution, financial reporting, procurement, and
oversight systems. There is also typically a weak linkage between agreed policies, budget
36
planning, and execution. In the case of Burundi, the destruction of relevant institutions and
human resource base during the years of conflict has contributed to these fiduciary risks. The
provision of budget support is acceptable if clear expenditure priorities and a strong government
commitment for addressing institutional weaknesses reduce the risk to an acceptable level
relative to expected benefits. Budget support has already helped strengthen Burundi’s public
financial management systems, including transparency and accountability. Improvements in this
area continue to be both a precondition for, and objective of the proposed ERSG V.
102. A safeguards assessment of the Burundi Central Bank (Banque de la République du
Burundi, or BRB) was performed in 2006 and was updated respectively in June 2008 and
December 2010. The update found that since the previous assessment, certain safeguards had
been strengthened (e.g., external audits have been completed on a more timely basis and audited
financial statements comply with International Financial Reporting Standards (IFRS) and are
published). However, the 2008 assessment also identified significant control weaknesses and
recommended more robust controls over domestic disbursements to the government and its
creditors, including contracting an external auditor to review such controls. Other key safeguards
recommendations include a system to monitor the status of audit and safeguards
recommendations, continuation of semi-annual audits of disbursements to the government, and
establishing guidelines for investment operations. The Governor of the Central Bank and the
authorities have committed to implementing these recommendations. On June 2011, the
authorities recruited an international auditor to: (i) monitor the full implementation of all the
recommendations formulated in Deloitte's 2010 special audit reports (consistent with the 2010
agreed-upon action plan between Burundi's central bank and the Ministry of Finance and
Economic development Planning); and (ii) verify on a test basis the controls on significant
domestic disbursements and transfers executed by the central bank on behalf of the government
or its creditors during the first half of 2011. All of these recommendations, already monitored
under the current IMF’s ECF program,30
are expected to be followed under the successor ECF
program. In view of the outstanding implementation of the recommendations contained in the
action plan, this operation will, as in previous operations, require the use of dedicated account at
the BRB as further outline in the next section.
D. DISBURSEMENT AND AUDITING
103. A single-tranche of SDR 22.1 million (US$35 million equivalent) will be disbursed upon
effectiveness. The proposed grant will follow the Bank’s disbursement procedures for
development policy operations. Grant proceeds will be disbursed against satisfactory
implementation of the development policy program. The additional support of NOK 54.29
million (US$9.8 million equivalent, prior to trust fund administration fees) will be available to be
disbursed upon effectiveness of the Trust Fund Grant Agreement to be signed between the IDA
and the Recipient. The proposed IDA grant will follow the Bank's disbursement procedures for
development policy operations. The proposed grant will follow similar disbursement procedures
as in the case of the first programmatic series (ERSG II-III) and ERSG IV.
104. Once the IDA grant is approved by the Board and becomes effective, and provided the
Association is satisfied with the program being carried out by the Recipient and with the
30
The seventh review of the current ECF program is expected to be presented at the IMF’s Board in January 2012.
37
appropriateness of the Recipient's macroeconomic policy framework, the proceeds of the grant
will be deposited at the request of the Recipient by IDA in a dedicated account at the Central
Bank (Banque de la République du Burundi, BRB) designated by the Recipient and forming part
of the official foreign exchange reserves of Burundi. Within a week, the BRB will credit the
local currency (Burundi Franc) equivalent of the grant proceeds to the government Treasury
account. The BRB will not impose any charges or commissions on the government for these
transactions. The conversion from United States Dollar to Burundi franc will be based on the
prevailing exchange rate on the date that the funds are credited to the Treasury Account. The
government will be required to provide confirmation to IDA that an amount equivalent to the
grant proceeds from the IDA has been credited to the Treasury Account, with an indication of the
exchange rate applied and the date of the transfer. The Government of Burundi will provide a
written confirmation to IDA within thirty days of disbursements. The confirmation will include
the local currency amount credited to account that is used to finance budgeted expenditures, the
exchange rate applied and the date of the transfer. If the proceeds of the grant are used for
―excluded expenditures‖ as defined in the Financing Agreement, IDA will require, the Recipient
to refund an amount equal to the amount of said payment to IDA promptly upon notice from
IDA. Amounts refunded to the Association upon such request shall be cancelled. The
administration of this grant will be the responsibility of the Ministry of Finance and Economic
Development Planning. IDA reserves the right to request an audit of the dedicated foreign
currency account. The disbursement of additional support provided through a TF administered
by IDA, in the amount of NOK 54.29 million (US$ 9.8 million equivalent) to be contributed by
Norway, could follow the same process.
E. ENVIRONMENTAL ARRANGEMENTS
105. The prior actions of the proposed ERSG V operation are not likely to cause significant
effects on Burundi's environment, forests and other natural resources. ERSG IV-V will provide
general budget support to the government of Burundi. Policy actions aimed at improving public
finance management procedures and practices and creating a positive environment for private
sector development are, in themselves, not likely to cause significant effects on the country’s
environment, forests, or natural resources.
106. The coffee sector reform component of the program, which the government has begun to
implement, following a review of the conclusions and recommendations of a divestiture study,
aims to increase coffee output, improving quality, and increasing the share of producers in border
prices. The increase in output is expected to come—at least initially—from improvements in
productivity of existing coffee growing areas, which fell to extremely low levels over the past 15
years and more efficient use of available land, not through forest clearing and extending
production into marginal lands and commons. Improvement in the quality and price of Burundi’s
coffee is expected to come from more effective use of existing washing stations and from a better
marketing strategy. Ideally the reform program will help restore the production of Burundi’s
coffee to the level already reached before the crisis of the 1990s. No significant environmental
impact is foreseen as a result of increased coffee output initially. A detailed and comprehensive
analysis of potential environmental impacts and mitigation options recently undertaken through a
―strategic environmental assessment‖ (SEA) of the coffee sector in Burundi confirmed our
predictions of limited environment impact of coffee reform. A similar exercise for other export
crops is also envisaged in the near future.
38
107. For the reform of public enterprises, the SCEP, which is the technical agency in charge of
managing the privatization or restructuring of public enterprises, has begun to require
environmental impact assessments in bidding and proposal documents. The capacity of the SCEP
to assess the quality of these documents or to follow through on their recommendations remains
low. In one case, that of the privatization of Abattoir du Bujumbura (the state-owned
slaughterhouse), SCEP is partnering with Gesellschaft für Internationale Zusammenarbeit
(German International Cooperation, GIZ), which has taken the lead in Burundi to improve
environmental protection, to assure that the environmental action plan for the privatization is
being respected. This approach should be encouraged for future privatizations.
F. RISKS AND RISK MITIGATION
108. Despite the commitment of the government, which remains unequivocally strong,
including at the highest level, the years of civil conflict have accentuated the weak technical
capacity and sub-optimal institutional and organizational arrangements. As a result, the expected
outcomes of the ERSG V are subject to a number of risks. These risks are mitigated to a large
extent by several factors,31
including: (i) the design of the proposed operation; (ii) the strength of
the government’s ownership and commitment, affirmed at the highest level, to implement the
proposed measures and the government’s resolve to advance its reform agenda; (iii) an active
and continuous policy dialogue between the Bank and the government; and (iv) a close
collaboration with other donors to provide technical assistance and ensure full financing of the
reform program.
109. Political risks. The main political risks are linked to the recent 2010 communal,
presidential and legislative elections. Local council elections began in May 2010, followed by
presidential elections in late June 2010 and an election in the National Assembly (lower
chamber) in late July 2010. These elections, the second since the end of civil strife, led to some
changes in key players in the executive or legislative levels. As mentioned in the section on the
political context, there have been some cases of election related violence during and after the
election. This risk is heightened by the fact that the former head of one of the opposition parties
has gone into hiding. This risk will be mitigated by: (i) focusing on ensuring the continuity of
reform efforts that have already begun and for which wide support has already been established
(i.e., PFM); (ii) building on the high-level Cabinet Seminar commitment and concrete action
planning to cement ownership within the new government; (iii) sequencing of reforms (i.e.
privatization/restructuring of PEs) to better align with election cycle; and (iv) maintaining a
dialogue with civil society and the private sector to ensure demand side pressure for targeted
reforms.
110. Macroeconomic risk. The success of the proposed reform program is contingent on
Burundi’s ability to continue to maintain macroeconomic stability, in conformity with their IMF
31
As a result of the risks identified, the Bank faces reputational risks in supporting programs in post-conflict
countries, especially as regards political instability that leads to substantial delays in reform implementation and
governance issues. However, it should be noted that in the context of Burundi, the cost of the Bank not getting
involved will be higher than these reputational risks. To mitigate these risks, the team will work closely with the
authorities to ensure that: (i) simplified and realistic measures are included in the program; (ii) governance measures
are implemented, especially in public finance management; and (iii) the locomotives of growth are started at the
earliest.
39
program. The weak performance of the agricultural sector and external shocks have affected
economic growth and overall macroeconomic performance. The ongoing food and fuel crisis is
an example of the vulnerability of Burundi to external shocks. The narrow export base and low
revenue mobilization capacity exacerbate debt distress risks for both the short and longer terms.
Further, many of the public enterprises are in poor financial shape and can have serious impact
on the government budget in terms of direct and contingent liabilities. Moreover, if the Burundi
Revenue Office is not able to increase domestic revenues as quickly as projected, there is a slight
risk that the financing gap in the following years may be larger than initially projected. IDA,
IMF, and other development partners will work closely with the government to help in
monitoring macroeconomic performance and in taking corrective actions in a timely manner.
The government will need to ensure more grant funding and concessional borrowing, and foster
continued economic and export growth to avoid debt distress. In the medium term,
diversification of the economy—a main objective of the authorities and the proposed ERSG
program—through improvements in the business environment and reforms in the mining sector
will mitigate the vulnerability of the economy to these shocks.
111. Institutional capacity risk. Lack of technical capacity could lead to delays in the
implementation of reforms, thus posing a significant risk to the proposed operation. Some
improvements in capacity building have been achieved in the Ministry of Finance and Economic
Development Planning, and some line Ministries, but significant weaknesses persist, particularly
as the ERSG series will attempt to begin working in new sectors. The risk of weak technical
capacity is mitigated by (i) concentrating on a limited number of themes/areas; (ii) leveraging
technical support from ongoing IDA projects (i.e. Economic Management Support Project and
Financial Sector Development Project); (iii) working with other donors to reduces the number of
activities to be implemented by the government and better target the focus of technical
assistance.
112. Fiduciary and economic governance risk. As the recent PEMFAR and the PEFA
revealed, economic governance remains a challenge and a source of continued risk. Recent
reforms in Procurement and PFM, supported in part by ERSG II and III, have helped to mitigate
this risk. The proposed operation will attempt to continue this progress with PFM reforms. The
Cabinet Seminar cemented recognition of the importance of reforms to making fiscal space and
receiving external support needed for achieving the development vision. The recent drafting of a
national governance strategy, following the GAC survey and the 2008 PEMFAR, could also be
perceived as evidence of the government commitment to improve governance. This commitment
will be further confirmed with the implementation of the recently adopted governance strategy
by the government for which improving governance remains on top of its key priorities.
113. Exogenous risks including weather. Weather conditions have a strong influence on the
output of the agricultural sector, as demonstrated in 2003 and 2005. This might impact the future
ability of the authorities to implement reforms in the export crop sector, and to maintain macro-
stability. In addition to the support provided by other development partners in Burundi (e.g.,
USAID), the World Bank has an ongoing agro-pastoral project that aimed to improve the
resiliency of the agriculture sector to external shocks through technology acquisition, small scale
irrigation and improved market access.
40
114. Policy reversal risk. Two recent instances have led the likelihood of this risk. First, the
recent decision to increase electricity tariffs could be reversed. The decision of the government
to increase electricity tariffs triggered massive protest from consumers and the civil society,
which could have forced the Council of Ministers to reverse its position. In that case, removing
the energy bottleneck, viewed by the private sector as priority, would have been significantly
compromised. Second, the draft Privatization Law, adopted by the Council of Ministers in
November 2010, may be facing some challenges in the Parliament, which could change the spirit
and pertinence of the proposed law.32
This risk is mitigated through frequent communication
campaign and public debates to explain the merits of reforms undertaken. In fact, as a result of
communication campaign and consultations with the civil society, the government, supported by
the Parliament, was able to proceed with the tariff increase (effective starting from 2012). At the
request of the authorities, the Bank and other development partners could provide technical
assistance to the government in this area, if available.
32
Adoption of the new Privatization Law by the Council of Ministers and submission to the Parliament was a
condition of effectiveness for ERSG IV.
41
Annex 1: Burundi ERSG V - Good Practice Principles on Conditionality
Principle 1: Reinforce country ownership
The Government of Burundi is strongly committed to the reforms supported under the operation. The grant supports
the government’s PRSP, which was developed in a participatory manner involving consultation of a wide range of
stakeholders and including 17 provinces and sectors. The process was led by the Permanent Secretariat for
Monitoring Economic and Social Reforms, with the support of international partners and local non-governmental
organization (NGOs), quantitative and qualitative surveys were undertaken in all the provinces and more than 145
grassroots civil society groups were consulted. The Bank has actively supported the government in this process. The
new PRSP, under preparation, is following the same participatory process.
Principle 2: Agree up front with the government and other financial partners on a coordinated accountability
framework
The government and the budget support donors have agreed on a common framework ―Cadre de Partenariat‖ and
the government is implementing a PFM action plan based on the PEMFAR (2008) and the PEFA (2009) around
which donors can consolidate their support.
Principle 3: Customize the accountability framework and modalities of Bank support to country
circumstances
The ERSG series is fully aligned with the PRSP and has been developed through extensive consultations with the
government, the private sector, and development partners. The ERSG series should be seen as the overall umbrella
for the Bank’s support and policy dialogue, which is complemented by specific projects providing focused
investment assistance. Budget support is seen as necessary instrument to address the budgetary needs of Burundi
while strengthening the government’s systems. The series is designed to give the necessary space to develop critical,
but sensitive, reforms in coffee and public enterprise reform as well as reviewing progress made in the energy sector
reform. This approach is fully consistent with the government objectives, and in some areas broadens the setting of
the policy dialogue to multiple stakeholders, beyond government policy declarations.
Principle 4: Choose only actions critical for achieving results as conditions for disbursement
The ERSG series focuses on a few selected prior actions and triggers that are based on the PRSP. The prior actions
and indicative triggers were chosen based on extensive discussions with the authorities and the private sector to
identify the actions that would be critical steps for implementing the government’s program within a realistic
timeframe. They would provide meaningful outcomes and help loosen major constraints or facilitate further reforms.
A higher number of measures are included in the policy matrix (Annex 9) as measures of progress to monitor the
overall progress of the reform program.
Principle 5: Conduct transparent progress reviews conducive to predictable and performance-based financial
support
A full and close supervision of the program progress review will take place in line with the agreed Partnership
Framework between the Government of Burundi and the budget support donors.
42
Annex 2: Burundi ERSG V – Lessons Learned from Other IDA operations
The lessons of these operations can be summarized as follows:
Bank-financed Development Policy Operations had a major influence on government
policies. Specifically: (i) they helped stabilize the economy and improve public finance
management systems; and (ii) they encouraged the government to give high priority to pro-
poor public spending in key economic and social sectors.
Selectivity and donor coordination is important in the selection of prior actions and
triggers. The design of some DPOs (notably ERC and ERSG I) was too complex33
and
beyond the capacity of weak public institutions in a post-conflict situation. This was
exacerbated by the need for the government to implement policy reforms supported by
other donors, which, according to government officials, served the same objectives as the
Bank’s program, but whose conditions and timetables were not always fully consistent with
specific aspects of Bank operations.
ERC and ERSG I addressed politically sensitive privatization and export crop
restructuring issues, which should have been better prepared, both technically and
politically. This preparation should have included not only detailed diagnostic studies, but
also extensive consultations with all stakeholders, including farmers’ organizations and
potential domestic and foreign investors. The Economic Management Support Project
(EMSP), approved by the Board in 2004 and restructured in 2007, eventually financed
these studies and extensive consultations with stakeholders were organized in 2008.
ERSG II and III adopted a programmatic approach to reform, thus helping to ensure
the continuity of reforms in an otherwise unpredictable post-conflict policy
environment. By approaching complex reforms, such as that in the coffee sector, in a
gradual programmatic manner, the government was able to build buy-in and make progress
on more politically sensitive reforms.
It is more effective to continue reforms in which the government has already taken
ownership, than to begin reforms in new domains. ERSG II and III built off reforms,
where a strong dialogue had already been established with the authorities under earlier
operations (ERC and ERSG I), or where the government advised they hoped to make
progress.
The design of the proposed programmatic series also benefits from lessons learned from,
and synergies with, other on-going and forthcoming IDA funded operations.
The relative success of the public finance management components of the Bank’s
program is largely due to the achievement of IDA’s EMSP. The project provided
financial technical assistance support for the design of major PFM reforms, including
preparation of new codes (e.g., organic law of finance, and procurement code), census of
the public service workforce, implementation of PFM-related capacity-building programs,
and introduction of PFM information systems. It also supported the design and
implementation of the preferred strategic option for the reform of the coffee filière and the
privatization of processing facilities in the sector. Most of the business environment
33
ERSG I had two tranches, 12 prior actions and nine triggers.
43
legislations so far enacted (e.g., Commerce Code, Company Code, and Investment Code)
were supported through EMSP, with complementary support from the IFC. The preparation
of business environment-related implementation texts are expected to be undertaken with
support from the Financial and Private Sector Development Project currently managed by
the project implementation unit (PIU) of EMSP.
With respect to the involvement of beneficiaries in the assessment of public services,
the proposed operation series draws lessons from two existing projects: (i) The
Burundi Community and Social Development Project (PRADECS), which supports the
newly designed policies of the various sectoral ministries to reach out to the rural poor by
putting them at the center of the daily management of the basic social infrastructure that
benefit them; and (ii) the Health Sector Development Support project, which is currently
experimenting in performance based financing. Lessons learned from their preliminary
experience should help to enrich the analytical base for looking at the quality of service
delivery and the effective use of beneficiary assessment and performance based budgeting
in future operations.
There are strong synergies between the reforms supported in the proposed
programmatic series and the activities of the Agro-Pastoral Productivity and Markets
Development Project recently approved by the Board (May 2010). The program
document for this project recognizes that, “on-going and projected reforms in the
coffee and tea sectors, as well as the development of small entrepreneurs in the
horticulture subsector are vital to increasing the contribution of export crops to growth.
This will depend critically on increased productivity, as well as on improvement of the
investment climate and access to rural finance.‖ The new agricultural operation will help to
spur growth in the rural sector through support to agricultural productivity and improved
access to markets.
The Multi-Sectoral Water and Electricity Infrastructure Project and the Emergency
Energy Project (grant of IDA’s Crisis Response Window) focus on urgent investments
to rehabilitate the energy and water sector. While this project also supports the
strengthening of the capacities of the public utilities company, later operations in the
programmatic series will attempt to reinforce these efforts by supporting much needed
reforms of the sector.
The Financial and Private Sector Development Project (FPSDP), already managed
within the same project implementation unit as ESMP, will support targeted reforms
in privatization and public-private dialogue. The project also supports follow-on
activities which started under EMSP. These include, among others, technical assistance to
improve performance and corporate governance of PEs by reinforcing SCEP’s overall
capability and monitoring of PEs, and supporting ongoing privatization efforts, and
promoting public-private dialogue by strengthening the institutional framework of private,
parastatal, and public enterprises that are pivotal to private sector development and regional
integration (i.e., the Arbitration Center, the Chamber of Commerce, the Association of
Women, etc.).
The IFC also supports a complementary set of advisory services. In the past several
years the IFC has taken a key role in supporting the business environment through
investments and advisory services to government and businesses. In the financial sector,
44
the IFC Financial Advisor Service is currently scoping potential interventions, including
agribusiness and SMEs. It is also expected that the IFC Investment Climate Team, in
cooperation with the IFC Conflict Affected States in Africa (CASA) program, will help the
authorities to undertake a range of reforms including: (i) Doing Business; (ii) business
taxation; (iii) public-private dialogue; (iv) support to the implementation of the EAC
Common Market Protocol; and (v) reform communication.
Finally, the Emergency Demobilization and Transitional Reintegration Project (and
its predecessor operation the Burundi Emergency Demobilization, Reinsertion and
Reintegration Program), support the ongoing reforms by helping the authorities to
resolve some of pressing issues related to the transition to peace. The demobilization
process of ex-combatants is complementary to the on-going reforms in PFM as
demobilization has created some fiscal space for other priority and social expenditures (see
PEMFAR 2008 for more details). Further, by providing support to demobilized ex-
combatants, this project help to alleviate some of the short term political and social
pressures the authorities face working in a fragile state, so that they are able to take on
forward looking reform efforts.
45
Annex 3: Burundi ERSG V – Analytical Underpinning – Key Recommendations
Analytical Report Recommendation Link to ERSG Series
Public Finance Management
PEMFAR
(2008)
PEFA (2009)
―…the government should progressively begin the
introduction of a medium-term expenditure
framework for broad categories of expenditure…‖
(PEMFAR).
―The absence of an MTEF prohibits the
optimization of actions in the medium term and
timely planning of resource availability.‖ (PEFA).
Expansion of MTEF process beyond
the pilot sectors (including a list of
priority expenditures to be protected in
case of drastic budget cuts) to improve
budget planning and credibility.
PEMFAR
(2008)
PEFA (2009)
The government should, ―Produce, on a quarterly
basis, a global cash management plan and a
sectoral plan for each ministry and disseminate it
publicly….‖ (PEMFAR).
―The implementation of cash management plans on
the basis of actual receipts and engagement
platforms would contribute to an improvement [in
resolving arrears].‖ (PEFA).
Focus on strengthening cash
management and linking cash
management in a more direct manner to
commitment plans.
Cabinet
Seminar Policy
Notes (2011)
―In the short to medium term, the authorities
should: (i) accelerate PFM reforms (fiduciary
controls) to improve the transparency in the
management of public expenditure and avoid the
misappropriation of resources…‖
Efforts to introduce a decree
establishing the rules for the
implementation of
the national public budget and control
along the lines of the Loi Organique.
PEMFAR
(2008)
Study on the
options for pay
reform
(2009/2010)
On the management of the public wage bill, the
PEMFAR suggests, among others: ―(a) The
MEFDC and MFP to work more closely together
on salary and staffing issues; (b) Establishment of
clear staffing targets for line ministries that are in
line with a lower wage bill [objective]; (c) MFP to
monitor implementation of agreed staffing ceilings;
and (d) Setting up a human resources management
information system…‖
These suggestions figure into the
proposed and agreed prior actions and
triggers for the series.
Cabinet
Seminar Policy
Notes (2011)
The authorities should: (i) finalize and adopt the
National Governance Strategy and its action plan;
and (ii) strengthen transparency in public finance
management by improving access to information
relative to public finance. In this regard, voted
national budget bills and quarterly budget
execution reports should be released on a
government website (e.g. Internet site of the
Ministry of Finance and Economic Development
Planning).
This recommendation is reflected into
the proposed and agreed prior actions
for the series.
Private Sector Development
CEM (2010)
ICA (2008)
―Improve the regulatory environment to attract
domestic and foreign investment. Critical
components are the implementation of the
investment code, the finalization of the revision of
the tax code and the establishment of an export and
investment promotion agency.‖
The program will focus on the
implementation of the new investment
code, including the operationalization
of the new investment promotion
agency.
46
Analytical Report Recommendation Link to ERSG Series
CEM (2010) ―The government has recently undertaken to
reform the legal framework (of the mining sector)
to make it more conducive to the development of
the sector. A number of international companies
have been interested in investing in commercial
exploration of the mineral resources. If these
reform and exploration efforts prove successful,
one or more mineral deposits could be developed
on an industrial scale.‖
The program will support the
government’s on-going efforts to
modernize the mining sector.
CEM (2010)
Cabinet
Seminar Policy
Notes (2011)
―In a shorter term, the authorities should improve
the financial viability of the REGIDESO (the
electricity generation and supply organization in
Burundi), by: (i) improving its cost recovery
through the pre-payment system, that is already
operational; and (ii) undertaking a tariff revision on
the basis of the conclusions of a recent tariffs study
for water and electricity.‖
The program supports ongoing reforms
in the energy sector.
CEM (2010)
Report on the
weaknesses of
legal and
regulatory
framework of
privatization
(2009)
―The Service Chargé des Entreprises Publiques
(SCEP) …does not have the capacity and the
resources necessary to bring about substantial
improvements in the performance of the sector and
to plan and monitor the privatization program
envisaged by the government.‖
The program supports the
implementation of the action plans that
produced in the recent technical and
financial audits of the 8 PEs, as well as
communication campaigns to bring the
various stake holders into the process.
CEM (2010)
Sources of
Rural Growth
(2007)
―Most important is the complete implementation of
the ongoing privatization agenda. Next steps
include the setting up of an efficient regulatory
agency and the development and strengthening of
producer organizations.‖
The program supports on-going
privatization efforts in the coffee sector
and proposes to expand a similar
approach to the tea and sugar sectors.
Cabinet
Seminar Policy
Notes (2011)
―… the authorities should: …adopt a draft pre-
Cooperative law, consistent with the liberalization
strategy of the coffee sector, to provide the legal
framework for the creation of producer
associations…‖
The prior action on the adoption of the
draft pre-cooperative law is consistent
with the recommendation.
General Approach
WBI’s
Governance
and Corruption
diagnostic
survey (2008)
Some of the key lessons learned from this exercise
include: ―(i) It is possible to achieve targeted
results that are above current national performance
levels; (ii) Results build on results when capacity is
unleashed and participants become motivated and
confident; (iii) Leaders play a critical role in
articulating the strategy that translates development
vision into rapid results; (iv) Leaders at all levels
should engage in leadership development (from the
highest level in the hierarchy to the operational
level — that is, the level of those who manage
programs and projects) and should work toward a
collective leadership.‖
The policy dialogue pursued during the
preparation and evaluation of the
proposed program draws strongly from
these lessons learned. The policy
dialogue targets leaders at all levels,
particularly on more complex reforms.
For example, with the progressive
introduction of the MTEF, the team has
worked with government counterparts
from the technical level all the way to
the second vice presidency. Further,
the approach has favored building the
capacity of the authorities to implement
reforms by matching strategic technical
assistance to the reforms, where
necessary.
47
Annex 4: Burundi ERSG V - National Institutional Structure for the Monitoring and Evaluation of the Reforms
SCEP
Technical Committee to coordinate the
development and follow-up of the
ERSG II-III and ERSG IV-V , including
focal points from technical groups
below and representative of the REFES.
Policy Committee to Promote
Economic Reforms, presided by
the Minister of Finance (MF)
Technical Group in
on the PFM reforms
(MFEDP, MFP)
Technical Committee for the
improvement of the business
environment, including
representatives from private sector,
MOGG, and MFEDP.
Contact: Chief of Staff, MoCIT.
*Coffee Reform
Committee
*Tea Reform
Committee
*Energy sector reform
(REGIDESO, MEM)
*Petroleum Reform
and Pricing
Committee (MFEDP,
MoCIT, and private
sector)
48
Annex 5: Burundi ERSG V - Letter of Development Policy
REPUBLIQUE DU BURUNDI
~W~ ~
MINISTERE DES FINANCES ET DE LA PLANIFICATION DU DEVELOPPEMENT ECONOMIQUE CABINET DU MINISTRE
NIRef. : 5401, 15 .. ? 'b-J 2011
Objet: Lettre de Politique de DeveJoppement pour Ie Cinquieme Don d'Appui a Ja R6forme Economique (DARE V).
Monsieur Ie President,
Bujumbura, Ie /v::; 1 ;\ " 12011
A Monsieur Robert ZOELLICK President de la Banque Mondiale 1818 H Street, NW Washington, D.C.20433.
Nous avons I'honneur de vous transmettre ci-joint la Lettre de Politique de Developpement (LPD) convenue dans Ie cadre du nouveau programme d'appui budgetaire entre Ie Burundi et l'Association Internationale de Developpement (IDA) au titre du serna Don d'Appui a la Reforme Economique (DARE V).
Le Gouvernement du Burundi a mis en Oluvre avec succes Ie programme 2010-2011 appuye par la quatrieme operation de Don d'Appui a la Retorme Economique (DARE IV). Durant cette periode, des resultats appreciables ont ete enregistres dans la gestion transparente et efficace des finances publiques, I'amelioration du climat des affaires en vue de stimuler Ie developpement du secteur prive ainsi que la promotion de I'expansion des secteurs a haut potentiel de croissance et la diversification des exportations du pays notamment dans les secteurs agricoles et miniers.
Au niveau politique, les institutions issues des elections de 2010 travaillent d'arrache-pied pour asseoir la paix sociale dans tout Ie pays. Un cadre de dialogue permanent des partis politiques a ete institue pour permettre aux partis politiques de discuter de la vie du pays en general et des questions politiques en particulier. D'autres initiatives importantes pour la stabilisation politique telles que la creation d'institutions nationales sur les droits de I'homme et de Justice transitionnelle ont ete prises en 2011 . Un projet de loi portant statut de l'Opposition politique a ete adopte par Ie Conseil des Ministres et se trouve sur la table du Parlement pour adoption. Le 11 fevrier 2011, l'Ombudsman a commence a fonctionner officiellement (Ia loi portant organisation et fonctionnement de l'Ombudsman a ete promulguee Ie 25 janvier 2010). Bref, Ie Gouvernement poursuivra les efforts entrepris pour assurer Ie bon fonctionnement du systeme democratique, consolider la bonne gouvernance, et promouvoir Ie dialogue politique et social.
Les grandes priorites du Gouvernement restent la consolidation des acquis economiques et sociaux du CSLP 1, ella mise en Oluvre du CSLP2 (en cours de finalisation) qui remettra Ie pays sur la voie de la croissance, en privilegianl les axes stralegiques suivants : (i)Renforcer I'Etat de Droit, consolider la Bonne Gouvernance et promouvoir I'egalite du genre ; (ii) Transformer I'economie par une croissance soutenue creatrice d'emplois a travers notamment I'investissemenl dans Ie secteur de I'energie electrique ; (iii) Ameliorer I'acces aux services de base de qualite afin de renforcer la solidarite nationale et (iv) Bien gerer
49
2
Toutefois, -Ies defis de la recherche de cette croissance forte et partagee restent immenses et la crise energetique a empire la situation. La mobilisation des moyens financiers consequents reste la cle de reussite pour faire face aces defis.
C'est dans ce cadre, que Ie Gouvernement du Burundi sollicite un nouvel appui de I'IDA pour faciliter la realisation d'un programme de retormes economiques sur la periode du 1 er juillet 2011 au 30 juin 2012 dans Ie cadre du DARE V pour un montant equivalent a 22,1 millions de droits de tirages speciaux(DTS), soit 35 millions de dollars E.U.
Les priorites mises en avant dans Ie cadre du DARE V concernent la gestion trans parente et efficace des finances publiques, I'amelioration du climat des affaires et developpement du secteur prive.
Cette Lettre de Politique de Developpement expose aussi la strategie de reformes economiques a moyen terme que Ie Gouvernement s'engage a realiser dans Ie cadre du don et au-dela, afin de renforcer les actions de lutte contre la pauvrete avec I'appui des autres partenaires au developpement du Burundi.
Les politiques et mesures indiquees dans la lettre de politique de developpement contribueront a renforcer les efforts entrepris en matiere de gestion des finances publiques et a ameliorer Ie climat des affaires, en vue d'accelerer la croissance economique et d'assurer I'irreversibilite des progres atteins.
Toutefois, Ie Gouvernement reste pret a adopter toute mesure additionnelle que I'IDA jugerait necessaire pour assurer Ie succes du programme.
Enfin, dans Ie but de faciliter Ie suivi des progres accomplis dans la mise en reuvre des politiques et mesures contenues dans ce programme, Ie Gouvernement reste pret a repondr.e favorablement a toute demande d'informations de la part de I'IDA.
Les autorites burundaises souhaitent que la Lettre de Politi que de Developpement et Ie document de programme qui I'accompagne soient rendus publics. Elles autorisent par consequent leur publication et leur affichage sur Ie site de la Banque Mondiale, une fois que ces documents sont transmis au Conseil d'Administration. Le Gouvemement fera autant sur ces sites officiels .
Veuillez agreer, Monsieur Ie President, I'expression de notre haute consideration.
LA MIN ISTRE DES FINANCES ET DE LA PLANIFICATION DU DEVEL ESSl'4PMIQUE
_
~~~~~~£L~' ,.
50
REPUBLIQUE DU BURUNDI
CINQUIEME DON D'APPUI BUDGETAIRE ET DE SOUTIEN A LA REFORME ECONOMIQUE (DARE V)
LETIRE DE POLITIQUE DE DEVELOPPEMENT
Octobre 2011
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51
Introduction
1. Le Gouvernement sollicite I'appui de I'IDA pour completer Ie financement de son programme de politique economique de 2011. Le but de ce programme est de poursuivre les efforts entrepris depuis Ie premier CSLP pour ameliorer les fondamentaux de I'economie burundaise. Ses objectifs peuvent etre resumes de la fa90n suivante : (i) maintenir I'inflation a un taux de 1 chiffre ; (ii) ameliorer la composition des depenses publiques au profit des secteurs prioritaires, tout en preservant la viabilite budgetaire ; (iii) renforcer la gestion des finances publiques (GFP) et la bonne gouvernance ; et (iv) renforcer les systemes de controle interne de la Banque Centrale. Un emploi prudent de ces instruments de politique economique permettra au Gouvemement de poursuivre et con solider la stabilisation macroeconomique qui conditionne Ie succes des rEiformes : a la fois les rMormes structurelles globales et I'appui au secteur prive qui a ete intensifie des 2011 en vue d'une croissance plus forte et d'une reduction plus rapide de la pauvrete.
2. Pour Ie Burundi, I'exercice 2011 co'incide avec I'elaboration du CSLP 2 qui operationnalisera la Vision « Burundi 2025 ». Cette vision est un instrument de planification a long terme, qui va guider les politiques et les strategies de developpement durable, afin de satisfaire les besoins des generations presentes sans compromettre les chances des futures generations. N'eussent ete les tensions budgetaires et financieres resultant de la hausse des prix alimentaires et energetiques commencee en 2010, Ie programme de developpement du Gouvemement aurait ete fonde sur des bases plus solides. Avec I'appui de ses partenaires, Ie Gouvernement a mis en ceuvre des mesures d'attenuation des effets de la crise, grace notamment a des programmes cibles en faveur des burundais les plus vulnerables. Le bilan de la mise en ceuvre du CSLP 1 montre que I'economie du Burundi a progressivement acquis la capacite de resister aux chocs externes et de preserver la dynamique des progres realises depuis 2007 dans chacun des quatre domaines socio-economiques du programme. Aujourd'hui, Ie Gouvemement veut non seulement con solider les acquis economiques et sociaux du CSLP 1, mais egalement changer les mentalites et transformer les bases de I'economie burundaise en vue d'atteindre un taux de croissance de 4,9% des 2012. En fait cette croissance pourra alteindre 6% si les parten aires du pays augmentent leurs appuis notamment dans Ie domaine de I'energie et de I'infrastructure et si la securite est completement retablie sur toute I'etendue du territoire. La mise en ceuvre du CSLP 2 (en cours de finalisation) mettra Ie pays sur celte voie d'une croissance forte et partagee en privilegiant les axes strategiques suivants : (i) Renforcer l'Etat de droit, consolider la bonne gouvernance et promouvoir I'egalite du genre ; (ii) transformer I'economie pour une croissance soutenue, creatrice d'emplois ; (iii) ameliorer I'acces et la qualite des services de base pour renforcer la solidarite nation ale ; et (iv) gerer I'espace et I'environnement pour un developpement durable.
3. Commencees en 2010, les crises alimentaires et energetiques menacent a nouveau I'equilibre budgetaire et financier. Sur la base des resultats (positifs) de la gestion des crises en 2008, Ie Gouvernement estime qu'il faudra mobiliser environ 22 milliards de francs burundais (BIF) pour altenuer I'impact de ces crises sur Ie succes des rMormes structurelles, sur la croissance economique et sur les conditions de vie en milieu rural, ou vit 90% de la population. Afin de ne pas compromettre Ie retablissement des equilibres financiers en tame de puis 2009, Ie programme du Gouvernement doit etre soutenu massivement pour combaltre cette crise dont les effets sont deja visibles par exemple sur la position exteneure du pays.t
Malgre la forte augmentation des besoins de financement induite par deux chocs exogenes, Ie Gouvernement est fermement resolu a poursuivre les efforts entrepris et a consolider les resultats obtenus dans Ie but : (i) de promouvoir la transparence des systemes de gestion des finances publiques ; (ii) d'ameliorer Ie climat des affaires et de developper Ie secteur prive ; et (iii) d'assurer la continuite des filets de securite crees depuis la crise de 2008 et d'alleger la pression fiscale sur les denrees alimentaires et les carburants en faveur des menages les plus pauvres.
I Les effe1s les plus visibl es sonl : a) I'augmentalion de 10 facture petroliere el du coal des produils . Iimenlaires; b) Ie ralentissement de la croissance economique ; et c) 1a hausse des depenses publiques, en general, et des depenses pro-pauvres. e,,!. p.!rtic~.!~e.r: _ __ . _ .. 21 P age
52
4. Le Gouvernement sait qu'iI doit encore relever de nombreux defis pour assurer I'emergence economique du pays a moyen terme. Malgre les progres realises lors de la mise en ceuvre du premier CSLP, beaucoup reste a faire. Le CSLP 2 distingue quatre defis majeurs : (i) I'intensification des systemes de culture, (ii) I'efficacite de la depense publique, (iii) Ie developpement du secteur prive ; et (iv) I'energie.
(i) L'intensification des systemes de cultures
L'intens~ication des systemes de cultures est essentielle afin d'assurer la securite alimentaire face a la croissance demographique et pour reduire la pauvrete en milieu rural. Or la production vivriere a tres peu augmente depuis 2006. Le defi est donc de diversifier la production, de promouvoir des cultures a haut rendement, de redynamiser la recherche et la vulgarisation agricole, de promouvoir I'utilisation d'intrants, d'ameliorer les systemes d'irrigation et de reorienter <les ressources publiques vers Ie secteur agricole.
(ii) L'efficacite de la de pense publique
Bien qu'elle represente pres de 45% du PIB en 2010, la depense publique n'a pas ete a mesure de dynamiser I'activite economique et de reduire la pauvrete monetaire. La faiblesse relative des depenses en capital, la priorite accordee aux secteurs securitaires et aux services sociaux, la gestion inefficace et Ie manque de previsibilite des ressources exterieures; tous ces facteurs expliquent I'inadequate performance de la depense publique. Pour que la depense publique soit veritablement au service de la croissance economique et de la lulle contre la pauvrete, iI faut que Ie Gouvernement - de concert avec ses bailleurs de fonds - renforce les methodes de planification, d'execution, de suivi et d'{waluation de ses depenses. Celle demarche s'appuiera sur des outils efficaces (strategies sectorielles, CDMT, cadre logique) et sur un systeme statistique fiable.
Un aspect particulier du probleme de I'efficacite de la depense publique est la mailrise de la masse salariale dont la part du PIB a dangereusement augmente, atteignant 11 .8% en 2011 . En outre la qualite de la depense publique necessite une gestion rigoureuse des recrutements, de la gestion des carrieres et de la notation des fonctionnaires.
(iii) Le developpement du secteur prive
Jusqu'a present, I'economie burundaise a ete principalement dominee par Ie secteur public. Elle a main tenant besoin d'un secteur prive fort et dynamique pour stimuler une croissance soutenue. Le developpement du secteur prive n'est envisageable que si Ie climat des affaires s'ameliore de fa90n notable. A cette fin, d'importants obstacles doivent etre surmontes, notamment Ie manque d'infrastructures, les problemes d'acces au financement, la rigidite des reglementations, la lourdeur des procedures et I'absence de services de conseil et d'appui.
(iv) L'energie
Le deficit energetique, la faiblesse de la production d'electricite et Ie manque de fiabilite de cette production sont des obstacles majeurs a la croissance. Les problemes energetiques du pays freinent Ie developpement de I'industrie et des investissements etrangers. L'energie est donc un enjeu vital pour la reussite du CSLP 2. Le developpement du secteur energie necessite la mobilisation de ressources considerables au niveau des budgets nationaux, de I'aide internationale et des investisseurs prives.
5. Un appui massif et coordonne des bailleurs de fonds est necessaire pour renforcer I'efficacite du programme du Gouvernement. Le Burundi a donc besoin d'un cadre de reference pour une politique commune des bailleurs de fonds. La nouvelle politique de I'aide, qui sera adoptee dans les prochaines semaines, a deja obtenu I'adhesion des partenaires techniques et financiers qui ont participe activement a I'elaboration du CSLP 2 dans les ateliers techniques et les groupes sectoriels du Groupe de Coordination des Partenaires. C'est dans ce cadre que la presente lellre de politique de developpement definit Ie programme de reformes du Gouvernement pour 2011 pour
311'age
53
lequel I'appui de I'IDA est sollicite. En outre, la letlre identifie des indicateurs de performance qui permettront d'evaluer la qualite de la mise en ceuvre du programme. C'est dans un souci d'efficacite que les autorites ont tenu 11 impliquer tous les acteurs dans la conception des futures reformes dont la mise en ceuvre fera I'objet de communications regulieres.
II Developpements Recents et Programme de Politique
6. Malgre les crises rtlcentes, Ie Burundi espere que sa performance economique restera favorable au cours des prochaines annees. Le taux de croissance annuel du PIS a atteint 4,2% au cours de la periode 2006-2009. Ce resultat est encourageant, meme s'iI est infeneur a I'objectif de 7%, vise dans Ie CSLP 1, qui aurait permis d'atteindre certains des objecUfs des OMD. Une relance economique est probable. En effet I'economie burundaise a acquis une capacite de resistance aux chocs qui I'ont secouee au cours des dernilires annees. En 2008, malgre la severite des crises alimentaire et energetique de I'epoque, Ie taux de croissance atteint 4,5%. En 2009, Ie taux de croissance a chute it 3,5% a cause des effets (differes) des crises de I'annee precedente et de la nouvelle crise economique et financiere mondiale. Mais grace aux retormes structurelles en faveur du developpement du secteur prive, au fonctionnement effectif de l'Office Surundais des Recettes (OSR) et aux appuis budgetaires de ses partenaires, Ie Gouvernement a pu ratteindre une croissance economique de 3,9% en 2010. II compte poursuivre les prognis accomplis, atteindre un taux de croissance de 4,2% en 2011 et d'au moins 4,9% des 2012.
7. Pour atteindre cet objectif, Ie Gouvernement s'efforcera d'exploiter pleinement toutes les opportunites de I'economie nalionale. Pour realiser une croissance forte et durable capable de reduire la pauvrete de fa~on significative, Ie Gouvernement s'attaquera a la resolution des grands defis identifies dans les strategies sectorielles et dans Ie CSLP 2 en cours de finalisation. Des r€!formes importantes - lancees dans Ie cadre des precedents DARE, avec I'appui d'autres bailleurs de fonds (notamment la Commission Europeenne. et autres bilateraux) - ont jete les bases: (i) d'une amelioration sensible du climat des affaires, de la gouvernance et de la transparence budgetaire et fiscale ; (ii) de I'innovation et d'investissements massifs dans les secteurs porteurs de croissance, y compris Ie capital humain; (iii) d'une reduction du deficit en infrastructures productives telles que I'energie; et (iv) d'une croissance de la production et de la productivite agricole, creatrice d'emplois grace it la diversificalion des produits et a I'amelioration des systemes de commercialisation. Ce sont les memes principes qui inspireront la selection des programmes et activites permettant d'atteindre les principaux objectifs du Gouvernement.
8. Le Gouvernement sait qu'une croissance economique forte passera par une promotion agressive de I'industrie et des services marchands. L'agriculture, qui domine I'economie burundaise (en moyenne 46% du PIS), va continuer de jouer un role moteur dans la croissance des services (en moyenne 37% du PIS en 2004-2009) et de I'industrie (en moyenne 17%). Ce r61e preponderant s'explique par la forte contribution du secteur agricole aux recettes d'exportation (plus de 60% de 2006 a 2009) et a la creation d'emplois (plus de 90% de la population active travaille dans I'agriculture). Une profonde transformation de I'economie burundaise, creatrice d'emplois et de revenus salariaux et fiscaux, necessitera une promotion agressive des services et de I'industrie (donc du secteur prive), dont les parts du PIS devront donc fortement augmenter. En accord avec ses partenaires, Ie Gouvernement a defini un programme de r€!formes prioritaires pour 2011 centre sur deux principaux objectifs strategiques, a savoir : (1) ameliorer Ie climat des affaires et promouvoir Ie secteur prive ; (2) consolider les resultats obtenus sur Ie plan de la transparence des systemes de gestion des finances publiques. Pour assurer la mise en ceuvre effective de ces reformes, Ie Gouvernement devra aussi meltre en place des mesures permettant d'attenuer les effets des crises alimentaires et energetiques actuelles dont Ie coUt sera finance avec I'appui des bailleurs de fonds.
9. Le Gouvernement va multiplier les actions pour faire du secteur prive Ie pivot du developpement economique et social du Burundi. En 2010, Ie Gouvernement a aug mente les ressources publiques affectees au secteur agricole afin d'accroitre une productivite encore insuffisante pour garantir la securite alimentaire. De nouveaux investissements agricoles ont ete realises en vue d'attenuer I'impact des fluctuations cycliques de la
41Pag e
54
production (notamment la production de Cafe), des aleas climatiques, de certaines degenerescences varietales et des plmuries en semences et produits phytosanitaires de qualite. En plus de ces appuis indirects aux activites privees, les autorites ant donne des signaux forts qui demontrent leur volonte d'ameliorer Ie classement du Burundi selon I'indicateur du « Doing Business » pour 2012. Grace au Comite Decisionnel cree a cet effe!, on note aujourd'hui une reduction sensible des delais necessaires pour obtenir un permis de construire, effectuer un transfert de propriete, et creer une entreprise. Assainir la situation financil~re de la REGIDESO, lancer la seconde phase de la vente des stations de lavage du cafe, et preparer la restructuration des entreprises publiques sont des mesures prioritaires dont Ie Gouvemement poursuivra la mise en Clluvre dans Ie cadre de la sene programmatique des DARE IV et V. Dans chacun de ces domaines, des progres importants ont ete realises, notamment I'installation de compteurs electriques avec prepaiement pour plus de 25% des abonnes, I'evaluation de la premiere phase de vente des stations de lavage, et I'adoption par Ie Conseil des Ministres et la sou mission au Parlement de la loi revisee sur les privatisations.
10. Le retour de la securite et de la paix s'est confirme en 2010. Une etape decisive a ete la transformation du demier mouvement arme en parti politique. Les elections generales de mai et septembre 2010 - qui ont reelu Ie President sortant, Mr Pierre Nkurunziza - confirment Ie choix du processus democratique, com me I'unique moyen de surmonter les divergences et de regler les problemes politiques et sociaux du Burundi. Malgre Ie coOt de ces elections, partiellement finance par les parten aires du pays, les auto rites gouvernementales ont su maintenir Ie cap des ~formes et eviter la surchauffe qui aurait pu resulter de la mise en Clluvre des promesses electorales. Pour consolider Ie processus de reconstruction politique, condition d'une croissance forte et durable, un forum des partis politiques a ete cree en 2010 pour un dialogue continu sur les questions concernant Ie bien-etre de la population. D'autres initiatives importantes pour la stabilisation politique, telles que la creation d'institutions nationales sur les droits de I'homme et la justice transition nelle, ant aussi ete prises en 2011 . Le 11 fevrier 2011, l'Ombudsman a commence a fonctionner offciellement (Ia loi portant organisation et fonctionnement de l'Ombudsman a ete promulguee Ie 25 janvier 2010). Bref, Ie Gouvernement poursuivra les efforts entrepris pour assurer Ie bon fonctionnement du systeme democratique, can solider la bonne gouvernance, et promouvoir Ie dialogue politique et social.
11. Dans eet environnement apaise, Ie Burundi est parvenu a retrouver un taux d'inflation a 1 chiffre (6,4% en 2010).2 La flambee recente des cours des produits petroliers devrait entrainer une hausse du prix des importations du fa~ de la pression exercee sur Ie coG! du transport. Compte tenu d'une part de la hausse du prix des importations, et d'autre part des efforts que fera Ie Gouvernement pour contr61er I'augmentation de la masse monetaire, accroitre la production vivriere et ameliorer sa distribution et sa commercialisation, il est probable que la hausse des prix que devront supporter les menages burundais sera de I'ordre de 8,4% de 2008 a 2010. En effet, pendant la crise de 2008, Ie taux d'inflation, qui, en glissement annuel, avait atteint 26% en 2008, a pu etre reduit a 4,6% en 2009, et 6,5% en 2010. II semble cependant qu'avec la montee des prix des produits petroliers et energetique, I'inflation atteindra 10,4 % en 2011 . Cependant, I'objectif a moyen terme du Gouvemement est de ramener Ie taux d'inflation en dessous de 10%, grace a I'application des mesures et la mise en place des instruments de politiques definis en accord avec Ie Fonds Monetaire International dans Ie cadre de la Facilite Elargie de Credit. Pour suivre les progres vers I'accomplissement de cet objectif, I'indicateur de reference sera I'indice des prix a la consommation calcule par I'ISTEEBU sur base de I'evolution des prix d'un panier de biens de consommation sur Ie Marche Central de Bujumbura. Comme cet indicateur est inadequat, Ie Gouvernement va redoubler d'efforts pour convaincre ses partenaires de I'aider a actualiser ce panier en realisant en 2012 une enquete budget-consommation.
~eE Ie_ tau,,-.!!,,-c-'2i~~anc~.E~YJndice ~~~e) ,!,~x,,-n~~tr~_~Q9J_ et 201 9c _. ______ ._ . ______ . ____________ _ 51P age
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12. Le deficit budgetaire (base caisse) a diminue depuis 2009, atteignant 4,3% en 2010, soit un niveau proche de I'objectif du Gouvernement. La baisse du deficit est la consequence d'une bonne gestion des depenses publiques, qui privilegie les depenses pro-pauvres, de I'operationnalisation de I'OBR dont les recettes (19,8% du PIB) ont surpasse les previsions de 2010, et d'une meilleure coordination des politiques monetaire et budgetaire grace a la production regulh~re de plans de tresorerie (Comite de Gestion de la Tresorerie) en coherence avec les plans d'engagement, et a la rationalisation des comptes de l'Etat (fenmeture des demiers comptes hors budgets depuis la fin decembre 2010). En outre, conformement aux objectifs du CSLP et des OMD, les autorites augmentent constamment les depenses destinees it la lutte contre la pauvrete. Celles-ci devraient de passer 14% du PIB en 2010 (contre 12,3% en 2009). Compte tenu des financements addition nels massifs (environ 22 milliards de BIF) qu'il faudra mobiliser pour faire face a la crise energetique et alimentaire, Ie Gouvernement prendra de nouvelles mesures pour controler Ie volume et ameliorer I'efficacite de la depense gr~ce notamment au gel des recrutements, it la « contractualisation » du personnel de la sante (pour ameliorer la qualite des soins), a une politique reduisant a zero Ie charroi de l'Etat, et a la rationalisation des eftectifs des corps de defense et de securite, Ie but etant de creer plus d'espace fiscal et budgetaire.
13. Selon la derniere revue du FMI, Ie budget 2011 est conforme aux objectifs macroeconomiques convenus. Le cadre macroeconomique a ete revise pour tenir compte des eftets de la crise energetique et alimentaire sur les depenses et financements publics et sur la position exterieure du Burundi. En outre, soucieux d'accelerer la progression vers les OMOs, Ie Gouvernement a continue d'ameliorer la composition des depenses publiques, augmentant les depenses pro-pauvres de 15 milliards de BIF, et reduisant de fa90n substantielle les droits d'accise sur Ie petrole lampant et Ie diesel. Grace it ces mesures, I'impact de la crise sur les conditions de vie des menages les plus pauvres sera moins grave. Les depenses de croissance ne sont pas aftectees. En eftet,
. I'agriculture (irrigation moderne et adaptee, repeuplement du cheptel, approvisionnement en semences de qualite) et I'energie (barrage hydroelectrique de 10,4 megawatts) ont re9u des credits additionnels. Enfin, la position exteneure devrait continuer it s'ameliorer grace aux mesures de liberalisation et de diversification des exportations. Des 2011, Ie Gouvernement va mettre en oeuvre les operations de privatisation des 104 stations de lavage restantes, ce qui devrait generer d'importantes recettes budgetaires en fin 2012. Mais I'amelioration de la position exterieure du pays risque d'lltre limitee par les consequences de la hausse des prix des produits energetiques et alimentaires sur Ie coOt des importations. L'extension des mesures de privatisation du secteur cafe encouragera de nouveaux investissemenls qui permettront Ie rajeunissement des plantations, arreteront donc progressivement Ie declin et la cyclicite de la production. Le Gouvernement va donc continuer d'appuyer les secteurs cafe et the : (i) en encadrant les associations de producteurs ; (ii) en investissant dans I'irrigation et la distribution de produits phytosanitaires ; et (iii) en adaptant la loi sur les privatisations en fonction des meilleures pratiques internationales.
14. Malgre les contraintes financieres resultant de la crise mondiale, Ie Gouvernement va conserver Ie filet de securite mis en ptace en faveur des populations pauvres et vulnerables. Oepuis 2008, Ie Gouvernement a pris un certain nombre de mesures d'aide aux populations vulnerables afin de proteger leurs conditions de vie deja precarisees par les crises successives recentes. Les reductions tarifaires temporaires et ciblees pour les importations de produits alimentaires et petroliers consommes par les pauvres ont ete combinees avec des filets de securite sociale (i.e., supplements nutritionnels, mesures urgentes de securite alimentaire, cantines scolaires, transferts de kits aux agriculteurs, microcnidits agricoles pour les ruraux, assistance aux refugies et deplaces, etc.). Enfin, pour accroitre la production agricole, Ie Gouvernement a organise I'approvisionnement des paysans en semences et engrais, lance la rehabilitation du systeme d'inrigation de la plaine de I'lmbo, et entrepris la rehabilitation des infrastructures de base. Le Gouvernement souhaite poursuivre ces programmes pendant les prochaines annees afin d'ameliorer Ie niveau de vie des plus pauvres.
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III Les Principales Realisations des DARE II, III et IV
15. Les reformes du Gouvernement refletent sa determination a atteindre les objectifs de developpement du CSLP. Le programme de reformes est articule autour des objectifs suivants: (i) consolider la stabilite macroeeonomique ; (ii) des retonmes structurelles visant a ameliorer Ie systeme de gestion des finances publiques, la politique monetaire et la politique de change; et (iii) renforcer I'efficacite du systeme productif, notamment par la privatisation des entreprises publiques et la restructuration du secteur des exportations (cafe, the, coton). Sur chacun de ces axes, la sarie des DARE, en combinaison avec les programmes des autres bailleurs, a perm is des avancees significatives qu'it convient de rappeler.
16. La mise en ceuvre de retormes globales concernant la gestion des finances publiques a produit des resultats substantlels. Le Parlement a adopte une nouvelle Loi Organique des Finances Publiques et une nouvelle Loi sur les Marches Publics. Ces deux lois integrent les principes modemes de gestion et de transparence et specifient les concepts, principes et responsabilites regissant I'action des agents publics. Un decret sur Ie cadre de preparation budgetaire a ete adopte et est applique. Pour ameliorer la qualite des depenses publiques, une enquete PETS a ete realisee en 2007 et a donne lieu a I'adoption de plans d'actions en 2009; I'introduction d'un CDMT central dans la preparation budgetaire a ete n~alisee ; elle garantit la coherence entre les plans budgetaires et les objectifs du CSLP. Par ailleurs, les comptes extrabudgetaires ont ete elimines et des plafonds d'engagement ont ete fixes (de concert avec les sectoriels) pour venir a bout des arrieres de paiement et tendre vers I'unite de la tresorerie. En complement aces reformes lancees dans Ie cadre de la premiere serie des DARE, une Loi instituant la Taxe sur la Valeur Ajoutee a ete promulguee Ie 17 Fevrier 2009 et I'elimination de toutes les exonerations de fiscalite indirecte a ete decidee et incorporee dans Ie nouveau Code des Impots. Le Gouvernement a acheve Ie recensement des fonctionnaires civils de I'Etat, de la police et des forces armees. La base de donnees mise en place 11 cet elfet est en attente d'actualisation pour que des cartes magnetiques d'identification personnelle soient distribuee~ a tous les fonctionnaires. Entretemps, it y a eu installation d'un logiciel de la paie interface avec Ie SIGEFI. Une Strategie de Gestion des Finances Publiques (SGFP) a ete adoptee en mai 2009 par Ie Conseit des Ministres. Le suivi de sa mise en reuvre - jusqu'en 2012 - est fait regulierement grace a des rapports trimestriels valides par Ie Comite de Pilotage des Retormes des Finances Publiques. Un projet de deeret portant Reglement General de Gestion des Budgets Publics a ete adopte par Ie Conseit des Ministres. Une nouvelle· nomenclature de classification budgetaire et comptable harmonisee avec Ie Plan Comptable de l'Etat de 2008 a ete adoptee par Ordonnance Ministerielle 540/1210 du 10 AoOt 2010. Une convention entre !'Etat et la B.R.B., clarifiant Ie role du caissier de l'Etat, a ete signee en Fevrier 2010. Un projet de decret presidentiel portant sur la Gouvernance Budgetaire est en cours d'elaboration avec I'appui d'un expert du F.M.I. /I traitera notamment des questions relatives aux modalites d'application du prinCipe de legalite des recettes et des depenses, definira les objectifs et la fonmulation des politiques economiques et budgetaires (cad rage macroeconomique, coherence entre politique eeonomique et politique budgetaire, respect des criteres de I'EAC, soutenabitite de la dette, CDMT, et budgets-programmes). II traitera egalement des regles relatives aux Lois de Finances, notamment leur structure et I'amelioration des procedures budgetaires tant au niveau du Gouvernement que du Parlemen!. La mise en reuvre des 19 programmes de la SGFP par des groupes techniques multisectoriels et par la Cellule d'Appui au Cadre de Partenariat est actuellement une realite.
17. Des progres appreciables ont egalement ete realises dans la mise en ceuvre de mesures visant a faciliter les actlvites du secteur prive. Un nouveau Code des Investissements conforme aux meilleures pratiques internationales a ete promulgue en septembre 2008, et devrait contribuer a I'amelioration du climat des alfaires, apres harmonisation avec Ie nouveau Code des ImpCits. Le Conseil des Ministres a adopte des projets de Codes du Commerce et des Societes Privees et Publiques conformes aux normes internationales. Leur formulation a suivi un processus largement participatif. Le decret portant creation du cadre de dialogue public-prive a ete signe par Ie President de la Republique en juin 2008 et Ie Tribunal de Commerce a rMuit de plus de 10% Ie nombre des litiges qui passaient plus de 60 jours en delibere. L'Agence Burundaise de Promotion des Investissements (API) est
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pleinement fonctionnelle depuis 2010. La reforme du secteur financier a egalement progresse par I'adoption d'une strategie de reforme du secteur financier. II s'agit egalement de I'adoption par Ie Parlement d'une nouvelle Loi portant statuts de la Banque Centrale de la Republique du Burundi (BRB.) qui renforce son independance et sa gouvernance. La BRB a en outre mis en ceuvre d'importantes mesures visant a renforcer son systeme de controle interne et de gestion des risques en application des recomrnandations du rapport d'evaluation des clauses de sauvegarde financiere du FMI. Toutes ces actions renforcent les mesures directernent soutenues par les DARE.
18. Des avancees significatives ont ete rI!alisees dans la reforme de la filiere cafe. Apres I'adoption par Ie Conseil des Ministres d'une strategie de desengagement de l'Etat en 2008, un decret presidentiel a mis en place l'Organe de Regulation du Secteur Cafe (ARFIC), lan9ant ainsi Ie processus de cession des actifs de l'Etat dans Ie secteur. Bien avant cela, Ie Gouvernernent avait adopte un nouveau reglernent des ventes qui ouvrait les exportations de cafe aux operateurs locaux et internationaux. L'application de ce reglement s'est traduite par I'entree effective d'exportateurs dans un rnarche devenu cornpetitif et transparent. En plus de la creation de I'ARFIC, Ie DARE III a soutenu : (i) des carnpagnes nationales de sensibilisation sur les avantages de la privatisation des actifs du secteur cafe; (ii) Ie lancement de I'appel d'olfre international pour la vente de ces actifs ; et (iii) I'abrogation de la convention de 50 ans qui liait les SOGESTALS 11 I'OCIBU. La vente a reussi en ce qui concerne 13 stations de lavage qui ont ete reprises par un groupe international repute.
IV Les Detis du DARE V
19. La mise en ceuvre du DARE V progresse parallelement ilia preparation du CSLP 2 qui avance bien. En ce qui concerne les axes strategiques retenus, Ie CSLP 2 completera et approfondira les programmes et activites lances pour atleindre les objectifs du premier CSLP 1. Le processus CSLP 2 a alteint une etape cruciale ou les partenaires et la societe civile examinent au niveau sectoriel la pertinence et Ie realisme des programmes proposes dans Ie plan d'actions prioritaires.
20. Le DARE V completera les reformes lancees par les precedents DARE sans pourtant s'ecarter du programme du Gouvernement. La recherche de synergies est en elfet un critere que Ie Gouvernement va privilegier dans la definition des actions prealables du DARE V. Dans celte optique, Ie CSLP 1 est la premiere reference des politiques auxquelles Ie DARE V contribuera. Les trois priorites operationnelles du CSLP conformes d'ailleurs aux objectifs du Gouvernement sont les suivantes : (i) une gestion transparente et efficace des finances publiques; (ii) I'amelioration du climat des alfaires et Ie developpement du secteur prive ; et (iii) I'expansion des secteurs a haut potentiel de croissance et la diversification des exportations du pays (agriculture et mines).
V Les Actions PrI!alables du DARE V
V.1. Transparence des Systilmes de Gestion des Finances PubJiques
21. Dans ce do maine, trois mesures sont concernees : (i) I'approfondissement progressif des reformes visant a introduire les processus des CDMT et des plans d'engagement dans les procedures de preparation budgetaire ; (ii) la signature d'un decret presidentiel portant Reglement General de Gestion des Budgets Publics (RGBP); et (iii) la publication de la loi portant fixation du budget general du Burundi pour I'exercice 2012.
22. Adoption de la lettre de cadrage du budget general de 2012. Grace a I'extension progressive du processus des CDMT, il sera possible d'utiliser un CDMT central 2012·2014 pour la preparation de la leltre de cadrage du projet de Loi de Finances 2012. La mise au point du mecanisme des CDMT centraux et I'extension progressive des CDMT sectoriels a un plus grand nombre de secteurs permeltront I'utilisation systematique du processus dans la planification des depenses. Un CDMT central pour 2012·2014 a deja servi de base pour la preparation de la letlre de cadrage du projet de Loi de Finances 2012 et pour la fixation des plafonds de depense des dilferents ministeres et institutions.
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23. Signature d'un decret presidentiel portant Reglement General de Gestion des Budgets Publics (RGBP)
Nouvelle « constitution financiere » du Burundi, la loi organique sur les finances publiques (LOFP) promulguee en decembre 2008 prevoit I'adoption d'un certain nombre de textes d'application. Le Raglement General de Gestion des Budgets Publics est Ie principal texte d'application de la LOFP dont il developpe les principales dispositions. II s'applique au budget de l'Etat et a celui des etablissements publics. Ce projet de decret a ete analyse et approuve par Ie Conseil des Ministres et iI a ete signe par Ie President de la Republique.
Les travaux de preparation d'un decret sur la gouvernance budgetaire, d'une ordonnance sur les contr61eurs des engagements de depenses et d'une ordonnance sur les ragies ont egalement ete engages.
24. Publication de la loi portant fIXation du budget general du Burundi pour I'exercice 2011. Pour plus de transparence, la loi des Finances 2011 , elaboree sur la base du CDMT adopte en decembre 2010, a ete publiee sur Ie Site Web du Ministere des Finances (www.tinances.gov.bi). Dela meme fayon, I'execution de ce budget pour Ie premier et Ie second trimestre a ete publiee sur Ie meme site.
V.2.Amelioration du Climat des Affaires et Deve/oppement du, Secteur Prive
25. Dans ce domaine, cinq mesures sont concernees: (i) la revision des tarifs d'electricite; (ii) un plan d'actions pour la restructuration eUou la privatisation d'entreprises publiques ; (iii) la mise sur pied d'une commission chargee de la preparation du lancement d'appel d'offres pour la privatisation des stations de lavage du cafe qui restent dans Ie domaine public; (iv) I'adoption d'un projet de loi portant creation des groupements pre·cooperatifs ; et (v) des mesures visant a attenuer les effets de la crise sur les plus pauvres.
26. La revision des tarifs d'electricite vient completer la grande campagne d'installation des compteurs avec prepaiement. Dans Ie cadre d'une reforme visant a ameliorer la performance technique de REGIDESO et II retablir la viabilite financiEi re de I'entreprise, une etude sur les tarifs d'electricite, combinee avec I'analyse de I'impact sur la pauvrete d'une eventuelle reforme tarifaire, a servi de base pour une revision du niveau et de la structure de ces tarifs, dans Ie cadre d'un vaste programme de rehabilitation operationnelle et de redressement financier de la REGIDESO. Sur Ie terrain, une campagne de sensibilisation nationale s'avere necessaire pour garantir I'adhesion de la societe civile et de la population a la reforme,
27. Adoption d'un projet de plan d'actions pour la 'restructuration ou la privatisation des entreprises publiques. Les audits des huil entreprises publiques ont ete publies et ont servi de base pour I'elaboration d'un plan d'actions et d'un calendrier pour la privatisation ou la restructuration de ces entreprises. Ce plan I calendrier sera adopte par Ie Conseil des Ministres et accompagne par un expose des motifs. Le Gouvernement lancera une strategie de communication destinee a sensibiliser I'opinion publique en expliquant les nombreux avantages qui justifient un tel programme.
28, Mise en place d'une Commission chargee du Ian cement de I'appel d'offres pour les stations de lavage du cafe qui demeurent dans Ie domaine public. La reprise de 13 stations de lavage par un groupe international repute et Ie retablissement progressif d'un climat d'investissement plus favorable permellent d'esperer que la plupart des stations qui sont encore dans Ie domaine public interesseront des investisseurs prives. Le Gouvernement a donc I'intention ferme de relancer Ie processus. Le Comite Interministenel de la Privatisation sera donc charge de lancer des appels d'offres pour la vente des 104 stations qui demeurent dans Ie domaine public. Pour ce faire, Ie DAO doit etre revise en tenant compte des le90ns de la premiere phase de privatisation et des resultats de la campagne de communication. Un volet important de celie campagne sera I'explication du traitement de la part reservataire.
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29. Un projet de loi sur les pre-cooperatives. Le secteur agricole emploie 90% des Burundais et c'est 97% des pauvres qui vivent en zones rurales. Le Gouvernement accorde donc une haute priorite au developpement du secteur, qui repose non seulement sur la promotion du cafe et autres cultures de rente, mais encore sur I'expansion et la diversification des cultures vivrieres et sur I'amelioration de la productivite. Le Gouvernement eslime que les associations de producteurs peuvent jouer un r61e capital dans ce processus. II compte donc prendre les mesures necessaires pour promouvoir et encadrer ces associations. L'une de ces mesures est la definition du cadre juridique dans lequel operent les cooperatives. Le Conseil des Ministres adoptera donc un projet de loi sur Ie statut et Ie fonctionnement des cooperatives.
30. Mesures visant it aUenuer les eftels de la crise sur les plus pauvres. Sous I'effet combine de la crise de I'energie et des denrees alimentaires, Ie Gouvernement a pris des mesures a court terme pour soulager les plus pauvres en exonerant les droits d'accises sur Ie petrole lampant et sur Ie diesel que .les cam ions utilisent pour transporter les produits alimentaires. L'impact de cette mesure est estime a une perte de recettes budgetaires de plus ou moins 8 milliards. De meme, Ie Gouvernement a continue de financer Ie programme de canlines scolaires, en partenarial avec Ie PAM, et d'assister les populations pauvres par la distribution de vivres aux plus demunis par l'intermediaire du Ministere charge de la Solidarite Nationale.
VI Conclusion
31. Telles sont done quelques unes des mesures qui dominent I'action du Gouvernement au cours de cette annee 2011 . Ce programme, qui a ete discute avec les experts de la Banque Mondiale, sera suivi de fayon rigoureuse par les autorites. Pour renforcer sa collaboration avec la Banque Mondiale et faciliter les echanges ae vues entre les deux parties, Ie Gouvernement s'engage a fournir dans les delais prevus les informations suivantes :
• Un tableau sur I'execution du budget 2010 (classification administrative et economique), taus les trimestres.
• Un tableau comparant I'execution des budgets 2009 et 2010 des secteurs prioritaires (sante, education, agriculture, infrastructures, protection social e) et des depenses pro-pauvres (selon la methodologie revisee en 2008), taus les trimestres.
• Le total des depenses sans engagement prealable en 2009, 2010 et 2011 , taus les trimestres. • Le total des depenses sur comptes hors budget (sauf Ie Fonds National Routier) en 2009, 2010 et
2011. • Pendant I'execution du programme, un tableau comportant : a} les delais moyens, maximaux et
minimaux entre: (i) I'engagement juridique ; (ii) I'engagement comptable ; (iii) la reception des factures; (iv) la liquidation; (v) I'ordre de paiement; et (vi) Ie paiement par Ie ministere des Finances; et b) Ie montant total des arrieres par Ministere (toute facture non payee 60 jours apres I'echeance), taus les trimestres. .
• Une evaluation des arrieres de paiement du Gouvernement a ta REGIDESO, taus les trimestres.
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REPUBLIC OF BURUNDI Bujumbura, November 10, 2011
MINISTRY OF FINANCE
AND ECONOMIC DEVELOPMENT PLANNING
OFFICE OF THE MINISTER
Reference: 540/2582/2011 TO: MR.ROBERT ZOELLICK
President of the World Bank
1818 H Street NW
Washington DC 20433
Subject: Development Policy Letter
for the Fifth Economic Reform Support Grant (ERSG V)
Mr. President
We are honored to send you the Letter of Development Policy (LDP) agreed by the Burundi and
the International Development Association (IDA) in the context of a new budget support
program involving a fifth economic reform support grant (ERSG V).
The Government of Burundi implemented successfully its 2010-2011 program supported by the
fourth economic reform support grant (ERSG IV). During that period significant progress was
made towards more transparent and efficient public finance management, improvement in the
business climate to stimulate private sector development, expansion of sectors with high growth
potential and diversification of exports, notably in the agricultural and mining sectors.
On the political side, the institutions established following the 2010 elections work hard to
promote social peace over the totality of the country’s territory. A permanent dialogue
framework for political parties has been created to enable the parties to discuss political and
other issues concerning the life of the country. In 2011, the government took a number of
important initiatives to promote political stability, including the creation of national human rights
and transitional justice institutions. A draft bill on the organization of the political opposition
parties has been approved by the Council of Ministers and submitted to the Parliament. On
February 11, 2011 the Ombudsman’s office started its operation officially (the law concerning
the creation and operation of the Ombudsman was promulgated on January 26, 2010). The
government will pursue ongoing efforts to ensure a sound implementation of the democratic
system, improve governance and promote political and social dialogue.
The main priorities of the government remain the consolidation of the results already obtained
during the first PRSP and implementation of the second PRSP (which is being finalized). This
second PRSP, which will put the country’s economy on a growth path, will give priority to the
61
following strategic objectives: (i) strengthen the rule of law, support good governance and
promote gender equality; (ii) transform Burundi’s economy to achieve sustained growth and
create jobs, notably through investment in the electric power system; (iii) improve access to, and
the quality of, basic services to strengthen national solidarity; and (iv) good management of
available space and environment in support of sustainable development.
Nevertheless promoting a strong and shared growth is a major challenge and the recent electric
power crisis did worsen the country’s economic situation. Mobilizing large sources of financing
is essential to achieve success.
In this context, the Government of Burundi requests the support of IDA to facilitate
implementation of its economic reform program for the July 1, 2011/June 30 2012 period
through an ERSG V grant amounting to DTS22.1 million, equivalent to US$35 millions.
The main priorities of ERSG V are: transparent and efficient public finance management,
improving the business climate and promoting private sector development.
This Letter of Development Policy also outlines the medium-term economic reform strategy
which the government is committed to implement during the grant period and beyond, in order to
intensify measures aimed at reducing poverty in cooperation with the other development partners
of Burundi.
The policies and measures described in the Letter of Development Policy will consolidate efforts
already made to strengthen public finance management and improve the business climate, in
order to accelerate economic growth and make future progress irreversible.
Nevertheless, the government is ready to adopt additional measures that IDA would find
necessary to ensure the success of the program.
Finally, to better monitor results achieved in implementing the policies and measures included in
the program, the government will respond positively to IDA’s enquiries and will provide the data
requested.
The Government of Burundi expresses the wish that the Letter of Development Policy and the
corresponding Program Document should be published. It therefore authorizes their publication
on the World Bank website when these documents have been submitted to the Board of
Executive Directors. The Government of Burundi will do the same on its own website.
With the expression of our high consideration
The Minister of Finance and Economic Development Planning
Clotilde Nizigama
[signature]
62
Burundi – Letter of Development Policy - Translation
REPUBLIC OF BURUNDI
ECONOMIC REFORM SUPPORT GRANT (ERSG V)
LETTER OF DEVELOPMENT POLICY
October 2011
I. Introduction
1. The government requests IDA support to complete the financing of its economic policy
program for 2011. The government plans to continue ongoing efforts – initiated in the context
of the first PRSP – to strengthen Burundi’s economic performance. The main objectives of the
program are as follows: (i) keep the rate of inflation below 10 percent; (ii) improve the structure
of public expenditures by increasing the share of priority sectors while protecting the viability of
the country’s budget; (iii) improve governance and strengthen public finance management; and
(iv) strengthen internal control mechanisms within the central bank. A careful use of these
various economic policy instruments will further stabilize the country’s macroeconomic position,
a pre-condition for the success of overall structural reforms and also more specific reforms
geared towards private sector development, reforms which the government will intensify in 2011
to accelerate economic growth and poverty reduction.
2. The 2011 fiscal year also is for Burundi the year during which the government will prepare a
second PRSP, that will help implement the ―2025 vision‖, a long-term planning instrument that
will dominate future sustainable development policies and strategies aimed at meeting the needs
of present generations, without compromising the prospects of future generations. In 2010,
increases in international prices of food and energy created budgetary and financial management
problems that affected implementation of the country’s economic development program. With
the help of its partners, the government initiated well targeted safety net programs aimed at
mitigating the impact of the crisis on the most vulnerable groups. According to the report
evaluating the performance of the first PRSP, Burundi’s economy has been increasingly capable
of resisting external shocks, thus protecting progress made since 2007 in the four main economic
and social sectors of the program. Now the government wants to build up on the economic and
social achievements of the first PRSP and embark on programs that will radically change the
country’s economic situation and the people’s mindset thus leading to a 4.9 percent growth rate
in 2012. The rate of growth could increase further to 6 percent, provided the country’s partners
increase their assistance in key energy and infrastructure sectors and security is maintained over
the totality of the country’s territory. Implementation of the second PRSP (which is being
finalized) will put the country on a path of strong and shared growth by giving priority to the
four following strategic objectives: (i) strengthening the rule of law, improving governance and
promoting gender equality; (ii) transforming the country’s economic situation and promoting
sustained growth and employment; (iii) improving access to and the quality of basic services in
support of national solidarity; and (iv) managing space and environment for sustained
development.
3. A food and energy crisis started in 2010 threatens again fiscal equilibrium. Based on the
successful management of the 2008 crisis, the government estimates at 22 billion Burundi francs
the funds required to mitigate the negative impact of the new crisis on the effectiveness of
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structural reforms, overall economic growth and also living conditions in rural areas which
include 90 percent of the country’s population. To avoid compromising the success of programs
initiated in 2009 to restore fiscal equilibrium, government efforts need to be massively supported
to fight adequately the negative impact of the crisis, which is already visible notably on the
external position of the country.34
Despite a massive increase in the financing gap created by these two exogenous shocks, the
government remains determined to consolidate results already achieved with a view to: (i)
promoting transparency in public finance management; (ii) improving the business climate and
promoting private sector development; and (iii) stabilizing the safety net programs initiated
during the 2007 crisis, and reducing taxes on food and fuel used and consumed by the poorest
households.
4. The government recognizes that engineering medium-term economic growth is a major
challenge. Despite progress achieved in implementing the first PRSP, many challenges remain
and much more needs to be done. The second PRSP identifies four main challenges: (i)
intensifying cultivation systems, (i) efficient public spending, (iii) private sector development
and (iv) energy.
(i) Intensifying cultivation systems
More intensive cultivation systems are essential to ensure food security, despite high population
growth rates, and reduce poverty in rural areas. The growth of food crop production since 2006
was very modest. The challenge for the future is to diversify output, to promote the development
of high quality products, to give a new impetus to agricultural research and extension services, to
promote the use of agricultural inputs, to improve irrigation systems and to allocate more
resources to the agricultural sector.
(ii) Efficient public spending
Public spending, which accounted for 45 percent of GDP in 2010, has been unable to stimulate
economic activity and reduce monetary poverty. The low share of capital expenditures, the high
priority accorded to security and social sector services, inefficient public finance management
and unpredictability of donor funding contributed to the poor performance of public spending.
Public spending will stimulate economic growth and reduce poverty provided public
expenditures planning, execution, monitoring and evaluation is strengthened, in cooperation with
donors. Achieving this objective will require efficient planning instruments (sector strategies,
MTEFs, logical framework), and a reliable statistical system.
(iii) Private sector development
Burundi’s economic performance, which so far largely relied on public sector spending and
activity, now needs a strong and dynamic private sector, capable of stimulating sustained growth.
Private sector development will depend on substantial improvements in the business climate.
34
The most obvious consequences of the crisis are: a) increased cost of petroleum imports and higher food prices; b)
slower economic growth; and c) increased public expenditures, notably pro-poor public spending.
64
This means removing a number of constraints including the lack of infrastructure, inadequate
access to financing, rigid regulations, cumbersome procedures and the lack of advisory and
support services.
(iv) Energy
Inadequate energy supply and an electric power generation system which does not meet the
demand and is highly unreliable are major constraints that slow down foreign investment,
industrial development and the growth of the service sector. Increased and improved energy
production is essential for the success of the second PRSP. To that end the country needs to
mobilize huge financial resources from the government, donors and private investors.
5. A massive, well coordinated inflow of donor assistance is necessary to improve the
efficiency of the government program. Burundi will need an adequate policy framework which
will serve as a reference for future donor programs. The new aid policies that will be adopted
within the next few weeks have already been approved by the country’s technical and financial
partners. They are contributing to the elaboration of the second PRSP through their participation
in technical workshops and sector groups in the context of the Partners Coordination Group. The
present development policy letter, which describes the reform program for which IDA assistance
is requested, is in line with the agreed policy framework. It also identifies performance indicators
that will facilitate an evaluation of the program’s implementation. To make the process more
efficient, the government involved all the actors in the design of reform measures whose
implementation will be systematically reported.
II. Recent developments and policy reform program
6. Despite the negative impact of recent crises, the country’s economic performance will not
change significantly over the next few years. The rate of growth of GDP reached 4.2 percent in
2006-2009. This is less than the 7 percent objective of the first PRSP, which would have enabled
the country to reach some of its MDG goals. However, Burundi’s economy should recover since
it has become more capable of absorbing the shocks that affected the country’s performance over
the past few years. The rate of growth of GDP was 4.5 percent in 2008 despite severe food and
energy crises. In 2009, the delayed impact of 2008 developments and the new world economic
and financial crisis led to a decline in the GDP growth rate to 3.5 percent. However, the
combined impact of structural reforms in support of private sector development, the operation of
Burundi’s Revenue Authority and budget support provided by donors led to a 3.8 percent growth
rate in 2010. The government is confident that it will be able to keep the momentum and increase
economic growth to 4.2 percent in 2011 and at least 4.9 percent in 2012.
7. To achieve that ambitious objective, the government will take advantage of all available
economic opportunities. In this context, a strong and sustainable economic growth rate, capable
of reducing poverty, will require persistent efforts to address the challenges that have been
identified in sectoral strategies and are clearly articulated in the second PRSP (under
preparation). In the context of the preceding series of ERSGs, and with the support of other
donors, notably the European Union and a number of bilateral donors, the government launched
important reforms that paved the ground for: (i) significant improvements in the business
65
climate, governance and financial transparency; (ii) innovations and massive investment in high
growth sectors and human resource development; (iii) improvements in economic infrastructure,
notably energy; and (iv) increased agricultural production and productivity, and job creation
through economic diversification and improved access to markets. The same policy framework
will continue to dominate the selection of concrete measures that will help achieve the objectives
described in paragraph 1.
8. The government recognizes that stimulating growth will require vigorous efforts to
promote the development of industry and services. The agricultural sector, which accounts for
about 46 percent of GDP, will continue to play a major role in the growth of industry (an average
of 17 percent of GDP in 2004-2009) and the service sector (an average of 37 percent of GDP),
notably trade and other commercial services. The dominant role of agricultural production is due
to the strong contribution of the sector to export earnings (more than 60 percent in 2006-2009)
and to the fact that agriculture employs more than 90 percent of the country’s labor force. To
trigger economic changes capable of creating jobs, and generating income and tax revenue, it is
essential to promote aggressively the industrial and service sectors, thus increasing their share of
GDP, and to expand private sector activity. The government – in cooperation with its partners –
has organized its 2011 reform program around two major strategic objectives: (1) improving the
business climate and promoting private sector development; and (2) improving the transparency
of its public finance management. To ensure timely implementation of its reform program, the
government will initiate measures aimed at mitigating the impact of the ongoing food and energy
crisis, whose cost will be financed by donors.
9. The government will intensify measures aimed at making the private sector the main
engine of economic growth and social development. In 2010, the government allocated more
public resources to the agricultural sector in order to increase productivity and improve food
security. New investments in agriculture were implemented to mitigate the impact of cyclical
fluctuations (notably in the coffee sector), climate change, varietal degradation, and lack of high
quality seeds and other inputs. In addition, the government signaled its intention to improve the
country’s ranking in the Doing Business Indicator for 2012. Thanks to the creation of an ad hoc
Decision Committee, significant progress has been achieved in terms of reduction in the time
required to obtain construction permits, execute property transfers and create new enterprises.
Improving the financial viability of REGIDESO, launching the second phase of the sale of coffee
washing stations, and restructuring public enterprises also are among the priority measures that
the government will implement in the context of the ERSG IV and V programmatic series. In
each of these areas progress has already been made in terms of enlisting more than 25 percent of
REGIDESO customers in pre-payment mechanisms, evaluating the first phase of the sale of
washing stations, and approval by the Council of Ministers and submission to the Parliament of a
revised bill on the privatization of public enterprises.
10. Restoring peace and security also is an area in which progress was made in 2010. An
important result is the conversion of the last rebel movement into a political party. The 2010
electoral process – that re-elected President Pierre Nkurunziza – consolidated the democratic rule
as the only acceptable method to settle political and social disputes. Despite the cost of these
elections – supported by the country’s partners – the government continued to implement its
reform program and was able to control inflationary pressures linked with a variety of electoral
66
promises. To consolidate the political reconstruction process, which is essential to promote
strong and sustainable economic growth, the government, in 2011, created a Forum of political
parties aimed at stimulating a continuous dialogue on issues related to the population’s welfare.
Other useful measures were also taken in 2011 to stabilize the political situation, including the
creation of national institutions aimed at protecting human rights and the introduction of a
―transitional justice system‖. February 11, 2011 was the date at which the Ombudsman officially
started its activity (the law creating the position of Ombudsman and defining his role was
promulgated on January 25, 2010). In brief, the government plans to pursue ongoing efforts to
support the democratic process, improve governance and promote an effective economic and
social dialogue.
11. In this peaceful environment, Burundi was able to reduce the rate of inflation below 10
percent (6.4 percent in 2010).35
Higher petroleum prices should increase the price of imports
through its impact on transport costs. The combined effect of higher cost of imports and
measures taken by the government (to contain the growth of money supply, increase food
production and improve its marketing and distribution) should lead to an 8.4 percent increase in
prices paid by Burundian households (from 2008 to 2010). The rate of inflation that reached 26
percent in 2008, declined to 4.6 percent in 2009 and 6.5 percent in 2010. However, the increase
in the price of petroleum and energy should lead to an increase in the rate of inflation to 10.4
percent in 2011. The government is determined to keep the rate of inflation below 10 percent
through the use of appropriate instruments and implementation of policies designed in agreement
with the International Monetary Fund (IMF) within the framework of the Extended Credit
Facility. To monitor progress towards that objective, the government will use the consumer price
index, which ISTEEBU calculates on the basis of a basket of consumer goods sold on
Bujumbura’s central market. Conscious that the CPI index is inadequate, the government will
make additional efforts to mobilize help from its partners in order to carry out a household
consumption survey in 2012 to update the basket of goods used by ISTEEBU.
12. Since 2009, the budget deficit (on cash basis) declined to 4.3 percent of GDP in 2010 and
has been kept at a level close to the government target. The decline in the deficit is due to
good public expenditure management – which gives priority to more efficient pro-poor
expenditures – to the operation of Burundi’s Revenue Authority (at 19.8 percent of GDP, its
revenue surpassed 2010 forecasts), to improved coordination of budget and monetary policies
(through periodic preparation of cash management plans consistent with commitment plans), and
through more rational government accounting (closure of last off-budget accounts by the end of
December 2010). In addition, the government keeps increasing poverty alleviation expenditures,
in line with PRSP and MDG objectives. Pro-poor expenditures should have gone up from 12.3
percent of GDP in 2009 to more than 14 percent in 2010. Considering the size of additional
resources (about Fbu 22 billion) that should be mobilized to fight the energy and food crisis, the
government will look for additional savings and increased efficiency by freezing recruitment,
remunerating health personnel on a contractual basis (to improve the quality of health services),
reducing to virtually zero the fleet of government vehicles, and rationalizing the use of defense
and security personnel, to create budget and fiscal space.
35
This is the average monthly rate of increase of consumer prices from 2009 to 2010.
67
13. The most recent IMF review concluded that the 2011 budget was in line with agreed
macroeconomic objectives. The macroeconomic framework has been revised to take into
account the impact of the food and energy crisis on public expenditures and on Burundi’s public
finance and external position. To accelerate progress towards the MDGs, the government further
improved the structure of public expenditures, including an increase by Fbu 15 billion in pro-
poor expenditures, and reduced substantially taxes on kerosene and gasoil. These measures will
cushion the negative impact of the crisis on poor households. Growth-oriented public spending
has not been affected. Additional funds have been allocated to agriculture (modern and other
irrigation schemes, distribution of cattle, and supply of quality seeds) and energy (a 10.4 MW
hydroelectric plant). In addition, the country’s external position should improve thanks to export
liberalization and diversification measures. In 2011, the government will privatize the 104
remaining coffee washing stations and this should generate additional export receipts before the
end of 2011. However, higher prices of food and energy will increase the cost of imports, thus
reducing the expected improvement in the external position. Expanding the coffee sector
privatization process will induce new investments including the rehabilitation of existing
plantations which will gradually stop the decline and the cyclical variations in coffee output. The
government will continue to support the coffee and tea sectors as follows: (i) support to producer
associations; (ii) investments in irrigation and agricultural inputs; and (iii) improving the
privatization law in line with the best international practices.
14. The safety net will be maintained despite financial constraints resulting from the
international crisis. Since 2008, the government took a number of measures aimed at helping
the most vulnerable groups and protecting them against the negative impact of recent crises. In
addition to temporary, well- targeted tariff reductions on imports of food and petroleum products
consumed by poor households, social safety net measures have been adopted (food supplements,
emergency food security assistance, school feeding programs, distribution of kits to farmers,
micro-credits for rural population, assistance to refugees and displaced persons, etc.). To increase
agricultural production, the government distributed seeds and fertilizers to farmers, initiated the
rehabilitation of the Imbo plain irrigation system, and rehabilitated basic infrastructure facilities.
To help the poor, the government will continue to implement these programs over the next few
years.
III. Main Achievements of ERSG II, III and IV
15. The reforms undertaken by the government show its determination to achieve the
development objectives of the PRSP. The reform program is structured around the following
objectives: (i) strengthening the macroeconomic stabilization process; (ii) structural reforms
aimed at improving public finance management and monetary and exchange rate policies; and
(iii) increasing efficiency and productivity notably through privatization of public enterprises and
restructuring of the export sector (coffee, tea and cotton). In each of these areas, the ERSG series
– together with programs supported by other donors – led to significant progress that should be
highlighted.
16. Implementation of overall public finance management reforms produced substantial
results. The Parliament adopted a new Organic Public Finance Law and a new Public
Procurement Code. These two laws integrate modern public finance management systems and
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define clearly concepts, principles and responsibilities applicable to government agents. A decree
regulating the budget preparation process has been issued and is in force. To improve the quality
of public expenditures, a Public Expenditure Tracking Survey (PETS) was carried out in 2007
and led to the definition of action plans in 2009. Introducing the central MTEF system in the
budget preparation process ensures the coherence of budget plans with PRSP objectives. Off-
budget accounts have been closed and commitment ceilings have been defined (in cooperation
with sector ministries) to eliminate arrears and unify cash accounting. In addition to reforms
initiated in the context of the first ERSG series, a law creating the added value tax was
promulgated on February 17, 2009 and all indirect tax exemptions have been eliminated (a
provision included in the new tax code). The government completed a census of civil service
staff, including police and defense personnel. The data base established in this context will soon
be updated thus allowing for the distribution of digital ID cards to all the civil servants. Payroll
software has been interfaced with SIGEFI. In May 2008 the Council of Ministers adopted a
Public Finance Management Strategy. Its implementation until 2012 is monitored through
quarterly reports validated by the Steering Committee for Public Finance reforms. A draft decree
regulating budget management has been approved by the Council of Ministers. A new budget
and accounting classification consistent with the State Accounting Plan of 2008 has been
adopted under Ministerial ordnance 540/1210 of August 10, 2010. A convention between the
government and the central bank that clarifies the functions of the BRB as the government
cashier was signed in February 2010. A draft presidential decree on budget governance is being
prepared with the help of an IMF expert. It will address a variety of budget issues, including
implementation of the principle of legality of revenue and expenditures, the definition of
economic and budget policy objectives (macroeconomic framework, budget policies consistent
with macroeconomic objectives, implementation of EAC convergence criteria, debt
sustainability, MTEFs and program-budgets). The decree will also address rules governing
Budget Laws, notably their structure and ways and means of improving government and
Parliament budget procedures. The 19 programs included in the Public Finance Management
Strategy are effectively implemented with the help of multi-sector technical groups and the
Partnership Framework Support Unit.
17. Implementation of measures aimed at stimulating private sector activity has also made
significant progress. A new Investment Code in line with the best international practices was
promulgated in September 2008. It should help improve the business climate, when the
provisions of the Investment and Tax Codes have been harmonized. The Council of Ministers
adopted a draft Commerce Code and a draft Code on public and private companies that are
consistent with international norms and were prepared on the basis of a participative process. A
decree creating the Public/Private Dialogue Framework was signed by the President in June 2008
and the Tribunal of Commerce reduced by more than 10 percent the number of cases that have
not been adjudicated within 60 days. The Investment Promotion Agency has been operating
since 2010. The financial sector reform has progressed with the adoption of a financial sector
reform strategy. The Parliament has adopted new statutes for the central bank, which strengthen
the Bank’s independence and governance. The central bank also adopted important measures
aimed at improving its internal control mechanisms and risk management systems in line with
the recommendations of the IMF report on financial safeguards. All these actions increase the
effectiveness of measures supported by the ERSG series.
69
18. Significant progress has also been made towards reforming the coffee sector. In 2008,
the adoption by the Council of Ministers of a coffee sector disengagement strategy was followed
by a presidential decree creating the Coffee Sector Regulation Agency and launching the
privatization process. Earlier, the government had adopted new regulations opening coffee
exports to local and international operators. Implementation of the new regulations induced new
operators to enter a market that was becoming more transparent and more competitive. In
addition to the creation of the regulation agency, ERSG III supported: (i) national
communication campaigns aimed at showing the merits of the coffee sector privatization
process; (ii) the international bidding procedure for the sale of government assets in the coffee
sector; and (iii) cancellation of the convention between SOGESTALs and OCIBU. The result of
the procedure was the sale of 13 washing stations to a reputable international group.
IV. The ERSG V challenges
19. Implementation of ERSG V coincides with the preparation of the second PRSP, which
is making progress. The second PRSP has selected strategic priorities that will deepen and
supplement programs and activities aimed at achieving the goals of the first PRSP. Preparation
of the second PRSP has reached an important stage, when government partners and the civil
society review the relevance and feasibility of sector programs proposed in the priority action
plan.
20. The ERSG V is in line with the government program and will complete the reforms
launched during the previous ERSGs. Creating a synergy is one of the criteria that will inspire
the selection of the ERSG V prior actions. The first PRSP provides the reference for the policy
framework which ERSG V will support. Three main operational priorities – consistent with the
government program – will emerge: (i) transparent and efficient management of public finances;
(ii) improving the business climate and stimulating private sector development; and (iii)
promoting sectors with high growth potential and diversifying exports (in agriculture and
mining).
V. The Prior Actions of ERSG V
V.1. Transparent Public Finance Management Systems
21.In this area three measures are particularly relevant: (i) expanding and deepening ongoing
reforms aimed at introducing the MTEF and commitment plan processes in budget preparation;
(ii) signing a presidential decree for overall budget regulation; and (iii) publishing the budget law
for 2011.
22. Adoption of the framework letter (lettre de cadrage) for the 2012 budget. Thanks to a
gradual extension of the MTEF process, a central MTEF for 2012-2014 will be used to help
prepare the lettre de cadrage for the 2012 budget. Completing the central MTEF process and
extending sector MTEFs to more sectors will enable the government to use systematically these
instruments in planning public expenditures. A 2012-2014 Central MTEF was used to prepare
the lettre de cadrage for the 2012 budget law and for determining commitment ceilings for
ministries and other institutions.
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23. Signing of presidential decree on Overall Budget Management Regulation. The Organic
Public Finance Law, which is the ―financial constitution‖ of Burundi and was promulgated in
December 2008, provides for the adoption of a number of implementation documents. The
Overall Budget Management Regulation, which provides a detailed definition of its principles, is
the main implementation document for the Organic Law. It is applicable to the budget of the
government and of other government institutions. The draft decree has been analyzed and
approved by the Council of Ministers and will soon be signed by the President for effective
implementation. A decree on budget governance, an ordinance on commitment controllers
(contrôleurs des dépenses engagées) and an ordinance on government agencies are also under
preparation.
24. Publication of the 2011 budget law. The 2011 budget law – prepared on the basis of the
MTEF – was approved in December 2010 and, for more transparency, was published on the web
site of the Ministry of Finance and Economic Development Planning (www.finances.gov.bi).
Budget execution reports for the first and second quarters have also been published on the same
web site.
V.2. Improving the business climate and promoting private sector development
25. Five measures have been taken to that end: (i) revision of electricity tariffs; (ii) an action
plan for restructuring and/or privatizing public enterprises; (iii) Appointment of a Commission
by Ministerial Ordinance to prepare the launching the bidding procedure for the privatization of
the coffee washing stations that remain in the public sector; (iv) adoption of a draft law on the
creation of pre-cooperative movements; and (v) mitigating the impact of the crisis on the poorest
groups.
26. The revision of electricity tariffs follows a vast campaign for the installation of pre-
payment meters. A reform aimed at improving the technical performance of REGIDESO and
restoring its financial viability, provided for a study of electricity tariffs combined with an
analysis of the impact of the tariff reform on the poor. The study served as a basis for revising
the level and the structure of electricity tariff. A national campaign is necessary to mobilize the
support of the population and the civil society.
27. Adopting an action plan for restructuring or privatizing public enterprises. Audits of
eight public enterprises have been published and served as a basis for preparing an action plan
and timetable for restructuring/privatizing these enterprises. The action plan and the timetable,
together with the rationale for the measure (exposé des motifs), will be approved by the Council
of Ministers. The government will launch a communication strategy aimed at explaining the
merits of the program.
28. Appointment by Ministerial Ordinance of a Commission in charge of preparing the
launching the bidding procedure for the coffee washing stations that remain in the public
sector. Thanks to the purchase of 13 washing stations by a reputable international group and the
gradual restoration of a more favorable business climate, the government hopes that most of the
washing stations that remain in the public sector will be viewed as attractive by private investors.
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Consequently, the government plans to launch again the bidding procedure. The Inter-ministerial
Privatization Committee will be responsible for launching the bidding procedure for the 104
stations in the public sector. Bidding documents must be revised taking into account the lessons
of the first phase and of the new communication campaign. An important theme of the campaign
will be explanations about the part réservataire (shares of the washing stations reserved for
producers’ associations).
29. A draft law on pre-cooperatives. The agricultural sector employs 90 percent of the
Burundian population and 97 percent of the poor live in rural areas. The government, therefore,
gives a high priority to the development of that sector, i.e. not only coffee and other export crops,
but also expansion and diversification of food crops and improved productivity. The government
believes that producers’ associations can play a crucial role in this area. It plans to take
appropriate measures to promote and guide these associations. One of these measures is the
definition of the legal framework within which cooperatives will operate. The Council of
Ministers will adopt a draft law on the statutes and operations of the cooperatives.
30. Mitigating the impact of the crisis on the poor. Because of the combined impact of the
food and energy crisis, the government took a number of short-term relief measures for the
poorest people: tax exemption for kerosene and gasoil used by trucks to transport food crops.
The cost of the measure (in terms of lost revenue) is estimated at more than 8 billion. The
government also continued to support school feeding programs in partnership with WFP and to
distribute food to the poor through the Ministry responsible for National Solidarity.
VI. Conclusion
31. These are some of the measures that will dominate the government program during 2011.
This program was discussed with World Bank staff and will be closely monitored by the
government. To strengthen its cooperation with the World Bank and facilitate exchange of views
between the parties, the government will provide, on a timely basis, the following information:
2010 budget execution tables (administrative and economic classification) on a quarterly
basis.
A table comparing budget execution of priority sectors (health, education, agriculture,
infrastructure, and social protection) and pro-poor expenditures (based on the revised
2008 methodology) also on a quarterly basis.
The total of payments made outside prior commitment (paiements sans ordonnancement
préalables) in 2009, 2010 and 2011, every quarter.
The total of payments on off-budget accounts (except the National Road Fund) in 2009,
2010 and 2011.
During program execution, a table indicating: a) average, maximal and minimum time
elapsed between: (i) legal commitment; (ii) accounting commitment; (iii) reception of
bills; (iv) liquidation; (v) payment order; and (vi) payment by the Ministry; and b) total
amount of arrears by Ministry (any bill that has not been paid within 60 days following
the due date), every quarter.
An estimate of government arrears on payments to REGIDESO every quarter.
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Annex 6: Burundi ERSG V – Targeting Performance of Electricity Subsidies in Burundi
Rationale for and against Residential Electricity Consumption Subsidies
In a Sub-Saharan African context, it is tempting to subsidize electricity services. As the
population is overwhelmingly poor (68 percent), the need to make service affordable appears to
be paramount. Electricity is more and more considered as a basic necessity, it has important
benefits for education and health outcomes, and it contributes to productivity and thereby
economic growth. Yet for many households the cost of a standard electricity bill is high since
electricity often represents from three to five percent of the total consumption of households
connected to the network, and sometimes more. Since in many cases sixty percent of a
household’s budget must be devoted to food to cover nutritional needs, this makes it difficult for
households connected to the grid to pay for electricity without sacrificing other basic necessities.
The desire to make electricity affordable combined to high levels of poverty has led many
governments and regulatory agencies to maintain tariffs at an artificially low level. The tariffs
have often not followed the general increase in the cost of living, nor have they factored in the
recent increases in oil prices. As a result, most utilities are not able today to properly maintain
their network, yet alone expending it. At the same time, increasing tariffs is politically difficult
for governments and regulatory agencies. First, such increases in tariffs would be highly visible
for electricity customers who will feel it right away (especially as bills are paid only once a
month, for relatively large amounts for the poor), while they may not know much about the cost
structures of their utilities and the need for such tariffs increases. In addition, such increases in
tariffs affect urban populations disproportionately, but these are the populations that (at least in
some countries) are likely to be more vocal in their opposition to such increases.
While the temptation is high to keep subsidizing electricity tariffs for residential customers (as
well as in some cases for commercial and industrial customers, but for other reasons), the cost of
doing this is high for the budget, the economy, and the population, and actually especially the
poor. The cost of generating, transmitting and delivering electricity is often high, in part because
the populations served by the electricity network are small in many countries in West and
Central Africa. This may prevent to some extent the utilities to reap the full benefit of
economies of scale. In addition, many countries are landlocked, with high transportation costs,
and limited hydroelectric power, which also contributes to high generation costs due to the need
to rely on thermal power. Thus, due in part to high and increasing generation costs, subsidies
that may appear to be limited at the household level tend to be very expensive at the
macroeconomic level, especially when compared to the limited resources available to
governments through taxation and foreign aid. Under strict budget constraints, subsidizing
electricity has a direct cost in terms of crowding out today or in the future (through the
accumulation of debt for the utilities but guaranteed by governments) resources for public
interventions aimed at poverty reduction, for example through programs for employment
creation or improvements in education and health service provision.
In addition, there is one additional perverse incentive that derives from the inability of utilities to
cover their costs due to low tariffs. When utilities are operating at a loss, or at least cannot
73
properly fund their maintenance and investment costs, they have no incentives to expand the
network, since expanding the network would imply increasing their losses. At the margin, new
customers may be poorer than existing customers, thereby increasing the cost of delivery and
also increasing the risk of non-payment. Furthermore, when investments are not sufficient,
expanding the network to new customers is also problematic because of the limited generation
capacity installed, which translates into service disruptions. Finally, adding consumption
through an expansion of the network often tends to further increases the average cost of
generating electricity, since at the margin, even when countries have access to cheap
hydroelectric power, the additional demand must be met through more costly fuel generation.
The upshot of the above is that many utilities are trapped in a vicious circle. For the poor, the
benefits of network extension are much larger than the benefits from the subsidization of
electricity consumption. At the same time, without enough revenues to cover their operating and
maintenance costs fully, utilities cannot seriously think about network expansions, as this might
exacerbate their losses. In addition, poor quality of service, which is in part the consequence of
a lack of revenues, limits the willingness of customers to pay a higher price for a service that is
considered by them as deficient, due for example to repeated cuts. As to regulatory agencies and
governments, given also price increases for oil and thereby for the cost of generating power, they
are under pressures to reduce existing subsidies, especially in the context of their broader
commitment to implement poverty reduction strategies, but the fear of a backlash makes such a
reduction in subsidies difficult to implement. All parties are then trapped into a situation that
does not benefit them. In order to move forward, it is necessary to assess whether electricity
subsidies are indeed a good option for reaching the poor in comparison with alternatives.
Targeting Performance of Electricity Subsidies in Burundi
The 2006 QUIBB (Questionnaire des Indicateurs de Base du Bien-être) survey enables us to
measure the targeting performance of electricity subsidies in Burundi, and to compare this
performance to that of other social programs and public expenditures categories. We use that survey
because it is the latest nationally representative household survey available in Burundi with detailed
information on consumption, including for electricity. Two indicators are used for the analysis of
targeting performance. The first parameter, omega (Ω), is equal to the share of the subsidies
allocated to the poor divided by the proportion of the poor in the total population. A value of 1
for this indicator suggests that targeting is neutral. A value greater (less) than 1 implies that, on
average, the poor receive more (fewer) subsidies that the population as a whole. The second
parameter, gamma (), is the share of subsidies received by the poor. Note that this share
depends on the poverty incidence since a smaller share of the poor in the population normally
leads to a smaller share of subsidies they receive. In order to assess who benefits from existing
electricity subsidies, we used the data from the survey as well as the (inverted block) tariff
structure for Burundi’s REGIDESO at the time of the implementation of the survey.
Table 1 gives the values of and not only for residential electricity subsidies, but also for a
range of other subsidies and programs, including water subsidies, food transfers, and public
spending for education and health. The poor are defined as those who cannot satisfy their basic
needs, and they account for about two thirds of the population. Of all the programs considered in
table 1, electricity subsidies are the least well targeted to the poor. The value of suggests that
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only six percent of the subsidies benefit the poor, and the value of 0.10 for implies that on
average, a randomly chosen household among the population as a whole would benefit from an
electricity subsidy ten times larger than what would be received by a randomly chosen household
among the poor. The performance of electricity subsidies in reaching the extreme poor (defined
as those who cannot satisfy their basic food needs) is even weaker – with only three percent of
the subsidies reaching the extreme poor. Many other programs or categories of public spending
also have relatively weak targeting performance, including especially subsidies for piped water,
but none of the programs is as poorly targeted to the poor as electricity subsidies.
Table 1: Performance of Electricity Subsidies and other public transfers, CWIQ 2006
Poverty Extreme poverty
Utility subsidies
Electricity subsidies 0.10 0.06 0.06 0.03
Water subsidies 0.15 0.09 0.12 0.05
Food transfers
Private transfers 0.82 0.56 0.75 0.37
World Food Program transfers 0.89 0.60 0.84 0.41
Public spending for education
All cycles 1.08 0.72 0.77 0.51
Primary 1.10 0.73 0.79 0.53
Secondary 0.79 0.53 0.52 0.35
Higher 0.49 0.32 0.13 0.09
Public spending for health
All consultations 0.89 0.60 0.60 0.40
Public hospital 0.81 0.54 0.54 0.36
Public dispensary 0.91 0.61 0.62 0.41
Source: World Bank staff estimation using the CWIQ survey 2006.
Why are electricity subsidies so poorly targeted to the poor? A big part of the explanation lies in
the fact that according to the national survey, connection rates to the network are extremely small
(three percent at the national level), and concentrated among households located in the top
deciles of the distribution of consumption per capita, as shown in table 2. This also means that
an increase in tariffs for electricity, although costly for households currently connected to the
network – but warranted given the cost of providing the service, would have a very small impact
on poverty. In a situation such as that of Burundi, one could even possibly argue that to the
extent that an increase in electricity tariffs for households already connected to the network
would make it feasible for the REGIDESO to extend connections to a large segment of the
population, the increase in tariffs could potentially benefit the poor through a larger pool among
them benefitting from the service. Now, the fact that an increase in average residential tariffs is
necessary and could potentially benefit the poor by making resources available for a network
expansion (or for other social programs that better reach the poor) does not mean that efforts to
make electricity affordable to the minority of households connected to the grid that are indeed
poor should be abandoned. It remains beneficial to keep a social tranche in the inverted block
tariff structure to provide electricity at a lower unit price for those consumers who consume the
least quantity of electricity and indeed tend to be poorer than the average residential consumer.
75
Table 2: Performance of Electricity Subsidies and other public transfers, CWIQ 2006
Decile of
consumption
Access to electricity at the
neighborhood/village level
(1)
Take up rate where
households have access
(2)
Connection rate to the
electricity network
(3)=(1)*(2)
1 3.7 9.7 0.4
2 4.1 10.6 0.4
3 6.7 8.1 0.5
4 5.1 9.5 0.5
5 7.0 4.9 0.3
6 7.7 13.0 1.0
7 7.5 30.2 2.3
8 9.3 21.0 2.0
9 13.5 26.5 3.6
10 29.1 67.0 19.5
Total 9.4 32.5 3.0
Source: World Bank staff estimation using the CWIQ survey 2006.
76
Annex 7: Burundi ERSG V - Prospects for Achieving the MDGs by 2015
Goal 1: Eradicate extreme poverty and hunger
Unlikely. The internationally agreed baseline year of 1990 for the MDGs coincides with the beginning of a decade
of political turmoil and civil war during which GDP fell by almost 20 percent. The national poverty headcount
increased from 36 in 1990 to 81 percent in 1998. However, according to a 2006 household survey, about 67 percent
of the population still lives below the national poverty line (the MDG target is 18 percent).
Meeting the hunger target is unlikely. Malnutrition rates were very high even before the crisis, and in 2000 Burundi
had the highest under-five malnutrition rates in Africa with 57 percent. However, according to national nutrition
surveys, malnutrition rates decreased to 53 percent in 2005 and 46 percent in 2007 (the MDG target is 23 percent).
Goal 2: Achieve universal primary education
Likely. Burundi will potentially meet the target for ensuring that all boys and girls complete a full course of primary
schooling. Since free universal primary education was introduced in September 2005, gross enrollment reached
close to 100 percent. But completion rates remain low at only 37 percent.
Goal 3: Promote gender equality and empower women
Likely. The target on gender equality in primary education will very likely be met with the ratio of girls to boys
estimated at 0.8 in 2000, 0.9 in 2005, and 0.95 in 2008. The target on women participation in parliament has been
met. However, women’s lack of control over resources will remain a key challenge.
Goal 4: Reduce child mortality
Highly unlikely. Child and infant mortality rates remain high at 190 and 114 (per 1,000 live births) but show
improvements from their 2000 peak rates of 291 and 156, respectively. Communicable diseases, such as malaria,
diarrhea, respiratory infections, and the compounding effect of malnutrition are the major causes of mortality and
morbidity especially among children.
Goal 5: Improve maternal health
Highly unlikely. Maternal mortality remains very high at 1,000 (per 100,000 live births). At the same time, the
proportion of births attended to by skilled health personnel is only 31 percent, well below the MDG goal of 100
percent. The key challenges to enhance utilization of health services are: (i) cost to households; and (ii) lack of
trained people.
Goal 6: Combat HIV/AIDS, malaria and other diseases
Likely. Burundi will potentially meet the HIV/AIDS target. Overall HIV prevalence of 2.9 percent is low. However,
Burundi’s rate of 12 percent HIV affections among pregnant women is quite high compared with neighboring
countries (Rwanda 9.8 percent, Uganda 8.5 percent, and Tanzania 7.5 percent).
Goal 7: Ensure environmental sustainability
Unlikely. About 71 percent of the population has access to improved water resources. Among these, 75 percent live
in urban areas and only 45 percent in rural areas.
77
Annex 8: Burundi ERSG V - IMF Staff’s Assessment of Recent Economic Performance
INIf-PNAT IONAL MONETARY FUND ,~RHAnON5 QEAA.Q1 M'Nl
Pr= ~Ie= NO.I] / 280
FOR IMMEDIATE RELEASE July 13, W] 1
Inte maliooal Monetary Fund Wash ir.gton, D.C. 20431 USA
H U Encutin Bond COlDp l~t~, Sixth Revi~w UndH t h ~ ECf Art'au~~ID~I1I rm· But' undi aud AI'pt'on" US$ I O.5 :\ Iilliou Di,b"t'S~ID~I1I
1k Bt~Ti, .. Bo:ard of tbr InlrmaTiooal Moottary Fund (Thlf) l00.y comp]tlW Ibr sixth my", of Burundi 's ttooomic program supponw by the Btten<led C....tit Facitity (EO) 1k approval will mabl~ 3D immtdi.11~ di~t in an 3DlOIIII.l tqUi'"3.lmt to SDR 6.6millioo (about US$10.5 millioo) , bringing 100al di,buJ=nrnts UD<kr tbt ~ to an :nnoont ~qw\'alenllo SDR 46.2 millioo (about US$73.2 million).
In rornpltling tbt R\~~'\'i . tbt Board apprO\,"" 3D :rugmentlTion of x«ss by 3D :arnowIt
N[Ui\"alenl to SDR 5.0 millioo 10 mitig:lt~ lbr irnp.lCl oftbt fuod and fuel crisis 00 tbt bal3DC~ of p")menlS. and 3D aten>ion of tbt EO an-.ngen>enl to end-January 2012. Burundi's EO .~ was appr",,",, 00 July 7. 2008 by the Bt~Ti, .. Bo:ard (Stt Prr>s Rtle;l,e No (81167).
Following tbt Btttuti, .. Board's disru<OOn. !>Ir. N30yuki Shinohar:i. Dtputy Man:oging Dir«lor and Acting Chair . .>ai<l:
'"p.rnmnance UD<kr tbt ECF-supponw program has been >3ti,bcTory. and Burundi's ttooomic outlook is broa<lly posiTiv". 1k most imminenl policy challeng~ is to presen .. macrottooomic stability while rusbioning the irnp.lct of rising rommodity pri~.
'1M rni=! 2011 program "PP'opoiat~ly addfe;se; priority ooc:i.>lllffils in tbt ronlat of ~ fi",al coosoli<l:uioo. Hown·ft. the fuel subsidy .honld bt btnft targeted 10 the most ".lner.Ibl~ groups. O\~ tbr medium lnm enh3Dcing m~ mobilization. prioritizing spen&ng. and !dying on grant. and highly ronce;,iooal fm:mcing \\;11 bt key to tbt susl:tinability ofThe fiscal positloo.
"Cohereoc~ of !IlODeTaf)' and fi",al policies is • r~t for effttti, .. macrOttOOOlllic policymaking With tbt r~ttlll fue] and food price incr~ases f~g into OOmestic price;. !llOtItIary policy should bt tighTened to curb price P'=urtS and btnft ancbor infl:llion ""'P«tltions.
10 raise Iong-1t1m gro\\1h. it will bt critical 10 ac""Ier:II~ structur.ll rdhrIlls. panicularty in tbr coffee :rnd financia] stcrors. Impr",ing go,~ will bt import:mt for continued 00n0r support" Mr. Shinoh:n:i added.
78
Annex 9: Burundi ERSG V - Policy Matrix: Objectives and Prior Actions (2010-2012)
Medium Term
Objectives
POLICY ACTIONS Target and actual Outcomes Observation Responsible
Entity
ERSG IV Prior Actions and
Effectiveness Condition
(Prior actions are in bold and the effectiveness condition is
underlined)
ERSG V Prior Actions Indicators Baseline
(Year) 2010 2011 2012
1. PUBLIC FINANCIAL MANAGEMENT
Strengthening strategic and budget planning to improve the quality of public spending
1.1. Strengthening
strategic planning and budget
preparation
Ministries of Finance and
Planning jointly develop a
central medium term
expenditure framework for
the period 2011-13,
supported by
macroeconomic forecasts
derived from the
macroeconomic model of the
Ministry of Planning.
The Recipient has adopted a
budget framework for the
preparation of its 2012 budget
law, consistent with its
medium term expenditure
framework for the period
2011-2014 (MTEF),
consequently bringing the
spending thresholds for its
ministries’ budget allocations
in line with the MTEF.
Percent of national
budget that has followed the
MTEF process
A draft of the
central MTEF has been
prepared. The
Ministry of Planning has
pushed the
effort forward, with the
support of sectoral
ministries, but
without that of the Ministry of
Finance.
[1-31 2010]
Target: 0%
Actual: 0%
[8-31-2010]
Target: 50%
Actual: 50%
[5-30-2011]
Target: 100%
Actual: N/A
[5-30-2012]
The preparation
of the budget in 2012 was based
on a budget
framework letter supported by
MTEF process.
This is the first time that this
letter with MTEF was
approved by the
Council of Ministers in line
with the PFM
Loi Organique.
Ministry of
Finance and Economic
Development
Planning
Reinforcing systems for transparent public financing
1.2. Reliable
financial
management information system.
The Recipient has disclosed to
the public its budget law for
2011 and the corresponding
report on the implementation
of said law for the first two
quarters of said year.
Publication of the
national budget
and budget execution reports
Neither budget
laws nor
execution reports are
published on
the website of government.
[12-31-2010]
N/A Target: 2011
budget law
available on the website of
the Ministry
of Finance and
Economic
Development Planning.
Actual: Done. [1-30-2011]
Target: Four quarterly
budget
execution reports for
2011 budget
law are posted on the
Target:
Budget laws
and execution reports are
published on
the government
website.
Actual: N/A
[12-31-2012]
The 2011 budget
law has already
been released on the MFEDP
website.
Three quarterly budget execution
reports are
posted on the said website.
The report for
the last quarter is to be posted in
December.
Ministry of
Finance and
Economic Development
Planning
79
Medium Term
Objectives
POLICY ACTIONS Target and actual Outcomes Observation Responsible
Entity
ERSG IV Prior Actions and
Effectiveness Condition
(Prior actions are in bold and the effectiveness condition is
underlined)
ERSG V Prior Actions Indicators Baseline
(Year) 2010 2011 2012
said site.
Actual: 75% Done.
[12-31-2011]
The Recipient has issued a
decree to establish the general
regulations on public budget
management designed to
improve the management of
its budget execution and
public accounting.
Availability and
implementation of
a decree
governing the
general rules for budget
management and controls.
No texts enacts
the
management of
budget
execution and public
accounting along the lines
of the Budget
Framework Law (Loi
Organique)
[12-31-2009]
Target:
Preparation of
a draft decree
Actual: A draft decree
was prepared with support
from IMF
technical assistance.
[12-31-2010]
Target:
Issuance of a
decree
establishing
the rules of public budget
management and controls.
[4/15/2011]
Actual: Done
with delay.
[10/18/2011]
Target: The
management
of budget
execution and
controls are guided by a
Presidential Decree.
Actual: N/A
[1-31-2012]
The decree was
discussed and
adopted by the
Council of
Ministers in April 2011. The
decree was issued on
October 18,
2011.
Ministry of
Finance and
Economic
Development
Planning
1.3. Improved Cash Management and
reduction in interior
payment arrears
Improve the quality of
quarterly commitment plans
through: (i) their compliance
with the annual cash
management plan and (ii)
verification of the
breakdown of engagement
by ministry in consultation
with ministries.
Amount of arrears towards suppliers
as a percent of to
total expenditures
(this will measure
the extent to
which the system is preventing their
accumulation –
defined as invoices that have
not been paid 60
days after their due date).
Peak arrears toward
suppliers
accumulated in
October 2009
to a height of 3
to 4 billion of Fbu (0.4-0.5 %
of annual
expenditures). Arrears were
cleared by the
end of 2009, however.
[10-31- 2009]
Target: Peak arrears
reduced by 50
percent
compared to
2009.
Actual: Peak
arrears were
reduced to zero (i.e.,
100%)
[12-31-2010]
Target: Arrears
reduced to 0.
[12-31-2011]
Actual: No
arrears accumulated.
[10-31-2011]
Target: Arrears
reduced to 0.
Actual: N/A
[12-31-2012]
No arrears accumulated
since December
2010.
Ministry of Finance and
Economic
Development
Planning
Improving the management of the public wage bill
1.4. Improving the
human resource
planning and the management of the
public wage bill.
Introduction/installation of a
new payroll software
interfaced with the country’s
public finance management
information system
(SIGEFI) to improve payroll
management.
Percentage of
civilian wage bill
paid through new management
information
system.
SIGEFI in
place, but does
not include a module for
public wage
bill management.
[12-31- 2009]
Target:
Software for
the management
of the wage
bill is designed and
installed.
Actual:
Software
Target: 100%
of the public
civilian wage bill can be
effectively
managed through
HRMIS-
SIGEFI.
Actual: 100%
Target: 100%
of the public
civilian wage bill can be
effectively
managed through
HRMIS-
SIGEFI.
Actual: N/A
Software is fully
operational since
January 2011 but training will
continue to be
needed for the sustainability of
the tool.
Ministry of
Public
Administration and Labor;
Ministry of
Finance and Economic
Development
Planning, Council of
Ministers.
80
Medium Term
Objectives
POLICY ACTIONS Target and actual Outcomes Observation Responsible
Entity
ERSG IV Prior Actions and
Effectiveness Condition
(Prior actions are in bold and the effectiveness condition is
underlined)
ERSG V Prior Actions Indicators Baseline
(Year) 2010 2011 2012
available and
installed.
[12-31-2010]
of the civilian
payroll is
managed through the
software
[12-31-2011]
[12-31-2012]
Public wage bill
as a percent of
GDP.
The public
service wage
bill amounted
to about 12.2% of GDP (Based
on the 2010 budget).
[1-31-2010]
Target: The
public service
wage bill
amounts to 12 % of GDP.
Actual: 11.7%
[12-31-2010]
Target: The
public service
wage bill
amounts to 12% of GDP.
[12-31-2011]
Actual: 1.8%
[10-31-2011]
Target: The
public service
wage bill
amounts to 11 percent of
GDP.
Actual: N/A
[12-31-2012]
Ministry of
Public
Administration
and Labor; Ministry of
Finance and Economic
Development
Planning
2. PRIVATE SECTOR DEVELOPMENT
Promoting private investment development through improvements in the legislative framework and economic infrastructure
2.1. Strategy for
promotion of investment
The effective operation of
the Investment Promotion
Agency is ensured through
the allocation of appropriate
personnel, budget and a
work program.
Number of
dossiers registered with API.
100 dossiers
recorded.
[12-31-2009]
Target:
Number of dossiers
registered
with the API in the second
half of 2010 is
30 percent higher than in
the first half.
Actual: 130%
higher.
[12-31-2010]
Target:
Number of dossiers
registered
with the API in 2011 is 15
percent
higher than in 2010.
Actual:
Expected to
meet target.
[12-31-2011]
Target:
Number of dossiers and
amount of
investment registered
with the API
in 2012 is 20 percent
higher than in
2010. Actual: N/A
[12-31-2012]
For the first year
of API existence, number of
investment
requests was increased by
130% during the
second half of 2010 compared
to the first.
API
Average time
required to process a dossier.
Average time
to process a dossier is 4
weeks.
[12-31-2009]
Target: The
average dossier takes
no more than
2 weeks to process.
Actual: Dossiers
make less
than 2 weeks.
[12-31-2010]
Target: The
average dossier takes
no more than
1 week to process.
Actual: N/A Expected to
meet target.
[12-31-2011]
Target: The
average dossier takes
no more than
3 days to process.
Actual: N/A
[12-31-2012]
API
81
Medium Term
Objectives
POLICY ACTIONS Target and actual Outcomes Observation Responsible
Entity
ERSG IV Prior Actions and
Effectiveness Condition
(Prior actions are in bold and the effectiveness condition is
underlined)
ERSG V Prior Actions Indicators Baseline
(Year) 2010 2011 2012
2.2. Financial
viability of
REGIDESO and improved reliability
of electricity
provision
REGIDESO undertakes
necessary investment to
expand pre-payment
program to cover at least 25
percent of subscribers
(including government
institutions).
Percent of
subscribers
enrolled in prepayment
program.
Prepayment
system
established, but coverage is
18.7%.
[12-31-2007]
Target: More
than 25% of
non industrial subscribers
enrolled in
prepay program.
Actual: 31% of non-
industrial
customers subscribe.
[12-31-2010]
Target: More
than 75% of
non industrial subscribers
are covered
under the prepayment
program.
Actual: 50%
[12-31-2011]
Target:
100%of non
industrial subscribers
are covered
under the prepayment
program.
Actual: N/A
[12-31-2012]
REGIDESO
The Recipient has (i)
completed a water and
electricity tariff study and, on
the basis of the study, (ii) has
revised said tariffs in order to
improve the financial viability
and operational performance
of REGIDESO and (iii) has
launched a campaign to
sensitize the public and make
it aware of the revised tariffs
and the schedule for their
application.
Average
unplanned
interruptions frequency in
Bujumbura
(number/year).
51
interruptions
Source:
Burundi –
Emergency Energy Project
(P122217)
[12-31-2009]
Target: 56
Actual: 56
[12-31-2010]
Target:45
Actual: N/A
[12-31-2011]
Target: 30
Actual: N/A
[12-31-2012]
REGIDESO
Facilitating the restructuring or privatization of public enterprises
2.3. Effective reform
of public enterprises
(PEs).
The Council of Ministers
adopt and submit to
Parliament a new revised privatization law satisfactory
to the Bank, which meets
modern international best
practice.*
The SCEP makes the 8
technical and financial
audits conducted on the PEs
public through the
publication of these audits
on its newly developed
The Recipient’s Council of
Ministers has adopted, on the
basis of technical and
financial audits, a draft action
plan with a timetable for the
privatization and/or
restructuring of eight pre-
identified state-owned
enterprises, so as to
rationalize their operations.
Number of
restructuring/
privatizations begun.
The current
privatization
law includes dispositions
which are
blocking
progress on
privatization.
The new law is in the process
of being
drafted.
[12-31-2009]
Target: Eight
(8) audits are
finalized and published on
the SCEP’s
website.
[12-31-2010]
Actual: Done
and posted in
the website.
Target:
Action plans
and audits for 8 PEs are
publically
available.
Restructuring/
privatization
of at least 3 PEs has
begun.
[12-31-2011]
Actual: Done
and posted in
Target:
Restructuring/
privatization of at least 5
PEs has
begun.
[12-31-2012]
Actual: N/A
The revised code
is still pending in
the Parliament.
SCEP.
82
Medium Term
Objectives
POLICY ACTIONS Target and actual Outcomes Observation Responsible
Entity
ERSG IV Prior Actions and
Effectiveness Condition
(Prior actions are in bold and the effectiveness condition is
underlined)
ERSG V Prior Actions Indicators Baseline
(Year) 2010 2011 2012
website. 8 audits of PEs
underway.
[08-31-2009]
the website.
Modernization of export sectors
2.4. Private sector led growth in the
coffee, sugar and tea
sectors.
The Recipient has appointed,
by ministerial ordinance, a
commission responsible for
the preparation of the bidding
documents for the sale of 104
state-owned washing stations
in the coffee sector and the
aforementioned commission
has established its work
program with a clear
timetable and deliverables.
The Recipient’s Council of
Ministers has approved and
submitted to the Recipient’s
parliament a draft law on
agricultural Pre-cooperatives
Groups consistent with the
Recipient’s coffee sector
privatization strategy.
Number of coffee washing stations
sold.
Thirteen (13) coffee washing
stations were
successfully sold in the first
round of
bidding.
[12-31-2009]
N/A The measure
was
postponed due to elections.
Target: At least 30
washing
stations are sold to private
investors.
[12-31-2011]
Actual: 0
A number of washing
stations is
expected to be sold during
the second
phase of bidding
process.
[10-31-2011]
Target: The majority (at
least 60)
washing stations are
sold to private
investors.
Actual: N/A
[12-31-2012]
Evaluation of the first phase was
completed. A
Commission prepared the
documents for
the call for sale. Effective
launching is
expected soon.
Draft law was
adopted by the Council of
Ministers in May
2011.
SCEP
3. Food and Fuel prices related Measures
3.1. Coping with the
effects of the food and fuel prices crisis.
The Recipient has temporarily
reduced excise taxes on the
following petroleum items
from their levels as listed in
the 2009 Ministerial
Ordinance, to a minimum of
70 percent on kerosene, 60
percent on diesel and 34
percent on gasoline.
Share of budget
allocated to the school feeding
program in the
primary
0.5% of budget
[12-31-2010]
N/A Target: At
least 0.6% of budget
[12-31-2011]
Target: At
least 0.7% of budget.
[12-31-2012]
Ministry of
Finance and Economic
Development
Planning Share of budget
allocated to the
free health care program for
children under
five
1.5% of budget
allocated
[12-31-2010]
N/A At least 1.5%
of budget
[12-31-2011]
At least 1.6%
of budget
[1-31-2012]
83
Annex 10: Burundi at a Glance (including Country Map)
Burundi at a glance POVERTY and SOCIAL
,0(), Population, mid-year (millions) GNI per capita (A tlas me/hod. US$) GNI (Atlas method, US$ billions)
Average annual growth, 2003'()9
Population (%) Labor force (%) .
Most recent estimate (lates t year available, 2003'()9)
Poverty (% of population below national poverty line) Urban population (% of /o/al population) Ufe expectancy at birth (years) Infant mortality (per 1,000 l;ve bitths) Child malnutrition (% of children under 5) Access to an improved water source (% of population) Literacy (% of population age 15+) Gross ptimary enroHment (% of school-8(.16 population)
Male Female
KEY ECONOMIC RATIOS and LONG-TERM TRENDS
GOP (US$ billions)
Gross capital formation/GOP Exports of Roods and services/GOP Gross domestic savir19s/GDP Gross national S8vil"l9s/GDP
Current account balance/GOP Interest payments/GOP Total debt/GOP Total debt service/exports Present value of debt/GOP Present value of debt/exoorts
1989-99 (average annual growth) GDP -2.7 GOP per capita -4.0 Exports of Roods and services "
STRUCTURE of the ECONOMV
(% of GOP) Agriculture Industry
Manufacturing Services
Household final consumption expenditure General90v't final consumption expenditure Imports of goods and services
(average annual growth) Agriculture Industry
Manufacturirl!=l S8fVices
Household final consumptioo expendi tUre Geoeral9QV't final consumption expenditure Gross capital formation Imports of Roods and services
Note: 2009 data are prel iminary estimates.
1989
1.1 16.5
9.7 3.3
-6.1 1.'
79.8 364
1999..09
2.8 0.0
1989
53.7 19.7 13.3 26.7
86 .• 10.2 22.9
1989-99
-1 .5 -3.8 -7.4 -2.5
-3.5 -1.1 OA 0.7
Sub-Saharan
Burundi Africa
8.3 840 150 1,126 1.2 946
3.0 2.' 4.' 2.9
11 37 50 52
101 81 25
72 60 66 62
136 100 139 10' 132 95
1999 2008
0.81 1.2
'.9 7 .•
-2.5 -0.1
-5.9 -5.9 1.0 0.7
140.4 123.5 46.1 21.7
2008 2009
4.' 3.' 1.4 0 .•
1999 2008
43.7 17.9 8.2
38.5
84.3 18 .2 16.0
1999-09 2008
-1 .6 -6.2
10.4
This table was produced from the Development Economics LOB database .
Low-Income
84. 512 433
2.2 2 .•
29 57 76 28 64 66
104 107 100
2009
1.3
0.3 39.1
11 .7
2009-13
2009
2009
2125111
Development diamond"
Ufe expectancy
GNI /. "- G,~ pe,
~ /' primary
capita enrollment
Access to improved water source
--__ -- low-incomegroop
Economic ratios'
Trade
~+ Domestic Capital savings
Indebtedness
--"",""", --Low-~group
Growth of capital and GOP (%)
.~ V¥.'; :: ~ ~
--= - =
• The diamonds show four key indicators in the country (in bold) compared with its income.group averaQe. If data are missirl!=l, the diamond will be i llCOlllplete.
84
Burundi
PRICES and GOVERNMENT FINANCE 1989 1999 2008 2009 Inflation {OM
Domestic prices (% change) ~
h ~
?:': Consumer prices 11.7 3.4 5.0
~
Implicit GOP dena tor 14.8 15.0 25.1 13.6 " Government finance " (% of GOP, includes current grants) Current revenue 21.1 16.2
" " " ". " .. Current budget balance 6.2 -2.6
--GDPdeftelO< _c-Overall surplus/deficit -4.3 -6.6
TRADE 1989 1999 2008 2009 Export and Import levels (US$ mill.)
fUSS millions) Tolal exports (fob) 93 55 "" Coffee 75 42
Tea 6 12 ~
Manufactures 4 1 ,~
Tolal imports (cit) 184 111 ,,. Food 10 11 Fuel and energy 20 18 ~
Capital Roods 65 33
Export price index (2000=100) 155 118 ro " " " " .. .. Import price index (2000=100) 75 63 .-- . Irn\lOrtt
Terms of trade (2000=100) 205 187
BALANCE of PAYMENTS 1989 1999 2008 2009 Current account balance to GOP (%)
(USS mil/ions) E)(ports of goods and services 109 61 Imports of poods and services 256 129 Resource balance -147 -68 ~
Net income -18 -11 -34 • Net current transfers 31
Current account balance -68 -48 -68 • Financing items (net) 118 19 -n Changes in net reserves -50 29
Memo; Reserves including QOld (US$ millions) Conversion rate (DEC, IocaIlUS$) 158.7 563.6 1,185.7 1,230.2
EXTERNAL DEBT and RESOURCE FLOWS 1989 1999 2008 2009 Composition of 2009 (tebt (VS$ mill.)
(USS millions) Total debt outstanding and disbursed 889 1,135 1,443 518
IBRD 0 0 0 0 Go 7 IDA 328 599 819 147
Total debt service 43 29 19 19 IBRD 0 0 0 0 IDA 3 12 4
Composition of net resource flows Official grants 74 60 442 1,441 Official cre(titors 91 7 14 15 Private creditOfs -6 0 0 0 Fore~n direct investment (net inflows) 1 0 4 10 Portfolio equity (net inflows) 0 0 0 0
World Bank program Commitments 53 12 0 0 Disbursements 45 15 14 9 A - IBRO E - B~ateral
Principal repayments 1 8 0 0 B - IOA 0 - Other mul!:ilaleral F - Private
Net flows 44 8 14 9 C_IMF G - Short-term
Interest payments 2 4 4 1 Net trans fers 42 3 10 8
Note: This table was produced from the Development Economics LOB database. 2/25/11
Mt. HehaMt. Heha(2,670 m)(2,670 m)
Most distantMost distantheadwater ofheadwater ofthe Nile Riverthe Nile River
C I B I T O K EC I B I T O K EN G O Z IN G O Z I
K AK AYYA N Z AA N Z A
B U B A N Z AB U B A N Z A K A R U Z IK A R U Z I
K I R U N D OK I R U N D O
M U Y I N G AM U Y I N G A
C A N K U Z OC A N K U Z O
R U Y I G IR U Y I G IG I T E G AG I T E G A
M WM WA R OA R O
R U TR U TA N AA N AB U R U R IB U R U R I
M A K A M B AM A K A M B A
MM UU RR AA MM VV YYAA
BB UUJJ UU
MM
BB UURR AA
Nyanza-LacNyanza-Lac
RumongeRumonge
MabandaMabanda
MatanaMatana
BukirasaziBukirasazi
MutangaroMutangaro
RusibaRusiba
MusadaMusadaBuhigaBuhiga
BururiBururi
MwaroMwaro
GitegaGitega
MuramvyaMuramvya
BubanzaBubanza
KayanzaKayanzaNgoziNgozi
CibitokeCibitoke
RuyigaRuyiga
CankuzoCankuzo
KaruziKaruzi
MuyingaMuyinga
KirundoKirundo
RutanaRutana
MakambaMakamba
BUJUMBURABUJUMBURA
C I B I T O K EN G O Z I
K AYA N Z A
B U B A N Z A K A R U Z I
K I R U N D O
M U Y I N G A
C A N K U Z O
R U Y I G IG I T E G A
M WA R O
R U TA N AB U R U R I
M A K A M B A
M U R A M V YA
B UJ U
M
B UR A
Nyanza-Lac
Rumonge
Mabanda
Matana
Bukirasazi
Mutangaro
Rusiba
MusadaBuhiga
Bururi
Mwaro
Gitega
Muramvya
Bubanza
KayanzaNgozi
Cibitoke
Ruyiga
Cankuzo
Karuzi
Muyinga
Kirundo
Rutana
Makamba
BUJUMBURA
DEM. REP.OF CONGO
RWANDA
TANZANIA
Kanyaru
Rusiz
i
Rum
pung
u
Kagera
Ruvuv
u
Ruvuvu
Ruvuv
u
Luvi
ronz
a
Mwerusi
Muragarazi
LakeTanganyika
LakeKivu
LakeCohoha
LakeRweru
To Kasulu
To Uvira
To Kibondo
To Kakonko
To Nyakanura
To Rulenge
To Kigali
To Gitarama
To Butare
To Cyangugu
Mt. Heha(2,670 m)
Most distantheadwater ofthe Nile River
29°E
29°E
30°E
30°E
31°E
31°E
4°S 4°S
3°S 3°S
BURUNDI
This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other informationshown on this map do not imply, on the part of The World BankGroup, any judgment on the legal status of any territory, or anyendorsement or acceptance of such boundaries.
0 10 20 30
0 10 20 30 Miles
40 Kilometers
IBRD 33380
SEPTEMBER 2004
BURUNDI
SELECTED CITIES AND TOWNS
PROVINCE CAPITALS
NATIONAL CAPITAL
RIVERS
MAIN ROADS
PROVINCE BOUNDARIES
INTERNATIONAL BOUNDARIES