Documentof The World Bank FOR OFFICIAL USEONLY ReportNo: 32018-BI INTERIMSTRATEGY NOTE FOR THE REPUBLICOFBURUNDI April 11,2005 CountryDepartment9 Africa Region This documenthas a restricteddistribution andmaybe usedbyrecipients only inthe performance of their official duties. Its contents may not otherwise be disclosedwithout World Bank authorization. CURRENCY EQUIVALENTS SDR 1.00 =US$ 1.48 US$ 1.00 =Fbu 1,079 March 10,2005 FISCALYEAR January 1to December 31 ABBREVIATIONS AND ACRONYMS AAA Advisory andAnalytical Activities CBB Central Banko fBurundi BP Bank Procedures CAS Country Assistance Strategy CDD Community DrivenDevelopment CFAA Country FinancialAccountability Assessment CPAR Country ProcurementAssessment Report CPIP Country ProcurementIssuesPaper DSA Debt Sustainability Analysis DRR Demobilization, ReinsertionandReintegration Fbu Burundian franc GDP Gross Domestic Product HIPC Highly-Indebted Poor Countries IDF Institutional DevelopmentFund IDP Internally DisplacedPopulation IGR Institutional andGovernance Review IMF International Monetary Fund I-PRSP InterimPoverty Reduction Strategy Paper I S N Interim Strategy Note JSA Joint StaffAssessment MDG MillenniumDevelopment Goal MDRP Multi-Country Demobilization and Reintegration Program MDTF Multi-Donor TrustFund NGO Non-governmental organization NPV Net PresentValue OCHA Office o f Coordination ofHumanitarianAffairs OP OperationalPolicy PCF Post-Conflict Fund PER Public ExpenditureReview PETS Public ExpenditureTracking Survey PRGF Poverty Reductionand GrowthFacility PRSP Poverty Reduction Strategy Paper SMP StaffMonitoredProgram TG Transitional Government TSS Transitional Support Strategy UN UnitedNations UNDP UnitedNations Development Program UNOB UnitedNations OperationinBurundi Vice President: Gobind T. Nankani Country Director: Pedro Alba Country Manager Alassane Sow Task Team: Alassane Sow and Elena Kastlerova (Co-team Leaders), Burundicountry team FOROFFICIALUSEONLY TABLE CONTENTSOF EXECUTIVESUMMARY ................................................................................................................... 1 INTRODUCTION ............................................................................................................................... 3 1 BACKGROUND CONTEXT . ................................................................................................... A.Politicaldevelopments ........................................................................................................ AND 3 3 B.Economic developments....................................................................................................... 5 6 D.Internally displacedpeople(IDP) andrefugees ................................................................... C.The debt issue andHIPC ...................................................................................................... 7 E.The persistingsocial crisis.................................................................................................... F. Governance andcapacity ................................................................................................... 10 7 11IMPLEMENTATIONOFTHE2002TRANSITIONALSUPPORTSTRATEGY . ............................... 12 A.The 2002 TSS..................................................................................................................... B.Overall assessmentandresults....................................................................... 12 12 C.Detailed implementation status .......................................................................................... 12 D.Lessons learned.................................................................................................................. 13 I11 THEROAD . AHEAD ................................................................................................................. 14 A.Burundi's strategic objective for the coming period.......................................................... 14 B.The PRSP Process .............................................................................................................. 15 Iv.THEKEY .......................................................................................................... A.Improvedsecurity. social stability. and service delivery.................................................... CHALLENGES 16 16 B.Debtrelief. highandsharedeconomic growth. anddiversification................................... 18 C Governance and institutional strengthening . ...................................................................... 21 V A WORLDBANKGROUP . INTERIM STRATEGY ...................................................................... 22 22 B.Objective andstrategic elements of the ISN....................................................................... A.Operational context ............................................................................................................ 22 D.Donor coordination andselectivity .................................................................................... C.Instruments for the Bank Group assistance........................................................................ 22 E.Expectedresults, monitoringand evaluation...................................................................... 25 25 F.Riskmanagement andresponseto increased insecurity ..................................................... 25 - Risk management ..................................................................................................... 25 - Response to increased security ................................................................................ 27 ANNEXES Annex 1: Overall Review o f ProposedActivities and Strategic Objectives ..........28 Annex 2: Proposed Performance Indicators........................................................... 29 Annex 3: Status o f Performance Indicators for 2002 TSS ..................................... 30 Annex 4: Ongoing and Planned Support byKey BilateralDonors........................ Status o f Operations Approved since 2002 ............................................ 34 Annex 5: 35 Annex 6: Consultations with stakeholders ............................................................. 36 Annex 7: Burundiat a glance ................................................................................. 40 Annex 8: Map o f Burundi...................................................................................... 42 This document has a restricteddistributionandmaybe usedbyrecipients only inthe performanceo ftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization. I I REPUBLICOFBURUNDI INTERIM STRATEGY NOTE EXECUTIVE SUMMARY 1. ThisInterim StrategyNote (ISN) sets out a road mapfor Bank support to theRepublic of Burundifor FY06FY07. It was designed through an extensive consultation process with a broad variety o f stakeholders including Govemment, private sector, other civil society members, and donors. It builds on recent analytical work by DEC, and experience inAfrica and elsewhere, indealingwithpost-conflict countries. Background 2. Since 2000, Burundi has made considerableprogress towards peace, and political reconciliation, and taking the_firststeps towards economic and social recovery. It i s gradually emerging from more than 10 years o f instability and civil conflict that took a heavy toll on human lives and on the country's economic and social fabric. On the political / military front: (i)security has been restored throughout most o f the country. Peace and cease-fire agreements have been signed by all but one armed movement, the FNL, and negotiations between this organization and the govemment are planned to start over the next few weeks. Military fighting has halted in all but one province, Bujumbura Rural, where the FNL i s most present. The demobilization program was launched in December 2004, including combatants from former rebel groups and the army; (ii)a transitional constitution was adopted in October 2001, and a Transitional Govemment (TG), based on the principle o f power-sharing among the country's two main ethnic groups, was appointed in November 2001. A referendum to adopt the post-transition constitution was held on February 28, 2005, and national elections are expected to conclude during this summer. On the socialfront, the crisis remains acute. In2003, about 1.2 millionpeople (16 percent o f the population) have remained refugees and internally displaced. Social services delivery i s largely weakened, social capital has been eroded, and the spread o f the HIV/AIDS pandemic i s o f a serious concern. The chances for Burundi to achieve the Millennium Development Goals (MDGs) by 2015 have become a major challenge. 0 On the economicfront: (i)a solid economic program, supported by the Bretton Woods Institutions, including an ongoing Fund's PRGF program, has been implemented since the inception o f the Transitional Government; and, (ii) economic growth resumed in 2001 and 2002, and accelerated in2004. 3. The achievements, in particular on thepolitical front, while important stepsforward, are only the beginning of aprocess and need to be consolidated. Burundistands at a crossroads with daunting challenges ahead, but also very high stakes, not only for the country, but for the entire sub-region. Implementationofthe first 2002 TransitionalSupport Strateev 4. Thefirst 2002 Transitional Support Strategy (TSS) aimed to support the Government's transitional strategy in helping to stabilize the economy as the peace process evolved, and to prevent further deterioration of living standards. This strategy had four pillars: (i) demobilization of ex-combatants in the context o f the regional Demobilization and Reintegration 1 Program; (ii) prevention o f HIV/AIDS and support to health services; (iii) economic policy and institutional reforms to revitalize the economy and improve governance; and, (iv) donor coordination andresource mobilization. 5 . Overall, implementation of the 2002 TSS has been very successful. Bank support during this period has been credited with malung a critical contribution to the political and economic stabilization o f the country. All performance indicators have been reached or exceeded. Key activities and milestones included: (i) provision o f substantial, hands-on policy advice; and (ii) approval and satisfactory implementation o f eight new projects totaling US$167 million o f IDA credits andUS$92 milliono f IDA grants. The plannedBankStratepvfor FY06 FY07 - 6. ThisISN reflects the outcome of the consultationswith stakeholders in Burundi, and is also fully aligned with priorities set forth in the I-PRSP. Its objective i s two-fold: first, to consolidate achievements o f the past three-year transition period, and inparticular, to ensure that communities and populations have access to basic services and are supportive o f the peace process and the economic reform agenda; and second, to lay the bases for sustained economic recovery and growth. This will be undertaken in close coordination with other donors, with a view to maximizing synergies. 7. The strategic elements o f the ISN include: (a) improved security, social stability, and services delivery; and (b) debt relief, economic growth and diversification. Governance and institutional strengthening are cross-cutting issues that will need to be addressed throughout the whole program inorder to sustain progress. Specifically, the ISNaims at addressing: P First,the country's socialneeds, includingaccessto basic services, enhancedemployment opportunities, and stronger social capital in particular within rural communities. Proposed instruments would include: (i)fast-tracking the demobilization and reintegration o f ex-combatants; (ii) the scaling up (through supplemental financing) o f the ongoing public works and employment generation project; (iii)a nation-wide community development operation; and (iv) inthe health and education sectors, assisting the government in making the transition from an emergency-driven approach to a national policy-based operation; and > Second, the basis for a sustained economic recovery and growth. Proposed instruments would include: (i) assistanceto the Government to complete its full PRSP (scheduled for completion by early-2006); (ii)a budget support operation to help implement the Government's structural reform program (i.e. the coffee sector) and to clear sizeable domestic arrears to the private sector; (iii) assistance to the Government in the area o f public finance management, in order to keep the PRGFprogram on track and to enhance Burundi'schances to reachthe HIPCDecisionand Completion points; (iv) preparation o f a multi-sector infrastructure rehabilitation project inthe energy, water and sanitation sub- sectors; and (v) preparation o f a multi-sector analytical work on the sources o f growth. 8. Preliminary estimates put the fundingneeds o f the ISN at US$170 million in grant form. This amount is equivalent to the average Bank's financial assistance to BurundiduringFY02-04, which was about US$83 million per year, and i s only indicative. The actual amount will be determined by: (i) the country's own performance; (ii) performance relative to the performance its o f other IDA recipients; (iii)the amount o f overall resources available to IDA; and (iv) the terms o f financial assistance provided (grants versus loans). 2 INTRODUCTION 1. This Interim Strategy Note (ISN) aims at dejXng a road mapfor Bank support to the Republic of Burundi during FY06 - FY07. It follows an earlier Bank Transitional Support Strategy (TSS), covering the 2002-2004 period that was discussed by the Board on March 7, 2002. This Interim Strategy proposes a program for continued Bank support, building on the substantial progress made by Burundi over the last three years towards peace, political reconciliation, and economic recovery. It i s designed to help consolidatethese achievements, and to help establish the basis for a sustainable economic growth, including through assistance in the preparation o f the full PRSP. It was prepared withinthe context o f OPh3P2.30 on "Development Cooperation and Conflict", with a view to moving towards a Country Assistance Strategy (CAS) bythe end ofthe transitionperiod. 2. The new Interim Strategy was designedthrough an extensive consultationprocess with a broad variety of stakeholders. Consultations were heldwith the central and local Govemment, political parties, students, parliament, the private sector, other civil society members, and the donor community. These were held in Bujumbura, through formal consultations during August 23 - September 3, 2004. The outcome o f these discussions provided a useful guide for delineating Bank's assistancepriorities over the next two years (Annex 6). 3. The preparation of the new Interim Strategy draws from the Bank's growing ~ experience in post-conflict countries. Particular attention i s paid to Bank's research and experience inpost conflict countries, with regard to the assistance needed to support stabilization the Conflict Trap" - as well as general orientations and best practices from the Africa Region and and recovery. The planned strategic directions reflect recent analytical work by DEC - "Breaking elsewhere - "Post-conflict recovery in Africa: An agendafor theAfrica Region ". 4. This document is organized as follows: Part Ipresents a summary o f recent developments in Burundi. Part I1 reviews the implementation o f the 2002 TSS, discusses progress to date, and highlightssome o f the key lessons learned along the way. Part I11discusses Burundi's strategic objective for the coming period, andthe PRSP process. Part IV describes the key challenges faced by Burundiover the next few years, and Part V proposes a strategy for Bank support for the coming period. I.BACKGROUND CONTEXT AND A. Political Developments 5. A decade of political instability and conflict during 1993-2003 has been dreadful. Burundiobtained its independence in 1962, after about seventy years o f colonization. One o fthe legacies o f colonialism, however, has been the tensions between the two dominant ethnic groups, the Hutus (over 80 percent o f the population) and the Tutsis (around 15 percent). This tension that has fueled political instability and civil conflict for several years, took a heavy toll on human lives and on the country's economic and social fabric. Since the beginning o f the latest wave o f the conflict in 1993, over 300,000 people have lost their lives. By 2003, about 1.2 million (16 percent o f the population) have become refugees and internally displaced, The war has had a devastating impact on Burundi's economy, an impact that was compounded by an economic 3 embargo by neighboring countries', and several episodes o f drought. As a result, GDP per capita has fallen by almost 40 percent, from US$180 in 1993 to US$llO in2003. 6. A widening window of opportunityfor peace and stability. The international community sponsored a framework for national reconciliation and lasting peace among Burundians, under former Presidents Nyerere o f Tanzania, and Mandela o f South Afnca. Negotiations towards a comprehensive peace agreement were concluded in Arusha, Tanzania in August 2000. Signatories o f this Arusha Agreement included seventeen political organizations. However, several rebel groups, including the CNDD-FDD, the largest movement, and the FNL did not participate inthese talks. Inthis context, a transitional constitution was adopted inOctober 2001; a thirty-six-month Transitional Government (TG) was appointed inNovember 2001,based on the principle o f power-sharing among the country's two main ethnic groups. A transition parliament was installed inJanuary 2002. President Buyoya, a Tutsi, led the first eighteen months o f the TG, with Mr.Ndayizeye, a Hutu, as Vice-president. InMay 2003, a smooth hand over was observed, and Ndayizeye was appointed to lead the second half o f the TG along with a Tutsi as Vice- president. By the end o f 2003, the TG had signed new peace and cease-fire agreements with all armed political parties and movements that did not sign the Arusha Agreement, with the exception o f a fringe FNL faction. Since December 2003, major fighting has halted inall but one province, Bujumbura Rural, where sporadic FNL activity still remains. These new peace agreements resulted in a larger TG wherein leaders o f the new signatories are appointed. The thrust o f these new agreements has been to allocate power positions in the army, the central, provincial, and district Governments roughly in accordance with the relative political weight o f the respective groups. 7. Goodprospectsfor the integration of all armedfactions into new security and defense forces, and demobilizationand reintegration of former combatants that will not be enlisted in theseforces. The TG launched in January 2003 the preparation o f a national Demobilization, Reinsertion and Reintegration program (DRR), with support from the Bank and inthe context o f the regional framework o f the Multi-country Demobilization and Reintegration Program for the greater Great Lakes (MDRP). In May 2004, UN Security Council resolution No.1545 transformed the African Union interposition force (AMIB) into a UN peacekeeping operation (UNOB) to monitor cease-fire agreements and to support the consolidation of the peace process. UNOB has deployed about 5,000 peacekeepers and i s now at its mandated strength. This timely development i s expected to facilitate the implementation o f the DRR and the accompanying security sector reform program, 8. The demobilization process started smoothly in December 2004, and by end-February about 5,000 ex-combatants were demobilized. It i s expected that upto 14,000 ex-combatants will be demobilized 2005. Subsequently, thousands o f ex combatants will be demobilized every year until 2008, as part of the restructuring process of the new integrated National Defense Force. Financing o f the DRR program has been secured through an IDA grant (US$33 million) and the Multi-Donor Trust Fund (MDTF; US$41.8 million) o f the MDRP. The MDTF also finances a special project (US$3.5 million) for the demobilization, reintegration and recruitment prevention o f child soldiers inBurundi. 9. Progress in thepolitical transition has been reasonablygood though the road ahead, in particular the organization o f the national elections is expected to be another challenge. As per Followingthe assassination of the democratically elected President Ndadaye in 1993,the region's heads of state (including Rwanda, the DRC, Uganda, and Tanzania) institutedan economic embargo against Burundibetween 1996 and 1999. 4 the Arusha Agreement, national elections were scheduled to be held by end-October 2004. However, the TG has not been able to adhere to this timeline for political and logistical reasons. Burundian political leaders have chosen, to their credit, to bring to the forefront and to debate openly the sensitive issue o f the ethnic divide. Whereas this makes the process more challenging and slow, it i s likely to enhance the prospects o f sustainable outcomes. Thus, agreement to, and adoption o f a post-transition constitution that are pre-requisite to the organization o f the elections have proven to be thomier than anticipated. The issue o f power-sharing between the two main ethnic groups --inthe executive, legislative, and military institutions-- has been a major source o f dissent for a few Burundian politicians. The Tutsi-dominated political parties held the position that power sharing should also be allocated across political party lines, a position not endorsed by the TG. But thanks to the strong leadership and resolve o f the president o f the TG and the constructive attitude o f an increasing number o f Burundian leaders, the organization o f a referendum for the adoption o f the new post-transition constitution was held peacefully on February 28, 2005. General elections are scheduled to be completed duringthis summer. 10. Most of the county is currently at peace, with sufficient security for economic activities to resume both at the local level and on a county-wide scale, though fear and scepticism are widespread. A window of opportunity has opened, after eleven years o f conflict. Both DEC research and experience in other countries suggest that exceptional levels o f support are needed rapidly to take advantage o f this opportunity. Reconciliation efforts need to be consolidated, displaced persons need to be re-inserted in their communities, and thousands o f ex- combatants need to be demobilized and reintegrated. Furthermore, concerns are high among a large part o f the population about lack o f economic opportunities in the wake o f an expected lasting peace. Indeed, during the consultations with stakeholders, several participants indicated that a key obstacle to the peace process i s thepeople'sfear ofpeace, as the conflict has beenused to rationalize the deep state o f poverty. Thus, a strong signal for assistance from the international community would be an important contributor to the peace process. 11. The Gatumba massacre of over 160 Congolese refugees of Tutsi origin in August 2004 in Burundiprovided a somber reminder of the inter-linkages between the conflicts of Burundi, Rwanda and the DRC. The continued instability and lack o f law and order inthe eastem DRC provides a vacuum all too easily exploited by Burundian rebel groups. It i s hoped that the recent strengthening o f the UN peacekeeping presence in the eastern DRC (MONUC) will help minimize hture security threats emanating from that country. Negotiations with the FNL, which i s deeply entrenched inBujumbura Rural, have for awhile not shown much progress. However, the FNL has recently been expressing interest in negotiating cease-fire agreements with the TG. The first o f a series o f new negotiations are scheduled to start this springinTanzania. B. Economic developments 12. The decade of recurring conflicts has had devastating effects on Burundi's economy. In2004, Burundihasbecome the fourth least developedcountry inthe world, ranked 173rdout of 177 countries according to the United Nations Development Program - Human Development Index. Its social indicators are among the weakest o f Sub-Saharan Africa, and the percentage o f people living with less than a dollar a day has nearly doubled, from 35 percent in 1992 to 68 percent in2002. Real GDP declined by 25 percent over 1993-1996. As a result,just to reach the 1993 pre-war GDP per capita o f US$210 (constant 1995) by 2015, Burundi's economy would need to grow by an average annual rate per capita o f 8 percent (assuming a population growth rate o f 3 percent). 13. The Transitional Governmenthas been implementing a solid and ambitiousprogram of economicreforms. Following an IDA Emergency Economic Rehabilitation Credit supporting 5 the peace process in2000, Burundireceived assistancein2002 and 2003 throughthe IMF's post- conflict emergency assistance policy, and the Bank-supported Economic Rehabilitation Credit covering the period 2002-2004. It implemented successfully the IMF staff-monitored program (2002). Burundi is now implementing a reform program supported by the Fund's Poverty Reduction and Growth Facility (PRGF) covering 2004-2006. This performance, together with progress in the peace front, have encouraged "stepped up" international assistance. During a forum o f donors in January 2004, Burundi received pledges from a large number o f donors, totaling more than US$l billion equivalent (see Annex 5). 14. Macroeconomic developments have been broadly on track with the reform program. After almost a decade o f economic turbulence --due to civil strife and an economic embargo-- economic activity resumed a positive real GDP growth in 2001 (2.1 percent) and in 2002 (4.5 percent). Despite a decline to 1.1percent in 2003 due to adverse weather, a forceful recovery of coffee production and favorable weather in 2004 supported a retum to an estimated positive growth o f about 5.1 percent in 2004. However, as the economy remains highly vulnerable to climatic vagaries and external shocks, future growth will require increasing both resiliency and diversification. 15. The Government has made progress on the fiscal front, increasing the fiscal revenue to about 20 percent o f GDP and limiting military outlays to provide resources for pro-poor spending. However, accommodating former rebel factions into the national transition Government has been costly. In addition, the Government's response to the plunge in world coffee prices that started in 2000, was to guarantee bank loans to the coffee commercialization parastatals and hence, to incur heavy costs when the guarantees were invoked. Still, the Government has managed to limit its financing needs to what has been forthcoming from external assistance and to what could be borrowed domestically --without triggering monetary over- expansion. Inflation which averaged 24 percent in2000, fell to less than 9 percent in2002. It has been volatile recently, and reached an estimated level o f 10.5 percent in 2004. Transparent and competitive foreign exchange auctions have been implemented, and the differential between the parallel and the official rates has narrowedto below 5 percent in2004, from 30 percent in 1999. 16. The Government's medium-term macroeconomic objectives are: (a) to achieve real growth o f about 5 percent per year; (b) to raise public spending on the social sectors from 6 percent o f GDP in 2003 to 7 percent in 2004, and 10 percent by 2006; (c) to lower inflation to about 4-5 percent annually; (d) to maintain gross official foreign reserves at 4 months of imports o f goods and services; (e) to limit the deficit o f the external current account to levels that can be financed by grants and concessional loans; and (f) to substantially reduce the debt stock and debt- servicing ratios through the HIPC initiative. The Government seeks to disengage the State from the productive economy through privatization, and to establish a regulatory environment that is more conducive to private sector development. C. The debtissueandHIPC 17. Burundi has a heavy debt burden and limited resources, with a NPV o f debt-to-export ratio o f almost 1,800 percent after traditional debt relief. Alleviation o f this debt i s essential for consolidating the efforts to sustainpeace, stabilize the society, and revive the economy, as well as to deepen structural reforms for durable poverty reduction. Based on this analysis, even after applying traditional debt relief mechanisms', Burundi's external debt situation would continue to In March 2004 Burundi was accorded a Paris Club debt rescheduling under Naples terms, and has since signed a bilateral agreement with all members. Discussions are underway to secure 6 be unsustainable for a few years. The HIPC preliminary document was reviewed by the IDA and IMF Boards in January 2005. Burundi's track record on macroeconomic stabilization and reforms suggests that it could reach the HIPC decision point by June 2005. Following continued satisfactory performance under the PRGF, and one year of implementation o f the full PRSP including satisfactory review of the first annual PRSP progressreport, the completion point could be reached by early 2007. D. Internally Displaced Population O P ) and Refugees 18. I n 2003, it was estimated that about 1.2 millionpeople were internally displaced (IIP), or took refuge in other countries including 550,000 in Tanzania. The cease-fire agreement signed between the Govemment and the CNDD-FDD group in late 2003 generated much enthusiasm for refugees to return home. With the support o f the international community, the Govemment initiated a reconciliation process to encourage the re-settlement o f IDP and the return o f refugees. Inearly 2004, the Government presented to the donor community a National Program for the Rehabilitation o f Affected People (NPRAP), to be implemented over 2004-06. Progress in the re-insertion o f IDP and the return o f refugees has been good. InApril 2004, a survey conducted by OCHA found that about half the number o f IDPs that were established in specific sites have returned to their communities. By the end o f 2004, about 230,000 refugees have retumed home, thus leaving about 320,000 inthe refugee camps inTanzania. E. The persisting social crisis 19. Burundi's deep poverty constitutes a major risk for the country's recovery. While political progress, economic reforms and the return o f growth have produced visible results in Bujumbura and other places, the social situation remains appalling owing to: (i) widespread poverty; (ii) large number o f displaced populations; (iii) inadequate coverage o f health services; (iv) HIV/AIDS; and (v) ineffective education system. Indeed, the odds for Burundito reach the Millennium Development Goals (MDGs) by 2015 are slim (see Box 1). 20. The paucity o f reliable and detailed data makes it difficult to gauge accurately the scope and structure o f poverty in Burundi. The only household survey that allows for direct measurement of income poverty was conducted in 1998. According to this survey, poverty indicators have worsened in the last decade. Between 1992 and 1998, relative poverty rate3 has nearly doubled, from 35 percent in 1992 to 66 percent in 1998. Both urban and rural areas have been affected. Relative poverty was found to be slightly higher in urban areas, but living standards were probably lower inrural areas. In 1998, the poverty lines were Fbu54,000 and Fbu 250,000 respectively in m a l and urban areas4. Furthermore, households headed by women (divorced or widows) and by the unemployed were found to be more prone to poverty. Poverty risk appeared to increase with household size, and to decrease with the education level of the head o f the household. 21. The results o f a 2004 opinion survey funded by the Bank and covering 3,000 respondents provide insights on perceptions o f poverty and priorities for action. The survey results suggest comparable treatment from other bilateral and commercial creditors. A multi-donor debt service trust fund has been established, but to date, the contributions are insufficient to cover debt service in the medium term. IFAD has resumed lending activity; and the Afiican Development Bank in July 2004 reinstated its Burundi program with a grant-funded activity while it developed a strategy to clear arrears and resume lending, approved by its Board o n October 27. 3 Consumptionlevels below two-thirds o f the average per capita expenditure. 1US$=500 Fbuin 1998 7 that approximately 40 percent are subjectively poor'. More than 80 percent o f respondents think that poverty has either remained constant or increased over the last 5 years, o f whom more than 50 percent suggest a large increase. About 40 percent o f respondents predict that poverty will decrease in the next five years. A similar proportion anticipates a further increase in poverty. The majority of respondents relate poverty, first to the inability to feed their family, followed by lack o f decent housing, and inability to pay for medical expenses for family members. The satisfaction rate with the quality o f public services i s stated as generally low, especially among the poor (except for primary schooling which recorded moderately high levels o f user satisfaction); with satisfaction rates below 50 percent for maternities, health centers, and community centers. Lack o f assets, namely livestock, but also illiteracy and an inadequate state o f security are considered by respondents as major hurdles that limit the effectiveness o f their coping strategies against poverty. The end o f the conflict i s cited as the number one factor for reducing poverty by almost a third o f the respondents. Perceptions ofpriority needsfor the whole communi@ as indicated by the respondents include the provision o f potable water, followed by the promotion o f productive activities, construction of health centers and schools, support for community organizations, financial support and access to credit, and the promotion o f livestock activities. Suggestions regarding priority actions by the State rank health and education first, followed by security. Food security (in particular lower prices for consumption goods), and increased youth employment are also seen as important areas for State intervention. 5Subjective poverty i s a self-declared poverty by the respondent 8 Box 1: Targetsand currentstatus of MDGs in Burundi MILLENNIUMDEVELOPMENTGOAL 1990 TARGET STATUS REMARK I: Halve, between 1990and2015, theproportionof 34.9 30% 68% people whose income is less thanone dollar a day. 2: Halve, between 1990 and 2015, the proportionof N.A. 45 el people who suffer from hunger measuredinterms o f proportion o f underweight children under 5 years o f age. 3: Ensure that, by 2015, children everywhere, boys and 47% 100% 30% girls alike, willbe able to complete a full course o f primary schooling. 4: Eliminate gender disparity inprimaryand secondary 0.85 1.oo 0.78 GirlsI boys ratio. education by 2005, and to all levels o f education no later (Primary> (primary) than 2015. 0.57 0.75 (secondary) (secondary 5: Reduce by two-thirds, between 1990 and 2015, the 36 169 Per 1,000 under-five mortality rate. 184la 61la 208la 6: Reduce by three quarters, between 1990 and 2015, the Not 202 800 nation- Per 100,000 live maternal mortality ratio. available wide. 335 in births urban areas. c l 1OOOh 7: Have halted by2015 and begunto reverse the spread Not N o reliable HIV Prevalence o f HIVIAIDS. available data available rates between 9.5% and 10.5% increasing rate in rural areas. 9.5 el (40.1 malaria Per 100,000 people ~ 8: Have halted by 2015 andbegunto reverse the incidence o f malaria and other major diseases cases) d/ for both malaria and TB. 359 (TB There is incidence) significant progress 96.6% o f all onpolio, TB, new-born measles and vaccinated tetanus against TB & vaccinations. polio 9: Integrate the principles of sustainable development Non-quantitatwe. Substantial progress through adoption o f the into country policies and program and reverse the losses new forestry code. of environmental resources. 10: Halve, by 2015, the proportion ofpeople without 48 el Intemal sustainable access to safe drinlungwater (77% o f the (combining 47% el displacements have urbanpopulation has access to potable water, o f whom connections 22% bl reduced % o fpersons 23% do not have access to improved water services. 43% with good drinking o fthe rural population have access to improved water standposts) water sources. services. inurban areas and 71% for the a/. 2002 data from WDI 2004 b/.2000datafrom WDI 2004 c/. date from the MOH, Burundi di.1996-2002datafrom WD 2004 e/. basedon HIPC (Jan. 2004) document, using2002 provisional data 9 F. Governance and capacitv 22. Capacity of Government in managing public resources still remains largely eroded Institutions have weakened, administrative procedures are illadapted and/or hardly followed, and the legal framework needs to be updated. The current legislation that establishes budget principles upon which public finances inBurundii s govemed has been ineffect since 1969 and is obsolete. Inaddition, much of the public sector's human resourcebase has been destroyed. As a result, lack o f transparency and predictability in public resource management as well as over- centralization o f responsibilities has become an increasing concem; and vested interests appear solidly entrenched in a number o f areas. Duringthe consultations with Government officials and other stakeholders, good governance was listed as being critical to ensuring implementation of the economic reform agenda and the appropriate absorption of donors' funds. Areas o f concems included: (i) coordination o f planning and decision making by the central and local Governments, and implementation o f activities with active participation of local populations; (ii)improved transparency, and elimination o f discriminatory practices against certain geographical areas and population groups (see tables 1-4); (iii)improved access by decision makers to relevant information (using telecom, IT technologies, etc.) for policy making; (iv) effective decentralization; and (v) review and re-adaptation o f current regulations onprocurement. 23. Governance of the security sector in Burundi has been an important factor in the conjlict. Reform o f the national army and police forces has been a central political objective o f opposition parties and armed groups. In accordance with the provisions o f the 2000 Arusha Accord, as well as subsequent cease-fire agreements, the Government o f Burundi plans to fundamentally restructure the national military, police and intelligence services. This reform should lead to the re-balancing o f the ethnic and regional composition o f the officer corps o f the National Defense Force (NDF) and the national intelligence services. The restructuring process includes the demobilization and reintegration o f up to 55,000 Burundian ex-combatants. It will also provide the establishment o f a much larger national police force that will be responsible for ensuring internal security. UNOB and several bilateral donors, including the Netherlands, Germany, Belgium, and France are key players for providing technical and financial support to this process*. The DRR i s closely linked to these activities, as it will provide the "exit strategy" for soldiers that do not remain with the NDF. 'TheBankisprohibitedbyitsArticlesofAgreementfromgettinginvolvedinactivitiesofpoliticalnature, commonly understood to include work with police, intelligence services and the military. 10 E0 TABLE 1: NUMBEROF CLASSROOMS/ 1000 INHABITANTS 5 5 * + 43 c0 2 Q $ 01 Provinces TABLE2: HEALTHCENTERSPER 10,000 HABITANTSACROSS PROVINCES 150 100 0.50 TABLE3: RATIOOF MARKETS/20,000 HABITANTSACROSS PROVINCES 2.50 2 00 1 50 1 00 0 50 TABLE 4: METERS OF ROAD PER SQUARE KM2 11 11. IMPLEMENTATIONOFTHE2002 TRANSITIONALSUPPORT STRATEGY A. The 2002 TSS 24. The 2002 TSS aimed at supporting the Government's transitional strategy to stabilize the economy as the peace process evolved, and to prevent further deterioration of living standards. This strategy had four pillars: (i) demobilization of ex-combatants inthe context o f the regional Demobilization and Reintegration Program; (ii) prevention o f HN/AIDS and support to health services; (iii) economic policy and institutional reforms to revitalize the economy and improve governance; and (iv) donor coordination and resource mobilization. B. Overall assessmentand results 25. Bank support to the Government's strategy has been three-fold including: (i) analytical work and policy advice; (ii)support to the balance of payments; and (iii) investment projects. Overall, Bank support during the 2002 TSS period has been credited by the highest Governmental authorities, the UN Special Representative o f the Secretary General, donors, and civil society, to have made a critical contribution to the political and socio-economic stabilization of the country. A relationship o f trust has been developed with the Government and key stakeholders, includingboth the private sector and civil society. This has been instrumental in defining and implementing the program of economic reforms currently underway, and in supporting the overall recovery effort. Standard post-conflict-based performance indicators set for the 2002 TSS are presented inAnnex 3. C. Detailed implementation status 26. Substantial policy advice was provided to Burundian authorities. Bank's cooperation with the IMF has been very close, with Bank staff focusing on Public Expenditure tracking and review. The Bank's support to Burundi's access to HIPC included policy advice and technical assistance, as well as preparation o f a Joint Staff Assessment (JSA) o f the Interim Poverty Reduction Strategy Paper (I-PRSP). On governance and fiduciary issues, a Country Financial and Accountability Assessment (CFAA) and a Country Procurement Issues Paper have been completed. Support has also been provided, together with Transparency International, to help the Government design and start implementing its anti-corruption strategy. Finally, a Post-Conflict Social Sector Assessment has been conducted that provided valuable inputs to the preparation o f the PRSP. 27. Eight new projects were approved, in line with the strategy outlined in the 2002 TSS. These include six operations identifiedinthe TSS (an Economic Recovery Credit; a supplemental for the Second Health and Population; a supplemental for the Social Action; an HN/AIDS; a Road Sector Development; and a Demobilization and Reintegration projects); and two operations that were not included in the TSS, but were subsequently judged necessary to respond to Burundi's urgent needs brought about by the positive evolution o f the peace process (an Economic Management Support and an Agriculture Rehabilitation and Support projects). 12 28. Overall implementation of this portfolio is satisfactory. All projects are rated satisfactory on both implementation and development objectives. Appropriate procurement and financial management systems have beenput inplace. Results (notably from Box 2: Non-traditional ways of working the Public Works and Employment for implementation Creation Project, and the Economic Multi-sector approach - including multi-sector Recovery Credit) have been impressive. projects, and multi-sector teams for economic This was facilitated by the intensive use dialogue. o f non-traditional ways o f working (see Box 2). Risk management, not avoidance - through the introduction o f risk identification, early warning 29. The 2002 TSS period also and rapid response mechanisms to prevent helped generate the potential for re- slippages and implementation issues. engagementof IFC and re-initiation of the dialogue with MIGA. Contingent Involvement of the entire team in implementation help counterparts in the field beyond upon the improvement o f the security - to traditional roles. situation, IFC Regional office would initiate discussions regarding its Hands-on implementation support - with involvement in privatization o f the substantial assistance, both formal and informal, in CBB. It is hoped that IFC involvement the early stages o f implementation, and close will substantially expand in the coming follow up o f activities. period (potentially in the agribusiness, other SME industries, infrastructure, Decentralization - strong involvement o f country and telecom sectors). In FY03, MIGA office staff in imnlementation. provided US$O.9 million in guarantees to Mauritel, a Mauritius investor involved in Burundi's telecommunications sector. D. Lessons learned 30. Several insights have been gained from the implementation experience o f the 2002 TSS for future Bank and donor support to Burundi. These include (see Box 3): 0 First, continuous presence throughout the troubled period is critical. Keeping an active program and a country office inBujumbura has considerably facilitated the policy dialogue with the authorities and stakeholders, and has made it possible to move forward the reform agenda. It has generated, in many instances, the framework for effective interventions. The Country office is now staffed with experienced local and international staff, with local staff gradually taking more responsibility for the Bank-supported program. These staff are expected, inclose collaboration with headquarter-based staff, to help further deepen Bank's advice and assistanceto our clients. Second, hands on policy support is most effective. The Bank has played a key role in supporting Burundi's authorities to prevent complete collapse o f the economy, and to undertake in-depth economic reforms. Such support has been provided through hands-on policy advice (such as regular and intensive informal dialogue) in response to Government's request, and has proven most effective. Dialogue has included parliamentarians, labor unions, business organizations, and civil society. e Third, risks can be managed. Although Burundirepresents a highrisk environment, the current satisfactory status o f Bank-supported portfolio suggests that it i s possible to achieve results on the ground. The chosen approach o f managmg risks with flexibility, andnot avoiding them, has proven effective and therefore should be pursued. 13 Fourth, budget support hasproven essential. Provision o f balance o f payments support to finance imports needed to rehabilitate economic and social infrastructure and to implement policy and institutional reforms, is critical in a post-conflict environment. This hasbeen highlightedbythe successful experience o fthe Economic Recovery Credit. Box 3: Lessons of post-conflict assistanceprograms Over the last years, several lessons have emerged from Bank assistance to post-conflict recovery, including: Exceptional levels of financial assistance are needed for a long period. DEC research, analyhal work in the Africa region, and experience in post-conflict countries, show that an exceptional level o f financial support is necessary for close to ten years to face the challenges associated withpost-conflict recovery. Aid is key to prevent thefall-back in conflict. About half o f the countries emerging from conflict return to violence within five years. Aid focused on growth and improved governance can make a critical difference. Risks need to be managed, not avoided. Working in a post-conflict country i s often a high- risk,high-gain endeavor. * Effective assistance topost-conflict countries requires an overhaul of standard approaches e.g., the careful design of the nature, pace, and sequencing of reforms, and not to focus on specific programs e.g. for war-affected groups. Successispossible -as evidenced inAfi-ica bythe cases o f Mozambique andUganda. HI. THEROADAHEAD 31. The new Strategy needs not only to build on past successes, but also to tailor the planned assistance to the new political context in Burundi. The commitment to continued reforms that has already been demonstrated by the TG bodes well for the coming period. New opportunities have emerged, although with new risks. However, experience in other counties shows that the level and nature o f post-conflict assistance has to be continuously adjusted to reflect and accompany changes in the political environment. There have been instances where external assistance, while initially very successful, has eventually failed to deliver the type of support needed for medium-term recovery - inpart because the initial strategy has been adhered to for too long, and the necessary shifts havenot takenplace intime. A. Burundi'sstrategic objective for the cominp period andthe PRSP 32. Breaking the cycle of conflict and impoverishment. Attempts at linking factors o f conflict and poverty were very limited inthe I-PRSP. Foremost, this included the recognition o f structural poverty, and the degree to which it had been aggravated by the conflict. Inthe context o f the ongoing full PRSP process, ex-combatants have representatives or committees representing their interests in some communes, and the PRSP Steering Committee aims at integrating them into the planned consultations. Looking ahead, the key challenge for Burundi is to consolidate achievements o f the last three-year transition period so as to help prevent renewed conflict. A two-pronged strategy i s hereby proposed, focusing on addressing urgent needs, and tackling some of the deep-rooted causesofconflict, includingenhanced prospects for poverty reduction. 14 B. The PRSPprocess 33. The PRSP process is expected to be instrumental in articulating Burundi's developnient challenges. The InterimPRSP was completed inNovember 2003, and the JSA was discussed by the Boards o f the World Bank and IMF in January 2004. It is centered around six main themes: (i) peace and democratic governance; (ii)economic reintegration for victims o f conflict and disadvantaged groups; (iii)private sector promotion; (iv) human capital development; (v) HIV/AIDS; and (vi) advancing the role o f women in development. The approach o f this InterimStrategy is, in addition to assisting Burundi to prepare its full PRSP, to address the six main themes o f the I-PRSP through two main pillars: (i) improved security, social stability, and services delivery; and (ii) debt reliex economic growth and diversijkation. Governance and institutional strengthening are cross-cutting issues that will need to be addressed throughout in order to sustain progress in implementing the two pillars. These are discussed below, inPart IV "Key challenges". 34. The formulation o f the full PRSP was launchedinMay 2004 under the leadership of the Head of State. The Government has formulated an action plan, budget, and timetable to that effect. With support from the Bank and other donors, the full PRSP i s expected to be completed through an extensive consultationprocess by early-2006. Progress to date includes: 0 Establishment o f an organizational framework for the participatory processes at the national, provincial and communal levels. The objective i s to carry out extensive consultations, also inthose provinces that were not accessible during the I-PRSP process due to security reasons; 0 Organization o f workshops at provincial and communal levels to inform and discuss with local Governments and key stakeholders, the PRSP formulation process and expected outcomes; 0 Establishment o f communal and provincial "Poverty Reduction Committees" in order to bring the participatory consultation process closer to the participants, especially at the level o f the "collines"; 0 Establishment o f a "contact group" composed o f representatives o f UN agencies and international NGOsto discuss issues relatedto the PRSP; 0 Re-activation and training o f the coordination team composed o f focal points from technical ministries, civil society organizations, NGOs, religious groups, labor unions, and parliament to assist the Permanent Secretariat in the design and implementation of the full PRSP Action Plan. 35. The Bank team considers the preparation of a full PSRP that is as participatory and inclusive as possible, to be a critical outcome of the two-year period of this Strategy. It will require very close consultations with the Government and other donors to ensure that the preparation process i s adequate. Donors' support to the PRSP process has generally been considerable, interms o f technical assistance and financing, includingthe Bank, UNDP, Belgium, UNFPA, and Action-Aid. However, many donors have lamented about the lack o f regular consultations with the Government on progress in the preparation o f the PRSP. As a result, the PRSP Steering Committee has recently begun to hold a few meetings with the donors. Plans to institutionalize this consultation mechanism with the donor community have been finalized amongst the PRSP Steering Committee, UNDP and the Bank. 15 IV. THEKEY CHALLENGES A. Improved securitv, social stability, and service delivery 36. The issues of security, social stability and service delivery are closely linked. These are at the heart o f the "conflict-poverty" vicious cycle. The challenge for Burundiis "to walk on two feet" through a full implementation o f the DRR program, and the efficient delivery o f social services. A failure to provide effective assistance to enhance reintegration opportunities for ex- combatants would provide forces opposed to the peace process with a pool o f disaffected persons with military experience and who could easily be manipulated. There has been strong political support from former rebel groups as well as Government's officials for the implementation o f the program. It features a substantial social and economic reintegration assistance component, and seeks to proactively link ex-combatants to broader economic recovery efforts. In this context, a re-integration strategy for ex-combatants has been prepared by the TG, with much hands-on assistance provided by the MDRP. 37. The effective implementation of the National Program for the Rehabilitation of Affected People, which remains critical for the socio-economic reconstruction of Burundi, faces several challenges. The TG has yet to define a national policy for the re-insertion o f victims o f conflict. It needs to define the institutions responsible for addressing policy and operational issues; it needs to ensure access to land and other resources by IDP and rehgees; and it needs to sensitize and enhance capacities of communities to provide support for the smooth implementation o fre-insertion programs. Efforts are underway, but muchremains to be done, in particular to facilitate coordination o f donors' efforts. 38. There is a need to rapidly improve social conditions. This i s critical to enhance Burundi's prospects to reach the Millennium Development Goals, but also to ensure that communities and populations are supportive o f the peace process and the economic reform agenda. Priorities include: (i)rehabilitating the health sector and curbing the spread o f the HIV/AIDS epidemic; (ii) improving water supply and sanitation; (iii) revitalizing the education sector; and (iv) helpingthe neediest. 39. The HIV/AIDSpandemic has been aggravated by frequent and intermittent large-scale population displacements, severe deterioration o f the health system (due to widespread destruction o f health infrastructure and massive exodus of trained health personnel), the presence of foreign troops from countries with high HIV prevalence rates and increased sexual violence inflicted on women during the conflicts. The current national HIV prevalencerate i s estimated at 11percent with urban rates as highas 18 percent and lower but steadily increasing rural rates o f about 7 percent. To help curb the spread o f the disease, a multi-sector national HIV/AIDS Program supported by IDA, Global Fundand bilateral donor resources i s being coordinated by a National A I D S Council. A ministry has been created and specially mandated to interact with sector ministries and civil society organizations involved in implementing the program. This program focuses efforts on: (i) creating increased awareness and changing behavior to prevent new infections, (ii) providing comprehensive care and treatment for persons already infected, (iii) alleviating the impact o f A I D S through support to Orphans and vulnerable children, destitute households, and workers in key sectors; and (iv) strengthening institutional capacities o f Government, NGOs, and community-based organizations and stakeholders. 40. The Health sector. Many years o f conflict and civil strife destroyed most o f Burundi's health infrastructure. Its health personnel were drastically reduced by the war, both by the widespread exodus of trained personnel to other countries and the increased mortality from 16 HIV/AIDS related causes. Consequently, there are significant regional inequalities inthe quality of health services and major inequalities in the accessibility o f available services. Major causes o f morbidity and mortality are preventable infections, communicable diseases and traumas, with malaria, acute respiratory infections, tuberculosis, diarrhea and malnutrition topic the list. Under- five year old immunization has increased inrecent years, and more women o f child-bearing ages are now protected against tetanus. The disruptive effects o f the war have had an adverse effect on reproductive health, family planning and environmental sanitation. Consequently, infant mortality remains high, estimated at 169 per 1000, well above the African average o f 114 per 1,000, and certainly far below the MDGtarget o f 36 per 1,000 by 2,015. Maternal mortality is relatively high(800 per 100 000 live births), also well above the MDGtarget o f 202 per 100 000 by2015. 4 1. Towards a National Healthpolicy. Government has embarked on a national consultation to formulate a strategy that aims at improving access to quality and affordable basic services to the general population. The short-term objective o f the new policy i s to restore pre-crisis level of services in all provinces through: (ijinfrastructure rehabilitation and re-equipment, especially in rural areas and poor urban neighborhoods; (ii) establishing a reliable essential drugs supply chain and institutingperformance-based delivery systems; (iii) promoting community participation in the management of decentralized health facilities; (iv) strengthening preventive (reproductive health, immunization, sanitation, nutrition education) and curative care through structured management and monitoring o f epidemics, particularly HIV/AIDS; and (v) training and retraining o f health personnel o f all categories, and using incentives to deploy and retain them in the health facilities, especially in rural areas and secondary towns. The medium term objective i s to institute and carry through sector reforms including: (i) establishing an independent national drug agency with management autonomy; (iij initiating and developing a decentralized health sector management system which accords management autonomy and eventual co-financing responsibility to local health committees; and (ii)instituting a coherent operational research program to detect and adequately address vulnerability and inequalities. 42. Sanitation and Potable Water. Solid waste collection remains an important problemwith more than 50 percent o f waste produced daily in Bujumbura uncollected. Open dumps are common and uncollectedrefuse drains into the Tanganyika Lake, the only source o f water supply for the capital city. Access to sanitation services remains limited in Bujumbura and in secondary towns. About 20 percent o f the existing sewer network inBujumbura was built 50 years ago, and i s not maintained. Sanitation services in rural areas are limited and only 22 percent o f the population use functional facilities, 90 percent of which are traditional pit latrines. Access to in- house water connections in urban areas is less than 50 percent, and only 29 percent o f the urban population has access to water standposts. Inthe rural areas, only 43 percent o f the population has access to potable water. About 40 percent o f rural water supply i s derived from the existing 22,000 improved spring facilities, the bulk o f which are non functional. In addition, the efficiency in the delivery o f water by the national water and electricity company remains low, with unaccountedfor water rates as highas 40 percent in2001. 43. Education. Less than half the population i s literate. Primary school enrolments have only been restored to the pre-crisis long-term trend level o f the early 1990s, at a gross primary enrollment ratio o f 73 percent (net enrollment 51 percent). A t secondary level, the gross enrollment ratio o f 10 percent i s below the average of Sub-Saharan A f m a (26 percent). There are significant disparities across geographic regions and gender. Gross enrollment rates range from 85 percent in Bujumbura to 9 percent in the province o f Bubanza. Females comprise 45 percent of the students at primary level, and 25 percent at university level. In the non-formal education system, about 300,000 students are enrolled to receive basic instruction but the effectiveness of this system i s very limited. Evaluations have found that students inyear 6 o f the 17 non-formal literacy training, at best attain the educational standard o f a pupil inyear 3 of formal primary school. Low enrollment appears linked to the difficulty o f paying school fees, school uniforms and study materials. Education at all levels suffers from a lack o f qualified teachers, and this problem i s particularly acute in the community colleges. Shortcomings in terms o f infrastructure and teaching materials (aggravated by the war's damages) are further constraints on educationalperformance. 44. The efforts in the short term will be focused on ensuring the availability o f minimum school supplies, redeploying teachers where there are shortages, organizing teacher training courses, and rehabilitating facilities. Inaddition to these emergency actions, strategies need to be launched to revive the development o f the sector. Key actions to reach the objectives o f universal primary enrollment and improved access, quality and relevance at secondary and higher education include: (i)training o f trainers at all levels in sufficient quantity and quality; (ii) updating technical education and university curricula and regulation; (iii)providing suitable teaching materials; (iv) upgrading the status and career prospects o f teachers; (v) better school planning and improved distribution o f schools ("school map"); and (vi) implementation o f a framework for community empowering andparticipation inprimary and secondary schools. B. Debt relief, highand shared economic growth and diversification 45. For Burundi to achieve higher and sustained growth performance, it would need to unleash theproductive capacity of the economy, in particular in the agricultural sector. This will require: (i)improved and sustained macro-economic management, fiscal mobilization, and public expenditure management - within the context o f the PRGF. Such a multi-year endeavor will require difficult political decisions, but is critical for Burundi to secure benefits from the HIPC; (ii) continuous improvement in the business environment for growth in agriculture and other non-agricultural activities; (iii)reconstruction, improvement, and development of basic infrastructure, particularly transport and utilities (water, electricity, telecommunication). This will require sizable extemal financial support as well as some institutional strengthening- with a particular view to the regional dimension o f this issue; and (iv) external support througha mix o f budget support, institutional strengthening, targeted analytical work, as well as direct support to private sector development (e.g. by IFC and MIGA). Inview o f the ongoing social crisis, visible results would be important early on, inorder to stabilize the situation and create an environment for reforms. Inthe short-term, efforts will hence focus on opportunities for quick-wins. 46. The agricultural sector is likely to remain theprimary source of growth of the economy over the medium term. Burundian agriculture occupies over 90 percent o f the population, accounts for 50 percent o f GDP, and provides over 80 percent o f export eamings. Cropping activities are mainly rain fed and subsistence-based. Cash crops include mainly coffee, tea and cotton. Tremendous development potential exists for livestock and fishery. Export production includes coffee, tea, rice, sugar, and cotton, but with a heavy dependence on coffee which accounts for about 50 percent of total export receipts (1999-2002). The performance o f the agricultural sector (and its ability to generate foreign currencies) has been largely weakened by unfavorable evolution o f world price movements, but several intemal factors have also played a significant role. First, the conflict has taken a heavy toll on the production capacity o f the agricultural sector. Crops and cattle were pillaged, and distribution and marketing channels for agricultural inputs and products collapsed. Second, farmers have little access to agricultural training and extension services and to agricultural credit for the purchase o f agricultural inputs. Third, Burundi's high population density has led to inefficient and ecologically damaging agricultural practices e.g. extension into fragde ecosystems and marginal lands, overgrazing, and shorter fallow periods. Because the anticipated response to population pressure on land (land productivity enhancement or yield increasing production practices) has yet to materialize, ill- 18 advised production practices, deforestation and watershed degradation have led to increased siltation o f the lake Tanganyika and the Nile and Congo river watersheds, threatening biodiversity and other ecosystems. 47. The agenda for actions. On the policy front, with support from donors including the Bank, the IMF, and the E.U., Burundi's Government has initiated a reform program inthe coffee sector (see Box 4). Additional measures are scheduled in the tea, cotton, and sugar sectors. Efforts to promote the involvement o f small scale agro-industries would be important for the development o f other higher value-added crops such as vegetables and flowers where there are some well established traditional practices. Off-farm activities, namely agricultural processing, also have good development potential. Enactment o f a new land legislation that would reduce disincentives against on-farm investments i s underway. In order to help rebuild on-farm assets, the Government has started implementing a matching grant program designed to provide funding support to farmers' groups for the implementation o f productive and income generating activities. A national program to enhance the supply and the quality o f training and extension services to small producers, and to provide backstopping support to farmers' organizations i s being implemented. Finally, a National Action Program to address the problem o f Land Degradation was reviewed in September 2003. Prospects for its implementation are encouraging, following positive results o f an FA0 supported pilot program that includes adoption o f more sustainable farming practices on steep slopes in some areas. The new Bank and GEF funded AgricuEtural Rehabilitation and Sustainable Land Management project is expected to further progress on NRM, byreducingpressure on fragile marshlands. 48. Infrastructure services remain costly and inefficient, thus making the cost of doing business very high. For instance, transport frondto the sea costs about US$250/ton. Despite the recent liberalization in energy, water and telecommunications sectors, utility services are still providedby de facto inefficient monopolies, with hightariffs andpoor services. 49. Transport. The I-PRSPestablishes a direct link between limited access to infrastructure services and the deteriorating social and economic indicators. Burundi is a small landlocked country, from over 1,500 kmto the nearest sea port. The country depends essentially on its road network for transport, and its small size limits intemal air transport. Recent analytical work on the sector has led to the conclusion that prolonged lack of maintenance, together with the deterioration caused by heavy rain falls, have placed most of the country's infrastructure in an almost "non maintainable" status. To clear the backlog of maintenance and reposition the infrastructure in a maintainable status would require not just increased financing but, more importantly, a set o f complementary short- and long-term reforms. 19 Box 4: Coffee sector reform Coffee remains the mainstay of Burundian economy. Performance of this sub-sector has been handicapped by many external and internalfactors: (i) a continuous decline of the worldprice in real terms; (ii) inadequate Governmentpolicies leading to the dominance of parastatals such as OCIBU, and ineficient institutional and organizational arrangements; (iii) lack of adequate regulatory framework; and (v) the negative impact of the conjlict onfarm production. Thesefactors have led to huge and unsustainable losses, andpersistently lowfarm-gate prices. New Government's commitment to reform the sector has emerged, with the recent adoption of a coffee sector developmentstrategy, based on two main pillars: (i) thefull liberalization of the sector; and (ii) theprivatization of all government-owned assets along the value chain. The reform is aimed at improving the "resiliency" of the sector, namely to world prices fluctuations by improving the regulatory environment, fostering competition and eficiency, and enhancing farmers ' productivity and revenue. Several issues remain to be addressed: Successful reform outcomes hinge on the capacity of the Government to take bold actions: (i) paving the way for an open business environment expected to enhance the involvement of national and international investors; (ii) securing the interventions of private financial institutions to meet the needs of the sub-sector; and (iii) providing supportive environment to increase production and productivity feeder road, information, extensionhesearch, diversijicationpolicy etc.). Forum of stakeholders, A key step for the implementation of the reform agenda has been the organization by the Government of a workshop in March 2005 during which a variety of actors in the sector, including the private sector (domestic and foreign) and farmers discussed extensively the implications for the liberalization andprivatization, as well as supporting measures necessaryfor the success of the reform. Afollow-up action plan is being prepared by Governmentfor discussion with donors. 50. The strategy set forth by the Government to address the transport sector issues emphasizes seven areas, namely: (i) preservation o f existing road network; (ii) increasing local financial resources for road maintenance; (iii) improving the sector management performance; (iv) involving beneficiary populations; (v) improving access to the sea, and balanced development o f the road infrastructure; (vi) improving road safety; and (vii) contribution to poverty reduction. Lessons learned from the implementation o f the on-going Public Works and Employment Creation (AGETIP) project are that outsourced labor-intensive contract execution, together with active community ownership and participation can lead to a speedy increase inthe stock o f sustainable infrastructure and delivery services in rural and urban areas. However, scaling-up the results achieved under the AGETIP would require vigorous support to community development as well as enhanced capacity buildinginplanning, programming, and monitoringfor infrastructure development. This is an important element o fthis ISN. 51. Access to electricitv in Burundiremains one o f the lowest in Sub-Saharan Africa with less than 5 percent coverage. Acute shortages o f electricity supply, low urban coverage and large swaths o f rural population without any access to services are important hurdles to the promotion o f economic activities. 52. The business environment remains unfavorable for private sector development. Inthe early 1990s, the Government launched efforts to support private sector growth and diversification o f the economy through: (i) promotion o f specializedinstitutions to support private sector agents; and (ii) liberalization o f key economic sectors. But more needs to be done, both to improve the regulatory environment and to implement a privatization program that covers about 15 public 20 enterprises. The program includes, inparticular, a telecommunications company (ONATEL), the energy parastatal (REGIDESO), all government-owned assets in the coffee sector, and a cotton ginning factory (COTEBU). The Government also commits to sell its stake intwo commercial banks, namely Banque Commerciale du Burundi (BANCOBU) and Banque de Credit de Bujumbura (BCB). 53. The financial sector is small and weak. There are seven commercial banks that are involved largely to lending to the Government. Duringthe 2003/2004 period, there has been an injection o f private capital into the commercial banking sector which helped improve its image. Although available knowledge base on the sector i s sketchy, it appears that it needs restructuring and strengthening o f its capacity in order to be able to accommodate potential private sector growth in the economy. In addition, encouraging results have been achieved in the area o f mitigating political risks on financial intermediation by ATF, the African Trade Insurance Agency, funded by the Bank and covering several countries inthe sub-region. C. Governance andinstitutionalstrendhening 54. The Government has engaged in an ambitious program to improve economic governance. In early 2004, an audit o f the Treasury has been conducted, and the Government appointed a Minister o f Good Governance whose responsibilities span across several ministries. An action planto reformthe procurement system has been adoptedby the Government andplans for its implementation are being completed. Authorities are also inthe process o f establishing an Office of the "cours des comptes" in charge o f auditing Government's resources and expenditures. A CFAA was conducted in June 2004, the recommendations o f which helped outline a detailed plan of actions for implementation by the Government. The recent Bank- funded Economic Management Support credit has been a key vehicle for implementing the CFAA recommendations, including: (i) the updating o f the legal and regulatory framework; (ii) reinforcing the operating capacity o f institutions charged with effecting and monitoring budget execution; (iii) reorganization o f the institutional arrangements including those for ensuring proper State control of public finances; and (iv) installation o f integrated informationsystems. In addition, following request fiom Burundianauthorities, the Bank will provide technical assistance in the implementation of the Public Expenditure Tracking Survey (PETS) to improve poverty reduction impact through effective transfers of resources to primary beneficiaries. And although not foreseen under this ISN period, the Government acknowledges that further work inthis area will berequiredto improve the public finance management. 55. Towardsa decentralized administration. There appears to be strong demand from civil society and Government for an active support to decentralization. Key objectives would include (i)empowerment of local communities and strengthening of their capacities; (ii)fostering synergies between community-based entities and local Government; and (iii) improvement o f basic service delivery at the grassroots level. Throughout the consultations with national stakeholders in the context o f the preparation o f this ISN, demands for community support have been ubiquitous. Most observers concurred that rebuilding social capital at the community level i s critical for restoring adequate delivery of social services, and for consolidating the peace process. In Burundi, there have been several positive experiences on community development support upon which a scaled up, national initiative, could be built. Community Development Committees (CDCs) have beenpromoted as key institutions for the devolution o f powers to local communities. The next step i s to provide legal recognition for elected members o f CDCs and their expanded capacity for decision making and implementation including (i) regular updates of Community Development Plans; and, (ii) identification and management o f necessary resources for implementation and monitoringo f activities at the locallevel. 21 v. A WORLD BANKGROUPTRANSITIONALASSISTANCESTRATEGY A. Operational context 56. This InterimStrategy was prepared within the context of OP/BP2.30 on "Development Cooperation and Conflict", with a view to moving towards a Country Assistance Strategy (CAS) by the end o f the transition period. It is expected that progress will be made during the period covered by the ISN, inparticular, towards improved security situation, development o f a broader knowledge base, and the preparation o f a full Poverty Reduction Strategy Paper (PRSP) that will provide the basis for a formal Country Assistance Strategy (CAS). B. Obiective and strategic elements of the I S N 57. This ISN reflects the outcome of the consultations with stakeholders in Burundi, and is also fully aligned with priorities set forth in the I-PRSP. Its objective i s two-fold: first, to ensure that communities and populations have access to basic social services and income generating activities and thus, are supportive o f the peace process and the economic reform agenda; second, to help restore the foundations on which growth and poverty alleviation efforts can be sustainably undertaken, including supporting the preparation o f a participatory and inclusive full PRSP. C. Instruments for Bank Group assistance 58. The ISNproposes a six-fold intervention plan aimed at: (i) maintaining the satisfactory implementation status o f the existing portfolio; (ii) helping Burundi reach the HIPC Decision point and move towards the Completion point (expected within 18 months after the Decision point); (iii)launching selected new lending operations; (iv) providing non-lending services; (v) engaging other donors; and (vi) involving the entire Bank Group. a. Managing the existing portfolio 59. Over half the number of projects in theportfolio will be closing during the ISNperiod (Table 5) and implementation performance to date is satisfactory. Particular efforts will be made in the coming years to maintain this result. This will be the first priority for both the Government and related Bank staff, particularly since existing projects are among those that are most likely to translate into actual results on the ground over the I S N period. This focus will translate into continuing to implement and to further expand the current implementation support strategy that aims at: strengthening the country office, inparticular to increase its reach out o f Bujumbura and facilitate its involvement inthe outer provinces; continuing to develop effective approaches to portfolio management, including increased responsibility devoted to the country office-based staff for managing the portfolio; scaling-up wellfunctioning projects; promoting intensiveparticipation of local communities inproject design; ensuring adequate budget allocations for implementation support; providing sufficiently frequent implementation support missions; and reviewing on a regular basis, and possibly adjusting, implementation mechanisms for ongoing projects, as may be necessary (in particular to prepare for an eventual transfer o f 22 responsibilities from the ad hoc institutions created over the last two years such as PIUs, to line ministries and other relevant technical entities). Pillarsofthe ISN CurrentportfolioofBank-fundedprojects FY Improved Security, HIV/AIDS Social Stability, and Service Delivery Road Sector Development Debt Relief, Regional Trade Facilitation (supplemental) FY11 Economic Agriculture Rehabilitation and Sustainable Land Management FYI1 b. HelpingBurundireachtheHIPCDecisionand Completionpoint 60. Substantial assistance will be provided to help Burundi meet the requirements for meeting the Decision point under the Enhanced HIPC initiative by mid-2005, and Completion point within 18 months thereafter. This will in particular call for intensive assistance to the Government to keep the PRGF reform agenda on track. It will also require close collaboration between donors and the authorities to ensure adequate processes for the preparation of the full PRSP. For the Bank, an internationally recruited staff has recently been posted at the resident mission, and will devote much o fhis time to this issue. c. Launchingselected new lendingoperations 61. To help Burundi address priority issues associated with the transition and recovery process, a program ofjinancial assistance (Table 6) totalingUS$170 millionis planned. These operations will be financed through grants, under IDA 14 for post-conflict, debt distressed countries, and on the basis of an allocation reflecting post-conflict performance. This amount is indicative only. The actual amount will be determined by: (i) the country's own performance, (ii) its performance relative to the performance of other IDA recipients, (iii) amount o f overall the resources available to IDA, and (iv) the terms of financial assistance provided (grants versus loans). The planned operations are expected to be implemented throughout the country, with a focus on ensuring a distribution of benefits across all provinces. These include, as key contributors to the first pillar of the ISN, a Community Rehabilitation project, an Education/Health sector project, and a Supplemental to the ongoing public works project. These are critical to facilitate the re-insertion o f IDP and ex-combatants to their communities as well as to reduce the gaps in access to basic services across communities and provinces; to enhance employment creation prospects, particularly for the relatively unskilled labor; and to help manage the transition to national policy-based development in the health and education sectors. As contribution to the second pillar of the I S N and to help improve basic infrastructure services such 23 as in the water and sanitation sectors, and in energy, planned activities include: a multi-sector infrastructure rehabilitation project, an economic rehabilitation operation, as well as an agriculture-focused sources o f growth study (Table 7). Table 6: Composition of plannedfinancial assistance duringthe ISNperiod Possible Pillars of the I S N Plannedprojects amounts py EducatioflealthSector RehabilitationProject 30 FY07 Improved Security, Social stability, Community Rehabilitation Project 30 FY06 and Service Public Works and Employment Creation Project - 30 FY06 Delivery supplemental d. Providingnon-lendingadvisoryservices 62. Non-lending services are a critical component of Bank assistance. It i s expected that the planned analytical work (Table 7) would be translated into practical, policy specific measures that can be implemented in the short and medium-terms. The ISN proposes to focus on: (i) advisory services for implementation o f the ongoing economic reforms program; (ii) analytical work to strengthen the knowledge base (including key core diagnosis tasks) and to prepare for new lending operations for the post-transition era; (iii) studies and technical assistance to support the PRSP process, such as an agriculture-centered study on the "sources o f economic growth"; and (iv) preparatory analyhcal work on external debt which is expected to be completed by the beginning o f FY06. This assistance package will be partly financed through ongoing operations with the view to ensure that non-lending activities best meet the Government's needs, and mitigate Bank's administrative budget constraints. Co-financing from other donors will also continue to be sought, as well as fundingfrom Trust Fundsmanagedbythe Bank. Table 7: Plannedkey nonlendingservices duringthe I S Nperiod I Delivery I Country Status Report on Education f FY06 I Growth, and Diversification Debt Sustainability Analysis FY06 24 e. Engaging the entire Bank Group 63. There is increasing interest by IFCfor re-engagement in Burundi. As indicated by a recent IFC mission to Burundiin December 2004, "should the democratic process be successful as anticipated, there may be a huge role for IFC - Private Enterprise Partnership (PEP) Africa in the areas o fprivatization, technical assistance inthe financial markets, agnbusiness, infrastructure and others". A follow-up IFC mission inJanuary 2005 confirmed this institution's interest inre- engaging inBurundi. D. Donor coordination and selectivity 64. Efforts made by the Government during the 2002 TSS period to mobilize and coordinate donors have beenpaying of$ While detailed data are somewhat difficult to compare and aggregate, information received at the January 2004 Donors meeting suggest that the international community has taken steps both to increase its commitments and to accelerate implementation. The Bank being a large financier may need to be involved in a broad range o f sectors, but it still needs to maximize impact o f its relatively limited resources. The synergy betweenthe plannedBank program and donor activities was discussed with key donors duringthe I S N consultations. Selectivity criteria have been agreed upon with Burundian stakeholders and other donors. These include: (i) activities that promise to have the largest pay-off with regard to supporting the recovery and reconciliation; (ii) areas in which the Bank has a comparative advantage v i s - h i s other donors currently involved in Burundi including where the Bank i s already active; and (iii) that are complementary to other activities planned or underway -to areas be supported by other donors or local stakeholders. As a result, several initiatives for improved donors' collaboration are underway or planned, involving: (i) the Bank, the E.U., France, and Belgium to support Government's plan to implement the CFAA recommendations; (ii) the Bank, FAO, E.U.,UNDP, and France on agriculture includingreform o fthe coffee sector; (iii) E.U. the and the Bank on infrastructure; (iv) Af.D.B., UNESCO, and the Bank on education; (v) WHO and the Bank on health and HIV/AIDS; (vi)UNOB, the Bank, Belgium, France, DFID, and the E.U. onDRR; and (vii)LJNDPandthe Bank on PRSP (see Annex 5). E. Expected results, monitoring and evaluation 65. TheISNproposes to assessperformance against a set of indicatorsaimed at measuring the outcome of Bank support (see Annex 2). As per standard IDA post-conflict performance indicators, the following were selected to monitor results in four areas: security; social stability and service delivery; debt relief; and economic growth and diversification. Progress against these indicators will be assessed on an ongoing basis, through regular consultations with the Government, key stakeholders, and donors. F. Riskmanagementandresponseto increased insecuritv a. Riskmanagement 66. Engagement in a post-conflict context is both high-risk but a potentially highly rewarding endeavor. The situation inBurundiremains difficult, though the risks o f engagement need to be balanced with the risks o f inaction which are considerable. The approach suggested under this planned ISN does not consist o f complete avoidance of risks, but o f adopting a pro- active, riskmanagement strategy whereby key factors o f risks are carefully identifiedand ways to minimize their potential impact are assessed. 25 67. Implementation o f this strategy couldbejeopardized if one or several criticalrisks came to materialize, including: Regional instability and threats to the peace process. The peace process in Burundii s intrinsically linked to progress throughout the region. Wars and civil conflicts have engulfed a large part o f the Great Lakes region over the last decade, including two o f Burundi's three neighbors. Recovery cannot be isolated, and will require a stabilization o f the entire sub-region to be sustainable. Key activities o f this ISN are expected to be complemented by parallel programs in other affected countries in the region, with a view to promoting an overall return to stability. Notably, the ISN will be implemented within the framework of the Multi-country Demobilization and Reintegration Program for the greater Great Lakes (MDRP). The situation in Burundi itself will be closely monitored (in conjunction with other key donors), so as to adjust the program to the political evolution on the ground (and scale it down ifneeded). Compromised administrative capacity. After a decade o f conflict and instability, implementation capacity remains limited, whether for Government-initiated policy reforms or for Bank-funded projects. This could become a critical obstacle to the effective implementation o f the reform program and other projects. Most Bank-funded projects and, in particular the Economic management support project, are largely designed to address administrative capacity, including in the area o f budget preparation and management, procurement, and financial management. In addition, limitations on administrative capacity will continue to be an important focus area in our dialogue with Government, so that good practices and lessons learned through Bank-funded operations are promptly brought to bear. Further collapse of coffee prices. Price volatility in the coffee sub-sector, the country's key export earner, i s a critical risk. Current low prices have significantly contributed to Burundi's inability to service its debt and to free up some resources for development programs. Continuous low prices couldjeopardize Burundi's foreign exchange position, thus making it difficult to service multilateral debts, and eventually puttingthe recovery efforts at risk. The planned I S N will aim at promoting economic diversification (in particular in the agriculture sector). It will also help to improve the competitiveness o f the coffee sub-sector by opening it to competition, and through productivity and production enhancement measures at the farm level (see Box 4). In addition, there i s reasonable expectation that the HIPC Decision Point will be reached as scheduled, and adequate provision for balance o f payments support (jointly with other donors such as the E.U.)is planned to helpmitigate the impact of external shocks. Finally, the Bank would also actively engage the Government to help identify critical expenditures that need to be preservedinorder to safeguard the reformprogram. e Reduced ownershipfollowing thegovernmental transition. Prospects for a participatory and inclusive process for the preparation o f the full PRSP have so far been good. A key outcome o f the I S N i s to consolidate current progress which would position the PRSP as a legitimate rallying document among Burundians and donors, and thus an important mitigatinginstrument against possible rejection by new authorities. Difficulty to translate donor support into action. Burundi needs to tackle a number of urgent social issues, in order to sustain peace and recovery. Inview o f the limited fiscal resources available, the absence of substantial external support would make it impossible to address these issues - and could hence jeopardize the recovery effort. This ISN aims 26 at encouraging the type of reforms that can contribute to making Burundimore attractive to donors andprivate investors. 68. To monitor these risks on a systematic basis, an early warning system has been put in place, which will help recognize and address slippages early on. This system will be based on: (i) an assessment o f security developments, both in the region and in Burundi, on the basis of informationprovided by the UNand key donors; (ii) assessment of the political developments an in Burundi, on the basis of information provided through a sustained dialogue with Government's authorities and the UN representatives in the country; (iii)an assessment o f the implementation of the economic program supported by the Bretton Woods Institutions, in close collaboration with the IMF; (iv) regular updates on progress towards the HIF'C decision point; and (v) implementation performance o f ongoing projects with a particular focus on transparency and timeliness o f actions. A portfolio monitoring system will be developed and managed in the country office with close collaboration with headquarters-based staff and the clients. b. Response to increased insecurity 69. The planned contingency response to a possible deterioration of the political and security situation is an incremental and targeted scaling down. In view o f Burundi's recent history, the risks o f renewed conflict or major policy slippages cannot be excluded. However, experience in other countries shows that while the security o f staff needs to be preserved, suspending operations over a longperiod o f time and closing an office make it difficult to provide the type o f rapid support needed when the situation improves. While the resumption o f a full- scale and lengthy war could lead the Bank to consider withdrawing from Burundi, the primary response to a deterioration o f the security or political situation will consist in scaling down activities, rather than withdrawing. 70. The Bank will work in close coordination with the Government, UNOB, UN agencies, and key donors to monitor political and security developments, so as to rapidly respond to unfolding events. The response will be based on a dual assessment o f staff security and of prospects for the successful implementation o f the Interim Strategy. Practical steps will include revision o f implementation schedules for specific activities, revision of planned interventions, and possibly partial suspension o f activities. The I S N proposes specific strategies for two key scenarios of negative security developments: e Localized eruptions of violence or insecurity in rural areas. Implementation o f the Interim Strategy would continue, with a suspension o f activities to be implemented in affected areas. Keeping inmindthat the program focuses on provision of basic services, the planned projects would need to focus on implementing activities inthose parts o f the country that are safe. For instance, the Public Works and Employment Creation activities (which are mainly implemented in urban areas), as well as the health and education activities (that could be outsourced to nongovernmental organizations in safe areas), would be good candidates under that scenario. e Shortfall in world prices of coffee. The team would consider increasing planned amount for budget support. This couldbe providedby reducing the amounts earmarked for other projects. e Sporadic eruptions of violence around Bujumbura. This could result in a temporary relocation o f non-critical staff and a possible scaling-down and/or refocusing of Bank- fundedactivities. 27 ANNEX1:OVERALL REVIEWOF PLANNEDACTIVITIES AND STRATEGIC OBJECTIVES Area of focus Strategic Proposed instruments element Implementation: Demobilization and Reintegration Project (FY04) Implementation: Multi-Sector HIV/AIDS(FY02) Implementation: Health & Population I1- Supplemental Grant (FY03) Build support m:Health Sector policy note (FY06) Improved from communities Lending: Education & HealthSector RehabilitationProject (FY07) security, social andpopulations a: Counhy Status Report on Education (FY06) stability,and to thepeace service delivery process and the Lending:Education & Health Sector RehabilitationProject (FY07) economicreform Implementation: Public Works and Employment Creation (FYO1) agenda Lending: Public Works and Employment Creation (supplement, FY06) m:Poverty Implementation: Social Action - Supplemental Grant (FY03) Assessment (FY06) Lending: Community Rehabilitation Project (FY06) Implementation: Economic Recover Credit -ERC- (FYOZ), Economic Management Project (FY04) Restore foundations on &: Debt Sustainability Analysis (FY06) Debt relief, which growth Lending: Post Conflict Transitional ERC (FY06); economic andpoverty Implementation: Road Sector Development Project (FY04) growth and alleviation efforts diversification Lending: Multi-sector infrastructure rehabilitation project (FY07) can be sustainably Implementation: Regional Trade Facilitation (FYO1) undertaken m:Study on Sources of Growth/Agriculture sector Review (FY06) Implementation: Agriculture Rehabilitation and Sustainability (FY05) a: Study of Sources ofGrowth/ Rural Review (FY07) 28 ANNEX2: PROPOSEDPERFORMANCE INDICATORS (Based on standard IDA Post-Conflict Performance Indicators) Strategic Performance indicators element (after two years of implementation) - Satisfactory progressinimplementing programs inpublic finance and procurement as well as the effective functioning o f the `cours des comptes'. - Satisfactory implementation o freconciliation-relatedresolutions, evidencedthrough assessmentby UnitedNations and key bilaterals. - Continued adequate security throughout the country for sustained economic activity, evidenced through country-wide economic growth. - Satisfactory progressinimplementing, a national demobilization andreintegration Security, program. social stability, and service - Integrationo fnon-demobilized combatants into the new defense force or the national delivery police. - Satisfactory progressinimplementingexpenditures the social sectors, following in HIPCDecisionPoint. - Satisfactory progressinimplementingthe Government's HIV/AIDS strategy, evidencedby timely implementation o f planned activities. - Satisfactory implementation o fBank-financed projects, evidencedbyprogress towards their individual development objectives. -Satisfactory progress inimplementingthe Government's anti-corruption strategy, evidenced through timely implementation o f planned activities. - Satisfactory implementation o fthe economic program supportedby the PRGF. - Satisfactory progresstowards conditions for reachingHIPC Decision Point relatedto Public Expenditure Management. - Satisfactory progresstowards settling the internal debt issues (including completion o f audits andreconciliation, and agreement on payment schedule). - Continuedprogress towards State-owned enterprises reforms including privatization. Debt relief, economic - Implementation of supporting measuresrelatedto the liberalization o fthe coffee sector. growth, and - Satisfactory implementation o f Bank-financed rehabilitation projects evidencedby diversification progresstowards their individualdevelopment objectives. - Satisfactoryprogresstowards conditions for reachingHIPCDecision Pointrelatedto governance. - Satisfactory implementation o f a departure programfor civil servants who have reached retirement age. - Adoption of an export-ledgrowth strategy. 29 ANNEX 3: STATUS OF PERFORMANCEINDICATORS FOR2002 TSS A. Security andReconciliation Indicators Progress indicators OutpuUoutcome indicators Status Step up efforts to bringthe two rebel Significant reduction of Partially done - Public groups (FNLand FDD)into the peace number of politically accord reached with Security process motivated crimes CNDD-FDD. FNL remains to be the last group to negotiate. Broadening of discussions between the Increased number o f Done. parties signatory of the Arusha Peace returned-political exdes and Accord to include the rebel groups refugees Ceasefire with all but FNLachieved. Progress towards a cease-fire within the Increasedgeographtcal Enhanced security in framework of the Arusha and Lusaka coverage inprojects 16 of 17 provinces PeaceAgreement implementation has allowed for projects to be expanded. The Government and melation inplace Effective demoblltzation and Demobdzation i s Reconcili- are accepted by all parties reintegration of soldiers into ongoingsince ation the civil force December 2004. Degree of integration of parties to Reduction o f "flttary Plan for military confict into economic and social expenditure andincreased integration envisages processes social expenditures and temporary increase in productive investments size of army and mhtary budget Establishment of a NationalTruth and Increased economic growth before progressive Reconcdiation Commission and revitahation of rural demobhation. economy Establishment of an internationalJudicial Commission of inquiry on genocide, war Diversification of the crime and other crimes composition of labor force in the admtlllstration Degree of commitment to consultation and participatory diagnostic processes to foster inter-Burundian dialogue Establishment of an International Tribunal to try and punishthe responsible of crimes Preparation of the DDR program for Number of soldiers and ex- All c M d soldiers Demobi- chdd and vulnerable soldiers combatants reintegrated into demobdzedby kation and civil life December 31,2004. Disannernent Establishment of the DDRprogram Increased social spendmg and DDRprogram Establishment of transitional safety-nets reduction of d t a r y and established in2003. for ex-combatants security-related expenditures Demob. of adult soldiers ongoing. Transitional safety nets established. 30 B. Economic recovery Indicators Progress indicators Output/outcome Status indicators Satisfactory review under the FundSMP Increased m o b h a t i o n o f PRGFinplace 2004, Management and Emergency Post-confict Assistance domestic resources and f E s t review of inflation, Facllity leadmg to PRGF reduction of fiscal deficit completed 2005. external debt, and inflation Inflation reduced, and fiscal deficit adequacyof Agreement on payments schedule and on Reduction and/or clearance elmmated 2003 but the budget arrears clearance mechanisms, includmg of external arrears deficit in2004 due to establishment of a MultilateralTrust Fund political for Debt servicing Increasedinflows of reunification, coffee extemal assistance, sector losses, and Progress inthe implementation of reforms productive investments for c i d service pay rises. under the public expendture review, growth including inthe area of public expendture Extemal arrears management and budget processes Eligbllityto debt relief cleared to MDBs. under the Enhanced HIPC Initiative Over $US1bilhon pledged in2004 donorsmeeting. Paris Club Arrangement 2004, HIPC PrelunDoc. Jan 2005. Liberalization of access to the official Reduction of parallel Regulation passed, Trade policy, exchange market through, adoption and market premium parallel market foreign publication of centralbank regulation premium decked to exchange authorizing access to the auctions marked Alignment of tariffs under 4% and price by alllicensed exchange bureaus structure with that of the regimes COMESA countries FirstrounddoneJan Revision of producers prices and marketing 2004, second round arrangements inthe agricultural sub-sectors underway Satisfactory progress inthe implementation of the reform program Degree of coordmation of policies and Increased absorptive Donor coordmation Management actions with the international community capacity through better throughPRSP and geographcal coverage and (underway). sustainability Utiltzation of the participatory and project implementation Participatory ofthe diagnostic processes methods inthe methods underway at development elaboration of the development program Satisfactory results inthe c o h e and municipal program poverty reduction level. Level of support of the development objectives, includmg programproposedby the Transition reduction of poverty Pro-poorspending Government incidence has not met goals due to extraordmary Degree of coherence of the development fiscal costs of and reform program, and coordination demobhation and between the key development agencies and the political institutions transition. 31 C. Social inclusion and social sector development program Indicators Progressindicators Output/outcome Status indicators Commitment of the Transition Increasingnumber of Data not avdable Reintegra- Government to addressing the needs of the houses rehabhtated tion of internally displaced persons displaced Increasingnumber o f About one halfof population displaced persons returning the IDPs returned The Transition Government is to their homes coordmating donors efforts and providmg assistance to internally displaced and Increasingnumber of returnees displaced persons re- Data not available engagmginto productive economic activities Implementation of program to address Increasingnumber o f open Inprogress Education urgent needs, particularly inprimary and functioning schools and (increased by 8 education education fachties percent since 2002) Public spendmg inthe education sector Increasinggross enrollment Primary and reflect the Government objective to reduce rates at the primary and secondary enrollment geographical, ethnic andgender dlsparities secondary levels, and increased: from 65 inaccess toeducation reduction of repetitionrates to 74percent, and from 11percent to 16 percent, Budget allocation and trends of public respectively. spending insocial sectors Progressing: gender Reduction of gender, dlsparities decreased regonal and ethnic inprimary dlsparities ineducation enrollment: from 44 access and outcomes percent of p l s in 2002 to 45 percent in 2004. The Transition Government has Increasingnumber of Health established a structure andhas a system in operating and functioning Increasing. place to address the medicalneeds of war hospitals and primary health affected population care fachties Public spendmg inthe health sector reflects Improvement in Improvements the Government objective to reduce vaccination/immunization underway. geographcal, ethnic andgender dlsparities rates and increase used of inaccess to healthservices skdled assisted deliveries Increasedinthe number o f Budget allocation and trends of public trained health personnel spending insocial sectors (doctors, nurses, and skilled midwives) Reduction inattrition rates Inprogress. o f doctors and nurses. Reduction of regionaland [nprogress. & m c dlsparities inaccess to health fachties 32 D. Publicsector management andinstitutions Indicators Progressindicators Output/outcome Status - indicators Budget Effectiveness of budget formulation and Continued increase o f Done, but goals 10 formulation implementation Government revenues and notmet inthe and public expenditure social sector (see efficiency of Performance o f revenue collection allocation inthe social B-6 above) revenue authorities and agencies sector mobilization Implementation of measures to reduce Improved education and Done but less than and/or elunmate tax and customs health outcomes target exemptions, creation of a unitinthe customs and internal revenue department Improved fiscal Done in2003, to monitor the purpose, recipients and performance and reduction deficit in2004 (see value of exemptions granted of fiscal deficit B-1above) The level of effectiveness of the Transition Level and quality of service M i n i s t r y of Good 11 Re-establi- Government inthe implementation of delivery Governance and shingthe transitional arrangements, including Government audit administra- strengthening of the justice system and Improved education, health agency (Cours de tion and rule- improvinggovernance and other social indicators Comptes) created, based Finance governance The degree of coherence and collaboration Inspectorate between the different branches of the moved to Good administrationand their capacity to deliver Governance. good services and enforce contracts Services lack sufficient qualififed personnel due to c i d service salary scale. See B-1 above. - Progress inongoing work on PER and Reduction of leakages and Done l 2 Transpa- implementation of public expenditure increased public spendmg rency, trackmg study allocation goingto public accounta- facilides and primary bilityand Progress inthe implementation of beneficiaries corruption in recommendations under the PER, Done the public including audit of the Treasury, revision of Improved allocation of sector the budget nomenclature, and budget processes social services and reduction of dsparities in Establishmentof an Office ofAuditor access Generalwith the responsibility of auditing the Government's resources and Improved access and social Progressing expenditures indicators Effectiveness of Bank-hanced IDFgrant Done to strengthen public procurement Improved administration Levelof coherence and coordmation Done between the M i n i s t r y o f good governance and other ministries inthe fight against Incomplete corruption, and participation of c i d society 33 A"EX 4: STATUS OF OPERATIONS&'PROVED SINCE 2002 Project US$ Objective Approval I Disbursed Rating mil. Effectiveness March `05 IP DO 1 Operationsincludedin2002 TSS 36.00 Helpto slow down the spread 6/27/02 14.60 S HIVIAIDS o f HIVIAIDSand mitigate its 10/7/02 damage to individuals and families. - Economic 54.00 Helpbuildingfoundations for: 8/29/02 57.40 S Recovery Credit Improvedpublic service 10/23/02 delivery and accessto social services; deepenreforms, establish a track record for early access to relief under HIPC. Supplement to 9.50 Support key sector reforms 1/16/03 3.50 S Second Health and and strengthen delivery of 3/7/03 Population priority health services. Supplement to 14.20 Promote Community Driven 4/8/03 4.40 S Social Action Development (CDD) for 6/20/03 improved delivery o f social services in, and for social protectiono fpoor :ommunities. - Demobilization 33.00 Support reintegration o f S and Reintegration targeted groups o f ex- 9/10/04 :ombatants. I - Road Sector 51.40 Restorepart of the priority ~ S Development Toadnetwork generating 9/9/04 zmployment for rural poor, I indimprovinginstitutional :apacity inthe road sector. - -- Economic 26.00 Increase efficiency o f 1/29/04 1.30 S S Management Burundi'smacroeconomic, 4/29/04 support financial and administrative managementby strengthening accountability and transparency through improvedprocedures and controls. Support to restore productive 7/27/04 2.80 S S Rehabilitation and capacity and livelihood o f 9/23/04 Sustainable Land rural population through Management ecologically and economically sustainable investments. (*) Rating: IP=ImplementationPerformanceRating; DO=DevelopmentObjectives Rating 34 ANNEX5: ONGOINGAND PLANNEDSUPPORTBY KEYDONORS Donors NATURE OFASSISTANCE Amount Pledged (US$ million) 2001 I 2004 Austria Reconstruction, water and sanitation, democracy and human rights, 13.26 21.80 and debt write off Belgium Security and humanitarian assistance, social sectors, public works and 25.42 44.62 economic management, HIV/AIDS Canada Peace andhumanitarianassistance, DDR 2.0 0.00 Denmark Humanitarian assistance 0.00 Finland Security and humanitarian assistance 1.5 0.00 France Justice and national reconchation, reinsertionand reintegration, 3.98 25.50 rehabhtation o f infrastructure, food security, ruraldevelopment I public expenlture management, trainingand technical assistance Germany Conflict prevention and democracy, water and sanitation, H I V / A I D S 35.68 46.22 Italy Reinsertion, decentraltzation, gender, orphans and H I V / A I D S 6.4 8.16 Ireland 3.82 laDan apan Foodsecurity and HIVIAIDS HIV/AIDS 1.0 0.00 Netherlands Humanitarian, demobilization, lsarmament and reintegration remtegratlon 7.96 Norway Peace and reconchtion, humanitarian assistance and DDR 4.3 10.90 OIF Governance, education through dtrect support and scholarship 0.00 OPEPFund Agriculture and ruraldevelopment 15 0.00 Sweden Humanitarian assistance and social sectors 21.81 Switzerland Humanitarian assistance and debt relief 0.00 UK HIV/AIDS, debt relief 8 60.00 USA 1IHumanitarian assistance, agnculture and rural development, social 150 135.00 sectors and HIV/AIDS, support to refugees and orphans, promotion I of civd society and gender, education and training EU I 1 Balance of payments support, food security humanitarian assistance, I I242.17 270.92 A , & A reinsertion and reintemation, rehabhtation of economic and social " infrastructure, agriculture and rural development t e c h c a l assistance AfDB Agt-iculture - and rural development, infrastructure, education, social 78.53 39.33 action projects and poverty alleviation, rehabhtation of economic and social infrastructure, post-conflict reconstruction and governance IMF Emergency post-confhct assistance facillty and technical assistance, 25.0 93.30 macroeconomic management PRGFand its first review 106.00 UNDP Donor coordmation, foodsecurity, rehabilltation, reintegration, 32.0 11.00 governance, HIV/AIDS, t e c h c a l assistance UNICEF Rehabilitationof social infrastructure and education 31.0 0.00 FIDA Programme Transitoire de ReconstructionPost-confht 12.00 MDRP/DDR 80.00 FNUAP HTV/AIDS reintegrationand reinsertion 1.5 0.00 World Bank Balance of payments support, DDR, rehabhtation of economic and 156.0 140.00 social infraitructure, pubic works and roads rehabilitation, education and health, HIV/AIDS and Orphans, governance and public expenditure management, poverty monitoring, t e c h c a l assistance, macroeconomic management. Total Amount 832.74 1,032.07 35 Annex 6: SUMMARYOFCONSULTATIONSWITH STAKEHOLDERS InBujumbura,August 23 -September 3,2004 1, K e y issues raised by the managers/coordinators o f Bank-financed proiects 0 Need for more frequent and longer implementation support missions, and timely reaction o f Bank's TTL including transmission o f Aide Memoires. Critical to compensate for limited Government's capacity to prepare and implement projects; Coherence o f Bank's procedures to be improved, e.g. salaries o f local consultants to be harmonized; Problems with availability o f counterpart financing, and ineligibility o f some needed expenditures (taxes, salaries o f local staff, rehabilitation o f office premises, etc.). Bank should show flexibility during project execution -not wait for mid-term review-, to adjust inlight o f evolving macro-economic situation and Government revenues. Scale-up well functioning implementation models such as the public works projects- PTPCE- ;Socialactionprojectviaadditionalfinancing instrumentssuchAdditionalFinancing. Coordination with other donors to be improved. Promote more participation o f local communities in project design, in particular for community development projects. 2. K e y issues raisedby the Minister o f Good Governance 0 Successful reintegration o f refugees, internally displaced, and demobilization o f ex- combatants critical to the peace process- Improved agricultural production i s a key instrument; Good govemance critical to ensure implementation o f the reform agenda and absorption o f donors' funds. This requires (i) effective planning/decision making, and implementation o f activities with real participation from the local population, and entirely driven from central level o f Government; (ii) improved transparency and elimination o f discriminatory practices against certain geographical areas and population groups; (iii) improved access by decision makers to relevant information (using telecom, IT technologies,.: .) for relevant policy mahng and effective decentralization; and, (iv) review and adapt current regulation on procurement. 3. Meetingwith the Secretary General o f UPRONA,Mr.Jean-Baptiste Manwangari -pressing issues for 2005-06: Peace, security, stability-Fundingsupport i s important, but good politics is paramount. Delivery o fbasic services should emphasize education, health, andnutrition; Increase job opportunities inrural areas and strengthen growth o f the economy. This requires restoration o f productive capacities in rural areas through road improvement and private sector development. 4. Meetingwith FRODEBU: k e v issues: 0 Equitable growth and poverty reduction including a growth performance o f 6% as in 1992. Rural development is key which should account for 50 to 60% o f Government's expenditures. Development actions should carefully consider regional differences across the country. National agricultural census necessary. Strong efforts to promote rural organizations to help foster harmonious cooperation between Tutsis and Hutus, in particular for effective use and protection o f arable land; Reinsertion o f displacedpopulations; labor intensive programs to provide employment opportunities and rehabilitate infrastructure, social service delivery; 36 0 Free access to primary education, and promotion of technical secondary schools, rather than general secondary schools; health;, water supply, infrastructure; etc.). 5. K e y issues from the private sector perspective: 0 Budgetary support to Government to clear domestic arrears 0 Active promotion o f private provisiono f public services; 0 Growthinagricultural sector to stimulate domestic demand; 0 Fiscalreforms to reduce heavy burdenon private sector; 0 TrainingKapacitybuildinge.g. horticulture sub-sector; Support to buildprivate institutions and voice of private sector agents inpolicy formulation. 6. Meetingwith UNOB - key issues for development: 0 Security, andpeace inrural areas 7. Meetingwith Donors -need for: 0 More thorough consultation process for the full PRSP; 0 Buildmechanismthrough which all bi- lateral andmulti-lateral donors would be informed about each other's ongoing and planned activities; 0 Improve predictability o f donors' assistance so that the Government can budget accordingly and on time; Needto address Government's capacity to lead efforts for improved coordination. 8. Meeting with UNorganizations -need for: 0 Government to timely provide informationon progress inthe preparation o f the full PRSP; 0 A framework linkingGovernment's budgetingprocess andprogramming ofhumanitarian aid; 0 Bank's leadership for coordination o f health sector issues; and 0 Informationsharing among donors, and modality o f future consultations. 9. Mainissues raisedby the representatives o f communes andprovinces: 0 Concerns that responsibility would be devoted to the local level without adequate means and capacity; 0 Infrastructuredevelopment (roads, schools, health facilities) i s a good way to promote local development, but attention needed on maintenance issues; 0 Decentralization still remains inits infancy and Government needs to clarify its vision of the process, and show strong commitment; 0 About only 1/3 o f fiscal revenues i s collected at the commune level due to lack o f incentives of local administrators; 0 Food aid has very counterproductive impact on local production; 0 Visit to more advanced countries highlydesirable to help set out a vision for the way forward. 10. Meetingwith representatives o f youth and students groups - issues raised: 0 Need for more consultation, sensitization, and communication with beneficiaries o f Bank- fundedprojects; Limitedadequacy of available training withjob opportunities; Needto enhancejob opportunities: unemployed youth includesrefugees and ex-combatants; Lack o f involvement o f students' associations inmonitoringand evaluation o f projects; Governance; Large national debt; Reverse environmental degradation. 37 11. Perceivedpriority issues o f the Parliamentarians (EconomicPlanninp; and Social/HIV commissions): 0 Development o f agriculture production and off-farm activities to improve the country's food security, including refugees through (i) improved soil management; (ii) "modemization" o f agricultural production; (iii) support to agro processingactivities e.g. tomatoes, fisheries; and, (iv) micro-credit; 0 Governance; 0 Development o fnon-farm activities including support to craftsmanship; 0 More direct consultationbetween donors and the localpopulation; 0 Ensurethat basic infi-astructure (schools, health facilities) i s developed along with the effective provisiono f expected services including the necessary personnel and provisions to operate and maintain it; 0 Free access to primary education; 0 Electricity, water supply; and environmental protection (including lake Tanganyika). 12. Meeting with transport sector ministries - kev issues: Improve efficiency o f intemational transport inparticular on the corridors to Mombassa (2,000 km), and Dar Es Salam (1,500 km) includingthrough Lake Tanganyika Furtherreduce hurdlerate oninternationaltransport: before 1988, some 64 documents were required to transport goods from Bujumbura to Mombassa; now one needs 8 documents. Objective is to limitrequirement to one document; Assistance to enhance Government's capacity to formulate an international transport master planto address the two issues above; Limitedequipment at the airport to respondto higher levels o ftransport demand; Limited urban development planning capacity. Neededassistance to enhance Govemment's capacity to formulate master plans for the urbanization o f main cities includingBujumbura, Gitega, Ngozi, Muyinga. 13. Meetingwith rural development ministries -key issues: 0 Support to agriculture i s a strong signal that the peace process yields dividends; 0 The public sector still has a key role inrejuvenating the economy, thus capacity buildingand budget support to the sector are important, e.g. by developing on thejob training programs for a pool o fjunior experts includingnew graduates; Food aid has not been consistent with policies to improve localproduction; Development o f rural credit should be supported; Bank support neededto implement results o f Bank-supported TradeDiagnosis Study; Concrete impact-led activities needed to nurture the peace process, e.g. labor intensive public works programs; Approach to humanitarian assistance should be considerate o f the dignity o f beneficiaries; Reforestation to address energy demand and environmental protection; Need for effective implementation o f environmental mitigationmeasures agreed upon under the public works project; Provision o f basic infrastructure to national parks; 14. Meeting:with social sector ministries: 0 Curvingspread o fHIVIAIDS. Bothprevention and treatment; 0 Inadequate incentive framework to retain qualified local experts; civil service reformto improve status o f local experts; 0 Increase share o f grants inBank's funding; 38 School infrastructure overstretched by demographic pressure; Well trained teachers are available but limitedpublic resources to hirethem; Needto develop professional training; Humanitarian assistancenurtures dependency; Reduce social risks o f vulnerable groups; Enhanceland productivity to occupy more people per unit o f land; 15. K e y issues raisedby the Civil Society Organizations: e Bank to enhance its communication activities; e More support to civil society organization critical to Burundi'srecovery, because Government's institutions cannot by themselves address the challenges; e Some donors have politicalbiases against some civil society organizations; e Women's organization deserve special attention for support. Women are the main rural producers; 0 More effective involvement o f civil society organizations inevaluation o fprojects; e Need for capacity building, e.g. training, institutional and organizational support. 16. Meeting:with international NGOs -key issues raised: e More frequent consultations between International NGOs and WB highly desirable; e Need for better understanding o f the operating procedures o f Twitezimbere which is an active partner inthe implementation of Bank-funded projects; for example a wider dissemination o f the implementation manual o f the Bank-funded project would be desirable; Closer attention to sustainability o f activities executed under the Public Works project; Managers o f the Public Works project should develop a more effective communication strategy, and interact more with other implementation agencies at the provinciallevel; e Need for more coordination betweenhumanitarian assistance and development activities; e Needto provide funding support to activities aimed at sensitization o f local communities on peace related issues including return o frefugees; e InviteNGOsto participate inproject launchworkshops o f Bank-funded projects 39 ANNEX7:BURUNDIAT A GLANCE Burundiat a glance 9/15/04 Sub- POVERTY and SOCIAL Saharan Low- Burundi Africa income Developmentdiamond" 2003 Population, mid-year (millions) 7 2 703 2,310 Life expectancy 100 490 450 GNI (Atlas method, US$ billions) T 0.72 347 1,038 Average annual growth, 1997-03 I Population (%) 1.9 2.3 1.9 Labor force (%) 2.4 2.4 2.3 GNI Gross per primary lable, 1997-03) capita nrollment 10 36 30 42 46 58 123 103 82 45 44 Access to improved water source 78 58 75 50 35 39 71 87 92 Burundi 80 94 99 __Low-incomegroup 62 80 85 TRE 2003 Economic ratios' 0 67 9.7 6.1 Trade -0 2 Gross national savingsiGDP 1 7 6.1 Current account balancelGDP -11.9 -8.4 -6.6 -9 0 Interest paymentslGDP 0.3 1.3 0.6 Total debffGDP 28.4 113.1 167 5 Total debt servicelexports 14.5 36.4 35.6 Present value of debffGDP 104.4 Present value of debffexports .... 1145.8 Indebtedness 1983-93 1993-03 2002 2003 2003-07 (average annual growth) GDP 3.6 -0 7 3.6 -1.o 3.1 Burundi GDP per capita 0.8 -2 7 1 7 -2.9 1.I _ _ Low-income aroun Exports of goods and services 5.5 15 4 6.4 10.0 6.9 STRUCTURE of the ECONOMY 1983 I993 2002 2003 Growth of investment and GDP (%) (% of GDP) I: I Agriculture 57.2 50.6 49.3 49.0 ' O T Industry 15.5 21.1 19.4 19.0 Manufacturing 8.9 14.1 Services 27.3 28.3 31.3 32.0 Private consumption 84.6 91.4 91.7 92.6 General government consumption 8.3 13.3 12.8 7.6 Imports of goods and services 24.7 30.4 18.9 15.9 1963-93 1993-03 2002 2003 (average annualgrowth) ~ Growth of exports and imports ( O h ) 1 Agriculture 2.9 0.7 3.9 -0.8 t 00 Industry 3.4 0.4 25.3 Manufacturing 4.1 -7.5 50 Services 4.4 -0.4 3.5 0 Private consumption 2.5 -3.4 12.5 -5.7 General government consumption 5.8 -1.o 0.9 -0.5 -50 Gross domestic investment 2.6 2.8 6.9 7.3 Imports of goods and services 0.8 8.4 22.5 8.5 Note 2003 data are preliminary estimates This table was produced from the Development Economics central database 'Thediamondsshowfourkeyindicatorsinthecountry(inbold)comparedwithitsincome-groupaverage Ifdataaremissing,thediamondwill be incomplete 40 PRICES and GOVERNMENT FINANCE 1983 1993 2002 2003 Domestic prices (% change) Consumer prices 8.2 9.7 3.8 3.7 Implicit GDP deflator , 6.4 7.1 12.9 9.4 Government finance (% of GDP, includes current grants) Current revenue 13.3 21.0 19.4 13.3 Current budget balance -0.3 3 9 2.2 2.6 Overali surplus/deficit 3.4 -9.3 -1.I TRADE I 1983 1993 2002 2003 (US$ millions) ~Export and import levels (US$ mill.) Total exports (fob) 82 74 57 77 Coffee 70 48 54 50 Tea 2 9 15 16 Manufactures 2 9 1 1 Total imports (cif) 184 210 183 191 Food 15 19 12 11 Fuel and energy 29 24 22 23 I I Capital goods 56 78 68 71 Export price index (1995=100) 98 64 60 97 98 99 00 01 02 Import price index (1995=100) 84 91 93 Exports Terms of trade (1995=100) HImports O3 116 70 65 BALANCE of PAYMENTS 1983 1993 2002 2003 (US$ millions) Current account balance to GDP ( X ) Exports of goods and services 98 88 61 61 Imports of goods and services 268 285 150 161 ' T Resource balance -170 -197 -89 -100 Net income -9 -10 -10 -8 Net current transfers 52 47 Current account balance -129 -79 -47 -61 Financing items (net) 147 79 57 60 Changes in net reserves -18 0 -10 1 Memo: Reserves including gold (US$ millions) Conversion rate (DEC, /oca//US$) 93.0 242.8 930.7 1,082.6 EXTERNAL DEBT and RESOURCE FLOWS 1983 1993 2002 2003 (US$ millions) :omposition of 2002 debt (US$ mill.) Total debt outstanding and disbursed 308 1,062 1,204 IBRD 0 0 0 IDA 92 509 648 G 96 Total debt service 15 36 23 IBRD 0 0 0 IDA 1 5 16 Composition of net resource flows Official grants 45 112 119 Official creditors 92 59 28 Private creditors 13 -1 -2 Foreign direct investment 3 1 0 Portfolio equity 0 0 0 C: 13 World Bank program Commitments 16 10 90 , IBRD Disbursements 27 36 E - Biialeri 36 I IDA D-Other multilateral F Private Principal repayments 0 2 11 ; IMF --- G Short-I -- Net flows 27 35 25 Interest payments 1 3 4 Net transfers 27 31 21 Note: This table was produced from the Development Economics central database. 9/15/04 41 ANNEX 8: MAP BURUNDI OF IBRD33380 42