1. This statement provides information on recent developments with regard to the security situation in the region and economic performance, received since the issuance of the Board papers.1 The authorities have already given their written consent to publish all documents, except for the Managing Director’s report on noncomplying disbursements. The information in this statement does not alter the thrust of the staff appraisal or the Managing Director’s recommendation on corrective action.
2. Both the UN and the African Union (AU) remain involved in addressing the tensions in the Great Lakes region. On March 15, 2005, the Secretary General, in his report on the United Nations mission (MONUC) in the Democratic Republic of Congo (DRC), reported that the situation in North and South Kivu remained tense. On March 30, 2005, the UN Security Council passed a resolution demanding, among other things, that Uganda, Rwanda, and the DRC halt the use of their respective territories to support violations of the arms embargo or of activities of armed groups. On the positive side, the main Hutu rebel group on April 1 accepted to voluntarily disarm, and return peacefully to Rwanda. Moreover, MONUC has been in consultation with Rwanda and the DRC to implement a strategy involving political, military, and judicial pressure to accelerate the demobilization of paramilitaries in the eastern DRC. It has also stepped up efforts to crack down on militias. To help disarm the militias, the AU announced in mid-March that it was planning to send peacekeepers.
3. As foreshadowed in the staff papers, based on final data, all but two performance criteria for the fifth review were met. The performance criterion on priority spending at end-December was missed by one percent of GDP, as the authorities needed to address the acute electricity crisis. However, had spending on the electricity sector been included in the definition of priority spending, the target would have been met.2 Moreover, the continuous performance criterion on external arrears was not observed.3
4. Macroeconomic performance in the first two months of 2005 appears to have been broadly on track, based on preliminary data:
Recent weather forecasts and estimates for agricultural production indicate that, as programmed, agricultural output is likely to remain flat.
The 12–month rate of consumer price inflation rose from 10 percent at end–2004 to 12 percent at end-January 2005, reflecting mainly the doubling of electricity tariffs. Twelve-month underlying inflation (excluding energy and food) remained unchanged at about 5 percent.
International reserves at end-February 2005 increased to US$238 million from US$216 million at end-December 2004, mostly due to inflows for donor assistance. At the same time, the exchange rate appreciated slightly by about 1 percent to RF 561 per U.S. dollar in late March.
Staff report for the fourth review under the PRGF arrangement; completion point document under the enhanced HIPC Initiative; joint staff advisory note on the PRSP progress report; and the Managing Director’s report on noncomplying disbursements.
Although energy was identified as a priority in the PRSP, it was not formally defined as such in the 2004 program. For 2005, the definition of priority spending has been expanded to include energy-related spending.
The relevant facts were set out in a memorandum from the Managing Director on noncomplying purchases and disbursements (EBS/05/54, 3/28/05).