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Burundi: Staff Report for the 2012 Article IV Consultation and First Review Under the Three-Year Arrangement of the Extended Credit Facility and Request for Modification of Performance Criteria — Informational Annex

Author(s):
International Monetary Fund
Published Date:
August 2012
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Relations With the Fund

(As of May 31st, 2012)

I. Membership Status: Joined: September 28, 1963; Article XIV

II. General Resources Account:

SDR Million%Quota
Quota77.00100.00
Fund holdings of currency (Exchange Rate)76.6499.53
Reserve Tranche Position0.360.47

III. SDR Department:

SDR Million%Allocation
Net cumulative allocation73.85100.00
Holdings82.87112.22

IV. Outstanding Purchases and Loans:

SDR Million%Quota
ECF Arrangements86.82112.75

V. Latest Financial Arrangements:

TypeDate of ArrangementExpiration DateAmount Approved (SDR Million)Amount Drawn (SDR Million)
ECFJan 27, 2012Jan 26, 201530.001.00
ECF1Jul 07, 2008Jan 23, 201251.2051.20
ECF1Jan 23, 2004Jan 22, 200869.3069.30

VI. Projected Payments to Fund2 (SDR Million; based on existing use of resources and present holdings of SDRs):

Forthcoming
20122013201420152016
Principal2.866.7310.5612.4912.98
Charges/Interest0.000.180.150.12
Total2.866.7310.7412.6313.10

VII. Implementation of HIPC Initiative: Enhanced

I. Commitment of HIPC assistance

Framework
Decision point dateAug 2005
Assistance committed
by all creditors (US$ Million)3832.60
Of which: IMF assistance (US$ million)27.87
(SDR equivalent in millions)19.28
Completion point dateJan 2009

II. Disbursement of IMF assistance (SDR Million)

Assistance disbursed to the member19.28
Interim assistance0.26
Completion point balance19.02
Additional disbursement of interest income43.07
Total disbursements22.35

VIII. Implementation of Multilateral Debt Relief Initiative (MDRI):

I. MDRI-eligible debt (SDR Million)5

26.40
Financed by: MDRI Trust9.01
Remaining HIPC resources17.39

II. Debt Relief by Facility (SDR Million)

Eligible Debt
Delivery DateGRAPRGTTotal
February 2009N/A26.4026.40

IX. Implementation of Post-Catastrophe Debt Relief (PCDR): Not Applicable

Decision point - point at which the IMF and the World Bank determine whether a country qualifies for assistance under the HIPC Initiative and decide on the amount of assistance to be committed.

Interim assistance - amount disbursed to a country during the period between decision and completion points, up to 20 percent annually and 60 percent in total of the assistance committed at the decision point (or 25 percent and 75 percent, respectively, in exceptional circumstances).

Completion point - point at which a country receives the remaining balance of its assistance committed at the decision point, together with an additional disbursement of interest income as defined in footnote 2 above. The timing of the completion point is linked to the implementation of pre-agreed key structural reforms (i.e., floating completion point).

X. Exchange Arrangements

While the de jure exchange rate arrangement is floating, the de facto exchange rate arrangement has been reclassified to other managed arrangement from stabilized arrangement against the dollar, effective July 26, 2011, due to increased flexibility of the Burundi franc. The US dollar is the intervention currency. On June 14th, 2012, the official exchange rate was BIF 1412.04 to the US dollar. In 2003 the central bank eliminated most remaining exchange restrictions on current international transactions and delegated authority to commercial banks to approve standard transactions. In early 2004, the surrender requirement was lowered to 50 percent and in early 2005 it was eliminated. The central bank has admitted foreign exchange bureaus to the weekly auctions. Most external arrears to bilateral and multilateral creditors were cleared by the end of 2005. In December 2006 the government published a new foreign exchange regulation, the Foreign Exchange Regulation of 2006 that liberalized access to foreign exchange for current transactions and removed one multiple currency practice. In June 2010, the government replaced the Foreign Exchange Regulation of 2006 with the Exchange Regulation of 2010. The new regulation became operational in July 2010.

Burundi has availed itself of the transitional arrangements of Article XIV since it joined the Fund in 1962 but no longer maintains any exchange restrictions or multiple currency practices that relate to that article. It does have one multiple currency practice that is inconsistent with Article VIII, Section 2(a): the exchange rate used for government transactions differ by more than 2 percent from market exchange rates. Burundi maintains certain foreign exchange restrictions for security reasons and has notified the Fund of those restrictions pursuant to Decision 144-(52/51). Burundi modified the 2010 foreign exchange regulation on March 3, 2011. Consequently the two foreign exchange restrictions mentioned in EBS/11/29 Sup. 1 relating to: (i) a tax clearance requirement for certain current international transactions such as payments of moderate amounts for amortization of loans or for depreciation of direct investments by nonresidents and (ii) the limitations on the availability of foreign exchange for the making of payments and transfers for current international transactions based on noncompliance with obligations that are unrelated to such transactions are no longer in place.

XI. Article IV Consultation

In accordance with Decision No. 14747-(10/96), adopted September 28, 2010, Burundi is on the 24-month Article IV cycle. The 2008 Article IV consultation was completed by the Executive Board on July 23, 2010, (IMF Country Report No. 10/313), along with the fourth review of the ECF arrangement.

In concluding the 2010 consultation, Executive Directors acknowledged the commendable progress that Burundi made in implementing its first ECF-supported program in a difficult post-conflict environment. They agreed that fiscal sustainability in the face of a heavy debt burden will depend on broadening the revenue base and improving the composition of spending while financing the budget though grants and highly concessional external resources. Directors encouraged the authorities to continue their efforts to reform the financial sector by improving banking supervision, and addressing weaknesses in the banking system, notably concentration risk. Directors also saw the need to accelerate structural reforms, especially in the coffee sector, and welcomed Burundi’s membership in the East African Community.

XII. Technical Assistance

July 2012FAD mission on revenue administration
April 2012AFRITAC mission on National Accounts
December 2011AFRITAC mission on PFM reform
November 2011MCM mission of foreign exchange operations
October 2011AFRITAC mission on PFM reform
July 2011STA mission on Balance of Payments statistics
March 2011FAD mission on implementing the organic budget law
January 2011MCM mission on Foreign exchange operations
September 2010FAD mission on implementing the organic budget law
November 2010MCM mission on monetary operations
Oct 2010FAD mission on Tax administration.
April 2010MCM mission on Foreign exchange operations.
November 2009AFRITAC mission on VAT implementation.
September 2009MCM mission on BRB capacity building and public debt management
June 2009MCM multitopic mission
April 2009FAD mission on implementing the organic budget law
March 2009MCM mission on monetary operations
March 2009MCM mission on foreign exchange
March 2009MCM mission on internal audit
March 2009MCM mission on reserve management
February 2009AFRITAC mission on banking regulation and supervision
February 2009FAD PSIA mission on fuel pricing policy and social protection
January 2009MCM FSAP mission
December 2008AFRITAC mission on fiscal administration
December 2008MCM multi-topic mission
December 2008MCM mission on internal audit
August 2008MCM mission on organizational, human resources, and communication reforms
July 2008MCM mission on foreign exchange
June 2008AFRITAC mission on banking regulation and supervision
Oct 2008FAD mission for installation of a PFM resident advisor
December 2007AFRITAC statistics mission on national accounts and consumer price index
November/December 2007STA monetary and financial statistics mission
November 2007AFRITAC mission on building capacity in banking supervision
November 2007FAD Tax policy mission
November 2007STA monetary statistics mission
September 2007MCM multitopic mission
September 2007AFRITAC mission on tax revenue administration
September 2007AFRITAC mission on building the capacity of the central bank
September 2007FAD public financial management mission
July 2007AFRITAC PFM mission on payroll control
June 2007AFRITAC PFM mission on treasury operation and control

XIII. Implementation of HIPC Initiative:

Enhanced
I. Commitment of HIPC assistanceFramework
Decision point dateAug 2005
Assistance committed
by all creditors (US$ million)6832.6
of which: IMF assistance (US$ million)27.87
(SDR equivalent in millions)19.28
Completion point dateJan. 2009
II. Disbursement of IMF assistance (SDR million)
Assistance disbursed to the member19.28
Interim assistance0.26
Completion point balance19.02
Additional disbursement of interest income73.07
Total disbursements22.35

XIV. Resident Representative

A part-time resident representative took up the post in Oct 2005 and an office with an administrative assistant opened in January 2006 in Bujumbura. Mr. Koffi Yao has been the resident representative since January 2010.

Joint World Bank-Imf Work Program, 2011–12

TitleProductsProvisional Timing of MissionExpected Delivery Date
A. Mutual Information on Relevant Work Programs
Bank work program1. Public Expenditure ReviewFebruary 2012 (identification)

June 2012 (Main mission)
September 2012
2. Public Expenditure Review Policy NoteMay 2012
3. ERSG-5 (Budget support)Dec. 2010 – Jan. 2011 (Identification) June 2011December 2011
4. ERSG-6 (Budget support)(pre-appraisal) September 2011 (appraisal)
January-February 2012 (identification)August 2012
5. Diagnostic Trade Integration Study-Update (DTIS)April 2012 (pre-appraisal) May 2012 (appraisal)
November 2011 (Identification) May 2012 (main mission)June 2012
IMF work program1. Seventh ECF reviewMar. 2012

November 2012
Jan 2012

Nov 2012
2. 1st Review of New ECFJune 2012July 2012
3. 2nd review of new ECF
B. Requests for Work Program Inputs
Fund request to Bank1. Progress report on reform implementation of reforms in REGIDESOMarch 2012
C. Agreement on Joint Products and Missions
Joint productsJSAN on PRSPJuly 2012

Relations With the African Development Bank Group

(As of May 23, 2012)

Burundi has been a member of the African Development Bank (AfDB) Group since the group was founded in 1964. AfDB grant and loan operations with the country were interrupted by the outbreak of civil strife in 1993. On July 19, 2004, the AfDB Boards approved general policy guidelines to help postconflict countries clear their arrears and created a facility, the PCCF, initially funded with about SDR 100 million in AfDB funds, to provide financial assistance to qualifying countries. The policy guidelines call for a three-way burden-sharing formula among the country, donors, and the PCCF. On October 27, 2004, the AfDB Boards endorsed an arrears clearance proposal for Burundi whereby the balance of arrears was settled with the help of donors and the PCCF before the decision point for the enhanced HIPC Initiative.

On April 21, 2009, under the enhanced framework of the Heavily Indebted Poor Countries (HIPC) Initiative, the Board of Directors of AfDB approved AfDB’s share of the HIPC debt relief in an amount equivalent to USD 150,200,000 in Net Present Value (NPV) terms as of the end of 2004. The Board of Directors also approved Burundi’s qualification for debt relief under the Multilateral Debt Relief Initiative (MDRI), in an amount of US$ 15.38 million, (UA 10.48 million), in nominal terms.

In support of the Government’s economic and social program, the Board approved the Country Strategy Paper (CSP) in October 2008. The CSP covers the period 2008 to 2011 and focuses on 2 pillars of the CSLP namely, (i) support to effective government by improving economic governance and the functioning of key public sector institutions, and (ii) increase employment opportunities through developing infrastructure and targeted interventions in the agricultural sector. The Country Strategy Paper Mid-Term Review and Country Portfolio Review have been presented to CODE on 30th of November 2010 and confirmed the relevance of the pillars. The Bank Group intervenes actively in infrastructure (transport, water and sanitation, and energy), agriculture, governance and social sectors. The Bank ongoing portfolio comprises seven (7) national operations for a total UA 112.23 million. The road sector accounts for 58.9% of the portfolio, followed by the social sector (17.7%). There are six (6) active multinational operations for UA 117.7 million, mostly in the road sector (70.1%). The amount of 7 million UA for the fourth phase of Burundi’s “Programme d’Appui aux Réformes Economiques” (PARE IV) has been fully disbursed in 2011.

The 2012-2016 CSP has been approved by the Board of Directors on January 11th, 2012. The CSP proposed strategy emphasizes selectivity, with two complementary pillars, namely (i) strengthening state institutions and (ii) infrastructure improvements in order to promote inclusive growth and development. The selection of these pillars is consistent with the Bank’s comparative advantage in the infrastructure sector, as well as its value-added in the area of support of reforms, good governance and institutional capacity building. The Bank plans to support Burundi trough infrastructure projects (mainly transport and energy); a two tranches GBS, namely PARE V, amounting of UA 12 million for the period 2012-2013 and capacity building.

SectorProject NameAmount (million UA)
AgricultureWatershed Development Project9.00
Lake Tanganyika Integrated Management Project4.96
Bugesera PPF Studies0.32
EnergyElectricity Infrastructure Rehabilitation/Expansion7.32
Water and SanitationWater Infrastructure Rehabilitation/ Expansion12
Social SectorMultisector Reintegration Project9.81
Employment Creation Project10.00
Multi SectorGovernance Structure Support Project1.5
Economic Reform Support Programme III10
MultinationalBugesera Multinational Project15.02
Kicukiro (Rwanda) – Kirundo (Burundi) Road14.9
Isaka-Kigali Railway Feasibility Study Phase II0.57
Nyamitanga-Ntendezi-Mwityazo Road49.38
NELSAP Interconnection5.05
Total (Public Sector only)64.91
Total (Public and Multinational)159.95

Statistical Issues

(As of June 26, 2012)

I. Assessment of Data Adequacy for Surveillance
General: Data provision has serious shortcomings that significantly hamper surveillance. The most serious shortcomings affect national accounts, government finance, and balance of payments statistics. Insufficient funding, staffing shortages and lack of equipment, along with coordination difficulties among responsible institutions, impede the timely production and dissemination of macroeconomic statistics.
Real sector statistics: Serious deficiencies in real sector data compilation hamper economic analysis and management. National accounts statistics are compiled infrequently by ISTEEBU, the national statistical office. Source data on agriculture, the most important economic activity, is inadequate. Consequently, there is a high degree of uncertainty regarding estimates of the level and the growth rate of GDP, components of expenditure, and all ratios to GDP. Annual national accounts estimates provided to the Fund, are not compiled, but rather, are derived from a macroeconomic projection model and certain base year estimates for 1998 and 2005. Since 2007, ISTEEBU has started the process for improvement of national accounts statistics with the assistance of AFRITAC. National accounts are now established on the basis of SNA 1993 (partially) using ERETES software with 2005 as base year. Compilation of GDP estimates for the years 2007 and 2008 is nearly finalized. Data on non-financial corporations is also a major area of concern for national accounts compilers. The monthly consumer price index features expenditure weights derived from a dated 1991 household expenditure survey and covers only the capital city. The CPI also has serious problems with the methodology used, including the lower-level formula, treatment of missing prices, and the sample selection, all of which lead to an inaccurate measurement of inflation. No producer price indices are compiled. Limited labor market statistics are available, thus hampering surveillance.
Government finance statistics: Burundi has benefitted from technical assistance provided by the World Bank and Fiscal Affairs Department in the areas of public financial management information systems and public expenditure management, as well as Statistics Department (STA) training in the compilation of government finance statistics. Nevertheless, government finance statistics (GFS) continue to suffer from weaknesses in coverage, accuracy, consistency, and timeliness. Burundi has accepted to participate in the GFS module under the Enhanced Data Dissemination Initiative (EDDI) project for Africa funded by the United Kingdom Department for International Development (DFID). The GFS module has as its main objective to improve the quality and dissemination of fiscal statistics using the guidelines of the Government Finance Statistics Manual 2001 (GFSM 2001). The support under the module consists mostly of a series of technical assistance missions over the next 3 to 5 years. The first mission took place in April 2011. The second mission will take place later this year.
Monetary and financial statistics: The monetary and financial statistics are now compiled following the recommended methodologies of the IMF’s Monetary and Financial Statistics Manual (2000), and are broadly adequate for both surveillance and harmonization with the monetary statistics of other East African Community member countries. Transactions with the IMF are reflected incorrectly—the amount of loans received from IMF differs from the IMF records, misrepresenting foreign liabilities of the central bank. STA informed the central bank of the issue, the resolution of which is pending. Because of the current payment system, there are differences between the central bank and other depository corporations (ODC) records. Normally, transactions between the central bank and ODC show up in ODC balance sheet with one-day lag that affects other items (net) (OIN) in the Depository Corporations survey. The liabilities of three banks in liquidation are shown in the central bank balance sheet; however, the information on these banks is not included in the summary of ODC data.
External sector statistics: Annual balance of payments and international investment position statistics are compiled by the Banque de la République du Burundi (BRB) according to the fifth edition of the Balance of Payments Manual (BPM5). However, severe coverage and measurement difficulties impart a high degree of uncertainty to external sector statistics and surveillance. For example, there are significant unrecorded imports and exports (particularly coffee and tea) of merchandise and services, and while adjustments are made, the uncertainty remains. For both services and income, the accuracy of the source data is not routinely assessed against other data sources. Similarly, measurement of capital and financial account transactions relies on Burundi’s International Transaction Reporting System, which is known to have incomplete coverage. Further actions are required to improve the accuracy and reliability of external sector data.
II. Data Standards and Quality
Participant in the General Data Dissemination System (GDDS) since August 2011.No data ROSC is available.
III. Reporting to STA
Summary government finance transactions data are reported for publication in International Finance Statistics (IFS). The BRB has completed migration to the Standardized Report Forms for the submission of its monetary statistics to the Fund; detailed monetary statistics are published in the IFS. Balance of payments and international investment position data are published in IFS and in the Balance of Payments Yearbook.
Burundi: Table of Common Indicators Required for Surveillance
Date of Latest ObservationDate ReceivedFrequency of Data8Frequency of Reporting8Frequency of Publication8
Exchange RatesCurrentCurrentDMM
International Reserve Assets and Reserve Liabilities of the Monetary Authorities1Mar. 2012Mar. 2012MMM
Reserve/Base MoneyMar. 2012Mar. 2012MMM
Broad MoneyMar. 2012Mar. 2012MMM
Central Bank Balance SheetMar. 2012Mar. 2012MMM
Consolidated Balance Sheet of the Banking SystemMar. 2012Mar. 2012MMM
Interest Rates2Mar. 2012Mar. 2012MMM
Consumer Price IndexMay 2012May 2012MMM
Revenue, Expenditure, Balance and Composition of Financing—General Government4/NANANANANA
Revenue, Expenditure, Balance and Composition of Financing3—Central GovernmentMar. 2012Mar. 2012QQQ
Stocks of Central Government and Central Government-Guaranteed Debt5NANANANANA
External Current Account Balance2010Mar. 2012AAA
Exports and Imports of Goods and Services2010Mar. 2012MMM
GDP/GNP62009Mar. 2012AAA
Gross External Debt2010Mar. 2012MMA
International Investment Position72010Mar. 2012AAA

Formerly PRGF.

When a member has overdue financial obligations outstanding for more than three months, the amount of such arrears will be shown in this section.

Assistance committed under the original framework is expressed in net present value (NPV) terms at the completion point, and assistance committed under the enhanced framework is expressed in NPV terms at the decision point. Hence these two amounts cannot be added.

Under the enhanced framework, an additional disbursement is made at the completion point corresponding to interest income earned on the amount committed at the decision point but not disbursed during the interim period.

The MDRI provides 100 percent debt relief to eligible member countries that qualified for the assistance. Grant assistance from the MDRI Trust and HIPC resources provide debt relief to cover the full stock of debt owed to the Fund as of end-2004 that remains outstanding at the time the member qualifies for such debt relief.

Assistance committed under the original framework is expressed in net present value (NPV) terms at the completion point, and assistance committed under the enhanced framework is expressed in NPV terms at the decision point. Hence these two amounts cannot be added.

Under the enhanced framework, an additional disbursement is made at the completion point corresponding to interest income earned on the amount committed at the decision point but not disbursed during the interim.

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