Burundi has made much progress since the signing of the Arusha peace and reconciliation agreement. The handling of the economy has been highly competent considering the inordinate difficulties faced by Burundi in recent years. The bank of the Republic of Burundi has made progress in the implementation of monetary policies and in the conduct of bank supervision. Progress in implementing structural reforms has been satisfactory overall. Burundi continues to face unsustainably heavy debt-service obligations. The government is gradually rebuilding its administrative capacity.

Abstract

Burundi has made much progress since the signing of the Arusha peace and reconciliation agreement. The handling of the economy has been highly competent considering the inordinate difficulties faced by Burundi in recent years. The bank of the Republic of Burundi has made progress in the implementation of monetary policies and in the conduct of bank supervision. Progress in implementing structural reforms has been satisfactory overall. Burundi continues to face unsustainably heavy debt-service obligations. The government is gradually rebuilding its administrative capacity.

January 23, 2004

The following information has become available since the issuance of the staff report on January 6, 2004. It does not change the thrust of the staff appraisal.

  • Preliminary data indicate that the increase in consumer prices was 10½ percent in 2003, compared with an earlier projection of 9 percent (end-of-period basis), owing mainly to food price volatility. The official exchange rate of the Burundi franc has remained broadly stable against the U.S. dollar during December-January and the differential with the parallel market exchange rate (in foreign currency terms) has declined further to around 10-11 percent.

  • The 2004 finance law was promulgated on December 30, 2003, consistent with the authorities’ commitment under the program. Also in December, the Bank of the Republic of Burundi lowered the foreign exchange surrender requirement on traditional exports (coffee, tea, and cotton) from 70 percent to 50 percent, as envisaged in the MEFP.

  • A donors’ forum on Burundi was convened on January 13-14 in Brussels. The meeting, which was co-sponsored by Belgium, the UNDP, and the Burundi government, attracted a wide attendance and raised substantial resources for the government’s programs. Donor representatives were unanimous in praising the major progress made by the authorities in 2003 in advancing the peace process and strengthening economic policies. Pledges totaled over US$1 billion for the 2004-06 period (up from US$0.9 billion at the previous donors’ conference in November 2002). In addition, several bilateral donors announced their willingness to cancel ODA debts in the context of a forthcoming meeting of the Paris Club. Financing for the envisaged PRGF-supported program is well secured, but the authorities did not obtain the full amounts requested for the restructuring of armed forces and the resettlement of refugees and internally displaced persons. Under the circumstances, the authorities will be implementing these programs based on the availability of resources.