Statement by the IMF Staff Representative

Burundi’s First Review Under the Poverty Reduction and Growth Facility and Request for Waiver of Performance Criteria are discussed. Fiscal slippages emerged following the surge in petroleum prices and higher spending needs associated with the peace process and the domestically financed counterpart to much higher-than-expected project spending. Important progress has been made in pursuing peace and reconciliation and initiating the multiyear demobilization effort and security programs. Burundi has made considerable progress in normalizing relations with international creditors.

Abstract

Burundi’s First Review Under the Poverty Reduction and Growth Facility and Request for Waiver of Performance Criteria are discussed. Fiscal slippages emerged following the surge in petroleum prices and higher spending needs associated with the peace process and the domestically financed counterpart to much higher-than-expected project spending. Important progress has been made in pursuing peace and reconciliation and initiating the multiyear demobilization effort and security programs. Burundi has made considerable progress in normalizing relations with international creditors.

The following is information received since the staff report was issued, on the prior actions, important structural measures, and macroeconomic developments. The thrust of the staff appraisal remains unchanged.

1. All three prior actions have been implemented

  • The 2005 budget was approved by parliament and signed by the President on December 31, 2004, in line with the program.

  • The new budget and accounting charter was also approved on December 31, 2004 and is entered into effect with the 2005 budget.

  • The law on the status of magistrates of the audit court was sent to parliament in mid-December 2004. In late 2004, the audit court reviewed the 2005 budget proposals. Preparations to initiate the audit of the 2004 government accounts by April 2005 have begun.

2. Good progress has been made on the structural side

  • Regarding the coffee sector, the Presidential decree liberalizing private investment at all levels of the supply chain was signed into effect on January 14, 2005.

  • With regard to the foreign exchange regime, on January 10, 2005, the remaining export surrender requirement (50 percent of exports of coffee, tea, and cotton) was abolished, considerably in advance of the program target (a structural performance criterion for end-March 2005).

3. Macroeconomic developments have been mixed

  • Preliminary data indicate that CPI inflation in December 2004 was above target at about 10% percent (year-on-year). This in part reflects a sharp rise in the prices of basic food items in recent months subsequent to a severe drought in two Northern provinces and continued high petroleum prices.

  • Since the liberalization of the exchange regime to a market-determined system in mid-December 2004, the exchange rate has depreciated some 3% percent against the U.S. dollar, and now appears to have stabilized in value.

  • Government revenue has performed very strongly in the fourth quarter and may exceed program expectations for 2004 by close to 1 percent of GDP.