Front Matter

Front Matter Page

© 2009 International Monetary Fund

July 2009

IMF Country Report No. 09/242

Burundi: Second Review Under the Three-Year Arrangement Under the Poverty Reduction and Growth Facility and Request for Modification of Performance Criteria—Staff Report; Press Release on the Executive Board Discussion; and Statement by the Executive Director for Burundi

In the context of the second review under the three-year arrangement under the Poverty Reduction and Growth Facility and a request for modification of performance criteria, the following documents have been released and are included in this package:

  • The staff report for Second Review Under the Three-Year Arrangement Under the Poverty Reduction and Growth Facility and Request for Modification of Performance Criteria, prepared by a staff team of the IMF, following discussions that ended on June 10, 2009, with the officials of Burundi on economic developments and policies. Based on information available at the time of these discussions, the staff report was completed on June 29, 2009. The views expressed in the staff report are those of the staff team and do not necessarily reflect the views of the Executive Board of the IMF.

  • A Press Release summarizing the views of the Executive Board as expressed during its July 13, 2009 discussion of the staff report that completed the review.

  • A statement by the Executive Director for Burundi.

The documents listed below have been or will be separately released.

  • Letter of Intent sent to the IMF by the authorities of Burundi*

  • Memorandum of Economic and Financial Policies by the authorities of Burundi*

  • Technical Memorandum of Understanding*

  • *Also included in Staff Report

The policy of publication of staff reports and other documents allows for the deletion of market-sensitive information.

Copies of this report are available to the public from

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Front Matter Page

INTERNATIONAL MONETARY FUND

BURUNDI

Second Review Under the Three-Year Arrangment Under the Poverty Reduction and Growth Facility and Request for Modification of Performance Criteria

Prepared by the African Department

(In consultation with other departments)

Approved by Robert Sharer and Dominique Desruelle

June 29, 2009

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Contents

  • Executive Summary

  • I. Background

  • II. Recent Developments and Performance Under the PRGF

  • III. Consolidating Economic Stability and Sustaining Growth

    • Macroeconomic Outlook

    • Fiscal Policy and Related Reforms

    • Monetary Policy

    • External Sector Policies

    • Structural Reforms

    • Program Monitoring

    • Risks

  • IV. Staff Appraisal

  • Figure

  • 1. Recent Macroeconomic Performance, 2000–08

  • Text Table

  • 1. Medium Term Outlook 2008–12

  • Tables

  • 1. Millennium Development Goals

  • 2. Selected Economic and Financial Indicators, 2007–12

  • 3. General Government Operations, 2007–12

  • 4. Monetary Survey, 2005–09

  • 5. Central Bank Accounts, 2006–09

  • 6. Balance of Payments, 2007–12

  • 7. Banking System Soundness Indicators, 2005–09

  • 8. Actual and Projected Schedule of PRGF Disbursements and Reviews, 2008–11

  • Appendix

  • 1. Letter of Intent

  • Attachment I. Memorandum of Economic and Financial Policies

  • Attachment II. Technical Memorandum of Understanding

  • Appendix Tables

  • I.1. Performance Criteria and Indicative Targets for 2008

  • I.2. Performance Criteria and Indicative Targets for 2009

  • I.3. Performance Criteria and Structural Benchmarks for 2009

Executive Summary

Burundi’s economy performed well during 2008, though food and fuel price shocks kept inflation high. Real GDP growth increased to 4½ percent, mainly because of a good coffee harvest and more donor-financed projects. With international commodity prices higher in the first half of the year, 12-month inflation peaked at about 30 percent in June before declining to about 26 percent by year-end. Higher donor support helped build gross official reserves to about 6½ months of imports. The real effective exchange rate appreciated by 16 percent.

In a difficult post-conflict environment, performance under the PRGF-supported program was generally satisfactory. Most indicative targets for end-December 2008 were met, as were all quantitative and structural performance criteria for March 2009, and structural reforms are on track. In particular, the value-added tax law was promulgated, payroll management was transferred to the Ministry of Finance, and the census of government employees was completed. Monetary and financial sector reforms have also progressed well, and the foreign exchange auction system is being revamped.

Though Burundi’s macroeconomic prospects for 2009 remain positive, they are less so than they were because of the global financial crisis. Projected economic growth would moderate to 3.2 percent, from 4½ percent in 2008, mainly because of (i) reduced demand for exports; (ii) a decline in world coffee prices; and (iii) lower private transfers and foreign direct investment. Against the backdrop of weak economic growth and lower international oil and food prices, 12-month inflation is expected to decline to 9 percent by year-end.

The discussions focused on ways to mitigate the adverse impact of the global economic slowdown on Burundi. Fiscal policy will be eased by about 1.3 percent of GDP to accommodate the temporary revenue shortfall due to the global financial crisis. The revised fiscal program also incorporates additional grants-financed spending of 1.5 percent of GDP to mitigate the impact of the crisis on the poor. Monetary policy will be eased slightly, while still seeking to reduce inflation to single digits. The flexible exchange rate regime will also help the economy adjust.

Because Burundi is a postconflict country, risks to the program remain significant.Foremost would be a worsening political, social, and security situation as general elections near in mid-2010. Other risks are governance slippages and worse than expected effects of the global financial crisis.

Staff recommends completion of the second review, based on Burundi’s performance and the strength of the program.

Front Matter Page

INTERNATIONAL MONETARY FUND

BURUNDI

Second Review Under the Three-Year Arrangment Under the Poverty Reduction and Growth Facility and Request for Modification of Performance Criteria

Information Annex

Prepared by the African Department

(In consultation with other departments)

June 29, 2009

  • Relations with the Fund. Describes financial and technical assistance from the Fund and provides information on the safeguards assessment and exchange rate system. Outstanding purchases and loans amounted to SDR 51.39 million (66.7 percent of quota) at end-May 2009.

  • Relations with the World Bank. Describes the World Bank Group’s program and portfolio.

  • Relations with the African Development Bank. Describes the AfDB Group’s operations and portfolio.

  • Statistical Issues. Assesses the quality of statistical data. Shortcomings in economic statistics are hampering surveillance.

Contents

  • I. Relations with the Fund

  • II. Joint World Bank-IMF Work Program, 2008-09

  • III. Relations with the African Development Bank Group

  • IV. Statistical Issues

Burundi: Second Review Under the Three-Year Arrangement Under the Poverty Reduction and Growth Facility and Request for Modification of Performance Criteria: Staff Report; Press Release on the Executive Board Discussion; and Statement by the Executive Director for Burundi
Author: International Monetary Fund