Letter of Intent
Bujumbura, January 28, 2013
Ms. Christine Lagarde
International Monetary Fund
Washington, D.C., 20431
Dear Ms. Lagarde:
On January 27, 2012, the Executive Board of the International Monetary Fund (IMF) approved a new three-year arrangement under the Extended Credit Facility (ECF) in favor of the Republic of Burundi. This arrangement is intended to support our medium-term program and to strengthen macroeconomic stability, expedite growth, and reduce poverty. Under this arrangement, the government of Burundi and an IMF mission recently assessed implementation of the program as part of the second review of the arrangement. This review focused on program implementation from April 1, 2012 to September 30, 2012, as well as on the outlook and the economic and financial measures to be implemented in 2013.
In 2012, Burundi continued to endure the effects of external shocks related to rising food and oil prices and the slowing global economy. These shocks led to higher living costs, declining budgetary assistance, terms of trade deterioration, and sluggish domestic demand, which adversely affected our macroeconomic policy.
These shocks notwithstanding, program implementation at end-September 2012 was satisfactory overall. All performance criteria and indicative targets were observed, with the exception of the indicative target on pro-poor expenditure, owing to spending cuts and the delay in the disbursement of budgetary assistance. Nevertheless, the government intends to press ahead with the program in pursuit of the objectives of fiscal and debt sustainability and the country’s economic recovery in the medium term. In particular, the government intends to conduct prudent fiscal and monetary policies in the short term in an effort to curb inflationary pressures and maintain a sustainable debt position, while safeguarding pro-poor expenditure.
In light of the appreciable progress in implementing the program supported by the ECF arrangement, the government is requesting completion of the second review as well as the third disbursement of SDR 5 million under the ECF arrangement.
The government is convinced that the policies defined in this MEFP are sufficient for attainment of the program objectives and are consistent with the orientations of the second-generation Poverty Reduction and Growth Strategy Paper (PRSP-II). It also stands ready to adopt any additional measures that may be required for this purpose. The government will consult with the IMF in advance of the adoption of such measures and/or of revisions to the policies contained in the MEFP, in accordance with the IMF’s policies on such consultations.
The government will provide the IMF with such information as it may request to ensure implementation of the program. That information as well as arrangements for monitoring implementation of the program and the performance criteria, quantitative targets, and structural benchmarks are detailed in the Technical Memorandum of Understanding, which is also attached to this letter. We expect the third review based on the end-March 2013 performance criteria to be completed by July 31, 2013 and the fourth review based on the end-September performance criteria to be completed by January 31, 2014.
The Burundi authorities wish to make this letter available to the public, along with the attached MEFP and Technical Memorandum of Understanding (TMU), as well as the IMF staff report on this second review. We therefore authorize their publication and posting on the IMF website, subject to Executive Board approval. These documents will also be posted on the official websites of the Burundian government.
Tabu Abdallah MANIRAKIZA
Minister of Finance and
Economic Development Planning
Governor, Bank of the Republic of Burundi
Attachments: Memorandum of Economic and Financial Policies (MEFP)
Technical Memorandum of Understanding (TMU)
Attachment I. Amendements to the Memorandum of Economic and Financial Policies
Attachment II. Amendments to the Technical Memorandum of Understanding
1. This technical memorandum of understanding covers the agreements on monitoring implementation of the program supported by the Extended Credit Facility (ECF) Arrangement. It sets out the definitions of program variables to monitor implementation of the program and the reporting requirements for the government of Burundi and the Bank of the Republic of Burundi (BRB). It defines quantitative performance criteria, indicative targets, and applicable adjustors.