Press Release: IMF Executive Board Completes Third and Fourth Reviews Under Burundi's PRGF Arrangement and Approves US$21.1 Disbursement
July 14, 2006Press Release No. 06/156
The Executive Board of the International Monetary Fund (IMF) has completed the third and fourth reviews of Burundi's economic performance under an SDR 69.30 million (about US$102.4 million) Poverty Reduction and Growth Facility (PRGF) arrangement (see Press Release No. 04/13), and approved the disbursement of an amount equivalent to SDR 14.3 million (about US$21.1 million), which will bring the total disbursements under the PRGF arrangement to SDR 55 million (about US$81.3 million).
In completing the third and fourth reviews, the Executive Board granted Burundi's request for waivers of nonobservance of two performance criteria, one relating to the installation of a computerized financial management information system (IFMIS), and the other to external payments arrears. The Board also extended Burundi's PRGF arrangement through to September 30, 2007 and granted additional interim assistance to Burundi under the enhanced Heavily Indebted Poor Countries (HIPC) Initiative.
Following the Executive Board's discussion on July 14, 2006 on Burundi's economic performance, Mr. Agustín Carstens, Deputy Managing Director and Acting Chair, stated:
"Following a long-lasting social conflict, the recent successful political transition and improved security situation in Burundi have now set the stage for moving ahead resolutely with structural reforms that are essential to stimulate private sector activity, improve the business climate, and accelerate growth over the medium term. Given Burundi's pressing social needs—as one of the poorest countries in the world—the authorities' intention to refocus public spending on the social sectors and infrastructure needs that will help achieve the Millennium Development Goals (MDGs) is welcome.
"Performance under the PRGF-supported program in 2005 was satisfactory. Although the pace of structural reform was uneven, reflecting the political transition, commendable progress was made in the fiscal, monetary, and foreign exchange areas. In the period ahead, the authorities will need to focus on initiating deeper reforms in the productive sectors that are fundamental for a sustained economic recovery.
"Fiscal revenues have been stronger than expected, and public expenditure management has improved. Further steps will be needed over the medium term—and with donor assistance--to strengthen budget execution, financial control, and public procurement. Expectations of a peace dividend need to be managed carefully, and the costs of all social initiatives should be included in the budget. Further enhancements in good governance and transparency practices will help strengthen private investor and donor confidence.
"Monetary policy implementation has been strengthened, as evidenced by the decline in inflation and stronger exchange rate. At the same time, banking supervision should be improved, and efforts continued to modernize the central bank's internal operations. The managed-float exchange rate regime has served Burundi well, helping to cushion external shocks, and commendable progress has been made in liberalizing the exchange regime.
"The authorities are in the final stages of preparing a full PRSP, which is expected to be ready in mid-2006. An expenditure-tracking mechanism has been set up. A donor's conference to mobilize financing is planned for the fourth quarter of 2006. Donor coordination and predictable disbursement of program support will be important for macroeconomic stability and administrative capacity building, and helping the authorities reinforce the delivery of social services. Following the extension of additional interim assistance under the enhanced HIPC Initiative, the authorities are now encouraged to buttress their efforts toward reaching the HIPC completion point," Mr. Carstens said.
The PRGF is the IMF's concessional facility for low-income countries. PRGF-supported programs are based on country-owned poverty reduction strategies adopted in a participatory process involving civil society and development partners and articulated in a PRSP. This is intended to ensure that PRGF-supported programs are consistent with a comprehensive framework to foster growth and reduce poverty. PRGF loans carry an annual interest rate of 0.5 percent and are repayable over 10 years with a 5 ½-year grace period on principal payments.