## _cr05329 ## Source details **Canonical URL:** [_cr05329](https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2005/_cr05329.pdf) ## Other formats - [Markdown version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2005/_cr05329.pdf.md) - [Structured JSON version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2005/_cr05329.pdf.json) --- ### I. Introduction and purpose - Assessment of Burundi’s eligibility for assistance under the enhanced Initiative for Heavily Indebted Poor Countries (HIPC). - IMF and IDA Executive Boards discussed the preliminary HIPC document for Burundi on January 19 and 27, 2005. - Executive Directors' preliminary determination of eligibility based on: - heavy debt burden, - track record under IDA- and IMF-supported programs, - status as an IDA-only and PRGF-eligible country. - Directors indicated Burundi could reach its decision point by mid-2005, conditional on satisfactory policy implementation under the government’s macroeconomic and structural program. - Staff view: Burundi has met the conditions for reaching the HIPC decision point. ### II. Poverty, social indicators, and human development - Income and poverty: - Nominal per capita GDP: about US$83 in 2003. - Income per capita recovered since 2000 but remains less than one-half the historic high of US$180 attained before the 1993 conflict. - Percentage of people living below the poverty line: from 35 percent in 1992 to 68 percent in 2002 (68.7 percent in rural areas, 66.0 percent in urban areas). - Health and social indicators: - Child malnutrition: rose from 35 percent in 1987 to 45 percent in 2000. - Access to safe water: less than 48 percent of the population. - Access to health services: less than 20 percent of the population. - Displaced persons: some 200,000 internally and in refugee camps (down from one million at peak). - HIV/AIDS prevalence: an estimated 1 in 9 sexually active Burundians infected; HIV/AIDS prevalence (percent of active sexually population; 2001): 11.3. - Number of people with HIV/AIDS in 1999: about 360,000 in the 15–49 age group, and 19,000 for those under 15. - AIDS orphans: some 200,000 (out of a total of some 556,000 orphans). - Selected indicators (latest available years as reported): - Population (in millions; 2002): Burundi 7.3. - Population growth (2003): Burundi 2.0. - GDP per capita (US$; 2003): Burundi 83. - Life expectancy at birth (years; 2002): Burundi 41.7. - Infant mortality rate (per thousand, 2002): Burundi 123. - Child mortality rate (per thousand, 1998): Burundi 208. - Maternal mortality rate (per 100,000/live births; 2001): Burundi 1300. - Literacy rate (percent of population; 2001): Burundi 55.4. - Gross school enrollment rate (percent of age group; 2001): Burundi 71.0 (Male 79.5; Female 62.4). - Population density (persons/sq km): Burundi 262.0. ### III. Political and security context - Peace process and political milestones: - Arusha peace and reconciliation accord signed August 2000 among 39 political-ethnic groups. - Transition government, ethnically balanced senate and parliament established in 2002; peaceful presidential rotation from Tutsi to Hutu in 2003. - Remaining holdout rebel group agreed to a cease-fire in May 2005. - February 2005 referendum approved a new constitution; June 23 communal elections; July 4 parliamentary elections. - New constitution assures minority Tutsis 40 percent of seats in the National Assembly and positions in the council of ministers; subsequent presidents to be directly elected. - Security sector and DDR: - Creation of a new, ethnically balanced army and national police began late 2004. - United Nations Operation in Burundi (ONUB) peacekeeping force of 5,650 (including civilians). - By end-May 2005 almost 10,000 ex-combatants had been demobilized. - National Commission on Reintegration of Refugees (established 2003) assisted resettlement of some 500,000 refugees and internally displaced persons. - January 2005: National Truth and Reconciliation Commission set up with a two-year mandate covering acts between 1962 and 2000. ### IV. Macroeconomic performance and outlook - Recent performance and programs: - Real GDP growth: close to 5 percent in 2004 and expected to be sustained at that level in 2005. - Inflation: rose to almost 12 percent in 2004; authorities aim to reduce inflation to 10 percent by year-end 2005. - Current account deficit (including grants) in 2004: 7.2 percent of GDP. - Social sector spending rose to 6.7 percent of GDP in 2004. - IMF engagement: three-year PRGF arrangement starting January 2004 (SDR 69 million); first review concluded by IMF Executive Board on January 19, 2005. - Donor pledges: more than US$1 billion over three years (donor forum January 2004). - Fiscal strategy and security-related spending: - 2005 fiscal strategy emphasizes transition from a “conflict” to a “peacetime” budget. - Security sector projects will raise the share of military and security spending in the short term; demobilization expected to permit shift to social outlays over time. - Share of military spending projected to rise in 2005, while share of social sector spending would decline slightly; budget savings on security spending appear possible from late 2005 assuming pace of demobilization maintained. ### V. Public finance, monetary policy, and structural reforms - Public finance management reforms and status: - Adoption of a unified functional and economic classification of budgetary expenditure. - Adoption of a double-entry accounting system. - Implementation of a system for monitoring flows of external assistance and government expenditures. - Computerization of expenditure management; integrated public expenditure computerized system connected to the central bank (BRB) expected by October 2005. - Civil service payroll management strengthened; inventory of domestic payments arrears completed May 2005; external audit expected to begin shortly. - Establishment of an audit court (Cour des Comptes) in 2004; audit of 2004 government accounts began April 2005. - Revenue mobilization measures: - Strengthened tax administration and collection; introduction of a single taxpayer identification number; elimination of loopholes in import pre-shipment inspection regime; recognition and enforcement of income tax liability of Burundian nationals working for international organizations. - Monetary policy and foreign exchange: - BRB measures: abolished specific credit ceilings and introduced market-based liquidity (credit/deposit) auctions in April 2005. - Foreign exchange liberalization: restrictions on current transactions removed in 2003; December 2004 change to official exchange rate determination; abolishment of remaining export foreign exchange surrender requirement in January 2005. - Structural and sectoral reforms underway: - Coffee sector liberalization measures in 2004–05 (private entry, abolition of coffee production tax, freeing coffee sales); privatization of state assets in the coffee sector expected to begin mid-2005. - Tea and cotton sector reform strategy approved October 2004. - Sugar sector liberalized May 2005 (abolition of export restrictions, minimum import prices, and domestic price controls). - IDA-supported programs to strengthen Ministry capacity and statistics, justice system reform planning, and community-driven projects for decentralization and social cohesion. ### VI. PRSP process and medium-term strategy for poverty reduction - I-PRSP formulation: - I-PRSP based on broad consultations; six strategic themes: (i) peace and democratic governance; (ii) reintegration; (iii) private sector development; (iv) human capital development; (v) fighting HIV/AIDS; (vi) advancing role of women. - 2004 opinion survey (3,000 respondents): more than 80 percent think poverty has remained constant or increased over last 5 years; some 40 percent predict poverty will decrease in next five years. - PRSP timetable and monitoring: - Joint Staff Assessment (JSA) found the I-PRSP framework sound. - PRSP Preparation Status Report (PSR) April 2005 indicates on track to adopt a full PRSP; analysis and synthesis expected by mid-July 2005; full PRSP expected in late 2005. - Importance of well-costed sector strategies integrated into the budgetary process emphasized. - Medium-term macroeconomic objectives: - Achieve sustained economic growth of some 5 percent per annum. - Lower inflation to about 4–5 percent. - Maintain foreign reserves at 6 months of imports. - Reduce external current account deficit (after grants) to some 5½ percent of GDP by 2015. - Limit external financing to grants and highly concessional credits; restore a sustainable external debt position; boost private savings and investment. - Sectoral priorities: - Education: universal primary enrollment objectives; teacher training; rehabilitation. - Health: restore pre-crisis service coverage; preventive and curative measures, HIV/AIDS strategy; medium-term reforms including an independent national drug agency and decentralized health management. - Gender and social protection: gender action plan; micro-finance support fund; revision of matrimonial code; constitutional assurance of 40 percent women parliamentarians. - Rural/agriculture: agriculture contributes nearly 50 percent of GDP and supports more than 90 percent of the population; coffee sector reform expected to raise incomes of some 800,000 small rural producers; land legislation, matching grant programs, training and extension emphasized. - Infrastructure: seven-area road strategy; labor-intensive techniques and community ownership; IDA support via Public Works and Employment Creation project supplement. ### VII. Debt stock, DSA baseline findings, and HIPC sizing - External debt stock and composition (end-December 2004): - Public and publicly guaranteed external debt (including arrears): US$1,384 million. - Creditor composition: Multilateral creditors 84.5 percent; Paris Club bilateral creditors 10.5 percent; other official and commercial creditors 5 percent. - NPV of external debt outstanding at end-2004: US$902 million. - Nominal value of debt stock (reported): US$1,325 million. - Present value (PV) of debt: US$894.8 million; PV of debt stock: US$902.0 million. - Debt Sustainability Analysis (baseline assumptions): - Real GDP growth: maintained at 5 percent average over 2004–24. - CPI inflation: 12 percent in 2004, 10 percent in 2005, dropping to 4 percent by 2011 and remaining at that level through 2024. - Revenues excluding grants: rise from about 18 percent of GDP in 2005 to about 21 percent of GDP by 2024. - Gross official external financing: about 22 percent of GDP during 2004–05, trending to about 10 percent by 2009 and 6 percent of GDP in 2024. - Export receipts: stable in 2006, rise 21 percent in 2007, then annually between 7 and 11 percent; coffee production gradually reaching about 55,000 tons. - Export volume growth: average 6.5 percent over projection period. - Imports: average 34 percent of GDP in 2004–05, decline to 25 percent of GDP in 2013, then to 22 percent of GDP in 2024. - Baseline DSA outcomes: - Even after HIPC assistance phased in, external debt projected to remain above the HIPC threshold for a considerable period. - NPV of debt-to-exports ratio estimated at 1,772 percent at end-2004 (Table 4 presentation) and projected to remain above 150 percent throughout interim period. - After full delivery of HIPC assistance, projected NPV of debt-to-exports path: rise initially to 168 percent in 2010, then decline steadily to 86 percent in 2024. - Projected current account deficit: widen initially to above 10 percent of GDP before narrowing to about 3.5 percent of GDP by 2024. - Gross investment and national savings by 2024: 13.7 and 10.1 percent of GDP, respectively. ### VIII. HIPC Initiative assistance sizing, modalities, and impact - Required relief to reach 150 percent NPV of debt-to-exports after traditional mechanisms: - Common reduction factor required: 91.5 percent for all creditors. - Relief amount: US$826 million in NPV terms. - Estimated creditor contributions (NPV terms): Multilateral creditors about US$701 million; Bilateral and commercial creditors US$124 million (Paris Club US$86 million; Commercial creditors US$5 million; Other official bilateral creditors US$33 million). - Nominal terms translation: about US$1,495 million of debt relief over time. - Assumed delivery modalities and timing: - Paris Club: flow rescheduling on Cologne terms (90 percent NPV reduction) after decision point (assumed end-June 2005), with remaining assistance at completion point expected end-2006 through a stock-of-debt operation. - IMF assistance: total US$27.84 million in NPV terms. - Interim IMF assistance: about 50 percent of debt-service falling due from decision point in 2005 through end-2006. - PRGF principal repayments to IMF begin August 2009; most IMF remaining HIPC relief delivered following completion point with debt-service reduction through 2015. - IDA assistance: total US$424.8 million in NPV terms. - Interim IDA assistance: debt-service reduction on debt outstanding and disbursed at end-2004, beginning immediately after decision point approval and continuing until 2039 assuming completion point at end-2006. - Delivery of interim assistance by IDA expected to start August 2005. - Savings as a percent of debt service due to IDA: 39 percent for 2005 and increase to 90 percent thereafter. - Impact on debt service: - Interim period (July 2005 to end-2006): HIPC assistance would reduce debt service due from 52 percent of exports and 29 percent of fiscal revenue in 2005 to 12.6 percent of exports and 6.2 percent of fiscal revenue in 2006. - Debt service trending down to an average of 5.3 percent of exports and 3.2 percent of fiscal revenue in 2015–24. - Expected average savings: nearly US$26 million in 2005–06; expected annual average about US$46 million after the completion point. - Timing of crossing the 150 percent threshold: - Under baseline assumptions, the NPV of debt-to-exports ratio would not decline below 150 percent until 2013. ### IX. Scenarios, sensitivity analysis, and risk assessment - Four scenario experiments and key results: - Scenario 1 — Lower export growth (export volumes 1 percentage point lower than baseline): NPV of debt-to-exports ratio averages 29 percentage points more than baseline in 2004–14; 130 percentage points above baseline at end of projection period. - Scenario 2 — Higher non-oil import prices (5 percentage points higher during 2006–09): NPV of debt-to-exports worsens by almost 50 percentage points above baseline in 2004–14 and about 105 percentage points above baseline thereafter; debt service ratio deteriorates only slightly. - Scenario 3 — Higher interest rates (two percentage point increase on all loans from 2005): NPV of debt-to-exports almost 60 percentage points higher than baseline over 2004–14; debt-service-to-exports about 6 percentage points higher than baseline on average. - Scenario 4 — Grant-heavy future financing (100 percent grants 2006–07; 70 percent grants/30 percent concessional loans thereafter): keeps NPV permanently below HIPC threshold; highly concessional financing lowers debt-service ratio only marginally relative to baseline. - Sensitivity and stress tests: - Small export base and reliance on export performance make Burundi very vulnerable to external shocks. - Historical and stress scenarios (lower GDP/export growth, exchange rate depreciation) show significant deterioration in debt indicators; a 30 percent exchange rate depreciation has the largest impact. - LIC DSA framework (Annex II) confirms vulnerability and that even after HIPC assistance Burundi would remain above the indicative threshold for a considerable period. - Key medium- and long-term projection highlights (selected figures): - Real GDP growth baseline: 5.0 percent per annum for 2005–24. - Nominal GDP: 2004 664.1; 2005 800.4; 2015 1,751.4; 2024 3,239.8 (all mem. millions of U.S. dollars as reported). - Exports of goods and nonfactor services: 2004 58.9; 2005 81.6; 2015 197.6; 2024 419.7 (millions of U.S. dollars). - Government revenue excluding grants: 2004 133.5; 2005 146.1; 2015 355.6; 2024 673.4 (millions of U.S. dollars). - GDP per capita (U.S. dollars): 2004 95.5; 2005 111.8; 2015 185.5; 2024 271.8. ### X. Debt management capacity and institutional issues - DDE (Direction de la Dette Extérieure) at Ministry of Finance responsible for debt management; BRB collects external sector statistics. - Main constraints: - Lack of trained human resources at the DDE. - Lack of communication among units responsible for external debt management. - SYGADE software not used to full capacity; Debt-Pro installed but not yet used. - Capacity support and plans: - 2004 training received on enhanced HIPC Initiative, rescheduling, and debt management by Debt Relief International. - Major restructuring and capacity strengthening planned for the DDE under the World Bank’s EMSP. - Current data on disbursed debt, serviced amounts, and payment schedules reported accurate and up to date. - Institutional recommendation: - Strengthen DDE coordination with the Finance Minister’s cabinet and services monitoring the IMF/WB program; integrate debt management within the overall macroeconomic policymaking framework. ### XI. Monitoring, safeguards, and use of HIPC savings - Monitoring and transparency measures: - New budget nomenclature in the 2005 budget to track poverty-related resources by activity and region. - Introduction of a computerized integrated public expenditure management system in 2005. - A special treasury subaccount in the central bank to hold budgetary savings from debt relief. - HIPC-related expenditures to be codified in the integrated public expenditure management system. - Independent Oversight Committee (national, local, international donor representatives) to monitor expenditures financed by HIPC relief; independent technical and financial audits to be made publicly available. - IDA’s EMSP and procurement reform grant to strengthen public procurement systems. - Expenditure priorities for HIPC relief (proposed, nonexclusive): - National reconciliation and security: resettlement and economic reintegration of displaced people; justice system reform. - Health: HIV/AIDS public awareness; rehabilitation and strengthening of basic health facilities; training and retraining of health personnel; improving availability of drugs and vaccination performance; improving access to potable water. - Education: rehabilitation/reconstruction of rural schools; provision of teaching materials; increasing teaching personnel, especially in rural/underserved areas. - Infrastructure: rehabilitation and expansion of rural water supply; rehabilitation/construction of key rural roads and bridges. - Agriculture: strengthening research and development; promoting private sector involvement. ### XII. Decision point assessment and Board guidance requested - Key questions for Directors: - Do Directors agree Burundi is eligible for relief under the enhanced HIPC Initiative and recommend approval of a decision point? - Do Directors agree the IMF and IDA should provide interim assistance between the decision and completion points, in line with existing guidelines? - Do Directors agree that the floating completion point will be reached when the triggers in Box 6 have been met and satisfactory assurances of other creditors’ participation have been received? - HIPC assistance sizing and burden-sharing (summary): - Total estimated assistance under enhanced HIPC Initiative: US$826 million (NPV). - IDA contribution: US$424.8 million (NPV). - IMF contribution: US$27.9 million (NPV). - Decision point expected: August 2005; delivery of interim assistance by World Bank Group expected to start August 15, 2005; first IMF interim deposit to be in August 2005. ### XIII. Key quantitative indicators and memorandum items (selected exact values reported) - Nominal public and publicly guaranteed external debt (end-December 2004): US$1,384 million. - NPV of external debt outstanding at end-2004: US$902 million. - NPV of debt-to-exports ratio (mem.): 1,772 (as presented in Table 4). - Target NPV of debt-to-exports ratio: 150.0 percent. - DSA headline projections and averages (selected): - Debt service-to-exports ratio (excluding arrears), selected averages: 2005 62.4; 2006 63.6; 2007 50.6; 2008 47.0; 2009 46.9; 2010 46.2. - Debt service-to-revenue ratio (excluding arrears), selected averages: 2005 34.9; 2006 31.5; 2007 27.8; 2008 25.7; 2009 25.2; 2010 24.8. - After HIPC assistance (scheduled debt service, cash basis) sample annual values: 2005 26.3; 2006 10.5; 2007 4.5; 2008 5.0. - NPV of total debt (before traditional debt-relief, 2004): 894.8; after traditional debt-relief: 902.0; after enhanced HIPC assistance: 889.3 (selected table series). - Nominal GDP (mem. millions of U.S. dollars): 2004 664.1; 2005 800.4; 2015 1,751.4; 2024 3,239.8. ### XIV. Conclusions and policy recommendations - Main conclusions: - Burundi faces a heavy external debt burden; DSA shows external debt would remain above HIPC thresholds for a considerable period even after proposed HIPC relief under baseline assumptions. - Debt sustainability is highly vulnerable to external shocks, export performance, and the composition/terms of external assistance. - Achieving a robust external debt position depends critically on sustained export-led growth, heavy grant financing, prudent debt management, and sustained domestic reforms. - Recommended priority actions: 1. Implement a strong and sustained reform effort to develop a diversified export base and promote private sector investment and improved infrastructure. 2. Ensure future external financing is heavily weighted toward grants and highly concessional loans. 3. Pursue prudent fiscal and monetary policies to maintain macroeconomic stability and fiscal discipline. 4. Strengthen institutional capacity for debt management (notably the DDE) and public expenditure management to raise resilience and the indicative debt thresholds for risk of debt distress. - Triggers for the floating completion point (summary): - Preparation of a full PRSP through a participatory process and one year of implementation evidenced by an Annual Progress Report. - Maintenance of macroeconomic stability demonstrated by satisfactory performance under the PRGF program. - Utilization of enhanced HIPC budgetary savings in line with decision-point priorities, approved by parliament and monitored by a national independent oversight committee. - Specific and monitorable measures on public expenditure management, governance, demobilization, structural reforms, key social sectors, and debt management. - If Burundi remains on track with PRSP implementation and reforms supported by IDA and IMF, the HIPC completion point could be reached as early as end-2006. *Source: IMF/IDA staff HIPC preliminary document for Burundi (content unit _cr05329).* ### 1. Poverty and Social Indicators ...................................................................................... ### 1. Poverty and Social Indicators ### I. Introduction and purpose - Presents an assessment of Burundi’s eligibility for assistance under the enhanced Initiative for Heavily Indebted Poor Countries (HIPC). - IMF and IDA Executive Boards discussed the preliminary HIPC document for Burundi on January 19 and 27, 2005. - Executive Directors made a preliminary determination that Burundi could be eligible for assistance under the enhanced HIPC Initiative based on: - its heavy debt burden, - its track record of performance under IDA- and IMF-supported programs, - its status as an IDA-only and PRGF-eligible country. - Directors indicated Burundi could reach its decision point by mid-2005, provided policy implementation under the government’s macroeconomic and structural program is satisfactory. - Staff view: Burundi has met the conditions for reaching the HIPC decision point. ### II. Key findings from the Debt Sustainability Analysis (DSA) - The DSA indicates Burundi’s external debt would remain above the HIPC threshold even after full application of traditional debt-relief mechanisms. - The present value (NPV) of debt-to-exports ratio is estimated at 1,772 percent at end-2004 and is projected to remain above 150 percent throughout the projection period. ### III. PRGF and IDA status - Burundi is an IDA-only country, with a nominal per capita GDP of about US$83 in 2003. - Eligible to receive resources under the IMF’s Poverty Reduction and Growth Facility (PRGF). - Expected to remain an IDA-only country and eligible for PRGF resources for many years. ### IV. Dimensions of poverty and social indicators - Income per capita recovered since 2000 but remains less than one-half the historic high of US$180 attained before 1993 conflict. - The percentage of people living below the poverty line has doubled since 1992: - from 35 percent overall to 68 percent in 2002 (68.7 percent in rural areas, 66.0 percent in urban areas). - Burundi ranked as the fourth least developed country in the world (2004 Human Development Index). - Immediate priority: restore pre-conflict levels of social services; meeting the Millennium Development Goals (MDGs) will be a challenge. - Social and health indicators cited: - Child malnutrition rose from 35 percent in 1987 to 45 percent in 2000. - Access to safe water: less than 48 percent of the population. - Access to health services: less than 20 percent of the population. - Displaced persons: some 200,000 internally and in refugee camps (down from one million at peak). - HIV/AIDS prevalence: an estimated 1 in 9 sexually active Burundians infected. - Number of people with HIV/AIDS in 1999: about 360,000 in the 15–49 age group, and 19,000 for those under 15. - AIDS orphans: some 200,000 (out of a total of some 556,000 orphans). Box 1 — Selected indicators (In percent, unless otherwise specified; as of latest year for which data are available) - Population (in millions; 2002): Burundi 7.3; Sub-Saharan Africa 702.6 - Population growth (2003): Burundi 2.0; Sub-Saharan Africa 2.1 - GDP per capita (US$; 2003): Burundi 83; Sub-Saharan Africa 490 - Life expectancy at birth (years; 2002): Burundi 41.7; Sub-Saharan Africa 45.8 - Infant mortality rate (per thousand, 2002): Burundi 123; Sub-Saharan Africa 103.1 - Child mortality rate (per thousand, 1998): Burundi 208; Sub-Saharan Africa 173.9 - Maternal mortality rate (per 100,000/live births; 2001): Burundi 1300; Sub-Saharan Africa 916.8 - HIV/AIDS prevalence (percent of active sexually population; 2001): Burundi 11.3; Sub-Saharan Africa n.a. - Literacy rate (percent of population; 2001): Burundi 55.4; Sub-Saharan Africa 64.9 - Gross school enrollment rate (percent of age group; 2001): Burundi 71.0; Sub-Saharan Africa 87.0 - Male: Burundi 79.5; Sub-Saharan Africa 94.0 - Female: Burundi 62.4; Sub-Saharan Africa 80.0 - Population density (persons/sq km): Burundi 262.0; Sub-Saharan Africa 29.2 - Sources for box: Burundi I-PRSP; World Bank, African Development Indicators 2004 and World Development Report 2005; and UNESCO database. ### V. Recent political and security developments - Post-independence performance strong until civil conflict in 1993; economic decline continued through regional embargo in 1996–99. - Peace and reconciliation accord signed in August 2000 in Arusha among 39 political-ethnic groups. - Transition government and ethnically balanced senate and parliament established in 2002; peaceful presidential rotation from Tutsi to Hutu in 2003. - Remaining holdout rebel group agreed to a cease-fire in May 2005. - February 2005: national referendum approved a new constitution; June 23 communal elections; July 4 parliamentary elections. - New parliament to elect a new president by late August; subsequent presidents to be directly elected. - New constitution: majority rule while maintaining rights and representation for minorities and women; minority Tutsis assured 40 percent of seats in the National Assembly and of positions in the council of ministers. - Security sector integration and DDR: - Creation of new, ethnically balanced army and national police began late 2004 by incorporating former rebel combatants. - United Nations Operation in Burundi (ONUB) maintains operations including a peacekeeping force of 5,650 (including civilians). - By end-May 2005, almost 10,000 ex-combatants had been demobilized. - National Commission on Reintegration of Refugees (established 2003) has assisted resettlement of some 500,000 refugees and internally displaced persons. - January 2005: National Truth and Reconciliation Commission set up with a two-year mandate covering acts between 1962 and 2000. ### VI. Macroeconomic and structural adjustment record - Despite political difficulties, Burundi has made progress stabilizing the economy, implementing financial and structural reforms, and beginning to restore social services. - Main challenges remain: consolidation of democracy, full demobilization, promotion of private sector-led growth, and addressing widespread deep poverty. - External support and programs: - IDA provided Emergency Economic Recovery Credit in 2000, Economic Recovery Credit in 2002, sector grants and credits (including for DDR), and managed support through a trust fund for multilateral debt service. - A Post-Conflict Transition Economic Recovery grant (US$50 million) planned for 2005. - IMF: Staff-Monitored Program in 2001–02; Emergency Post-Conflict Assistance policy (2002–03); three-year PRGF arrangement starting January 2004 (SDR 69 million). - First review of the PRGF-supported program concluded by IMF Executive Board on January 19, 2005. - Donor pledges: in a donor forum in January 2004, Burundi received pledges of more than US$1 billion over three years. - Macroeconomic performance: - Real GDP growth picked up in 2004 to close to 5 percent and expected to be sustained at that level in 2005. - Inflation rose to almost 12 percent in 2004; continued impact of drought, surge in imported petroleum prices, and rapid monetary growth led to further increase in early 2005. - Current account deficit, including grants, in 2004: 7.2 percent of GDP. - Fiscal performance in 2004 broadly in line with PRGF, though primary deficit somewhat higher than programmed due to higher domestic counterpart outlays for project spending; overall revenues exceeded target. - Social sector spending rose to 6.7 percent of GDP. - Fiscal performance in Q1 2005 was within program targets. Box 2 — Selected Economic Policy and Structural Measures, 2003–05 (Measure — Status) - Elimination of remaining exchange restrictions on current account transactions and bona fide amortization payments. — September 2003 - Preparation and adoption by the cabinet of a gender action plan, satisfactory to IDA, to eliminate gender disparities, including enabling women to inherit land and other properties. — September 2003 - Extension of transactions tax to domestically produced goods and services. — January 2004 - Adoption by the cabinet of draft legislation to establish an Office of Auditor General responsible for auditing the financial operations of public agencies, and the submission of the draft legislation to the National Assembly. — March 2004; audit service to be created in 2005 - Assessment of bank compliance with minimum capital requirement. — March 2004; two banks subsequently closed - Adoption by the cabinet of an action plan for the reform of the public procurement administration. — August 2004 - Adoption by the cabinet of a comprehensive strategy, developed in consultation with stakeholders, to revive the coffee, tea, and cotton subsectors. — October 2004 - Mandatory nature of BRB auction reference exchange rate for commercial bank transactions abolished; official exchange rate now a weighted average of daily commercial bank transactions. — December 2004 - Adoption of a new government budget and accounting nomenclature. — December 2004 - Reduction in number of import tariff bands and rates. — Implemented with 2005 budget - Decree liberalizing private entry and investment in the coffee sector, and operations at all levels of the supply chain. — January 2005 - Abolished the remaining export foreign exchange surrender requirement (50 percent of coffee, tea, and cotton exports). — January 2005 - Establishment of a new audit court (Cour des Comptes). — December 2004. Audit of 2004 government accounts began in April 2005 - Abolished the central bank’s credit ceilings to financial institutions and directed sectoral credit. — April 2005 - Market-based liquidity (credit/deposit) auctions introduced. — April 2005 - Trade restrictions and price controls on sugar abolished. — May 2005 ### VII. Fiscal outlook and security-related spending - 2005 fiscal strategy emphasizes transition from a “conflict” to a “peacetime” budget. - Security sector projects (military integration and creation of national police force) will raise the share of military and security spending in the short term. - Demobilization effort expected to permit a shift from military spending to social outlays over time. - Share of military spending in total expenditure projected to rise in 2005, while share of social sector spending would decline slightly. - Assuming the pace of demobilization is maintained and given the smaller number of soldiers and ex-combatants than originally assumed, budget savings on security spending appear possible from late 2005. *Source: IMF/IDA staff HIPC preliminary document for Burundi (excerpts).* ### 16. The management of public finances, severely weakened by the loss of skilled and ### 16. The management of public finances, severely weakened by the loss of skilled and ### Public finance management reforms and current status - Key actions undertaken in public expenditure management since 2000 and currently under the Economic Management Support Project (EMSP) include: - Adoption of a unified functional and economic classification of budgetary expenditure. - Adoption of a double-entry accounting system. - Implementation of a system for monitoring the flows of external assistance and government expenditures. - Computerization of expenditure management.5 - Civil service payroll management is being strengthened; an inventory of domestic payments arrears of the government was completed in May 2005, and an external audit is expected to begin shortly. - Measures to improve budget transparency: - Establishment of an audit court (Cour des Comptes) in 2004, which began a review of the 2004 government accounts in April 2005. - Revenue mobilization reforms: - Strengthened tax administration and collection. - Introduction of a single taxpayer identification number. - Elimination of loopholes in the import pre-shipment inspection regime. - Recognition and enforcement of the income tax liability of Burundian nationals working for international organizations. - Planned systems: - An integrated public expenditure computerized system connected to the central bank (BRB) is expected to be introduced by October 2005.5 ### Monetary policy and inflation objectives - For the remainder of 2005, authorities aim to contain monetary growth with a view to reducing inflation to 10 percent by year-end. - Central bank (BRB) measures: - In April 2005, liquidity auctions were introduced. - The BRB’s specific credit ceiling system was abolished. ### Foreign exchange liberalization - Major progress since 2000 has led to gradual convergence of parallel and official exchange rates to about 3 percent by late 2004. - Policy changes: - Restrictions on current transactions were removed in 2003. - In December 2004, the BRB abolished the mandatory nature of its foreign exchange auction reference price for commercial transactions and changed the determination of the official exchange rate to the daily weighted average of banking system transactions. - In early January 2005, the remaining foreign exchange surrender requirement on export earnings was abolished. ### Structural and sectoral reforms underway or initiated - Ministry capacity and statistics: - IDA-supported reform program to strengthen the capacity of the Ministry of Development Planning and Reconstruction to collect and process statistical information leading to timely and reliable national accounts, estimates, and forecasting. - Justice system: - Reform to bring about ethnic balance and ensure equity and human rights; a Judiciary Reform Strategy to be prepared with EMSP assistance. - Coffee sector reform (adopted October 2004): - Opening of state marketing board (OCIBU) auctions to a wider range of participants in December 2004. - January 2005: private entry and investment in the sector and operations at all levels of the supply chain liberalized. - April 2005: coffee production tax (loyer verger) abolished. - June 2005: ministerial order freeing coffee sales outside OCIBU. - Mid-2005: privatization of state assets in the coffee sector expected to begin with offers to sell washing stations and processing factories. - Later in 2005: adoption of an action plan defining new roles of coffee sector institutions for the start of the 2006 crop season (April 2006). - Tea and cotton sector reform strategy approved in October 2004. - Sugar sector liberalized in May 2005: abolition of export restrictions, minimum import prices, and domestic price controls. ### III. MEDIUM-TERM STRATEGY FOR POVERTY REDUCTION A. The PRSP formulation process - The Interim Poverty Reduction Strategy Paper (I-PRSP) is based on broad consultations, limited in some provinces by security conditions. - The I-PRSP’s six strategic themes: - (i) peace and democratic governance; - (ii) reintegration of conflict victims and disadvantaged groups into the economy; - (iii) private sector development; - (iv) human capital development; - (v) fighting HIV/AIDS; and - (vi) advancing the role of women in development. - 2004 opinion survey covering 3,000 respondents found: - More than 80 percent of respondents think that poverty has remained constant or increased over the last 5 years. - Some 40 percent predict that poverty will decrease in the next five years. - Poverty relates to inability to feed family, have decent housing, and pay for health care. - Satisfaction with quality of public services is low, except for primary schooling. - The end of the conflict is cited as the most important factor for reducing poverty; together with provision of education services, it is seen as the most important government action. - Improving food security and increasing youth employment are also seen as important government intervention areas. - Data and monitoring gaps: - Last available household survey dated 1998–99 estimates poverty at close to two-thirds of the population. - The implementation in 2005 of a new nationally representative extended Core Welfare Indicators Questionnaire (CWIQ) will provide an opportunity to reassess poverty and vulnerable groups. - Need to strengthen budgetary and delivery data for social services to better target and assess pro-poor spending and specify what expenditure is pro-poor. - Data collection planned among potential users of hospitals, clinics, and schools to measure user-satisfaction and unmet needs. - PRSP timetable and assessment: - Joint Staff Assessment (JSA) of the I-PRSP by IDA and IMF staff concluded the I-PRSP framework was sound. - PRSP Preparation Status Report (PSR) issued by Burundi authorities in April 2005 indicates Burundi is on track to adopt a full PRSP based on participatory processes at the colline level; local and provincial reports completed. - Analysis and synthesis of results, including household surveys, expected to be completed by mid-July (2005). - Authorities expect full PRSP to be finalized in late 2005 (compared with end-August in the PSR) to account for possible technical delays and electoral process impact. - Joint Staff Advisory Note (JSAN) found the authorities’ revised PRSP preparation timetable appears feasible. - Importance of preparing well-costed sector strategies to be integrated into the budgetary process. B. Macroeconomic objectives - Medium-term macroeconomic objectives: - Achieve sustained economic growth of some 5 percent per annum. - Lower inflation to about 4–5 percent. - Maintain foreign reserves at 6 months of imports of goods and services. - Reduce the external current account deficit (after grants) to some 5½ percent of GDP by 2015. - Limit external financing to grants and highly concessional credits. - Restore a sustainable external debt position. - Boost private savings and investment. - Strategy to achieve objectives: - Promote private-sector-led growth through privatization, improved governance, and a business and regulatory environment that encourages private sector activity. - Pursue sustained export-led growth; policies addressed in a Diagnostic Trade Integration Study (DTIS) and to be furthered by an IDA Sources of Growth study to be completed by June 2006.6 C. Governance, structural and institutional reforms - Governance measures taken: - Appointment of a state minister for good governance in 2003. - Establishment of an inter-ministerial committee to promote good governance and fight corruption. - Preparation of a governance action plan. - Strengthening of the Inspectorate General of Finances and creation of an audit court. - Establishment of an International Commission of Inquiry on political prisoners. - Outside government, an Observatory for the Fight against Corruption and Economic Embezzlement (OLUCOME) provides criticism of malfeasance. - Private sector development measures: - Programs to clear government arrears to private sector suppliers. - Implementation of a revised corporate law and preparation of a new commercial law. - Revisions to the bankruptcy law and improvements in the arbitration system under way. - Preparation of a policy framework to implement the public enterprise privatization program. - Note on context: Burundi has experienced major net disinvestment and destruction leading to a deteriorated capital stock; durable peace and further policy actions are necessary to improve the business environment and sustain revival of growth. - The DTIS will provide guidance on the pro-private sector growth strategy. - Community development and decentralization: - Government priority: effective decentralization and improved social services delivery through a community-driven project supported by IDA. - Main goals of the project: - (i) promote social cohesion within and across communities; - (ii) facilitate and support reintegration of social groups displaced or marginalized by conflict; - (iii) foster local accountability through participatory decision-making for community investments. D. Social and sectoral policies - General social sector challenge: - Burundi is far from meeting the MDGs related to health and education, including both child and general mortality. - Public sector contributions have not been sufficient to restore services diminished by conflict or to raise services to national levels for previously disadvantaged groups. - Large-scale population displacements have disrupted delivery of social services; return of refugees and displaced persons will place new burdens on local services. - Human resource development: - Rehabilitation programs for education and health infrastructure implemented. - Priorities: improve access in formerly underserved ethnic communities, decentralize health management, introduce independent management for public hospitals, and use cost-recovery mechanisms to improve sustainable provision of health services. - A multi-sector strategy for the fight against HIV/AIDS is under way. - Education sector priorities and actions: - Short-term focus: rehabilitate facilities, ensure minimum supplies, redeploy teachers to shortage areas, and organize teacher-training courses. - Key actions needed for universal primary enrollment and improved secondary/higher education: - (i) training of teachers at all levels in sufficient quantity and quality; - (ii) updating technical education and university curricula and regulation; - (iii) providing suitable teaching materials; - (iv) upgrading the status and career prospects of teachers; - (v) improving school planning and distribution of schools; - (vi) implementing a framework for community empowerment and participation in primary and secondary schools. - Health sector priorities and actions: - National consultation to formulate a strategy to improve access to affordable basic services. - Short-term efforts to restore services to pre-crisis performance levels focus on: - (i) improving health care coverage by rehabilitating and strengthening existing basic health services, establishing new facilities in line with the health map, and re-equipping health centers; - (ii) strengthening preventive (reproductive health, immunization, sanitation, and nutrition education) and curative care through structured management and monitoring of epidemics, particularly HIV/AIDS; - (iii) improving availability of medical services and drugs by enhancing local production capacities and distribution channels; - (iv) redeploying health workers to, and offering incentives to retain available human resources in, areas of shortages especially rural and secondary towns, while continuing to train medical personnel. - Medium-term reforms: - (i) establish an independent national drug agency with management autonomy; - (ii) initiate and develop a decentralized health sector management system; - (iii) establish a coherent operational research program to identify and address vulnerability and inequalities. - Gender and social protection: - Preparation of a gender action plan. - Establishment of a fund to support development of micro-finance institutions in rural communities and safety net mechanisms to assist the poor and victims of conflict. - Revision of the matrimonial code to grant property rights to wives, including right of widows to inherit land. - Campaigns to promote the role of women undertaken. - Increased representation of women in public offices: - The new Constitution assures 40 percent of parliamentarians are women. - The Arusha Accord established a minimum threshold that 30 percent of public office holders must be women. - Rural sector and agriculture: - Rural sector contributes nearly 50 percent of GDP and supports more than 90 percent of the population. - Coffee sector reform implementation expected to raise income levels of some 800,000 small rural producers. - Measures implemented to rebuild livestock herds. - Agriculture Rehabilitation and Sustainable Land Management Program supported by IDA addresses land degradation and demographic pressures. - Priority on resettling war victims and returning refugees, reintegrating them in agricultural activities, restoring former properties where possible, and arranging new properties or vocations for others. - Agriculture priorities: - Enact new land legislation to reduce disincentives against on-farm investment. - Implement a matching grant program to provide training and funding support to farmers’ groups for start-up of productive and income-generating activities. - National program to enhance supply and quality of training and extension services to small producers and provide backstopping support to farmers’ organizations. - National Action Program to address land degradation. - Beginning in 2005, activities funded by IDA and the Global Environment Facility (GEF) are expected to reduce pressure on critical fragile marshlands, help maintain hydrological cycles, and contribute to carbon storage and nutrient cycling in forests and wetlands. - Infrastructure - I-PRSP links limited access to infrastructure services with deteriorated social and economic indicators. - Government strategy emphasizes seven areas: - (i) preservation of existing road networks; - (ii) increase in local financial resources for road maintenance; - (iii) improvement of sector management; - (iv) involvement of beneficiary populations; - (v) improvement of access to the sea and balanced development of road infrastructure; - (vi) improvement of road safety. - Labor-intensive techniques with active community ownership and participation can increase sustainable infrastructure and service delivery in rural and urban areas and contribute directly to poverty reduction. - IDA will continue support through a supplement to its ongoing Public Works and Employment Creation project. *Source: _cr05329 - 16. The management of public finances, severely weakened by the loss of skilled and* ### 35. Mining. The mining sector holds some promise. The government's strategy is to ### _cr05329 - 35. Mining. The mining sector holds some promise. The government's strategy is to ### Mining - Government strategy: relaunch a national mining exploration promotion program and improve the legal and regulatory framework to attract private local and foreign investment. - Technical and financial assistance partners: UNDP, Germany, and France. - Objective: explore Burundi’s mineral potential and develop sufficient information to attract foreign investments. ### Debt Reconciliation Status - The DSA was prepared jointly by the authorities and IDA and IMF staff, based on loan-by-loan data provided by the authorities and creditors for public and publicly guaranteed debt outstanding and disbursed as of end-December 2004. - All outstanding debt data has been reconciled with creditors. ### The Structure of External Debt - At end-December 2004, Burundi’s public and publicly guaranteed external debt, including arrears, is estimated at US$1,384 million. - Creditor composition at end-December 2004: - Multilateral creditors: 84.5 percent of debt. - Paris Club bilateral creditors: 10.5 percent. - Other official and commercial creditors: 5 percent. - Net present value (NPV) of external debt outstanding at end-2004 after assumptions noted: US$902 million. - Note on stock change: Or a net increase of US$33 million compared to end-2003; mainly due to new borrowing from IDA (US$43 million) and under the PRGF (US$10 million) and the effect of the devaluation of the dollar vis-à-vis other currencies in 2004. ### Paris Club Rescheduling (Box 3) — key elements - Paris Club agreement date: March 4, 2004. - Total treated under the agreement: US$85 million, of which US$4 million was cancelled. - Treatment specifics: - Agreement treats accumulated arrears as of end-2003 and current maturities falling due in 2004–06 under Naples terms. - Pre-cutoff date (June 20, 1999) ODA debts: rescheduled over 40 years, with 16 years grace, at interest rates at least as favorable as original rates. - Pre-cutoff date commercial credits: rescheduled over 23 years, with 8 years of grace, at market interest rates, with a present value reduction of 67 percent. - 75 percent of interest accruing in 2005–06 on rescheduled amounts was capitalized, with repayment in equal semi-annual installments between September 2008 and March 2016. - Creditors agreed to top-up the reduction rate to 90 percent (Cologne terms) as soon as Burundi reaches its decision point under the enhanced HIPC Initiative. - Burundi committed to seek comparable treatment from other external creditors. - Timing: deadline for concluding bilateral agreements extended from end-September 2004 to March 2005 and further to September; by February 2005 bilateral agreements signed with all but one creditor (Austria). ### Arrears Clearance (Box 4) — key arrangements and amounts - Total stock of remaining arrears at end-2004: US$78.6 million (6 percent of total debt outstanding); a US$106.1 million decrease compared to end-2003. - Breakdown of arrears at end-2004: - Multilateral creditors: US$21.3 million (27 percent of total arrears). - Bilateral and commercial creditors: US$57.3 million (73 percent of total arrears). - Paris Club bilateral creditors arrears: US$13.8 million. - Other bilateral and commercial creditors arrears: US$43.5 million. - Multilateral arrears clearance highlights: - AfDB: Burundi paid UA 6.7 million to clear 30 percent of total UA 22.6 million (US$35.9) in arrears at end-2003; donors (France and the EU) committed UA 8.0 million and AfDB PPC grant UA 8.0 million to complete clearance in October 2004. - OPEC Fund: implemented a Commodity Import Program to reschedule US$6.0 million in arrears at end-1998; resumed in 2003 and granted additional CIP to clear US$3.2 million in arrears since 1998. - BADEA: consolidated US$16.7 million in arrears in July 2003; total US$17.3 million to be repaid on concessional terms over 11 years. - European Union and European Investment Bank: arrears totaling US$27.1 million cleared in mid-2004 with a grant from the European Commission as budget support. - Paris Club creditors: arrears cleared in context of March 2004 rescheduling; last bilateral agreement signed February 2005; Austria awaiting an elected government to sign a write-off. ### Debt Sustainability Analysis — baseline assumptions and projections - Underlying macroeconomic projection assumptions: - Real GDP growth: maintained at 5 percent (projected average 5 percent over 2004–24 per Box 5). - CPI inflation (end-period): 12 percent in 2004, 10 percent in 2005, dropping to 4 percent by 2011 and remaining at that level through 2024. - Revenues excluding grants: rise from about 18 percent of GDP in 2005 to about 21 percent of GDP by 2024. - Gross official external financing (grants plus loan disbursements): about 22 percent of GDP during 2004–05, trend to about 10 percent by 2009 and 6 percent of GDP in 2024. - Net resource transfers: trend down from 32 percent in 2005 to 9 percent of GDP in 2024. - Official financing: program loans entirely on concessional IDA or comparable terms; project loans evenly split between ODA and IDA terms. - Export receipts (U.S. dollars): remain stable in 2006, rise by 21 percent in 2007, then rise annually between 7 and 11 percent; coffee production gradually reaching about 55,000 tons. - Export volume growth: average 6.5 percent over projection period; spurt to 8 percent in 2015-20 from non-traditional sectors. - GDP share of exports of goods and services: rise from 10 percent in 2005 to about 13 percent in 2024. - Imports of goods and services (U.S. dollars): average 34 percent of GDP in 2004–05, decline to 25 percent of GDP in 2013, then to 22 percent of GDP in 2024. - Import volumes: rise an average of 4.5 percent from 2009 onwards. - Baseline outcomes: - Even after HIPC assistance phased in, Burundi’s external debt is projected to remain above the HIPC threshold for a considerable period. - NPV of outstanding debt-to-exports ratio would remain significantly above 150 percent throughout the interim period. - After full delivery of HIPC assistance, NPV of debt-to-exports projected path: rise initially to 168 percent in 2010, then decline steadily to 86 percent in 2024. - Projected current account deficit: widen initially to above 10 percent of GDP before narrowing to about 3.5 percent of GDP by 2024. - Gross investment and national savings by 2024: 13.7 and 10.1 percent of GDP, respectively. - Growth and export performance caveats: - Projected real GDP growth (5 percent) slightly exceeds rates observed in peace periods in the 1980s but consistent with post-conflict recoveries elsewhere. - Coffee exports projected to about triple over next twenty years; coffee quality improvements assumed to yield a premium over international prices starting in 2008. - Export-led diversification into horticulture, fresh fruits and vegetables, tourism, agro-based goods, processed foods, and light manufactures is assumed. ### Possible HIPC Initiative Assistance — required relief and assumed modalities - To reach the target external debt-to-exports ratio of 150 percent after full use of traditional mechanisms requires: - A common reduction factor of 91.5 percent for all creditors. - Relief amount: US$826 million in NPV terms. - Estimated creditor contributions in NPV terms: - Multilateral creditors: about US$701 million. - Bilateral and commercial creditors: US$124 million. - Paris Club: US$86 million. - Commercial creditors: US$5 million. - Other official bilateral creditors: US$33 million. - Nominal terms translation: about US$1,495 million of debt relief over time. - Assumed time profile and modalities: - Paris Club bilateral creditors: flow rescheduling on Cologne terms (90 percent NPV reduction) after decision point (assumed end-June 2005), with remaining assistance at completion point expected end-2006 through a stock-of-debt operation. - Comparable treatment by non-Paris Club official bilateral and commercial creditors. - IMF assistance: total US$27.84 million in NPV terms. - Interim IMF assistance: about 50 percent of debt-service falling due (equivalent to interest obligations on PRGF borrowing) from decision point in 2005 through end-2006. - PRGF principal repayments to IMF begin August 2009; most IMF remaining HIPC relief delivered following completion point with debt-service reduction through 2015 (Table 11). - IDA assistance: total US$424.8 million in NPV terms. - Interim IDA assistance: debt-service reduction on debt outstanding and disbursed at end-2004, beginning immediately after decision point approval and continuing until 2039 assuming completion point at end-2006. - Delivery of interim assistance by IDA expected to start in August 2005. - Savings as a percent of debt service due to IDA: 39 percent for 2005 and increase to 90 percent thereafter. ### Impact of HIPC Initiative Assistance - Timing of debt-to-exports threshold: - NPV of debt-to-exports ratio would not decline below 150 percent until 2013 under baseline assumptions. - Debt-service burden effects: - HIPC assistance would considerably reduce debt-service burden over the medium term. - Interim period (July 2005 to end-2006): HIPC assistance would reduce debt service due from 52 percent of exports and 29 percent of fiscal revenue in 2005 to 12.6 percent of exports and 6.2 percent of fiscal revenue in 2006. - Debt service subsequently trending down to an average of 5.3 percent of exports and 3.2 percent of fiscal revenue in 2015–24. - Reduction of debt service due to HIPC assistance: - Expected average nearly US$26 million in 2005–06. - Expected annual average about US$46 million after the completion point. - Fiscal and poverty-reduction implications: - Additional resources freed by HIPC relief would permit a sizeable increase in poverty-reducing spending, projected to exceed current expenditure on health and education. - Comparative note: - Projected ratios of debt service to exports after HIPC relief in the interim period do not compare favorably with the average ratio (8.2 percent in 2004) of the 27 countries that have reached their decision or completion points, due to the limited number of creditors assumed to provide interim relief and debt service on new borrowing. - Multilateral delivery: - All other multilateral creditors are assumed to provide debt-service reduction until their contributions meet enhanced HIPC Initiative requirements; discussions ongoing with AfDB and other multilaterals on modalities. *IMF/World Bank staff report content as provided in the source document.* ### 46. Four scenarios were carried out to test the sustainability of Burundi’s external debt ### _cr05329 - 46. Four scenarios were carried out to test the sustainability of Burundi’s external debt ### Scenario analysis of post-HIPC external debt sustainability - Four scenarios were carried out to test Burundi’s external debt after HIPC Initiative assistance (Table 8, Figure 4). - Scenario 1 — Lower export growth: - Export volumes projected to increase at a rate 1 percentage point lower than the baseline. - NPV of debt-to-exports ratio projected to average 29 percentage points more than the baseline in the period 2004–14. - NPV of debt-to-exports ratio projected to be 130 percentage points above the baseline level at the end of the projection period. - Scenario 2 — Higher non-oil import prices: - Non-oil prices assumed 5 percentage points higher than projected during 2006–09 and thereafter to increase according to the baseline. - Higher import growth partially financed by additional concessional borrowing for the whole projection period. - Debt-to-exports ratio worsen considerably at an average of almost 50 percentage points above the baseline in 2004–14 and remaining at about 105 percentage points above the baseline thereafter. - Debt service ratio would deteriorate only slightly. - Scenario 3 — Higher interest rates: - Two percentage point increase in interest rates paid on all loans starting in 2005 and remaining throughout the projection period. - Export receipts and government revenues unchanged from the baseline. - Ratio of the NPV of debt to exports would remain on average almost 60 percentage points higher than the baseline over 2004–14. - Debt-service-to-exports ratio would average some 6 percentage points higher than the baseline, a differential maintained to the end of the projection period. - Scenario 4 — Grant-heavy future financing: - Future financing (excluding the IMF) assumed entirely in grants until the NPV of debt to exports reaches 150 percent. - Burundi would benefit from 100 percent grant financing during the period 2006–07. - After 2007, financing needs met by a mix of 70 percent grants and 30 percent concessional loans to maintain the NPV of debt permanently below the HIPC threshold. - Highly concessional financing lowers the debt-service ratio only marginally with respect to the baseline over the projection period. ### Sensitivity analysis and key findings - The sensitivity analysis indicates Burundi’s ability to service external debt after HIPC relief is very vulnerable to external shocks and export performance. - The small export base constrains the amount of debt Burundi can service in the medium and long term, especially if public expenditure prioritizes achieving the MDGs. - Achievement of a robust external debt position is heavily influenced by: - Composition and terms of external assistance (grants vs. loans). - Sustained domestic reforms and development of exportable production (traditional and nontraditional). - Prudent debt management strategy. - The DSA shows that even after HIPC assistance Burundi would remain above the HIPC threshold for a considerable period of time, leaving it vulnerable to prolonged risk of debt distress. - The LIC DSA framework reported in Annex II confirms this assessment. ### Policy implications and recommended actions - Prioritize a strong and sustained domestic reform effort, notably: - Active program to develop exportable production aimed at promoting private sector investment and improved infrastructure. - External financial assistance should be heavily weighted toward grants (more so than in the past) to sustain a robust external position. - Pursue a prudent debt management strategy to manage vulnerability given the low export base. ### Triggers for the Floating Completion Point (summary) - Standard general triggers: - Preparation of a full PRSP through a participatory process and one year of implementation, evidenced by an Annual Progress Report analyzed in a Joint Staff Advisory Note. - Maintenance of macroeconomic stability as evidenced by satisfactory performance under the PRGF-supported program. - Utilization of enhanced HIPC Initiative budgetary savings in line with priorities identified at the decision point and in the PRSP, approved by parliament, and monitored by a national independent oversight committee. - Specific and monitorable policy measures on: - Public expenditure management, governance, demobilization, structural reforms, key social sectors (health and education), and debt management. - If Burundi remains on track with PRSP implementation and reforms supported by IDA and IMF, the HIPC completion point could be reached as early as end-2006. ### Monitoring, use, and safeguards for enhanced HIPC Initiative debt relief - IDA and IMF staff to monitor completion point triggers jointly, with IMF leading macroeconomic stability monitoring and IDA leading PRSP and sector-related triggers. - Use of HIPC-related savings: - New budget nomenclature in the 2005 budget to track poverty-related resources by activity and region. - Introduction of a computerized integrated public expenditure management system in 2005. - A special treasury subaccount in the central bank will hold budgetary savings from debt relief. - HIPC-related expenditures to be codified as HIPC expenditures in the integrated public expenditure management system. - Monitoring and accountability: - Expenditures financed by enhanced HIPC Initiative debt relief will be monitored by an Independent Oversight Committee composed of national, local, and international donor representatives. - Use of assistance subject to independent technical and financial audits; all such audits to be made publicly available. - IDA’s EMSP and a grant on procurement reform to strengthen public procurement systems and adopt international best practices. ### Expenditure priorities for HIPC debt relief (proposed, nonexclusive) - National reconciliation and security: - Resettlement of internally displaced people and refugees. - Economic reintegration of civil strife victims. - Justice system reform. - Health: - Public awareness programs to control HIV/AIDS. - Rehabilitation and strengthening of basic health facilities; new facilities in under served areas. - Training and retraining of health personnel and incentives for rural deployment. - Reinforcing programs for prevention and control of major endemic-epidemic diseases and promoting health education. - Improving availability of drugs and national child vaccination program performance. - Improving access to potable water supplies particularly in rural areas. - Education: - Rehabilitation or reconstruction of rural schools. - Provision of suitable teaching materials for rural and urban schools. - Increasing the number of teaching personnel, particularly in rural and underserved areas. - Infrastructure: - Rehabilitation and expansion of rural water supply systems. - Rehabilitation of key rural roads and bridges; construction of new roads and bridges. - Agriculture: - Strengthening research and development through support to agricultural research institutions. - Promoting private sector involvement. ### Authorities’ views - Burundi authorities emphasize that external debt and debt service remain unsustainably high and could further delay national reconstruction and social improvement. - They note Burundi is one of the poorest countries in sub-Saharan Africa with large segments of the population lacking access to basic needs; conflict aggravated poverty via massive destruction of infrastructure, especially in rural areas. - Authorities see enhanced HIPC Initiative debt relief as a means to free financing for critical social and infrastructure programs and to accelerate reconstruction and improve access to primary education, preventive health care, and urban and rural infrastructure. *Source: IMF staff report content unit _cr05329 - sections 46–60.* ### 61. This paper presents a decision point assessment of Burundi’s eligibility for assistance ### _cr05329 - 61. This paper presents a decision point assessment of Burundi’s eligibility for assistance ### Decision point assessment and requested Board guidance - Purpose: assessment of Burundi’s eligibility for relief under the enhanced HIPC Initiative and request for Executive Boards’ endorsement. - Issues for Directors: - Eligibility and decision point: Do Directors agree that Burundi is eligible for relief under the enhanced HIPC Initiative, and do they recommend approval of a decision point? - Amount and delivery of assistance: To reduce the NPV of debt-to-exports ratio to 150 percent, the total amount of assistance under the enhanced HIPC Initiative is estimated at US$826 million in NPV terms (Table 4). - Of this amount, US$424.8 million is to be provided by IDA and US$27.9 million by the IMF. - Staff and management recommend that the World Bank and IMF provide interim assistance in line with existing guidelines. Question: Do Directors agree that the IMF and IDA should provide interim assistance between the decision and completion points, in line with existing guidelines? - Completion point: Do Directors agree that the floating completion point will be reached when the triggers in Box 6 have been met and satisfactory assurances of other creditors’ participation under the enhanced HIPC Initiative have been received? ### Composition and stocks of external debt (end-December 2004) - Nominal value of debt: US$1,384 million. - Nominal value of debt stock: US$1,325 million. - Present value (PV) of debt: US$894.8 million. - Present value of debt stock: US$902.0 million. - Major creditor shares (as reported, various figures across nominal and PV series): - World Bank Group: 57.4% (nominal composition before traditional relief) / 58.6% (nominal debt stock) / 51.4% (PV of debt stock) - AfDB Group: 16.2% / 16.5% / 18.1% - IMF: 3.0% / 3.4% / 3.0% - Paris Club: 10.5% / 8.9% / 10.4% - Other multilaterals and other official bilaterals and commercial creditors represented in remaining shares. ### HIPC assistance sizing and burden-sharing - Target: reduce NPV of debt-to-exports ratio to 150 percent. - Total estimated assistance under enhanced HIPC Initiative: US$826 million (NPV terms). - IDA contribution: US$424.8 million (NPV). - IMF contribution: US$27.9 million (NPV). - Table 4 memorandum items (after full use of traditional debt relief, end-2004 basis): - NPV of debt (mem.): 902 / 136 / 766 (displayed in table as components by creditor type). - Three-year average of exports: 50.9 - Current-year exports: 58.9 - NPV of debt-to-exports ratio (mem.): 1,772 (as presented in Table 4) ### World Bank Group possible delivery (Table 12 highlights) - Enhanced HIPC assistance of US$426 million in end-2004 NPV terms proposed to be delivered over about 34 years through a 90 percent relief on the debt service falling due to IDA on credits outstanding at end-2004, corresponding to a nominal relief of US$773 million. - Decision point expected in August 2005. Delivery of interim assistance by the World Bank Group expected to start on August 15, 2005. - Detailed annual flows and cumulative savings to IDA shown (Table 12): e.g., debt service before HIPC assistance on IDA credits shows annual scheduled debt service values (2005–2015) including principal and interest components; savings on debt service to IDA shown cumulatively (e.g., cumulative savings figures: 387.2, 149.1, 773.0 in table summary context). ### IMF possible delivery and mechanics (Table 11 highlights) - Total IMF assistance under the enhanced HIPC Initiative: US$27.84 million in NPV terms (calculated on the basis of decision-point data), excluding interest earned on Burundi's account and on committed but undisbursed amounts. - Delivery schedule (percent of total assistance by year): table reports year-by-year breakdowns for 2005–2015 (e.g., early interim deposits and completion-point disbursements). First delivery of interim assistance to be deposited into Burundi's account in August 2005 to cover PRGF interest obligations falling due over the next 12 months. - Debt service due on IMF obligations and the share covered by IMF assistance are shown annually (Table 11), with examples: - Debt service due on IMF obligations (in millions of U.S. dollars) listed by year (e.g., 0.6, 0.8, 0.8, 0.8, 4.6, 9.6, 10.6, 10.5, 10.5, 6.5, 1.4 in the memo items). - Share of debt service due on IMF obligations covered by IMF assistance (in percent) examples: 16.6, 17.0, 26.9, 27.7, 88.9, 78.9, 67.5, 67.4, 70.2, 54.1, 45.2. ### External debt and fiscal sustainability indicators (selected projections and averages) - Debt service-to-exports ratio (excluding arrears), selected averages: - 2005: 62.4 - 2006: 63.6 - 2007: 50.6 - 2008: 47.0 - 2009: 46.9 - 2010: 46.2 - 2011–2014 and beyond: shown declining in projections (Table 6 series). - Debt service-to-revenue ratio (excluding arrears), selected averages: - 2005: 34.9 - 2006: 31.5 - 2007: 27.8 - 2008: 25.7 - 2009: 25.2 - 2010: 24.8 - After HIPC assistance (scheduled debt service, cash basis), totals and averages: - Total (after HIPC assistance, 2005–24 annual series) sample values: 26.3 (2005), 10.5 (2006), 4.5 (2007), 5.0 (2008), rising in later years as new borrowing and existing maturities evolve (Table 6 and Table 6 concluded). - Net present value (NPV) of external debt—selected series (Table 7): - I. Before traditional debt-relief: NPV of total debt (2004): 894.8; NPV of outstanding debt (2004): 894.8. - II. After traditional debt-relief: NPV of total debt (2004): 902.0; NPV of outstanding debt (2004): 902.0. - III. After enhanced HIPC assistance: NPV of total debt (2004): 889.3; NPV of outstanding debt (2004): 889.3. - IV. After enhanced HIPC assistance assumed committed unconditionally (hypothetical): NPV of total debt (mem.): 76.3 / 101.8 / … (table presents alternative unconditional commitment profile). - Memorandum indicator: NPV of debt-to-exports ratio target set at 150.0 percent (baseline after enhanced HIPC assistance assumed committed unconditionally shows 150.0 in table memo). ### Sensitivity analysis (selected scenarios, Table 4/8/figures) - Baseline and scenario outcomes (NPV of debt-to-exports ratio, NPV of debt-to-revenue ratio, debt service ratios) are reported for scenarios including: - Lower export growth (assumes 1 percent lower export growth from 2005 to 2023): raises NPV of debt-to-exports and affects debt service ratios (detailed year series in Table 8). - Higher non-oil import prices (assumes non-fuel import prices 5 percent higher than WEO baseline for 2005–09): raises NPV of debt-to-exports and debt service ratios. - Lower concessionality of new borrowing (assumes interest rate on all debt 2 percentage points higher than baseline from 2005 onwards): significantly raises NPV of debt-to-exports and debt-service burdens. - 100 percent grant financing (assumes project financing and budget support in grant form 2006–07, 50/50 grants/loans 2008–11): reduces NPV and debt-service ratios relative to baseline. - Figures 3–6 and Table 8 provide year-by-year trajectories for NPV of debt-to-exports ratios, debt service-to-exports and debt service-to-revenue ratios, NPV of debt-to-GDP ratios, and sensitivity bands for 2004–24. ### Medium- and long-term macroeconomic framework and projections (selected figures) - Real GDP growth: baseline projection 5.0 percent per annum for 2005–24 (Table 10 long-term assumptions). - Nominal GDP (selected years): - 2004: 664.1 (mem. millions of U.S. dollars) - 2005: 800.4 - 2015: 1,751.4 - 2024: 3,239.8 - Exports of goods and nonfactor services (millions of U.S. dollars), sample series: - 2004: 58.9 - 2005: 81.6 - 2015: 197.6 - 2024: 419.7 - Government revenue excluding grants (millions of U.S. dollars), sample series: - 2004: 133.5 - 2005: 146.1 - 2015: 355.6 - 2024: 673.4 - GDP per capita (U.S. dollars), sample series: - 2004: 95.5 - 2005: 111.8 - 2015: 185.5 - 2024: 271.8 ### External resource transfers and aid composition (Table 9 highlights) - Total external resource inflows (selected years): 280.3 (2005), 219.0 (2006), annual projection series through 2024. - Grant disbursements vs. loan disbursements (selected year 2005): Grant disbursements 218.2; Loan disbursements 62.1 (all figures in millions of U.S. dollars as presented). - Net inflows of resources and aid-related imports: net inflows (2005) 254.0; aid-related imports (2005) 40.0. ### Key operational dates and assumptions cited - Paris Club cutoff date referenced: June 20, 1999 (Table 5 memorandum). - Decision point expected: August 2005 (Table 12 notes). - Interim assistance period cited: August 2005–December 2006 (text and footnotes). - Completion point expected: end-2006 (Table 6/footnotes). - IMF assumption on rate of return for interest earnings on account balances: 5.25 percent in U.S. dollar terms (Table 11 footnote). *Sources: Burundi authorities; and staff estimates and projections.* ### 1. The “Direction de la Dette Extérieure” (DDE) at the Ministry of Finance is ### _cr05329 - 1. The “Direction de la Dette Extérieure” (DDE) at the Ministry of Finance is ### Institutional capacity for debt management - The “Direction de la Dette Extérieure” (DDE) at the Ministry of Finance is responsible for debt management; the central bank, Banque de la République du Burundi (BRB), collects and gathers debt and external sector statistics. - Main impediments: - Lack of trained human resources at the DDE. - Lack of communication among units responsible for management of external debt. - SYGADE software is used but not in its full capacity due to limited trained human resources. - Debt-Pro software has been installed but is not yet being used. - Recent capacity support and plans: - During 2004, authorities received training on the enhanced HIPC Initiative, debt rescheduling, and debt management by Debt Relief International. - Authorities plan a major restructuring of the DDE and strengthening of capacities. - Support to address weaknesses is planned as part of the World Bank’s Economic Management Support Project (EMSP). - Current data quality: - Data on the level of debt disbursed, amount of debt serviced, and payment plan schedules are accurate and up to date. - Institutional recommendation: - The DDE should be strengthened to better coordinate with the cabinet of the Finance Minister and all services in charge of IMF/WB program monitoring. - Well-coordinated institutional arrangements fully integrated within the overall macroeconomic policymaking framework are needed for effective external debt management. ### Baseline scenario (LIC DSA framework) - Baseline assumptions: - Continued growth of real GDP sustained by an increase in export volumes. - Financing in the form of grants or highly concessional borrowing. - Medium-term outlook: macroeconomic stability, solid economic growth, consolidation of the peace process, deepening of structural reforms, full normalization of relations with creditors. - Exports are projected to drive long-term growth via recovery of traditional export sectors and development of nontraditional exports. - Key macro projections: - Current account deficit projected to widen initially to above 10 percent of GDP in 2006, before narrowing to about 3.5 percent of GDP by 2024. - Gross investment and national savings gradually rise to 13.7 percent and 10.1 percent of GDP, respectively, by 2024. - HIPC assumption: - Unless otherwise indicated, all debt ratios assume full delivery of HIPC assistance as proposed for the decision point. ### External debt sustainability — baseline results - End-2004 stock and NPV: - Public and publicly guaranteed (PPG) external debt: US$1,384 million. - NPV of PPG external debt: US$895 million. - Assuming full delivery of HIPC assistance, the NPV of debt would amount to US$76.3 million, corresponding to 13.8 percent of GDP, 155.6 percent of exports, and the ratio of debt service to exports would be 123.1 percent. - Key indicator trajectories: - NPV of debt-to-exports: - Remains above the indicative threshold for a considerable period, falling below it in 2020. - Declines from 155.6 percent at end-2004 to 76.2 percent in 2024. - Public external debt service: - Projected to average about 9.6 percent of exports during the 2005-24 period. - Trajectory: initial decline, then increase through 2012, before decreasing to 6.1 percent in 2024. - NPV of debt-to-GDP: - Projected to increase to 18.3 percent in 2009, before declining to 10 percent in 2024. - Interpretation: - Even after full delivery of HIPC assistance and assuming future financing on highly concessional terms, the NPV of debt-to-exports ratio indicates a debt distress concern over the next 15 years. - Relatively low debt-service-to-exports reflects: (i) a stable and relatively high grant element on the debt stock; and (ii) high export growth during periods when debt service requirements increase as grace periods end. ### Alternative scenarios and stress tests - Historical (alternative) scenario: - Uses historical averages for 2001-04. - All debt burden indicators under the historical scenario show significant deterioration compared to the baseline. - Ratios of NPV of debt to GDP and to exports exhibit an upward trend under the historical scenario. - Stress tests: - Tests assuming lower GDP and export growth or exchange rate depreciation cause considerable deterioration in debt sustainability indicators. - NPV of debt-to-GDP increases sizably when main parameters are one-half standard deviation below historical averages during 2006-07. - Significant increases in external debt-to-exports and debt service-to-exports occur when exports grow at the historical average minus one standard deviation. - An exchange rate depreciation of 30 percent has the largest impact on debt stock indicators. ### Fiscal sustainability analysis - Baseline fiscal assumptions: - Revenues as a percentage of GDP rise from 18 percent of GDP in 2004 to 21 percent of GDP in 2024. - Borrowing decreases from 7.6 percent to 1 percent of GDP between 2005 and 2024. - Fiscal debt indicators: - NPV of debt-to-revenue ratio projected to drop from 101.8 percent in 2004 to 49.6 percent in 2024. - Debt service-to-revenue ratio projected to decline from 36.6 percent in 2004 to 12.3 percent in 2010 before dropping to 8.9 percent in 2024. - Fiscal debt indicators remain below their respective indicative thresholds given the relatively strong revenue effort. - Note: In the LIC DSA methodology, the ratio of debt service to revenue is calculated with revenue including budgetary grants. - No reform scenario: - Maintaining the primary balance at the 2004 level signals an increase in all debt indicators. - If there was no improvement in the fiscal primary balance after 2004, the NPV of debt-to-revenue indicator is projected to increase to 283 percent in 2024 (a difference of 233 percentage points with respect to the baseline). ### Summary of baseline debt sustainability indicators (Box 1) - Indicative Thresholds and selected indicator values: - NPV of debt to GDP — Threshold: 30 - 2005: 13.9 - 2015: 136 - 2024: 9.9 - Average 2005-24: 14.1 - NPV of debt to exports — Threshold: 100 - 2005: 136.3 - 2015: 120.2 - 2024: 76.2 - Average 2005-24: 127.8 - NPV of debt to revenue — Threshold: 200 - 2005: 35.7 - 2015: 46.4 - 2024: 36.5 - Average 2005-24: 47.1 - Debt service to exports — Threshold: 15 - 2005: 35.9 - 2015: 9.2 - 2024: 6.1 - Average 2005-24: 9.6 - Debt service to revenue — Threshold: 25 - 2005: 9.4 - 2015: 3.5 - 2024: 2.9 - Average 2005-24: 3.4 - Note: Figures in italics in the source are under the indicative thresholds. All debt indicators assume full delivery of HIPC relief and refer to the NPV of public and publicly guaranteed external debt. ### Conclusions and policy recommendations - Main conclusions: - Burundi’s NPV of external debt-to-exports ratio after enhanced HIPC assistance is projected to remain above its indicative threshold over the period 2005-20. - Adverse shocks would negatively impact debt sustainability indicators and place Burundi in the high debt distress category for low-income countries. - Total (domestic and external) debt indicators suggest a more robust position due to a strong domestic revenue effort; however, external indicators point to a potentially binding foreign exchange constraint. - Sustained export-led growth and macroeconomic stability are critical to decreasing Burundi’s risk of debt distress. - Four priority areas to lower debt risk and maintain indicators below thresholds: 1. Implement a strong and sustained reform effort, especially to develop a diversified export base to support robust growth in exports and GDP. 2. Implement prudent fiscal and monetary policies to ensure fiscal discipline and macroeconomic stability. 3. Ensure future financing is mainly in the form of grants and highly concessional loans, alongside prudent debt management. 4. Strengthen policies and institutions to raise the indicative debt thresholds for the risk of debt distress. *Source: IMF staff analysis in Annex II: Burundi: Debt Sustainability Analysis for Low-Income Countries Framework (LIC DSA).* ### Box 2. Impact of the Use of the LIC Framework Methodology on the End-2004 ### Box 2. Impact of the Use of the LIC Framework Methodology on the End-2004 ### Summary finding - Using the new LIC framework methodology, Burundi’s NPV of debt-to-exports ratio is estimated to have reached 155.6 percent at end-2004. This is 5.6 percentage points higher compared with the 150 percent obtained using the HIPC methodology, assuming full delivery of HIPC assistance. ### Decomposition of the change (end-2004) - Total change in NPV of debt-to-exports ratio: 5.6 percentage points. - Of which, due to changes in: - Exchange rates: 34.0 percentage points (increase). - Discount rates: -7.9 percentage points (decrease). - Exports of goods and services (denominator change): -20.5 percentage points (increase in ratio due to change from three-year backward-looking average to current exports). - Memorandum items: - Exports of goods and services — Current: 58.9 - Exports of goods and services — Three year average: 50.9 - Note: 1/ Refers to public and publicly guarenteed external debt. ### Key end-2004 indicators (selected) - End-2004 NPV of debt-to-exports ratio (Decision point/HIPC methodology): 150.0 - End-2004 NPV of debt-to-exports ratio (LIC framework): 155.6 - NPV of external debt (in percent of GDP, selected series shown): 13.8, 13.9, 15.3, 17.3, 17.9, 18.3, 17.9, 13.6, 12.0, 9.9 - NPV of external debt (in percent of exports, selected series shown): 155.6, 136.3, 166.1, 167.3, 172.0, 177.2, 171.5, 120.2, 94.4, 76.2 - Debt service-to-exports ratio (in percent, selected series shown): 123.1, 35.9, 11.5, 5.3, 5.4, 5.4, 10.3, 9.2, 6.0, 6.1 - Total gross financing need (billions of U.S. dollars, selected series shown): 111.7, 1516.5, 1373.3, 89.9, 83.0, 88.9, 96.2, 100.3, 102.3, 111.7 - Noninterest current account deficit that stabilizes debt ratio (selected series shown): 24.6, 36.3, 153.7, 7.5, 8.4, 8.7, 9.2, 6.8, 5.2, 4.5 ### Selected macroeconomic assumptions and projections (selected series shown) - Real GDP growth (in percent, selected series shown): 4.8, 1.7, 2.7, 5.0, 5.0, 5.0, 5.0, 5.0, 5.0, 5.0 - GDP deflator in U.S. dollar terms (change in percent, selected series shown): 6.5, -4.5, 8.8, 14.8, 7.3, 2.4, 2.4, 2.5, 2.8, 5.4 - Effective interest rate (percent, selected series shown): 0.6, 1.0, 0.2, 0.7, 0.3, 0.8, 0.8, 0.6, 0.7, 0.7 - Growth of exports of goods and services (U.S. dollar terms, in percent, selected series shown): 7.0, 7.0, 39.3, 38.5, 1.8, 20.9, 8.1, 6.7, 8.8, 14.1 - Growth of imports of goods and services (U.S. dollar terms, in percent, selected series shown): 19.9, 6.4, 16.0, 43.8, 0.2, 1.7, 3.2, 4.8, 4.0, 9.6 ### Public sector debt highlights (selected) - Public sector debt (in percent of GDP, selected series shown): 232.3, 194.2, 49.5, 50.4, 49.3, 47.8, 45.5, 33.4, 26.9, 21.7 - Of which: foreign-currency denominated (selected series shown): 210.0, 177.3, 35.3, 37.6, 37.7, 37.4, 36.1, 27.5, 22.7, 18.1 - Change in public sector debt (selected series shown): -15.1, -38.2, -144.7, 0.9, -1.1, -1.4, -2.3, -1.8, -1.2, -1.3 - Identified debt-creating flows (selected series shown): -38.0, -61.8, -155.1, -5.2, -5.7, -5.8, -6.2, -6.4, -6.7, -7.0 - Primary deficit (selected series shown): 1.0, 2.2, 2.9, -3.6, -4.9, -3.8, -5.0, -5.0, -5.3, -4.6 - Revenue and grants (in percent of GDP, selected series shown): 35.5, 38.9, 35.4, 31.1, 31.5, 31.2, 30.8, 29.3, 27.9, 27.0 - Grants (in percent of GDP, selected series shown): 15.4, 20.7, 16.8, 12.3, 12.5, 12.0, 11.4, 9.0, 7.3, 6.2 ### Debt sustainability stress and sensitivity (selected scenarios) - Table summaries indicate alternative scenarios and bound tests through 2024, including: - Alternative A1 (key variables at historical averages in 2005-24) and A2 (new public sector loans on less favorable terms in 2005-24). - Bound tests B1-B6 (real GDP growth shocks, export growth shocks, U.S. dollar GDP deflator shocks, net non-debt-creating flows shocks, combination shocks, and a one-time 30 percent nominal depreciation). - Selected scenario results (NPV of debt-to-exports and related ratios) are reported across scenarios and bound tests; example baseline and scenario outcomes are presented in the text tables and figures. *Source: Staff projections and simulations.* --- _Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2005/_cr05329.pdf_