## Burundi: Poverty Reduction Strategy Paper—Annual Progress Report—Joint Staff Advisory Note (_cr0991)

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---

### I. Introduction
- Government approved its first Poverty Reduction Strategy Paper (PRSP) in September 2006.
- PRSP four priorities:
  - (i) improved governance and security;
  - (ii) equitable and sustainable growth;
  - (iii) development of human capital through improved social services; and
  - (iv) the fight against HIV/AIDS.
- First Annual Progress Report (APR) received by the Bank and the IMF on November 6, 2008.
- Staffs view APR’s assessment of economic performance as broadly in line with recent staff evaluations, citing:
  - slow implementation of structural reforms,
  - a sharp decline in coffee production,
  - an unstable security situation,
  - poor weather conditions,
  - rising international petroleum and food prices.

### II. Macroeconomic performance and medium-term framework
Findings
- Progress implementing macroeconomic policies set out in the PRSP and supported by the PRGF arrangement (2004-08) and Bank-financed Development Policy Operations, notably the Economic Reform Support Grant (ERSG) (2006–07).
- Based on progress and government commitment, IMF approved in July 2008 a new PRGF arrangement for 2008-11 and the Bank approved ERSG 2 in August 2008.
- Major obstacles to effective implementation:
  - an unstable external environment,
  - governance problems,
  - limited implementation capacity,
  - an unsettled security situation.
- APR links disappointing GDP growth in 2007 to these factors but could strengthen linkage to slow structural reform, especially in the coffee sector.

Policy recommendations and gaps identified
- APR should include:
  - a more in-depth analysis of reasons for the coffee sector’s performance and its bi-annual cycle;
  - an analysis of the relationship between the demand for resources needed to achieve PRSP objectives and the expected availability of foreign financing within a medium-term macroeconomic framework;
  - an assessment of the lack of predictability and the lumpy nature of donor-financed budget support, given donor budget support finances about one quarter of the government’s budget.
- Continue monitoring external developments in light of the global economic slowdown.

Public financial management and tax policy
- Government actions taken:
  - approved a new budget organic law;
  - consolidated and unified government accounts;
  - improved government accounting systems and payroll operations;
  - enhanced management of HIPC funds;
  - requested posting of a full-time PFM technical assistance expert.
- Tax policy measures initiated:
  - process leading to the introduction of a value-added Tax;
  - adoption of the common external tariff of the East African Community (EAC);
  - phasing out the distortionary transactions tax;
  - enhancing tax and customs administration.

Monetary policy and regional integration
- Parliament approved a new central bank charter guaranteeing central bank independence; respecting and reinforcing this independence is critical.
- APR could discuss monetary policy objectives and performance in more detail.
- On EAC regional integration, APR’s discussion is general; future APRs should specify required policy reforms, actions for adoption, and mitigating measures for short-term adjustment costs.

Structural reform
- APR’s presentation of structural reform results is somewhat optimistic; future APRs should give a more detailed assessment identifying critical next steps for faster growth, lower poverty, and diversification.

### III. Governance and security
Findings
- Positive developments:
  - resumption of negotiations between the government and the FNL-PALIPEHUTU;
  - formation of a unity government including main political parties and ethnic groups.
- Negative issues APR should emphasize more:
  - continued insecurity in several parts of the country, contributing to sluggish rural economic activity;
  - long internal struggle between the government and Parliament that blocked adoption of laws and slowed reform in 2007.
- Demobilization and reintegration program status:
  - As of end-December 2007, 20,330 soldiers or ex-combatants have been demobilized;
  - performance indicators show only 438 soldiers and ex-combatants were demobilized in 2007.
  - Slower than expected 2007 demobilization reflects implementation difficulties; new power-sharing agreement with the FNL is hoped to improve security and clarify demobilization.

Governance priorities
- Better access to an efficient and equitable justice system;
- Measures to resolve complicated land ownership issues;
- Progress in decentralization and community development;
- Institutional and policy measures to improve public finance management and fight corruption.
- APR is silent on two major governance incidents in 2006 and 2007 and corrective measures taken; next APR should be more candid about economic governance.

### IV. Equitable and sustainable growth
Agriculture and rural development
- APR emphasizes stimulating primary sector production: food crops, export crops, and livestock.
- Food crop production increased by 3 percent from 2006 to 2007 but remains slightly below the peak of 3.8 million tons reached in 2004.
- Ongoing/planned initiatives aim to increase agricultural production and productivity; livestock sector reconstitution is a noted achievement.
- Staffs recommend effective implementation of the 2007 national strategy for disaster risk reduction (DRR) to systematically identify, assess, mitigate and finance disaster risks.

Export crop sector and coffee
- APR optimistic on export crop reform but omits findings of a recent divestiture study; future APRs should review implementation of the disengagement option and measures to encourage private investment and increase farmers’ incomes.
- Causes of coffee sector decline and cyclical fluctuations:
  - ageing plantations,
  - lack of investment in infrastructure and processing,
  - slow restructuring.
- Government adopted a comprehensive action plan for coffee sector reform.

Private sector, infrastructure, and micro-credit
- Positive actions:
  - design and full implementation in 2006 and 2007 of a plan to settle government arrears in non-oil sectors to small and large creditors, including banks;
  - a revised investment code has been approved and promulgated;
  - a new consultation mechanism established for public–private dialogue.
- Infrastructure priorities:
  - development of transport infrastructure and rehabilitation of power supply facilities;
  - increasing resources to road maintenance and a realistic rural road rehabilitation program.
- Micro-credit and labor-intensive programs:
  - APR underlines importance of micro-credit promotion and reviews reasons for recent institutional failures;
  - recommendation to link micro-credit stimulation to reinforcement of central bank supervisory capacity;
  - APR notes positive employment impact of labor-intensive techniques, but performance indicators show a drastic decline in number of workers engaged in such projects—appropriate measures are needed.

Technical assistance
- Large program of donor-financed technical assistance (TA) is available and targeted to strengthen technical and institutional capacity (e.g., tax reform, PFM, central bank modernization).
- APR does not discuss links between availability, timing and quality of TA and implementation difficulties; such analysis would inform TA needs and priorities.

### V. Development of human capital
Education — Findings
- APR provides a good analysis of education sector measures and objectives, including:
  - primary education for all (EFA) by 2015;
  - improved regulation of flows to secondary and higher education;
  - improved quality and efficiency.
- Drivers of increased primary enrollments:
  - increased budget allocations,
  - availability of HIPC funds,
  - increased foreign assistance,
  - elimination of primary school fees.
- Recent studies indicate abolition of school fees benefited mainly the poor and rural areas, potentially reducing regional and income disparities.

Education — Challenges and recommendations
- Rapid enrollment growth creates new challenges due to insufficient facilities and human resources.
- Required actions:
  - large school construction and rehabilitation programs;
  - recruitment and training of teachers;
  - provision of teaching materials.
- Ongoing initiatives to improve coordination:
  - Sector Development and Action Plans,
  - initiation of the MTEF process,
  - creation of an Education Common Fund.
- APR should propose concrete measures and budget adjustments to finance costs associated with free primary education as assessed in Education Sector Plans.
- System inefficiency: less than 40 percent of children admitted to primary schools will complete the entire primary cycle; policies should aim at a drastic reduction in the extremely high repetition rate.

Health and the fight against HIV/AIDS
- Government prioritizes expanding access to and improving quality of health services, with reducing maternal and child mortality as a major objective.
- Increased allocations and policy changes (abolition of primary school fees and health care fees for women in delivery and children under five) contributed to higher utilization of health facilities.
- Growth of the wage bill largely reflects expansion of social sectors to attain these objectives and delays in demobilization associated with the unsettled security situation.

### Health service utilization and infrastructure (Section 2)
- Decision to abolish fees for women in delivery and children under 5 had a significant positive impact on rates of utilization of health facilities.
- Future priorities:
  - construction and/or rehabilitation of health facilities;
  - increasing and redeploying available human resources.

### Financing and donor coordination (Section 2)
- Donors contribute close to 72 percent of funds allocated to health services.
- Recommended government actions:
  - Continue to increase its own contribution to health services.
  - Improve the coordination of donor assistance.
  - Promote a sector-wide approach (SWAp) to the programming and financing of Burundi’s health system as the best way to strengthen coordination of government and donor programs.

### User-fee policy and budgetary implications (Section 2)
- Report should have evaluated budgetary implications of the May 2006 decision abolishing user fees for certain medical services (children under 5 and women during delivery) to inform increases in budget allocations and the share of primary health in the overall health program.

### HIV/AIDS program (Section 2)
- Government continues to give high priority to the fight against HIV/AIDS.
- Program composition:
  - A combination of preventive and curative measures.
  - Educating the population, particularly women, about the pandemic, how it spreads and how it can be avoided is one of the most critical components of the program.

### Monitoring and evaluation of the PRSP (Section 2)
- Report includes an extensive matrix of performance indicators to enable government, civil society and the donor community to analyze progress toward PRSP objectives and major obstacles.
- Observations and recommendations:
  - Poverty reduction in a poor post-conflict country like Burundi is a very slow process; implementation of the country’s poverty reduction strategy started in 2003 with the interim PRSP.
  - For comparison purposes, it would be useful if the matrix could also show the situation of each main indicator at the beginning of the 2000s.
  - Ongoing initiatives exist for establishing a basic poverty reduction strategy results framework in Burundi.
  - Government is considering ways and means to further improve the institutional framework for evaluating implementation of the PRSP, and in particular to enhance the participation of communities in the monitoring process.
- Data and surveys:
  - Reliable data on poverty and other social indicators are scarce.
  - National statistical office (ISTEEBU), with donor help, has improved coverage and quality of data collection and analysis.
  - A 2006 Core Welfare Indicator Questionnaire (CWIQ) survey showed that the rate of poverty remains high at about 69 percent.
  - A new household survey is planned for 2009.

### Conclusion and forward-looking recommendations (Section 2)
Assessment
- First Annual Progress Report is a good document that gives a generally fair assessment of progress achieved and difficulties encountered in implementing the country’s poverty reduction strategy.
- Report takes into account many comments made in the Joint Staff Advisory Note on the 2006 PRSP.
- It provides an adequate macroeconomic analysis, including a medium-term outlook.
- It presents a good description of measures taken and progress achieved in public finance management, notably to improve allocations of public resources.

Recommendations for future reports
- Better coordinate the discussion of macroeconomic performance and poverty reduction programs.
- Better integrate the objectives of the PRSP into the budget preparation process.
- Provide reliable estimates of the cost of measures envisaged in priority sectors.
- Include in future APRs a debt sustainability analysis to strengthen the links between priority sector programs and debt management.

*Source: _cr0991 - Section 2*

### Section 1

### Burundi: Poverty Reduction Strategy Paper—Annual Progress Report—Joint Staff Advisory Note (Section 1)

### I. Introduction
- The government approved its first Poverty Reduction Strategy Paper (PRSP) in September 2006.
- The PRSP has four priorities:
  - (i) improved governance and security;
  - (ii) equitable and sustainable growth;
  - (iii) development of human capital through improved social services; and
  - (iv) the fight against HIV/AIDS.
- The first Annual Progress Report (APR) was received by the Bank and the IMF on November 6, 2008.
- Staffs view the APR’s assessment of economic performance as broadly in line with recent staff evaluations, citing:
  - slow implementation of structural reforms,
  - a sharp decline in coffee production,
  - an unstable security situation,
  - poor weather conditions,
  - rising international petroleum and food prices.

### II. Macroeconomic performance and medium-term framework
Findings
- Progress was made implementing macroeconomic policies set out in the PRSP and supported by the PRGF arrangement (2004-08) and Bank-financed Development Policy Operations, notably the Economic Reform Support Grant (ERSG) (2006–07).
- Based on progress and government commitment, the IMF approved in July 2008 a new PRGF arrangement for 2008-11 and the Bank approved ERSG 2 in August 2008.
- Major obstacles to effective implementation included:
  - an unstable external environment,
  - governance problems,
  - limited implementation capacity,
  - an unsettled security situation.
- The APR links disappointing GDP growth in 2007 to these factors but could strengthen linkage to slow structural reform, especially in the coffee sector.

Policy recommendations and gaps identified
- The APR should include:
  - a more in-depth analysis of reasons for the coffee sector’s performance and its bi-annual cycle;
  - an analysis of the relationship between the demand for resources needed to achieve PRSP objectives and the expected availability of foreign financing within a medium-term macroeconomic framework;
  - an assessment of the lack of predictability and the lumpy nature of donor-financed budget support, given donor budget support finances about one quarter of the government’s budget.
- Continue monitoring external developments in light of the global economic slowdown.

Public financial management and tax policy
- Government actions taken:
  - approved a new budget organic law;
  - consolidated and unified government accounts;
  - improved government accounting systems and payroll operations;
  - enhanced management of HIPC funds;
  - requested posting of a full-time PFM technical assistance expert.
- In tax policy, the government has started:
  - the process leading to the introduction of a value-added Tax;
  - adoption of the common external tariff of the East African Community (EAC);
  - phasing out the distortionary transactions tax;
  - enhancing tax and customs administration.

Monetary policy and regional integration
- Parliament approved a new central bank charter guaranteeing central bank independence; respecting and reinforcing this independence is critical.
- The APR could discuss monetary policy objectives and performance in more detail.
- On EAC regional integration, the APR’s discussion is general; future APRs should specify required policy reforms, actions for adoption, and mitigating measures for short-term adjustment costs.

Structural reform
- The APR’s presentation of structural reform results is somewhat optimistic; future APRs should give a more detailed assessment identifying critical next steps for faster growth, lower poverty, and diversification.

### III. Governance and security
Findings
- Positive developments noted:
  - resumption of negotiations between the government and the FNL-PALIPEHUTU;
  - formation of a unity government including main political parties and ethnic groups.
- Negative factors the APR could emphasize more:
  - continued insecurity in several parts of the country, contributing to sluggish rural economic activity;
  - the long internal struggle between the government and Parliament that blocked adoption of laws and slowed reform in 2007.
- Demobilization and reintegration program status:
  - As of end-December 2007, 20,330 soldiers or ex-combatants have been demobilized;
  - performance indicators show only 438 soldiers and ex-combatants were demobilized in 2007.
  - Slower than expected 2007 demobilization reflects implementation difficulties; the new power-sharing agreement with the FNL is hoped to improve security and clarify demobilization.
- Governance issues highlighted as priorities:
  - better access to an efficient and equitable justice system;
  - measures to resolve complicated land ownership issues;
  - progress in decentralization and community development;
  - institutional and policy measures to improve public finance management and fight corruption.
- The APR is silent on two major governance incidents in 2006 and 2007 and corrective measures taken; the next APR should be more candid about economic governance.

### IV. Equitable and sustainable growth
Agriculture and rural development
- As most poor live in rural areas, the APR emphasizes stimulating primary sector production: food crops, export crops, and livestock.
- Food crop production increased by 3 percent from 2006 to 2007 but remains slightly below the peak of 3.8 million tons reached in 2004.
- Ongoing/planned initiatives aim to increase agricultural production and productivity; livestock sector reconstitution is a noted achievement.
- Staffs recommend effective implementation of the 2007 national strategy for disaster risk reduction (DRR) to systematically identify, assess, mitigate and finance disaster risks.

Export crop sector and coffee
- The APR is optimistic on export crop reform but omits findings of a recent divestiture study; future APRs should review implementation of the disengagement option and measures to encourage private investment and increase farmers’ incomes.
- Ageing plantations and lack of investment in infrastructure and processing, plus slow restructuring, contributed to coffee sector decline and cyclical fluctuations; the government has adopted a comprehensive action plan for coffee sector reform.

Private sector, infrastructure, and micro-credit
- Positive actions for private sector development:
  - design and full implementation in 2006 and 2007 of a plan to settle government arrears in non-oil sectors to small and large creditors, including banks;
  - a revised investment code has been approved and promulgated;
  - a new consultation mechanism established for public–private dialogue.
- Infrastructure priorities:
  - development of transport infrastructure and rehabilitation of power supply facilities are important for growth;
  - increasing resources to road maintenance and a realistic rural road rehabilitation program are essential components of poverty-reduction-oriented rural development.
- Micro-credit and labor-intensive programs:
  - APR underlines importance of micro-credit promotion and reviews reasons for recent institutional failures;
  - recommendation to link micro-credit stimulation to reinforcement of central bank supervisory capacity;
  - APR notes positive employment impact of labor-intensive techniques, but performance indicators show a drastic decline in number of workers engaged in such projects—appropriate measures are needed to stimulate micro-credits and labor-intensive techniques.

Technical assistance
- A large program of donor-financed technical assistance (TA) is available and targeted to strengthen technical and institutional capacity (e.g., tax reform, PFM, central bank modernization).
- APR does not discuss links between availability, timing and quality of TA and implementation difficulties; such analysis would inform TA needs and priorities.

### V. Development of human capital
Education
Findings
- The APR provides a good analysis of education sector measures and objectives, including:
  - primary education for all (EFA) by 2015;
  - improved regulation of flows to secondary and higher education;
  - improved quality and efficiency.
- Drivers of increased primary enrollments:
  - increased budget allocations,
  - availability of HIPC funds,
  - increased foreign assistance,
  - elimination of primary school fees.
- Recent studies indicate abolition of school fees benefited mainly the poor and rural areas, potentially reducing regional and income disparities.

Challenges and recommendations
- Rapid enrollment growth creates new challenges due to insufficient facilities and human resources.
- Required actions include:
  - large school construction and rehabilitation programs;
  - recruitment and training of teachers;
  - provision of teaching materials.
- Ongoing initiatives to improve coordination:
  - Sector Development and Action Plans,
  - initiation of the MTEF process,
  - creation of an Education Common Fund.
- APR should propose concrete measures and budget adjustments to finance costs associated with free primary education as assessed in Education Sector Plans.
- System inefficiency highlighted: less than 40 percent of children admitted to primary schools will complete the entire primary cycle; policies should aim at a drastic reduction in the extremely high repetition rate.

Health and the fight against HIV/AIDS
- The government prioritizes expanding access to and improving quality of health services, with reducing maternal and child mortality as a major objective.
- Increased allocations and policy changes (abolition of primary school fees and health care fees for women in delivery and children under five) contributed to higher utilization of health facilities.
- The growth of the wage bill largely reflects expansion of social sectors to attain these objectives and delays in demobilization associated with the unsettled security situation.

*Prepared by the Staffs of the International Monetary Fund (IMF) and International Development Association (IDA); Approved by Robert Sharer and Dominique Desruelle (IMF) and Obiageli Kathryn Ezekwesili (IDA); January 6, 2009.*

### Section 2

### _cr0991 - Section 2

### Health service utilization and infrastructure
- The decision to abolish fees for women in delivery and children under 5 already had a significant positive impact on rates of utilization of health facilities.
- For the future, priority should be given not only to the construction and/or rehabilitation of health facilities but also to increasing and redeploying available human resources.

### Financing and donor coordination
- Donors contribute close to 72 percent of funds allocated to health services.
- Government actions recommended:
  - Continue to increase its own contribution to health services.
  - Improve the coordination of donor assistance.
  - Promote a sector-wide approach (SWAp) to the programming and financing of Burundi’s health system as the best way to strengthen coordination of government and donor programs.

### User-fee policy and budgetary implications
- The report should have evaluated the budgetary implications of the May 2006 decision abolishing user fees for certain medical services (children under 5 and women during delivery) in order to increase budget allocations and the share of primary health in the overall health program.

### HIV/AIDS program
- The government continues to give high priority to the fight against HIV/AIDS.
- Program composition:
  - A combination of preventive and curative measures.
  - Educating the population, particularly women, about the pandemic, how it spreads and how it can be avoided is one of the most critical components of the program.

### Monitoring and evaluation of the PRSP
- The report includes an extensive matrix of performance indicators to enable government, civil society and the donor community to analyze progress toward PRSP objectives and major obstacles.
- Observations and recommendations:
  - Poverty reduction in a poor post-conflict country like Burundi is a very slow process; implementation of the country’s poverty reduction strategy started in 2003 with the interim PRSP.
  - For comparison purposes, it would be useful if the matrix could also show the situation of each main indicator at the beginning of the 2000s.
  - There are ongoing initiatives for establishing a basic poverty reduction strategy results framework in Burundi.
  - The government is considering ways and means to further improve the institutional framework for evaluating implementation of the PRSP, and in particular to enhance the participation of communities in the monitoring process.
- Data and surveys:
  - Reliable data on poverty and other social indicators are scarce.
  - The national statistical office (ISTEEBU), with the help of the donor community, has improved the coverage and quality of its data collection and analysis activities.
  - A 2006 Core Welfare Indicator Questionnaire (CWIQ) survey showed that the rate of poverty remains high at about 69 percent.
  - A new household survey is planned for 2009.

### Conclusion and forward-looking recommendations
- Assessment:
  - The first Annual Progress Report is a good document that gives a generally fair assessment of progress achieved and difficulties encountered in implementing the country’s poverty reduction strategy.
  - The report takes into account many comments made in the Joint Staff Advisory Note on the 2006 PRSP.
  - It provides an adequate macroeconomic analysis, including a medium-term outlook.
  - It presents a good description of measures taken and progress achieved in public finance management, notably to improve allocations of public resources.
- Recommendations for future reports:
  - Better coordinate the discussion of macroeconomic performance and poverty reduction programs.
  - Better integrate the objectives of the PRSP into the budget preparation process.
  - Provide reliable estimates of the cost of measures envisaged in priority sectors.
  - Include in future APRs a debt sustainability analysis to strengthen the links between priority sector programs and debt management.

*Source: _cr0991 - Section 2*

---


_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2009/_cr0991.pdf_