Since the signing of the Arusha Agreement in 2000, Burundi

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1 IDA at Work Burundi: Promoting Economic and Social Reforms for Shared Growth and Peace Since the signing of the Arusha Agreement in 2000, Burundi has improved its political, social and economic stability. While the peace process has taken several years to achieve, it boasts a multiparty approach and the chance to rebuild the country s political institutions after a thirteen-year civil war. The country is now preparing for its second presidential elections in May In this regard, the recent creation of the independent electoral commission is a positive development. Burundi has made progress at demobilizing and re-integrating ex-combatants and repatriating refugees. However, the country still faces daunting peace-building and development challenges to improve security and governance, rebuild a severely damaged economic structure, stimulate and sustain economic growth, and reduce poverty. To achieve these goals Burundi will need the longterm support of the international community. Country Indicators average average 2008 Real GDP growth (%) GNI per capita (Atlas method, current prices, US$) Inflation (average CPI, %) Debt service to exports ratio (%) Poverty Incidence (%) 81.1 (1998) (2006) Net primary school enrollment rate (%) Under-five child mortality (per 1000) Population (millions) Sources: World Bank: World Development Indicators (2008).

2 The International Development Association (IDA), the World Bank s fund for the world s poorest countries, has played a pivotal role in supporting the peace-building process and rebuilding the economic and social infrastructure of the country. Starting with a series of emergency operations, IDA supported the stabilization of the economy and launch of the national reform program. IDA has now moved to supporting the country s development strategy through a series of budget supports and investment operations. n n n COUNTRY ACHIEVEMENTS Burundi is a landlocked, leastdeveloped country emerging from over a decade of civil war. With one of the lowest rankings in the UNDP s Human Development Index in 2008 (172 out of 179 countries), a GDP per capita of only US$110, a high population density and a young and growing population, the country faces daunting development challenges. The armed conflict claimed an estimated 300,000 lives and led to the flight of large numbers of refugees to neighboring countries. It also destroyed production and human capital as well as infrastructure supporting economic activity. Agricultural production, the mainstay of economic life, suffered from lack of inputs and care, leading to a downward trend in its contribution to the GDP, accentuated by higher vulnerability to external shocks and higher volatility of production, especially in coffee. Social sector indicators collapsed so that life expectancy only reached 42.8 years in Since the signing of the Arusha Agreement in August 2000, the authorities have made great strides in reaching political and social stability. While the peace process has taken several years to achieve, it can claim a multiparty approach that led to democratic elections in 2005, which led to a new parliament, a new constitution, and a new president. The country is now preparing for its second presidential elections in In addition, the country has worked to demobilize and reintegrate ex-combatants, including children, and in an estimated 300,000 refugees returned to the country from Tanzania. However, concerns of violence are rising and internal safety and security remain a serious challenge. The government has shown great drive in reversing the economic losses incurred during the war years through economic and social reforms supported by IDA and other international donors. The program set out in the Poverty Reduction Strategy Paper (PRSP) approved in September 2006 supports the redirection of the economy away from a post-conflict focus toward economic growth and development. Prepared on the basis of a participatory process, the PRSP aims to strengthen political stability, consolidate peace, and reduce poverty through accelerated, sustainable, and equitable growth. The principal strategic axes of the PRSP are: (i) improving governance and security; (ii) promoting sustainable and equitable economic growth; (iii) developing human capital; and (iv) combating HIV/AIDS. 2

3 Economic stabilization and reform Since January 2004, the authorities have implemented an economic reform program supported by IDA and the IMF. As a result, the government has made progress in terms of macroeconomic stabilization, implementation of financial and structural reforms, and restoration of social services, despite a difficult political, social, and economic context. The economy has gradually recovered from the political turmoil, embargos, deteriorating terms of trade, and severe drought experienced during Annual real GDP growth is estimated to have risen to an average of 4.4 percent in from an annual average of 1.8 percent during the decade of economic and political turbulence. Burundi s moderate inflation experienced an upward swing due to the external food and fuel price crisis of , rising from 8.3 percent in 2007 to 23.7 percent in Poverty still affects approximately 66 percent of the population, and the economy remains highly dependent on subsistence agriculture, with little diversification and coffee as its major source of foreign exchange earnings. Health services While available social indicators show progress, it is unlikely that Burundi will reach the Millennium Development Goals (MDGs) by Nonetheless, progress has been registered in health, where life expectancy rose from 42.8 years in 2000 to 44.6 years in Vaccination rates have improved, and the government has attempted to increase services coverage by putting in place a policy of free health services for children under five and mothers. However, the lack of essential medicine and qualified staff is affecting service delivery severely. Limiting the spread of HIV/AIDS continues to be a priority of the government, with the prevalence rate in the general population of 2.9 percent in About 79 percent of the total population benefit from safe water (slightly above the sub-saharan African average of 75 percent). Education In education, progress has been made, but continued improvements are critical to the long-term growth of the country. Although about 60 percent of the adult population is literate (67 percent males and 52 percent females), education at all levels suffers from a lack of qualified teachers, teaching materials, and adequate infrastructure. Since the free primary education policy was introduced in September 2005, primary education enrollment has significantly improved from 80 percent in to about 100 percent in But quality remains poor and completion rate is only 37 percent. The likelihood of reaching the second MDG (i.e., 100 percent primary completion rate) remains slim. Better governance The authorities are committed to improving governance. They have asked IDA for help in undertaking a governance diagnostic, adopted a law on sale of public goods, and are pursuing a large and successful public financial management (PFM) reform agenda supported by many development partners. To improve transparency and accountability, while making budget execution more efficient, a new budget organic law and new procurement code was promulgated in

4 IDA contributions IDA has extended US$715 million in credits and grants to Burundi since About 26 percent of this financial support has been provided through budget support operations linked to economic governance reforms. These include: the US$35 Emergency Economic Recovery Credit (EERC 2000); US$54 million Economic Rehabilitation Credit (ERC 2002); US$60 million ERSG (2006); US$30 million single-tranche Second Economic Reform Support Grant (ERSG II, 2008); and the US$10 million Food Crisis Response Development Policy Grant. Another budget support operation of US$25 million is under preparation (ERSG III). In addition, IDA has mobilized an additional US$127 million from other development partners in the form of Trust Funds to support Burundi s development program. As of June 30, 2009, IDA s lending portfolio comprised ten active operations with a total commitment value of US$ million. IDA has financed projects in (i) post-conflict rehabilitation and reintegration; (ii) education; (iii) health, HIV/AIDS and social policy reforms; (iv) public works (water sanitation and flood protection) and job creation; (v) transportation (roads and highways) rehabilitation; (vi) agriculture rehabilitation; (vii) regional communications infrastructure (including a regional telecommunication project); and (viii) economic management and a policy-based quick-disbursing operation (Economic Reform Support Grant). IDA is also supporting a signifance amount of macroeconomic and sector analysis and technical assistance. IDA is also coordinating the activities of international donors, while its macroeconomic and sector analyses have shaped key government policies and programs. Supporting the peace-building process Following the signing of the peace agreement the government decided to demobilize part of the statutory and non-statutory forces in Burundi. In support of this in 2004, IDA approved a US$33 million grant for the National Program of Demobilization, Reinsertion, and Reintegration (PNDRR). There was an additional financing to the project of about US$41.8 million from Trust Funds. By the end of 2008 when the project closed, 23,022 adults-combatants were demobilized, subsistence indemnities to all demobilized were delivered; reintegration support was provided to 21,928 beneficiaries; 3,261 child soldiers were reunited with their families or placed in orphanages, and about 3,000 of them received reinsertion and reintegration support; 18,709 peacekeepers and 8,674 militant combatants were disarmed and received compensation; and about 2,000 out of the 3,743 handicapped at the beginning of the program received at least initial medical care, while 2,100 benefited from adapted reintegration support. Given the strategic importance of continued peace to the development efforts in Burundi, on June 16, 2009, the World Bank s Board of Executive Directors approved a $15 million IDA grant to help the government continue the demobilization and reintegration of excombatants from the last rebel group (the National Liberation Forces) following the successful conclusion of peace negotiations and the transformation of this group into a political party. 4

5 Re-launching economic growth through economic and social reforms A US$27.8 million Economic Management Support Project (ESMP or PAGE in French), approved in 2004, led to better macroeconomic management through the training of statisticians, production of national accounts, improved macroeconomic forecast tools, and the publication of a progress report of the PRSP. The project brought better public expenditure management through the revision of the Organic Budget Framework Law, computerization of the public expenditure chain, securing public service wage bill files, conducting census of civil service employees and those in the military, and a study for the establishment of a Pensions Office. Development of the private sector was achieved through diagnostic studies and strategies for development of the agriculture sector (coffee, tea, cotton, horticulture and sugar), modernization of codes and laws for business climate, support to reforms to privatize corporations with public participation, arrears clearance vis à vis the private sector, and coffee sector privatization. The PAGE also provides support to audit and oversight entities of public finance, as well as to procurement reforms. The government and IDA are preparing a support project to private and financial sector of US$16 million. To transform Burundi s post-conflict economy context, and to design and implement policies to accelerate growth and promote human development, including through private sector development, IDA has provided budget support to the government of Burundi in the form of Economic Sector Support Grants (ESRG). The ERSG series (ERSG II and III) builds on the Emergency Economic Recovery Credit (EERC, 2000), the Economic Rehabilitation Credit (ERC, 2002), and ERSG I (2006). A US$25 million grant, second in the programmatic series is currently under preparation. Supporting community development Following the results of municipal elections in 2005, the government of Burundi embarked on a process of transferring responsibilities from the central to the decentralized levels. With very limited basic services, such as health, education and water, municipalities lacked the capacity for financial and project management. A community development project was negotiated with IDA. The Projet d Appui au Développement Communautaire et Social (PRADECS) supported the strategic direction of the government of Burundi to empower local governments in the fight against poverty, through better distribution of public resources and their transparent and effective use. The project provided a unifying framework for interventions in developing decentralized, community participation. It also combined activities of capacity building of central government and local micro-finance development projects in the areas of education, health and water supply. PRADECS, which began in September 2007, has supported the preparation of 23 municipal development plans and training of about 1,880 local staff in project management techniques. PRADECS has also signed 100 micro-projects agreements, including 30 in favor of vulnerable groups. 5

6 Improving food production and land management After signing the peace agreement, the government of Burundi wanted to rehabilitate rural areas and the agricultural sector to provide the basis for national reconciliation and poverty reduction. To that end the Agricultural Rehabilitation and Sustainable Land Management Project (PRASAB) supported by a blended GEF and IDA grant, was designed to restore the productive capacity of rural areas through investments in production and sustainable land management and through capacity building for producer organizations and local communities, including war distressed returnees and internally displaced people. By April 2009, PRASAB had funded over 2,920 micro-projects. Project beneficiaries enjoyed a 60 percent increase in yields for food crops (potatoes, rice) and more than 500 percent for milk production. More than 9,000 households reported that the project activities were now their primary source of income. In addition, about 3,000 ha of watershed areas are under sustainable land management; 310 ha of marshland have been rehabilitated; 24,000 ha of community forests have been established; and 60 million trees have been introduced into the farming system. More than 200,000 returnees and internally displaced people including 17,000 Batwa (marginalized populations) households have received agricultural kits as part of their reinsertion. A recent impact assessment found that 98 percent of project beneficiaries saw positive impacts on their nutritional status, 87 percent on their revenues, 97 percent on basic knowledge, and 92 percent on farmers organizations. Rehabilitating public infrastructure and creating jobs A Public works and Job Creation project (PTPCE) helped address the lack of resources to repair and rebuild the infrastructure damaged and destroyed by the war and contributed to the peace-building process by generating jobs through public works with high labor intensity. It also sought to develop institutional capacity at the municipal level and provided support for the fight against AIDS. As a result, the creation of jobs was accelerated (6,082,722 person-days) and the capacity of enterprises to carry out subprojects was strengthened. The budget allocated to the infrastructure of communities has increased by 80 percent between 2004 and 2007 and 3,614 maintenance teams for local community infrastructure have been established. A separate road sector development project rehabilitated more than 40 km of roads and ensured the maintenance of over 122 km, generating over 10,000 jobs in rural areas. Through the improvements of Burundi s roads, the project has had a direct impact on the country s security and economic situation. In addition, the project helped to improve the structure of road maintenance by strengthening the Road Fund, financed by a special tax on fuel, which is used for the rehabilitation of the road network. Building on human development Burundi s long civil strife caused the degradation of basic education and social health services and conditions. The country also experienced an increase in the prevalence rate of HIV/AIDS. Successive behavioral surveys revealed limited change in general knowledge 6

7 of the disease, prevalent high risk behavior, and low use of condoms. Uncoordinated public and private sector activities hindered the government s ability to slow down HIV/ AIDS prevalence and to effectively address its associated health and social problems. IDA supported the implementation of Burundi s Multisectoral HIV/AIDS Program and its underlying National Strategic Plan through a US$36 million credit approved in IDA funds accounted for between 80 and 90 percent of the national program resources for HIV/AIDS activities from and for about 60 percent in A follow-up project was approved in 2008 for a grant of US$15 million and is expected to fill the financing gaps confronting the National HIV/ AIDS program for These projects have supported community empowerment and development. The Bank is also providing technical assistance to improve governance and social accountability in this sector. Consistent with the project s approach of reaching the general population with key preventive activities, over 52 million condoms were distributed over the life of the project. The number of people living with HIV/AIDS receiving antiretroviral treatment increased from 600 in 2002 to 14,343 in Survey data suggests that the prevalence of HIV/ AIDS may be at least stabilizing if not declining among the general population in Burundi, with a slight decrease in prevalence observed among youth years old (from 3.5 percent in 2001 to 3.1 percent in 2007). In the education sector, IDA supported an Education Rehabilitation Support Project aimed at improving the capacity of schools to educate a rapidly increasing number of primary-level students; and strengthening government s capacity to carry out policy analysis, strategic planning, and management and implementation of sectoral programs. As of April 2009, two years after Working closely with multiple partners To improve development results, IDA is collaborating more with partners and strengthening the capacity of Burundians to monitor progress, evaluate results, and manage their own development processes. IDA works with multiple partners in Burundi including the government, other multilateral and bilateral donor organizations, UN agencies, non-governmental organizations (NGOs), members of academia, parliamentarians, journalists, civil society groups, and the private sector. IDA works closely with the International Monetary Fund and the European Commission to improve public finance management. In partnership with the Dutch and Norwegian governments, IDA has provided direct support to the budget. IDA collaborates closely with UN agencies such as UNICEF, UNAIDS, UNHCR, UNDP, WHO, FAO to improve the provision of social services such as water, sanitation, health and education to the poor. Through its small grants program, IDA provided grant funding to promote development outside regular operations. For example, IDA recently gave small grants to vulnerable women affected by conflict, local youth groups to gain workforce skills, and to the Batwas to improve their access to education and health facilities. IDA has supported the Government to forge partnerships with civil society groups through the Conseil National de Lutte Contre le Sida (CNLS) to support the fight against HIV/AIDS, and has sought ideas and suggestions from government and non-governmental partners in order to develop its country assistance strategy (CAS). Wide consultations are also undertaken regularly to improve the quality of policymaking, strengthen national ownership of key reforms, and promote accountability. 7

8 project approval, the primary completion rate has increased from 38 to 41 percent. The gross enrollment rate had increased from 80 percent in to percent in (The rate can be higher than 100 percent mostly because of overage students enrolled past the 'prescribed' age.) Educational inequalities between provinces have decreased and the number of pupils per teacher has decreased and the girl-boy ratio has improved. In addition, 24 schools were constructed and tens of thousands of books distributed to schoolchildren. challenges ahead Burundi has made real progress since 2004 but still faces considerable development challenges. Burundi must improve and diversify its export base. Coffee is the major source of foreign exchange earnings for Burundi, representing an average of 60 percent of all export revenues. But the continual poor export performance explained by the volatility of coffee production, combined with the downturn of international export prices for coffee makes reliance on this crop problematic. Burundi s ability to sustain a growing wage bill is another factor of uncertainty. The wage bill is projected to account for about 11.6 percent of GDP in 2009 up from 8-9 percent in Burundi must ensure that the wage bill hike is not a long lasting phenomenon and that the fiscal situation is sustainable in the medium to long term. Other development challenges include: Improving security and governance Building strong economic and administrative institutions in the public sector to ensure the effective use of resources Building strong institutional capacity for successful implementation of the poverty reduction strategy Improving the investment climate to promote private sector development as the engine for future economic growth Revitalizing and diversifying the economy for sustained growth Rehabilitating destroyed economic and social infrastructure and expanding access to social services Strengthening human resource capacities, and Improving the likelihood of reaching some key MDGs in IDA has and will continue to assist the government of Burundi in addressing these challenges, along the two strategic objectives defined in the World Bank s current Country Assistance Strategy: (i) promote sustainable and broad-based economic growth; and (ii) improve access to social services and consolidate social stability. August