Document of The World Bank FOR OFFICIAL USE ONLY Report No. 72334-BI INTERNATIONAL DEVELOPMENT ASSOCIATION AND INTERNATIONAL FINANCE CORPORATION COUNTRY ASSISTANCE STRATEGY FOR THE REPUBLIC OF BURUNDI FOR THE PERIOD FY13-16 September 18, 2012 International Development Association East Africa Country Cluster 1, AFCE1 Africa Region International Finance Corporation Sub-Saharan Africa Department This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. The previous Country Assistance Strategy for Burundi (Report no. 44193-BI) was discussed by the Board of Executive Directors on August 8, 2008. CURRENCY EQUIVALENTS (Exchange rate effective as of July 6, 2012) Currency Unit = Burundi Franc US$1 = 1,480.4 FBu GOVERNMENT FISCAL YEAR January 1 – December 31 ABBREVIATIONS AND ACRONYMS AAA Analytical and Advisory Activities GPE Global Partnership on Education AFAB Association des Femmes Entrepreneurs du HIPC Heavily Indebted Poor Countries Burundi AfDB African Development Bank HIV/AIDS Human Immunodeficiency Virus/Acquired ARV Anti-retrovriral Immune Deficiency Syndrome API Investment Promotion Agency HSS Health Systems Strengthening CAS Country Assistance Strategy ICR Implementation Completion Report CASA Conflict Affected States in Africa ICT Information and Communication Technology CASCR Country Assistance Strategy Completion Report IDA International Development Association CASPR Country Assistance Strategy Progress Report IFAD International Fund for Agricultural Development CEM Country Economic Memorandum IFC International Finance Corporation CPR Contraceptive Prevalence Rate IMF International Monetary Fund CNDD-FDD National Council of the Defense of Democracy- IPPs Independent local power producers Forces for the Defense of Democracy IT Information Technology COMESA Common Market for Eastern and Southern LAC Latin America and Caribbean Africa LIC Low-Income Country CP Completion Point M&E Monitoring and Evaluation CPIA Country Policy and Institutional Assessment MCM Monetary and Capital Markets CPPR Country Portfolio Performance Review MDG Millennium Development Goal CSOs Civil Society Organizations MDRI Multilateral Debt Relief Initiative3 CWS Coffee Washing Stations MTEF Medium-Term Expenditure Framework DDR Demobilization, Disarmament, and Reintegration NES National Education Strategy DeMPA Debt Management Performance Assessment NGOs Non-Governmental Organizations DFID Department for International Development NSS National Statistical System DHS Demographic and Health Survey NSSD National Strategy for Statistic Development DPs Displaced Persons OBR Office Burundais des Recettes DPG Development Policy Grant PEFA Public Expenditure and Financial Accountability DPO Development Policy Operation PER Public Expenditure Review DSA Debt Sustainability Analysis PETS Public Expenditure Tracking Survey DTIS Diagnostic Trade Integration Study PFM Public Finance Management EAC East Africa Community PIU Project Implementation Unit EC European Commission PPPs Public Private Partnerships ECCAS Economic Community of Central African States PRSP Poverty Reduction Strategy Paper ECGLC Economic Community of the Great Lakes PSD Private Sector Development Countries RBF Result-Based Financing EITI Extractive Industries Transparency Initiative RRI Rapid Results Initiative EPA Economic Partnership Agreement STDs Sexually transmitted diseases ERSG Economic Reform Support Grant SMEs Small and Medium Enterprises ESP Education Sector Plan TA Technical Assistance ESW Economic and Sector Work TFs Trust Funds FDI Foreign Direct Investment TFR Total Fertility Rate FMIS Financial Management Information System GBV Gender-based Violence FY Fiscal Year UK United Kingdom GAVI Global Alliance for Vaccines and Immunization UN United Nations GDP Gross Domestic Product UNAIDS Joint United Nations Program on HIV/AIDS UNDP United Nations Development Program USAID United States Agency for International Development VAT Value Added Tax WBI World Bank Institute WHO World Health Organization WISE Women’s Initiative for Self-Empowerment IDA IFC Vice President: Makhtar Diop Executive Vice President: Rashad R. Kaldany Country Director/Director: Philippe Dongier Regional Director: Jean Philippe Prosper Country Manager: Mercy Tembon Regional Manager: Aida Kimenia Task Team Leader: Mercy Tembon/ Task Team Leader: Eric Mabushi Jean-Pascal Nguessa Nganou Country Economist: During the preparation of this Country Assistance Strategy, invaluable contributions were received from the following team members: Alain-Désiré Karibwami; Albert Zeufack; Alexandre Marc; Andrew Sunil Rajkumar; Aurélien Serge Beko; Aurelien Kruse; Aurore Simbananiye; Armand Evariste Rwobahirya; Armaud Niyindereye; Bella Diallo Lelouma; Chantal Ruvakubusa; Chiara Bronchi; Clarette Rwagatore; Cyprien Mbonigaba; Déo-Marcel Niyungeko; Dodeline Niyongere; Dominic Haazen; Eric Mabushi; Fabrice Lusinde Kabemba Wa Lusangi; Ferdinand Bararuzunza; Gertrude Ndabemeye; Goretti Rukohoza; Hege Hope Wade; Humberto Lopez; Jacques Morisset; Javier Suarez; Jean Mvuyekure, Jerome Chevallier; Judith Laufman; Julia Lendorfer; Katherine A. Bain; Lantoharifera Ramiliarisoa; Leanne Michelle Bayer; Marco Larizza; Marie-Claire Nzeyimana; Mélance Ndikumasabo; Michael Wilson; Nneoma Nwogu; Noa Nizane; Novence Gahungu; Oscar Nzaramyimana; Pacifique Kwizera; Paula Agostini; Peggy Mischke; Pia Peeters; Rasit Pertev; Rigobert Mpendwanzi; Rolande Pryce; Rosalie Kigeme; Rosemary Mukami Kariuki; Sajjad Ali Shah; Shobhana Sosale; Syed Hye; Tidiane Diop; Vonjy Rakotondramanana; and William Rex. COUNTRY ASSISTANCE STRATEGY FOR THE REPUBLIC OF BURUNDI (FY13-16) TABLE OF CONTENTS EXECUTIVE SUMMARY i I. INTRODUCTION 1 II. COUNTRY CONTEXT 2 A. Political Context 2 B. Economic Context 3 Recent Economic Developments 5 Medium-term Economic Prospects 5 Debt Sustainability 7 Governance 8 C. Social Context 9 Poverty 9 Health and Malnutrition 9 Education and Youth Unemployment 11 Drinking water 12 Gender 12 D. Environmental Protection and Climate Change 13 E. Regional Integration 14 III. SUMMARY OF DEVELOPMENT OPPORTUNITIES AND CHALLENGES 15 IV. THE GOVERNMENT’S VISION AND DEVELOPMENT STRATEGY 17 V. WORLD BANK GROUP ASSISTANCE STRATEGY 18 A. Lessons learned from previous CAS and Stakeholder Feedback 18 Lessons learned from the CAS Completion Report 18 Findings from the Client Survey 19 B. Proposed World Bank Group Assistance Strategy 20 World Bank Group Assistance Strategy Overview 20 Existing Portfolio 22 Program of Lending and Non-lending Activities and Expected Results 22 C. Implementing the FY13-16 Country Assistance Strategy 26 Financial Envelope 26 Managing Program Implementation 26 Partnerships and Donor Coordination 27 Monitoring and Evaluation 28 VI. MANAGING RISKS 29 TABLES Table 1: Selected Indicators of Economic Performance, 2001-11 4 Table 2: Medium-Term Economic Outlook – Main Economic Indicators, 2012-2015 7 Table 3: Proposed IDA and Other Financing (indicative) and AAA, FY13-16 22 Table 4: Proposed Analytical and Advisory Activities (indicative), FY13-16 23 BOXES Box 1: Development Challenges Constraints and Opportunities 17 FIGURES Figure 1: Fertility rate by age and location, 2010 10 Figure 2: Demographic Projections 10 ANNEXES Annex 1: Burundi at a Glance 30 Annex 2: Selected Indicators of Bank Portfolio Performance and Management 32 Annex 3: Social Indicators 33 Annex 4: Key Economic Indicators 34 Annex 5: Key Exposure Indicators 38 Annex 6: Operations Portfolio (IBRD/IDA and Grants) 39 Annex 7: IFC Committed and Disbursed Outstanding Investment Portfolio 40 Annex 8: Donors’ Total Disbursements for Year 2011 41 Annex 9: Development Partners Division of Labor 42 Annex 10: CAS Results Framework 43 Annex 11: Burundi CAS Completion Report 47 Map of Burundi: IBRD No. 33380 66 EXECUTIVE SUMMARY i. Burundi, a small, predominantly rural and landlocked country, is at a critical stage in its development. More than 13 years of conflict have devastated much of the country’s physical, social and human capital until the Arusha Peace Agreement was signed in 2000. Burundi is one of the poorest countries in the world, with one of the highest population densities. Its annual population growth rate is at an estimated 2.4-2.8 percent (2010), among the highest in Sub-Saharan Africa. Competition for scarce land resources has been an important driver of continued fragility, among other causes. ii. Burundi faces many challenges. Around 90 percent of the population depends on agriculture for livelihood, though cultivable land is extremely scarce. The human capital base is weak due to limited access to basic social services. Many youths are under-employed because of lack of opportunities. There is limited access to basic infrastructure. For example, less than 3% of the population has access to electricity and access to potable water supply is also very low. Governance issues also create challenges for consolidating legitimacy of the Government, and for accelerating private sector development, growth and poverty reduction. iii. Since 2000, Burundi has made progress in consolidating peace and security, establishing a relatively stable macroeconomic environment, rebuilding institutions, and improving sector outcomes, in particular in basic health and education. Burundi now needs to intensify efforts to avoid a fragility trap. To achieve greater stability and prosperity, Burundi needs to move on a path of faster and more inclusive growth with a view to reducing poverty, including by taking advantage of the opportunity for greater integration within the East Africa Community. Burundi also needs to reduce the risk of renewed instability by building more trust between the state and its citizens and mitigating pressure on scarce land resources. Strengthening governance is an essential enabler of continued progress at all levels. iv. The new Country Assistance Strategy (CAS) for the period FY13-16 provides the framework for the World Bank Group’s support to Burundi over the next four years. It aims to support Burundi’s development as an increasingly stable, competitive and diversified economy with enhanced opportunities for productive employment and improved standards of living. The CAS focuses on two strategic objectives: first, improving competitiveness by establishing an enabling environment for inclusive growth and poverty reduction; and second, increasing resilience by consolidating social stability. Strengthening governance is the foundation of the proposed CAS, as it is expected to contribute to both strategic objectives. v. To improve competitiveness by establishing an enabling environment for inclusive growth and poverty reduction, the Bank Group will focus on programs aimed at reducing infrastructure-related bottlenecks and improving the business climate. To help increase resilience by consolidating social stability, the Bank Group will support interventions that improve access and quality of social services and increase safety nets to reduce livelihood volatility, all aimed at improving trust between state and citizens. To strengthen governance, the Bank will aim to increase the efficiency of public expenditure by strengthening public sector management, including public financial management and efforts to prevent corruption and increasing the demand for good governance. vi. The CAS is aligned with priorities of the Government of Burundi’s development strategy, outlined in its second Poverty Reduction Strategy Paper (PRSP II). The CAS draws on the lessons learned from the implementation of the previous CAS and from stakeholder feedback and takes into account the Bank Group’s ongoing commitments and its comparative advantage in Burundi. Further, drawing on the findings of the 2011 World Development Report on Conflict, Security and Development, the CAS supports building stronger social cohesion in communities and ensuring a more constructive relationship and greater trust between the state and its citizens. The CAS is aligned with the Bank’s Africa Strategy. i vii. The CAS will achieve the defined outcomes through a mix of lending and knowledge services. The Bank’s current portfolio – 14 projects for US$423.7 million – is one of the best performing programs in the Africa Region. The proposed new program will include a programmatic series of development policy operations, investment lending, policy dialogue, economic and sector work and technical assistance. To leverage IDA resources, the CAS will promote innovative financing, such as output-based schemes or guarantee products which could attract private sector financing. viii. The CAS recognizes three main risks: the global economy may experience greater volatility; the risk of renewed conflict and political violence; and insufficient resources to implement the strategy. Burundi’s land-locked situation aggravates food and fuel price volatility; peace and stability could be threatened by domestic fragility and instability in neighboring countries; and Burundi may experience a gradual reduction in external aid. ix. The CAS will help Burundi mitigate these risks through continued and increased support for public financial management and budget planning, improving the business climate, heightening agricultural productivity to help boost Burundi’s export competitiveness, and support continuation of existing safety net programs that include labor-intensive public works to provide employment opportunities, community and social development interventions that promote more equitable local service delivery, and ongoing efforts to demobilize ex-combatants and support their socioeconomic reintegration. ii I. INTRODUCTION 1. Burundi is making the transition from a post-conflict to a developing economy. In the last decade, the country has made progress in establishing a relatively stable macroeconomic environment, rebuilding institutions, and consolidating peace and security. 2. Nevertheless, many development challenges combine to restrict poverty alleviation. The last household survey (carried out in 2006) estimated that around 67 percent of the population lives below the poverty line. Some of the major challenges Burundi faces include: (i) the narrow range of existing sources of economic growth; (ii) the high dependence on agriculture with, around 90 percent of the population depending on agriculture for livelihood, and the vulnerability of the agrarian economy to climatic and external shocks; (iii) the high population density and growth rates and increasing competition for scarce resources, including land in particular, (iv) the return of refugees; (v) a weak human capital base, due to limited access to and poor quality of basic social services; (vi) the limited access to basic infrastructure such as potable water and electricity (e.g. less than 3% of the population has access to electricity); (vii) the high youth unemployment; (viii) a small private sector; and (ix) weak governance structures and institutions. 3. The Government of Burundi is committed to tackling these critical challenges to economic growth and social stability. The first Poverty Reduction Strategy Paper (PRSP I, 2006-2011) introduced first-generation structural reforms designed to consolidate peace and security and set the stage for economic growth and public sector effectiveness. With a foundation of relative peace and macro- economic stability established, the Government of Burundi’s recently launched second Poverty Reduction Strategy Paper (PRSP II, 2011-2015) builds on the achievements to date and supports far-reaching economic, social and political reforms to improve Burundi’s competitiveness and stimulate inclusive and sustainable economic growth while consolidating peace and social stability. 4. The CAS (FY13-16) supports key elements of the PRSP II and seeks to help Burundi to: lay the foundation for faster and more inclusive growth with a view to reducing poverty; and mitigate the risk of renewed instability by building trust between the state and its citizens. The CAS is framed around two strategic objectives: (i) improving competitiveness by establishing an enabling environment for inclusive growth; and (ii) increase resilience by consolidating social stability. Improving governance is the foundation and cross-cutting theme that is expected to contribute to both strategic objectives. There is a significant degree of continuity between this CAS and the previous one. However, the new CAS is more selective. The CAS incorporates lessons from the implementation of the previous CAS. It is further informed by the findings of the Client Survey (2012), and consultations held with the Government, civil society, the private sector, and other development partners. 5. This CAS document presents the proposed approach and strategic directions for the Bank Group’s assistance to Burundi over the four-year period ending in June 2016. It is organized into the following five sections: Section II reviews the country context, including the political, security, economic, poverty, and social dimensions; Section III summarizes Burundi’s development challenges and opportunities; Section IV outlines the Government’s planned development program as set out in the PRSP II; Section V summarizes the lessons learned from the implementation of the previous CAS (FY09-12) and outlines the proposed strategy, along with key principles to guide the Bank’s engagement; and Section VI assesses the key risks and describes mitigation strategies. 1 II. COUNTRY CONTEXT A. Political Context 6. Since the 2000 Arusha Peace Agreement, Burundi has made progress towards restoring peace and political stability. The Peace Agreement initiated the end of hostilities and helped launch democratic election processes. From 2000-2005, Burundi made a transition to a multi-party system of Government. A transitional Government shared power between the country’s two main ethnic groups and by the end of 2003, had signed peace agreements with all but one of the rebel movements. In February 2005, the country approved, by referendum, a new constitution emphasizing power sharing and protection of minority rights. 7. The first democratic elections under the new constitution took place in August 2005 and paved the way for progress on consolidating political stability. The CNDD-FDD, led by Pierre Nkurunziza, won over 58 percent of the vote; and Parliament elected him President the following month. In December 2008, the Government signed a power-sharing agreement with FNL-PALEPUHETU the last remaining rebel group which became a political party afterwards. Elections that took place from May through September 2010 at all levels of Government constituted a milestone in the country's political transition from conflict to stability but also underscored Burundi’s political fragility. According to international observers, the elections conformed to international standards despite minor observed irregularities in local council elections. However, 13 opposition parties, alleging fraud and vote rigging, formed a coalition to boycott the Presidential election, leaving the incumbent President unopposed. 8. Security has improved but remains fragile. Even though the security environment has improved significantly in recent years, the situation remains fragile. The increasing cost of living triggered by recent volatility of fuel and basic commodity prices placed severe strain on the poor. Scarcity of land and competition for land resources is a continued underlying driver of conflict and fragility. At the end of August 2012, a former rebel group announced it would take up arms against the Government. Narrow space for political dialogue, weak governance, corruption, high levels of poverty, and high youth under- employment are potentially destabilizing factors, given the high expectations that political stability would bring about rapid economic improvement in people’s lives. 9. The Government has launched important initiatives to mitigate potential sources of conflict. In provinces with high levels of insecurity, the authorities launched socio-economic recovery activities and the mandatory collection of weapons held illegally by the population. To address land scarcity, the Parliament adopted a revised land code that includes the establishment of a national land commission tasked with managing the redistribution of land and resolution of disputes. The Parliament adopted the National Governance and Anti-corruption Strategy that provides a framework for supporting reforms in justice and public sectors, protection of human rights, election procedures and interaction with the media. Following extensive national consultations, the Government is preparing a transitional justice strategy that includes the establishment of a truth and reconciliation commission and judicial mechanisms to address impunity. 10. Complementary reforms seek to consolidate social stability and stimulate private sector development, to prepare the country for positive and sustainable change. The authorities demobilized former combatants, and several programs are under way (financed by the Government and international development partners) to help ex-combatants to integrate into communities. These programs also aim to assist vulnerable groups and to reduce social tensions. In addition policies are in place to promote increased access to education and health services with gender equity, to develop the private sector, improve the business climate and stimulate progressive integration into the East African Community, with the reduction of barriers to trade. 2 B. Economic Context 11. Burundi is one of the poorest countries in the world. In the last decade economic growth has been slow, averaging about 3% in the first eight years but increasing to 3.9% in 2010 and 4.2% in 2011. Burundi’s gross domestic product per capita of US$ 170 in 2011 is still far below the GDP per capita of US$ 286 before the crises in 1993. Even though the country is endowed with natural resources and a large network of rivers, economic growth is held back by several factors including poor diversification, lack of adequate infrastructure, an unattractive business climate and unskilled or a low capacity labor force. Furthermore, there is high pressure on land and natural resources due to high population growth rate (2.6% in 2011 percent) and high population density (300 inhabitants per square kilometer). 12. Burundi’s economy is undiversified, making the country vulnerable to external shocks and dependent on foreign financing. The economy is dominated by agriculture which accounts for about 32 percent of GDP and 90 percent of employment. However, traditional farming methods coupled with the adverse effects of soil erosion have caused a decline in agricultural production capacity over the years and has in turn had enormous socio-economic consequences on the poor whose livelihood depends on agriculture. Coffee and tea to a small extent are the main export crops, accounting for more than 60 percent of export revenues and the source of income for about 800,000 households (about 3 million Burundians). In 2011, good weather and the liberalization and other reforms led to the production of 30,000 tons of coffee compared to 23,000 tons in 2010. Tea is also an important export crop, though to a much lesser extent than coffee. A similar positive trend was registered in the production of tea, from 8,016 tons in 2010 to 9,000 tons in 2011. However, due to climate fluctuations and other cyclical factors, production might be low in 2012. 13. The services sector, within which the public sector is predominant, accounts for 43 percent of GDP. The industrial sector is narrow (17 percent of GDP) but growing. Growth in the industrial sector increased from 3.7% in 3007 to 5% in 2010 mainly from construction and mining. The economy is characterized by a high dependence on external aid and low domestic revenue leading to relatively low Government expenditures. Furthermore as a small, landlocked country Burundi faces other significant challenges in accessing global markets. High trade costs, uninviting business climate (though improving in recent years), poor infrastructure and underdeveloped services sectors limit Burundi’s ability to attract Foreign Direct Investment (FDI). 14. The private sector in Burundi is small and underdeveloped. The private sector is embryonic and it includes a relatively large number of small and medium size enterprises. Most of them operate in the informal sector and are concentrated mostly in Bujumbura and two or three other provincial towns. The private investment’s share of GDP increased significantly from 2.2 percent in 2000 to 13 percent in 2010, although it is still relatively small. Lack of infrastructure, notably lack of electricity and an inadequate road network within and linking the country to neighboring countries constitute major impediments to private sector development. Corruption, poor access to credit, long bureaucratic procedures and political instability are some of the factors that have stymied the growth of the private sector and hampered Burundi’s economic competitiveness. Furthermore, the financial sector is small and not well developed; and access to finance is a major obstacle for companies including SMEs in the formal and informal sectors. As a result of these characteristics Burundi is ranked 140th out of 142 in the global competitiveness report and 169 out of 183 in the 2012 Doing Business report. 15. The private sector’s contribution to growth is increasing but remains limited. Foreign direct investment (FDI) remained low (less than one percent of GDP) with a moderate improvement from US$0.8 million in 2010 to US$3.4 million in 2011. Domestic private investment increased from 7.6 percent of GDP in 2005-08, to 10.1 percent of GDP in 2010-11, reflecting renewed activity by the private sector mostly in tourism and agriculture. Increased macroeconomic stability, HIPC and MDRI relief (see below) as well as the disbursement of the Extended Credit Facility in 2009, boosted gross international reserves to a high of US$332 million in 2010, which is equivalent to about 4.8 months of imports on 3 average. Foreign reserves declined to US$296 million in 2011 (3.8 months of imports) as development assistance fell. 16. Burundi’s deposits of mineral resources are a potential source of growth. Burundi possesses 5- 6 percent of known world reserves of nickel as well as other minerals such as gold, cobalt, tungsten, and ore. Currently, the mines are exploited informally and about 50,000 workers are employed in this sector. Even though mining activities are undertaken in a small scale the sector does contribute to the country’s GDP. With the improvement in internal security and transport links, there is investor interest in the mining of nickel. The Government is working on improving the legal and regulatory framework of the sector and has started with the revision of the mining code, which is pending approval by the Cabinet. Moreover, the authorities are considering undertaking the initial steps of accession to EITI to promote transparent reporting of mining revenues. The development of the mining sector will also depend on infrastructure, including energy and transport. Exploiting regional links (especially toward the border with Tanzania, given the location of these mineral reserves) offers positive prospects to develop mineral assets in Burundi. Investment in electricity, roads and urban infrastructure, together with regional port and rail links, will lay the foundations for growth, with trade facilitated by EAC agreements. 1 Table 1: Burundi – Selected Indicators of Economic Performance, 2001-11 2001-05 2006-11 Output and Prices GDP (current prices, US$ billions) 0.9 1.7 Real GDP growth (%) 3.0 4.5 Inflation (average CPI, %) 7.8 10.4 Nominal exchange rate (US$) 1005.2 1168.2 Terms of trade (% change) 5.7 -2.4 Savings and Investment Gross investment (% of GDP) 7.3 17.7 Gross national savings (% of GDP) 3.5 6.4 Balance of Payments Overall balance of payments (% of GDP) -1.2 2.0 Current account balance (Incl. official transfers, % of GDP) -4.2 -10.7 Gross international reserves (months of imports) 2.9 4.2 Export growth, goods only (f.o.b; US$; % change) 5.3 11.6 Export growth, goods and service (f.o.b; US$; % change) 13.7 15.5 Public Sector Finances Overall fiscal balance (after grants, excl. HIPC, % of GDP) -4.3 -3.7 Debt Debt service to exports ratio (%) 77.6 5.2 External debt stock (% of GDP) 151.7 65.6 Source: Burundi authorities; World Bank; IMF. 1 The Kabanga project in Tanzania, referred to as the world's largest undeveloped nickel sulphide deposit, is part of a nickel belt, which crosses Burundi. Moreover, Burundi is also known to be endowed with other mineral resources such as uranium, tin, cobalt, copper, platinum-group metals, columbium (niobium), tantalum, gold, tungsten, chromium and vanadium. Burundi had significant deposits of feldspar, kaolin, nickel, phosphate, platinum-group metals, quartzite, rare-earth metals, vanadium, and limestone for cement. Although gold production has waned in recent years, there are gold deposits at Mabayi, Muyinga, Cankuzo, and Tora-Ruzibazi, where artisanal mining took place. The nickel’s potential was estimated at 45,000 metric tons per year in the Musongati region alone. 4 Recent Economic Developments 17. Real economic growth rates in the last three years, averaged 4 percent which is lower than the projected 7 percent owing to a series of exogenous shocks. Burundi’s economy grew by 4.5 percent in 2008 due to improved agriculture performance, an expansion of small manufacturing and increased donor financing. However as a result of the impact of the global economic and financial crisis and continued energy shortages, private transfers and foreign direct investment were lower than expected and real economic growth slowed to 3.5 percent in 2009. After that, the economy rebounded modestly to 3.9 percent in 2010 and 4.2 percent in 2011. Economic growth has been volatile partly due to its dependence on the widely fluctuating agricultural sector and partly due to lower than expected private transfers and weak investment. 18. Despite slippages in 2009, the authorities generally pursued sound macroeconomic and prudent fiscal policies during 2010–11 that managed to contain the fiscal deficit. Tight expenditure management, improved domestic revenue mobilization and foreign aid inflows helped to stabilize the fiscal deficit (on a cash basis before HIPC grants) to an average of 3.8 percent of GDP in 2010-11, from 5 percent of GDP in 2009. 2 This deficit was financed with limited recourse to domestic borrowing. Domestic revenue stabilized in 2011 at 15.4 percent of GDP (up from 14.6 percent in 2010 and 13.6 percent in 2009), reflecting improved collection of income and other taxes. following the implementation of the tax revenue mobilization program and the establishment of the Burundi Revenue Authority (OBR). Despite a slight reduction in total expenditure (from 41.0 percent of GDP in 2010 to 40.0 percent in 2011) and improved revenue collection, overall fiscal out-turn in 2012 (cash basis after grants, excluding HIPC grants) is projected to have deteriorated slightly, to 4.0 percent of GDP from 3.6 percent in 2010.3 19. A narrow export base, and the reliance on oil and capital-goods imports, accounted for Burundi’s substantial current account deficits. In 2009, the current account deficit (including official transfers) reached 11.5 percent of GDP mainly due to declining donor assistance (over 60 percent of net current transfers). The external current account deficit declined to 9.4 percent of GDP in 2010, because of higher exports and official transfers but increased to 12.3 percent of GDP in 2011 due to increased imports of petroleum products and official current transfers. 20. The private sector’s contribution to growth is increasing but remains limited. Foreign direct investment (FDI) remained low (less than one percent of GDP) with a moderate improvement from US$0.8 million in 2010 to US$3.4 million in 2011. Domestic private investment increased from 7.6 percent of GDP in 2005-08, to 10.1 percent of GDP in 2010-11, reflecting renewed activity by the private sector mostly in tourism and agriculture. Increased macroeconomic stability, HIPC and MDRI relief (see below) as well as the disbursement of the Extended Credit Facility in 2009, boosted gross international reserves to a high of US$332 million in 2010, which is equivalent to about 4.8 months of imports on average. Foreign reserves declined to US$296 million in 2011 (3.8 months of imports) as development assistance fell. Medium-term Economic Prospects 21. The medium-term economic outlook is challenging but remains positive. Real GDP growth forecast for 2012 has been revised downward to 4.2 percent from 4.8 percent previously projected in 2011, reflecting the anticipated impact of the unfolding sovereign debt and banking crisis in Europe. The macroeconomic framework for 2012-2014 projects that the recovery will continue, however at a slower 2 The authorities have shown restraint in adjusting their fiscal program to changing circumstances. Given the volatile nature of foreign aid to Burundi, the 2008 and 2009 budget laws put more emphasis on the prioritization of public expenditures and make the provision of non-priority expenditures contingent upon assured disbursement of external budget support. 3 This reflects a reduction in donor support. 5 pace than originally expected (GDP growth is expected to increase gradually, reaching an average of 5.3 percent in 2014-15). The assumptions behind this scenario are: (i) inflation declining to 10 percent in 2013 and beyond, with price stabilization opening up a path to growth; (ii) stable revenue with declining outlays for defense and security; (iii) exports improving due to increased agricultural productivity (based on small-scale irrigation and feeder roads rehabilitation) and growth in agri-business, mining and construction, with imports falling from 29.5 percent of GDP (2011) to 24.0 percent in 2013-2014; and (iv) gradual softening of the energy constraint, with new investments in hydroelectric generation. A renewed impetus in the services sector, including banking, telecommunications and tourism, within EAC, should have an added positive effect on growth. 22. The modest growth path (5 percent average) projected in the baseline scenario is insufficient to reduce poverty levels significantly. Growth has the potential to be significantly higher, depending on exogenous factors and on the Government’s commitment to reforms. Demographic growth rates of 3 percent limit the per capita growth rate to only 2 percent. Moreover, much of the projected growth is linked to official foreign transfers, which may have reached a plateau. FDI remains modest and linked mainly to EAC projects. As the experiences of other post-conflict countries, such as Rwanda and Sierra Leone, have demonstrated, Burundi could achieve higher growth if exogenous factors are favorable (e.g. contained Eurozone debt crisis and reduced international food and fuel prices) and if the Government’s commitment to accelerate the execution of its overall reform program remains strong. The 2010 Country Economic Memorandum (CEM) for Burundi argues that, assuming continued social and political stability, and prudent macroeconomic and public sector policies and structural reforms, the emergence of an enabling business environment could help boost economic growth to about 8 percent per annum. Such sustained growth would increase non-farm employment significantly, creating an estimated one million jobs over the next two decades. Driven by improved access to infrastructure, lower costs, and private sector growth, jobs would emerge mainly in urban areas, with industry (including mining) projected to account for almost 10 percent of the work force and the services sector projected to account for 20 percent of the work force. The key features of the infrastructure investment plan would include: • Access to reliable power supply 24 hours a day by establishing a national transmission and distribution grid by 2015, with all 15 of the provincial capitals linked and 25 percent of households connected by 2020, and 40 percent connected by 2030. • Improved access to local and international markets through upgrading and expansion of the country’s road network over the next decade, with the expansion and modernization of the international airport, extension of the Tanzanian rail network into Burundi, and with port improvements. • Improving access to the international communications network as well as a national communications grid providing communities and business with low-cost voice and data communications. A high priority is the immediate development of a national communications grid of fiber-optic cable and digital microwave linked to the regional network (a task well underway). 6 Table 2: Medium-Term Economic Outlook - Main Economic Indicators, 2012-2015 Actual Prel. Projections Projections Ave 2010 2011 2012 2013 2014 2015 2012- 15 (annual percent change) Real GDP growth 3.8 4.2 4.2 4.5 5.1 5.5 4.8 Consumer prices (period 6.4 9.7 19.6 6.4 7.4 6.3 9.9 average) Exports, f.o.b (change in US$ 48.0 22.5 3.1 0.2 -1.0 9.3 2.9 value) Imports, f.o.b (change in US$ 105.3 3.7 -2.9 3.5 1.2 3.7 1.4 value) (percent of GDP) Current account deficit (incl. -9.4 -12.3 -11.6 -11.0 -10.8 -11.1 -11.0 grants) Revenue (excl. grants) 14.6 15.4 15.1 15.5 15.6 15.6 15.6 Total expenditure and net 41.0 40.0 33.6 34.9 34.8 32.5 34.1 lending Overall balance (excl. -26.4 -24.6 -18.5 -19.4 -19.2 -16.9 -18.5 grants)a Overall balance (incl. grants) -3.6 -4.0 -2.7 -4.6 -4.9 -3.9 -4.5 ab Gross international reserves c 4.9 4.4 4.0 3.8 4.2 3.9 4.0 Source: IMF. Note: a cash basis, b excluding HIPC, c in months of imports. 23. Food production and services are key sectors for a Burundi’s development and growth strategy, particularly as they create jobs. The linkage analysis conducted confirms that agriculture, livestock and food and beverage processing, marketed services (including real estate services and IT activities), trade services, and financial services, are key sectors with significant linkages to the rest of the economy. Other sectors with strong backward linkages include tourism, wood-based manufacturing, mining, utilities (electricity and gas), water treatment and distribution, textiles, forestry/sylviculture, and housekeeping services. 24. A combination of factors pose significant risks going forward, including spillover from Eurozone debt crisis and continued upward trend in international food and fuel prices, with negative consequences for the poor. Increased food and fuel prices will impact economic growth as well as domestic inflation. Aid inflows might also be lower than projected, leading to a larger fiscal gap. If the Government responds to crises with fiscal stimulus (as it did most recently), while facing lower external financing, it could be forced to make difficult adjustments (such as cutting allocations for key social programs including school feeding and free health care for vulnerable populations) to keep inflation in check. Second, the ongoing European debt crisis could have ripple effects on Burundi since Europe is the destination for 60 percent of Burundi’s exports. Moreover, lower than projected foreign direct investment would exacerbate pressure on the balance of payments and negatively affect prospects for privatization of the tourism industry and coffee sector, further reducing growth prospects. Lastly, land pressures aggravated by the return of refugees and displaced people could affect agriculture productivity and growth. These risks, taken together, could place Burundi in a very difficult position. Debt Sustainability 25. Burundi’s external debt situation has improved since the country reached the Highly Indebted Poor Countries (HIPC) Completion Point. In January 2009, Burundi reached the HIPC Initiative Completion Point and became eligible for US$833 million (net present value) in debt relief, including 7 US$425 million from IDA and US$38 million from the IMF. This reduced the country’s public and publicly-guaranteed debt by more than 90 percent in net present value terms, and reduced scheduled debt service by some US$30-40 million per year for the next 30 years. The most recent joint World Bank-IMF Low Income Country (LIC) Debt Sustainability Analysis (DSA) (December 2011) concluded that due to the country’s narrow export base and low capacity of Government institutions, the risk of external debt distress remains high. Moreover, according to the DSA, strong growth is crucial to prevent any deterioration of debt indicators even though Burundi is in a position to service its public and publicly guaranteed debt. Burundi should maintain prudent borrowing policies and accelerate the structural reforms required for private sector-led growth, particularly in infrastructure and export diversification, to mitigate risks to debt sustainability. Governance 26. Weak governance is a major obstacle to growth and private sector development, discouraging investors and increasing the cost of doing business. According to the 2011 World Governance Indicators Burundi ranks in the lowest 10th percentile on Government effectiveness, the rule of law, regulatory quality and control of corruption. However, the country performs relatively better on voice and accountability, in itself a major achievement in a post-conflict and fragile environment. 27. Governance challenges include high levels of corruption, weak public financial management and poor performance of public administration. Weaknesses in the civil service include: (i) low levels of remuneration that are inadequate for attracting and retaining high-skilled staff; (ii) perceived clientelism in appointments, promotions and remuneration levels; and (iii) the lack of a system of incentives for performance. Inefficiencies in the justice system include: (i) lack of transparency in judicial processes; (ii) weak capacity to draft laws; (iii) lack of participation of stakeholders; as well as (iv) perceptions of endemic corruption practices. These problems are compounded by the small number of trained judges and lawyers, and the low salaries levels Strengthening the justice system and the integrity of the courts is important for encouraging investment but also for protecting the poor. 28. The Government has created many institutions and systems for transparency and accountability and improving the effectiveness of these institutions is the next step. To tackle the governance challenges, the Government has recently put in place a number of corrective measures, notably the creation of the Anticorruption Brigade, the Audit Court, and the Office of the Inspector General, charging them with the responsibility to fight corruption. Moreover, the country is also pursuing economic reforms with the support of partners, to improve governance and transparency. Recent Government achievements in this area include: (i) the effective operation of the Burundi Revenue Authority (Office Burundais des Recettes); (ii) the introduction of VAT; (iii) the revision of the customs code; (iv) a decree on the rules and regulations of the management of the budget and control, a key element of the implementation of the budget framework law (Loi Organique); and (v) the creation of a single treasury account and the strengthening of controls and audits. The creation of the Investment Promotion Agency (API) in 2010 was an important development in creating an enabling business environment (see above). In 2011, the Government adopted the National Strategy for Good Governance and Anti-corruption and a related action plan, which provides a solid foundation to move the governance agenda further. More recently in 2012, the Government approved the ‘National Program of Public Administration Reform. 29. The Government has initiated significant reforms in public financial management. The Government is committed to a comprehensive reform of PFM that seeks to (i) improve budget formulation by strengthening the linkage between policies and budgets; and (ii) improve budget execution by strengthening cash management and overhauling treasury operations. The Government is also committed to strengthening administrative and economic governance particularly at the decentralized levels so as to improve the quality of service delivery, reduce corruption and resolve land disputes. 8 Improving governance is essential to mitigate factors of instability and to enable growth for poverty reduction. C. Social Context 30. Despite recent progress in social sectors, Burundi is unlikely to reach the 2015 Millennium Development Goals (MDGs) on poverty, health and education. The long period of political and social crisis negatively affected the country’s baseline and performance towards achieving the set development targets. Poverty 31. Burundi is one of the poorest countries in the world with about 2/3 of its population living in poverty. 4 Poverty is widespread, but higher in rural areas where the poverty rate is twice that of urban areas. Up to 60 percent of the population suffers from food insecurity, particularly in the season between crops. 5 Poverty varies widely across regions, from a low of 29.7 percent in Bujumbura to a high 82 percent in the province of Kirundo. It also varies significantly across the urban-rural divide, with urban households typically better educated and less likely to be poor or under-employed. 32. Poverty is linked to many factors and is predominant among certain vulnerable groups. Factors contributing to poverty include: low agricultural productivity; underemployment with few income opportunities outside agriculture (and food production is typically limited to family consumption); shrinking and inequitable access to land (owned 70 percent by men); lack of infrastructure – electricity, lack of clean water and adequate rural roads; weak local governance; and rapidly depleting forestry and fisheries resources. Groups especially vulnerable to poverty include those displaced by strife, minority groups such as Batwa, and households headed by single women who are often forced into food “coping� strategies (reducing portions or skipping meals), which impact negatively on child nutrition and schooling. 33. While there is no recent estimate of the poverty level, there have been improvements in some social sector outcomes. 6 Burundi still ranks at the bottom of UNDP’s Human Development Index (185th out of 187 countries in 2011) but education and health outcomes improved significantly over the past few years. Life expectancy rose from 43 years in 2000 to 50.4 years in 2011. A poverty assessment and the production of regular statistical information would help build the Government’s knowledge base and facilitate the design of effective pro-poor policies and programs and the adjustment of existing programs to address vulnerability and maximize the impact on poverty. Health and Malnutrition 34. The Demographic and Health Survey of 2010 shows that the population’s health status is improving; however the results are insufficient to meet MDG targets. Thanks to better immunization coverage (83-90 percent) and free health services for under-five children and pregnant women, maternal mortality (499 per 100,000 live births in 2010) and under-five mortality (96 per 1,000 live births in 2010 from 167 per 1,000 in 2005) have declined significantly. The incidence of malaria rose from 26 percent in 2005 to 34 percent in 2010, but the distribution of insecticide-treated mosquito nets (now used by 44 percent of households) is expected to have positive effects going forward. Limiting the spread of HIV/AIDS continues to be a priority of the Government (the prevalence rate in the general population 4 According to data from the official World Development Indicator, the percentage of the population living below the national poverty line in 1990 was 36.4 percent. This figure had roughly doubled by 1998 to 68.0 percent and reached 67 percent in 2006 (based on the latest household survey available). 5 In rural Burundi, food insecurity affects about 30 percent of the population in harvest periods, and up to 60 percent during lean periods. 6 The next household survey will be available in end-2013 and provide updated poverty figures. 9 was 3.3 percent in 2009). From 2005 to 2010, the rate of deliveries assisted by qualified staff increased from 34 percent to 60 percent. Yet, with the slow increase in contraceptive use (11.4 percent in 2008, 14 percent in 2009, and 18 percent in 2010), reaching universal access to reproductive health by 2015 is highly unlikely. Further improvements are constrained by the lack of essential medicines, scarcity of qualified staff and limited financing. However, with donor support including that of the World Bank, access to basic health services has increased significantly. Further improvements in assuring greater equity of access and quality of care would require: (i) improving the functionality of existing infrastructure to provide adequate health care to the whole population; (ii) strengthening performance- based financing and free care policies by ensuring the financial sustainability of the system; and (iii) providing better health insurance to the rural and poor population through community mutual associations for health and the promotion of health insurance. 35. Very high rates of population growth are expected to put a major strain on the delivery of social service and access to basic infrastructure in the coming years. The current population of Burundi is estimated at 8.3 million, having almost quadrupled from 2.5 million in 1950. The population is very young, with a high proportion of girls and women in their peak child-bearing years. Figure 1 shows the fertility rate for rural and urban women according to age group. The fertility rate is significantly lower in urban areas. An increasingly significant fraction of the population is now migrating toward urban centers. This trend will add pressures on social and physical infrastructures in cities. Current projections are for the population to increase at a rate of 3.4 percent a year, as shown in Figure 2. Figure 1: Burundi – Fertility rate by age and location, 2010 Fertility rate by age and location 350 Fertility Rate per 1000 women 300 250 200 Urban 150 Rural 100 Total 50 0 15-19 20-24 25-29 30-34 35-39 40-44 45-49 Women's Age Group Source: 2010 Burundi DHS Survey Figure 2: Burundi Demographic Projections 10 36. Malnutrition and anemia are endemic and likely to have a negative inter-generational impact on human development. Malnutrition in infants and young children can lead to delayed cognitive development and malnutrition at any age makes people more susceptible to other diseases. The product of poverty, compounded by prolonged conflict, spatial displacement and periodic food crises, malnutrition needs priority attention with safety nets to improve nutrition pre-school and in-school. To begin to reverse the negative impact on physical and mental development and the knock-on effects for the economy, sustained financial allocations to the local Government level are crucial. According to the WHO definition, almost 58 percent of children in Burundi suffer from chronic malnutrition, half of whom (27 percent) are afflicted by severe malnutrition (2010). Stunting increases progressively with age, reaching 60-65 percent of all children between the ages of 18 and 59 months. The Northern and Center-East regions are the most affected, 62 percent each. In addition, 45 percent of children between the ages of 6 and 59 months are anemic: 23 percent with light anemia, 21 percent moderate and 1 percent severe. The consequences of anemia for children and mothers are far-reaching. Education and Youth Unemployment 37. The free primary education policy has resulted in a significant increase in enrollment and greater gender parity, but the quality of learning services is poor. Primary gross enrollment rates improved significantly from 80 percent in 2003-04 to 156.3 percent in 2010, although significant shortcomings remain in terms of achievement and quality. The ratio of girls-to-boys at primary level is almost 100 percent. The completion rate is only 56 percent making it unlikely that Burundi will reach the second MDG target (primary completion rate of 100 percent). The rapid growth in enrolment has stressed the delivery system. Large class sizes combined with poor teaching skills and limited resources have undermined the quality of instruction. Enrollment levels in secondary and tertiary education are much lower (24.8 percent and 3.2 percent, respectively). Consequently, only 40.5 percent of the population is literate, with significant gender disparities 7. The Government is committed to improving access and quality further. In 2010, the Government announced the introduction of “basic education� which extends the duration of compulsory primary schooling from 6 to 9 years. The Government is also updating the 2009-2016 Sector Development Plan for Education and Training, with the support of donors to address enduring bottlenecks such as lack of qualified teachers, teaching materials and adequate infrastructure. 38. Under-employed youth present a special challenge. Rural exodus is turning youth unemployment or under-employment into a worrying phenomenon in urban areas. In 2008, the youth unemployment rate in Bujumbura was estimated at 14.4 percent, in Gitega at 9 percent and in Karusi at 6.5 percent according to a “1-2-3� survey, undertaken in three phases, in several African countries. The unemployment phenomenon in Burundi has not been studied in detail. Nevertheless some of the causes of high youth unemployment as discussed in the PRSP II include among others lack of a national employment policy, poor knowledge of the labor market, mismatch between training and employment, lack of access to credit, and absence of relevant vocational training programs. 39. Measures are already being undertaken to address the youth unemployment problem. For example, the Government has developed work programs for demobilized soldiers and with financing from development partners such as the World Bank and the United Nations, many non-governmental organizations (NGOs) are serving as implementation partners for re-integration programs that are job related for ex-combatants and returnees. Furthermore the “Agence burundaise pour l’emploi des jeunes� (ABEJ Burundi Youth Employment Agency), has been created to link up employers with unemployed youth through internship programs to build their capacity. The United Nations Development Programme (UNDP) is currently working with the Government to develop a youth employment strategy. Increasing youth employment will not only increase their income and reduce poverty but it will also help to consolidate peace, security and economic growth in the country. 7 35 and 47 percent for women and men respectively 11 Drinking water 40. Access to safe drinking water is slowly improving, contributing to better health outcomes. Access to safe drinking water in urban areas increased marginally from 80 percent of households in 2005 to 85 percent in 2010. Most of the water is collected from Lake Tanganyika, which is increasingly polluted and could require costly treatment, impacting on water tariffs. In rural areas, access to safe drinking water still lags though there have been improvements – access rose from 63 percent of the population in 2005 to 74 percent in 2010, 8 with almost all water points in working conditions. However, women and children still spend an average of 2 hours a day on water fetching, impacting negatively on school attendance and performance. Gender 41. Progress has been made in achieving gender parity in education but challenges remain. Having achieved gender parity in primary education, Burundi is likely to reach the MDG-3 on gender equality. However, (i) inequality persists in some regions and girls’ dropout rate is higher than that for boys; and (ii) gender disparities in the primary completion rate (PVCR) remain, with 55 percent of girls completing versus 57.4 percent of boys in 2010, though the gap is narrowing. A positive economic outcome is that the literacy rate for women and men ages 15-24 is equal (within the margin of error). However, in secondary education, girls’ enrollment is only 70 percent of boys. On average young girls leave school earlier. The consequence is that in the 25 and above population only 5 percent of women have a secondary education versus 9 percent of men. Girl’s enrollment in higher education is 40 percent of boys. 42. In health, services to women and children have improved. Maternal health is improving as a result of the Government’s priority placed on expanding access and improving quality. The maternal mortality rate dropped from 615 per 100,000 live births in 2005 to 499 in 2010. Government’s policy (2006) of free health care for pregnant women and children under the age of five has increased clinic utilization rates and the number of women giving birth in health facilities. The proportion of children and pregnant mothers accessing medical services has increased from about 28 percent in 2006 to 69 percent in 2009. However, current usage rates are still below what is needed for health indicators to improve significantly and lack of medicine is regarded as a continuing obstacle to health maintenance. 43. The maternal mortality rate is significantly decreasing, but is still slightly above the regional average. In 2005 the maternal mortality rate was 615 per 100,000 live births (Source: MICS 2005) and in 2010 the rate was 499 per 100,000 live births (Source: DHS 2010); the same year the Sub-Saharan Africa regional average was 480 per 100,000 live births (Source: WHO-World Health Statistics 2012). Even though the improvement is obvious, Burundi is still far to reach the targeted level toward MDGs which is expected at 250 per 100,000 per live births by 2015. Although free health care policy provides a tremendous incentive to beneficiaries, remaining challenges undermine this positive trend as more than 35% women are still delivering at home while fertility rate is among the highest in the world. 44. In terms of economic opportunities, households headed by females are extremely vulnerable and more acutely affected by poverty than households headed by men (76 percent versus 64 percent for men) due to limited access to land, capital and credit. A national poverty study shows that poor heads of household are generally less educated; rely heavily on agricultural activities, and are predominantly female. The majority of the Burundian labor force (84 percent) is in the agriculture sector and women make up 56 percent of that group. Rural women therefore play a major role in the economy and the stagnation of the agricultural sector due to low productivity is a critical factor with respect to the income 8 There are comparability issues to bear in mind while interpreting these data. 12 and status of women. Compared to men, they can less afford inputs to modernize their plots farming, since they lack land tenure and cannot inherit land, thereby limiting their access to credit. However, access to micro loans appears to be increasing. The Association of Women Entrepreneurs of Burundi (Association des Femmes Entrepreneurs du Burundi (AFAB)) has the mission of promoting women’s entrepreneurship and has created a micro-finance system for women through the formation of WISE Bank (Women’s Initiative for Self Empowerment). The participation of women in cash-for-work road works, and in micro-credit schemes have helped increase Burundian women’s ability to be self-employed. 45. With regard to political power and decision-making, the representation of women in Government has improved significantly since the 2010 election. Forty-five percent of the Cabinet members are women. The evolution of women’s representation is mainly due to the Constitution (2005), which allocates 30 percent of senior positions at both the legislature and executive level to women. In Parliament, 32 percent (54 out of 167 seats) are currently held by women. The Election Code (2009) introduced an allocation of at least 30 percent of women in councils at the local level and an official network for elected women officials, giving the 700 Councilors a framework for consultation. Another important gain is the increased role in public decision making, with the entry of women to the Ubushingantahe, a traditional institution which plays a significant role in conflict resolution but which was traditionally reserved for men. Today, the election of women to the Ubushingantahe marks recognition of women’s right to participate in conflict resolution. 46. Despite this progress, some legislation is still biased in favor of men. Matrimony is still governed by male-dominated customs which discriminate against women. The law on citizenship does not allow a woman married to a foreigner to give her nationality to her child or to her husband. Divorce law discriminates against women and tax laws treat women heads of household as single tax payers, ignoring their dependents. Finally the labor code is not in harmony with regional agreements on women’s rights. The penal code in adultery-related matters also discriminates against women. Gender-based violence (GBV) remains a major obstacle to the achievement of gender equality. While the law provides strong protection for women on paper with respect to domestic abuse, in practice that protection is not applied. D. Environmental Protection and Climate Change 47. Burundi’s endowment of natural resources, abundant rainfall, a dense network of rivers, fertile land and a huge ability to harness its marshlands and lakes is key to Burundi’s agricultural productivity and socio-economic development. Yet the country continues to be vulnerable because of poor biodiversity management and inability to harness the benefits from these resources. Consequently, the country is unable to perform to its maximum potential. Furthermore the country has been facing rapid degradation of the environment resulting in a decline in agricultural productivity which provides livelihood to about 90% of the population who depend on agriculture. 48. Agriculture production in Burundi has contributed to environmental issues. The use of marginal lands on steep slopes and the elimination of shade cover for increased production have contributed to land degradation, biodiversity loss as well as to the encroachment of agriculture on protected areas. Water pollution has been caused mainly by effluents of solid and liquid waste from coffee washing stations (CWS). Effluents from the CWS flow into the streams and rivers, carrying large quantities of decomposing organic matter. Using this water for drinking, irrigation, cultivation, or even personal hygiene negatively affects the health of farmers and their families. The exploitation of wetlands has disrupted the hydrological balance, resulting in biodiversity loss, notably birds, impoverishment of soils and hampering natural flood. Corrective measures were proposed after an environmental assessment supported by the Bank. 49. Burundi confronts major environmental issues that will jeopardize its development given its limited land availability. Burundi has one of the highest deforestation rates in the world (9 percent per 13 year between 1990 and 2000) due to excessive use of timber for domestic energy and resulting in soil erosion. The uncontrolled exploitation of mineral resources such as gold and coltan continues to be a problem. These issues are being addressed by land and watershed management, by forest and wildlife protection, by maintenance of forest roads and trails through cash-for-work programs with women’s participation (modeled on similar programs in Vietnam), as well as by Great Lakes environmental agreements and protection programs. 50. The economic impacts of weather related extremes - and the costs of these to the growth and development in East Africa and Burundi are already significant. Future climate change may lead to a change in the frequency or severity of such extreme weather events, potentially worsening impacts. In 2011, a United Nations Environment Programme (UNEP) study examined climate change impacts and their economic costs for Burundi and the benefits of adapting to these effects over different time scales. 9 The findings indicated that extreme flood and drought events are estimated to reduce long-term growth in the region by about 2.4 percent of GDP per annum. Almost 30 percent of Burundi’s population lives in areas which are likely to be affected by recurrent droughts and floods. Increased average temperatures and changes in annual and seasonal rainfall will be felt across key economic sectors, possibly affecting agricultural production, health status, water availability, energy use, infrastructure, biodiversity and ecosystem services (including forestry and tourism). Impacts are likely to have disproportionately strong effects on the poor as such vulnerable groups have fewer resources to adapt to climatic change E. Regional Integration 51. Regional integration is a key pillar of Burundi’s development agenda and the country’s efforts in this direction have begun to bear fruit. Since joining the EAC, Burundi has made remarkable progress in the integration process. Regional and international integration are expected to provide Burundi with economies of scale and opportunities to attract investment, increase access to regional public infrastructure, strengthen political stabilization and improve security, create employment, generate incomes and reduce poverty. The country is land-locked and has pursued a strategy of gaining membership in regional, political and economic groupings such as: the Common Market for Eastern and Southern Africa (COMESA), the Economic Community of Central African States (ECCAS), the Economic Community of the Great Lakes Countries (ECGLC), the Nile Basin Initiative, the International Conference on the Great Lakes Region, and the East African Community (EAC). Burundi’s membership in the EAC, since July 2009, has prompted structural reforms aimed at improving the business climate and medium-term general economic policy, notably the free movement of the labor force, goods and capital and the creation of jobs. Important reforms were set in motion to promote foreign trade, such as the application of the EAC common tariff, the new investment code, and new bankruptcy and commercial arbitration legislation. 52. The country is currently implementing the Customs Union Protocol of July 1, 2009. The Protocol includes the introduction of a three-tier common external tariff, 25 percent for consumer goods and 10 percent for intermediate products, with no levy on commodities and equipment. The Common Market Protocol came into effect July 1, 2010. While Burundi is likely to reap larger gains from the Economic Partnership Agreement (EPA) with the EU than through the EAC, 10 trade with the EAC has enabled Burundi to export to the EAC goods which it does not export to Europe. Regional trade agreements among natural trading partners are also more likely to facilitate differentiation and diversification, which further expand welfare gains. The EAC offers a good opportunity for Burundi to export new products. The Diagnostic Trade Integration Study (DTIS) update under preparation is expected to provide the analytical underpinning for a series of reforms that Burundi will need to implement in order to successfully maintain and increase exports. 9 UNEP 2010, “ADAPTCost Project: Analysis of the Economic Costs of Climate Change Adaptation in Africa.� 10 Burundi's export structure is very complementary with the EU import structure, and vice versa. 14 III. SUMMARY OF DEVELOPMENT OPPORTUNITIES AND CHALLENGES 53. Reducing poverty remains one of Burundi’s most pressing development challenges and it can only be addressed through faster and more inclusive growth. A high proportion of the population lives below the income poverty line, and there is limited access to electricity, potable water and basic social services. Agricultural productivity is low and there are few opportunities to generate income aside from agriculture upon which approximately 90 percent of the population relies. The private sector is embryonic. 54. The key to unlocking growth in Burundi lies in tapping the country’s private sector, mining and agricultural potential as well as creating the appropriate enabling environment. At present poor infrastructure and an unfriendly business climate inhibit the development of the private sector. This can be improved by establishing an enabling environment by reducing infrastructure bottlenecks by, among other things, increasing energy production and services and improving regional transport connectivity, and improving the business climate to generate private sector development. Potential sources of growth include nurturing the development of small and medium size enterprises (SMEs) in urban areas, increasing agriculture productivity particularly among export crops, and developing the mining sector. Unemployed or under-employed youth in urban areas is turning into a worrying phenomenon and one that the Government should look to address as it pursues its policy on urbanization. 55. Regional integration is fundamental to Burundi’s drive to improve competitiveness. It is expected to provide Burundi with economies of scale and opportunities to attract investment, increase access to regional public infrastructure, strengthen political stabilization and improve security, create employment, generate incomes and reduce poverty. 56. At the core of the poverty reduction challenge are fragmented and insufficient data and/or information systems necessary for monitoring and evaluation and effective decision making. Poverty indicators have not been updated since 2006, making it difficult to consistently assess the impact of poverty reduction efforts. In general, the statistical information is not readily available. The National Statistics System (SSN) produces limited data on an irregular basis, standard surveys are not conducted at regular intervals, and analytical capacity is weak making it difficult to discern major trends and their policy implications. To build its knowledge base that will inform the design of pro-poor policies and adequately monitor the impact of development programs, Burundi should aim to produce high-quality statistical information regularly. 57. Addressing the challenge of maintaining social stability is indispensable to continued progress on all aspects of Burundi’s development. The situation in Burundi remains fragile as evidenced by sporadic violent incidents that still occur. This violence is mainly driven by the scarcity of resources associated to increasing demographic pressures. High population density puts pressure on land and water (given the limited area of arable land and low access to water), threatening agricultural production and exports, and undermining social stability. The PRSP II recognizes these serious threats and sets the ambitious goal of reducing the total fertility rate significantly, from the current 6.4 children per woman to 5.3 children per woman in 2015. 58. Land scarcity is an important source of social tension. It is estimated that between 70-90 percent of cases brought before tribunals are linked to land matters. Land conflict seriously affects family and community cohesion and scarcity is a particularly volatile issue given that around 90 percent of the population relies on cultivable land for its livelihood. 11 Burundi’s environmental issues, related among other things to mining and agricultural production, further limit the availability of land. Additionally, 11 Arable land per person is about 0.1 ha (World Bank 2009) and the average size of family farms is around 0.4 to 0.5 ha, mostly divided into two to four parcels. 15 Burundi has one of the highest deforestation rates in the world (9 percent per year between 1990 and 2000) due to excessive use of timber for domestic energy and resulting in soil erosion. 59. There have been positive developments, grounded in improved social stability and cohesion that reflect coordinated efforts, with strong donor support. Demobilized soldiers and child soldiers are being re-integrated socially and economically, with the parallel development of host communities, and construction of social and economic infrastructure (health clinics, primary schools, water supply). Moreover, a country-wide network of civil society organizations (CSOs) has emerged, operating programs targeting the vulnerable (single mothers, recently resettled displaced persons, ethnic minorities, and other vulnerable groups) through safety net programs such as cash for work and food for work on rural infrastructure, general distribution of food to vulnerable groups and school feeding. Delivery of education and health services has improved substantially, providing major instruments for social cohesion. Education in particular serves as a powerful vector of communication of national goals and civic responsibilities. However, the impact of these interventions on poverty has not yet been measured. A poverty assessment would enable the Government to design effective pro-poor policies and programs and adjust existing programs to address vulnerability and maximize the impact on poverty. 60. Poor governance remains a challenge for Burundi, seriously undermining its economic and social potential and increasing the risks of conflict and fragility. The central strategic challenge now facing Burundi is how to create a strong link between stability and prosperity. Burundi’s key risk is that insufficient or highly unequal progress toward prosperity – in its economic, social and environmental dimensions – may undermine the platform of stability that the country has been carefully putting together over the last decade. How can Burundi promote urbanization and help to relieve the pressure on land in rural areas? How can it improve agricultural productivity and diversification to improve incomes and reduce the structural narrowness of Burundi’s exports? And how can it develop its mining sector to ensure that revenues are transparently captured by the state and benefit the citizens? The World Bank’s Group’s CAS (FY13-16) will selectively support key elements of the PRSP II and help the Government in supporting policies and programs to contribute to answering the above questions. 16 61. Some of the key challenges and opportunities/corrective measures underway are summarized in Box 3 below. Box 1: Burundi’s Development Challenges, Constraints and Opportunities CHALLENGES AND CONSTRAINTS OPPORTUNITIES AND CORRECTIVE MEASURES • Unfriendly business climate • Streamline business creation procedures & make tax regimes more favorable • Constrained /high costs transport • Increase investment in system highways and feeder roads; in port and airport infrastructure • Insufficient energy – (major impediment to PSD and only 2 • Improve energy generation and percent household access) transmission investment • Slow regional integration • Improve regional trade facilitation and infrastructure • Rapid population growth • Expand Result Based Financing (RBF) in Human Development activities (incl. HRS) • Weak governance/corruption • Strengthen the legal and judicial systems and create public demand for accountability and transparency through communication campaigns of local communities • High unemployment • Create opportunities for cash- for-work (women and men) and youth unemployment programs • Accelerated forest and land • Improve land and watershed degradation management • Sub-optimal use of donor • Exploit donors comparative resources advantages/better distribution of tasks across donors IV. THE GOVERNMENT’S VISION AND DEVELOPMENT STRATEGY 62. In accordance with the objectives of Burundi’s Vision 2025, the Government of Burundi launched its second Poverty Reduction Strategy Paper (PRSP II) in February 2012. The overarching goals are to promote economic growth, create jobs, reduce poverty, strengthen the rule of law and consolidate peace and security. 63. The PRSP II is designed around the following four strategic pillars: (a) Strengthening the rule of law, consolidating good governance and promoting gender equality. This pillar includes plans to rehabilitate the justice system, promote human rights, and strengthen security while reintegrating ex-combatants into their communities. Governance and public sector performance will be strengthened through the implementation of the National Governance and Anticorruption Strategy, strengthening the democratic process, improving civil service performance and accelerating the decentralization process, while promoting gender equality. (b) Transforming Burundi’s economy to generate sustainable and job-creating growth. The Government plans to: (i) increase productivity in sectors with growth potential such as agriculture and mining; (ii) promote the private sector and job creation; (iii) expand access to better-quality economic infrastructure; and (iv) enhance regional integration. 17 (c) Improving access to and quality of basic social services and strengthening social safety nets. In education the Government plans to focus on improving quality at the primary, secondary and tertiary levels, as well as capacity building through vocational, technical, and professional education. In health, the Government plans to improve the capacities and performance of the health care system while controlling non-communicable and communicable diseases (including intensifying efforts against HIV/AIDS), as well as controlling population growth. (d) Promoting development through sustainable environmental and spatial management: Given the interdependence of the environment and other sectors with growth potential (such as agriculture, tourism, industry, energy, infrastructure, and mines), the Government plans to pursue sustainable development through (i) rational, balanced regional development; (ii) protection of the environment and sustainable resource management; (iii) pollution control and cleanup; and (iv) consideration of climate change in development policies and programs. 64. Burundi also seeks to improve its international image, diversify its foreign relations and attract more foreign investors given its limited resource base and huge development needs. A key priority of the Government is to enhance its economic links with countries within regional groupings such as the East African Community (EAC), International Conference of the Great Lakes Region (CIRGL) and Common Market for Eastern and Southern Africa (COMESA). The Government intends to raise awareness within the broader international community of Burundi’s progress and challenges and to mobilize additional resources to help achieve its goals during a Partners Conference scheduled for the end of October 2012. 65. In consultation with the Government, the World Bank Group’s program of support is linked to selected key development priorities outlined below to set the foundation for sustainable and broad based economic growth and poverty reduction and to consolidate social stability by improved access to basic social services and social safety nets. V. WORLD BANK GROUP ASSISTANCE STRATEGY A. Lessons learned from previous CAS and Stakeholder Feedback Lessons learned from the CAS Completion Report 66. The key lessons learned are: the need for selectivity; avoidance of overly ambitious project goals; and recognition of capacity constraints. The multiplicity of objectives - many complex with tight implementation schedules - were overly optimistic and placed Government in new territory, beyond their experience. 67. The Bank Group must be more selective in its interventions. It should focus on high priority activities where it has a comparative advantage, ensuring continuity in Bank or other staff needed to support reform implementation through the medium term, and leveraging its funds with other partners for higher impact. 68. Project and program design must give more attention to capacity constraints. Human resources and skills are constrained. There is a need for agricultural technicians, teachers, health workers, as well as cross-cutting skills such as planning, programming and project preparation. Service delivery is vulnerable to the continuing weakness of public administration, compounded by problems pertaining to the selection, management, deployment of civil servants, and by low remuneration and a lack of career development tracks. Effective deployment is a challenge for the geographically extensive services such as agriculture, education and health. Capacity building remains a high priority, cross-cutting issue. 18 69. In a fragile and weak capacity environment, project intermediate outcomes should be realistic. The privatization of coffee assets, for example, failed to reach targets in a first tender. However, a second tender had more promising results, with the sale of the largest washing station triggering independent private investment. 70. Programmatic development policy operations supported the Government’s actions in a particular area over a period of time which facilitate policy reforms by the Government that could otherwise have been difficult to achieve without sustained engagement. These operations were a good instrument for facilitating door coordination in critical areas where a number of development partners wished to engage such as the economic growth enhancing initiatives and improving public financial management. 71. Governance requires ongoing attention. Governance (including accountability mechanisms and public financial management (PFM)) remains a challenge and is critical for operational efficiency, transparency in the use of funds and in the delivery of public services. The Government will require continued support on PFM issues in reducing corruption, improving external and internal audit, and strengthening procurement. Governance issues transcend PFM and fiduciary safeguards. Specifically, more focus is needed on political analysis and on the demand-side of good governance (“voice�, participation, accountability and grievance mechanisms). 72. Given the strong collaboration that has developed in Burundi among development partners, there are opportunities for a better division of labor, with different partners taking the lead where they enjoy a comparative advantage. The working committees established for key sectors provide the framework for re-balancing the work load and harmonizing procedures to deliver aid more effectively, with lower transaction costs for Government. Findings from the Client Survey 73. The FY12 Burundi Client Survey demonstrates that in general stakeholders in the country share very positive views of the World Bank in terms of the programs that it supports, its relationships, and its outreach. Rural and agriculture development, energy, education, stimulating growth and preventing corruption emerged as the main development priorities and the areas in which the Bank should focus its resources. While the Bank was most valued for its financial resources, strategy formulation and to a lesser degree training and capacity building were also highly valued. The Bank was criticized for imposing technocratic solutions without appropriate concern for political realities, being too heavily influenced by developed countries, and not collaborating sufficiently with state actors. 74. Having noted the Bank’s weaknesses and strengths, stakeholders observed that the slow pace or failure of reform efforts was less attributable to the Bank and more attributable to: (a) the substance of the reform; (b) the Government’s ineffectiveness; (c) political pressures; and (d) lack of citizen input. Stakeholders perceive the Bank’s work in rural and agricultural development and education and growth as highly effective. In contrast, effectiveness ratings for energy and anti-corruption, high-priority areas, are relatively low compared with other sectoral ratings. Stakeholders tended to be positive about the Bank’s relevance and priority alignment in Burundi. However, half of the stakeholders interviewed suggested that the Bank should reduce the complexity of its financing, while one-quarter noted the need for more innovative financing products. Stakeholders also noted that beyond its interaction directly with Government, the Bank should work more closely with beneficiaries, community-based organizations and the private sector. 19 B. Proposed World Bank Group Assistance Strategy World Bank Group Assistance Strategy Overview 75. The proposed Country Assistance Strategy (CAS or Strategy) is aligned with priorities of the second Poverty Reduction Strategy Paper (PRSP II) and aims to help Burundi to: lay the foundation for faster and more inclusive growth with a view to reducing poverty; and mitigate the risk of renewed instability by building trust between the State and its citizens. In the proposed CAS, the World Bank Group will undertake programs that will step up efforts to enhance development impact as explicitly requested by the Government, private sector and civil society groups during consultations. The proposed CAS provides the framework for World Bank Group support to Burundi over the next four years ending June 30, 2016. The CAS is also closely aligned with the Bank’s Africa Strategy. 76. Burundi has the potential to experience significant acceleration in private investment and productivity gains across the economy, including in the delivery of public services. This potential could translate into rapid economic growth and improvements in poverty and human development indicators. Burundi may therefore be poised to enter a phase of catch up with many of its neighbors. 77. Realizing Burundi’s potential requires a balanced approach that focuses on laying the foundations for greater competitiveness, growth and poverty reduction, as well as on interventions that will help consolidate stability and security. Realizing the potential of Burundi will not only require improved infrastructure and financial services, a strengthened business environment, and more effective institutions of governance. As the country remains fragile and exposed to important risks of re-emergence of insecurity and instability, it is essential to also address the different dimensions of continued fragility. While much of the political and security dynamics are driven by factors that are beyond the sphere of economic development, the inter-dependencies between the development and political and security agendas are increasingly understood. In this respect, it is essential to structure development interventions in a manner that contributes to building trust between the state and citizens, as one of the contributing factors to sustained stability. 78. The FY13-16 Strategy focuses on two strategic objectives: first, to improve competitiveness by establishing an enabling environment for inclusive growth; and second, to increase resilience by consolidating peace and social stability. Strengthening governance is the foundation of the proposed CAS, as it is expected to contribute to both strategic objectives. The CAS will be selective in its approach, retreating to more focused interventions. This will permit the Bank Group to utilize its financing, analytical and advisory expertise to leverage other development partners and the private sector, with a division of labor that reflects their comparative advantages and financial capacity. Interventions that benefit women and girls will be mainstreamed throughout the CAS program. Further, and particularly in relation to increasing competitiveness, the CAS will target projects that support regional integration, which is a development priority for Burundi. The Bank Group has a comparative advantage in designing and implementing regional programs relative to other development partners. The proposed CAS draws on the lessons learned from the implementation of the previous CAS and from stakeholder feedback (paras. 74-75 above) and takes into account the Bank’s ongoing commitments and its comparative advantage in the Burundi. Further, drawing on the findings of the 2011 World Development Report on Conflict, Security and Development, the proposed CAS supports building stronger social cohesion in communities and ensuring a more constructive relationship and greater trust between the state and its citizens. 79. The Bank Group’s engagement is guided by the following key principles: a) Selectivity; b) Leverage; and c) Increasing aid effectiveness. a. Selectivity. The Bank’s resources are limited relative to Burundi’s needs. Against that backdrop, concentrating resources in a few high priority areas is key. The choice of sectoral or thematic interventions will be based on the following: (i) impact potential in increasing competitiveness for 20 inclusive growth and poverty reduction, and in enhancing stability and addressing different dimensions of fragility; (ii) balancing interventions that produce short-term results with interventions aimed at longer- term impact; (iii) opportunity to build on successful programs and assuring continuity of support to these programs if no other donor and/or the Government are continuing with the activity; (iv) support of local champions who have a track record of achievement; (v) comparative advantage of the World Bank Group; (vi) potential for regional operations, in view of the need for Burundi to become more integrated with regional and international markets, and the opportunity to leverage the IDA resources for regional activities b. Leverage. The Bank Group will utilize its programs as a catalyst for leveraging and combining other sources of financing and support to enhance development impact. In this regard, where possible, the Bank will endeavor to: (i) access trust funds to finance analytical and advisory work; (ii) encourage co- financing of its operations by other development partners to scale up interventions; and (iii) provide the platform for other development partners’ interventions through the preparation of robust analytical work. c. Increasing aid effectiveness. Burundi receives roughly 60 percent of its available investment resources from donors and development partners and is thus highly impacted by whether these resources are effectively and efficiently translated into results. The Bank will continue to assist the Government in facilitating effective use of aid by, among other things, coordinating interventions with other development partners and seeking opportunities for better division of labor amongst development partners. (Annex 8 & 9 provides a picture of donor assistance). 80. To help improve competitiveness and establish an enabling environment for inclusive growth (Pillar 1), the Bank Group will support interventions aimed at reducing infrastructure-related bottlenecks and improving the business climate and increase private sector development. The Bank has a comparative advantage in economic infrastructure, and will increase its support to improving access to electricity and regional transport linkages. With regard to the business environment, the Bank will support interventions aimed at strengthening the regulatory and institutional environment to strengthen the financial system, improving agricultural productivity, particularly in the coffee sector, and promote private sector investment, in particular in the mining and ICT industries. The IFC’s complementary interventions, guided by its strategy for Conflict Affected States in Africa (CASA), include advisory services aimed at: (a) improving the business enabling environment, particularly on tax simplification, implementing the East Africa Community Common Market Protocol and public-private dialogue; (b) improving access to finance; (c) developing Micro, Small and Medium Enterprises by building capacity of potential entrepreneurs; and (d) supporting the creation public-private partnerships. The IFC will also seek out opportunities for financing investment in the following sectors: telecommunications, tourism and financial services. Together, the Bank and the IFC are working on the broader agenda of improving the business environment for both external investors and domestic enterprises, including small and medium size enterprises, through local financing and capacity-building, with a focus on empowering female entrepreneurs. 81. To help increase resilience by consolidating peace and social stability (Pillar 2), the Bank Group will support interventions aimed at improving governance in the provision of basic services. This will include improving public financial management and anti-corruption measures, strengthening the access to and quality of health service, supporting community driven agriculture investment and labor- intensive works, and increasing safety nets to reduce livelihood volatility. The Bank will continue to provide support for results-based financing in the health sector, with a view to strengthening the health system to improve health outcomes for pregnant women and children under five and improving the delivery of reproductive health services essential to reducing the fertility rate. The Bank will continue and expand its support to community-driven agriculture and labor-intensive public works, as part of the Government’s efforts to provide safety nets for the vulnerable. In many instances, these projects give special attention to the participation of women, and are expected to provide tangible benefits that will be felt in the short term. In addition, the Bank will help the Government develop its strategy for safety nets 21 targeting the vulnerable to reduce livelihood volatility, including the high and growing numbers of urban unemployed. 82. To strengthen governance (Foundation), the Bank will support interventions aimed at increasing the efficiency of public expenditure by strengthening public financial management; strengthening public sector management, including efforts to prevent corruption and increasing the demand for good governance. Policy-linked budget support and technical assistance programs will contribute to strengthening public financial management. A continued and restructured program of technical assistance will support other improvements in public sector management, including for reforms in decentralization frameworks, measures to combat corruption, and, as mentioned above, strengthening of policy and regulatory frameworks for private sector development in the coffee, mining, and ICT sectors. Existing Portfolio 83. On July 1, 2012 the Bank’s portfolio comprised fourteen projects representing a total commitment of US$423.7 million (ten IDA grants/credits totaling US$371.8 million, one GEF for US$1.8 million and three regional operations totaling US$50.1 million) of which US$233.34 million or 55% had been disbursed. The trust fund portfolio consists of four recipient-executed trust funds totaling US$36.5 million, of which US$17.9 million or 49% have disbursed. At the end of FY12, Burundi’s disbursement ratio was 32.5% compared to 20.4% region-wide. Currently, Burundi portfolio does not have any projects at risk, although there are a number of projects rated “Moderately Satisfactory�. Program of Lending and Non-lending Activities and Expected Results Table 3: Proposed IDA and Other Financing (indicative) mapped to CAS Pillars, FY13-16 CAS Pillars and Foundation Operations according to Fiscal Year (FY) Source of Financing (US$ million) Improving Consolidating Strengthening IDA TF Competitiveness social stability governance FY13 Economic Reform Support Grant (ERSG) VI 25 X X X Health Sector Development Project Additional 25 20 X X Financing Regional NELSAP Rusumo Falls 40 X GEF Watershed Approach to Sustainable 4.2 X X X Coffee Production FY14 ERSG VII 25 X X X Economic Management Support follow-on 10 X X Public Works and Urban Management Project 15 X X X Additional Financing FY15 ERSG VIII 25 X X X Hydro Energy Project 60 X X FY16 ERSG IX 25 X X X Regional Transport 20 X X Agro-pastoral Productivity and Market 15 X X X Development Project Additional Financing 22 Table 4: Proposed Analytical and Advisory Activities (indicative), FY13-16 Pillar 1 – Improving competitiveness by establishing an enabling environment for inclusive growth and poverty reduction Regional Inter-modal Study Facilitating Agribusiness and Facilitating Tourism in Burundi (IFC) Skills for Private Sector Development Study Burundi Economic Update Pillar 2 – Increase resilience by consolidating social stability Poverty Assessment and Safety Nets Study Non-lending TA to Support implementation of the Social Protection Policy PSIA of reforms in the coffee, tea and sugar sectors Early Childhood Development Study Pillar 3 – Strengthening governance Programmatic Public Expenditure Review/Public Expenditure Tracking Survey ROSC follow-up Non-lending TA to strengthening capacity in budget planning Non-lending TA to support accession to EITI and develop the mining sector Non-lending TA to promote accountability and demand for good governance Pillar 1 – Improving competitiveness by establishing an enabling environment for inclusive growth and poverty reduction Results Area 1: Reducing infrastructure related bottlenecks 84. Several operations already active are expected to produce results during the proposed CAS period. Increased generation and efficient transmission of electricity, the development and maintenance of the feeder road network, the extension of the water distribution network and the accelerated development of information and communications technology (ICT) infrastructure will help improve competitiveness and private sector development in Burundi. Through the Road Sector Development Project, the Bank is supporting Burundi’s efforts to restore a portion of the priority road network and improve road sector management. Through the Multi-Sector Water and Electricity Infrastructure Project, the Emergency Electricity Infrastructure Project, and the GEF Energy Efficiency Project, the Bank helps to extend water services into selected peri-urban areas of Bujumbura, rehabilitate the primary electricity distribution network and improve institutional capacity to maintain the electricity systems and oversee investment in new electricity generation sources. The Regional Communications Infrastructure Program in which Burundi participates is expanding telecommunication access, reducing the cost of connectivity to global ICT infrastructure, and improving Government efficiency and transparency through e-Government applications. 85. The Bank’s planned interventions under the proposed CAS will focus on scaling up ongoing engagement designed to increase and improve transport networks and electricity production. The planned Regional Intermodal Study will examine the development of multi-modal transportation links (ports, airport, roads and rails) in the EAC region and beyond, and provide a basis for leveraging financing to enhance regional transportation to co-finance (with other countries and the Regional Integration Program) the Regional Transport Project in the outer years of the CAS. The Bank will also support the development of additional energy generation capacity through the planned NELSAP Regional Rusumo 23 Falls Hydroelectric and Multipurpose Project (multi-country project supported under the regional integration IDA program) and the Hydro Project (to be jointly financed by the European Investment Bank and other development partners). Results Area 2: Improving the business climate and increasing private sector development 86. The Bank Group will contribute to improving the economic, legal and regulatory environment for business (particularly in growth areas such as tourism), encouraging public-private partnership initiatives and increasing private investment. There is strong synergy between IFC’s investment and advisory interventions and the Bank’s financing and analytical and advisory work in this area. The IFC’s portfolio will include: investments in telecommunications and tourism, advisory services under the IFC Program on Investment Climate and technical assistance under the IFC’s Africa Strategy to micro, small and medium enterprises, enabling enterprises to launch ventures in diverse areas such as agri-business, light industry, ICT and tourism. The IFC will improve access to finance through the extension and guarantee of lines of credit at local banks and simultaneously provide technical assistance to potential borrowers to assist in the development of "bankable" projects. IFC will also support the economic empowerment of women, complementing the Bank's efforts to mainstream gender throughout the program. 87. Creating a basis for strong private sector-led growth requires a robust legal and regulatory framework and targeted actions to stimulate under-performing sectors such as Burundi’s export crop sector, in particular coffee. The private sector development promotion and diversification component of the proposed programmatic development policy operation (DPO) series, Economic Reform Support Grant VI-IX, supports the aforementioned objectives. The programmatic DPO is complemented by the Financial and Private Sector Development Project and the Agro-Pastoral Productivity and Market Development Project. Under these two existing operations the Bank is supporting the modernization of the financial sector infrastructure and improving financial sector regulations as well as increasing agricultural productivity by strengthening research and extension services centered on tea and coffee, and identifying new value chains through feasibility studies. The planned GEF Watershed Approach to Sustainable Coffee Production Project would pilot a shade-grown coffee program. Shade-grown coffee is an approach which promotes the cultivation of coffee with other tree and plant varieties generating additional income opportunities while protecting biodiversity. Through the planned Mining and EITI Technical Assistance, the Bank will support Burundi’s accession to the Extractive Industries Transparency Initiative (EITI) and will continue its support to develop Burundi’s mining sector. This offers an opportunity to further diversify the Burundian economy to yield significant revenues for Burundi, while EITI compliance will help to ensure the transparent reporting and accounting of mining revenues. 88. To support the development of a skilled work force as a foundation for growth of high potential industries, the Bank proposes to carry out a Skills for Private Sector Development Study (to identify options for skills development, based on assessments of the challenges related to skills formation, and the needs relative to the job market) and the planned Economic Management Support follow-on Project that would include interventions for addressing skills gaps in growth industries. These efforts will be complemented by IFC's support to facilitate private sector training providers (particularly in ICT) to take the lead in training personnel in the education sector, other public services and for the benefit of private enterprise. Pillar 2 – Increasing resilience by consolidating social stability Results Area 3: Improving access to and quality of social services 89. Through the additional financing of the Health Sector Development Project from IDA resources, and a grant from the Health Results Innovation Trust Fund, the Bank will consolidate the success achieved in Results Based-Financing (RBF) for human capital development, in the reduction of 24 HIV/AIDS prevention and in the delivery of treatment. Additionally, the Bank will broaden the scope of its interventions to include support for the achievement of the PRSP II goal of lowering the total fertility rate from the current 6.4 children per woman to 5.3 by 2015, by increasing the contraception prevalence rate. 90. The Bank will seek to leverage financial support, from development partners to improve education quality in Burundi. Under the previous CAS, the Bank’s technical assistance facilitated the development of the National Education Strategy (NES) that was endorsed by the education donor group led by Belgium. The NES was pivotal for Burundi’s access to financing from the Global Partnership on Education (GPE), a multi-donor trust fund. If the GPE grant is approved, its execution will be supervised by Belgium. The Bank will remain engaged in the education sector through the planned Early Childhood Education Study that will diagnose issues in the early childhood education sector in Burundi and suggest options for an early start to schooling. Results Area 4: Increasing safety nets to reduce livelihood volatility 91. Social protection, notably safety nets, reduces livelihood volatility by promoting social and economic stability. This is an essential element to restoring public trust in Government. The planned Poverty Assessment and Social Safety Nets Analysis will improve the poverty data and assist the Government in the design of effective pro-poor policies and programs and to better target social protection programs help address vulnerability and to reduce poverty. Through the proposed programmatic development policy operation series, Economic Reform Support Grant VI-IX, the Bank will support the Government in its efforts to strengthen safety nets and improve targeting through poverty maps and the planned Public Expenditure Tracking Survey (PETS) over the CAS period. The Bank will play a crucial supporting role in all phases of the social protection reforms: provision of annual budget allocations to deliver local-level emergency rations and staple foods to restore children’s diets to appropriate levels; design and implementation of an action plan to operationalize the National Social Protection Policy adopted in 2011; and the requisite institutional framework for the delivery of social protection services. The planned Economic Management Support follow-on project will support efforts to improve capacity within the public sector, particularly at the local Government level, and for CSO providers to manage programs to deliver social protection services. 92. Cash-for-work and matching grant programs, with specific targets for female participants, are vehicles for the Bank’s support to social safety nets via the existing Community and Social Development, Emergency Demobilization and Transitional Re-integration, Public Works and Urban Management, and the Agro-Pastoral Productivity and Market Development Projects. During the CAS period, the Bank plans to scale up activities through additional financing for the Public Works and Urban Management Project (labor-intensive public works), and for the Agro-Pastoral Productivity and Market Project (community-driven agricultural projects using matching grants). It is expected that continued support for the Community and Social Development project will be provided by other development partners. The ongoing Lake Victoria Environmental Management Project addresses land degradation in the Kagara River catchment through community-driven investments that improve land management. Foundation and Results Area 5: Strengthening Governance 93. To promote inclusive growth and strengthen state-society relationship, the CAS places governance and public sector capacity at the center of the Bank’s intervention. In particular, the Bank will support interventions to strengthen public financial management and budget transparency, through the proposed programmatic development policy operation (DPO) series, Economic Reform Support Grant VI- IX, consolidating measures initiated under the earlier ERSG series while extending the reforms in scope and depth. A Public Expenditure Tracking Survey (PETS) will be initiated for both the education and health sectors to identify bottlenecks and leakages in public finances at the national and local levels. Through the planned Economic Management Support follow-on project, the Bank will support efforts to 25 improve capacity within the public sector, particularly related to implementation of the National Strategy for Good Governance and Anti-Corruption, the National Program of Public Administration Reform, and supporting implementation of decentralization reforms. It is important to note that support for the essential reforms and capacity development of the judicial system is expected to be provided by other development partners, with the Belgian Government taking the lead. Through Technical Assistance on Accountability and Good Governance, support will also be provided to strengthen the capacity of Anti- corruption agencies to conduct investigations and promote dialogue with civil society organizations. Finally, ongoing work on the harmonization of standards and codes with international practice will continue through the ROSC Initiative. This is particularly important as Burundi begins to explore public private partnerships – such as in mining and energy – which depend on substantial quantities of internationally procured imports. 94. The Bank will play a stronger role in promoting an enabling environment for citizens’ engagement in the development process. Building demand for good governance requires the involvement of citizens in management and oversight, particularly with regard to service delivery which touches every citizen. Creating and training citizen committees, especially in local Government, is an important vehicle for this purpose. Through Technical Assistance on Accountability and Good Governance, the Bank will identify activities to support demand for good governance such as improving monitoring and evaluation mechanisms, implementing the Open Budget Initiative, promoting information-sharing mechanism, third party monitoring by CSOs, grievance mechanism and other tools for citizens’ feedback and participation. All these interventions will work to forge a new ‘social contract’ for development and build trust between the state and the citizen. C. Implementing the FY13-16 Country Assistance Strategy Financial Envelope 95. The indicative amount of resources available to Burundi for the remaining IDA 16 period (FY13-14) is SDR94 million (US$143 million equivalent). While the amount of the available resources under IDA 17 will not be known until the end of FY14, it is assumed for the purposes of the proposed CAS that a similar level of financing is expected for the FY15-16 (the first 2 years of IDA 17). Therefore, the amounts shown in the outer years are indicative only. Actual allocations will depend on: a) the country’s own performance; b) its performance relative to that of other IDA recipients; c) the amount of overall resources available to IDA; d) changes in the list of active IDA-eligible countries; e) terms of financial assistance provided (grants or loans); and f) the amount of compensatory resources received from the Multilateral Debt Relief Initiative (MDRI). IDA resources are expected to be made available to Burundi on a grant basis. Managing Program Implementation 96. The Strategy will achieve the defined outcomes through a mix of lending and knowledge services. A programmatic series of development policy operations will account for roughly one-third of the program. This is complemented by policy dialogue, investment lending, economic and sector work and technical assistance by the Bank and IFC. To leverage the country’s limited resources, consideration will be given to utilizing innovative financing products such as output-based schemes or guarantee products which could attract private sector financing. To increase development impact and efficiency in the utilization of resources, an effort has been made to consolidate the portfolio and, if successful, this should result in a 30% reduction in the number of projects under implementation by the second year of the CAS. 97. In-keeping with the Paris Declaration and the Accra Agenda for Action, the Bank is committed to making progress in the use of country systems for channeling Bank funds to partner countries. The ongoing series of Economic Reform Support Grants (DPO), as well as Burundi's PRSP I, have brought 26 improvements in the overall Public Financial Management (PFM) system. The Bank is currently conducting a review of Burundi's PFM systems. A comprehensive action plan will be developed for public sector accounting reform and budget preparation and execution, by the Government in consultation with the AfDB, IMF, and European Union. This review and action plan will help facilitate the Bank’s use of country financial management systems in Burundi. 98. The Bank Group will facilitate activities that deepen regional integration as this will provide Burundi with the economies of scale, enhance opportunities to attract investment, and increase access to public infrastructure. Additionally, a leverage opportunity will arise with the proposed regional transport project and other possible regional projects in the future. 12 Partnerships and Donor Coordination 99. The Bank Group has played and will continue to perform an active role in supporting donor coordination. A more efficient division of labor among the development partners is “front and center� on the agenda of consultations for the new World Bank Group CAS in Burundi. While the Bank Group will continue to be involved in several sectors, its program is expected to become more focused under the proposed new CAS. Building on the expertise, experience and expressed commitments of other development partners, they are expected to take the lead in funding and supporting programs in many sectors including in water supply and sanitation, national highways and rural roads, education, conditional cash transfers, community and social development, youth development, land management, and in selected areas of institutional reform related to the judiciary and the security forces – among others. 100. Burundi’s formal donor coordination framework is known as the Partners Coordination Group (Groupe de Coordination des Partenaires or GCP). The GCP provides a forum for dialogue and coordination between the Government and development partners to ensure that sector policies and financing are aligned with Burundi’s development priorities. The GCP operates at three levels namely the sector working groups (Groupe Sectoriels), the Strategic Forum (Forum Strategique) and the Policy Forum (Forum Politique). The Sector Working Groups led by the respective sector ministries discuss technical and policy issues and monitor the implementation of projects and development programs. The Strategic Forum chaired by the Minister of Planning and Finance is responsible for strategic dialogue on issues arising from sector group discussions and the Policy Forum chaired by the vice presidents discusses policy issues emanating from the Strategic Forum. To facilitate more effective aid coordination, aid flows are tracked through the Aid Management Platform (but this mechanism could be more effective. 101. There is division of labor amongst development partners. (Annex 9 reflects the list of partners and the sectors they support). Agriculture -- the largest sector -- is supported by most donors notably, the EU, Belgium, Netherlands, African Development Bank, UN agencies such as the World Food Program, Food and Agricultural Organization, the International Fund for Agricultural Development (IFAD) and the World Bank. The Swiss Cooperation primarily responds to issues related to land by contributing to the design and implementation of land reforms. Decentralization, social cohesion and capacity building are supported by the European Union, Germany, Belgium and others. Private sector development is supported by USAID, the World Bank and IFC. The IMF works closely with the World Bank to ensure macroeconomic economic stability and TRADEMARK East Africa (supported by Belgium, Sweden, Netherlands, DFID and the Danish Cooperation) support the Burundi Revenue Authority to improve 12 IDA regional projects are IDA operations: a) that involve two or more countries, if at least one IDA fragile country, all of which need to participate for the project’s objectives to be achievable; b) whose benefits spill over country boundaries (e.g., generate positive externalities or mitigate negative ones across countries); c) where there is clear evidence of country or regional ownership (e.g., by EAC) which demonstrates commitment of the majority of participating countries; and d) that provide a platform for a high level of policy harmonization between countries and are part of a well-developed and broadly-supported regional strategy. 27 domestic revenue collection and to improve cross border trade amongst countries within the East African Community. Overall, most of the key sectors in Burundi are covered by development partners and some international non-Governmental organization. 102. Development assistance is provided either be in the form of project financing or direct budget support aimed at improving public finance management. Budget support is expected to be provided by three main multilateral partners, the European Union, African Development Bank and the World Bank. Due to the international financial crises, external financing for Burundi may decline despite the relatively small volume of external financing which Burundi receives in absolute terms. 103. The Bank’s assistance within this CAS will therefore be in selected strategic sectors and the Bank will continue to work closely with other development partners and the Government within the donor coordination framework to ensure synergy and complementarities of efforts. Monitoring and Evaluation 104. The CAS Results Framework presents the results chain for the Bank’s program of support. (See Annex 10.) The framework uses Burundi’s PRSP II as a starting point, and narrows down the range of outcomes to those that the Bank Group can demonstrably influence over the CAS period. Since most of the new operations in the CAS will not likely conclude implementation until after the end of the CAS period, results during this CAS period will be drawn from existing operations and the quicker disbursing interventions included in the CAS. 105. The CAS outcomes will be monitored jointly by the Bank Group and the Government over the CAS period. The Bank Group will monitor and evaluate the CAS through periodic results-based CPPRs, among other methods of portfolio monitoring and will prepare a CAS Progress Report in mid-2014 to evaluate the progress towards CAS outcomes and adjust the strategy and program as appropriate. The Government will monitor and evaluate the strategy using the same country systems that will be used to monitor the PRSP II. 106. Burundi adopted its 2010-2014 National Strategy for Statistic Development (NSSD) in February 2010. Its comprehensive and budgeted priority action plan aims to address the constraints faced by the National Statistical System (NSS) in developing a robust national monitoring and evaluation (M&E) system for poverty reduction programs. An output under the previous CAS 13, the NSSD was expected to improve harmonization among development partners’ interventions in the area of statistics and lead to better alignment of these interventions with Government priorities. But the lack of a leading donor and relatively small allocation of domestic and external financial resources have limited the results of the NSSD priority action plan. 14 Low domestic budget allocation, weak human capacity, and lack of easy access of users to timely and reliable information are the main difficulties faced by the NSS. 15 107. The Bank will support the development of a fully integrated national M&E system capable of reliably tracking poverty reduction and employment outcomes, and monitoring the implementation of national development initiatives, as envisaged under the PRSP2. For this purpose, the Bank will leverage the support of other development partners, including through the use of trust funds. 13 The World Bank (through the TFSCB) and AfDB provided financial support to this project. 14 The major achievements under the action plan include: (i) the training and recruitment of local statistical engineers and agents; (ii) the progressive rebuilding and publication of national accounts; (iii) the launch of a National Statistical Office (NSO) website; (iv) the development of a national M&E system (MDGs and other PRSP indicators) publicly accessible through the Internet; and (v) the realization of two representative household surveys (2010 DHS and 2011-2012 agrarian survey). 15 The budget allocated to the NSS is small (US$1.069 million in 2012), relative to estimated needs (US$40.5 million over a 5 year period). Statistical activities aimed to build human capacity have benefited mostly the NSO’s staff, their counterparts in finance, education and health sectors, while statistical capacity continues to be weak in other sectors. As a result, the demand for and utilization of statistics and M&E results are greatly inhibited, preventing more robust involvement of citizens, service users, and civil society organizations in eliciting sustained Government accountability. 28 VI. MANAGING RISKS 108. There are three major risks that might impact the implementation of the CAS: the global economy may experience greater volatility; the risk of conflict and political violence; and insufficient resources to implement the strategy. Burundi’s land-locked situation aggravates food and fuel price volatility; peace and stability could be threatened by domestic fragility and instability in neighboring countries; and Burundi is experiencing a gradual reduction in external aid. The key risks and the Bank’s mitigation strategies follow. 109. Ongoing global financial instability could result in a decline in donor assistance. Burundi is extremely vulnerable to reduce aid inflows, as grants represented 22.7% of GDP in 2010 and nearly 60% of total Government resources, as the Government garnered international support for political and economic reforms. Grants as a percentage of GDP are expected to decline, to 20.7%, in 2012, while room for increasing fiscal space through taxation is limited. The CAS will help Burundi maintain external assistance by supporting continued reforms in public financial management, the public wage bill, accelerated export earnings, and improving the business climate through transparency and anti-corruption measures. The Bank Group will also play a pro-active role in supporting Burundi’s effort to re-position its image as a country where major improvements have been made in recent years, and where aid investments deliver high “value-for-money�. As part of this support, the Bank Group will engage with the Burundi’s Partners conference taking place in Geneva on October 29-30, 2012, to advocate the need for greater aid flows to Burundi because of the likely positive impact of aid and because of the importance that these flows represent to sustain country stability. 110. As a small, land-locked, predominantly rural country with limited land, Burundi is vulnerable to high transport costs, fuel-price volatility and food insecurity. The CAS will help manage these risks through various interventions that promote improved agricultural productivity while restoring scarce land resources. Planned operations in regional transport and mini-hydropower will help address Burundi’s ongoing infrastructure challenges, reducing transportation costs and the reliance on fuel. The Strategy’s support for development of the mining sector could yield significant revenues for Burundi; while accession to the Extractive Industries Transparency Initiative (EITI) will help ensure the transparent reporting and accounting of such revenues. 111. Social cohesion is critical, to avoid a return to conflict and violence, through strengthening of local-level structures, reform of the judiciary, and boosting youth employment. The CAS program seeks to address these risks through ongoing projects that include labor-intensive public works to provide employment opportunities; community and social development interventions that promote more equitable local service delivery; and ongoing efforts to demobilize ex-combatants and support their socioeconomic reintegration. While the Bank does not lead on judiciary reforms, such work is ongoing with the support of bilateral development partners. 112. Economic governance slippages and weak technical capacity could jeopardize the effective use of scarce public resources, undermining public confidence and eroding donor support for Burundi. The CAS provides for the continuation of the series of development policy operations that support improvements in public financial management and budget planning to improve the quality of public spending, while streamlining management of the public wage bill. 113. Burundi is also vulnerable to exogenous shocks such as climate impacts on agriculture output; the security situation in neighboring countries; and global prices for export commodities (notably coffee). The CAS provides for support for agricultural productivity through technology acquisition and small-scale irrigation that will help mitigate the climate risks and technical assistance to the coffee sector (both divestiture of state-owned washing stations and enhanced quality of the coffee) to help boost Burundi’s export competitiveness in the coffee sector. 29 Annex 1: Burundi at a Glance 30 31 Annex 2: Selected Indicators of Bank Portfolio Performance and Management As of 8/3/2012 32 Annex 3: Social Indicators 33 Annex 4: Key Economic Indicators As of Date 8/3/2012 34 35 36 37 Annex 5: Key Exposure Indicators As of Date 8/03/2012 38 Annex 6: Operations Portfolio (IBRD/IDA and Grants) As of 7/10/2012 39 Annex 7: IFC Committed and Disbursed Outstanding Investment Portfolio As of 6/30/2012 40 Annex 8: Donors’ Total Disbursements for Year 2011 (US$) 41 Annex 9: Development Partners Division of Labor African World Bank European United Nations Sector Dev USAID Belgium France Germany Norway Netherlands Switzerland Japan China IMF Group Union Agencies Bank Agriculture X X X X X X X X Community X X X X X X X X Dev/Decentralization DDR X X X X X X X Education X X X X X X 1 Energy X X X X Environment X X X X Financial/Priv Sect Dev X X X Governance X X X X X X X X X X Health X X X X X X X X X X Human rights X X X X X X Humanitarian X X X X X X X X X X X ICT X X Land X X X Macroeconomics X X X X X Justice X X X X Public Admin. X X X X X Regional Inter X X X X X X Security Sector X X X X Road/Transport X X X X X X Water and Sanitation X X X X X X X Budget Support X X X X X X X2 (Source CNCA and other donor sources, March 2012) _____________________________ Avec le 11ème FED le secteur de l’énergie sera une priorité de l’Union Européenne Le FMI fournit un appui à la balance des paiements. 42 Annex 10: CAS Results Framework (FY13-16) Proposed CAS Major Challenges Results influenced by the CAS Program FY13-16 World Bank and Partner Support Outcomes/ Results Clusters Results Indicators Milestones STRATEGIC OBJECTIVE I: IMPROVING COMPETITIVENESS Aligned with PRSP II, Pillar 2: Transforming Burundi’s Economy to Produce Sustainable Job-creating Growth – Improving access to quality economic infrastructure 1. Reduced • Landlocked with Roads network rehabilitated and Roads database completed and Ongoing Operations: infrastructure- inadequate rural maintained tested in the Office des Routes for Burundi Road Sector Development – AF related bottlenecks feeder roads Non-rural roads rehabilitated (km) paved and unpaved roads (P064876); to growth Baseline: 27 km in August 2012 Energy Efficiency project/ Global Energy • Insufficient and Target: 44km by December 2014 Trust Fund (P117225); unreliable electricity Multi-Sector Water and Electricity generation and Infrastructure project (P097974); transmission Electricity supply improved Completion of the Feasibility Emergency Energy project from CRW Generation capacity of hydro-power Assessment of Potential (P122217); Regional Communications • Limited ICT plants (Jiji and Infrastructure PPPs by June 2014 Infrastructure project (P094103). networks to support Mulwembe)constructed growth in education, Baseline: 0 in June 2012 Planned Operations: eGov, and private Target: 25MW by June 2016 Regional NELSAP Rusumo Falls project sector (energy); Volume and affordability of ICT Roll out of 60% the Backbone Mini-hydro project; services improved system achieved by June 2013. Regional Transport project. Reduce retail price of monthly internet services (per Mbit/s) Planned AAA and TA: Baseline: $1,600 in June 2012 Regional Transport Study; Target: $600 in Dec. 2013 ICT for Transformation Project pipeline screening and Initial Feasibility assessment of Potential Infrastructure PPPs (PPIAF) STRATEGIC OBJECTIVE I: IMPROVING COMPETITIVENESS Aligned with PRSP II, Pillar 2: Transforming Burundi’s Economy to Produce Sustainable Job-creating Growth –Promoting the private sector and job creation 2. Improved business • Poor governance and Financial infrastructure Establishment of a modern payment Ongoing Operations: climate and weak capacity limit strengthened system including electronic check Financial and Private Sector Development increased private private sector Time for check clearance in clearing and card payment. project (P107851); investment development and Bujumbura reduced Agro-Pastoral and Market Access increase the cost of Baseline: 5 days in June 2012 Development project (P107343); doing business Target: 3 days by February 2014 Public Works and Urban Management project (P112998); 43 • Most public enterprises face a Market access for targeted IFC Portfolio: distressed financial commodities increased 10% of participating producer Advisory: Investment Climate Program situation and are Percent of production of commodity groups/associations/cooperatives (574687); burdened by in targeted value chains marketed have contractual arrangements with SMS Africa (578327); governance by participating producers marketing agents by December Africa Micro, Small and Medium-Scale problems Baseline:10 in June 2012 2014. Enterprises (576488); Target:25 by April 2016 Investment: Hotel/Tourism and • Watershed Telecommunications. management and Promote development of the mining extension services sector Planned Operations: needed to boost Revised Mining Code submitted to Economic Reform Support Grant VI-IX agricultural Parliament by June 2014 Economic Management Support Project productivity and follow-on spur growth Watershed Approach to Sustainable Coffee Production project (GEF) • Untapped opportunities in Ongoing AAA and TA: tourism DTIS update; coffee marketing strategy Planned AAA and TA: ESW: Skills for Private Sector Development Study; ESW: Facilitating Tourism (IFC); ESW: Facilitating Agribusiness (IFC). ROSC followup STRATEGIC OBJECTIVE II: INCREASING RESILIENCE BY CONSOLIDATING SOCIAL STABILITY Aligned with PRSP II, Pillar 3: Improving Access to and Quality of Basic Services and Strengthening the Social Safety Net 3. Improved access • Infant and maternal Children under age 5 treated for Ongoing Operations: to and quality of mortality rates, moderate or severe malnutrition Completion of Annual Health Health Sector Development (P101160); health services while much Number children under 5 receiving Management Information System East Africa Public Health Laboratory improved, remain treatment for malnutrition survey by July 2013 Networking (P111556) high Baseline: 90,350 in 2012 Target: 92,200 in 2015 Planned Operations: Health Sector • High rates of fertility Development AF (P131919) place pressure on Increased utilization of land/water contraceptives by couples of Ongoing AAA and TFs: resources, jeopardize reproductive age Poverty and Social Impact Analysis for women’s health and Contraceptive prevalence rate Results-Based Financing in Health social stability Baseline: 19.8% in 2012 Target: 22% in 2015 • High child Planned AAA, TA and TFs: 44 malnutrition rates Health Results Innovation Trust Fund; ESW: Poverty Assessment and Social Safety Nets Study ESW: Early Childhood Development Study STRATEGIC OBJECTIVE II: INCREASING RESILIENCE BY CONSOLIDATING SOCIAL STABILITY Aligned with PRSP II, Pillar 3: Improving Access and Quality in Basic Services and Strengthening the Social Safety Net 4. Expanded safety • Expiration of DDR Enhance security of livelihoods and Ongoing Operations: nets to reduce financing heightens improve local service delivery Reinforced capacity of local Agro-Pastoral Productivity and Markets volatility of importance of social Generate short-term employment consulting firms to develop training Development project (P107343); livelihoods protection programs through labor-intensive public programs and ability to produce Public Works and Urban Management for livelihoods and works design and tender documents for project (P112998); social stability Baseline: 2.94 million person- the public-works programs. Regional Lake Victoria Environmental days of work by August 2012 Management project (P118316); • Insufficient capacity Target: 4.92 million person-days Community and Social Development project to make local service of work by December 2014 (P095211) delivery equitable of which at least 15percent for women Planned Operations: • Pollution and Completion of Social Safety Nets Agro-Pastoral Productivity and Markets degradation of Establish the framework for the Assessment by September 2014 Development project AF; natural resources effective delivery of social Public Works and Urban Management jeopardizes protection systems project AF; livelihoods (notably Adoption of the National Social Watershed Approach to Sustainable Coffee Lake Victoria Basin Protection Strategy by FY15 Production project (GEF) (P127258). communities) Ongoing AAA and TFs: Emergency Demobilization and Transitional Reintegration project (P113506) Planned AAA and TA: ESW: Bio-Diversity and Water Management Study TA to develop a National Social Protection Strategy 45 Foundation: STRENGTHENING GOVERNANCE Aligned with PRSP II, Pillar 1: Strengthening the Rule of Law, Consolidating Good Governance and Promoting Gender Equality – Consolidating good governance and institutional performance 5. Enhanced • Weak financial Promote dialogue with civil society Planned Operations: transparency and management limits GoB to establish a joint Anti- Validate the census of public ESRG-VI –IX; accountability in efficiency and Corruption Forum with CSOs by employees to allow for an update of Economic Management Support Project public expenditure impact of resource December 2014 the payroll data base by July 2013 follow-on allocations Promote citizen engagement and Ongoing AAA and TFs: • High level of monitoring corruption Share of communes where budget Adoption of a mining sector policy. information is made publicly Planned AAA and TFs: • Weak institutions available TA: to promote accountability and demand with lack of Baseline: 26.5 % by March 2012 for good governance; transparency and Target: 50 % by December 2015 PETS/Public Expenditure Review accountability in TA: Mining and EITI public management Promote transparency and accountability in the use of revenues from extractive industries GoB to publish a financially sustainable work plan for implementing the EITI criteria by January 2015 46 Annex 11: Burundi Country Assistance Strategy Completion Report (CASCR) June 30, 2012 Date of the County Assistance Strategy (CAS): July 8, 2008 (Report no. 44193-BI) 16 Date of the CAS Progress Report (PR): April 21, 2011 (Report no. 60339 – BI) Period covered by the CAS Completion Report (CASCR): FY09-12 I. Introduction 1. This Country Assistance Strategy Completion Report (CASCR) presents the main findings from an assessment of the FY09-12 CAS program performance and the World Bank’s performance in designing and managing the implementation of the program. The objective of this Country Assistance Strategy Completion Report (CASCR) is to: (i) evaluate how the program of support articulated in the Burundi CAS FY09-12 influenced the outcomes as laid out in the results matrix in the CAS Progress Report (CASPR); and (b) to derive lessons to guide the design and implementation of the new program for Burundi, as presented in the CAS FY13-16. Political, Economic and Social context 2. In 2008, the Government was faced with daunting challenges to achieve sustained peace, security and economic stability. The country had just made the transition to a multiparty system of Government after several power struggles including coups and armed conflicts. The 2005 elections provided an opportunity for Burundi to strengthen democracy and exit the conflict trap but challenges remained formidable, as sporadic hostilities were initiated by the one remaining active rebel movement which was not party to the Arusha peace and cease-fire agreement. 3. Government faced overwhelming challenges in increasing and sustaining peace and security. Subsequent to successful demobilization negotiations, Government had moved, with strong donor support, to reintegrate thousands of former combatants into civilian life, offering incentives that would prevent them from returning to illegal military activity. Widespread corruption, coupled with weak institutional capacity, remained a major impediment to political and economic development. The risk of a relapse to conflict remained high. 4. Nevertheless, the Government undertook steps to implement an economic reform program that improved economic performance and enabled Burundi to reach the Heavily Indebted Poor Country (HIPC) decision point in 2009. The country had also advanced regional integration by becoming a member of the Common Market for Eastern and Southern Africa (COMESA) in 2005 and joined the East Africa Community (EAC) in 2007. To minimize the risk of future conflict, the country sought to build a diversified economy, capable of creating modern sector jobs with better pay, providing basic social services, with special protection for the poor and vulnerable, back-stopped by more accountable and inclusive institutions, to improve governance and ensure efficient and equitable delivery of basic services. 5. While progress has been made in some sectors of the economy (education, health and transport), macroeconomic performance has been adversely affected by exogenous shocks. During the CAS period, successive crises worked to slow growth – surging energy costs (2007), high global food commodity costs (2008) and the 2009 world financial crises. The economy remains vulnerable to volatile world prices, especially in the agricultural sector, which accounts for half of GDP annually, and employing almost 90 percent of the population. Burundi is a net food importer so any surge in world food prices immediately 16 The CAS (Report No. 44193-BI) of July 8, 2008 was presented to the Board of Executive Directors on August 8, 2008. 47 impacts on households, increasing the risk of malnutrition, with increased exposure to endemic disease. At the time of the 2008 food crisis, the IMF listed Burundi among the 18 most vulnerable countries in terms of food and oil price volatility. Reflecting the impact of these shocks, headline inflation rose from 4.1 at end-2010 to a high of 13.3 percent in October 2011. 6. The lack of diversified exports, reliance on imported fuel and capital goods, and the limited contribution of the narrow private sector, all suggest that current account deficits will continue through the medium term. The external debt position has improved, thanks to prudent macroeconomic management, with limited access to non-concessional financing. Increased macroeconomic stability and increased donor funding, 60 percent of net current transfers, resulted in an increase of foreign reserves equivalent to five months of imports over the CAS period. 7. At the time of the preparation of the FY09-12 CAS, Burundi was one of the poorest countries in the world. More than two thirds of the population lived below the poverty line and severe food insecurity and high levels of child malnutrition were endemic country-wide (2005 Demographic and Health Survey). Poverty was deeper and more pervasive in the rural areas, with those without or with little education suffering disproportionately and women heads of household the most severely impacted. Due to lack of investment, basic infrastructure and facilities such as water, electricity, were in severe disrepair, constraining economic activity. Coffee production, which accounted for 5 percent of GDP and more than 70 percent of export revenues had fallen drastically as a result of poor management and low productivity. The economy remained dominated by public enterprises and the private sector was embryonic – 96 formal enterprises - severely constrained by an unfavorable investment climate. 8. The poverty outlook remains daunting. GDP per capita remains very low, although it increased from US$147 in 2008 to US$178 in 2010 (IMF). The years of conflict led to high internal displacement of the population, especially rural dwellers, and to the destruction of key economic and social infrastructure (roads. bridges, schools and clinics), limiting incomes and growth. An estimated 67 percent of the population is deemed poor, far from the Millennium Development Goal (MDG) of 18 percent. Although progress is being made in education enrollments, in access by pregnant women and children under five to health care, after the abolition of fees and charges, and in improved prevention and treatment of HIV/AIDS, the MDGs are unlikely to be met by 2015, the target date. Burundi remains one of the poorest countries, ranking 167 out of 169 countries in 2010 in the UNDP Human Development Index. The World Bank Group Program 9. The CAS sought to assist Burundi to make a smooth transition from a post-conflict economy to one of diversified growth. The World Bank Group’s Strategy for FY09-12 supported two strategic objectives: (i) promoting broad-based, sustainable economic growth; and (ii) improving access to social services and consolidating social stability. Improving governance is a cross-cutting objective of the CAS. The strategic objectives and development outcomes of the CAS are aligned with Burundi’s priorities as articulated in the poverty reduction strategy– Cadre Stratégique de croissance et de Lutte contre la Pauvreté (2006 – 2010). The CASPR (2011) reaffirmed the relevance of the CAS and the CAS outcomes, adjusting the timing and allocation within the program slightly to accommodate delays in project preparation and facilitate a rapid response to the global food, fuel and energy crises. 10. For each strategic objective, the CAS defines three related outcomes. To promote broad-based sustainable economic growth, the program sought to attain the following outcomes: (a) increased productivity of agriculture, leading to food security and the export of high-value crops; (b) a business climate favorable to foreign direct investment (FDI) and domestic investors; and (c) a robust economic infrastructure to underpin commerce and trade, facilitated by integration with the East African Community (EAC). To improve access to social services and consolidation of social stability, the program sought to attain the following outcomes: (a) improved reintegration of ex-combatants and vulnerable groups into society and the economy, with enhanced social stability; (b) efficient and transparent public financial management; 48 and (c) improved access and enhanced quality of basic social services, with decreased vulnerability to HIV/AIDS. 11. The original investment lending program of US$309 million was increased by nine percent (to US$336 million) to help Burundi respond to the global food and fuel crisis. At the CAS closing date, US$331 million were committed. The lending program included 15 operations, supplemented by 20 analytical and advisory support activities, on priorities ranging from investment climate, coffee sector reforms, financial sector and debt management assessment, to reviews of public expenditure. Trust funds, amounting to US$30 million, supplemented IDA resources, including a US$10-million grant under the Global Food Crisis Response Program. IFC significantly increased its investment engagement by investing US$36 million in four investment projects which underpin the CAS outcomes in the areas of improving the investment climate. 12. In sum, program performance is rated as “Moderately Satisfactory� owing to mixed progress towards achieving CAS outcomes. Bank performance is rated “Satisfactory� due to the strong design of the program, the responsiveness of the program to client demand, and the leveraging of partnerships during program implementation to scale up interventions and strengthening of relationships with civil society, the media and the Parliament all of which resulted in greater development impact. 13. This report is organized as follows: Section II below details the assessment of the program’s performance, and provides a concise review of the progress made towards achieving each CAS outcome and identifies key challenges remaining; Section III below details the evaluation of the Bank Group’s performance in designing and implementing the CAS and managing risks; and Section IV presents key lessons learned— outlining recommendations for future program design and implementation. II. CAS Program Performance 14. Program performance merits a rating of “Moderately Satisfactory� as progress in achieving the goals of the CAS was uneven. There were notable successes in three of the six outcomes, improving the business environment; the reintegration of ex-combatants and vulnerable groups into the society; and the access to and quality of basic health services, with decreased vulnerability to HIV/AIDS. A. Progress on Objective I: Promote Broad-Based and Sustainable Economic Growth 15. The CAS outcomes under the first strategic objective are: (1.1) Increased productivity of food and high- value export crops; (1.2) Improved business environment; and (1.3) Improved infrastructural services with enhanced regional integration. Seven of the eleven results indicators under this strategic objective have been achieved; three were partially achieved, despite having made some progress; and there is no available data to confirm the progress on the remaining indicator. Progress on achieving the strategic objective has been mixed. 16. In summary, Agricultural productivity indicators for irrigated rice and palm oil have been; while for cassava and milk, little progress was made towards the target. The target for the indicator related to improved productivity of export crops was exceeded. Business environment indicators were achieved. Related to improved infrastructure services, the targets for improved roads and energy supply were exceeded, good progress was made on improved water supply though the target was not achieved, while data on current international internet traffic is unavailable. 49 CAS Outcome 1.1: Increased productivity of food and high-value export crops 17. There have been marked improvements in rice and oil palm production achieved with inputs from the Agriculture Rehabilitation and Sustainable Land Management Program, while the growth in traditional export crops, such as tea and coffee, was stagnant or declined. This sluggish growth during the CAS period is mainly the result of weak agricultural production and exports, with sector growth 3 percent lower than during the preceding period, 2006-2009. During the period, cassava cultivation in particular was negatively impacted by blight and other diseases. Urgent measures are required to improve the productivity of agriculture investment. These include: (i) introducing new varieties and technology to increase yields; (ii) focusing greater attention and resources to research and extension, with the goal of crop diversification; and (iii) improving distribution of seed, fertilizer, and tools. Other key priorities include developing new irrigated perimeters, extending and rehabilitating rural feeder roads, and improving internet access to facilitate access to pricing information. 18. The target for the CAS indicator related to the privatization of coffee assets was exceeded. The related subsector reforms were supported through the Economic Reform Support Grant (ERSG) series with complementary technical assistance financed by the Economic Management Support Project. Increased liberalization of the coffee subsector (including the privatization of publicly-held assets) together with improved quality control is key to increasing Burundi’s coffee exports. It is estimated that Burundi could export 60,000 tons of fully-washed coffee during peak production years (compared to 15,000 tons in 2011). Coffee is the dominant crop produced by about 800,000 households and accounted for about 70 percent of the country’s export revenues (3.3 percent of GDP) in 2011. Consequently, given its potentially-high impact on growth and poverty reduction, the coffee sector has been targeted as a priority sub-sector. Private sector interest in the industry is now taking hold, as twenty-six new washing stations were constructed recently, financed by private capital. The private sector must take the lead in investment if there is to be sustained progress on productivity. CAS Outcome 1.2: Improved business environment 19. There has been good progress in improving the business climate in Burundi. With resources from the Economic Reform Support Grant series, in 2011, the Government cleared its arrears to the private sector existing at the start of the CAS period, encouraging new investment. The IFC’s Investment Climate Program supported a number of key reforms that ultimately led to the “Doing Business Report� (2012) rating Burundi the seventh most improved economy in the world. Some of these key reforms and ongoing activities are summarized below. There has been a marked reduction in the time it takes on average to receive a judgment from the Commercial Court. Progress was also made in revising legislative codes (commerce, companies, and investments) and in streamlining contracts. A “one-stop shop� for starting businesses has been set up and the Export and Investment Promotion Agency was launched in 2011. The Burundi Revenue Authority (Office Burundais des Recettes (OBR)) was created with the support of IDA and DFID and is developing a more friendly tax regime for SMEs which facilitates compliance. In terms of regulations, real estate property transactions have been facilitated with streamlining of procedures for obtaining construction permits. These changes in the regulatory environment are harmonized with those of the East Africa Community (EAC) and will help to smooth and increase trade across borders. Complementary measures include: more robust lending to the SMEs by the banks; strengthening of business institutions such as the Chambers of Commerce and employer associations; and developing a pool of training providers to help enterprises introduce new production technologies. Further, a joint Bank-Fund Financial Sector Assessment Program (FSAP) conducted in FY09, identified weaknesses in the financial sector and formed the base for the preparation of a financial sector strategy by the Government which is expected to contribute to private sector development and help form the foundation for economic growth. 20. The Economic Management Support Project has provided technical assistance aimed at improving institutional capacity to the agency responsible for the Government’s privatization program (SCEP), particularly with regard to analyzing financial statements of firms. Nevertheless, SCEP remains weak and 50 urgent measures are required to increase its capacity to plan and program divestiture and to evaluate proposed investments, in particular the proposed public-private partnerships (PPPs) in the power, water and telecommunication sectors. An important achievement of the SCEP was to build the knowledge base about state–owned enterprises (SOE) prior to the privatization. As such under the Economic Reform Support Grant series, the financial and technical audits for a list of 10 SOE firms were conducted with financial support from PAGE and results were made accessible to public. 21. The IFC also significantly increased its investment engagement by investing $36 million in four investment projects including: (i) a line of credit to Diamond Trust Bank, a greenfield subsidiary of Diamond Trust Kenya Limited, to increase credit availability to small and medium size enterprises, enhance competition in the banking sector in Burundi, and expand credit availability across all segments of the market; (ii) a loan to Leo Burundi, the country’s major telecommunications company, to finance the expansion of the company’s network in rural areas, which accounts for 90 percent of the Burundian population; (iii) a loan to Opulent (B) Ltd (Hotel company) to develop the first Double Tree by Hilton Hotel in Burundi after acquiring the State-owned Hotel Novotel. The hotel will help improve the country’s essential business infrastructure by providing international-standard rooms and conference facilities. This is expected to stimulate a range of indirect jobs and SMEs to provide goods and services to the hotel and its clients; and (iv) a loan to Progimmo (local real estate company) to address the huge need for office space of international standards in Bujumbura. CAS Outcome 1.3: Improved infrastructural services with enhanced regional integration 22. Substantial progress has been made in improving transport, water, energy and broad-band IT infrastructure. The IDA-financed Road Sector Project and the Multi-Sector Water and Electricity Infrastructure Project, that have been supplemented by resources from the EU, supported the improvement of road maintenance, with funding doubling between 2007 and 2010. The percentage of paved roads rated “fair to good� increased from 21 percent to 49 percent in the same period. However, Burundi’s international transportation costs, representing 40 percent of the value of agriculture exports, remain exorbitant, due to high port costs and customs issues. For landlocked Burundi, the rapid development of regional transportation infrastructure is essential to lowering costs and boosting competitiveness of exports. Investment in domestic secondary and rural feeder roads is crucial to get products to local markets and onward to external shipment points–railheads, ports, and airports. The development of appropriate regulatory frameworks for both investment and regulations, to encourage new PPPs, is a work in progress. 23. Limited access to energy is a major impediment to economic development, with only 3 percent of the population served by the public electricity supply. Supported by the ongoing Multi-Sector Water and Electricity Infrastructure Project, the Government is preparing the ground for the next generation of domestic hydropower projects. Feasibility studies and engineering drawings were completed for four of the most promising hydro sites by REGIDESO, the national utility company, in September 2011. Each of these plants will have installed capacity of between 10-30 MW, totaling about 70 MW, with generating costs around US$0.10 per kWh. Once completed (2014/2015), the plants will make a major contribution in delivering low-cost energy to the rural population. The Bank and the IFC are developing an “energy marketplace� and standard procurement documents to encourage PPP investments in both small hydro plants and other renewable power sources. 24. Bringing electricity tariffs more in line with generating costs was an important policy decision taken in 2011. Until then, tariffs were the lowest in the region, US$0.08 per kWh (2010), as compared with US$0.21 in Rwanda and US$0.18 in Kenya. The tariff revision and the introduction of the pre-payment program to improve cost recovery were reforms aimed at improving the financial and operational viability of the national utility authority which the Bank supported through a Bank-financed tariff study and the Economic Reform Support Grant (ERSG) series. The tariff increase was introduced gradually, first in September 2011, after a communications campaign explaining the decision to customers. The new tariff regime reflects operating costs, a sinking fund to cover maintenance and eventual equipment replacement 51 costs, as well as a reserve fund to cover the costs of power imports under regional power-sharing agreements. This approach is likely to promote increased generating capacity through PPPs and independent local power producers (IPPs), with the goal of increasing access from the current 3 percent to 18 percent by 2018, through public and private investment. It is expected that these developments will impact favorably on the private sector that has been paying approximately US$0.35 per kWh for power from stand-alone diesel generators. B. Progress on Objective Two: Improve Access to Social Services and Consolidating Social Stability 25. The CAS outcomes under the second strategic objective are: (2.1) Improved reintegration of ex- combatants and vulnerable groups; (2.2) More efficient and transparent public financial management; and (2.3) Improved access and quality of basic social services and decreased vulnerability to HIV/AIDS. Ten of the thirteen results indicators under the second strategic objective have been achieved. The three indicators that were partially achieved concern public financial management and education. CAS Outcome 2.1: Improved reintegration of ex-combatants and vulnerable groups 26. Through the Emergency Demobilization and Transitional Reintegration project, the re-integration of ex- combatants and vulnerable groups has progressed well as all results indicators relative to this outcome have been achieved or exceeded. Since the 2008 peace agreement with the FNL to transform the rebel movement into a political party, the Government of Burundi moved forward with the final phase of demobilization, disarmament, and reintegration (DDR) resulting in over 6,500 FNL ex-combatants being demobilized. The Government is now focusing on economic and social reintegration efforts for ex- combatants in their host communities, as well as specialized services for disabled ex-combatants. Leveraging partnerships has been a key element for achieving results in the demobilization and reintegration activities in Burundi. The Demobilization Disarmament and Reintegration Project has brought together the four main bilateral donors and the Government of Burundi, with implementation of program activities entrusted to 12 local agencies, representing a broad spectrum of the civil society. These implementing agencies represent regional civil society organizations working on the ground in Burundi, as well as specialized agencies working in the domain of medical service provision for disabled ex- combatants, psycho-social support services, and communications. Economic reintegration remains a focus for the Government, as activities to consolidate livelihoods, such as support to economic associations and technical assistance, are strengthened. Further, gaps have been identified in how women are targeted in the demobilization and reintegration process. The Bank, through the DDR Project, is supporting efforts to develop and implement a gender action plan. Partnerships have been a strong element of demobilization and reintegration activities in Burundi. The DDR project has brought together four donors, working with 12 NGO implementation partners, representing a broad spectrum of civil society actors. These implementing agencies represent regional CSO’s working on the ground in Burundi, as well as specialized agencies working in the domain of medical service provision for disabled ex-combatants, psycho-social support services, and communications. DDR programming in Burundi is achieved by the successful management of partnerships at all levels. Through these interventions, the Bank has an important role in supporting the country’s efforts to achieve lasting peace and inclusive development. 27. Access to social services and the consolidation of social stability have been augmented through support to decentralized financing at the commune level. The Community and Social Development Project supported the creation of the first communal development plans. Through this mechanism, 593 social infrastructure projects and 293 projects in support of social cohesion, largely focused on vulnerable groups, have been implemented. The capacity of local officials has been enhanced in areas such as budgeting, procurement, and project management. As the majority of Burundians access all services at the commune level, this level of Government decision-making and participation represents the nexus of social service provision in the country. CAS Outcome 2.2: More efficient an transparent public financial management 52 28. Significant progress has been made in establishing the framework and systems for more efficient and transparent public financial management. The enactment of the 2009 Budget Law represented a milestone for the Government as it provided the requisite framework for the budget preparation, execution, procurement, and oversight and controls. However, the Government still experiences delays in presenting the budget to the National Assembly, and as a consequence the result indicator related to this outcome was not achieved. But this should not diminish the significant advances made by the Government in the area of public financial management during the CAS period, including: (i) the modernization of the procurement code; (ii) the rolling out of the financial management system which now encompasses most transactions and cash flow; (iii) the implementation of medium-term expenditure framework (MTEF) to facilitate planning, programming and budgeting; (iv) the increase in allocations to priority sectors, including the sustained financing of poverty-related programs; and (v) the improvement of payroll and human resource management of the public sector. In addition, the percentage of expenditures allocated to priority sectors increased significantly from about 41 percent in 2005 to 55 percent in 2009. All of these reforms were supported under the ERSG series. 29. These actions were supported by a comprehensive suite of analytical and advisory services provided by the Bank including: the FY2009 Public Expenditure and Financial Accountability (PEFA) report that prepared the ground for the introduction of MTEF and the design and implementation of cash management systems; the FY2011 Public Expenditure Review that focused on public investment, with recommendations for stimulating growth, with poverty reduction, and also a review of civil service pay and incentives; and a debt management performance assessment carried out. The Bank’s technical assistance focused on building MTEF capacity at the ministry level, on poverty monitoring and the development of a macro- fiscal simulation model. However, key challenges remain which include building the Government’s capacity for planning, programming, and budgeting, and improving the quality of public expenditures. CAS Outcome 2.3: Improved access to and quality of basic social services and decreased vulnerability to HIV/AIDS 30. Substantial progress has been made in improving access to and quality of basic social services, particularly in the health sector, and decreasing vulnerability to HIV/AIDS. There has been good progress in both health and education as reflected in Table 1 below. All the results indicators associated with health that support this CAS outcome have been achieved. In health, a notable achievement has been the introduction of results-based financing (RBF) supported by the Health Sector Development Support Project which has underpinned the policy of free health care for pregnant women and their children and, as a consequence, increased the utilization rates of primary health care services. The percentage of women giving birth in health facilities rose substantially, leading to a significant reduction of maternal and child mortality rates. Today, Burundi's child and infant mortality rate is among the best in Africa as reflected in Figure 6, especially given its income level. Significant efforts have been made to improve the capacity of general practitioners and nurses through training. Despite the success of the RBF program, its financial sustainability in the face of population pressure remains an issue as Burundi’s economic growth rate remains only slightly ahead of the population growth rate. Assessment of the efficiency and effectiveness of expenditures through regular Public Expenditure Tracking Survey (PETS) is also key to sustainability of the programs. 53 Figure 1: Child Mortality and per Capita Income, by Country Niger Mali Guinea Nigeria Benin Liberia Zambia Lesotho Malawi Ghana Burundi Moz. Kenya Senegal Ethiopia Tanzania Madagascar Uganda Rwanda 31. Several prevention and screening measures have been successfully instituted to help combat HIV/AIDS, resulting in a substantial decrease in vulnerability to HIV/AIDS. The number of male circumcisions rose from 539 in 2008 to 3,343 in 2010; the number of new HIV/AIDS cases put on anti-retroviral (ARV) treatment rose from 2,880 in 2007 to 5,074 in 2010; and the percentage of HIV-infected pregnant women who received a completed ARV treatment to reduce the risk of mother-to-child transmission rose from 6 percent in 2008 to 41 percent in 2011 (substantially exceeding the targeted result). IDA funding is highly complementary to funding from other partners, including UNAIDS. National serological surveys suggest that the national HIV/AIDS prevalence rate fell from 2.97 percent in 2007 to 1.4 percent in 2010. 54 32. In education, after the spectacular increase in primary school enrollments, due to the abolition of fees and charges in 2005, the main challenge is to improve education quality, which is closely linked to insufficient numbers of trained teachers and weak administrative capacity. Gross enrollments (including students repeating a grade) grew from about 80 percent in 2005 to 134 percent in 2009. Remarkably, despite this growth spurt, Burundi achieved gender parity at the primary level, thus meeting the related Millennium Development Goal. In addition to the expansion in the number of teachers and classrooms, key quality indicators such student-textbook ratios have also improved. Although the ambitious target of 1:1 student- textbooks ratio has not yet been achieved, progress has been made towards reducing the ratios from 3:1 to 2:1. The short-term challenge for Burundi to join the Global Partnership for Education’s Fast Track Initiative is being achieved. One obstacle to joining has been delays in the development of a medium-term Education Sector Plan (ESP), supported by the education development partners. The ESP was delayed by a decision in 2010 to re-structure the education system by making nine years of education (“Basic Education�) mandatory, in line with the EAC region and the majority of Sub-Saharan African countries. Government has now completed a revised ESP with technical assistance from the World Bank and other development partners. During fiscal year 2012 the Bank’s contribution was specifically oriented towards assisting the Government to update the education sector diagnostics, which has subsequently assisted the Ministries to revise the ESP. The now-endorsed Plan reflects the resource parameters of the new nine-year program. Table 1: Performance Indicators in Health and Education 2000 2005 2006 2007 2008 2009 2010 Health Births attended by skilled health staff (% 33.5(a) 60.0%(g) of total) Under 5 mortality rate (per 1,000 live 176 (a) 96 (g) births) Infant mortality rate (under 1, per 1,000 120(a) 59 (g) live births) Maternal mortality ratio (modeled 1,200 1,100 970 970 estimate, per 100,000 live births) Maternal mortality ratio (from survey 615 (a) 499 (g) data, per 100,000 live births) Person sick/injured during the last 4 29.9(e) 23.4(f) weeks preceding surveys (%) HIV/AIDS Prevalence of HIV, total (% of 3.2(b) 2.97(c) 1.4 (g) population aged 15-49) Education Primary completion rate (GOB, %) 26.8 36.1 38.5 40.7 46 48 51 Net school enrollment, primary (GOB, 44.0 69.8 72.4 82.6 84.6 89.7 96.1 %) Pupil-teacher ratio, primary (GOB, 49 55 51.9 49.4 number) Pupil-classroom ratio (GOB, number) 76.3 86.3 82.7 75.6 Girl-boy ratio (GOB, number) 0.86 0.91 0.97 0.99 Notes: (a) estimated from the MICS-2005 survey; (b) figure estimated from the 2002 survey; (c) HIV sero-prevalence survey of 2007; (e) estimated from CWIQ-2006 survey; (f) estimated from the 2009 baseline Bank-funded health survey; (f) estimated from the 2010 Demographic and Health Survey. Other data come from the World Development Indicators database. GOB stands for Government of Burundi. Source: Various sources assembled/calculated by World Bank staff. 55 C. Progress on the cross-cutting objective of strengthening governance 33. Strengthening governance and fighting corruption remain major challenges but overall progress has been satisfactory. During the CAS period, the Bank provided technical assistance including through the Belgian Partnership Trust Fund for Poverty reduction that supported the Government’s drafting and adoption of the National Strategy on Good Governance and Anti-corruption which provides a framework and action plan for addressing governance issues. The strategy was validated at a Cabinet-level seminar on governance aimed at familiarizing both ministers and senior officials with the strategy and proposed implementation measures. The strategy was approved by the Council of Ministers on October 20, 2011. Another important step forward has been the formation of local committees to promote good governance at the commune level. Led by the ministry charged with good governance and privatization, this initiative enjoys the strong support of NGOs and CSOs such as the Anti-Corruption Brigade, the Burundi League of Humans Rights, and the Anti-Corruption and Economic Malpractice Observatory (OLUCOME). There have also been notable results on the ground, including arrests of officials in public enterprises such as “Société Sucrière du Moso (SOSUMO)� and “Office des Transports en Commun (OTRACO).� However, some major cases remain pending, such as the recovery of funds owed to the Government by the petroleum companies identified by the petroleum sector audit in 2008. The client survey conducted in 2012 confirms that corruption is viewed as a source of inequity and injustice by the majority of the population. 34. The Bank’s support through analytical work included: The Country Economic Memorandum (CEM, FY10) that generated three Policy Notes on - (i) priority areas for economic growth; (ii) creating fiscal space for productive investment and (iii) improving governance for development effectiveness. These Notes informed discussions at the cabinet governance seminar held in March 2011. The World Bank Institute (WBI) also contributed to the governance objective, by helping set up the Rapid Results Initiative (RRI) program which trained 2,764 civil servants in 14 out of 25 ministries, leading to enhanced efficiency and accountability in public expenditure. 35. The Government took complementary actions in the area of public financial management including: (i) revision of the budget framework law, improving the transparency of public financial management; (ii) establishment of regulatory and control agencies in the area of procurement, with revision of the procurement code; and (iii) generalization of the financial management information system, improving the allocation of resources, expenditure tracking, and personnel management, including payroll, leading to appreciable savings. Following the recommendations of the 2008 Public Expenditure Management and Financial Accountability Review (PEMFAR), a census of civil servants and military personnel conducted in 2009 through the Bank’s PAGE project financial support led to the elimination of about 1800 ghost workers. Unfortunately this database has to be updated since it was not used as the basis for the payroll since payroll software was introduced with some delays. The introduction of the new software in payroll management has already started showing positive results: data entry mistakes have been reduced, resulting in savings of about US$18,000 in the wage bill of January 2011. 36. More capacity-building is needed to enhance the effectiveness of measures already underway. These include: (i) building capacity in national audit (the Court of Public Accounts); (ii) further strengthening of the agencies directly responsible for the inspection and policing of public expenditures, the state inspectorate, under the authority of the Presidency (Inspection Générale de l’Etat-IGE) and the finance ministry inspectorate (Inspection Générale des Finances–IGF); and (iii) developing enhanced internal audit capacity in technical ministries. In addition, the national procurement commission still has work to do in improving the standardized bidding documents and in upgrading related software, with “trickle-down� training for staff at the sector and project levels. In infrastructure, governance has improved, with a reduction in the number of informal payments on roads and at ports and better training of police and border control officers. That said, a more comprehensive governance framework is still to be developed. 37. Despite these achievements governance challenges remain particularly with regard to strengthening the justice system and the integrity of the courts, as these are essential to protecting the poor and encouraging 56 investment. Legal issues include inconsistencies in legislation, lack of transparency in legislative processes, weak capacity to draft laws, and lack of participation of stakeholders. Judicial issues include: weak governance and corruption in the judiciary, the need for reform of the Supreme Council of the Magistracy, the small number of trained judges and lawyers, and the low salaries of judges and prosecutors. Pressing institutional measures are: (i) improving ethics in public service; (ii) strengthening internal and external controls; and (iii) a more robust investigative capacity, leading to more timely prosecutions and more appropriate sanctions. 38. At the project level, a recent Country Portfolio Performance Review (CPPR) concluded that performance in financial management and procurement has been satisfactory. Burundi's portfolio has no “problem projects�, compared to 28 percent for the Africa Region as a whole. However, there is work to be done in capacity building at the Project Implementation Unit (PIU) level, with special attention to procurement. III. World Bank Group Performance 39. The Bank Group performance during the CAS period is rated as “Satisfactory�. The design of the strategy was sound. The Bank provided strong implementation support, evidenced by the health of the portfolio, the responsiveness of the program to the impact of the global crisis on Burundi and the successful leveraging of other development partner support to scale up Bank-led interventions. A. CAS Design 40. The CAS was aligned with the Government’s Poverty Reduction Strategy (2006 – 2010) and benefited from the application of the Bank’s extensive country experience in the choice of areas of engagement and instruments, which contributed significantly to the achievement of CAS outcomes. The CASPR (2011) affirmed the relevance of the Strategy and the CAS outcomes. The defined outcomes were realistic as evidenced by the fact that progress ranged from good to substantial relative to each outcome. However, the results framework could have been strengthened, as in some cases the indicators were not a good proxy for the spectrum of activity that the Bank is undertaking in the relevant sector. For example, although the Government made significant progress in reforms related to governance and public financial management, these advances have not been captured in the results matrix. The indicator on PFM reform is too narrowly defined, given the Bank’s numerous and diverse interventions in this area. 41. The Bank’s CAS program addressed Burundi’s vulnerability to external shocks through a multi-sector approach, with a focus on empowering women. Agriculture projects aimed to increase food crops productivity in order to make the country less susceptible to rising international food prices. The operations also focused on making sure vulnerable groups are being effectively integrated into their communities by supporting them in their own agriculture activities. These efforts were directly synched with other projects that promote better and more equitable local service delivery together with projects that focus on demobilization and socio-economic integration of ex-combatants. Further, the Bank’s program supported short-term employment through public works–of which 17 percent of work-days directly benefitted women (aimed at providing income and safety nets outside of agriculture). These efforts are being complemented by transport projects with a focus on enhancing road maintenance that creates permanent jobs (with a target of more than 30 percent of contracts allocated to women). The CAS and CASPR had appropriately identified critical risks, some of which materialized and were well managed through the Bank’s ability to respond to changing circumstances and adapt the program accordingly. B. Implementing the strategy 42. The Bank implemented the program outlined in the CAS and made slight adjustments particularly in response to client demands associated with the international financial, food and fuel crises. Implementation of the CAS program has been satisfactory and has benefitted from the Bank’s regular 57 implementation support interventions and periodic reviews of the portfolio, including CPPRs conducted in 2008 and 2011, to assess portfolio quality. Systemic issues and implementation bottlenecks such as financial management and procurement issues were identified and action plans were drawn up, with milestones and target dates for remediation. As a result, portfolio performance is satisfactory. The low turnover of Bank staff, particularly among field-based staff, has helped deepen the dialogue and is a key contributor to the strong portfolio performance. Table 2 presents the key portfolio indicators. Table 2: Key Portfolio Indicators Indicators FY09 FY10 FY11 FY12* Number of projects 10 12 11 11 Net commitment (US$ million) 337.4 394.4 371.8 371.8 Number of problem projects 1 2 0 0 % Commitment at risk 30.1 16.5 0 0 % Proactively 0 100 0 Overage projects 0 0 0 0 Total undisbursed balance (US$ million) 235 224.2 196 183.1 Disbursement ratio 20.6 26.7 34.4 31.7 Source: World Bank. Note. (*) includes amount yet to be disbursed. 43. The Bank facilitated and also provided a substantial transfer of knowledge and advisory services. A major contribution was the 2010 CEM which reviewed development over the past decade, identifying pervasive and enduring constraints to economic growth, presenting a strategy for growth and poverty reduction which serves as a solid basis for the FY2013-16 CAS. The Policy Note Series which was generated thereby are at the center of policy dialogue in Burundi. 44. Leveraging partnerships and improving aid effectiveness were important factors under consideration during the CAS implementation period. In 2009, the Bank chaired Burundi’s Consultative Group meeting, reviewing progress on the first PRSP. The Bank has also chaired the development partners sector working groups in Agriculture and HIV/AIDS, as well as co-chairing the Strategic Forum for donor coordination, promoting dialogue on the coordination of development aid and fostering the harmonization of development partner programs and projects with PRSP II priorities and objectives. IDA has taken the lead in the demobilization and reintegration sector in support of the Government. In the health sector, IDA financing supported the creation of a health fund for the purchase of quality health services, creating a domestic health market. There are now 10 contributing partners, backstopping Government of Burundi commitments through the budget and HIPC debt relief funds, with the balance met by IDA, the European Commission, Belgium, Switzerland, the Global Fund for HIV/AIDS, the Global Alliance for Vaccines and Immunization (GAVI), and others. 45. The Bank has developed solid working relations with civil society, the media and Parliament. During the CAS period, the Bank meet quarterly with CSOs, discussing key issues in policy dialogue, progress in analytical work, as well as in project design and implementation. Parliamentarians were briefed on the World Bank project cycle and their role in ensuring efficient project implementation in their respective constituencies. Also, journalists were trained in reporting on economic and governance issues. 58 46. The major risks identified by the CAS were well managed. Fiscal pressures were alleviated by prudent macroeconomic management which enabled Government, with IDA support to respond rapidly and effectively to the major exogenous risks posed by high energy prices, world food commodity prices and the 2009 world financial crisis, through budget support, emergency operations, as a consequence of the flexible program design. The reforms implemented in public finance management and procurement, with robust policy support, contributed to mitigating weak governance and corruption, although there is considerable work still to be done in strengthening public institutions through capacity building. The socio-political climate has significantly improved. After the 2010 elections, continuity was maintained in key policy posts. Ex-combatants have responded positively to re-integration programs supported by the Bank and the flow of people and goods is unhampered across the national territory. IV. Conclusions and Lessons Learned 43. For the most part the Bank was able to achieve the CAS outcomes and thus was able to advance the CAS’ strategic objectives. Progress was registered in the overall implementation of the country development program, and within the CAS period, the incidence of poverty declined slightly; economic growth trends were positive but the base for economic growth continues to be fragile. With a few exceptions, the MDG targets are not likely to be reached by 2015. While Government’s achievements in strengthening governance and the fight against the corruption during the CAS period are notable and have begun to bear fruit, more progress needs to be made in these areas. While the foundations of the governance, service delivery, and investment climate were appropriate and remain so today, good delivery of the program led to marginally better improvement in outcomes than was anticipated at the inception of the CAS. Going forward, a number of key lessons learned from the experience of implementing this CAS should be taken into consideration when designing the next CAS. 44. The key lessons learned are: the need for selectivity; avoidance of overly ambitious project goals; and recognition of capacity constraints. The multiplicity of objectives - many complex with tight implementation schedules - were overly optimistic and placed Government in new territory, beyond their experience. 45. Project and program design must give more attention to capacity constraints. Human resources and skills are constrained. There is a need for agricultural technicians, teachers, health workers, as well as cross- cutting skills such as planning, programming and project preparation. Service delivery is vulnerable to the continuing weakness of public administration, compounded by problems pertaining to the selection, management, deployment of civil servants, and by low remuneration and a lack of career development tracks. Effective deployment is a challenge for the geographically extensive services such as agriculture, education and health. Capacity building remains a high priority, cross-cutting issue. 46. The focus on results and the flexibility in the use of instruments was effective and should be maintained. The global financial, food and fuel prices crises impacted Burundi, demanding adjustments to the lending program. The flexible, multi-sector design of the strategy allowed the Bank to respond quickly and effectively to Government’s requests for assistance. Maintaining a strong focus on results was facilitated by a results framework aligned with the country’s strategic priorities. 47. The Government should give priority to finalizing the overall regulatory framework for PPPs to finance domestic investment in key sectors such as energy, port infrastructure, agriculture and mining, in light of the fact that official aid and concessionary financing is likely to diminish in the face of the continuing European debt crisis. Since the limiting of non-concessionary financing is unlikely to change, the Government must turn increasingly to PPPs to finance domestic investment. The PPP regulatory framework should emphasize fairness in profit-sharing between partners and transparency. Increased integration of economic activity within the EAC is a priority since it promises synergy in the utilization of resources such as lowered transport costs. Implementing the Extractive Industries Transparency Initiative is a priority if mineral wealth is to play a bigger role in economic growth. 59 48. World-wide, financing SMEs is a major issue (OECD 2012 “report card� on SMEs). Burundi has made setting up a business easier and is working on a tax regime which is business-friendly. Recommendation: It will be important to address SME financing issues, working with the local banks. 49. In the social sectors, key priorities are sustainable financing and reducing demographic pressures which threaten to overwhelm service delivery, making efforts to improve quality almost financially infeasible. Without a significant injection of funds, quality will decline further as the severe demographic pressure inexorably increases the number of children per class, with over-crowding making class management and instruction difficult. It is urgent to tap the resource pool represented by the Global Partnership for Education. Burundi must work to reduce population growth through better public information and the provision of reproductive services in the context of RBF. The most recent demographic and health survey (2012) reveals unmet demand for family planning. 50. Programmatic development policy operations supported the Government’s actions in a particular area over a period of time which facilitate policy reforms by the Government that could otherwise have been difficult to achieve without sustained engagement. These operations were a good instrument for facilitating door coordination in critical areas where a number of development partners wished to engage such as the economic growth enhancing initiatives and improving public financial management. 51. Governance and accountability remain a challenge. The Bank should continue its focus on PFM issues and support the Government in reducing corruption, improving external and internal audit, and foster good governance and accountability through the training of civil servants and by creating public demand for the transparent delivery of public services. . 60 Annex 1: CASCR Results Matrix CAS Outcomes Lending and Non-lending & Results Indicators Status and Activities that Contributed to the (from CAS PR) Evaluation Summary Outcome CAS STRATEGIC OBJECTIVE I: PROMOTE SUSTAINABLE AND BROAD-BASED ECONOMIC GROWTH 1.1 Increased productivity of food crops and high-value export crops Food crops PRASAB: Agriculture - Irrigated rice: from 4.0 tons/ha (2008) to - Achieved Irrigated rice:5 Rehabilitation and Sustainable Land > 5.0 tons/ha by 2012 tons/ha Management (FY05) and - Cassava: from 10 tons/ha (2008) to at Additional Financing (FY08) least 18 tons/ha by 2012 - Partially achieved Cassava: PAGE: Economic Management - Milk: from 5 l/cow/day (2008) 8 12 tons/ha Support (FY04) l/cow/day by 2012 PRODEMA: Agro-Pastoral - Palm oil: from 2.2 tons/ha (2008) to 3.0 - Partially Achieved Milk: 6 Productivity and Markets tons/ha of oil by 2012 l/cow/day Development Project (FY10) Export crops Road Sector Development (FY04) - At least 30 (of 117) coffee washing - Achieved Palm oil: 3 tons/ha ERSG DPL Series (Annual) stations are sold to private investors by Lake Victoria-regional (FY11) 2012 - Achieved 41 coffee washing Ongoing/Planned AAA and TFs: stations have been privatized Coffee Sector Strategic by 2012 Environmental Assessment 1.2 Improved business environment - At least 70% of Government arrears to - Achieved All arrears to the PAGE: Economic Management the private sector have been cleared by private sector have been Support (FY04) 2012 settled (by May 2011) Financial and Private Sector - Achieved Considerable Development (FY10) - Commercial court cases where the delays reduction in delays of court ERSG DPL Series (Annual) in rendering judgment is over 60 days cases to 10% of cases beyond Investment Climate Reform reduced from 40% in 2008 to below 25% the 60 day deadline (by July Program (IFC/WB) in 2012 2009) 1.3 Improved infrastructural services with enhanced regional integration Roads Road Sector Development (FY04) - 51% of paved road network in good and - Achieved 78% of paved and Additional Financing (FY11) fair condition by 2012 (from 21% in roads in good and fair Multisectoral Water and Electricity 2008) conditions infrastructure (FY08) Water Regional Communications - 363,200 people served with access to - Partially Achieved 320,000 Infrastructure Project (RCIP) improved water in Bujumbura (with people served with access to (FY08) surroundings) in 2012, compared improved water in Bujumbura ERSG DPL Series (Annual) to185,000 in 2008 Energy Tariff study on water and electricity - Unplanned power interruptions reduced - Achieved 1,500 minutes in (FY11); Study on management of from 3,100 minutes of unplanned MV 2011 public stand posts (FY12) interruptions/quarter in 2007 to 2,000 in 2012 ICT - Annual volume of international Internet - Not available (no data for traffic from 250 (Mbit/s simplex) in 2010) 2007 to500 in 2011 61 CAS STRATEGIC OBJECTIVE II: IMPROVING ACCESS TO SOCIAL SERVICES AND CONSOLIDATION OF SOCIAL STABILITY 2.1 Improved reintegration of ex- combatants and vulnerable groups - Achieved 90% of beneficiaries Emergency Demobilization & - 70% of beneficiaries (ex-combatants) (ex-combatants) report being in Transitional Reintegration Project report being in a similar economic a similar economic situation to (FY09) situation to that of their peers in the that of their peers in the Public Works and Urban community community Management (FY09) Agriculture Rehabilitation and - Achieved 2,000,575 in 2011 Sustainable Land Management - 500,000 person-days short-term (and 48,000 permanent jobs (FY05) and Additional Financing employment created through labor- created by road maintenance) (FY08) intensive public works by 2012 Community and Social (accumulative number) - Achieved 120,000 returnees Development (FY07) and displaced persons have Road Sector Development (FY04) - 120,000 returnees and displaced been effectively reinserted into and Additional Financing (FY11) persons have been effectively their communities reinserted into their communities (from zero in 2005) by 2012 2.2 More efficient and transparent public financial management - Draft annual budget prepared on the - Partially Achieved annual PAGE: Economic Management basis of new Budget law and budget is prepared on the basis Support (FY04) presented to National Assembly 3 of the new budget law but delays PARSEB: Education Sector months before beginning of the fiscal in presenting the budget to the Recon. (FY07) year from 2009 onwards National Assembly continue Second Multi-Sector HIV/AIDS (FY08) Health Sector Development Support (FY09) ERSG DPL Series (Annual) Public Works Additional Financing (FY12) 2.3 Improved access to and quality of basic social services and decreased vulnerability to HIV/AIDS PARSEB: Education Sector Education - Partially achieved current rate Recon. (FY07) - Increase in the primary completion is 51% Second Multi-Sector HIV/AIDS rate from 40% in 2006/7 to 65% in (FY08) 2012 - Achieved Primary GER 134% Health Sector Development - Increase in primary gross enrollment in 2009 Support (FY09) rate (GER) from 80% in 2005/06 to PRADEC: Community and Social 100% in 2010 - Achieved 49.1 Dev. (FY07) - Regional Great Lakes Initiative on - Improvement in student teacher ratio - Partially achieved 2:1 HIV/AIDS from 57:1 (2006/07) to 50 ( 2012) - Achieved parity reached in 2010 Multi-Sector Water and Electricity - Textbooks per student in French & Infrastructure (FY08) Kirundi increase from 3:1 in 2006 to 1:1 in 2012 - Achieved 87% in 2009 - Reach parity in ratio of girls to boys in primary (%) - Achieved 64% in 2009 Child and Maternal Health - Achieved 66% in 2010 - % of children covered by 62 DPT3/pentavalent 3 vaccine before reaching age one from 63% in 2005 to - Achieved 41% in 2011 at least 80% over the CAS period - % of assisted births increase from 37% in 2006 to at least 45% by 2012 - % of pregnant women with at least three ante-natal care visits increase from 20% to 40% by 2012 HIV/AIDS - 20% of HIV-infected pregnant women receive complete PMTCT services by 2012 (6% in 2008) 63 Annex 2: CASCR - Planned Lending Program and Actual Delivery Fiscal Original CAS Program Original IDA Status Revised IDA Amount Year Amount (US$ million) (US$ million) National Regional CRW • Economic Reform Support Grant II (DPO) 30.0 Actual 30.0 -- -- 2009 • Health Sector Support 25.0 Actual 25.0 -- -- • Second Public Works and Urban Management 45.0 Actual 45.0 -- -- • Emergency Demobilization and Transitional -- -- Reintegration Project 10.0 Actual 10.0 Subtotal 110.0 110.0 • Economic Support Reform Grant III (DPO) 25.0 Actual 25.0 -- -- 2010 • Agriculture (Agro-Pastoral Productivity and 43.0 Markets Development Project) Actual 43.0 -- -- • Public Enterprise and Financial Sector (Financial 16.0 -- -- & Private Sector Development Project) Actual 19.0 • (Regional) Lake Victoria Environment 5.0 Slipped to FY11 Management Subtotal 89.0 87.0 • Economic Support Reform Grant IV (DPO) 25.0 Actual 25.0 -- -- 2011 • Additional Financing: Roads 20.0 Actual 22.0 -- -- • (Regional) Transport 15.0 Slipped -- -- • (Regional) Hydropower (Rusumo Falls 10.0 Slipped to FY12 Hydroelectric and Multipurpose Project) Additional Planned Emergency Electric Infrast. Project Actual -- -- 15.4 Additional Financing-Financial and Private Actual 8.0 Sector Dvpt Project (Regional) Lake Victoria Env. Mgmt Actual 5.0 Subtotal 70.0 60.0 -- 15.4 IDA 15 Subtotal 269.0 257.0 -- 15.4 • Economic Support Reform Grant V 35.0 Actual (Dec. 2011) 35.0 -- -- 2012 • Additional Financing: Second Public Works 15.0 Actual (May 2012) 15.0 -- -- • (Regional) Hydropower (Rusumo Falls 27.0 Slipped to FY13 -- 40.0 -- Hydroelectric and Multipurpose Project) Subtotal 77.0 50.0 40.0 -- TOTAL 346.0 307.0 40.0 15.4 64 Annex 3: CASCR - Planned Non- Lending Program and Actual Delivery Fiscal Year Analytical and Advisory Activities by CAS Theme 2009 Financial Sector Assessment Program (ESW) Public Expenditure Financial Accountability – PEFA (ESW) Poverty & PRSP TA BPRP (TA) Legal and institutional framework for privatization (TA) Option for pay reform (TA) Petroleum Sector Technical Advice (TA) 2010 Country Economic Memorandum (Core ESW) Debt Management Performance Assessment (ESW) GAC Strategy Development (TA) Quantitative Macro-Fiscal Framework (TA) Review of Poverty Reduction and Transport Strategies (TA) Investment Climate Reform Program (WB/IFC Advisory) 2011 Public Expenditure Review (ESW) Coffee Sector Strategic Environmental Assessment (TA) Investment Climate Reform Program (WB/IFC Advisory) Development of Financial Sector (TA) 2012 Public Expenditure Review (ESW) Trade Work (ESW) Support for set-up of Distance Learning Center (TA) Extending Medium Term Expenditure Frameworks (MTEF) Capacity Building (TA) Investment Climate Reform Program (WB/IFC Advisory) Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) Assessment (ESW) TA - Technical Assistance ESW - Economic and Sector Work 65 IBRD 33380 BURUNDI SELECTED CITIES AND TOWNS MAIN ROADS PROVINCE CAPITALS PROVINCE BOUNDARIES NATIONAL CAPITAL INTERNATIONAL BOUNDARIES RIVERS 29°E 30°E 31°E Lake This map was produced by the Map Design Unit of The World Bank. To Kigali Kivu The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, or any To endorsement or acceptance of such boundaries. Gitarama Kagera Lake Lake Rweru Cohoha R WANDA KIRUNDO To Cyangugu Kirundo To Butare To Rulenge u ar y u an uv uv K R CIBITOKE MUYINGA NGOZI Muyinga To Cibitoke Nyakanura Ngozi Kayanza Rusiba 3°S Musada Ruvuvu 3°S Buhiga To Bubanza AY AYA N Z A K AYA Karuzi si Kakonko M w eru BUBANZA izi KARUZI CANKUZO Rus vu Cankuzo vu Muramvya V YA Ru R AM MU To Uvira BUJUMBURA L uvironza Gitega WA R O M WA RA Ruyiga DEM. REP. Mwaro RUYIGI BU OF CONGO GITEGA To Kibondo M gu JU p un Mt. Heha U Rum (2,670 m) Bukirasazi B Matana TA NZA NIA BURURI Mutangaro R U TA N A Bururi Most distant Rutana Rumonge headwater of the Nile River 4°S 4°S Makamba BURUNDI MAKAMBA z i ara Mabanda r ag Mu Lake Nyanza-Lac Tanganyika To Kasulu 0 10 20 30 40 Kilometers 0 10 20 30 Miles 29°E 30°E 31°E SEPTEMBER 2004